The Texas Restaurant Association and the legal arm of the National Restaurant Association have asked a federal court to halt the Biden administration’s return to a controversial rule for determining when tips don’t count as wages.
The state association and the national group’s Restaurant Law Center have filed a lawsuit that seeks to halt the re-adoption of discarded guidelines for determining how much an employer has to directly pay a server, bartender or other tipped employee.
A victory by the industry groups would prevent the re-adoption of the 80/20 standard for determining when tipped employees are entitled to a full minimum wage directly from their employer and when tips constitute part of their pay. The rule-of-thumb has been the foundation for a slew of lawsuits filed by restaurant workers against their employers. Most sought late payment of the full wage the servers allege they should have been paid.
Because of what’s called the tip credit, employers need only make up the difference between an allowed amount of gratuities and the minimum wage legally due the tipped worker. Under federal law, the credit is capped at $5.12, meaning an employer has to directly pay an employee at least $2.13.
The legal action filed Friday alleges that the U.S. Department of Labor exceeded its authority when it yanked the guideline that was already in place.
That measure, put forth by the Trump Administration, scuttled the 80/20 rule. Under that guideline, a tipped employee was entitled to a full, direct minimum wage—unchanged by a tip credit—for any work that didn’t generate tips and exceeded 20% of the worker’s job time.
The Trump administration set looser guidelines. Essentially, the new rule regarded a server or bartender’s normal side work—chores with no chance of generating tips—as supportive of their tip-generating work. As long as that was the case, and the work was done before or not long after an employee was earning gratuities again, employers could use a tip credit to reduce what they paid in wages.
DOL yanked the Trump rule several months after the Biden administration took office and announced it would bring back the 80/20 rule. It also suggested a limit on how much side work could be done before a full wage rate kicked in: 30 minutes.
The agency argued that a server or bartender actually had dual jobs: The customer-facing role that earned them tips, and the behind-the-scenes side work they do. DOL contended that two jobs could mean two pay scales.
The association lawsuit says DOL was essentially acting like Congress and instituting a “dual jobs” law with the standard due to take effect Dec. 28.
The plaintiffs are also blasting the DOL standard for failing to understand what actually happens in a restaurant.
“Tasks such as getting the restaurant ready for customers, restocking items during meal service, cleaning, and closing down the restaurant at the end of the day have long been an integral part of the tipped occupations commonly found in restaurants,” Emily Knight, CEO of the Texas Restaurant Association (TRA), said in a statement. “Because restaurant employees often move rapidly from one task to another throughout a shift, there is no practical way for an employer to keep the task-by-task records the administration’s regulations would to avoid potential liability."
The action asks the court to enjoin the adoption of the new standard and to vacate it.
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