The following article first appeared in the Insights section of Littler Mendelson’s website. It is reposted here with permission.
In the latest development involving the so-called “80/20 Rule” for tipped employees, the U.S. Department of Labor has taken another step toward elimination of the rule by formally withdrawing three opinion letters that served as the basis for the rule.
Since 1966, the federal Fair Labor Standards Act has permitted employers to pay “tipped employees” a lower minimum wage and take a “tip credit” to satisfy the FLSA’s minimum wage requirement.
A “tipped employee” is “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” [29 U.S.C. § 203(t)]
In 1967, DOL issued a “dual jobs” regulation that recognized the reality that an employee may be employed to perform two or more distinct jobs for the same employer, and that a tip credit may only be taken for work in an occupation in which the employee customarily and regularly receives at least $30 per month in tips.
The “dual jobs” regulation also provides that a tipped employee may perform related duties, such as cleaning and setting tables, that need not be directed toward producing tips. [29 C.F.R. § 531.56(e)]
Through opinion letters issued in 1979, 1980, and 1985, and as formalized in 1988 in the DOL’s Field Operations Handbook, DOL took the position that the tip credit was not available when tipped employees devoted more than 20% of their...
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