On June 23, the U.S. Department of Labor Wage and Hour Division published a notice of proposed rulemaking titled “Tip Regulations Under the Fair Labor Standards Act (FLSA); Dual Jobs.” The proposed rulemaking reinstates the department’s longstanding 80/20 rule applicable to wages paid to tipped employees.

The Tip of the Iceberg: The Tip Credit and the 80/20 Rule

Under the FLSA, employers of tipped employees are permitted to pay a reduced cash wage of $2.13 per hour ($2.83 in Pennsylvania) and take a “tip credit” by applying the employee’s tips to satisfy the difference between the reduced wage and statutory minimum wage of $7.25. In 1967, the year after Congress first created the tip credit provision to the FLSA, the DOL promulgated its initial tip regulations. Those regulations recognized that, in some cases, an employee may be employed in both a tipped occupation and a nontipped occupation. The regulations characterized this as a “dual job” situation, and provided that an employer could only take a tip credit against minimum wage obligations for the time the employee spent in the tipped obligation. Time spent in the nontipped occupation must be paid at the federal minimum wage.

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