The U.S. Department of Labor recently announced a proposed rule to limit the amount of non-tip producing work that a tipped employee can perform when an employer is taking a tip credit. These new rules apply to tipped employees such as servers, bartenders, and nail technicians that are paid at the tipped minimum wage.
The proposed rule states that employees can be paid the tipped minimum wage when they are engaging in “tip-producing” work, such as waiting on a table; or “tip-supporting” side work, such as folding napkins, cleaning tables in preparation for customers or preparing fruit to garnish drinks, provided they are not performing the side work for (1) more than 20% of their weekly hours or (2) a continuous period of time exceeding 30 minutes. Therefore, under the proposed rule, if a tipped employee spends more than 20% of their workweek performing side work, the employer cannot pay them at the tipped minimum rate for any time that exceeds 20 percent of the workweek. Likewise, if a tipped employee performs side-work for a continuous period exceeding 30 minutes, the employer cannot take a tip credit for that entire period of time that was spent on the directly supporting work.
The Department of Labor will accept comments on the proposed rule for the next 60 days through August 23, 2021 before taking further action. Notably in New York State, if an employee performs side work for more than two hours or 20% of their shift, the employer cannot take a tip credit for any work performed on that workday.