tip jar

There has been much controversy in recent years over the Department of Labor’s (DOL) so-called 80/20 rule, under which an employer is required to pay a tipped employee the full minimum wage for non-tip-producing work if the employee performed such work for over 20% of the work week. Employers complained of the time-keeping requirements imposed by the 80/20 rule and litigation was common. In March, the DOL published two new fact sheets with additional guidance, though the topic remains somewhat murky.

Tip credits and minimum wage can be a complicated combination. And if you’re a tipped employee, there may be a number of ways your employer is breaking the law and violating your rights. If you have legal questions about tips, our firm is here to advise you.

A Brief History of the Tip Credit

Certain industries are permitted to pay less than the general minimum wage (e.g. $7.25/hour, the federal rate) and allow tips to make up the difference. However, the DOL has steadily curtailed this practice by imposing increasingly narrow rules upon employers. In November 2021, a rule went into effect that expanded the DOL’s power to assess fines against employers who violate the Fair Labor Standards Act (FLSA), the main federal law concerning minimum wage, tip credits, and related regulations.

Then in December 2021, another regulation went into effect which reinstated and strengthened the above-mentioned 80/20 rule. The same regulation amended the FLSA rules concerning when restaurants that employ tipped workers may take a tip credit. The December 2021 rule also updated the definition of work that is considered to be part of a tipped job.

What did the DOL do in March?

The DOL in March issued two new fact sheets governing the practice of tipping employees. The new guidance restates the 80/20 rule by requiring that a tipped worker must perform tip-producing work at least 80% of the time. Under this rule, a worker cannot spend more than 20% of his or her workweek (or 30 consecutive minutes) engaged in so-called supporting work, which is labor that does not itself produce tips but which supports tip-producing work.

An employer has the obligation to track its employees’ time to ensure compliance with the updated DOL rules. But if you’re a tipped employee, it would be a good idea to keep up with your time yourself. If you are spending too much time engaged in non-tip-producing work during the week, your employer may be in violation of the FLSA.

Other Issues that Tipped Employees May Face

The essence of the updated rules is that employees cannot spend too much time doing work that does not produce tips. However, the 80/20 rule is not the only problem facing many employees in the restaurant and other industries that heavily rely on tips. Other ways in which employers infringe on their tipped workers’ rights include:

  • Failing to pay at least $2.13/hour, the federal minimum wage for tipped employees (many state and local rates are higher)
  • Failing to pay the difference between $2.13/hour (or a higher rate, if applicable) and the regular minimum wage, if the employee does not receive enough in tips
  • Tip pool violations, such as supervisors or managers participating in tip pools
  • Paycheck deductions which reduce an employee’s effective rate of pay below the minimum wage
  • Failing to reimburse employees for job-related expenses such as fuel, mileage or other expenses associated with a personal vehicle used for deliveries or other business tasks.
  • Taking credit for food discounts given to employees on menu prices (in the form of a deduction from the employee’s pay)
  • Automatic meal break deductions when the employee was not relieved of work duties

Are You A Tipped Worker? Is Your Employer Paying You What You’ve Earned?

Rules concerning tipped work can be complex, but every employer must follow them. If your employer is breaking the law in one of the ways listed above, or you aren’t sure, it’s time to let The Lore Law Firm take a look at your situation. Complete our free and confidential online client intake form so we can review your case.

Michael Lore is the founder of The Lore Law Firm. For over 25 years, his law practice and experience extend from representing individuals in all aspects of labor & employment law, with a concentration in class and collective actions seeking to recover unpaid back overtime wages, to matters involving executive severance negotiations, non-compete provisions and serious personal injury (work and non-work related). He has handled matters both in the state and federal courts nationwide as well as via related administrative agencies. If you have any questions about this article, you can contact Michael by using our chat functionality.