Department of Labor Deflates the 80/20 Rule & Inflates the Tip Pool

Executive Summary: On Monday, October 7, 2019, the Department of Labor (DOL) proposed a new 80/20 rule and tip pooling regulation. First, the proposed regulation, if finalized, will permit employers to take a tip credit regardless of the amount of non-tip generating work (such as cleaning tables or folding napkins) a tipped employee performs as long as it is performed contemporaneously with his/her tipped duties, or within a reasonable time immediately before or after performing tipped duties. Second, the proposed regulation eliminates some regulatory restrictions regarding tip pooling when the employer does not take a tip credit. If the proposed rule is finalized, employers who do not take a tip credit will be permitted to include “back-of-the-house” employees who usually do not receive tips (such as cooks and dishwashers) as part of a tip pool. Lastly, the existing rule prohibiting employers from keeping employees’ tips or participating in tip-pooling arrangements will remain. Continue reading

Out With The Old; In With The Original: DOL Re-issues 2009 Tip Credit Guidance

Briit, Louis - 300dpi
Louis Britt

On November 8, 2018, the U.S. Department of Labor (DOL) re-issued an opinion letter abandoning the “80/20 Rule,” which prohibited employers from taking a tip credit if a tipped employee spent more than 20% of his or her working time on non-tipped work.

The opinion letter is a re-issuance of one previously published on January 16, 2009 by the Bush administration.  The letter, however, was withdrawn once President Obama took office. The DOL’s new guidance provides restaurant and hospitality employers with clarity and a more practical approach defining when a tip credit can be taken. Continue reading

Tip Credits and Florida Minimum Wage Laws

Gomez, Rudy - 300dpi
Rudy Gomez

Background: The Fair Labor Standards Act (“FLSA”) and Florida minimum wage law allow an employer to take a tip credit toward its minimum wage obligation for “tipped employees”. A “tipped employee” is an employee who customarily and regularly receives more than $30 per month in tips. 29 U.S.C. § 203(t). An employer is permitted to take a tip credit equal to the difference between the minimum wage (currently $8.25 in Florida) and the required cash wage (currently must be at least $5.23 in Florida). Thus, the maximum tip credit that an employer can currently claim under the FLSA and Florida law is $3.02 per hour ($8.25 – $5.23).  Continue reading

The Fate of the DOL’s 80-20 Rule: Will the 80-20 Rule Survive?

Douglas, Jeff - 300dpi
Jeffrey Douglas

The U.S. Department of Labor’s (“DOL”) “80/20 Rule” has caused significant anxiety and concern for employers in the restaurant industry and other industries with tipped employees.  A recent spate of nation-wide class action litigation is leading to record-setting settlements for restaurant employers.  However, in a recent lawsuit filed in the Western District of Texas, Restaurant Law Center, et al. v. United States Department of Labor, 18-cv-567 (W.D.Tex.), national and local restaurant groups hope to bring an end to this wave of litigation by seeking to invalidate the 80/20 Rule. Continue reading

Eleventh Circuit Allows Employer to Share Employee’s Tips as Long as It Pays Employee Minimum Wage

Federal regulations currently treat tips as the employee’s property, regardless of whether the employer pays that employee the minimum wage or whether it uses a tip credit to satisfy the minimum wage requirement. Recently, the federal Department of Labor (DOL) proposed a rule that, if passed this year, would allow employers to require the sharing of tips with employees who do not customarily receive direct tips (such as restaurant cooks, dish washers, and similar workers), so long as the employer pays employees the full federal minimum wage of $7.25 per hour. Employers who use the tip credit option to satisfy the minimum wage obligation would not be allowed to require tip sharing with workers who do not customarily receive tips.

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