The seemingly never-ending battle over interpretation of the Fair Labor Standards Act’s tip credit provision took another turn Monday. The U.S. Department of Labor’s Wage and Hour Division issued proposed rules that would set clear limits on the amount of non-tipped tasks employees who are paid the $2.13 sub-minimum wage can work. Non-tipped tasks include things like setup before service at a restaurant, light cleaning, and other time that would not directly result in customer gratuities.

Under the Trump administration, DOL proposed in 2019 to eliminate any bright-line test for determining when employees needed to be paid the full $7.25 minimum wage, instead looking at the employee’s activities as a whole to determine if they support the primary tipped work. Under the new proposal, workers for whom the employer claims the tip credit are limited to no more than 20% of their total working time on non-tipped tasks. This “80/20” rule had been in place for decades prior to the 2019 changes but not as a formal regulation. In addition, for continuous periods when tipped employees work more than 30 minutes on non-tipped tasks, they must be paid the full $7.25 minimum wage under the proposal.

If finalized, these rules would require employers in the hospitality industry to rethink how they assign and track various work tasks for tipped employees. By formalizing these time limits, managers will be required to closely monitor employee tasks to make sure that they are being paid the appropriate rate based on the work performed. DOL is accepting comments on the proposed regulations through August 23.

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