April 14, 2021
Amy DeBisschop
Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor
Room S-3502
200 Constitution Avenue NW
Washington, D.C. 20210
Re: Tip Regulations Under the Fair Labor Standards Act (FLSA); Delay of Effective Date (RIN 1235-AA21)
Dear Ms. DeBisschop,
The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers, and assesses policies with respect to how well they further those goals. EPI submits these comments on the Department of Labor’s (DOL) request for comment on the delay of the effective date of the rule entitled “Tip Regulations Under the Fair Labor Standards Act” (2020 Tip Final Rule/Tip Rule).
In the notice of proposed rulemaking (NPRM)1, the Department of Labor proposes delaying the effective date of two portions of the 2020 Tip Final Rule that address the assessment of civil monetary penalties as well as the portion of the 2020 Tip Final Rule that amends the Department’s dual jobs regulations to address the application of the FLSA tip credit to tipped employees who perform both tipped and non-tipped duties. EPI strongly supports the Department’s proposed further delay of these portions of the Tip Rule.
The 2020 Tip Final Rule eliminated the long-standing “80/20” rule, which provided employers guidance on the use of tip credit for non-tipped work. The 80/20 rule said that tipped workers can spend a maximum of 20 percent of their time on nontipped duties while still being paid the subminimum wage for tipped workers. However, the Tip Rule does away with this protection, replacing it with vague and much less protective language. In particular, the Tip Rule allows tipped workers to be paid the subminimum tipped wage while performing an unlimited amount of nontipped duties, as long as those nontipped duties are performed “contemporaneously with tipped duties or for a reasonable time immediately before or after performing the tipped duties.” In the Tip Rule, “reasonable time” is not defined, and its ambiguity would make it difficult to enforce, providing employers an immense loophole that would be costly to workers.
EPI estimates that the Tip Rule would allow employers to capture more than $700 million annually from workers.2 It should be noted that the estimate of the $700 million annually workers will lose as a result of the Tip Rule was calculated pre-COVID-19. The impact of the Tip Rule will likely be much worse for workers during the COVID-19 pandemic, since nontipped work now makes up a much greater share of work being done in establishments that employ tipped workers (for example, restaurants have shifted a meaningful portion of their services from dine-in to takeout). This would only exacerbate the economic losses tipped workers are already experiencing during the COVID-19 pandemic.3 Further, this loss would be especially harmful for women and people of color who are both disproportionately represented in the tipped workforce and have borne the brunt of the pandemic’s devastating impacts.4 It is worth noting that the Department, in the Tip Rule, disagreed with EPI’s findings, but upon further consideration believes that the findings call for the Department to revisit the economic analysis regarding the 80/20 rule.5
We further encourage the Department to evaluate whether it may, consistent with the FLSA, adopt a standard stronger than the 80/20 rule that further clarifies, and limits, the amount of non-tipped work for which an employer can claim a tip credit. The Department should consider, for example, more tightly defining duties related and unrelated to tipped occupations; directing employers to assess the relative share of tipped and (related and unrelated) non-tipped duties on a per-shift, rather than per-workweek, basis; barring an employer from taking any tip credit for an employee on any day during which the employee spends more than 20 percent of their time in a non-tipped occupation (as is the policy in New York6); clarifying that an employer may not claim a tip credit for time when the employer’s establishment is not open for service to customers (as is the policy in Connecticut7); reducing the share of time spent in non-tipped related tasks for which an employer can claim a tip credit; and/or strengthening notice and recordkeeping requirements,8 including by requiring employers to provide employees with clear information regarding hours deemed to be spent in tipped and non-tipped occupations and wage rates applied.9
EPI strongly supports the Department of Labor’s delay of effective date of the three portions of the 2020 Tip Final Rule. If the portion of the 2020 Tip Final Rule that amends the Department’s dual jobs regulations to address the application of the FLSA tip credit to tipped employees who perform both tipped and non-tipped duties were to go into effect, employers would capture millions annually from workers—an amount that would be even greater during the coronavirus pandemic. For this reason, we encourage the Department to use the period of delay to withdraw the portion of the 2020 Tip Final Rule amending the dual jobs regulation and re-propose amendments that establish a standard no less protective than the long-standing 80/20 Rule.
Thank you for the opportunity to comment on this important issue. Please do not hesitate to contact Heidi Shierholz at hshierholz@epi.org if you have questions or require additional information regarding these comments.
Sincerely,
Heidi Shierholz
Senior Economist and Director of Policy
Economic Policy Institute
Margaret Poydock
Policy Analyst
Economic Policy Institute
1. Tip Regulations Under the Fair Labor Standards Act (FLSA); Delay of Effective Date, 86 Fed. Reg. 15811 (March 25,, 2021). On February 26, 2021, the Department of Labor published a final rule extending until April 30, 2021, the effective date of the rule titled Tip Regulations Under the Fair Labor Standards Act (2020 Tip final rule) in order to allow the Department the opportunity to review issues of law, policy, and fact raised by the 2020 Tip final rule before it takes effect.
2. Heidi Shierholz and Margaret Poydock, “EPI Comments on the Department of Labor’s Proposed Rule Regarding Tip Regulations,” comments submitted on behalf of Economic Policy Institute to U.S. Department of Labor, December 10, 2019.
3. One Fair Wage et al., Take Your Mask Off So I Know How Much to Tip You: Service Workers’ Experience of Health & Harassment During COVID-19, November 2020. Report finds that 83% of workers survey had experienced a decline in tips during the pandemic, with nearly two-thirds of respondents reporting that tips had declined by at least 50%. Survey consisted of 1,675 food service workers in 5 states and Washington, D.C.
4. David Cooper, Zane Mokhiber, and Ben Zipperer, Raising the Federal Minimum Wage to $15 by 2025 Would Lift the Pay of 32 Million Workers, Economic Policy Institute, March 2021.
5. 86 Fed. Reg at 15814
6. See N.Y. Comp. Codes R. & Regs. Tit. 12 § 146-2.9.
7. See Regulation of the Conn. Dep’t of Labor Concerning Tip Credit, § 31-62-E2a (Sept. 24, 2020), https://eregulations.ct.gov/eRegsPortal/Search/getDocument?guid={6037C174-0000-CC14-B3D3-93941FD076BE}.
8. See, e.g., New York’s requirements at N.Y. Comp Codes R. & Regs. Tit. 12 §§ 146-2.1 – 2.3, 146-2.14 – 2.20.
9. Irvine, 106 F. Supp. 3d at 734.
