The U.S. Department of Labor (DOL) provided full-service restaurants with a potent defense against tip-related lawsuits today by clarifying when servers and other tipped employees are entitled to a full minimum wage and when their employers can pay a lower amount because gratuities are considered part of an individual’s compensation.
The department reissued guidelines that entitled employers to take a tip credit, or count tips toward the minimum wage due a server or bartender, provided that employee’s work time is spent in tip-generating work or "related duties". When a waiter or waitress does side work such as rolling silverware or setting tables, her employer can still pay the lower wage and take a tip credit, even though the employee doesn’t earn tips for that work, provided those duties are "contemporaneous"--coming immediately before or after waiting on customers--and related to tip-producing work.
The gauge replaces the prior determinant of when side work merits payment of a full minimum wage (at least $7.25 an hour, instead of the $2.13 allowed with a tip credit.) Employees were entitled to the full wage for any ancillary or non-tipped work exceeding 20% of their total duties.
Because gauging 20% of a server or bartender's job is difficult, employees often sued their restaurant employers, arguing in court that they should have been paid a full page for their nontipped work and were entitled to the back pay.
Plaintiffs would often contend that restaurants were purposely assigning nontipped work to servers—the sort of chores that busboys or prep cooks might have done—because they could be paid a lower wage.
The threshold reaffirmed by today's DOL letter provides restaurants with far more latitude for applying a tip credit to server's ancillary work.
"We do not intend to place a limitation on amount of duties related to a tip-producing occupation that may be performed, provided they are performed contemporaneously with direct customer-service duties," DOL wrote.
DOL argued that auxiliary functions are duties related to serving, assigned regularly and by custom to servers as part of their job, for which they are compensated to a large degree by customers’ tips. The nontipped side work does not constitute a second job, and hence does not merit a different mode of compensation, the department decided.
The guideline issued today is known as an opinion letter, or an advisory to employers about how to interpret a law and act in accordance. It was actually a verbatim copy of instructions that had been in effect until March 2, 2009, under the Obama administration, when DOL reconsidered its interpretation of wage and hour rules on tipping.
DOL did not say why it chose this moment to reassert the guidelines that had been withdrawn in 2009, but the move is consistent with the Trump administration’s perceived pro-business stance.
The reissue of the opinion letter was praised by the Restaurant Law Center, the litigation arm of the National Restaurant Association.“The opinion is closely in line with the longstanding and well-known realities of front-of-house restaurant work, as well as the wording and intent behind the underlying statute,” Angelo Amador, executive director of the Center, said in a statement. “We feel that today’s opinion letter reflects the department’s willingness to establish a clear definition of ‘related’ and ‘unrelated’ work regarding the 80/20 rule.
“This is a win-win both for tipped workers and employers alike, and will help curb the onslaught of frivolous lawsuits resulting from the current illegal and arbitrary interpretation.”
Correction: An earlier version of this story incorrectly indicated the 80/20 rule could still be used a gauge for determining when a tip credit could or could not be taken. That determinant has been replaced.