Q. We use the tip credit for servers who work in our restaurant. When service is slow, we ask our servers to pitch in with other jobs around the restaurant, like sweeping up the dining room and cleaning the restroom. Can we still take the tip credit for time that our servers spend working on these tasks?
A. Short answer: it depends.
Long answer: Specifically, it depends on whether the extra duties assigned to your servers are directly related to the servers’ “tip-producing occupation.” The U.S. Department of Labor recently re-issued a previously-withdrawn opinion letter dealing with this subject. The letter is worth a read if you are a wage & hour wonk, but the upshot is that the DOL will look to the job duties listed in the Occupational Information Network database, O*NET, available at https://www.onetonline.org/, to determine whether duties are directly related to a tip-producing occupation. Tipped employees can perform any of the job duties listed in the “tasks” section of the Details report for their occupation in the O*NET database, without regard to whether they involve direct customer service, so long as the duties 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.” For “waiters and waitresses”, this includes such tasks as setting up and cleaning tables and restrooms, among others. (See the O*NET report for waiters and waitresses for the full list.) Conversely, employers cannot take the tip credit for any work not included in the O*NET task list.
So, the duties listed in the question above would count as duties “directly related” to a server’s tip-producing job if performed while a server is also waiting tables, or immediately before or after the meal service. However, if a server was called in to clean the dining room and restrooms on a day when the restaurant is closed, the server would likely have to be paid the full minimum wage for that time. Likewise, a server who is asked to help enter payroll on a slow night may have to be paid at the full minimum wage for any time spent on that work, because entering payroll is not among the tasks included in the O*NET task list.
This guidance replaces the “80/20 rule,” which said that an employer can take the tip credit only if a tipped employee spends no more than 20% of their time performing “related duties” that do not directly involve customer service.
Insights for Employers
While the new guidance provides employers with greater flexibility, caution is still warranted.
DOL opinion letters represent the agency’s interpretation of the law at the time of the letter. They are not themselves legally binding. As this reversal indicates, they are subject to change by the DOL, without Congressional action or even the more formal “notice and comment” rulemaking process used for binding regulations. Courts may or may not agree with the DOL’s interpretation of the law. Some states and localities may also impose different limitations on the amount of non-tipped work a tipped employee can perform. In New York state, for example, employers of service employees and food service workers cannot take a tip credit for days in which an employee works more than 20% or two hours, whichever is less, of the workday in a non-tipped occupation.
The U.S. DOL’s new interpretation also leaves plenty of unanswered questions. For example, new occupations may not be listed in O*NET. The guidance says that employers should look at similar occupations for guidance, but that leaves room for interpretation, which leaves potential risk for employers. The regulation also leaves room for debate about what is a “reasonable” amount of time for tipped employees to perform related duties.
In light of these uncertainties, be sure to speak with an employment attorney familiar with wage and hour law in your jurisdiction and your specific situation before making decisions regarding application of the tip credit to your work force.