A Sigh of Relief for Restaurant and Hospitality Employers

On November 8, 2018, the U.S. Department of Labor’s Wage and Hour Division (“DOL”) issued an opinion letter reviving its 2009 guidance that eliminated the 80/20 rule for tipped workers.

The “tip credit” under the Federal Labor Standards Act (FLSA) allows an employer to pay a lower hourly rate to employees who are engaged in an occupation in which the employee customarily and regularly receives a certain amount of tips per month. The employer then uses a portion of the tips as a “credit” towards the required minimum wage amount. In order to take advantage of the “tip credit,” employers determine upfront which duties are related and unrelated to a tip-producing occupation.

In 2011, the DOL took the enforcement position that if a tipped employee spent more than 20% of his or her time on non-tip-producing tasks, the employee’s time spent on those non-tip-producing tasks be paid at minimum wage rather than at the below-minimum wage “tip credit” rate. This opened the door to plaintiffs using the DOL’s enforcement position as the basis for lawsuits alleging that they engaged in non-tipped work for more than 20% of their work time and therefore were entitled to the full minimum wage for their work.

As of November 8, the DOL eliminated this restriction stating, “We do not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.” Employers no longer need to keep track of how much time their workers spend on certain tasks now that the 80/20 rule has been abandoned. However, in order to comply with the FLSA, employers must still ensure tipped employees are performing tasks related to the tip-generating work.

Should you need any assistance with this issue, as well as any other wage and hour issues, please reach out to your MWH Law Group, LLP attorney today.

This article is a publication of MWH Law Group LLP and is intended to provide general information regarding legal issues and developments to our clients and other friends. It should not be construed as legal advice or a legal opinion on any specific facts or situations. For further information on your own situation, we encourage you to contact the author of the article or any other member of the firm.

CONTACT ATTORNEY JULIE T. BITTNER

Julie T. Bittner
Partner – West Des Moines
1501 42nd St., Suite 465, West Des Moines, IA 50266
P: (515) 453-8509 / F: (515) 267-1408
E: julie.bittner@mwhlawgroup.com
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