![]() Obama Era 80/20 Rule for Tipped Employees zations across the country continue to fight for higher wages, the United States Department of Labor (DOL) has provided new guidance on what is commonly referred to as the "80/20 Rule" the DOL issued Opinion Letter FLSA 2018-27 rolling back the Obama era's enforcement of the 80/20 Rule. The new rule eases restrictions on an employer's use of what is known as the "tip credit" and has vast implications for employers of the millions of tipped employees throughout the United States who are paid the minimum wage. mandates that non-exempt employees be paid at least the hourly minimum wage (the federal minimum wage is currently $7.25 per hour) for all hours worked. Some states also have minimum wage laws which provide greater employee protections than federal law. However, a majority of states have a special, lower minimum wage, which an employer can pay an employee who receives tips. A tipped employee is defined as an employee who works in an occupation in which he or she "customarily and regularly receives more than $30 a month in tips." 29 U.S.C. § 203(t). Many states allow an employer to pay a lower service rate to tipped employees, such as servers and bussers, and to take a "tip credit" equal to the difference between the service rate paid and the state's basic minimum wage. For example, in Massachusetts, the basic minimum wage is currently $12 per hour, but tipped employees can be paid a service rate of $4.35 per hour, so long as the employee is informed of the law and the sum of the service rate and tips received by the employee equal or exceed the basic minimum wage. $7.65 per hour toward its minimum wage obligation for tipped employees. If the combined service rate and tips received by an employee do not equal at least the basic minimum wage for all hours worked, the employer must make up the difference. However, service employees generally receive tips well in excess of the basic minimum wage. In fact, in some states where the legislature has attempted to raise or eliminate the service rate, proactively lobbied against the change, concerned that customers would stop tipping, resulting in a net decrease in take home pay. amounts (the federal tip credit is currently $5.12 per hour), while the remaining seven states require employers to pay tipped employees the full state basic minimum wage before tips. 30d00(f) of the DOL's internal Field Operations Handbook, acted as a limit on the use of the lower service rate. The 80/20 Rule stated that no tip credit could be taken on "related duties" where a tipped employee spent more than 20 percent of working time performing duties related to the tipped occupation, but not directly producing tips, such as cleaning and setting tables, rolling silverware, making coffee, etc. requiring employers defending wage claims to take on the nearly impossible task of attempting to recreate, minute by minute, the activities performed by tipped employees, separating them into "related" and "un-related" duties. This was further complicated because the DOL offered little guidance on what duties were "related" versus "un-related" to a tip- producing occupation, making it difficult for an employer to determine whether it complied with the law. For example, if a server performed cleaning duties after guests finished dining, such as sweeping and mopping floors, vacuuming the carpet or tidying up a server station, were those duties "related" to the server's tip Friedmann LLP. Robert practices in the firm's litigation group with a primary focus in the areas of business, employment and real estate litigation. In addition, he works with employers to develop and implement employee handbooks, policies and procedures. 92 State Street Boston, Massachusetts 02109 rflawyers.com |