Over the past year, the U.S. Department of Labor has been in the process of reworking its final rule on tip regulations under the Fair Labor Standards Act. On October 28, 2021, the DOL announced publication of the final rule that effectively redefines the circumstances in which an employer can take a tip credit when employees are engaged in dual-role tipped work, such as “side work.” The final rule will take effect on December 28, 2021.
Under the final rule, an employer may take a tip credit only when an employee is performing work that is tip-producing or work that directly supports tip-producing work, provided that such support work is not performed for a substantial amount of time.
While taking and inputting orders and delivering food and drinks is tip-producing work, tipped workers (for instance, in the restaurant industry), are commonly required to set tables, make coffee, and occasionally wash dishes or glasses. These activities, which are “single-step, easily executed food and drink preparations,” support tip-producing work. As such, an employer may take a tip-credit so long as this support work is not performed for a substantial amount of time.
The final rule defines “substantial amount of time” as either (1) work exceeding, in the aggregate, 20% of the employee’s hours worked during the workweek or (2) work which is performed for a continuous period of time exceeding 30 minutes.
Though bearing some similarities, this final rule is a departure from the prior “20% rule.” Under the 20% rule, for an employer to take a tip credit for work that was not directly tip-producing, the employee’s side work had to be “incidental to” tip-producing work and must not exceed 20% of the employee’s overall duties.
This new rule is likely to require increasingly close supervision of employees by the employer to ensure compliance. A careful review and possible revision of current practices, policies and procedures, as well as training on the final rule, may be required for those employers impacted by this change. For any questions, please feel free to contact Giancarlo Cellini at Assouline & Berlowe.
Giancarlo Cellini, Esq.
213 East Sheridan Street, Suite 3
Dania Beach, Florida 33004