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Deciding what to pay employees who receive tips

On Behalf of | Nov 16, 2018 | Firm News

The Fair Labor Standards Act requires restaurant owners to pay tipped employees at least $2.13 per hour in wages. The employer can then take a tip credit for differences between wages paid and minimum wage requirements.

However, many tipped employees also perform services unrelated to receiving tips. Deciding what to pay such employees can be difficult.

Retraction of the 80/20 rule

The Department of Labor recently retracted what was popularly known as the 80/20 rule. The 80/20 rule holds that employees who receive tips may still receive a minimum wage payment for services they perform on the job that do not generate tips. This rule required them to receive minimum wage for such duties.

The 80/20 rule was not a federal regulation. Instead, it came about concerning interpretations of section 30d00(e) within the U.S. Department of Labor’s (“DOL”) Field Operations Handbook. Under the rule, employers cannot use the tip credit for non-tip job duties if such duties exceed 20 percent of work hours.

As an article in Food News Media noted, the 80/20 rule was confusing. It was often unclear for employers whether certain duties actually relate to the receiving of tips. For example, is rolling silverware for customers or cleaning tables related to receiving tips? Under the rule, even if ruled tip related the employer must pay the worker minimum wage for those tasks if these occupy over 20 percent of the workweek. Unfortunately, ambiguity regarding interpretation of the law has resulted in lawsuits.

Abiding by confusing wage and hour laws

It’s a difficult task for employers and restaurant owners to keep track of a whole slew of confusing laws and regulations pertaining to wages. While the 80/20 rule appears to no longer be a matter of concern, it’s difficult to know what actions legislators will take to replace it.

Seasoned business and employment law attorneys can monitor developments and help make certain your business remain in compliance with federal and state requirements. Such compliance will prevent legal disputes from arising.


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