On December 17, the U.S. Department of Labor (DOL) issued a dual jobs final rule that reinstates Fair Labor Standards Act (FLSA) tip regulations prior to a rule issued by the agency in 2021 [89 F.R. 101884, 12-17-24].
The dual jobs final rule is effective December 17, 2024.
Dual Jobs Final Rule
The DOL said the dual jobs final rule is a technical correction consistent with the 5th Circuit Court of Appeals decision in Restaurant Law Center v. U.S. Department of Labor, which led to the 5th Circuit vacating the DOL’s 2021 dual jobs rule.
2021 dual jobs rule. In 2021, the DOL issued a dual jobs final rule that created a functional test to measure whether a tipped employee is engaged in their tipped occupation under the FLSA. The 2021 rule permitted an employer to take a tip credit for an employee’s tip-producing work and also for other work that directly supported tip-producing work, provided that the employee did not perform that work for a substantial amount of time.
A substantial amount was defined as work that either: (1) exceeded 20% of the hours worked during the employee’s workweek or (2) was performed for a continuous period of time exceeding 30 minutes.
The “20% of the hours worked during the employee’s workweek” rule essentially codified the informal 80/20 guidance that had appeared in DOL documents for nearly 35 years. The “30 minutes of continuous time” was an entirely new condition.
2021 rule invalidated. In the Restaurant Law Center case, the 5th Circuit vacated the 2021 rule and said the rule was contrary to the FLSA’s clear statutory text. The 5th Circuit said the FLSA is clear that an employer may claim the tip credit for any employee who, when engaged in their given occupation, customarily and regularly receives more than $30 a month in tips.
Final Rule Reinstates Prior Regulations
The dual jobs final rule removes the 2021 rule and reinstates regulations prior to the 2021 rule. Prior to the 2021 rule, DOL regulations and guidance provided that an employee is a “tipped employee” in situations in which the employee customarily and regularly receives at least $30 a month in tips.
If an employee is employed in dual jobs, the employer can only claim a tip credit with respect to the tipped occupation. For example, a hotel employee who is employed as a maintenance worker and also as a waiter is only a tipped employee with respect to the employment as a waiter.
Additional coverage of the dual jobs final rule will be available in the January issue of Payroll Currently.
To learn more about federal and state laws, regulations, and information to keep your company’s payroll operations in compliance, check out Payroll Source Plus!
Rayna Alexander, Esq., is Editor of Payroll Information Resources for PayrollOrg.