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03 Nov

November 2021: Department of Labor Publishes Final Rule Setting Limit of Tip Credit

Posted at

9:03pm

in

Update Applicable to:

All employers with tipped employees.

What happened?

On October 28, 2021, The Department of Labor (DOL) announced publication of the Tips Dual Jobs final rule, which sets reasonable limits on the amount of time an employer can take a tip credit when a tipped worker isn’t doing tip-producing work.

What are the details?

The final rule clarifies that an employer may take a tip credit only when an employee is performing work that is part of a tipped occupation, specifically; performing work that is tip-producing or performing work that directly supports work that is tip-producing for a limited amount of time.

The final rule also amends the provisions of the Executive Order 13658 regulations, which address the hourly minimum wage paid by contractors to workers performing work on or in connection with covered federal contracts consistent with the amendments to the dual jobs regulations.

Under the final rule, an employer can take a tip credit only when the worker is performing tip-producing work or when: 

  • A tipped employee performs work that directly supports tip-producing work for less than 20% of the hours worked during the employee’s workweek. Therefore, an employer cannot take a tip credit for any of the time that exceeds 20% of the workweek. Time for which an employer does not take a tip credit is excluded in calculating the 20% tolerance.
  • A tipped employee performs directly supporting work for not more than 30 minutes. Therefore, an employer cannot take a tip credit for any of the time that exceeds 30 minutes.

The final rule will be effective on December 28, 2021. For more information, please see the links below:

DOL News Release
Dual Jobs Final Rule
Current PDF Version
Executive Order 13658

What do employers need to do?

Employers should review the information above and prepare to make changes to comply with the upcoming law.

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