Client Alert 
November 4, 2021

Follow-Up on Revised 80%-20%-30 min. DOL
Final Rule For Tipped Employees:
Interaction With NYS 80%-20%-2 hr. Rule
Following up on our Client Alert regarding a new U.S. Department of Labor Final Rule pertaining to tipped employees, that restricts the ability to take a tip credit from the full minimum wage for time in excess of 30 consecutive minutes or 20% of the employee’s workweek spent on Directly-Supporting Work (the “FLSA Final Rule”), we write to alert you to the interaction between the FLSA Final Rule and New York’s 80/20 rule.
 
There can only be damages under the FLSA Final Rule if an employer is paying an employee a wage below the federal minimum wage. Accordingly, in New York, where the state tipped minimum wage ($10) exceeds the full federal minimum wage ($7.25), there can be no damages for violation of the FLSA Final Rule where the employer pays a tipped employee at least the applicable state tipped minimum wage for straight time hours (hours up to 40 in one workweek). By contrast, employers wishing to pay the tipped minimum wage will need to track compliance with both the New York 80/20 rule and the FLSA Final Rule because violations of the FLSA Final Rule will require New York employers to pay overtime at the full overtime wage rate with no tip credit. In other words:
 
  • In New York, you may continue (for now) to take the tip credit on straight time (hours under 40) as long as you comply with New York’s 80/20 rule (even if you violate the FLSA Final Rule) because the New York tip credit minimum wage ($10) is greater than the full federal minimum wage ($7.25). This would change when/if federal minimum wage rises above $10/hour. 

  • By contrast, because of a wrinkle in federal law that requires overtime be paid at 1 ½ times the “regular rate” (which is the New York full $15 minimum wage), New York employers will not be able to take the tip credit on overtime if they do not satisfy the new FLSA Final Rule (because satisfying that rule is a requirement for taking the tip credit under Federal law).

Obviously, this is very complicated and will certainly lead to increased litigation.

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If you have questions or would like additional information, please contact our Labor & Employment attorneys or the primary EGS attorney with whom you work.

This memorandum is published solely for the informational interest of friends and clients of Ellenoff Grossman & Schole LLP and should in no way be relied upon or construed as legal advice.