Last November, the Wage and Hour Division (WHD) of the Department of Labor (DOL) reissued Opinion Letter FLSA2009-230, effectively eliminating the DOL's long-standing "80/20 rule," which put restrictions on an employer's ability to take a tip credit for tipped employees who also perform non-tip-generating duties when time spent on such duties exceeds 20 percent of their total daily work time.
Now the WHD has updated the division's Field Operations Handbook by issuing Field Assistance Bulletin (FAB) No. 2019-2 (Feb. 15, 2019), which further emphasizes the reduced burden on employers that utilize a tip credit.
The FAB confirms the WHD's new stance regarding the 80/20 rule, stating in relevant part, "WHD will no longer prohibit an employer from taking a tip credit based on the amount of time an employee spends performing duties related to a tip-producing occupation that are performed contemporaneously with direct customer-service duties or for a reasonable time immediately before or after performing such direct-service duties."
The FAB does remind employers, however, that regardless of whether an employer takes a tip credit, it may not keep tips received by its employees.
The FAB adds that WHD staff should apply the new guidance to all investigations on or after Nov. 8, 2018, and the DOL will follow the revised guidance in any open or new investigation concerning work prior to the issuance of the Nov. 8, 2018, opinion letter.
Other takeaways from the FAB include a reinforcement of the following principles the WHD will use when assessing an employer's use of tip credit. Each of these was discussed in the DOL's Opinion Letter FLSA2009-230:
- Duties listed as "core" or "supplemental" for the appropriate tip-producing occupation in the Tasks section of the Details report in the Occupational Information Network (O*NET), will be considered tip-related duties (even though they might not directly generate a tip).
- An employer may take a tip credit for any time spent by the employee on such tip-related duties if they are performed contemporaneously with, or within a reasonable time before or after, direct customer-service duties.
- Employers may not take a tip credit only for time spent performing any tasks that are not contained in 29 CFR 531.56(e) or in the O*NET task list for the employee's tipped occupation.
Despite the above, it's important for hospitality employers in New York to remember that they are still bound by the New York Hospitality Wage Order (NY wage order), which sets a stricter standard than DOL's 80/20 rule. Under the NY wage order, an employer may not take a tip credit for an employee if he or she spends at least two hours or 20 percent of his or her shift (whichever is less) working in a non-tipped occupation.
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