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Dual Jobs 80/20 Rule | Directly Supporting Work

The Department of Labor’s (DOL) revised dual-jobs and 80/20 tip credit rules went into effect on Dec. 28, 2021. Restauranteurs, battered by the headwinds of the last two years, now have a new compliance responsibility.

Historically, employers have taken a credit against their minimum wage obligations if an employee regularly earns tips. This is the “tip credit.” In Georgia, employers can pay employees $2.13 an hour if they earn tips during that time. Employers have to meet certain requirements to use this tip credit. As first established by the DOL in 1988, this meant requiring employees to spend at least 80 percent of their working time on tip-producing activities (hence the “dual jobs” and “80/20” designations) to qualify as a tipped employee.

The Trump administration relaxed these rules, making compliance easier for restaurant owners and operators. They could use the tip credit for any amount of time, provided employees were performing non-tipped work at the same time as tipped work — or within a “reasonable” amount of time immediately before or after. At the time, the DOL stated the policy was consistent with the statutory text. In their reading, the text applied to employees engaged in a tipping occupation, instead of whether they were performing specific tasks.

The Biden administration reinstated the Obama-era rules with a few new additions, which has left restauranteurs feeling a little whip-sawed. They now have to document employee activities, with a new level of detail, to claim the tip credit.

Three New Categories of Job Duties

The original guidance from the DOL under the Obama administration aimed to protect restaurant workers from being paid a sub-minimum wage for duties where they couldn’t earn tips. The revised guidance from the Biden administration restores those protections by adding new provisions. Owner-operators may still use the tip credit when employees perform non-tipped work that supports tip-producing activities.

The new 80/20 Rule introduced new categories of work into the analysis. The three new categories break down as follows:

  1. Tip-producing work — The DOL notes this “provides service to customers for which tipped employees receive tips.” This includes table service, taking orders, verifying customer food allergies, serving food, cleaning spills, making and refilling drinks, clearing plates and glasses and processing payments.

  2. Directly supporting work — This is work that prepares for or supports tip-producing activities, commonly referred to as side work. This includes waitstaff engaged in dining and room prep, such as refilling salt and pepper shakers, rolling silverware and folding napkins, setting tables and sweeping. For bartenders, this covers wiping down bars and tables, cleaning bar glasses, making drink mixes, adding liquor and supplies to inventory and prepping fruit for drinks.

  3. Work not part of the tipped occupation — This covers work outside of the tipped employee’s tip-producing activities. It includes cleaning dining rooms, kitchens and bathrooms, and preparing foods such as salads.

The new 80/20 rule holds that 80 percent of tipped employees’ work must be in the first category. No more than 20 percent can be in the second category. None of the duties in the third category are eligible for tip credit work. The new “substantial amount of time” distinction is similar to the Trump administration’s ruling, but with a new limit of 30 continuous minutes.

Tracking “Directly Supporting” Work

The DOL’s new classification of duties provides basic guidance, and the rule defines “a substantial amount of time.” Owners and operators must complete the 20 percent calculation once a week. The challenge comes from trying to track directly supporting work over the course of that week. Foodservice focuses on individual needs, so tipped waitstaff may move between multiple tipped and non-tipped duties in the course of taking care of one patron.

To further complicate matters, the new rule specifies that employers may not claim a tip credit for employees performing supporting work for “a substantial amount of time.” This was the basis of the original 80/20 rule, but the newly revised rule adds complication. An employer can’t use a tip credit for employees performing supporting work for longer than 30 continuous minutes. Those first 30 minutes apply to the tip credit and fall under the weekly 20 percent rule. Employers must pay a minimum wage for supporting work performed after the first 30 continuous minutes have elapsed. This falls outside of the weekly 20 percent analysis because the employer paid minimum wage for that time. Supporting work done in under 30-minute intervals throughout the workday wouldn’t invalidate the tip credit.

How does this work in practice? If a tipped employee handles supporting work continuously for 45 minutes, the employer takes the tip credit for the first 30 minutes but pays full minimum wage for the last 15 minutes. The DOL also holds that a tipped employee’s downtime, such as during slow periods of business, constitutes supporting work.

The Industry Pushes Back

Not surprisingly, the hospitality industry opposes the revised dual jobs and 80/20 tip credit rules. The Texas Restaurant Association and The Restaurant Law Center, part of the National Restaurant Association, filed a lawsuit challenging the new limits on the tip credit. The suit, filed in U.S. District Court for the Western District of Texas in Austin, claims that the DOL exceeded its authority and is “attempting to re-write the statute via regulation.” It also states the DOL used data from 2018 and 2019 to estimate implementation costs of the new rule, failing to account for the staffing shortages and inflationary pressure caused by COVID-19.

The Texas Restaurant Association’s president and CEO, Emily Williams Knight, said, “Because restaurant employees often move rapidly from one task to another throughout a shift, there is no practical way for an employer to keep the task-by-task records the administration’s regulations would demand to avoid potential liability. Operators are exhausted after a very difficult 20 months of the pandemic. Now is the wrong time to burden them with unnecessary regulations.”

Despite the vigorous industry pushback, the changes are likely to remain under the current administration (a district judge ruled against a preliminary injunction in February 2022). Although the new DOL guidance adds a compliance burden on restaurants, the dual jobs and 80/20 rules date back to 1988. In addition, owner-operators already deal with state or municipal regulations regarding tip credits.

How to Adapt Moving Forward

Larger regional or national chains may have corporate staff to manage compliance. The new rule will be more challenging for smaller, family-owned restaurants with fewer people on the payroll, particularly if they’re forced to defend themselves against lawsuits brought by employees. To adapt to the new compliance requirements, you should revisit your workflow and processes. Conduct an audit to determine the scope of your employees’ duties — who does what and how long these duties take. You should also meet with your payroll providers to ensure proper tracking of employee time by category.

Peter Lambros, Director of Product, SpotOn Labor Management Center and former operator of a multi-unit restaurant group, offers specific steps to manage compliance in Modern Restaurant Management:

  1. Define your policy and expectations — Work with your legal advisors to create a restaurant policy that defines your compliance strategy. Make sure current staff and new hires read the policy and understand how it works and what it means for them.

  2. Create job codes for every task — Use one job code for tip-producing work and another for supporting work. Make sure employees use them.

  3. Train your managers and employers — Make sure your staff understands the differences between tip-producing, supporting work and non-tipped work. Then make sure they understand how to record their time when performing non-tipped work for more than 30 minutes.

  4. Maintain checks and balances — Prompt employees to confirm when they spend more than 20 percent or more than 30 consecutive minutes of their shift on non-tipped work. This safeguards your process against employees too busy to clock in and out of their respective roles during their shift. The prompt should request a detailed description of work performed.

  5. Validate the process — A manager should verify time worked by employees. This provides a strong record of compliance and protects the employer.

Like the new ASC 842 lease requirements, the new dual jobs and 80/20 rules may give you better insight into your operations. Compliance always comes with a cost, but you can use the data you generate to see who works efficiently and who adds value.

To make sure your 80/20 compliance is as cost-effective as possible, talk to your Windham Brannon advisor or contact Maggie Wise, Principal at Windham Brannon.