Labor Dept. revives '80/20 rule' for paying tipped workers

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REUTERS/Andrew Kelly

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  • Rule limits payment of tipped minimum wage for non-tipped tasks
  • DOL revived guidelines in place for 30 years before Trump govt
  • Business groups say tracking tasks for compliance is unworkable

Oct 28 - The U.S. Department of Labor on Thursday issued a final rule limiting when employers can pay workers the lower tipped minimum wage for performing non-tipped tasks, reversing a Trump-era regulation favored by business groups.

The rule from DOL's Wage and Hour Division (WHD) says workers can only be paid the tipped minimum, which is currently $2.13 an hour under federal law, for tasks that directly support tipped work and do not take up more than 20% of a worker's time or 30 consecutive minutes.

The so-called "80/20 rule" was first adopted by DOL in 1988. During the Obama administration the agency expanded the types of tasks that were not deemed to directly support tipped work under the federal Fair Labor Standards Act.

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The Trump administration finalized a rule last December that scrapped the 80/20 regulation and said employers can pay the tipped minimum wage for nontipped tasks performed contemporaneously or immediately before or after workers' primary tipped duties, regardless of how much time they take.

Major business groups backed the Trump-era rule, saying that keeping track of the precise amount of time workers spent on different tasks was unworkable. But worker advocates claimed the changes would cost tipped workers hundreds of millions of dollars in wages.

The new rule takes effect on Dec. 28. WHD estimated that the rule would cost employers $183.6 million per year on average over the next decade.

Jessica Looman, the acting administrator of WHD, noted in a statement that more than half of all tipped workers are women, people of color, or immigrants.

"Today’s final rule enhances protections for this vital segment of the nation’s essential workforce, and combats income disparity and promotes equity," Looman said.

But Shannon Meade, vice president of the National Restaurant Association, said the rule will create mass confusion and enormous compliance challenges for restaurants, particularly amid the busy holiday season.

"This rule does not provide the clarity that small business owners and their employees need and is likely to increase litigation around the issue," Meade said in a statement.

WHD last month adopted a separate rule restoring the agency's ability to levy monetary penalties on employers who pocket workers' tips, even when the violations are not willful.

That rule withdrew a Trump-era regulation that permitted DOL to issue penalties of $1,100 per violation only when employers were found to have purposely or repeatedly not paid workers the full tips they earned.

(Editor's Note: This article has been updated to include a statement from the National Restaurant Association).

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Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.