The DOL changes the rules for tipped employees


Under the Fair Labor Standards Act, an employer can take what is known as a “tip credit” for tipped employees. This means they can pay them an hourly rate less than the Federally proscribed minimum wage.  Tipped employees must be paid at least $2.13 per hour. Employers may take a “tip credit” up to $5.12 per hour and avoid liability for minimum wage/overtime violations. A tipped employee is a person who performs a job where they receive at least $30 per month in tips.

The Department of Labor recently changed its enforcement rules when a tipped employee performs “dual jobs”. An example of an employee performing “dual jobs” would be working as a server and also a janitor. The Department of Labor used to enforce what was known as the “20 percent” rule- if a tipped employee performed work that was not tip producing more than 20% of their time at work, then their employer could not claim the tip credit for the time spent performing non-tip producing work.

Under new enforcement guidelines, employees may be paid a lower wage rate regardless how much time spent performing non-tip producing work.  However, all job duties must bar “related to a tip producing occupation”. Job duties must also be “performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.”

Let’s say a waitress works 40 hours a week.  50% of that time is spent cleaning up the dining room, making coffee, etc. Under the old rule, the employer would have to pay the employee the federal minimum wage ($7.25) for the time they spent performing these non-tip producing tasks.

Under the new rule, the employer will be able to pay the lower rate for all hours worked so long as the employee makes enough in tips to ensure they make at least minimum wage for every hour worked. The tasks performed must also be “related to a tip producing occupation”.

Obviously, this lowers the labor costs for employers however it also lowers the amount an employee will take home in pay. Looking at the waitress mentioned in the above example, it would work out as follows:


20 hours performing non-tipped duties: 20 x $7.25= $145

20 hours performing tipped duties : 20 x $2.13= $42.60

$300 tips received

Total take home pay: $145 +$42 + $300= $487.60 



20 hours performing non-tipped duties: 20 x $2.13= $42.60

20 hours performing tipped duties : 20 x $2.13= $42.60

$300 tips received

Total take home pay: $42.60 + $42.60 + $300= $385.20

It is important to note, in order for an employer to pay an employee the lower rate for non-tip producing job duties; the job duties must be “related to a tip producing occupation”. What job duties are related depends on the tasks identified on the Occupational Information Network (O*NET) Unfortunately for persons working in “tip producing occupations”; this is probably going to end up meaning less take home pay.

Every case is very fact specific, the particular job duties of each job will vary- that is why it is important to talk to an experienced overtime/minimum wage lawyer to determine if you indeed have a claim. Our attorneys have recovered millions for workers who were not paid the correct minimum wage/overtime. Feel free to contact us for a free consultation to determine if you are indeed owed money for your employers potential violation.


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