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By: Justin Boron
As we have previously noted, the regulatory seesaw on the tip credit a business may take on employees’ tips has continued under the Biden Administration. After reversing the previous administration’s banishment of the so-called 80/20 rule, the DOL under the current administration has come up with a new proposed rule.
The current proposal distinguishes between “tip-producing” duties—which remain eligible for a tip credit allowing employers to pay tipped employees a rate lower than minimum wage—and work “unrelated” to “tip-producing” duties, which are ineligible for the tip credit. Of course, the gray area is in “related, but non-tip-generating” work, where the line between related and unrelated has been, and likely will continue to be, subject to debate and regulatory scrutiny.
The current DOL proposal draws the line on the basis of whether a server’s work is tip producing and non-tip producing that “directly supports tip-producing work,” such as for a server, “preparing items for tables so that the servers can more easily access them when serving customers or cleaning the tables to prepare for the next customers” or for a bartender, “slicing and pitting fruit for drinks so that the garnishes are more readily available to bartenders as they mix and prepare drinks for customers.”
If work is not tip-producing but directly supports tip production, an employer cannot take a tip credit on that work if the tipped employee spends more than 20 percent of their workweek on that kind of work. Likewise, if the tipped employee spends 30 or more minutes on non-tip producing, but directly supporting tipped work, then the employer cannot take a tip credit for the time spent on those kinds of tasks.
The current rule remains proposed. So, in the meantime, the old version of the 80/20 rule remains in place. But absent a clear standard on how an employer can realistically track the time spent between tipped and directly supporting untipped tasks, there will likely be continued litigation and consternation over this issue.