Duties and functions

DOL’s Proposal to Resurrect the 80/20 Rule for Tipped Employees Does Not Address Long-Standing Industry Concerns | Small

On June 23, 2021, the United States Department of Labor (DOL) released a notice of proposed regulations (NPRM), which reverses the course of a December 2020 final rule and seeks to resurrect the so-called “80/20 rule” which governs how tip employees are to be paid under the Fair Labor Standards Act (FLSA). Despite the DOL’s attempt to add clarity, the proposed rule is full of ambiguities and contradictions.

Littler and its Workplace Policy Institute (WPI) have been following this issue closely and have provided feedback every step of the way. We anticipate that we will provide feedback to DOL again on why the latest version of the 80/20 rule is poorly targeted and unworkable. We encourage those interested in the hospitality industry to make their voices heard also by submit comments to DOL before August 23, 2021.

The story of 80/20

In 1988, the DOL attempted to clarify an existing regulation on “duplication” by inserting a provision in its field operations manual that told DOL field investigators that tip credit was not available when tipped employees spend more than 20% of their time on non-professional activities. tip-producing activities. This concept, known as the 80/20 rule, was not often invoked until the early 2000s, when it became the subject of a tip litigation.

During the Obama administration, the DOL publicly stated that employers could only apply tip credit to employees spending less than 20% of their shift doing work without a tip. This position has led to more litigation and has proven to be totally impractical for the hospitality industry, in part due to the lack of guidance on what tasks qualify as tips or without tips. The position also left employers with the onerous task of identifying, down to the minute, the work done by tipped employees on a given shift.

In November 2018, the DOL reissued and adopted an opinion piece that was almost ten years old (and subsequently made corresponding changes to the Field Operations Manual) clarifying how employers can pay employees who tip tips. perform related duties without tip. This opinion letter stated that there is no limit to the number of tasks related to a tip production activity that can be performed, as long as the tasks are performed at the same time as the direct customer service tasks. , or for a reasonable period immediately before or after performing direct customer service duties In other words, as long as the side work was “in progress” the side work—that is to say., related tasks performed during a shift — there was no 20% or other limit on the amount of secondary work that could be done. If the waiters brewed coffee and rolled and polished the silverware during business hours while simultaneously serving guests, this type of work could be done while the employer was still applying tip credit to employees’ wages. The only quantitative limitation was that the waiter’s salary and tips combined had to be equal to or greater than the minimum wage. The DOL further stated that the functions set out in the Federal Occupation Database, O * NET, www.onetonline.org, were presumed to be related to the dumped occupation.

In December 2020, the DOL released a final rule that essentially adopted the language of the opinion letter. By eliminating the focus on the percentage of time spent on “no-tip” tasks (that is to say., the 80/20 rule), the December 2020 rule removed an unenforceable task-by-task timing requirement and replaced it with a reasonable, profession-based standard that guaranteed tipped employees full minimum wage protection. of the FLSA and overtime provisions.

In February 2021 and again in April 2021, the DOL delayed the date of entry into force of the December 2020 Final Rule to give it “time to deal with other matters of law, policy and fact and complete the development of separate rules ”. The June 24 NPRM is this “separate rule making”.

The 80/20 reboot of June 2021

In the June 2021 NPRM, the DOL seeks to resurrect the 80/20 rule with a few changes that the DOL says address some of the concerns that have been raised regarding the 80/20 rule. The restart falls short of addressing concerns, in large part because the 80/20 rule remains unworkable and compounds existing confusion over the proper application of tip credit.

In the June 2021 NPRM, the DOL proposes to divide the duties of a tip employee into three categories: (1) tipping work; (2) work that directly supports tip-generating work; and (3) unrelated work (that is to say, work that does not tip or directly support work that does tip). In the text of the proposed rule and in the preamble of the NPRM, the DOL provides examples of each category for a few tipping occupations, including restaurant waiters, buses, and bartenders.

Server

Busser

Bartender

Tip-producer

  • Fill water glasses
  • Clear dishes from tables
  • Replacement of table linen
  • Make drinks
  • Serve drinks
  • Talking to customers

Support directly

  • Prepare items for tables to facilitate service
  • Cleaning tables
  • Folding napkins
  • Silverware preparation
  • Plates of garnish
  • Sweep under the tables

  • Preparation of fruit garnishes
  • Wiping bar
  • Wiping tables in the bar
  • Cleaning of bar glasses and tools used behind the bar
  • Bottle storage behind the bar
  • “Briefly” recovery of storage items such as alcohol, ice and towels

Unconnected

  • Food preparation
  • Bathroom cleaning
  • Food preparation
  • Dining room cleaning

Under the proposed rule, any time spent in the unrelated task category must be remunerated at the full minimum wage (that is to say., no tip credit can be taken). Time spent on “direct support” tasks may be remunerated at a tip credit rate, but only if the work is not performed for a “substantial period”. “Substantial time” is defined as: (1) more than 30 continuous minutes; or (2) more than 20% of the “hours worked during the employee’s work week”. Although the proposed rule is unclear, it can be assumed that “hours worked during the working week” refers only to hours worked as a tip employee and would not include, for example, hours worked in the week. as a cook or in some other non-tip position.

The proposed rule provides that the first 20% of “direct support” work may be paid at a tip credit rate, but that any overage of 20% must be paid at full minimum wage. On the other hand, if an employee spends more than 30 continuous minutes in “direct support” work, all that continuous time must be paid at full minimum wage.

The DOL asked for comments on the proposal, and specifically invites comments on the definition of tip production work and any trades and examples that the DOL should consider.

Comments possibilities

As Littler and WPI have long argued, the 80/20 rule is flawed, and we will be submitting comments to remind DOL of the overriding concerns about the 80/20 methodology. Beyond that, the June 2021 reboot has issues that call for comment and revisions.

If there is to be an 80/20 rule, then the attempt to clearly define the three categories of work is an essential starting point. But the current proposal is far from sufficient. For example, what tasks are included in “wait tables” by a server? Does this include time spent walking to the back of the house and returning with food and drink? Does this include refilling soft drink glasses? Does this include the time spent processing cash and credit card transactions? All of these functions are an integral part of waiting tables and should be included in tipping tasks. If the DOL refuses to rely on an external resource such as O * Net to define the scope of the reported occupations, then the regulation itself should give employers and employees detailed instructions – but providing some illustrative examples is simply inviting. litigation to fill the huge void.

The current proposal also contains contradictions which invite various interpretations. For example, a busser’s job of clearing a table and replacing table linens is identified by DOL as tipping, but if a waiter or bartender cleans a table to get it ready for the next guest, that is simply “directly related”. Likewise, a bartender can prepare and garnish a drink, and this job involves tipping. But garnishing a plate is simply “directly related”.

Beyond that, the June 2021 proposal does nothing to address the concern that the 80/20 rule requires employers to attempt to track employee activities second by second throughout a shift. job. Even if / when DOL decides how each task should be classified into one of the three categories, in practice there is still no reasonable way to accurately track the few seconds spent on each task before a knowledgeable employee does. go to the next one.

Proponents of the 80/20 rule suggest that the dilemma of time tracking is resolved by only assigning tipping tasks. This may be a possibility if / when DOL clearly defines these tasks. But what should an employer do if limiting tip-producing tasks results in significant downtime? What category does inactivity time belong to?

The proposal also does not take multitasking into account. How do you characterize the time a bartender spends cleaning the bar while chatting with customers?

Take away food

We urge employers and relevant industry groups to make their voices heard by providing their comments by the August 23, 2021 deadline. Stakeholders should take this opportunity to convey to DOL the lingering issues with the proposed rule.

Employers should also keep in mind that the FLSA does not prejudge more protective state or local laws. Many states have employee compensation provisions that do not allow tip credit at all, or that differ from the FLSA in many ways.

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