DOL Issues Final Rule for Tip Credits for Employees with Dual Jobs

APPLIES TO

All Employers with Tipped Employees

EFFECTIVE

December 28, 2021

QUESTIONS?

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The U.S. Department of Labor (DOL) recently published a Tips Rule addressing tip credits for employees who perform tipped and non-tipped duties (dual jobs). In 2020, the DOL published a tips rule that was later partially delayed in 2021 (2020 tips rule). The DOL already issued a final rule for the assessment of civil money penalties (CMPs) under the Fair Labor Standards Act (FLSA), and now addresses the dual jobs issue.

The dual jobs rule clarifies that an employer may take a tip credit only when an employee is performing work that is part of a tipped occupation. Specifically, an employer can take a tip credit only when the worker is performing tip producing work or when:

A tipped employee performs work that directly supports tip producing work for less than 20 percent of the hours worked during the employee’s workweek. An employer cannot take a tip credit for any of the time that exceeds 20 percent of the workweek, and time for which an employer does not take a tip credit is excluded in calculating the 20 percent tolerance.
A tipped employee performs directly supporting work for no more than 30 minutes. An employer cannot take a tip credit for any of the time that exceeds 30 minutes.

The dual jobs rule provides specific examples of “tip-producing work,” “directly supporting work,” and “work that is not part of the tipped occupation.” Notably, the resurrected 80/20 rule does not reference O*Net for determining qualifying tipped jobs, but rather seeks to be more flexible in looking at job functionality. The preamble also states that the 20% calculation need only be done once each workweek, avoiding the need to perform recalculations. Additionally, any time spent performing work that is not part of the tipped occupation must be fully compensated without a tip credit.

The Final Rule also amends the provisions of the Executive Order 13658 regulations, which address the hourly minimum wage paid by contractors to workers performing work on or in connection with covered federal contracts consistent with the amendments to the dual jobs regulations.

Action Items

Review the final rule here.
Review employee job roles for compliance.
Update tip credit practices consistent with the rule.
Have appropriate personnel trained on the regulations.
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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.