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Pssst! Tips can still cause headaches when calculating wages owed

November 2021 employment law letter
Authors: 
Glenn Rissman, Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.

The Fair Labor Standards Act (FLSA) allows “tipped” employees to be paid less than the minimum wage, provided the tips they receive at least make up for the difference between what the employer pays and the legal minimum wage. The Act allows employers to take a tip credit of $3.02 per hour toward the minimum wage. Thus, in Florida, for example, where the minimum rate is now $10 per hour, tipped employees must receive a direct wage of at least $6.98. So far, so good. Now comes the hard part.

80/20 rule explained

Problems arise when tipped employees perform duties unrelated to or only marginally connected with their tipped duties. After all, servers don’t spend the entire shift taking orders and delivering food and drinks to their assigned tables. Can the employer take the tip credit for the other duties? What if the server spends a lot of time doing things related to serving customers but not actually serving them?

The U.S. Department of Labor (DOL) has traditionally applied what it calls the 20% (or 80/20) rule: An employer can’t take the tip credit for time an employee spent performing duties unrelated to the tipped occupation. It can take the credit, however, for work related to the tipped occupation, provided the employee didn’t spend more than 20% of her working hours on the duties.

Fresh endorsement from 11th Circuit

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