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DOL delays discontinuation of 80/20 rule on servers' pay

The department is seeking a two-month postponement to further study the rule change proposed by the Trump administration.

The U.S. Department of Labor (DOL) has proposed a two-month delay in adopting the Trump administration’s rule for determining when servers and bartenders are entitled to the full minimum wage from their employers rather than the lower rate permitted with a tip credit.

The measure, a replacement of the 80/20 rule of thumb currently governing server pay, was scheduled to take effect on March 1. Pushing back the start date until April 30 will provide time for further study of the alternate plan that was put forth under Trump, DOL said in proposing the delay. The postponement increases the chances that the new rule will be scuttled or significantly altered.

Trump’s rule provided an employer-friendlier way of determining when a server or other tipped employee was entitled to the full minimum wage for performing functions that typically aren’t rewarded with a tip, such as refilling ketchup bottles or rolling silverware in napkins. Those chores are commonly known as side work.

The Trump administration reasoned that side work figures into the tips a server earns. Its rule allowed employers to count gratuities toward a waiter or waitress’ hourly pay if performed contemporaneously with direct customer-service duties or for a reasonable time immediately before or after performing such direct-service duties.” 

Although the new rule was not yet in effect, the DOL alerted its Wage and Hour Division in Feb. 2019 to stop enforcing the 80/20 standard. Under that rule of thumb, servers were entitled to the full minimum wage for any non-tipped work exceeding 20% of their duties.

Because that standard was vague and exact record-keeping was difficult, it was often the basis of lawsuits filed by servers alleging they were short-changed on pay for side work. If their employer took a tip credit for those functions, the servers could be paid as little as $2.13 under federal rules, versus the full nationwide minimum wage of $7.25.

States typically have a much higher pay scale. All but seven allow employers to take a tip credit.

The attorneys general of 18 states and the District of Columbia implored Trump’s DOL secretary, Eugene Scalia, not to adopt the new standard. They sent a letter to the secretary in Jan. 2019, arguing that the rule should not be enacted because there was no proof the 80/20 rule put an undue burden on employers. They also found fault with how the rule change was put forward.

Labor advocates have pushed for scuttling the tip credit altogether. They note that the concession to employers extends back to the 19th century when the measure was put forward as a way of creating enough jobs to employ soldiers from the Civil War and former slaves.  Groups like One Fair Wage have seized on the connection to slavery to blast the tip credit as a disgraceful economic and social anachronism.

DOL’s efforts to delay enactment of the new side work standard are part of a commitment by the Biden administration to review regulatory changes imposed or proposed by its predecessor.

The bureau has also delayed the enactment of a proposal that would allow more restaurant employees to participate in tip pools in states where a tip credit is not permitted.

DOL is currently soliciting comments on the delayed enactment of both measures.

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