What do Recent 2021 Tip Rulings Mean for Restaurant Workers?

As of December 28, 2021, the newest ruling of the Fair Labor and Standards Act by the Department of Labor, known as the “dual-jobs” rule, officially goes into effect. Like many government rulings, it is far from straightforward, even though it seeks to clear up confusion over previous policies. Here is a breakdown of how this change will affect tip sharing, “The 80/20 Rule”, ownership accountability, and what it means for tipped restaurant workers:

Tip Sharing is Clarified

Since 2018, managers have been prohibited from keeping employees’ tips or benefitting from a tip pool under any circumstances. But this caused some confusion regarding a manager’s personal tips. The new ruling clarifies that this policy still applies even if a manager contributes their tips. Also, can require management to share tips, if the policy is clearly communicated. Essentially, no hourly employee should be led to believe that any portion of their tips can be withheld by management.

The 80/20 Rule is back

The newest ruling reestablished a more nuanced 80/20 Rule: Employers may only utilize the tip credit if 80 percent or more of a tipped employee’s time is tip-generating, and no more than 20 percent is tip-supporting work. This means that if more than 20 percent (or 30 continuous minutes) is spent on non-tip-related duties, then it is a “dual job” and the employer should pay full minimum wage for that portion of work. The ruling also lays out a “functional test” to determine what is tip generating, supporting, or neither.

While this intends to prevent employers from taking advantage of tip credits, it relies heavily on accurate timekeeping. Though employees should expect employers to engage in reliable time-keeping systems, they should also be mindful of where their time is spent.

Stronger Worker Protections

Any violations of this FLSA ruling, whether intentional or not, will result in fines. This is a harsher definition of non-compliance than the previous rulings, which only penalized violations that were “willful and repeated.” The fines for noncompliance are also much steeper. This should give workers assurance that employers have enough incentive to abide by this ruling.

Because the stakes are so high for restaurant ownership, they must have the right leadership in place. Learn how the Restaurant Recruiters at Horizon Hospitality can connect restaurants and quality managers. Contact us today.

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