U.S. DOL axes its 80/20 tip rule — Eases the burden on employers managing tipped workers’ time
Earlier this month, the U.S. Department of Labor (DOL) removed its 2021 dual jobs regulation for tipped employees. This change eases the burden for employers with tipped employees, as it means they don’t have to worry about monitoring how much time workers are spending on different tasks.
The regulation returns to the pre-2021 provisions. This means that if an employee is working two separate jobs (such as server and cook) for the same employer, the employer may take a tip credit only when the employee is working in the tipped job.
The federal Fair Labor Standards Act (FLSA) allows certain employers to take a partial credit against their minimum wage obligations for tipped employees engaged in a job in which they customarily and regularly receive tips. Basically, this means that they can pay tipped workers a lower minimum wage because they earn tips. An employer that claims a tip credit must ensure that the employee receives enough tips from customers, and direct (or cash) wages per workweek to equal at least the minimum wage and overtime compensation required under the FLSA.
History
Shortly after Congress created this “tip credit” in 1966, the DOL issued a dual jobs regulation recognizing that an employee may be employed both in a tipped job and in a non-tipped job and that an employer may take a tip credit against its minimum wage obligations only for the time the employee works in the tipped job.
In 2021, the DOL published its dual jobs final rule addressing the circumstances under which an employer could take partial credit against its minimum wage obligations based on the tips employees received. Employers often referred to this as the “80/20” rule.
The 2021 rule indicated that employees could spend no more than 20 percent of their hours in a given workweek on work that supports tip-producing work (such as waiting on tables) but did not directly generate tips (such as setting tables).
The 2021 final rule also imposed a new “30-minute” restriction, limiting the amount of continuous time during a shift that a non-tipped employee could spend performing tipped tasks to 30 minutes.
On October 29, 2024, the United States Court of Appeals for the Fifth Circuit issued a decision vacating portions of the 2021 dual jobs final rule with the effect of reinstating the DOL’s original dual jobs regulation.
In response to the Fifth Circuit’s decision, the DOL removed the 2021 dual jobs rule from the Code of Federal Regulations and reinstated the regulation that was effective before the 2021 dual jobs rule.
Key to remember: Employers with tipped employees no longer need to worry about the 80/20 dual jobs rule.