As if restaurants haven’t endured enough already, the DOL just announced an 80/20 rule on steroids.

Do you have tipped employees?

If so, you’re gonna want to keep reading. If not, I’ll see you tomorrow.

(Either way, before you go, make sure to register here for the return of The Employer Handbook Zoom Office Hour on Friday, June 25, at noon. That’s when we’ll be answering all of your lingering COVID-19 return-to-work questions in a way that doesn’t actually involve providing any legal advice or create any attorney-client privilege.)

Still with me on the tipped employees?

Yesterday, the U.S. Department of Labor announced that it planned to change the rules for tipped employees. You can read the complete Notice of Proposed Rulemaking here. Or, if you’re a busy person and prefer the get the gist from the DOL press release, you can read that here.

Better yet, I’ll summarize it below.

What is a tip credit?

First, let’s dispense with the basics: Under your favorite federal wage and hour law, the Fair Labor Standards Act, employers must pay non-exempt employees at least $7.25 per hour, which is minimum wage. But, you can pay tipped employees as low as $2.13 per hour in direct wages while taking a credit against the tips earned by the employee to make up the balance of the minimum wage. A tipped employee customarily and regularly receives more than $30 per month in tips. For more on tip credits and tip pools, check this out.

What is tip-producing work?

Now, the DOL wants to tightly limit how much non-tip-producing work a tipped employee can perform when an employer is taking a tip credit. According to the DOL, “work considered part of the tipped occupation includes labor that produces tips and labor that directly supports tip-producing work, so long as the employee does not perform it for a substantial amount of time. For example, waiting on tables is an example of labor that produces tips for the worker. Labor that supports a server’s tip-producing work includes a server folding napkins or refilling salt and pepper shakers.”

What is the proposed rule change?

Under the DOL proposal, an employee is no longer performing labor that is part of the tipped occupation when the employee spends:

• 30+ continuous minutes in a workweek performing non-tipped labor, or
• at least 20% of all hours worked in a workweek performing non-tipped labor,

In that case, employers may not take a tip credit for work time spent performing that non-tipped work.

It’s the 80/20 rule on steroids.

What can employers do about it?

If you have tipped employees but don’t take a tip credit, this won’t affect your business. But, ff you do take a tip credit and aren’t keen on this DOL proposal, you have until August 23, 2021, to give the agency a piece of your mind. You can comment at www.regulations.gov. But, realistically, this is going through unless business groups sue to stop it.

So ensure that you have systems in place to track tipped and non-tipped work accurately. Plus, if there are separate heightened state and local wage and hour requirements, you’ll need to follow them too.

Or don’t. This isn’t Communist Russia. It’s a free country. But with freedom comes class and collective action lawsuits, which are no fun unless, like me, you’re paid to defend them.