On December 28, 2021, a new rule affecting tipped employees goes into effect. Tipped employees under the Fair Labor Standards Act (Fl.SA) are defined as (1) non-exempt, (2) customarily and regularly receive more than $30.00 a month in tips, and (3) the employer is allowed to credit a portion of their minimum wage obligation against the employee-earned tips. Employers utilizing the tip-credit must pay the employee a minimum direct cash wage of $2.13 per hour; the remainder balance of the minimum wage is available for a credit against tips earned by employee.
The new rule restricts employers from drawing a tip-credit when employees are not performing work that is part of the employee’s tipped occupation. Work that is part of the employee’s tipped occupation includes work that produces tips and work that directly supports tip-producing work. The Department of Labor provided examples of tip-producing work: setting/bussing tables, rolling silverware, and wiping down the bar area. However, the supporting work may only be for a non-substantial amount of time, defined as no more than 20% of the hours worked during the employee’s workweek or a continuous period that cannot exceed 30 minutes. Employers using the tip-credit should create a system of tracking tip-producing work and work directly supporting tip-producing work to separate such work from nontipped work to remain in compliance with the 20% and 30 minute rule. All other work must be compensated at minimum wage, which is federally defined as $7.35 per hour.
Importantly, two Texas restaurant industry groups have asked a Texas Federal District Court to block the rule from immediately enforcement. The groups contend rule will cause further irreparable harm to an industry already suffering from the aftermath of the global pandemic. As of December 22, 2021, the District Court has not acted on the industry’s request.
