New DOL Rules Set Limits on Amount of Non-Tipped Worked Tipped Employees Can Do When Tip Credit Applied

On Thursday, the United States Department of Labor (DOL) announced a final rule that sets reasonable limits on the amount of time tipped employees can spend in non-tipped activities when the employer receives a tip credit. The rule clarifies that an employer may only take a tip credit for the hours when an employee is doing work that is tip-producing or engaged in tasks that directly support tip producing work.

Under the final rule, an employer can take a tip credit only when the tipped employee is performing tip-producing work or when the tipped employee is performing work that directly supports tip-producing work as long as the tipped worker does not spend a substantial amount of time doing tip-supporting work. The rule defines substantial amount of time as more than 20 percent of the hours worked during the employee’s workweek or a continuous period of time that exceeds 30 minutes.

The final rule becomes effective December 28, 2021.