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Federal 80/20 tip rule took effect in December

On Behalf of | Dec 2, 2021 | Wage & Hour Laws |

The last 18 months were confusing for restaurants and difficult for restaurant workers, but the federal government is withdrawing wage provisions adopted late last year and reinstating 80/20 rules limiting when employers can pay restaurant workers the lower tipped wages for non-tipped tasks.

Former rule

In December 2020, the U.S. Department of Labor finalized a rule and eliminated the 80/20 regulation. Under the 80/20 rule, workers may be paid tips for tasks that directly support tipped tasks and do not take up over 20 percent of their time or 30 consecutive minutes.

When it withdrew that rule, the DOL said that employers could continue to pay the tipped minimum wage of $2.13 per hour ($6.98 in Florida); however, the nontipped work had to be performed at the same time or immediately before or after a worker’s primary tipped duties regardless of the time spent on these tasks.

Many business groups supported this decision and the DOL’s policies on these wage and hour issues. They claimed that knowing the precise amount of time that workers engaged in different tasks was impracticable. Worker advocates, however, said that these changes would take away hundreds of millions of dollars of wages from workers.

80/20 rule

The DOL issued a final rule in late October reinstating the 80/20 rule that was originally issued in 1988. The 80/20 rule took effect again this past December. The DOL’s Wage and Hour Division estimates that employers will pay an average of $183.6 million each year over the next decade.

The WHD said that women, people of color and immigrants comprise over half of all tipped workers in this country and that this rule improves protections for these workers, fights income disparity and promotes equity. The National Restaurant Association, however, claimed that this new rule will cause confusion and serious compliance problems, especially during the busy holiday season.

Financial penalties also addressed

The WHD also adopted another rule in October by reinstating its ability to impose monetary penalties on employers who keep their workers’ tips even if the violations are not willful. It withdrew a previous rule allowing DOL to issue penalties of $1,100 per violation only if employers purposely or repeatedly failed to pay workers their full earned tips.

Restaurants and workers with questions about the new rule should reach out to a legal advocate who can explain it in more detail.