In Restaurant Law Center et al. vs. US Department of Labor, Case 1:21-cv-01106-RP (W.D. Tex. July 6, 2023), the Texas Federal District Court granted summary judgment in favor of the DOL, upholding the DOL’s December 2021 regulations on the “80/20 Rule,” denying the plaintiffs’ summary judgment motion, and refusing to enter the requested preliminary injunction against the regulation. The key takeaway is that, unless the Fifth Circuit reverses the District Court, the 80/20 Rule will remain in effect. Restaurant owners and other employers of tipped employees must continue to ensure compliance with the 80/20 Rule through careful record keeping and supervision of employee duties.
Background of the 80/20 Rule
Under the Fair Labor Standards Act, an employer may pay an employee “engaged in a tipped occupation” cash wages at a special subminimum wage of $2.13/hour and take a “tip credit” using tips received by the employee to make up the difference between this wage and the regular $7.25 minimum wage. For purposes of when an employer may use the “tip credit”, the US Department of Labor revised the regulations in December 2021 to use a “functional” test based on an employee’s job duties. Under the Rule, the employer may use the tip credit for “tip-producing work” and “directly supporting work,” so long as 80 percent or more of the employee’s work is tip-producing, and no more than 20 percent is directly supporting work during the seven-day workweek. The Rule also requires employers...
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