Amy DeBisschop
Division of Regulations, Legislation, and Interpretation
Wage & Hour Division, U.S. Department of Labor
Room S-3502
200 Constitution Avenue NW
Washington, D.C. 20210
Re: National Employment Lawyers Association (NELA) Comments on Proposed Delay of Effective Date of Tip Regulations, Regulatory Information Number (RIN) 1235-AA21
The National Employment Lawyers Association (NELA) submits these comments in favor of the Department of Labor’s (“Department” or “DOL”) February 5th Delay of the Effective Date of Tip Regulations until April 30, 2021, to permit the Department to reconsider the factual, policy, and legal issues raised by the Rule. RIN 1235-AA21; 86 Fed. Reg. 8325. (“Tip Rule”)
NELA is the largest professional membership organization in the country comprised of attorneys who represent workers in labor, employment, and civil rights disputes. Founded in 1985, NELA advances employee rights and serves lawyers who advocate for equality and justice in the American workplace. NELA and its 69 circuit, state, and local affiliates have a membership of over 4,000 attorneys who are committed to working on behalf of those who have been treated illegally in the workplace. NELA members represent thousands of workers from around the country in wage theft cases in every state and circuit, which provides NELA with an important and insightful perspective on how issues surrounding tipping affect workers, especially those paid far below the minimum wage who rely on tipped wages to make a living. NELA members also have the experience to comment on the adverse impact the Department’s Rule will have on these workers and on enforcement of our nation’s wage theft laws.
NELA supports the Department’s delay of the Tip Rule because it improperly narrows the protections of the FLSA for tipped workers in a variety of fast-growing industries including delivery, limousine and taxi, airport workers, parking, carwash, and valet, personal services and retail, in addition to restaurants and hospitality. The federal minimum wage for tipped workers has been stuck at $2.13 since 1991, despite significant increases in the cost of living over that time. And too many tipped workers struggle to make ends meet, in part because the industries they work in are characterized by high rates of FLSA violations by their employers. The Department routinely identifies significant wage violations in industries with large concentrations of tipped workers[1], and yet fails to support its new policy change with factual findings that contradict its earlier positions.[2]
NELA supports a delay of the Tip Rule for the following reasons.
- The Tip Rule’s rescission of the “80/20” rule on tipped duties permits employers to call more workers “tipped,” and pay them the subminimum wage of $2.13/ hour, with nearly no barriers to doing so.
The Tip Rule allows an employer to require nontipped duties for “any amount of time” when the tipped worker is simultaneously engaged in tip generating duties, and for a “reasonable” amount of time before and after performing tipped duties. This Rule would: diminish tipped workers’ capacity to earn tips, and diminish employer hiring of workers in nontipped occupations (e.g., cleaners, maintenance, prep, and back-office workers.) The Rule particularly harms the women and people of color who comprise most of the tipped workforce.[3]
As the Department recognizes, Section 3(m) only allows employers to take a tip credit for a “tipped employee,” defined at section 3(t) as an “employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” This definition requires further explanation, because an individual employee may be employed in both a tipped occupation (for which the employer may take the tip credit) and a non-tipped occupation (for which the employer must pay at least the full minimum wage).
The “dual jobs” regulation at 29 C.F.R. § 531.56(e) distinguishes between an employee who holds both a non-tipped and a tipped occupation, and a person in a tipped occupation who performs some related non-tipped tasks. Between 1988 and 2018, guidance from the Department clarified the dual jobs regulation with the “80/20 rule,” which provided a necessary limit: when an employee spends more than 20 percent of their time during a workweek on activities that do not produce tips, the employee is no longer a tipped employee.[4]
The DOL’s justification for changing its position on the 80/20 rule is that it “was difficult for employers to administer and led to confusion.” To the contrary, the 80/20 rule has been consistently used and accepted by courts and the Department itself over a 30-year period.[5] In fact, even after the Department released its November 2018 Opinion Letter rescinding the 80/20 Rule, nearly every court to consider it has declined to afford it any deference and has continued to recognize the 80/20 Rule.[6]
Back-of-house employees and workers in non-tipped occupations will also lose out under the Department’s amendments to the dual jobs rule. If an employer can pay a tipped employee less to spend more time on “related” tasks like cleaning and food prep that have traditionally been performed by back-of-house staff, that will drive down wages for—or even eliminate—back-of house positions in restaurants, and related maintenance and prep jobs in other workplaces like hotels, carwashes and parking lots, and service establishments.
- The Tip Rule permits employers to take employees’ tips, in violation of the recent Congressional Amendments to the FLSA in 2018.
The Tip Rule does not comply with the 2018 Congressional Amendments to Section 3(m) of the FLSA, as explained above, and as alleged in the states’ legal challenge. Given Congress’s clear command that employers may not keep employees tips, employers’ use of tips to satisfy their minimum wage obligations should be minimized. Instead, the Tip Rule repeals the longstanding 80/20 rule and substitutes a much weaker standard. In doing so, DOL is in contravention of Congressional intent.
The Economic Policy Institute estimates (conservatively) that under the then-proposed Tip Rule, which became final, employers would claim $5.8 billion dollars taken legally from their employees, representing 16 percent of tips earned by workers annually.[7] And an astounding $4.6 billion of this $5.8 billion—nearly 80 percent—would be tips earned by women.[8]
- The lawsuit filed by eight states and the District of Columbia merits further review and revision of the Tip Rule.
Attorneys General of Pennsylvania, Illinois, Massachusetts, Delaware, the District of Columbia, Maryland, Michigan, New Jersey and New York filed suit against the Tip Rule last month, raising several legal claims that should be considered and addressed by the Department.
The lawsuit focuses especially on the elimination of the 80/20 Rule, and claims that the Rule
contradicts the text and purpose of the Fair Labor Standards Act. It also asserts that the DOL violated rulemaking process requirements, including failing to analyze the impact the rule would have on tipped workers. The states argue that the rule will harm the states by reducing income tax revenue, increasing public benefits expenditures, and imposing administrative costs.
- The Tip Rule should be delayed because of its improper narrowing of the reasons for assessing civil monetary penalties against employers.
The Tip Rule’s redefinition of willfulness improperly weakens worker protections, contrary to the language of the FLSA and in particular its recent Congressional amendments, where Congress sought to increase civil penalties, and must be reassessed. Despite Congresses clear intent to provide for civil money penalties for violations of section 3(m) without finding a willful violation, the DOL Tip Rule unlawfully adds one. That is contrary to the plain language of the statute and must be removed.
Thank you for your attention to these comments on a critical issue facing millions of workers.
[1] See, e.g., https://www.dol.gov/whd/resources/strategicEnforcement.pdf.
[2] See Perez v. Mortgage Bankers Ass’n, 135 S. Ct. 1199, 1209 (2015) (explaining that “the APA requires an agency to provide more substantial justification when ‘its new policy rests upon factual findings that contradict those which underlay its prior policy’”) (quoting FCC v. Fox Television Stations, Inc., 566 U.S. 502, 515 (2009)); see also Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57 (1983).
[3] Women make up 69 percent of tipped workers. Women of color are 28 percent of tipped workers, compared to 18 percent of all workers. NWLC calculations based on U.S. Census Bureau, American Community Survey 2017 one-year estimates (ACS 2017) using IPUMS USA. Figures include all workers employed in a set of predominantly tipped occupations identified by the Economic Policy Institute (EPI). See Dave Cooper, Zane Mokhiber & Ben Zipperer, EPI, Minimum Wage Simulation Model Technical Methodology (Feb. 2019), https://www.epi.org/publication/minimum-wage-simulation-model-technical-methodology/
[4] See U.S. Dep’t of Labor, Wage & Hour Div., Field Operations Handbook § 30d00(e) (Dec. 9, 1988); see also, e.g., Belt, 2019 WL 3829459 at *25.
[5] See, e.g., citations in comments submitted by NELP on February 17, 2021, in favor of the delay of this Rule.
[6] See, e.g., citations in comments submitted by NELP on February 17, 2021, in favor of the delay of this Rule.
[7] Heidi Shierholz et al., EPI, Employers Would Pocket $5.8 Billion of Workers’ Tips Under Trump Administration’s Proposed ‘Tip Stealing’ Rule 1 (2017). http://www.epi.org/files/pdf/139138.pdf.
[8] Shierholz et al., supra note 5.