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The US Department of Labor has issued a final rule Thursday which aims to set reasonable limits on the time that tipped employees, such as waiters and waitresses, can spend on tip-free activities when the employer receives a tip credit.

The rule clarifies that an employer can only take tip credit for hours when a tipping employee performs tip-producing work or is engaged in tasks that directly support the tip-producing work, as long as the tipping worker tipping doesn’t spend a lot of time doing the tipping support work. The rule defines a substantial amount of time as more than 20% of the hours worked during the employee’s work week or a continuous period of time that exceeds 30 minutes.

The US Department of Labor

Andrew Harrer/Bloomberg

The Fair Labor Standards Act requires employers covered by Section 6(a) to pay non-exempt employees a minimum wage of at least $7.25 per hour. Employers are permitted to satisfy a portion of their minimum wage obligation to a “tipped employee” by taking a partial credit, known as a “tip credit”, toward the minimum wage based on the amount of tips that an employee receives provided the employer meets certain conditions. conditions.

The final rule also amends the Biden administration’s Executive Order 13658 regulations, which address minimum hourly wages paid to employees performing work on or in connection with covered federal contracts, consistent with changes to the dual employment regulations. .

The Labor Department said the rule would bolster the Wage and Hour Division’s ability to ensure essential workers have all the protections the law affords them, as many tipped employees stayed on the job throughout. of the pandemic, at risk to themselves and their families.

“Women, people of color and immigrants make up more than half of all tip workers,” Jessica Looman, acting administrator of the Wage and Hour Division, said in a statement. “Today’s final rule strengthens protections for this vital segment of the country’s essential workforce, combats income disparity and promotes fairness.”

The final rule goes into effect on December 28, 2021.