DOL’s Dual Jobs Final Rule: Will It Be a Horror Show for Employers?

On October 28, 2021, the U.S. Division of Labor (DOL) launched a final rule that will trigger many employers within the restaurant, hospitality, and repair industries to rethink and/or finish their use of tip credit beneath the federal Honest Labor Requirements Act (FLSA). Underneath the FLSA, an employer that meets sure necessities might depend a restricted quantity of the ideas its tipped staff obtain as a credit score towards its federal minimal wage obligation—a observe which is named a “tip credit.” At the moment, federal regulation caps the tip credit score an employer might take at $5.12 per hour, and the bottom subminimum wage that an employer might pay is $2.13 per hour. The FLSA defines a “tipped employee” for whom an employer might take a tip credit score as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.”

The brand new so-called Dual Jobs last rule, which was revealed within the Federal Register on October 29, 2021, and which is able to change into efficient 60 days after publication (on the finish of December), largely mirrors the notice of proposed rulemaking (NPRM) published in June 2021. The Dual Jobs last rule modifies some definitions, clarifies implications, and solutions questions that had been underlying the NPRM. Though the DOL, within the last rule’s preamble, states that it’s delicate to the affect the pandemic has had on the restaurant, hospitality, and repair industries, the ultimate rule seemingly will create extra challenges within the type of greater prices and administrative complications for employers in these sectors. Notably, the DOL’s Dual Jobs last rule rejects the strategy taken by the Trump administration for figuring out which hours will be paid on the subminimum wage.

Abstract of Variations Between the Dual Jobs Final Rule and NPRM

In each the NPRM and the Dual Jobs last rule, the DOL has taken the place that employers might take a tip credit score for “tip producing work” and work that “directly supports” tip producing work, offered that the immediately supporting work shouldn’t be carried out for a “substantial amount of time.” The DOL additionally has taken the place, in each the NPRM and the Dual Jobs last rule, that a “substantial amount of time” could be analyzed utilizing an “80/20” proportion of hours limitation and a steady 30-minutes limitation.

The Dual Jobs last rule is totally different from the NPRM within the following methods:

  1. clarifies that its definition of “tip-producing work” was supposed to be broadly construed to embody “any work performed by a tipped employee that provides service to customers for which the tipped employee receives tips” and offers extra examples illustrating the scope of what constitutes tip-producing work;

  2. amends the definition of “directly supporting work” “to reflect that this category of work is either performed in preparation of or otherwise assists the tip-producing customer service work”;

  3. modifies the definition of labor that’s not a part of the tipped occupation; and

  4. clarifies the 80/20 calculation and modifies the 30-minute rule.

The Dual Jobs Final Rule

Underneath the Dual Jobs last rule, an employer might take a tip credit score for the worker’s efficiency of labor that (1) “produces tips” or (2) “directly supports” tip-producing work, offered “the directly supporting work is not performed for a “substantial amount of time.”

Tip-Producing Work

The Dual Jobs last guidelines defines work that produces suggestions as “any work performed by a tipped employee that provides service to customers for which the tipped employee receives tips.” The DOL used a comparable definition in its NPRM, however within the Dual Jobs last rule, provides the phrase “that provides service to customers” to the definition of “tip-producing work.” Underneath the Dual Jobs last rule, tip-producing work “includes all aspects of the service to customers for which the tipped employee receives tips.” Critically, the Dual Jobs last rule clarifies that an employer might take a tip credit score when a employee is performing tip-producing work even when the employee can be performing immediately supporting work. The next are the DOL’s examples:

  • A bartender is performing tip-producing work of getting ready drinks when she or he is speaking to the client seated on the bar and guaranteeing that a patron’s favourite recreation is proven on the bar tv.

  • A server is performing tip-producing work when bringing a highchair and coloring ebook for an toddler seated at a desk.

  • A nail technician is performing tip-producing work when serving to his or her buyer select a complementary shade of polish or taking his or her personal buyer’s cost.

  • A bartender who retrieves a specific beer from the storeroom on the request of a buyer sitting on the bar is performing tip-producing work. Nonetheless, a bartender who retrieves a case of beer from the storeroom to inventory the bar in preparation for serving clients could be performing immediately supporting work.

  • A server including a garnish to a plate of meals within the kitchen earlier than serving the ready meals to the client, or wiping down a spill on a buyer’s desk, is performing the tip-producing customer support work of serving tables. Nonetheless, a server assigned to scrub round a beverage station is performing work in preparation of or in any other case aiding tip-producing work and thus is performing immediately supporting work.

Immediately Supporting Work

Work that “directly supports” tip-producing work is a class of labor that’s carried out by a tipped worker “in preparation for or otherwise assists in the provision of tip-producing service work,” based on the DOL.  The Dual Jobs last rule additional explains that immediately supporting work is figure that’s a part of the tipped occupation, offered it’s not carried out for a substantial period of time.

Critically, the Dual Jobs last rule makes clear that if a tipped worker has down time, has not began a shift, or is in any other case not offering service to clients for which the tipped worker receives suggestions, that point can’t be categorized as tip-producing work beneath the revised definition. Once more, that is a modified definition that’s arguably extra slender than what was contained within the NPRM, however the DOL additionally consists of further examples of immediately supporting work, resembling the next:

  • When carried out in preparation of or to in any other case help tip-producing customer support work, a bartender’s immediately supporting work “includes work such as slicing and pitting fruit for drinks, wiping down the bar or tables in the bar area, cleaning bar glasses, arranging bottles in the bar, fetching liquor and supplies, and vacuuming under tables in the bar area,” or “cleaning ice coolers and bar mats, and making drink mixes and filling up dispensers with drink mixes”;

  • When carried out in preparation of or to in any other case help tip-producing customer support work, “a server’s directly supporting work includes dining room prep work, such as refilling salt and pepper shakers and ketchup bottles, rolling silverware, folding napkins, sweeping or vacuuming under tables in the dining area, and setting and bussing tables.”

Regardless of feedback urging the DOL to set out a mounted listing of tip producing and immediately supporting duties, resembling by means of use of the O*NET database, the DOL declined to take action, stating the check is a “functional test” and permits for “better flexibility.”

Work Not A part of Tipped Occupation

Underneath the Dual Jobs last rule, work that isn’t a part of the tipped occupation is any work that doesn’t present service to clients for which tipped staff obtain suggestions, and doesn’t immediately help tip-producing work. The DOL’s examples of labor that falls inside this definitional class are:

  • “preparing food, including salads, and cleaning the kitchen and bathrooms, is not part of the tipped occupation of a server”;

  • “Cleaning the kitchen or bathrooms is not part of the tipped occupation of a busser”;

  • “Cleaning the dining room and bathrooms is not part of the tipped occupation of a service bartender.”

Substantial Quantity of Time

The Dual Jobs last Rule states that an worker has carried out work that immediately helps tip-producing work for a substantial period of time if the tipped worker’s immediately supporting work both (1) exceeds a “20 percent workweek tolerance” or; (2) the immediately supporting work exceeds half-hour for any steady time frame.

Incorporating the modified definitions above, the DOL offers the next examples within the Dual Jobs last rule:

  • “if a server takes customer orders at a table, sets the table she is serving, brings beverages to a third table, picks up a slice of pie, adds ice cream, and delivers it to the first table, and puts on a fresh pot of coffee at the beverage station for all of her tables, before heading back to the second table to take customer orders, the server is performing tip-producing work for the entire time. Accordingly, there is no need for the server’s employer to count any of this work toward the 20 percent or 30-minute limits.”

  • “If a bartender takes a buyer’s order and prepares them a drink, takes a second buyer’s order and leaves the bar space to retrieve a specific wine for the client, returns to the bar space and wipes down the bar the place clients are seated, the bartender is performing tip-producing work for your entire time and there’s no have to depend any of this work towards the 20 % restrict or 30-minute restrict.

a. 20 % of the Workweek

The Dual Jobs last rule clarifies that after “employee[s] spends more than 20 percent of their workweek performing directly supporting work, the employer cannot take a tip credit for any time” spent on immediately supporting work in that workweek and should pay a direct money wage equal to the total minimal wage for that point. (Emphasis added.) Importantly, the Dual Jobs last rule expressly states that “work paid at the full minimum wage would not count towards the 20 percent workweek tolerance.” (Emphasis added.) Any time that’s compensated on the full minimal wage as a result of it exceeds the 20 % restrict shouldn’t be excluded from the workweek in calculating the 20 % tolerance.

Employers calculate 20 % by subtracting the hours in that workweek for which an employer doesn’t take a tip credit score, “either because the employee is engaged in a non-tipped occupation, the employer decides not to take the tip credit for those hours, or because, as explained below, those hours exceed the 30-minute threshold.” Nonetheless, time that’s compensated on the full minimal wage “because it exceeds the 20 percent limit is not excluded from the workweek in calculating the 20 percent tolerance.” The DOL’s examples embrace:

“Example 1. A server is employed for 40 hours a week and performs 5 hours of work that is not part of the tipped occupation, such as cleaning the kitchen, for which the server is paid a direct cash wage at the full minimum wage. The server also performs 18 minutes of non-tipped directly supporting work twice a day, for a total of three hours a week. The employer may take a tip credit for all of the time the employee spends performing directly supporting work, because this time does not exceed 20 percent of the workweek. Because this employee has been paid the full minimum wage for a total of five hours a week, the employee could perform up to seven hours of directly supporting work (35 hours × 20 percent = 7 hours) without exceeding the 20 percent tolerance.” (Emphasis added.)

“Example 2. A server is employed for 40 hours a week and performs 5 hours of work that is not part of the tipped occupation, such as cleaning the kitchen, for which the server is paid a direct cash wage at the full minimum wage. The server also performs 10 hours a week of nontipped directly supporting work, in increments of time that do not exceed 30 minutes. The 5 hours of work paid at the minimum wage is excluded from the workweek for purposes of the 20 percent calculation. Therefore, the employer may take a tip credit for 7 hours of the directly supporting work (35 hours × 20 percent = 7 hours), but must pay the server a direct cash wage equal to the minimum wage for the remaining three hours.” (Emphasis added.)

b. Extra of 30 Consecutive Minutes

Underneath the Dual Jobs last rule, an employer might not take a tip credit score as soon as an worker has carried out greater than half-hour of steady nontipped, immediately supporting work. In different phrases, versus the NPRM, beneath the Dual Jobs last rule employers might take a tip credit score for time that doesn’t exceed half-hour, topic additionally to the 20 % workweek restrict. By means of instance:

“If a tipped employee is required to perform directly supporting work continuously for two hours after the establishment is closed to customers, the employer may take a tip credit for the first 30 minutes, but must pay the full Federal minimum wage for the remaining hour and a half. The first 30 minutes of directly supporting work, for which the employer took a tip credit, would count toward the 20 percent workweek limit.” (Emphasis added.)

The Dual Jobs last rule additionally clarifies, as famous above, that time in excess of 30 minutes, which is paid at the full minimum wage, is excluded from the hours worked in the workweek before calculating the 20 percent tolerance.” (Emphasis added.) The DOL’s instance is that this:

“A tipped employee who works five eight-hour shifts (40 hours a week) and who is required to perform one continuous hour of directly supporting work at the beginning and end of each shift must be paid a direct cash wage of the full minimum wage after the first 30 minutes of each hour. In this situation, a total of five hours per week (30 minutes x 2 blocks x 5 shifts) is excluded from the total hours worked for the purposes of calculating 20 percent.”

Subsequent Steps

The efficient date of the rule is 60 days after publication, which will probably be on the finish of December 2021. Though courtroom challenges to the Dual Jobs last rule are seemingly, employers that make use of the tip credit score might need to start thinking about what kind of adjustments they could have to make to adjust to this rule if it does change into efficient earlier than the tip of the yr. Notably, though the Dual Jobs last rule doesn’t embrace a recordkeeping requirement for consecutive minutes of immediately supporting work, employers that don’t to pay the total minimal wage for such blocks of labor might want to take into account how they’ll observe and doc such time, as pre-shift and post-shift work for tipped staff typically would be the focus of inevitable litigation.

Employers ought to understand that many states and localities have their very own guidelines concerning tip credit, and the FLSA doesn’t trump or preempt extra protecting state and native legal guidelines. For instance, some states have differing variations of the 80/20 rule, and a few apply their 80/20 rule on a day by day, reasonably than weekly, foundation.  Moreover, some jurisdictions don’t enable employers to take a tip credit score and a few have a greater sub-minimum wage for tipped staff and/or a greater minimal wage for non-tipped work. Many state and native minimal wage ranges and tipped minimal wage ranges improve yearly on December 31 or January 1, so employers additionally need to concentrate on any changes that have to be made by way of state and native regulation compliance.

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