USDOL has finally clarified the so-called “20% Rule” limiting the use of the FLSA tip credit even with respect to individuals qualifying as “tipped employees”.
In an opinion illustrating the tangled web we weave when de-facto legislation takes place outside of Congress, the Ninth Circuit in Marsh v. J. Alexander's gave deference to the USDOL's sub-regulatory "20% Rule", restricting an FLSA tipped employee's activities, essentially on the basis that the agency's position was previously available online and that employers were therefore presumed to have notice of its potential effect.
Tip credit controversies are alive and well as employers seek clarity on the USDOL's so-called 20% Rule regarding "tipped employees" engaging in activities that do not, or at least not directly, produce tips.
Employers should be aware of how we got to the recent FLSA amendment regarding tips, and have a solid understanding of their own tip-related practices, before trying to determine where to go from here.
Today's federal budget included a rider to amend the FLSA and prohibit an employer from keeping tips received by its employees, regardless of whether or not the employer takes a tip credit.
It is all-too-common for employers to make expensive mistakes where the FLSA tip-credit is concerned.
The U.S. Labor Department's new FLSA "tip-credit" pronouncements are a mixed-bag for employers.