Re-introducing: the Paycheck Warriors at Barkan Meizlish, LLP! The Paycheck Warriors is a weekly column written by The Paycheck Warrior himself, Managing Partner Bob DeRose. Every week, Bob will take the time to address commonly asked questions about wage and hour law. He will also take on wage and hour topics popping up in the news. Have a question? Leave a comment and see what The Paycheck Warrior has to say! Today’s topic: tip credit and the 80/20 rule
How many jobs can your server have? And which job pays them at least minimum wages? What is a tip credit?
Did you know that your busy server is actually doing three jobs at once?
An employer is required to pay their employees at least the Federal minimum wage for all hours worked, currently $7.25 per hour; however, for employees who regularly and customarily receive tips, employers may apply a “tip credit” which allows them count tips received as if it were cash payment toward the minimum wage. Servers being paid under a “tip credit” system, can be paid as little as $2.13 per hour (in states that don’t have a state tipped employee minimum here is a link to the Department of Labor’s list of state minimum wage requirements) and the restaurant owner uses customers’ tips to make up the remainder of the minimum wage owed. Thus, the employer gets a “credit” for the tips customers leave to apply to its obligation to pay its servers.
In 2018, the Trump administration, removed a provision of the “tip credit” that required employers to pay tipped employees the full minimum wage when they are spending more than 20% of their time performing non-tipped duties. On December 28, 2021, the U.S. Department of Labor (DOL) reinstated the “80/20 Rule” and broadened tipped employee protections. Under the revived and renewed “80/20” rule, a tip credit is not available when tipped employees spend more than 20% of their working time on non-tipped activities. The revision also created the “30-Minute” Rule. The “30-Minute” rule prohibits employers from taking a tip credit when a tipped employee spends more than thirty continuous minutes performing non-tipped work.
The new rule creates three categories of work: “Tip-producing work,” “work that directly supports tip-producing work,” and “work that is not part of the tipped occupation.”
What is tip-producing work?
The DOL provided a non-exhaustive list in its final rule but defined it as “all aspects of the work performed by a tipped employee when they are providing service to the customer” and customarily and regularly receive tips.
What is directly supporting work?
According to the Rule, directly supporting work is work that is “either performed in preparation of or otherwise assists the tip-producing customer service work.” The DOL provided another non-exhaustive list of what it considers directly supporting work. The directly supporting work are tasks that an employer assigns and are foreseeable such as refilling condiment containers, rolling silverware, setting tables, bussing tables, and cleaning up the table areas. Servers waiting for customers to wait on is considered “directly supporting work.” An employer cannot take a tip credit for directly supporting work that exceeds 20% of the server’s workweek or performed for more than 30-minutes at a time.
What is work that is not part of the tipped occupation?
Everything else.
Confused? Not surprising! The reinstated and revised “80/20 Rule” does give servers more protections. It will be a challenge for employers to categorize a tipped employee’s hours worked each week, but they must do it if they want to comply with the FLSA and pay employees correctly. It is important to note that the “80/20” Rule applies to all tipped employees, not just restaurant workers. If are a tipped employee with questions about how your employer pays you, feel free to call us at Barkan Meizlish DeRose Cox, LLP.
