On October 28, 2021, the U.S. Department of Labor (DOL) announced a new rule, effective December 28, 2021, that limits the amount of time tipped employees can spend on non-tipped activities when the employer receives a tip credit.
Since December 2020, the DOL had allowed an employer to take a tip credit for a tipped employee’s non-tipped work when the work was performed either contemporaneously with or for a reasonable time immediately before or after performing tipped duties. Employers could not take a tip credit only when a tipped employee engaged in a substantial amount of separate, non-tipped-related work in such a way that an employee ceased to be engaged in a tipped occupation.
The New 80/20 Rule and 30-Minute Rule
Under the new rule, an employer can take a tip credit only when the employer’s tipped employee dedicates at least 80% of the employee’s hours worked in a week to “tip-producing work” and no more than 20% of their hours worked in a week to “tip-supporting work.” If a tipped employee dedicates more than 20% of the employee’s hours worked in a week to “tip-supporting work” then the employer must pay the employee a full minimum wage for the time dedicated to “tip-supporting work” that exceeds the 20% limit.
Notably, the new rule also requires tipped employees who perform “tip-supporting work” for a continuous period of more than 30 minutes to be paid a full minimum wage for any “tip-supporting work” completed over the 30-minute limit.
What Qualifies as “Tip-Producing Work” and “Tip-Supporting Work”?
The DOL defines “tip-producing work” as “any work performed by a tipped employee that provides service to customers for which the tipped employee receives tips.” In the new rule, the DOL lists specific examples of “tip-producing work” for servers, bartenders, and bussers. Some examples of “tip-producing work” include providing table service, taking orders, making recommendations, filling water glasses, clearing dishes from tables, making and serving drinks, and serving food to customers at the bar.
“Tip-supporting work” is defined by the DOL as “either work performed in preparation of or otherwise assists such tip-producing customer service work.” The DOL provides a non-exhaustive list of work that is considered “tip-supporting work.” For servers, bartenders, and bussers, some examples of tip-supporting work include dining room prep, rolling silverware, folding napkins, sweeping or vacuuming under tables, setting and bussing tables, stocking the busser station, cleaning bar glasses, and arranging bottles behind the bar.
What’s Next?
Employers should begin preparing for the new rule and reviewing their timekeeping processes before the rule comes into effect on December 28. We will continue to monitor for updates and can help businesses navigate this process.
