February has been a busy month for the U.S. Department of Labor (“DOL”).  The Wage and Hour Division (“WHD”) published new guidance addressing tipped employees and payment of subminimum wages and released a new compliance tool.  The DOL also named a new Acting Wage and Hour Administrator.  Employers should review these new publications and developments for applicability to their workforce:

1. WHD’s Field Operations Handbook Updated to Align with the DOL’s Abandonment of the “80/20 Rule”

 The Fair Labor Standards Act (“FLSA”) and many state laws allow employers to apply a “tip credit” to satisfy part of the minimum wage obligation for tipped employees, thereby reducing direct wages the employer is required to pay.  The WHD’s position under the Obama Administration was that if a tipped employee spent 20% or more of his/her time performing “related,” but not directly tip-generating tasks, the employer could not take a tip credit for any time spent on those non-tipped tasks.  This guidance, referred to as the “80/20 Rule,” led to a wave of litigation across the country and, as explained here, resulted in conflicting and often confusing court decisions.  Last fall, as reported by FordHarrison here and here, the DOL abandoned the “80/20 Rule.”  The DOL’s new guidance, released on November 8, 2018, confirmed that (1) a tipped employee’s work is “part of a tipped employee’s occupation” if “directly related” to the employee’s occupation, and (2) “[n]o limitation shall be placed on the amount of these duties that may be performed, whether or not they involve direct customer service, as long as they are performed contemporaneously with the duties involving direct service to customers or for a reasonable time immediately before or after performing such direct-service duties.”  Last week, the DOL announced, in Field Assistance Bulletin (FAB) No. 2019-2, that it had updated its Field Operations Handbook to align with its new position on the “80/20 Rule.”  Consistent with DOL’s abandonment of the “80/20 Rule,” FAB 2019-2 states, “[The] WHD will no longer prohibit an employer from taking a tip credit based on the amount of time an employee spends performing duties related to a tip-producing occupation that are performed contemporaneously with direct customer-service duties or for a reasonable time immediately before or after performing such direct-service duties.”  The relevant portion of the Field Operations Handbook that has been updated can be accessed here.

2. New Guidance Regarding the Payment of Subminimum Wages Under Section 14(c) of the FLSA

Section 14(c) of the FLSA, passed in 1938, allows employers to obtain certificates from the DOL to compensate workers with significant disabilities via a special minimum wage.  The special minimum wage may be below the federal minimum wage but must be commensurate with the worker’s measured productivity and the job’s prevailing wage.  In 2014, Congress passed the Workforce Innovation and Opportunity Act (“WIOA”), which requires, among other things, that young people with disabilities be evaluated for regular work in the community before being steered to subminimum wage work.  The WHD is responsible for the administration and enforcement of Section 14(c) and the WIOA requirements.  When the WIOA requirements went into effect in July 2016, the WHD published several documents regarding the WIOA and its impact on Section 14(c) programs.  Last week, the WHD published additional guidance, vis-à-vis Field Assistance Bulletin (FAB) No. 2019-1, regarding the payment of subminimum wages pursuant the WIOA and the corresponding impact on the WHD’s enforcement of wage payments under Section 14(c).  In conjunction with FAB No. 2019-1, the WHD also published revised and new fact sheets regarding payment of subminimum wages, which can be accessed here and here.

3. Enhanced Electronic Version of the Handy Reference Guide to the Fair Labor Standards Act (FLSA)

On February 6, 2019, the DOL announced the launch of an enhanced electronic version of the Handy Reference Guide to the Fair Labor Standards Act (FLSA).  In addition to being mobile friendly, the reference guide includes embedded hyperlinks to relevant portions of the DOL’s website and clickable links to fact sheets and other DOL resources, as well as plain-language videos.

4. Keith Sonderling, New Acting Wage and Hour Administrator: Facts You Need to Know

 President Trump nominated Cheryl Stanton to serve as Administrator of WHD in September 2017, and she continues to wait for a confirmation vote in the Senate.  In the meantime, the WHD announced, on February 1, that Keith Sonderling will serve as the Acting Administrator of the WHD, following the resignation of Bryan Jarrett.  Here’s what you need to know about Keith Sonderling, the new Acting WHD Administrator:

• Sonderling previously practiced law with the Gunster Law Firm in West Palm Beach, FL where he focused on defending employers in labor and employment cases and reportedly helped defrauded EB-5 immigration investors.
• In September 2017, Sonderling was appointed by the Trump Administration as a senior policy advisor in the WHD.
• Sonderling conducted numerous outreach events to educate employers regarding the WHD’s Payroll Audit Independent Determination (“PAID”) program that launched in March 2018 and led many of the WHD’s listening sessions regarding the overtime rules.
• Sonderling is taking the helm during a time when the DOL is expected to propose significant regulatory changes regarding the definition of regular rate, overtime rule, and joint employer liability.