The U. S. Department of Labor (DOL) introduced the 80/20 rule in 1988, which stated that an employee was no longer a "tipped employee" when they spent more than 20% of their time in a workweek performing side work. After litigation and court opinions in the subsequent years, the DOL began dismantling the 80/20 rule in 2018. The DOL issued a rule in December 2020 which would have done away with the 80/20 rule. However, the DOL withdrew this rule prior to its effective date and, in June 2021, issued a proposal to strengthen the 80/20 rule. The final rule has been published.
Effective December 28, 2021, employers that wish to claim a minimum wage tip credit will soon need to make sure their employees don't spend too much time performing tasks that don't directly serve customers.
The final rule establishes three categories of work:
The rule used the example of a restaurant server to explain that directly-supporting work is performed either in preparation for or to otherwise assist, an employee's tip-producing work for customers.
For example, if a server takes customer orders at a table, sets the table she is serving, brings beverages to a third table, picks up a slice of pie, adds ice cream, and delivers it to the first table, and puts on a fresh pot of coffee at the beverage station for all of her tables, before heading back to the second table to take customer orders, the server is performing tip-producing work for the entire time. Accordingly, there is no need for the server's employer to count any of this work toward the 20 percent or 30-minute limits.
On the other hand, if the server folds napkins for the dinner rush after lunch customers leave, or rolls silverware for 15 minutes at the end of the night while waiting for a final table of customers to pay their bill, this would be categorized as directly supporting work and would count against the 20 percent and 30-minute limits.
At the very least, you will want to make sure that your tipped employees do not perform directly supporting work for more than 30 minutes when no tip-producing work is happening. Consider developing a process where tipped employees can notify management of directly supporting work in excess (so you can adjust compensation as appropriate). Other options include assigning side work in blocks of time, and paying tipped employees the full minimum wage before and after their guest service shift. As employers struggle with compliance, some may wonder if it is really worth it to utilize the tip credit.
These requirements represent the latest modifications to regulations affecting worker gratuities. Employers should also keep in mind any state and local rules that may apply. Clients of FrankCrum stay up to date on evolving legislation and have access to a team of experts. Click here to learn how FrankCrum can help you.