Public Comments | Unions and Labor Standards

EPI comments on the proposed delay of effective date for the Tip Rule

February 17, 2021

Submitted via: https://www.federalregister.gov/documents/2021/02/05/2021-02485/tip-regulations-under-the-fair-labor-standards-act-flsa-delay-of-effective-date

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: Comments on 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 for “Tip Regulations Under the Fair Labor Standards Act” (Tip Rule).

Under current law, tipped workers are protected by the long-standing “80/20” rule, which provides employers guidance on the use of the tip credit for non-tipped work. The “80/20” rule says tipped workers can spend a maximum of 20% 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, 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 will make it difficult to enforce, providing employers an immense loophole and leaving workers behind. As a result, EPI estimates that the Tip Rule would allow employers to capture more than $700 million annually from workers.1

In the final rule, the Department addressed EPI’s calculation that the Tip Rule would allow employers to capture more than $700 million annually from workers. In regards to EPI’s analysis, the Department stated that “In sum, EPI’s calculation is based entirely on the premise that replacing the 80/20 approach with this final rule would increase certain duties-shifting practices that it deems exploitative.”2  This is true. But, in the final rule, the Department did not explain how the “reasonable time” language would protect workers from exploitative duties-shifting practices that would result in tipped workers spending more time on non-tipped work and, as a result, allowing employers to capture a portion of workers’ tips. Instead, the Department simply claimed that the management burden of supervising tipped workers’ tasks to maintain “temporal proximity” between tipped and nontipped work would be prohibitive and it would therefore be “highly infeasible” for a restaurant (for example) to shift dishwashing duties onto servers.  However, the Department “acknowledges that such transfers could occur in some cases,” but “believes that employees will nonetheless benefit from this rule.” This explanation is not sufficient and delaying the effective date of the rule is highly appropriate to give the Department time to reassess the rule.

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 their services from dine-in to takeout).

EPI strongly urges the Department of Labor to delay implementation and reconsider the interpretation of the Tip Rule. If the Tip Rule were to go into effect, employers would capture millions annually from workers—an amount that would be exacerbated even more during the coronavirus pandemic.  For these reasons, the rule should not be finalized.

Sincerely,

Heidi Shierholz
Director of Policy and Senior Economist
Economic Policy Institute

Margaret Poydock
Policy Analyst
Economic Policy Institute

Endnotes

1. Heidi Shierholz and David Cooper, “Workers Will Lose More Than $700 million Annually Under Proposed DOL Rule,” Working Economics (Economic Policy Institute blog), November 30, 2019.

2. 85 Federal Register 86786


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