The Fair Labor Standards Act allows employers with tipped workers to pay as little as $2.13 per hour in direct wages, while taking a credit against the tips earned by the employee to make up the balance of the federal minimum wage of $7.25 per hour.
The proposed rule also clarifies that an employer may only take a tip credit when tipped employees perform labor that is part of their tipped occupation. Work considered part of the tipped occupation includes labor that produces tips and labor that directly supports tip-producing work, so long as the employee does not perform it for a substantial amount of time. For example, waiting on tables is an example of labor that produces tips for the worker. Labor that supports a server’s tip-producing work includes a server folding napkins or refilling salt and pepper shakers.
The proposed rule also clarifies that if an employee performs work that directly supports tip-producing work for a substantial amount of time – that exceeds 20 percent of all of the hours worked during the employee’s workweek or exceeds 30 continuous minutes – that worker is no longer performing labor that is part of the tipped occupation.
The proposal clarifies that employers may not take a tip credit for work that is not part of the tipped occupation.
“Tipped workers are among those who continue to be hardest hit as we emerge from the pandemic, and the Wage and Hour Division continues to prioritize protecting these essential front-line workers,” said Wage and Hour Division Principal Deputy Administrator Jessica Looman. “This proposed rule provides more clarity and certainty for employers while better protecting workers. It helps ensure that tipped workers are treated with dignity and respect, and that they receive wages appropriate for the work they perform.”
The department invites comments from the public on the proposed rule at www.regulations.gov. The comment period closes Aug. 23, 2021.
Anyone who submits a comment (including duplicate comments) should understand and expect that the comment, including any personal information provided, will become a matter of public record. The division will post comments without change at www.regulations.gov and include any personal information provided. The division posts comments gathered and submitted by a third-party organization as a group, using a single document ID number at the site.
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