For many years Department of Labor (DOL) has allowed restaurant owners to take a “tip credit” to be able to pay tipped service workers less than the minimum wage. The rationale is that they would be receiving enough tips to be guaranteed the minimum wage. The tip credit allows restaurants to pay tipped employees 38% of the minimum wage, but also must guarantee that an employee would earn enough tips to receive the minimum wage.

The issue that was raised during the Trump Administration was whether time spent doing non-tipped work (setup, cleanup etc) could also be paid at the same lower rate. Historically the DOL had said that the lower rate could be paid IF the non-tipped time was less than or equal to 20% of the overall hours worked. This was called the “80/20 Rule”. Under the Trump Administration, the 80/20 Rule was suspended, allowing restaurants to pay tipped employees at the lower rate regardless of the number of hours worked in non-tip generating activities.

Recently the DOL has reissued the 80/20 rule. At this time, restaurants cannot pay tipped employees at the lower rate if the total number of hours is greater than 20% of the total hours. If that situation does occur, restaurants must pay employees the full minimum wage for all non-tip generating time worked.

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