If you see your waiter or waitress grumbling during the holiday season, it could be due to the DOL’s Wage and Hour Division’s revision of the rules dealing with minimum pay due to “tipped” employees. Under the FLSA and accompanying regulations, employers can pay “tipped” employees (those who regularly receive not less than $30 a month in tips) not less than $2.13 per hour and take a “tip credit” for the difference they receive in tips up to the minimum wage. Waiters, bartenders, etc. are very familiar with this rule.
Dual Jobs vs. Side Work
Questions arise, however, when an employee may have “dual jobs.” For example, what if John, a hotel maintenance worker, also serves as a waiter in the hotel restaurant? In that situation, the employer can pay John as a “tipped employee” (i.e., $2.13/hour) only for the time he works as a waiter and must pay him at least minimum wage for the maintenance work.
What if, however, John is a server in the hotel restaurant and has regular “side work” that doesn’t generate tips (e.g., rolling silverware, wiping tables, or cleaning dishes)? Do you have to pay him minimum wage for the side work? Back in 1988, the DOL issued guidance stating that if 20 percent or more of a “tipped” employee’s work involved these non-tip-generating “side work” tasks, then the employer had to pay the full minimum wage for their time doing that side work. It’s not clear that this rule was ever aggressively pursued by the DOL, but it generated a lot of litigation. In January 2009, the Bush administration’s DOL explicitly rejected the 20 percent standard and instituted guidance stating that there was no limitation as long as the non-tip-producing duties were performed contemporaneously with the direct customer-service duties. Several months later, the Obama administration reversed course and re-instituted the 20 percent rule.
More litigation ensued over the 20 percent standard, including suits by restaurant advocacy groups claiming the guidance was unconstitutional. In November 2018, the Trump administration’s DOL went back to the 2009 Bush guidance and revoked the 20 percent standard. The DOL, in fact, simply re-issued the 2009 DOL letter on the guidance. Therefore, as it stands now, an employer can continue to use the “tip credit,” even if a server engages in more than 20 percent of their work in non-tip-generating work. However, that non-tip-generating work has to be contemporaneous with the customer-service work.
What Does All This Flip-Flopping Mean?
One of the reasons the 2009 letter (and now the 2018 letter) gives for changing the standard is to avoid all the confusion surrounding the rule. The letter cited a case where the court felt that the 20 percent rule could require “perpetual surveillance” or “precise time logs accounting for every minute” of an employee’s shift. However, even when the 20 percent rule was in place, it is unclear how much it was actually policed. The best takeaway for an employer faced with this situation is to evaluate the actual jobs being done by your employees. If you have a maintenance person who spends 85 percent of their time fixing things, but occasionally helps out with a shift behind the bar, you should not apply the tip rule to their maintenance duties. However, if you have your wait staff rolling silverware before their shift, you are probably OK continuing to apply the tip credit rule. Unless you have a HUGE amount of silverware.
