80/20 Rule

On December 28, 2021 the Department of Labor implemented a Final Rule that will serve as a sea change in the restaurant industry.  I get questions all the time from servers and bartenders who are required to do certain tasks that don’t seem related to their main mode of compensation, tips.  This new legislation is set to change all of that and here is the main takeaway:  If you are a server, bartender, or a busser and make a wage below minimum wage (currently the tipped minimum wage is $6.15 per hour) there is a very high chance that you will now be due the full minimum wage (currently $14.25 per hour) for a portion of your hours.  But how many hours and when?  Let’s take a look at the brand new version of what many call the 80/20 Rule.  

Let’s start at the beginning.  At its most simple level an employer can take a tip credit, i.e. pay you less than the current $14.25 minimum wage, as long as you make enough in tips to bring you up to minimum wage for all hours worked.  The new 80/20 Rule changes this calculation in a very significant way.  Basically, the Rule looks at how your time is spent while on the job, divvying time up into three buckets, “tip-producing work,” “directly supporting work,” and work that is NOT part of the tipped occupation.  The goal of the Rule is to make sure that if employees are being paid at the tipped minimum wage, they are actually engaging in tip producing work, not unrelated work.  

How is this calculated?  If an employee is engaging in tip-producing work an employer can take a tip credit for that time.  However, if they are engaging in directly supporting work, the time spent doing this can not exceed 20 percent of their total time.  Any time worked in excess of 20 percent must be paid at the full minimum wage.  If an employee is engaging in work that is NOT related to the tipped occupation, regardless of the amount of time, ALL of the time must be paid at full minimum wage.  

So how do we figure out what time goes into which bucket?  The Rule gives us a non-exhaustive list of activities for restaurant employees:

1. Tip Producing Work

• Server:  taking orders, serving food and drinks, adding garnish to plates, toasting bread, adding dressing to pre-made salads, placing coffee in pot for brewing, assembling bread in basket, cleaning spill at customer table, processing cash/card payments, bringing highchair, removing plates/glasses DURING meal service.
• Bartender:  making and serving drinks, talking to customers, and serving food (if the bar includes food service).
• Busser:  assisting servers with tip-producing work, such as table service, including filling water glasses, clearing dishes from tables, fetching and delivering items from tables, bussing tables, changing linens and setting tables.

2. Directly Supporting Work

• Server:  dining room prep, such as refilling salt and pepper shakers and ketchup bottles, rolling silverware, folding napkins, sweeping or vacuuming under tables in the dining area, and setting and bussing tables.
• Bartender:  slicing and pitting fruit, fetching liquor and supplies, vacuuming, cleaning ice coolers, and making drink mixes.
• Busser:  pre and post table service prep work, folding napkins, rolling silverware, stocking the busser station, vacuuming, wiping down soda machines, ice dispensers and food warmers.

3. Work that is NOT Part of the Tipped Occupation

• Server:  preparing food, including salads, and cleaning the kitchen or bathrooms.
• Bartender:  cleaning the dining room or bathroom.
• Busser:  cleaning the kitchen or bathroom.

But wait, there is more!  In addition to the creation of these three buckets the Rule also states that if an employee performs directly supporting work (bucket 2) for more than 30 continuous minutes the full minimum wage must be paid for any time in excess of those 30 minutes.  For anyone who has ever worked in a restaurant, this is a huge deal.  While this will certainly be litigated over the coming months and years it seems to indicate that if your in time is more than 30 minutes before the opening of the restaurant, you will be due full minimum wage for any time spent in excess of those 30 minutes.  After all, it is seemingly impossible to perform tip producing work if there are no customers in the restaurant.  This also creates similar questions about time spent after the restaurant has closed.  Most if not all restaurant employees have spent many nights cleaning up, polishing silverware, or doing rollups 2 or even 3 hours after close.

Frankly, just these changes are enough to send any restaurant employee or owner’s brain racing but there is still more to digest.  The Preamble to the Rule also addresses “down time.” It is a common occurrence for a restaurant employee to come in at 4, have the restaurant open at 5, and not have their first customer until 6 or even later.  If there are no customers in the restaurant the employee cannot perform tip producing work so the Rule places down time in bucket 2, which is subject to both the 30 minute and 20 percent limitations that we talked about before.  This creates big changes for Massachusetts restaurants during the slower months like January.

If you have made it this far you are probably left with more questions than answers.  If you are a restaurant manager or owner I would highly suggest taking a look at this Rule and doing your best to tailor your work environment to it.  It appears like the Rule will create big challenges for management in terms of tracking time.  If you are a restaurant employee keep an eye on your time sheets!  

Lastly, I wouldn’t be doing my job if I didn’t tell you that there is currently a legal challenge to this Rule.  That legal challenge could get rid of the Rule altogether but as it currently stands, this appears to be the law of the land. Keep in mind, future litigation over this Rule will answer many of these questions.  It could also completely change everything!  That is why it’s important to keep yourself educated and ask questions when you have them.  Feel free to drop me a line at lou@sabanlegal.com with further questions.  

#tips #minimum wage #restaurants #hospitality