Following its November 8, 2018 opinion letter on the same topic, the Department of Labor’s Wage and Hour Division has now published guidance stating that it “will no longer prohibit an employer from taking a tip credit based on the amount of time an employee spends performing duties related to a tip-producing occupation that are performed contemporaneously with direct customer-service duties for a reasonable time immediately before or after performing such direct-service duties.”
As we discussed in our November 2018 E-Update, under the Fair Labor Standards Act, employers of tipped employees may pay a tipped wage of $2.13 and take a tip credit for the difference between the tipped wage and the minimum wage, currently $7.75. (Maryland and many other states and local jurisdictions have a higher minimum wage for both tipped and non-tipped employees). The FLSA recognizes that tipped employees may work dual jobs – one tipped and one non-tipped, and the tip credit may be applied only to the tipped job. It also recognizes that a tipped job may involve both tipped and related non-tipped tasks (such as maintenance and preparatory or closing activities).
Prior to the November 8, 2018 opinion letter, the DOL had taken the position that employers could not take the tip credit for time spent on non-tipped tasks if the tasks exceeded 20% of the employee’s work time (i.e. 20% or 80/20 rule). In the opinion letter and now in its new Field Assistance Bulletin, explaining the recent change to its Field Operations Handbook 30d00(f), however, the DOL has rescinded the 20% rule.
The DOL states that it will now apply the following principles in evaluating whether non-tipped duties are related to the tipped occupation:
- Duties listed as core or supplemental for the appropriate tip-producing occupation in the Tasks section of the Details report in the Occupational Information Network (O*NET) http://online.onetcenter.org or 29 C.F.R. § 531.56(e) are related duties.
- Employers may take a tip credit for any amount of time an employee spends performing related tasks contemporaneously with tipped duties or for a reasonable time immediately before or after performing tipped duties, whether or not those related tasks involve direct customer service.
- If the task is not listed in O*NET or 29 C.F.R. § 531.56(e), the employer may not take a tip credit for time spent performing that unrelated task – although such task may be deemed non-compensable under the de minimis rule (meaning that such little time is spent on the task that it need not be paid).