UPDATE: Dec. 20, 2021: The Restaurant Law Center and Texas Restaurant Association, a pair of restaurant industry nonprofits, filed on Friday an emergency motion asking a court to temporarily block the Biden administration's tip rule. The entities are behind an ongoing lawsuit challenging the rule.

Dive Brief:

• The U.S. Department of Labor revised its Fair Labor Standards Act tip regulations Thursday, withdrawing a Trump-era provision and adopting the so-called "80/20" guidance from its June proposed rule.
• The final rule, like the proposed rule, addressed "dual job" situations in which tipped employees perform both work that produces tips as well as work that directly supports their tip-producing work. The latter may only be considered part of an employee's tipped occupation if it is not performed for a "substantial amount of time;" the rule defined "substantial" as either more than 20% of the employee's hours worked during the workweek or a continuous period of time exceeding 30 minutes.
• The rule provided additional examples that DOL said illustrate the scope of "tip-producing work," and it also included an amended definition of "directly supporting work" with further examples. The final rule is effective Dec. 28.

Dive Insight:

The update adds yet another compliance checklist item for employers with tipped workers before the end of the year, and poses another challenge for struggling restaurants. 

"The timing of this decision couldn't be worse for restaurants," Shannon Meade, vice president of public policy and legal advocacy for the National Restaurant Association, said in a statement. "As we go into the end of year holiday season, operators are now faced with new labor requirements."

Meade called the 80/20 rule arbitrary, arguing that it is likely to increase litigation around compliance and incite confusion for restaurants.

DOL noted in its discussion that the rule touches on concerns raised by commentators representing both employees and employers. "The Department agrees with commenters representing employees that it is important to maintain bright-line limits on the amount of time an employer can pay an employee a cash wage of $2.13 per hour during which the employee does not have an opportunity to earn tips," the agency said. "The Department believes, moreover, that the modifications to this final rule resolve employers' practical concerns about complying with quantitative limits on directly supporting work."

The rule, however, raises timekeeping concerns for employers, according to Laura Lawless, partner at Squire Patton Boggs. It also could create scheduling headaches and exposure to class and collective actions for unpaid and underpaid wages, she wrote in a blog post for the firm. "This is especially true with respect to calculating wages (and overtime wages) during periods in which an employee qualifies for the tip credit for 30 minutes but does not qualify for the tip credit for the remaining 30 minutes of a single hour of work," she said; employers may have to choose between abandoning tip credit use and increased wage and hour tracking.

The final rule used the example of a restaurant server to explain that directly-supporting work is performed either in preparation of, or to otherwise assist, an employee's tip-producing work for customers.

"For example, if a server takes customer orders at a table, sets the table she is serving, brings beverages to a third table, picks up a slice of pie, adds ice cream, and delivers it to the first table, and puts on a fresh pot of coffee at the beverage station for all of her tables, before heading back to the second table to take customer orders, the server is performing tip-producing work for the entire time. Accordingly, there is no need for the server's employer to count any of this work toward the 20 percent or 30-minute limits."

But if the server folds napkins for the dinner rush after lunch customers leave, or rolls silverware for 15 minutes at the end of the night while waiting for a final table of customers to pay their bill, this would be categorized as directly supporting work, DOL said.

Under the rule, once an employee spends more than 20% of their workweek on directly-supporting work, the employer cannot take a tip credit for any additional time spent on such work within the same workweek. Instead, the employer "must pay a direct cash wage equal to the full minimum wage for that time."