I subscribe to many blogs, one of which is HR Defense, Akerman Insights on the Latest Developments in Labor and Employment Law. Today’s update is located here.
Restaurant Industry Takes On Tip Credit “80/20 Rule”
The ongoing discussion regarding whether or not the Dual Jobs rule (using tips to comply with the Fair Labor Standards Act’s mandate to pay minimum wage and overtime to workers who are not exempt under one of the recognized exemptions) violates the FLSA. The Restaurant Law Center is also challenging the DOL Handbook’s 80/20 Rule, specifically that it was not created following the rulemaking process which violates the federal Administrative Procedure Act. Note that the DOL’s Wage and Hour Division investigators and staff use the Handbook to interpret statutory provisions, procedures for conducting investigations, and general administrative guidance.
Here is a link to the suit that is pending Restaurant Law Center v. U.S. Dept. of Labor, No. 18-cv-567 (W.D. Tex. July 6, 2018
PAGE 8 has a nice legal summary….
THE STATUTORY FRAMEWORK
15. Section 6(a) of the FLSA requires employers to pay their covered employees a
minimum wage of at least $7.25 per hour. 29 U.S.C. § 206(a).
16. Section 3(m) of the FLSA, which defines the term “[w]age” under the statute,
allows an employer to satisfy its minimum wage obligation to a “tipped employee” in part by taking a “credit” toward the minimum wage based on tips an employee receives. Id. § 203(m).
17. Section 3(t) of the FLSA defines “tipped employee” as “any employee engaged in
an occupation in which he customarily and regularly receives more than $30 a month in tips.” Id. § 203(t).
18. Section 3(m) requires an employer who elects to take the tip credit to pay the
employee a cash wage of at least $2.13 per hour, and then the law defines the employee’s tips as constituting a “wage” that counts toward the minimum wage, up to the point where the cash wage plus the employee’s tips equal the minimum wage. Id. § 203(m).
19. If the employee does not earn sufficient tips to bring his or her earnings up to the
full minimum wage, then the employer must pay additional wages to make up the difference. Id.
20. Before 1966, the FLSA generally did not apply to employees in restaurants and
21. In 1966, as part of the legislative compromise struck in extending the coverage of
the FLSA to these industries, Congress enacted the tip credit provision, modifying section 3(m) and adding section 3(t) to allow the tips received by employees to satisfy a portion of the minimum wage obligation.
While everyone waits for a resolution, Akerman offers suggestions on what employers should do to protect themselves from an 80/20 potential lawsuit. They also note that there is a possibility that the 80/20 rule will be short lived and the tip credit will disappear meaning employers will have to pay tipped-employees full minimum wage without being able to consider tips earned.
Here’s that Akerman to-do list:
- Keep records of the amount of time employees spend performing non-tip eligible tasks, such as cleaning bathrooms, mopping floors, dusting furniture or other tasks unrelated to direct guest services.
- Create and/or review existing job descriptions for all tip-credit eligible employees, including specific tasks to be performed by each position and routinely evaluate the time implications spent on non-tipped activities or those activities that may not be considered tip-generating.
- Regularly instruct tip-credit eligible employees on time-tracking policies, including requiring tipped-employees to report any shifts for which they claim to have spent more than 20% of their time on non-tip generating tasks.
Enjoy your day!