Presenting a live 90-minute webinar with interactive Q&A New DOL Guidance on Tip Credit: Elimination of "80/20" Rule, Best Practices for Hospitality Employers TUESDAY, FEBRUARY 19, 2019 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Mary Elizabeth Davis, Member, LeClairRyan , Richmond, Va. Cheryl A. Luce, Attorney, Seyfarth Shaw , Chicago Matthew R. Simpson, Partner, Fisher & Phillips , Atlanta The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 1 .
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Department of Labor Elimination of "80/20" Tip Credit Rule Presented by Matthew R. Simpson, Fisher & Phillips, LLP Cheryl A. Luce, Seyfarth Shaw LLP Betsy Davis, LeClairRyan Strafford
Agenda • Overview of the Prior 80/20 Rule • Analysis of Current Guidance on the Tip Credit • Best Practices for Employment Counsel Strafford 6
Overview of the Prior 80/20 Rule Matthew Simpson Fisher & Phillips, W W W . F I S H E R P H I L L I P S . C O M LLP Strafford 7
FLSA Basics • Minimum Wage of $7.25 per hour for all hours worked • Overtime premium for hours worked over 40 in a workweek • Accurate time records for all non-exempt employees Strafford 8
The Tip Credit • The FLSA permits employers to satisfy minimum wage requirements by paying a “tipped employee”: • A cash wage of at least $2.13 per hour; plus • An additional amount on account of the tips received by the employee which equals the difference between the cash wage (at least $2.13 per hour) and federal minimum wage ($7.25 per hour). • To take the tip credit, the employer must inform the employee of the tip credit provisions, and all tips received by the employee must be retained by the employee, unless there exists a tip pool among employees who customarily and regularly receive tips. Strafford 9
What Is a Tipped Employee? A tipped employee is “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips .” Strafford 10
Dual Jobs and Related Duties • Where an employee works “dual jobs,” DOL states that the employee may only take the tip credit for those hours worked in the job in which the employee is a “tipped employee.” • For example, where an employee works as a waiter and as a maintenance man, the employee may only take the tip credit for hours worked as a waiter. • In contrast, where a waitress spends part of her time cleaning and setting tables, toasting bread, making coffee, and occasionally washing dishes or glasses, she is merely performing “related duties” and may take the tip credit for all hours worked. Strafford 11
DOL Enforcement Guidance • In its Field Operations Handbook, DOL affirmed that an employer may take a tip credit where a tipped employee performs “related duties,” “provided such related duties are incidental to the regular duties of the tipped employees and are generally assigned to the tipped employee.” • DOL then stated that where the tipped employee spends more than 20% of time “performing related duties, no tip credit may be taken for the time spent in those duties.” Strafford 12
DOL Enforcement Guidance • To comply with DOL enforcement guidance, employers were therefore expected to ensure that “tipped employees” spent at least 80% of their time performing “tipped duties.” • Time spent performing preparatory or closing activities, rolling silverware and filling salt and pepper shakers, cleaning and setting tables, making coffee, and washing dishes or glasses could not exceed 20% of the employee’s total hours worked. Strafford 13
Case Law Applying the 80/20 Rule • District and circuit courts were split on application of DOL enforcement guidance. • In Fast v. Applebee’s , the Eighth Circuit adopted DOL enforcement policy precluding tipped employees from spending 20% or more of their time on non-tip related duties. • Most recently, in Marsh v. J. Alexander’s , the Ninth Circuit adopted DOL enforcement policy precluding tipped employee’s from spending 20% or more of their time on non-tip related duties. Strafford 14
DOL (Almost) Withdraws 80/20 Rule • On January 16, 2009, DOL issued an opinion letter rescinding the 80/20 rule. • On March 2, 2009, the DOL withdrew the opinion letter “for further consideration” and stated that it would “provide a further response in the near future.” • No further response was given by DOL until 2018. Strafford 15
Elimination of the 80/20 Rule and the Tip Income Protection Act Cheryl A. Luce Seyfarth Shaw LLP W W W . S E Y F A R T H . C O M Strafford 16
The DOL Eliminates the 80/20 Rule • DOL recognized that 20% rule is impracticable and bred litigation • On November 8, 2018, DOL issued opinion letter taking position that: “no limit is placed on the amount of [related but non-tipped duties that may be performed … as long as they are” either: 1. “performed contemporaneously with the duties involving direct service” or 2. “ for a reasonable time immediately before or after performing such direct-service duties” • Noted that revised FOH would be forthcoming • On February 15, 2019 the DOL issued a Field Assistance Bulletin noting that the WHD has a unified enforcement position that the 20% rule is laid to rest Strafford 17
Dual Jobs The Old Rule vs. The New Rule Strafford 18
How to Analyze Dual Jobs • What is tip producing? Doesn’t matter much now • What is inside versus outside the tipped occupation? – See O*Net Summary Reports 35-3031.00 for Waiters and Waitresses and for 35- 3011 Bartenders – Broad definitions of those tipped occupations Strafford 19
Broad Definitions for Tipped Occupations Allowed Duties for Allowed Duties for Bus tables Clean glasses, utensils, and bar Servers Bartenders Clean tables or counters after patrons have equipment finishing dining Balance cash receipts Prepare tables for meals, including setting up items such as linens, silverware, and glassware Clean bars, work areas, and tables Perform cleaning duties, such as sweeping and Stock bar with beer, wine, liquor, and mopping floors, vacuuming carpet, tidying up related supplies such as ice, glassware, server station, etc. napkins, or straws Roll silverware, set up food stations, or set up dining areas to prepare for next shift or for large Slice and pit fruit for garnishing drinks parties Stock service areas with supplies such as coffee, Arrange bottles and glasses to make food tableware, and linens attractive displays Fill salt, pepper, sugar, cream, condiment, and Create drink recipes napkin containers Perform food preparation duties such as preparing Order or requisition liquor or supplies salads, appetizers, and cold dishes, portioning desserts, and brewing coffee Plan bar menus Garnish and decorate dishes in preparation for Prepare appetizers such as pickles, serving cheese, and cold meats Strafford 20
How will courts respond? • The 20% rule was followed by the Eighth and Ninth Circuit Courts of Appeals and several lower courts • But valid because the DOL’s interpretation of its own regulations was reasonable and entitled to deference • In early January 2019, a federal district judge in the Western District of Missouri attempted to resurrect the DOL tip credit guidance • This case is likely an anomaly that was would have come out differently had the litigation not been pending so long Strafford 21
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