Jeffrey Ruzal Quoted in “3 Things to Do When Navigating Tip Credit Rules”

Law360 Employment Authority

Jeffrey H. Ruzal, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s New York office, was quoted in Law360 Employment Authority, in “3 Things to Do When Navigating Tip Credit Rules,” by Jon Steingart. (Read the full version – subscription required.)

Following is an excerpt:

Employers of workers who regularly receive tips, such as servers and bartenders, are allowed to pay a lower minimum wage as long as customer gratuities make up the difference, but navigating the rules can be difficult.

There are a few other requirements that employers must follow when they elect to pay someone the tipped minimum wage, such as doing so only for work hours connected to customer interaction and notifying employees ahead of time. …

Here, Law360 provides pointers for employers navigating tip credit rules. …

Pay Tipped Wage Only For Tipped Work

Jeffrey Ruzal, who advises businesses as leader of Epstein Becker Green's hospitality service team, said only tipped workers can be paid the tipped minimum wage.

A worker who splits their shifts between roles, such as someone who waits tables one day and cooks another, may be eligible for a tip credit for some shifts but not others, Ruzal said.

"In such cases, where you have distinct dual jobs, an employer can only take a tip credit for the tip-related work, or the service-related work," he told Law360.

It is more complicated when a worker takes on multiple roles within one shift, Ruzal added. In those situations, the DOL has applied an "80-20 rule" to evaluate whether a worker is eligible for a tip credit.

The 80-20 rule provides that a tipped worker who spends more than 20% of their time on untipped tasks, like setting up, running the dishwasher or cleaning after service, should receive standard minimum wage.

The rule has been in flux in recent months. The DOL finalized a rule shortly before the end of former President Donald Trump's term that would take a more flexible approach to determining which work hours are eligible for tip credit. Under President Joe Biden, the agency is acting to preserve the 80-20 standard.

"The takeaway, for now, is employers have to be very conscientious of the work that the front-of-the-house workers are performing," Ruzal said, "and do their best to ensure that it is squarely focused on service work to avoid potential issues where there could be a complaint of misapplication of the tip credit."