U.S. Department of Labor issues final rule for restaurant owners on tip credit, server side work

click to enlarge The U.S. Department of Labor has announced a long-awaited final rule on proposed changes to federal tip credit rules.
The U.S. Department of Labor has announced a long-awaited final rule on proposed changes to federal tip credit rules.

Looks like restaurant front-of-house managers dodged an administrative bullet.

The U.S. Department of Labor last week unveiled long-awaited final version of proposed changes to federal tip credit rules. Under its revamp, restaurant managers could have been required to closely monitor tipped employees’ work and deem whether it's “relevant” server side work.

In short, the final rule won’t require managers to document the minutiae of each server’s shift, which is basically what the proposed changes would have mandated.

Thursday’s rule restores the Obama-era “80/20” rule, which states that an employer can take a tip credit only when the worker is performing tip-producing work.

For those unfamiliar, the “80/20 rule,” or the “dual jobs” portion of the Fair Labor Standards Act (FLSA) gives employers the ability to pay a sub-minimum wage for tip-supporting work. However, that's only allowed if the worker spends less than 20% of hours worked during a workweek, or less than 30 minutes continuously, on tip-supporting work.

Examples of work that directly support the job of a restaurant server include folding napkins, preparing silverware and garnishing plates. Sweeping the floor, however, would only support tipped work if it's done in the dining room.

The updated rule supports tipped workers, many of whom have been doing what they can to keep the restaurant and bar industries afloat amid debilitating labor shortages. Labor Department officials argued that tipped workers weathered the pandemic at risk to themselves and their families and therefore should be protected.

“Women, people of color and immigrants represent more than half of all tipped workers,” Jessica Looman, the Labor Department’s wage and hour division acting administrator, said in a release. “Today’s final rule enhances protections for this vital segment of the nation’s essential workforce and combats income disparity and promotes equity.”

The final rule becomes effective Dec. 28.

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