Tipped Employees May be Entitled to $7.25 Minimum Wage When they Spend >20% on Non-Tipped Activities

Charles R. Bridgers : January 31, 2012 10:14 am 

The U.S. Supreme Court recently denied certiorari from an Eighth Circuit decision in Gerald Fast v. Applebee’s International, 10-1725 (8th Cir. 2011). In Fast, the Court approved a Department of Labor interpretation (Chapter 30d of its Field Operations Handbook (.pdf)) that states:

Reg 531.56(e) permits the taking of the tip credit for time spent in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips (i.e. maintenance and preparatory or closing activities). For example a waiter/waitress, who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses may continue to be engaged in a tipped occupation even though these duties are not tip producing, provided such duties are incidental to the regular duties of the server (waiter/waitress) and are generally assigned to the servers. However, where the facts indicate that specific employees are routinely assigned to maintenance, or that tipped employees spend a substantial amount of time (in excess of 20 percent) performing general preparation work or maintenance, no tip credit may be taken for the time spent in such duties.

As a result, restaurants and other employers of tipped employees need to be conscious of how much time such employees spend on activities not "directed toward producing tips," such as setup or cleaning tasks. Under the DOL’s interpretation, employers will have the burden of proving that time spent on these tasks falls below the 20% threshold. If tipped employees spend more than 20% of their time in non-tip-generating activities, the DOL will take the position that these employees should be paid at least the minimum wage for such time.