The U.S. Department of Labor (DOL) has announced a significant regulatory change impacting employers with tipped employees. Following a recent Fifth Circuit Court decision (Restaurant Law Center v. U.S. Department of Labor), the Department has reverted to the original “dual jobs” regulations under the Fair Labor Standards Act (FLSA), first established in 1967.
This change effectively nullifies the stricter provisions introduced in the 2021 Dual Jobs Rule, reinstating the previous standard for determining when employers can apply a tip credit toward minimum wage obligations.
Background
The original “dual jobs” regulation recognized that employees might hold both tipped and non-tipped roles within the same job. For example, a hotel maintenance worker who also works as a waiter would qualify for the tip credit only during hours spent in the waiter role.
In 2021, the DOL introduced specific time limits for non-tip-producing tasks, which the Fifth Circuit has now invalidated. The court’s decision reinstates the original 1967 regulation, simplifying compliance but requiring employers to reassess their pay practices.
What Employers Need to Know
The FLSA permits employers to apply for a tip credit—up to $5.12 per hour—against the federal minimum wage of $7.25, provided tipped employees receive at least $30 in monthly tips and are paid a direct cash wage of at least $2.13 per hour.
Under the restored rule:
- Employers may only apply tip credit for hours worked in a tipped occupation.
- Time spent on duties that support tip-producing work, such as cleaning tables or preparing condiments, is still eligible for a tip credit, provided these tasks are related to the primary tipped role.
- Hours spent performing unrelated, non-tipped duties (e.g., maintenance tasks) must be paid at the full minimum wage.
Next Steps for Employers
To ensure compliance with the restored regulations, employers should:
- Audit Job Descriptions. Review and update descriptions for tipped employees to clearly define tipped duties and related tasks.
- Adjust Payroll Practices. Verify systems are equipped to track time spent on tipped versus non-tipped duties accurately.
- Train Managers. Provide training on the reinstated rule to ensure proper task assignment and compliance with wage laws.
- Monitor Compliance. Implement routine checks to confirm that tip credits are applied only to eligible hours.
