The DOL Delivers Final Ruling on Reinstated 80/20 Rule

December 13, 2021

At a glance

  • The main takeaway: The Department of Labor reinstated the 80/20 Rule on “dual jobs” as well as introduced the 30-minute rule, which is set to impact business owners who employ tipped employees.
  • Impact on your business: While tip-generating work is done for specific customers, employers will need to determine a method to track a tipped employees time effectively and accurately that is within compliance of the 80/20 rule and the 30-minute rule.
  • Next steps: Aprio’s Retail, Franchise and Hospitality team is continuously monitoring activity on the 80/20 and 30-minute rules and are great resources to help you strategize your tip-generating vs non-tip generating duties.

Schedule a free consultation with Aprio’s Retail, Franchise and Hospitality team today.

The full story:

On October 29, 2021, the U.S. Department of Labor (DOL) published a final ruling on “dual jobs,” which will reinstate the 80/20 rule as well as introduce a new 30-minute rule for tipped employees.

The final ruling becomes effective on December 28, 2021. Below we discuss the 80/20 and 30-minute rules and their implications.

The Reinstated 80/20 Rule

The DOL reinstated and removed the longstanding 80/20 rule, which governs how tipped employees must be paid. The ruling stated an employer may take a tip credit for any amount of time that an employee in a tipped occupation performs related, non-tipped duties with, or within a “reasonable time” before or after the employee’s tipped duties. There was no strict amount of time a tipped employee could perform non-tip-generating work that would be eligible for the employer tip credit.

However, under the new rule a tipped employee’s time on the clock must be tracked in three categories:

  1. Tip-generating work is generally done for specific customers, such as providing table service, filling water glasses or serving customers food at the bar.
  2. Directly supporting work is performed in preparation of or to otherwise assist tip-producing customer service work and includes rolling silverware, folding napkins or cleaning bar glasses.
  3. Non-tip-generating work is not part of the tipped occupation and includes cleaning the kitchen or bathrooms.

If a tipped employee spends more than 20 percent of their weekly time completing directly supporting tasks, then the employer must pay the full minimum wage and be ineligible for the tip credit for any time in excess of that 20 percent threshold. Under the final rule, any employee time that falls into the third category of non-tip-generating work (not part of the tipped occupation) must be compensated at full minimum wage and will not be eligible for the tip credit.

The 30-Minute Rule

Included within the final ruling is the new 30-minute rule. If a tipped employee performs continuous directly supporting work for 30 minutes, then the employer cannot take a tip credit for any amount of time that the employee performs those duties and must pay the full minimum wage for that block of time.

When a directly supporting time block exceeds 30 minutes, it is still included in the 20 percent analysis for the 80/20 rule on a weekly basis. Also, worth noting that a tipped employee’s idle time is considered directly supporting, so any time spent idle during a shift is subject to the 20 percent weekly threshold and the 30-minute rule.

Industry groups aim to halt the re-adoption of the 80/20 rule

The National Restaurant Association as well as the Texas Restaurant Association and other industry groups have filed a lawsuit asking a federal court to halt the re-adoption of the 80/20 rule that determines how much an employer must directly pay tipped employees. The legal action filed alleges that the DOL exceeded its authority, going as far as stating the DOL really does not understand what happens in a restaurant.

Due to the fast nature of the restaurant industry, it’s nearly impossible for business owners to granularly track a tipped employee’s, often rapid, movement from one task to another throughout a shift. The industry is asking the court to stop the rule before it goes into effect on December 28, 2021.

The bottom line

Trying to define the separate tip-generating duties from those that are non-tip-generating while also adhering to the strict timetables is expected to be a great burden to employers. While restaurant authorities are already challenging the new rules, there is no guarantee that this rule will not be effective on December 28, 2021. It’s important that your business is closely monitoring activity on the 80/20 ruling. Aprio’s Retail, Franchise and Hospitality team of experts can assist you in strategizing and reimaging your scheduling, tip-generating and non-tip generating duties.

Schedule a free consultation today.

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About the Author

Dana Zukofsky

Dana Zukofsky is the Restaurant, Franchise & Hospitality Practice Leader at Aprio, providing advisory, accounting and consulting services to help foster profitability and growth.