Jeffrey (Jeff) H. Ruzal, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s New York office, was quoted in Law360, in “Tipped Credit Rule May Bring Down Tipped Wages,” by Daniela Porat. (Read the full version – subscription required.)

Following is an excerpt:

In the two years since the U.S. Department of Labor released a rule strengthening wage protections for tipped workers, compliance remains tricky and may even bolster the movement to abandon the tipped credit altogether, experts say.

The rule caps the amount of time tipped workers can earn the tipped minimum wage. Under the Fair Labor Standards Act, tipped workers can earn as little as $2.13 per hour as long as tips carry the worker to the standard federal minimum wage, which is $7.25.

What was particularly notable about the rule is that it sought to clarify the difference between duties that are directly tip-producing, such as serving restaurant patrons, and tip-supporting, such as folding napkins. …

Compliance with the rule has been challenging because of its nuances and the fact that it is disconnected from the practical realities of running a restaurant, said Jeff Ruzal, a member of management-side firm Epstein Becker & Green PC.

"The rule doesn't create clear guidelines or guardrails for how a restaurant could conceivably operate," he said. "I think it's difficult for front-of-the-house workers to do the jobs that the DOL believes a front-of-the-house employee performs in a vacuum." …

The rule came out at a turbulent moment in the tipping landscape with the pandemic upending hospitality. Some restaurants did away with tips and implemented service charges. Customers in the early days of COVID-19 tipped essential workers generously.

And now people are prompted to tip regularly in new situations.

This evolving tipping landscape may inspire businesses to consider using the tipped credit, but the complexity of the rule may discourage them from doing so, Ruzal said.

"Even though it might be better for the bottom line, the risks of noncompliance are just too great that it may not be worth the trouble," he said.


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