On October 28, 2021, the U.S. Department of Labor (DOL) announced publication of a Final Rule (Tips Dual Jobs Final Rule) that sets reasonable limits on the amount time an employer can take a tip credit when a tipped worker is not doing tip producing work. It clarifies that an employer may take a tip credit only when an employee is performing work that is part of a tipped occupation, specifically; performing work that is tip producing or performing work that directly supports work that is tip producing for a limited amount of time.
The Final Rule also amends the provisions of the Executive Order 13658 regulations, which address the hourly minimum wage paid by contractors to workers performing work on or in connection with covered federal contracts consistent with the amendments to the dual jobs regulations.
Under the Final Rule, an employer can take a tip credit only when the worker is performing tip producing work or when:
- A tipped employee performs work that directly supports tip producing work for less than 20 percent of the hours worked during the employee’s workweek. Therefore, an employer cannot take a tip credit for any of the time that exceeds 20 percent of the workweek. Time for which an employer does not take a tip credit is excluded in calculating the 20 percent tolerance.
- A tipped employee performs directly supporting work for not more than 30 minutes. Therefore, an employer cannot take a tip credit for any of the time that exceeds 30 minutes.
The final rule becomes effective December 28, 2021.
Next Steps for Employers
Employers who wish to claim a tip credit will have to ensure that employees do not spend too much time performing tasks which do not involve directly serving customers, such as cleaning tables, making coffee or preparing food. Further, having clear cut, well-defined job descriptions which have been reviewed with employees may assist employers in their efforts to ensure that not too much time is spent on unrelated duties.
