Food & Beverage Wage and Hour Alert: DOL Scraps 80/20 Rule, Clarifies Concept of Tipped Work

Earlier this month, the US Department of Labor rescinded the Obama administration’s guidance which was known as the “80/20 Rule” and clarified its stance on how employers should properly compensate tipped employees, most prevalent in the food and beverage industry.

When in place, the 80/20 rule prevented employers from taking tip credit (which allows employers to pay a sub-minimum wage because employees receive tips) from employees who spent more than 20 percent of their time on non-tipped work, such as cleaning, maintenance, and administrative tasks. Compliance with the DOL’s 80/20 rule demanded meticulous tracking of employee time on each set of tasks performed daily.

With this month’s clarification, food and beverage entities may go back to implementing a tip credit for employees who receive tips, even if the employees complete mixed duties while working. Such tasks may include duties like rolling silverware or setting tables. However, a tip credit can only be taken for mixed-duty work if the duties are performed contemporaneously with tipped duties and are incidental to the regular duties of a server.

The new clarification recognizes that some employers may routinely assign tasks that are not related duties to tip-generating work – like arriving prior to a restaurant’s opening to clean/prepare the restaurant. These situations are best evaluated on an individual basis, and if employers see that these duties are primarily or solely non-tipped duties, the employer should not take a tip credit.

In our employment law practice at the Forrest Firm, we routinely provide counsel to owners and managers in the food and beverage industry. Complying with federal and state rules can be particularly tricky in this industry, and we recommend performing periodic evaluations to ensure that your business stays compliant with an ever-shifting regulatory environment.  Contact us today for a consultation.