On November 8, 2018, the U.S. Department of Labor (DOL) re-issued an opinion letter rescinding the “80/20 Rule,” which prohibited employers from taking a tip credit if a tipped employee spent more than 20% of his or her working time on non-tipped work. The DOL’s new guidance provides restaurant and hospitality employers with clarity and a more practical approach regarding when a tip credit can be taken.
Under the Fair Labor Standards Act (FLSA), the tip credit allows employers to pay tipped employees not less than $2.13 per hour and to take a tip credit equal to the difference between that amount and the federal minimum wage. So, before an employer can take the tip credit, it must determine whether the employee is working in a tipped job.
If an employee works in separate jobs, one of which is tipped and the other of which is not, the employee has “dual jobs,” and the employer can only take the tip credit when the employee is working in the tipped job. For example, if an employee works at times as a waiter and at other times as a maintenance worker, the employer can take the tip credit only for the time the employee spends working as a waiter and must pay the full minimum wage for the time the employee spends working as a maintenance worker.