If the tip credit didn't exist, we wouldn't be having this conversation.
— Erika Adams
The tip credit may be an essential part of many restaurant operators’ budgets but the use of the credit also opens the door to a world of possibilities when it comes to restaurateurs and wage-related lawsuits.
Take, for example, one of the Restaurant Law Center’s newest projects: a joint lawsuit filed with the Texas Restaurant Association against the Department of Labor over a wage regulation called the “80/20” rule, tucked under the Fair Labor Standards Act. (For context, the National Restaurant Association launched the Restaurant Law Center in January 2017 in order to make moves like this, fighting legislation in court that makes it harder for restaurateurs to operate.)
The 80/20 split refers to the work delineation of tipped restaurant workers. In every state that allows a tip credit, the 80/20 rule mandates that a tipped worker can only do non-tipped side work, like folding napkins, polishing silverware, or brewing coffee, for 20 percent of their shift. The other 80 percent has to be spent doing tipped work: serving the food and interacting with customers.
The regulation was put in place to protect tipped workers. If a server is making the federal tipped minimum wage, which is currently $2.13 an hour, and then stuck in the back mopping floors for the majority of each shift, then an employer needs to be paying that server the general minimum wage for time spent doing non-tipped work.
The executive director of the Restaurant Law Center, Angelo Amador, told Skift Table that while the Law Center generally supports the 80/20 regulation, they decided to file this lawsuit now because, under the Obama administration, the guidelines of what constituted side work and how to track it became much more stringent.
Intent Vs. Reality
In the lawsuit, the Law Center named specific examples of how the 80/20 rule is getting jumbled in practice under its current definition. “A waiter who works 26 hours in a week and performs five hours of side work (i.e., 19.2% of the working time) may receive the tipped wage for his entire week, but a different waiter with the same schedule who performs the same side work but has a personal emergency on the last day of the week and has to leave two hours early, resulting in 24 hours of work, is, according to the Department, engaged in two different occupations and must receive full minimum wage for the five hours of side work (i.e., 20.8%).”
The Department of Labor declined to comment on the matter, citing ongoing litigation, but Amador explained that the department’s response could range from reverting back to the less stringent 80/20 definition that was in place during the Bush administration, supporting the Obama definition, or creating a whole new definition of what constitutes the 80/20 split.
The nuances of the 80/20 rule can be headache-inducing, like everything surrounding the tip credit. Because the credit is so unique in the way that it functions as a lawful wage cut for employers, it’s a strong magnet for extra rules around usage, which then leads to more openings for litigation. If the credit were eliminated, as is being discussed currently in several states, restaurant operators would be less liable for labor-related lawsuits. The Department of Labor wouldn’t be dealing with this very lawsuit. As it stands, the defendants named in the lawsuit just got served notices last week, and have til mid-September to prepare a response.