On June 23, 2021, the U.S. Department of Labor (“U.S. DOL”) published a Notice of Proposed Rulemaking which would impose a limit on when an employer can pay a tipped worker the “tipped minimum wage.”  The new rule would reinstate the “80/20” rule under federal law and would clarify that an employer may only take a tip credit when its tipped employees perform work that is part of the employee’s tipped occupation.

Under the Department’s proposal, work that “directly supports” tip-producing work is work that assists a tipped employee to perform the work for which the employee receives tips.  The U.S. DOL explains that an employee has performed work that directly supports tip-producing work for a substantial amount of time if the tipped employee’s directly supporting work either (1) exceeds, in the aggregate, 20 percent of the employee’s hours worked during the workweek or (2) is performed for a continuous period of time exceeding 30 minutes.  Work that does not directly support tip-earning would be considered non-tipped sidework for which the employer must pay at least the federal minimum wage.

The “80/20” rule is already applied under New York law so the most significant change the proposed rule would have for New York hospitality employers is that tipped employees could no longer commence work more than 30 minutes before service begins or work for more than 30 minutes after service ends at the tip credit rate. Instead, employers would be required to pay tipped employees at the regular minimum wage (or higher) for such pre-service and post-service work.

We will continue to follow developments and keep you informed of the status of the proposed rule. Should you have any questions, please contact ALG.