Tip Credits: Twenty Percent Rule For Non-Tipped Duties Adopted


Recently, the Eighth Circuit Court of Appeals ruled that tipped employees who spend more than 20 percent of their time on non-tip-producing “related duties” must be paid at least the minimum wage for that time. Fast v. Applebee's. This decision marks the first time an appellate court has expressly adopted the Department of Labor’s 20 percent rule – that employer’s may not pay subminimum wage for time spent on non-tipped related duties that exceeds 20 percent of an employee’s working time.

In Fast, the plaintiffs’ claimed that Applebee’s improperly paid servers and bartenders the tip-credit rate for all hours worked, which included time spent performing non-tip producing work, such as taking inventory, stocking serving areas, or rolling silverware. While the FLSA regulations governing “dual jobs” refer to certain terms and concepts, they do not explicitly define when an employee is engaged in a tipped job or related duties.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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