Login To  

Client Portal

Welcome News for Hospitality Industry: The DOL Retracts its "80/20 Rule"

The United States Department of Labor (DOL) issued an opinion letter yesterday that has redacted its “80/20 Rule.” The 80/20 Rule disallowed employers from taking the tip credit if a tipped employee spent 20% or more of their time performing non-tipped related duties in conjunction with their tip producing duties. Section 3(m) of the Fair Labor Standards Act (FLSA) allows employers to take a “tip credit” under certain circumstances for employees engaged in traditionally tipped occupations. Employers are able to pay tipped employees a minimum of $2.13 ($2.63 in Arkansas) an hour and take a tip credit equal to the difference between wages paid and the minimum wage.

In its letter the DOL stated the 80/20 Rule was found to be unworkable as it requires constant surveillance by employers to differentiate non-tipped related duties from tip-producing duties, essentially requiring employers to become time study professionals. In redacting the 80/20 Rule, the DOL opinion letter does not set a percentage limitation as to the amount of related duties that can be performed as long as they are “performed contemporaneously with the duties involving direct service to customers or for a reasonable time immediately before or after performing such direct-service duties.”

The DOL plans to revise this section again in the near future but for now, this withdrawal of the 80/20 Rule provides an easier application of FLSA regulations for employers who employ tipped employees. If you have questions about the DOL’s withdrawal of the 80/20 Rule, feel free to contact one of our wage and hour attorneys by calling (501) 371-9999.