Just to clarify: Tip credit applies only to tipped work
Posted November 12, 2018
On November 8, the U.S. Department of Labor issued an opinion letter clarifying situations in which tipped employees perform work in both tipped jobs and non-tipped jobs. In such “dual jobs,” the tip credit may be applied only with respect to the time spent in the tipped job.
The tip credit provision in the Fair Labor Standards Act (FLSA) allows an employer to pay its tipped employees not less than $2.13 per hour in cash wages and take a “tip credit” equal to the difference between the cash wages paid and the federal minimum wage, which is currently $7.25 per hour. The tip credit may not exceed the amount of tips actually received, and under the current minimum wage may not exceed $5.12 (7.25 – 2.13).
A “tipped employee” is any employee engaged in an occupation in which he or she customarily and regularly receives not less than $30 a month in tips.
In some situations, employees have more than one occupation, some of which may meet the tip credit requirements, and some of which may not. These are referred to as “dual jobs.” For example, Joe Employee works as a maintenance man in a hotel, and also serves as waiter. If Joe customarily and regularly receives at least $30 a month in tips for his work as a waiter, he is a tipped employee only with respect to his work as a waiter; no tip credit may be taken for his hours spent in his occupation of maintenance man.
Some single occupations, however, involve both tip-generating and non-tip-generating duties, but do not constitute dual jobs. For example, Joe Employee is a waiter who spends part of his time cleaning and setting tables, toasting bread, making coffee, and occasionally washing dishes. Such related duties in an occupation that is a tipped occupation need not, by themselves, be directed toward producing tips, but as long as they are incidental to the regular duties and are generally assigned to the servers, the employer may take the tip credit for the time spent performing those incidental duties as well as for the core duties.
The dividing line between “dual jobs” and “related duties” isn’t, however, always clear. The determination that a particular duty is part of a tipped occupation should be made based on the following principles:
- Duties listed as core or supplemental for the appropriate tip-producing occupations in the O*NET are considered directly related to tip-producing duties, whether or not they involve direct customer service, as long as they are performed contemporaneously with the duties involving direct service to customer or for a reasonable time immediately before or after performing such direct-service duties.
- Employers may not take a tip credit for time spent performing any tasks not contained in the O*NET task list.
Employers with tipped employees who perform multiple tasks, should review the particular tasks and determine which ones fall under the “dual jobs” provision and which ones fall under the “related duties” provision to avoid evading the minimum wage requirements of the FLSA.
As of 2017, more than 2.5 million people in the U.S. worked in a tipped job.
This article was written by Darlene M. Clabault, SHRM-CP, PHR, CLMS, of J. J. Keller & Associates, Inc.
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