A U.S. court has upended the new federal standard for determining when restaurants can count tips toward servers’ wages, reopening the door to employee litigation pivoting on the so-called 80/20 rule.
Under the 80/20 standard, which the U.S. Department of Labor (DOL) essentially scuttled in November, restaurants are required to directly pay servers a full minimum wage for non-tipped work that exceeds 20% of their overall shift time. If duties such as rolling silverware or setting tables constitute less than one-fifth of a waiter or waitress’ time on the clock, their employer can pay a lower wage and take a tip credit, or count tips toward the minimum hourly compensation, for all of the hours that were worked.
Because multitasking makes 20% of a server’s job difficult to gauge, restaurants are often sued by waitstaffs alleging they were shortchanged on receiving the full minimum wage. The lawsuits typically seek tens or hundreds of thousands in back wages.
The DOL sought to discourage the litigation by changing the standard that determines when a tip credit can be taken for non-tipped side work. It greatly broadened the instances where restaurants can pay the lower wage, saying a tip credit can be taken for most ancillary work that servers have regularly and customarily assigned.
"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 in an “opinion letter,” or a guide for employers. Servers are not performing two jobs, DOL argued, and hence are not entitled to two types of pay schedules.
The standard set out in the opinion later was taken verbatim from a statement of policy that was issued but subsequently retracted in 2009, at the start of the Obama administration.
But the U.S. District Court for the Western District of Missouri decided in a lawsuit brought against a Buffalo Wild Wings franchisee that the new standard did not merit adoption. The defendant, an operator called Let’s Eat Out, had argued that the DOL’s opinion letter was cause for decertifying the class action, or essentially killing the suit.
The district court said the opinion letter was “unpersuasive and unworthy.”
“The abrupt issuance of an opinion letter purporting to change the DOL’s interpretation after years of consistently construing the dual jobs regulation as limited by the 80/20 rule does not persuade this court to apply a new interpretation to this litigation,” wrote District Court Judge Stephen Bough. “The DOL does not offer reasoning or evidence of any thorough consideration for reversing course.”
The suit against Let’s Eat Out was settled a day later , for terms that were not revealed.
The turn of events leaves the new standard in a limbo of sorts, with a determination likely to be made in subsequent litigation.