On Monday, June 21st, the Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking (“NPRM”) that would alter regulations interpreting who is considered a “tipped employee” under the Fair Labor Standards Act (“FLSA”) yet again. Specifically, the NPRM proposes (1) to withdraw the dual jobs portion of the Final Rule promulgated in December 2020; and (2) a new regulatory framework by which to determine whether an employee is performing work that meets the definition of a tipped occupation and allows the employer to take a tip credit under the FLSA. Specifically, the FLSA allows an employer to pay a tipped employee less than the minimum wage – specifically $2.13 per hour under Federal law – only when the worker is engaged in a tipped occupation because the tips the employee receives should make up for the rest of minimum wage hourly rate. The NPRM creates a revised standard by which an employer would determine who is a “tipped employee” and for what portion of that employee’s work hours the employer can take a tip credit and pay the employee at the lower rate. The standard the DOL proposes to adopt generally reflects the interpretive guidance it maintained for decades before a new standard was established during the Trump Administration – the “80/20 Rule” – along with some other changes that the DOL asserts better define tipped work.
Background of the Dual Jobs Standard for Tipped Employees
Under the FLSA, “tipped employees” are defined as those employees who customarily and regularly receive more than $30 a month in tips. As stated, employers can pay tipped employees a reduced cash wage and claim a “tip credit” to make up the difference between the reduced cash wage and hourly minimum wage. When the DOL first published its regulations on application of the tip credit, it directly addressed the scenario where an employee has “dual jobs” under 29 C.F.R. 531.56(e) – two jobs for the same employer. In that situation, employers can take the tip credit only for the tipped job (i.e., the one routinely satisfying the $30-a-month provision). Later, the DOL revised its Field Operations Handbook (FOH), vastly broadening the scope of its “dual jobs” distinction by applying it to dual tasks. It stated that when “tipped employees spend a substantial amount of time (in excess of 20%) performing preparation work or maintenance, no tip credit may be taken for the time spent in such duties.” This is what’s known as the “80/20 rule.”
The DOL enforced this interpretation until 2018 when Continue reading