On June 21st, 2021, the U.S. Department of Labor (DOL) issued a proposed tipped worker rule. In general, the proposed rule instructs when employers must pay specific wages to a tipped worker. Before the new proposed tip worker rule, the DOL issued a tip regulations final rule in April 2021.
Overview of the Proposed Tipped Worker Rule
Specifically, the proposed new rule includes the following:
- Clarification as to when an employee is working in a tipped occupation. Accordingly, the rule dictates when a worker has performed a substantial amount of non-tipped labor. Consequently, the amount of non-tipped labor may prevent an employer from taking a tip credit. When an employer cannot receive the tip credit, they must pay the full federal minimum wage to the worker. The Fair Labor Standards Act (FLSA) allows employers with tipped workers to pay $2.13 per hour in direct wages. Then, employers would take a credit against earned employee tips to reach the federal minimum wage of $7.25 per hour.
- An employer may only take a tip credit when employees perform labor considered part of their tipped occupation. Work considered part of the tipped occupation includes labor that produces tips and actions that support tip-producing work. However, employees cannot perform the supporting work for a substantial amount of time.
- Defines the statement “supports tip-producing work for a substantial amount of time.” Overall, that period is anything that exceeds 20 percent of all of the hours worked during the workweek. Specifically, it could be anything that exceeds 30 continuous minutes. Following those guidelines, any work done outside of those time parameters is NOT tipped labor.
- Employers may not take a tip credit for work that is not part of the tipped occupation.
In conclusion, the DOL invites comments from the public on the proposed tipped worker rule. Interested parties can submit comments through www.regulations.gov until August 23rd, 2021.