July 23, 2019

July 23, 2019

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July 22, 2019

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The U.S. DOL Saves the Day: So Long to the 80/20 Rule

The application of the 80/20 Rule has been a hot topic in the restaurant industry the last several years because it is the foundation of an onslaught of collective and class action litigation brought by service workers claiming they were not paid minimum wage.

As a brief summary, the 80/20 Rule limits the use of the lower tip credit wage rate ($2.13 per hour) when a tipped employee spends more than 20% of their working time on non-tipped work. In other words, employers can only apply a tip credit to time spent on non-tipped work if such duties did not exceed 20% of the employee’s time.  Take a look at our previous post regarding the 80/20 rule for more information

Last year, in Marsh v. J. Alexander’s LLC the U.S. Ninth Circuit Court of Appeals struck down the 80/20 Rule and created a split among the circuits as to its validity.  However, the Ninth Circuit reheard the Marsh v. J. Alexander’s LLC matter en banc and, reversed its prior ruling, determining (in line with other Circuits) that the 80/20 Rule was indeed valid.

More recently, in November 2018, the U.S. Department of Labor (“DOL”) issued an Opinion Letter stating that it has officially done away with the 80/20 Rule for tipped workers and restored its old guidance. The Opinion Letter states:

“We do not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.”

This result comes as welcome news for the restaurant industry, as restaurants no longer need to track a tipped employee’s every task and the amount of time spent on each task – a logistical nightmare. Additionally, this change may result in a reduction of minimum wage collective and class action claims brought by tipped employees and lift the administrative burden the 80/20 Rule placed on restaurant employers.

© Polsinelli PC, Polsinelli LLP in California

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About this Author

Robert J. Hingula, Polsinelli, Education Matters Lawyer, Discipline Procedures Attorney
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Robert Hingula primarily focuses his practice on trial and counseling work involving labor and employment law.  Most recently, he has devoted a significant amount of his practice to representing employers in various industries in collective actions brought pursuant to the Fair Labor Standards Act.  As part of his representation, Mr. Hingula has advised and assisted clients with restructuring their compensation policies to comply with state and federal wage and hour laws.  Some of the industries Mr. Hingula has represented and counseled in wage and hour issues include...

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