DOL Clarifies Tip Credit Rule Regarding Non-Customer Service Work

The Fair Labor Standards Act (FLSA) allows employers to pay service employees — those who receive “more than $30 a month” in tips — less than the minimum wage, provided tips plus wages match or exceed the minimum wage.

dol-clarifies-tip-ruleThis arrangement is known as a “tip credit,” whereby the employer can pay a minimum wage of $2.13 an hour to waitstaff and others who routinely receive tips. (Note, however, that some states do not recognize this arrangement, instead mandating that all employees, even tipped ones, be paid the minimum wage.)

But what happens when the tipped employee performs non-tippable work? Under the Obama administration’s interpretation, tipped employees could spend no more than 20 percent of their time doing non-tippable tasks for the employer to legally take the tip credit.

Under the Trump administration that “80/20 rule” is no longer the standard. Instead, if a tipped employee is performing tasks associated with that person’s main occupation, then the tip credit is allowed.

For instance, a restaurant server can be asked to clean tables or restrooms during down times, and the tip credit still applies. However, if the employee is asked to do these tasks when the restaurant is closed, the full minimum wage (or higher) must be paid.

The Trump administration’s Department of Labor (DOL) and its Wage and Hour Division (WHD) rely on the Occupational Information Network database, O*NET, which is available at
https://www.onetonline.org/, to determine whether other duties are directly related to a tip-producing occupation. If they are related, then the tip credit applies.

The WHD on Feb. 15 issued a Field Assistance Bulletin (FAB) regarding the tip credit, which clarifies:

“For example, a server who also cleans and sets tables, makes coffee, and occasionally washes dishes or glasses is engaged in duties related to a tipped occupation, even though the server is not tipped for these related duties.”

Ultimately, however, the bulletin guidance does not carry the weight of the law, and courts may rule otherwise.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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