The Treatment of Tips under the FLSA: Dual Employment

If an employee is engaged in duties for which tips are received as well as duties for which tips are not received, the issue of whether the tip credit can only be taken for the time spent performing tipped duties arises.  The DOL regulation that addresses this circumstance, 29 C.F.R. § 531.56(e), provides that so long as a tipped employee is doing work related to the tipped duties, a tip credit is permitted. The regulation, by way of example, references a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses.  The employer of this waitress may take tip credit for all of these duties because the duties for which a tip is usually not received (setting tables, etc.) is related to the duties for which a tip usually is received (waiting tables).  See Pellon v. Bus. Representation Int’l, Inc., 528 F. Supp. 2d 1306, 1313 (S.D. Fla. 2007) (holding additional non-tipped duties skycaps performed to be incidental to their duties as skycaps where there was no “clear dividing line” between these duties and those that clearly were performed for tips), aff’d, 291 Fed. Appx. 310 (11th Cir. 2008); Townsend v. BG-Meridian, Inc., 2005 U.S. Dist. LEXIS 45200, at *6-7 (W.D. Okla. 2005) (holding that the employer could apply the tip credit towards the time the plaintiff-waitress spent while performing cashier and phone receptionist duties, in addition to the time she spent serving tables, because such duties were "merely related duties incident to her waitress position").  But see Dole v. Fred Bishop & Carol Bishop, 740 F. Supp. 1221, 1228 (S.D. Miss. 1990) (finding that the time waitresses spent cleaning and preparing food before the restaurant opened was easily separable from the time spent performing waitressing duties and, therefore, the waitresses were entitled to the full statutory minimum wage during these periods of time). 

DOL’s Field Operations Handbook (available at http://www.dol.gov/whd/FOH/FOH_Ch30.pdf ) contains guidelines for determining how much non-tipped work can be assigned to an employee before the employer can no longer take the tip credit for non-tipped duties.  The Handbook (Section 30d00e) indicates that employees who spend more than 20% of their time on general preparation and maintenance work cannot be considered tipped employees for the time spent doing general preparation and maintenance.  

In a 1985 opinion letter (Dep’t of Labor, Wage & Hour Div., Op. Letter FLSA-854 (Dec. 20, 1985)), the Department addressed the issue further, stating that the tip credit could be taken for “preparation work or after hours clean-up if such duties are incidental to the waiter or waitress’s regular duties and are assigned generally to the waiter/waitress staff. However, where the facts indicate that specific employees are routinely assigned to maintenance work or that tipped employees spend a substantial amount of time performing general preparation work or maintenance, we would not approve a tip credit for hours spent in such activities.”  Several years later, in 1988, DOL’s Handbook contained the 20% rule, which defined when general preparation or maintenance work had become substantial.  

In Fast v. Applebee’s Int’l, Inc., 2009 U.S. Dist. LEXIS 67564 (W.D. Mo. Mar. 4, 2010), appeal docketed, No. 10-1725 (8th Cir.), the principal contention is Applebee’s argument that the district court incorrectly used a task-based analysis rather than an occupation-based analysis in determining whether plaintiff-bartenders were tipped employees.  In its opening brief to the Eighth Circuit, Applebee’s argues that the FLSA’s tip credit requires an occupation-based analysis.  Applebee’s relies upon the language of the statute (§ 203(t)), which refers to “an occupation” as well as the record-keeping regulation (29 C.F.R. §516.28(a)(4) and (5)), which also uses the terminology “occupation.”

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