A significant ruling has shaken up the landscape for hospitality employers across the U.S. In Restaurant Law Center v. U.S. Department of Labor. The U.S. Court of Appeals for the Fifth Circuit invalidated a Department of Labor (DOL) rule that restricted the amount of time tipped employees could spend on non-tip-generating tasks. This decision effectively removes the burden of tracking the fine line between “tip-producing” and “supporting” tasks for tipped employees—a welcome change for many in the industry.
In 2021, the DOL issued a rule codifying the longstanding “80/20” standard, limiting non-tip-producing work to 20% of a tipped employee’s hours and enforcing a strict 30-minute cap on continuous time spent on tasks “supporting” tip-generating work, like bussing tables or wiping down countertops. For years, this standard has imposed rigid compliance burdens on hospitality employers who had to monitor tasks minute by minute to ensure they adhered to these restrictions.
The court’s decision makes it easier for employers to apply the tip credit under federal law because they no longer have to track the time employees spend on tip-supporting tasks. However, employers still need to follow state or local laws that may be more favorable to employees, or that don’t allow tip credits at all. Additionally, employers can’t claim a tip credit for time employees spend on tasks unrelated to their tipped job, such as maintenance work..
The Department of Labor might appeal this decision. Alternatively, if no appeal or further regulation occurs, the Fifth Circuit’s ruling could bring lasting relief to those working with tipped employees, allowing them to focus on service quality without the distraction of task-related timekeeping requirements.
Employers should still remain vigilant and consult state-specific wage laws regarding tip credits, as these may impose additional restrictions or compliance standards. For employers in states with stricter tip-related laws, the Fifth Circuit’s decision might not change the need for meticulous recordkeeping.
For questions on this ruling or help adjusting your payroll practices, reach out to an employment law professional to ensure compliance with evolving laws and regulations.
