Restaurants and other hospitality industries received some good news on Thursday, November 8, 2018. The Wage and Hour Division of the Department of Labor (DOL) overturned the "80/20" rule for tipped employees, returning to a 2009 opinion issued under the Bush administration.
The "Old" 80/20 Rule: Previously, employers were required to pay tipped employees the full minimum wage for "side work" if that work exceeded 20% of their total work time. The 11th Circuit referred to this rule as requiring a version of "perpetual surveillance" of tipped employees and their tasks (Pellon v. Business Representation Int'l Inc.). Further, this task algebra spawned a significant amount of class action litigation over tipped employees' pay across the United States.
The "New" Rule: A duty is now only considered part of a tipped occupation for which a tip credit may be taken if that duty is listed as "core or supplemental for the appropriate tip-producing occupation" by the Occupational Information Network. Tip credits may not be taken for time spent on tasks which are not found on this list. However, the DOL noted non-listed tasks "may be subject to the de minimus rule..." 29 C.F.R. § 785.47.
This is a significant development for those industries that take advantage of the tip credit.
The DOL issued four Opinion Letters on November 8, 2018. Reliance on an Opinion Letters can help establish that an employer's conduct in regards to calculating an employee's pay was done in "good faith" and provides a defense to the monetary damages available under the Fair Labor Standards Act (FLSA). One should note that Opinion Letters only deal with the DOL interpretation of obligations under Federal law. State and local wage payment laws may differ in application or interpretation.
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