Jasmine Sandhu

Sites at Penn State ! Log In Entrepreneurship Law Blog Home About Me Blog Purpose What’s The Tipping Point? Employers Should be Wary of Claiming Tip Credit for Employees’ Time Spent on NonTipped Duties 3 POSTED ON MARCH 18, 2020 BY JASMINE Search Recent Posts What’s The Tipping Point? Employers Should be Wary of Claiming Tip Credit for Employees’ The Fair Labor Standards Act (FLSA) allows employers to pay tipped Time Spent on Non-Tipped Duties workers as little as $2.13 per hour in cash wages, given that the employee Here’s a Tip: Employers Should makes at least the difference ($5.12) in tips to reach the $7.25 federal Claim Tip Credit to Offset Against minimum wage. Click here to read an earlier blog on how to claim tip credit. Minimum Wage for Tipped Employees This blog focuses on the legal risk in claiming tip credit for employees who have non-tipped duties. “Dual jobs” refer to an employee performing Take a Whisk & Start a Business different jobs for a single employer. An example of dual jobs is a hotel from Scratch: Registering Your employee serving as a maintenance person and a waiter. The employer cannot Kitchen as a “Limited Food claim tip credit for the hours spent in the maintenance role. Establishment” in Pennsylvania It gets complicated Recent Comments where an employee is engaged in “dual tasks.” Imagine a Najeebah Beyah on What’s The server. Servers reset Tipping Point? Employers Should tables, greet be Wary of Claiming Tip Credit for customers, and stock Employees’ Time Spent on Non- supplies. Employees Tipped Duties such as servers have sued employers who Kimberly on What’s The Tipping claim tip credit, Point? Employers Should be Wary arguing that they are entitled to minimum wage for time spent on non-tipped of Claiming Tip Credit for tasks. This blog focuses on: (1) the dual task issue and (2) how to ensure Employees’ Time Spent on Non- compliance and decrease the risk of lawsuits. Tipped Duties pjw5238 on What’s The Tipping HOW DOES FLSA ADDRESS PERFORMANCE OF DUAL TASKS? Point? Employers Should be Wary of Claiming Tip Credit for FLSA states that time spent on “related duties” can be counted towards the Employees’ Time Spent on Non- tip credit. For example, the regulation states that an employer can claim tip Tipped Duties credit for a “waitress who spends part of her time cleaning and setting tables […] and occasionally washing dishes.” azs1360 on Take a Whisk & Start a Business from Scratch: Registering This language seems straightforward, yet tipped employees engaged in dual tasks have sued employers for time spent on non-tipped duties. Your Kitchen as a “Limited Food Establishment” in Pennsylvania Greg Archibald on Take a Whisk & WHAT IS THE DOL’S INTERPRETATION OF THE REGULATION? Start a Business from Scratch: Registering Your Kitchen as a “Limited Food Establishment” in The US Department of Labor (DOL) has provided different interpretations Pennsylvania in their 2016 and 2018 Field Operations Handbooks (FOH). The FOH are guidelines — they are not binding law. Archives 2016 FOH & CASE LAW The 2016 FOH created the 80/20 test: an employer cannot factor non-tipped hours into tip credit if the non-tipped hours exceed 20% of the employee’s total hours. For instance, if a server can show that they spent more than 20% March 2020 January 2020 of their hours on setting tables, the employer must pay full legal minimum wage for said time. Categories The Eighth Circuit ruled Uncategorized that the 80/20 test is a reasonable interpretation of Meta the regulation language because the regulation did not generally approve claiming tip credit for dual tasks. The court reasoned that an Log in Entries RSS Comments RSS employer can claim tip credit for related duties only if it takes up a “part of [the employee’s] time” and is performed “occasionally.” Reread that Sites at Penn State seemingly straight-forward regulation above. In 2017, the Ninth Circuit held that the DOL’s 80/20 test and the Eighth Circuit failed to consider that the regulation deals with dual “jobs” or “occupations.” The Ninth Circuit stated that there must be a clear dividing line between two types of duties to be engaged in two different occupations. An example of a dividing line is when one set of duties is performed in a distinct part of the workday. 2018 FOH A year after the Ninth Circuit decision, the DOL published the 2018 FOH, which abolished the 80/20 test. The guideline allows employers to claim tip credit for all related duties performed “contemporaneously” or within a “reasonable time” before or after tipped duties. SO, IS THERE A TIPPING POINT FOR WHEN AN EMPLOYEE’S TIME SPENT ON NON-TIPPED DUTIES TRIGGERS THE MINIMUM WAGE REQUIREMENT? The answer is unsettled. Since the 2018 FOH, there have been a few cases addressing dual tasks. However, all courts have disregarded the 2018 FOH abolishing the 80/20 test. The Northern District of Illinois disregarded the DOL guidance, holding that the 80/20 test is a more reasonable interpretation. Similarly, the District Court for Maryland held that the DOL guidance did not have “any persuasive value.” The Eastern District of Pennsylvania held that the new guidance is “unreasonable and does not reflect the DOL’s fair and considered judgement.” IF THE ANSWER IS UNSETTLED, HOW DO I ENSURE COMPLIANCE AND DECREASE THE RISK OF LAWSUITS? The Ninth Circuit is the only circuit to decide that the 80/20 test is inapplicable. Recent case law trend shows that courts are largely ignoring the 2018 FOH guidance. Employers located in states other than the Ninth Circuit should continue to follow the 80/20 rule (refer to the map below for Ninth Circuit states). Here are some tips to ensure compliance: 1. Make Effective Timesheets. Tipped employees’ timesheets should require (1) hours per shift, (2) time spent on [X], and (3) total tip amount. Here’s an example: 2. Train Employees on Tracking Time. Employers should train employees on the importance of tracking “time spent on [X].” Employers should also provide employees with a list of categorized duties such as greeting/hosting, stocking supplies, or serving. It is important to allow employees to note down their time between tasks. 3. Check Timesheets for Detail. Employers should check timesheets periodically to ensure that employees are tracking their hours diligently. An employer should have a one-on-one meeting with employees who do not provide enough detail on the “time spent on [X]” section. 4. Designate Tasks as Non-Tipped or Tipped. Whoever controls the payroll system needs to diligently designate certain tasks as non-tipped or tipped tasks. The designation will help employers determine whether a tipped employee should be paid minimum wage for time spent on non-tipped tasks. FINAL TIP These tips may seem unnecessary and unnatural. You may wonder if it is reasonable to ask employees to jot down time spent on resetting tables before turning to serving customers. But, these tips are designed to ensure you are compliant with the dual task rules. Even more, these tips mitigate the risk of lawsuits, which can be time-consuming and costly. Some lawsuits even have the potential to cause a business to shut down. Currently, the issue of whether the 80/20 test is in force except for Ninth Circuit states. When facing murky waters, it is always best to err on the side of caution. SOURCE LIST: FLSA on Dual Jobs 2016 FOH 2018 FOH https://www.natlawreview.com/article/2019-wage-hour-developments-yearreview-state-updates https://www.jdsupra.com/legalnews/food-and-beverage-law-updatefebruary-28390/ https://www.jacksonlewis.com/publication/labor-department-abandons8020-tip-credit-rule-relief-restaurant-hospitality-industries https://www.wageandhourlawupdate.com/2018/11/articles/department-oflabor/dol-eliminates-employer-plaguing-80-20-tip-credit-rule/ PHOTO SOURCE LIST: Server Image 80/20 Image Tipping Scales Image Ninth Circuit Map Image Gavel Image All other images are created by author 3 THOUGHTS ON “WHAT’S THE TIPPING POINT? EMPLOYERS SHOULD BE WARY OF CLAIMING TIP CREDIT FOR EMPLOYEES’ TIME SPENT ON NON-TIPPED DUTIES” pjw5238 MARCH 19, 2020 AT 7:04 PM Great article on an interesting topic that many of us have some experience in. Keeping a detailed and thourough time sheet is a great way to ensure compliance, even if it may sound burdensome. An attorney must get together with the business owner to explain the importance of this practice effectively so that they can inform their workers who may not fully understand why they are now taking extra time to log hours when they are busy working. Compliance may be challenging at some times, but it can save you later when it counts. Reply Kimberly MARCH 25, 2020 AT 6:52 PM This article is VERY informative and well-written! I am curious how tip-credits impact businesses that require their staff who earn tips to split those tips with staff who do not ear tips (like when waitstaff earned tips are pooled and split evenly among all waitstaff and cooks for each shift). Reply Najeebah Beyah MARCH 27, 2020 AT 4:13 PM Wow I never even knew this concept was a thing before reading this post. I loved the way you broke things down and set up charts. I hypothesize that many employees do not even know about this rule. This blog was very well articulated and a good read. 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