On October 28th, 2021, the Department of Labor (DOL) set reasonable limits on non-tipped work performed by tipped employees. In summary, the final rule limits the amount of time tipped employees may spend performing non-tipped activities when the employer receives a tip credit. Correspondingly, the rule states that an employer may only take a tip credit for specific work activities. Namely, these are hours an employee spends doing tip-producing work or that directly supports tip-producing work. Earlier, in September 2021, the DOL announced a final rule levying penalties on employee tip withholding.
Background of DOL’s Final Rule
Section 3(t) of the Fair Labor Standards Act (FLSA) defines a “tipped employee” as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” Furthermore, the FLSA recognizes that employees in tipped occupations may perform duties that do not directly produce tips. Such duties may include:
- Cleaning and setting tables;
- Making coffee;
- Stocking a station; or
- Occasionally washing dishes.
Overview of Limits on Non-Tipped Work
Accordingly, the final rule allows employers to take a tip credit in specific situations. Those situations include:
- if a tipped employee is performing tip-producing work or
- the tipped employee is performing work that supports tip-producing work (as long as the tipped worker does not spend a substantial amount of time doing such work).
In addition, the rule defines a substantial amount of time as:
- More than 20 percent of the hours worked during the employee’s workweek; or
- A continuous period of time that exceeds 30 minutes.
The final rule imposing limits on non-tipped work becomes effective December 28th, 2021. In addition, the final rule amends regulations in Executive Order 13658, which address the minimum wage rate paid to workers performing work on or in connection with covered federal contracts.
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