The U.S. Department of Labor announced a Notice of Proposed Rulemaking on June 21, 2021, in order to limit the amount of non-tip producing work that a tipped employee can perform when an employer is taking a tip credit.


Key features of the proposed rule are as follows:

  • The proposed rule clarifies when an employee is working in a tipped occupation and when a worker has performed such a substantial amount of non-tipped labor that an employer can no longer take a tip credit and must pay the full federal minimum wage to the worker.
  • The Fair Labor Standards Act allows employers with tipped workers to pay as little as $2.13 per hour in direct wages, while taking a credit against the tips earned by the employee to make up the balance of the federal minimum wage of $7.25 per hour.
  • The proposed rule also clarifies that an employer may only take a tip credit when tipped employees perform labor that is part of their tipped occupation.
  • Work considered part of the tipped occupation includes labor that produces tips and labor that directly supports tip-producing work, so long as the employee does not perform it for a substantial amount of time.
  • The proposed rule also clarifies that if an employee performs work that directly supports tip-producing work for a substantial amount of time – that exceeds 20 percent of all of the hours worked during the employee’s workweek or exceeds 30 continuous minutes – that worker is no longer performing labor that is part of the tipped occupation.
  • The proposal clarifies that the employers may not take a tip credit for work that is not part of the tipped occupation.

Comments are invited by the department from the public on the proposed rule at until Aug. 23, 2021.

*Tanvi Singh, Editorial Assistant has put this story together.

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