32818 Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Proposed Rules 

public health or safety, common defense 

and security, protection of the 

environment, or regulatory efficiency 

and effectiveness. The public comment 

period was originally scheduled to close 

on April 6, 2020. On April 2, 2020, the 

NRC published a document in the 

Federal Register (85 FR 18477) 

extending the deadline to May 6, 2020. 

During the comment period, on March 

5, 2020 (ADAMS Accession No. 

ML20069A022), and March 24, 2020 

(ADAMS Accession No. ML20085H593), 

the NRC held public meetings to discuss 

the NRC’s request for public input. In 

addition, the NRC requested input from 

agency staff through various methods of 

internal outreach. The NRC received 

comment submissions from the Nuclear 

Energy Institute, agency staff, and a 

member of the public, for a total of 100 

individual comments. The evaluation 

summary of these comments is available 

in ADAMS under Accession No. 

ML21012A439. 

II. Discussion 

For this Retrospective Review of 

Administrative Requirements (RROAR) 

initiative, the NRC developed criteria 

with which to evaluate potential 

regulatory changes. In addition to the 

following five criteria, the NRC 

considered programmatic experience, 

intent of the requirement, impact to the 

NRC’s mission, and overall impact to 

resources when determining whether to 

pursue a change to the regulations. 

1. Submittals resulting from routine 

and periodic recordkeeping and 

reporting requirements, such as 

directives to submit recurring reports 

that the NRC has not consulted or 

referenced in programmatic operations 

or policy development in the last 3 

years. 

2. Requirements for reports or records 

that contain information reasonably 

accessible to the agency from alternative 

resources that, as a result, may be 

candidates for elimination. 

3. Requirements for reports or records 

that could be modified to result in 

reduced burden without impacting 

programmatic needs, regulatory 

efficiency, or transparency, through: (a) 

Less frequent reporting, (b) shortened 

record retention periods, (c) requiring 

entities to maintain a record rather than 

submit a report, or (d) implementing 

another mechanism that reduces burden 

for collecting or retaining information. 

4. Recordkeeping and reporting 

requirements that result in significant 

burden. 

5. Reports or records that contain 

information used by other Federal 

agencies, State and local governments, 

or Federally recognized Tribes will be 

dropped from the review provided the 

information collected is necessary to 

support the NRC’s mission or to fulfill 

a binding NRC obligation. 

To be screened in for rulemaking 

consideration, comments had to meet at 

least one of Criteria 1 through 4 and not 

meet Criterion 5. 

Once screened in for rulemaking 

consideration, the staff organized the 

comments into three categories of 

action: (1) To be further evaluated in a 

new RROAR-related rulemaking (44 

comments), (2) to be incorporated in an 

annual administrative corrections 

rulemaking (5 comments), or (3) to be 

considered in an ongoing rulemaking 

activity outside the RROAR initiative (5 

comments). For comments that need 

further evaluation within the context of 

a new RROAR rulemaking effort, the 

NRC will consider the comments, in 

combination with its preliminary 

evaluation of the comments, in the 

rulemaking process. However, this is 

not a final determination and could 

change as NRC proceeds through 

rulemaking activities. 

The NRC’s evaluation identified 46 

comments that did not meet the criteria. 

The staff plans no further action on 44 

of these comments, and identified two 

comments to be reviewed for potential 

non-rulemaking solutions under the 

agency’s innovation and transformation 

efforts. 

III. Public Meeting 

The NRC will conduct a public 

meeting to discuss the comment 

evaluation process and answer 

stakeholder questions. 

The meeting will be held on June 30, 

2021, from 10:00 a.m. to 12:00 p.m. 

Eastern Standard Time. Interested 

members of the public can participate in 

this meeting via WebEx at: https://

usnrc.webex.com/usnrc/onstage/ 

g.php?MTID=e01dcfc6971f79f394

a24d902b4e0e9b3, or by phone 

conference at (888) 390–2141, passcode 

8801623. 

This is an Information Public Meeting 

with a question and answer session. The 

purpose of this meeting is for the NRC 

staff to meet directly with individuals to 

discuss regulatory and technical issues. 

Attendees will have an opportunity to 

ask questions of the NRC staff or make 

comments about the issues discussed 

throughout the meeting; however, the 

NRC is not actively soliciting comments 

towards regulatory decisions at this 

meeting. For additional information or 

to request reasonable accommodations, 

please contact Andrew Carrera, phone: 

301–415–1078, email: Andrew.Carrera@

nrc.gov, or Solomon Sahle, phone: 301– 

415–3781, email: Solomon.Sahle@

nrc.gov. Stakeholders should monitor 

the NRC’s public meeting website for 

information about the public meeting; 

https://www.nrc.gov/public-involve/ 

public-meetings/index.cfm. 

Dated: June 14, 2021. 

For the Nuclear Regulatory Commission. 

Kevin A. Coyne, 

Deputy Director, Division of Rulemaking, 

Environmental Review and Financial 

Support, Office of Nuclear Material Safety 

and Safeguards. 

[FR Doc. 2021–13466 Filed 6–22–21; 8:45 am] 

BILLING CODE 7590–01–P 

DEPARTMENT OF LABOR 

Office of the Secretary 

29 CFR Part 10 

Wage and Hour Division 

29 CFR Part 531 

RIN 1235–AA21 

Tip Regulations Under the Fair Labor 

Standards Act (FLSA); Partial 

Withdrawal 

AGENCY: Wage and Hour Division, 

Department of Labor. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: In this notice of proposed 

rulemaking (NPRM), the Department of 

Labor (Department) proposes to 

withdraw and re-propose one portion of 

the Tip Regulations Under the Fair 

Labor Standards Act (FLSA) (2020 Tip 

final rule) related to the determination 

of when a tipped employee is employed 

in dual jobs under the Fair Labor 

Standards Act of 1938 (FLSA or the 

Act). Specifically, the Department is 

proposing to amend its regulations to 

clarify that an employer may only take 

a tip credit when its tipped employees 

perform work that is part of the 

employee’s tipped occupation. Work 

that is part of the tipped occupation 

includes work that produces tips as well 

as work that directly supports tipproducing work, provided the directly 

supporting work is not performed for a 

substantial amount of time. 

DATES: Submit written comments on or 

before August 23, 2021. 

ADDRESSES: You may submit comments, 

identified by Regulatory Information 

Number (RIN) 1235–AA21, by either of 

the following methods: Electronic 

Comments: Submit comments through 

the Federal eRulemaking Portal at 

https://www.regulations.gov. Follow the 

instructions for submitting comments. 

Mail: Address written submissions to: 


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1See, e.g., Marsh v. J. Alexander’s LLC, 905 F.3d 

610, 632 (9th Cir. 2018) (en banc); Fast v. 

Applebee’s Int’l, Inc., 638 F.3d 872, 879 (8th Cir. 

2011). 

Division of Regulations, Legislation, and 

Interpretation, Wage and Hour Division, 

U.S. Department of Labor, Room S– 

3502, 200 Constitution Avenue NW, 

Washington, DC 20210. Instructions: 

Response to this NPRM is voluntary. 

The Department requests that no 

business proprietary information, 

copyrighted information, or personally 

identifiable information be submitted in 

response to this NPRM. Please submit 

only one copy of your comments by 

only one method. Commenters 

submitting file attachments on https://

www.regulations.gov are advised that 

uploading text-recognized documents— 

i.e., documents in a native file format or 

documents which have undergone 

optical character recognition (OCR)— 

enable staff at the Department to more 

easily search and retrieve specific 

content included in your comment for 

consideration. Anyone who submits a 

comment (including duplicate 

comments) should understand and 

expect that the comment will become a 

matter of public record and will be 

posted without change to https://

www.regulations.gov, including any 

personal information provided. WHD 

posts comments gathered and submitted 

by a third-party organization as a group 

under a single document ID number on 

https://www.regulations.gov. All 

comments must be received by 11:59 

p.m. on August 23, 2021 for 

consideration in this NPRM; comments 

received after the comment period 

closes will not be considered. The 

Department strongly recommends that 

commenters submit their comments 

electronically via https://

www.regulations.gov to ensure timely 

receipt prior to the close of the comment 

period, as the Department continues to 

experience delays in the receipt of mail. 

Submit only one copy of your comments 

by only one method. Docket: For access 

to the docket to read background 

documents or comments, go to the 

Federal eRulemaking Portal at https://

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Amy DeBisschop, Division of 

Regulations, Legislation, and 

Interpretation, Wage and Hour Division, 

U.S. Department of Labor, Room S– 

3502, 200 Constitution Avenue NW, 

Washington, DC 20210; telephone: (202) 

693–0406 (this is not a toll-free 

number). Copies of this proposal may be 

obtained in alternative formats (Large 

Print, Braille, Audio Tape or Disc), upon 

request, by calling (202) 693–0675 (this 

is not a toll-free number). TTY/TDD 

callers may dial toll-free 1–877–889– 

5627 to obtain information or request 

materials in alternative formats. 

Questions of interpretation or 

enforcement of the agency’s existing 

regulations may be directed to the 

nearest WHD district office. Locate the 

nearest office by calling the WHD’s tollfree help line at (866) 4US–WAGE ((866) 

487–9243) between 8 a.m. and 5 p.m. in 

your local time zone, or log onto WHD’s 

website at https://www.dol.gov/ 

agencies/whd/contact/local-offices for a 

nationwide listing of WHD district and 

area offices. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary 

The Fair Labor Standards Act (FLSA 

or Act) generally requires covered 

employers to pay employees at least the 

federal minimum wage, which is 

currently $7.25 per hour. See 29 U.S.C. 

206(a)(1). Section 3(m) of the FLSA 

allows an employer that meets certain 

requirements to count a limited amount 

of the tips its tipped employees receive 

as a credit toward its federal minimum 

wage obligation (known as a ‘‘tip 

credit’’). See 29 U.S.C. 203(m)(2)(A). 

Section 3(t) of the FLSA defines a 

‘‘tipped employee’’ for whom an 

employer may take a tip credit under 

section 3(m) as ‘‘any employee engaged 

in an occupation in which he 

customarily and regularly receives more 

than $30 a month in tips.’’ See 29 U.S.C. 

203(t). The FLSA regulations addressing 

tipped employment are codified at 29 

CFR 531.50 through 531.60. See also 29 

CFR 10.28 (establishing a tip credit for 

federal contractor employees covered by 

Executive Order 13658 who are tipped 

employees under section 3(t) of the 

FLSA). 

The current version of § 531.56(e) 

recognizes that an employee may be 

employed both in a tipped occupation 

and in a non-tipped occupation, ‘‘as[,] 

for example, where a maintenance man 

in a hotel also serves as a waiter’’, 

explaining that in such a ‘‘dual jobs’’ 

situation, the employee is a ‘‘tipped 

employee’’ for purposes of section 3(t) 

only while the employee is employed in 

the tipped occupation, and that an 

employer may only take a tip credit 

against its minimum wage obligations 

for the time the employee spends in that 

tipped occupation. At the same time, 

the current regulation also recognizes 

that a distinguishable situation can exist 

where an employee in a tipped 

occupation may perform duties related 

to their tipped occupation that are not 

‘‘themselves . . . directed toward 

producing tips,’’ such as, for example, a 

server ‘‘who spends part of her time’’ 

performing non-tipped duties, such as 

‘‘cleaning and setting tables, toasting 

bread, making coffee and occasionally 

washing dishes or glasses.’’ 29 CFR 

531.56(e). 

For three decades, the Department 

issued subregulatory guidance to 

provide further clarity to the terms 

‘‘occasionally’’ and ‘‘part of [the] time’’ 

found in § 531.56(e). The Department’s 

guidance recognized that because the 

FLSA permits employers to compensate 

their tipped employees as little as $2.13 

an hour directly, it is important to 

ensure that this reduced direct wage is 

only available to employers when 

employees are actually engaged in a 

tipped occupation within the meaning 

of section 3(t) of the statute. The 

guidance explained that an employer 

could continue to take a tip credit for 

the time an employee spent performing 

duties that are related to the employee’s 

tipped occupation but that do not 

produce tips, but only if that time did 

not exceed 20 percent of the employee’s 

workweek (80/20 guidance). See WHD 

Field Operations Handbook (FOH) 

30d00(e), Revision 563 (Dec. 9, 1988). 

The 80/20 guidance and its tolerance 

permitting the performance of a limited 

amount of non-tipped, related duties 

provided an essential backstop to 

prevent abuse of the tip credit, and a 

number of courts deferred to the 

guidance.1

In 2018, the Department rescinded the 

80/20 guidance. In 2018 and 2019, the 

Department issued new subregulatory 

guidance providing that the Department 

would no longer prohibit an employer 

from taking a tip credit for the time a 

tipped employee performs related, nontipped duties, as long as those duties are 

performed contemporaneously with, or 

for a reasonable time immediately 

before or after, tipped duties. See WHD 

Opinion Letter FLSA2018–27 (Nov. 8, 

2018); Field Assistance Bulletin (FAB) 

2019–2 (Feb. 15, 2019); FOH 30d00(f) 

(2018–2019 guidance). The Department 

explained that, in addition to the 

examples listed in § 531.56(e), it would 

use the Occupational Information 

Network (O*NET) to determine whether 

a tipped employee’s non-tipped duties 

are related to their tipped occupation. 

On December 30, 2020, the Department 

published the 2020 Tip final rule 

updating § 531.56(e) largely 

incorporating the 2018–2019 guidance 

addressing situations where an 

employee performs both tipped and 

non-tipped duties (dual jobs portion of 

the 2020 Tip final rule). See 85 FR 

86771. 


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32820 Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Proposed Rules 

On February 26, 2021, the Department 

published a final rule extending the 

effective date of the 2020 Tip final rule 

from March 1, 2021, until April 30, 

2021, in order to allow it the 

opportunity to review issues of law, 

policy, and fact raised by the 2020 Tip 

final rule before it took effect. See 86 FR 

11632. On March 25, 2021, in a second 

NPRM, the Department proposed to 

further extend the effective date of three 

portions of the 2020 Tip final rule. See 

86 FR 15811. This delay provided the 

Department additional time to consider 

whether to withdraw and re-propose the 

dual jobs portion of the 2020 Tip final 

rule, and to complete a separate 

rulemaking addressing the two other 

portions of the rule. Having considered 

the dual jobs portion, the Department 

now believes that the 2020 Tip final rule 

may fall short of providing the intended 

clarity and certainty for employers and 

could harm tipped employees and nontipped employees in industries that 

employ significant numbers of tipped 

workers. On April 29, 2021, the 

Department published a final rule 

confirming the delay as proposed and 

announcing that it would undertake a 

separate rulemaking on dual jobs. See 

81 FR 22597. 

The Department is now proposing to 

withdraw the dual jobs portion of the 

2020 Tip final rule and to re-propose 

new regulatory language that it believes 

would provide more clarity and 

certainty for employers while better 

protecting employees. Specifically, the 

Department is proposing to amend its 

regulations to clarify that an employee 

is only engaged in a tipped occupation 

under 29 U.S.C. 203(t) when the 

employee either performs work that 

produces tips, or performs work that 

directly supports the tip-producing 

work, provided that the directly 

supporting work is not performed for a 

substantial amount of time. Under the 

Department’s proposal, work that 

‘‘directly supports’’ tip-producing work 

is work that assists a tipped employee 

to perform the work for which the 

employee receives tips. In the proposed 

regulatory text, the Department explains 

that an employee has performed work 

that directly supports tip-producing 

work for a substantial amount of time if 

the tipped employee’s directly 

supporting work either (1) exceeds, in 

the aggregate, 20 percent of the 

employee’s hours worked during the 

workweek or (2) is performed for a 

continuous period of time exceeding 30 

minutes. The Department believes it is 

important to provide a clear limitation 

on the amount of non-tipped work that 

tipped employees perform in support of 

their tip-producing work, because if a 

tipped employee engages in a 

substantial amount of such non-tipped 

work, that work is no longer incidental 

to the tipped work, and thus, the 

employee is no longer employed in a 

tipped occupation. The Department 

requests comment on all aspects of its 

proposal, including its proposal to 

withdraw the dual jobs portion of the 

2020 Tip final rule. 

II. Background 

A. FLSA Provisions on Tips and Tipped 

Employees 

Section 6(a) of the FLSA requires 

covered employers to pay nonexempt 

employees a minimum wage of at least 

$7.25 per hour. See 29 U.S.C. 206(a). 

Section 3(m)(2)(A) allows an employer 

to satisfy a portion of its minimum wage 

obligation to any ‘‘tipped employee’’ by 

taking a partial credit, known as a ‘‘tip 

credit,’’ toward the minimum wage 

based on tips an employee receives. See 

29 U.S.C. 203(m)(2)(A). An employer 

that elects to take a tip credit must pay 

the tipped employee a direct cash wage 

of at least $2.13 per hour. The employer 

may then take a credit against its wage 

obligation for the difference, up to $5.12 

per hour, if the employees’ tips are 

sufficient to fulfill the remainder of the 

minimum wage, provided that the 

employer meets certain requirements. 

Section 3(t) defines ‘‘tipped 

employee’’ as ‘‘any employee engaged in 

an occupation in which he customarily 

and regularly receives more than $30 a 

month in tips.’’ 29 U.S.C. 203(t). The 

legislative history accompanying the 

1974 amendments to the FLSA’s tip 

provisions identified tipped 

occupations to include ‘‘waiters, 

bellhops, waitresses, countermen, 

busboys, service bartenders, etc.’’ S. 

Rep. No. 93–690, at 43 (Feb. 22, 1974). 

The legislative history also identified 

‘‘janitors, dishwashers, chefs, [and] 

laundry room attendants’’ as 

occupations in which employees do not 

customarily and regularly receive tips 

within the meaning of section 3(t). See 

id. Since the 1974 Amendments, the 

Department’s guidance documents have 

identified a number of additional 

occupations, such as barbacks, as tipped 

occupations. See, e.g., FOH 30d04(b). 

However, Congress left ‘‘occupation,’’ 

and what it means to be ‘‘engaged in an 

occupation,’’ in section 3(t) undefined. 

Thus, Congress delegated to the 

Department the authority to determine 

what it means to be ‘‘engaged in an 

occupation’’ that customarily and 

regularly receives tips. See Fair Labor 

Standards Amendments of 1966, Public 

Law 89–601, 101, § 602, 80 Stat. 830, 

830, 844 (1966). 

B. The Department’s ‘‘Dual Jobs’’ 

Regulation 

The Department promulgated its 

initial tip regulations in 1967, the year 

after Congress first created the tip credit 

provision. See 32 FR 13575 (Sept. 28, 

1967); Public Law 89–601, sec. 101(a), 

80 Stat. 830 (1966). As part of this 

rulemaking, the Department 

promulgated a ‘‘dual jobs’’ regulation 

recognizing that an employee may be 

employed both in a tipped occupation 

and in a non-tipped occupation, 

providing that in such a ‘‘dual jobs’’ 

situation, the employee is a ‘‘tipped 

employee’’ for purposes of section 3(t) 

only while the employee is employed in 

the tipped occupation, and that an 

employer may only take a tip credit 

against its minimum wage obligations 

for the time the employee spends in that 

tipped occupation. See 32 FR 13580–81; 

29 CFR 531.56(e). At the same time, the 

regulation also recognizes that an 

employee in a tipped occupation may 

perform related duties that are not 

‘‘themselves . . . directed toward 

producing tips.’’ It uses the example of 

a server who ‘‘spends part of her time’’ 

performing non-tipped duties, such as 

‘‘cleaning and setting tables, toasting 

bread, making coffee and occasionally 

washing dishes or glasses.’’ 29 CFR 

531.56(e). In that example where the 

tipped employee performs non-tipped 

duties related to the tipped occupation 

for a limited amount of time, the 

employee is still engaged in the tipped 

occupation of a server, for which the 

employer may take a tip credit, rather 

than working part of the time in a nontipped occupation. See id. Section 

531.56(e) thus distinguishes between 

employees who have dual jobs and 

tipped employees who perform ‘‘related 

duties’’ that are not themselves directed 

toward producing tips. 

C. The Department’s Dual Jobs 

Guidance 

Over the past several decades, the 

Department has issued guidance 

interpreting the dual jobs regulation as 

it applies to employees who perform 

both tipped and non-tipped duties. The 

Department first addressed this issue 

through a series of Wage and Hour 

Division (WHD) opinion letters. In a 

1979 opinion letter, the Department 

considered whether a restaurant 

employer could take a tip credit for time 

servers spent preparing vegetables for 

use in the salad bar. See WHD Opinion 

Letter FLSA–895 (Aug. 8, 1979) (‘‘1979 

Opinion Letter’’). Citing the dual jobs 

regulation and the legislative history 


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distinguishing between tipped 

occupations, such as server, and nontipped occupations, such as chef, the 

Department concluded that ‘‘salad 

preparation activities are essentially the 

activities performed by chefs,’’ and 

therefore ‘‘no tip credit may be taken for 

the time spent in preparing vegetables 

for the salad bar.’’ Id. 

A 1980 opinion letter addressed a 

situation in which tipped restaurant 

servers performed various non-tipped 

duties including cleaning and resetting 

tables, cleaning and stocking the server 

station, and vacuuming the dining room 

carpet. See WHD Opinion Letter WH– 

502 (Mar. 28, 1980) (‘‘1980 Opinion 

Letter’’). The Department reiterated 

language from the dual jobs regulation 

distinguishing between employees who 

spend ‘‘part of [their] time’’ performing 

‘‘related duties in an occupation that is 

a tipped occupation’’ that do not 

produce tips and ‘‘where there is a clear 

dividing line between the types of 

duties performed by a tipped employee, 

such as between maintenance duties 

and waitress duties.’’ Id. Because in the 

circumstance presented the non-tipped 

duties were ‘‘assigned generally to the 

waitress/waiter staff,’’ the Department 

found them to be related to the 

employees’ tipped occupation. The 

letter suggested, however, that the 

employer would not be permitted to 

take the tip credit if ‘‘specific employees 

were routinely assigned, for example, 

maintenance-type work such as floor 

vacuuming.’’ Id. 

In 1985, the Department issued an 

opinion letter addressing non-tipped 

duties both unrelated and related to the 

tipped occupation of server. See WHD 

Opinion Letter FLSA–854 (Dec. 20, 

1985) (‘‘1985 Opinion Letter’’). First, the 

letter concluded (as had the 1979 

Opinion Letter) that ‘‘salad preparation 

activities are essentially the activities 

performed by chefs,’’ not servers, and 

therefore ‘‘no tip credit may be taken for 

the time spent in preparing vegetables 

for the salad bar.’’ Id. Second, the letter 

explained, building on statements in the 

1980 Opinion Letter, that although a 

‘‘tip credit could be taken for non-salad 

bar preparatory work or after-hours 

clean-up if such duties are incidental to 

the [servers’] regular duties and are 

assigned generally to the [server] staff,’’ 

if ‘‘specific employees are routinely 

assigned to maintenance-type work or 

. . . tipped employees spend a 

substantial amount of time in 

performing general preparation work or 

maintenance, we would not approve a 

tip credit for hours spent in such 

activities.’’ Id. Under the circumstances 

described by the employer seeking an 

opinion—specifically, ‘‘one waiter or 

waitress is assigned to perform . . . 

preparatory activities,’’ including setting 

tables and ensuring that restaurant 

supplies are stocked, and those 

activities ‘‘constitute[ ] 30% to 40% of 

the employee’s workday’’—a tip credit 

was not permissible as to the time the 

employee spent performing those 

activities. Id. 

WHD’s FOH is an ‘‘operations 

manual’’ that makes available to WHD 

staff, as well as the public, policies 

‘‘established through changes in 

legislation, regulations, significant court 

decisions, and the decisions and 

opinions of the WHD Administrator.’’ In 

1988, WHD revised its FOH to add 

section 30d00(e) which distilled and 

refined the policies established in the 

1979, 1980, and 1985 Opinion Letters. 

See WHD FOH Revision 563. According 

to the 1988 FOH entry, § 531.56(e) 

‘‘permits the taking of the tip credit for 

time spent in duties related to the 

tipped occupation, even though such 

duties are not by themselves directed 

toward producing tips (i.e., maintenance 

and preparatory or closing activities),’’ if 

those duties are ‘‘incidental’’ and 

‘‘generally assigned’’ to tipped 

employees. Id. at 30d00(e). To illustrate 

the types of related, non-tip-producing 

duties for which employers could take 

a tip credit, the FOH listed ‘‘a waiter/ 

waitress, who spends some time 

cleaning and setting tables, making 

coffee, and occasionally washing dishes 

or glasses,’’ the same examples included 

in § 531.56(e). Id. But ‘‘where the facts 

indicate that specific employees are 

routinely assigned to maintenance, or 

that tipped employees spend a 

substantial amount of time (in excess of 

20 percent) performing general 

preparation work or maintenance, no tip 

credit may be taken for the time spent 

in such duties.’’ Consistent with WHD’s 

interpretations elsewhere in the FLSA, 

the FOH noted a ‘‘substantial’’ amount 

of time spent performing general 

preparation or maintenance work as 

being ‘‘in excess of 20 percent,’’ creating 

a substantial but limited tolerance for 

this work. Id. This guidance recognized 

that if a tipped employee performs too 

much related, non-tipped work, the 

employee is no longer engaged in a 

tipped occupation. 

WHD did not revisit its 80/20 

guidance until more than 20 years later, 

when it briefly superseded its 80/20 

guidance in favor of guidance that 

placed no limitation on the amount of 

duties related to a tip-producing 

occupation that may be performed by a 

tipped employee, ‘‘as long as they are 

performed contemporaneously with the 

duties involving direct service to 

customers or for a reasonable time 

immediately before or after performing 

such direct-service duties.’’ See WHD 

Opinion Letter FLSA2009–23 (dated 

Jan. 16, 2009, withdrawn Mar. 2, 2009). 

This guidance further stated that the 

Department ‘‘believe[d] that guidance 

[was] necessary for an employer to 

determine on the front end which duties 

are related and unrelated to a tipproducing occupation . . . .’’ Id. 

Accordingly, it stated that the 

Department would consider certain 

duties listed in O*NET for a particular 

occupation to be related to the tipproducing occupation. See id. The 

guidance cited Pellon v. Bus. 

Representation Int’l, Inc., 291 F. App’x 

310 (11th Cir. 2008) (unpublished), aff’g 

528 F. Supp. 2d 1306 (S.D. Fla. 2007), 

in which the district granted summary 

judgment to the employer based in part 

on the infeasibility of determining 

whether the employees spent more than 

20 percent of their work time on such 

duties; significantly, however, the court 

believed such a determination was 

unnecessary because the employees had 

not shown that their non-tipped work 

exceeded that threshold. See 528 F. 

Supp. 2d at 1313–15. However, WHD 

later withdrew this guidance on March 

2, 2009, and reverted to and followed 

the 80/20 approach for most of the next 

decade. See WHD Opinion Letter 

FLSA2009–23 (dated Jan. 16, 2009, 

withdrawn Mar. 2, 2009); WHD Opinion 

Letter FLSA2018–27 (Nov. 8, 2018). 

Between 2009 and 2018, both the 

Eighth Circuit and the Ninth Circuit 

deferred to the Department’s dual jobs 

regulations and 80/20 guidance in the 

FOH. See Marsh v. J. Alexander’s LLC, 

905 F.3d 610, 632 (9th Cir. 2018) (en 

banc); Fast v. Applebee’s Int’l, Inc., 638 

F.3d 872, 879 (8th Cir. 2011). Both 

courts of appeal concluded that the 

Department’s dual jobs regulation at 

531.56(e) appropriately interprets 

section 3(t) of the FLSA which ‘‘does 

not define when an employee is 

‘engaged in an [tipped] occupation.’ ’’ 

Applebee’s, 638 F.3d at 876, 879; see 

also Marsh, 905 F.3d at 623. Both courts 

further held that the Department’s 80/20 

guidance was a reasonable 

interpretation of the dual jobs 

regulation. See Marsh, 905 F.3d at 625 

(‘‘The DOL’s interpretation is consistent 

with nearly four decades of interpretive 

guidance and with the statute and the 

regulation itself.’’); Applebee’s, 638 F.3d 

at 881 (‘‘The 20 percent threshold used 

by the DOL in its Handbook is not 

inconsistent with § 531.56(e) and is a 

reasonable interpretation of the terms 

‘part of [the] time’ and ‘occasionally’ 

used in that regulation.’’). 

In November 2018, WHD reinstated 

the January 16, 2009, opinion letter 


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2O*NET is developed under the sponsorship of 

the Department’s Employment and Training 

Administration through a grant to the North 

Carolina Department of Commerce. See https://

www.onetcenter.org/overview.html. 

3See also Roberson v. Tex. Roadhouse Mgmt. 

Corp., No. 19–628, 2020 WL 7265860 (W.D. Ky. 

Dec. 10, 2020); Rorie v. WSP2, 485 F. Supp. 3d 1037 

(W.D. Ark. 2020); Williams v. Bob Evans 

Restaurants, No. 18–1353, 2020 WL 4692504 (W.D. 

Pa. Aug. 13, 2020); Esry v. OTB Acquisition, No. 18– 

255, 2020 WL 3269003 (E.D. Ark. June 17, 2020); 

Reynolds v. Chesapeake & Del. Brewing Holdings, 

No. 19–2184, 2020 WL 2404904 (E.D. Pa. May 12, 

2020); Sicklesmith v. Hershey Ent. & Resorts Co., 

440 F. Supp. 3d 391 (M.D. Pa. 2020); O’Neal v. 

Denn-Ohio, No. 19–280, 2020 WL 210801 (N.D. 

Ohio Jan. 14, 2020); Spencer v. Macado’s, 399 F. 

Supp. 3d 545 (W.D. Va. 2019); Esry v. P.F. Chang’s 

China Bistro, 373 F. Supp. 3d 1205 (E.D. Ark. 2019); 

Cope v. Let’s Eat Out, 354 F. Supp. 3d 976 (W.D. 

Mo. 2019). 

A few other courts have followed the guidance. 

See Rafferty v. Denny’s Inc., No. 19–24706, 2020 

WL 5939064 (S.D. Fla. Sept. 4, 2020); Shaffer v. 

Perry’s Restaurants, Ltd., No. 16–1193, 2019 WL 

2098116 (W.D. Tex. Apr. 24, 2019). 

4 District courts have also declined to defer to the 

2018–19 guidance on the grounds that it did not 

reflect the Department’s ‘‘fair and considered 

judgment,’’ because the Department did not provide 

a compelling justification for changing policies after 

30 years of enforcing the 80/20 guidance. See e.g., 

Williams, 2020 WL 4692504, at *10; O’Neal, 2020 

WL 210801, at *7; see also 85 FR 86771 (noting that 

the 2020 Tip final rule addressed this criticism by 

explaining through the notice-and-comment 

rulemaking process its reasoning for replacing the 

80/20 approach with an updated related duties 

test). 

5See, e.g., Rorie, 485 F. Supp. 3d at 1042; 

Sicklesmith, 440 F. Supp. 3d at 404–05; Belt, 401 

F. Supp. 3d at 536–37; Esry v. P.F. Chang’s, 373 F. 

Supp. 3d at 1211; Berger, 430 F. Supp. 3d at 412; 

Cope, 354 F. Supp. 3d at 987; Spencer, 399 F. Supp. 

3d at 554; Roberson, 2020 WL 7265860, at *7–*8; 

Williams, 2020 WL 4692504, at *10; Esry v. OTB 

Acquisition, 2020 WL 3269003, at *1; Reynolds, 

2020 WL 2404904, at *6. 

6WHD–2019–0004–0425. 

7WHD–2019–0004–0438. 

rescinding the 80/20 guidance and 

articulating a new test. See WHD 

Opinion Letter FLSA2018–27 (Nov. 8, 

2018). Shortly thereafter, WHD issued 

FAB No. 2019–2, announcing that its 

FOH had been updated to reflect the 

guidance contained in the reinstated 

opinion letter. See FAB No. 2019–2 

(Feb. 15, 2019), see also WHD FOH 

Revision 767 (Feb. 15, 2019). WHD 

explained that it would no longer 

prohibit an employer from taking a tip 

credit for the time an employee 

performed related, non-tipped duties as 

long as those duties were performed 

contemporaneously with, or for a 

reasonable time immediately before or 

after, tipped duties. See WHD Opinion 

Letter FLSA2018–27 (Nov. 8, 2018), see 

also FOH 30d00(f)(3). WHD also 

explained that it would use O*NET, a 

database of worker attributes and job 

characteristics and source of descriptive 

occupational information,2 to determine 

whether a tipped employee’s non-tipped 

duties were related to the employee’s 

tipped occupation. See id. 

A large number of district courts have 

considered the 2018 Opinion Letter and 

2019 FAB and declined to defer to the 

Department’s interpretation of the dual 

jobs regulation in this guidance. Among 

other concerns, these courts have noted 

that the guidance: (1) Does not clearly 

define what it means to perform related, 

non-tipped duties ‘‘contemporaneously 

with, or for a reasonable time 

immediately before or after, tipped 

duties,’’ thus inserting ‘‘new uncertainty 

and ambiguity into the analysis,’’ see, 

e.g., Flores v. HMS Host Corp., No. 18– 

3312, 2019 WL 5454647 at *6 (D. Md. 

Oct. 23, 2019), and companion case 

Storch v. HMS Host Corp., No. 18–3322; 

(2) is potentially in conflict with 

language in 29 CFR 531.56(e) limiting 

the tip credit to related, non-tipped 

duties performed ‘‘occasionally’’ and 

‘‘part of [the] time,’’ see Belt v. P.F. 

Chang’s China Bistro, Inc., 401 F. Supp. 

3d 512, 533 (E.D. Pa. 2019); and (3) 

potentially ‘‘runs contrary to the 

remedial purpose of the FLSA—to 

ensure a fair minimum wage,’’ see 

Berger v. Perry’s Steakhouse of Illinois, 

430 F. Supp. 3d 397 (N.D. Ill. 2019).3 In 

addition, some courts have also 

expressed doubts about whether it is 

reasonable to rely on O*NET to 

determine related duties. See O’Neal, 

2020 WL 210801, at *7 (employer 

practices of requiring non-tipped 

employees to perform certain duties 

would then be reflected in O*NET, 

allowing employers to influence the 

definitions).4 After declining to defer to 

the Department’s 2018–2019 guidance, 

many of these district courts have 

independently concluded that the 80/20 

approach is reasonable, and applied a 

20 percent tolerance to the case before 

them.5

D. The 2020 Tip Final Rule 

The NPRM for the 2020 Tip final rule 

(2019 NPRM) proposed to codify the 

Department’s 2018–2019 guidance 

regarding when an employer can 

continue to take a tip credit for a tipped 

employee who performs related, nontipped duties. See 84 FR 53956, 53963 

(Oct. 8, 2019). Although, as noted above, 

multiple circuit courts had deferred to 

the Department’s 80/20 guidance, the 

Department opined in its 2019 NPRM 

that this guidance ‘‘was difficult for 

employers to administer and led to 

confusion, in part because employers 

lacked guidance to determine whether a 

particular non-tipped duty is ‘related’ to 

the tip-producing occupation.’’ Id. Some 

employer representatives raised similar 

criticism in their comments on the 

NPRM. In its comment on the 2019 

NPRM, for instance, law firm Littler 

Mendelson argued that the 80/20 

guidance was challenging to administer 

because it did not include a 

‘‘comprehensive list of related duties or 

even a way to determine which duties 

were related’’; among other concerns, it 

also argued that employers found it 

challenging to track employees’ duties.6

Littler Mendelson and the National 

Restaurant Association (NRA) also 

argued that the 2018–2019 guidance was 

more consistent with the FLSA than the 

80/20 guidance because the statute 

refers to tipped employees being 

‘‘engaged in an occupation’’ in which 

they receive tips, 29 U.S.C. 203(t), and 

therefore does not distinguish between 

duties of a tipped employee for which 

employers can and cannot take a tip 

credit.7 However, the NRA argued that 

the Department’s retention of a 

distinction between tipped and nontipped duties was still a ‘‘flawed 

analytical approach.’’ 

The 2020 Tip final rule amended 

§ 531.56(e) to largely reflect the 

Department’s guidance issued in 2018 

and 2019 that addressed whether and to 

what extent an employer can take a tip 

credit for a tipped employee who is 

performing non-tipped duties related to 

the tipped occupation. See 85 FR 86771. 

The 2020 Tip final rule reiterated the 

Department’s conclusion from the 2019 

NPRM that its prior 80/20 guidance was 

difficult to administer ‘‘in part because 

the guidance did not explain how 

employers could determine whether a 

particular non-tipped duty is ‘related’ to 

the tip-producing occupation and in 

part because the monitoring 

surrounding the 80/20 approach on 

individual duties was onerous for 

employers.’’ Id. at 86767. The 

Department also asserted that the 80/20 

guidance ‘‘generated extensive, costly 

litigation.’’ Id. at 86761. The 2020 Tip 

final rule provided, consistent with the 

Department’s 2018–2019 guidance, that 

‘‘ an employer may take a tip credit for 

all non-tipped duties an employee 

performs that meet two requirements. 

First, the duties must be related to the 

employee’s tipped occupation; second, 

the employee must perform the related 

duties contemporaneously with the tipproducing activities or within a 

reasonable time immediately before or 

after the tipped activities.’’ Id. at 86767. 

Rather than using O*NET as a 

definitive list of related duties, the final 

rule adopted O*NET as a source of 

guidance for determining when a tipped 

employee’s non-tipped duties are 

related to their tipped occupation. 

Under the final rule, a non-tipped duty 


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8See Compl., Commonwealth of Pennsylvania et 

al. v. Scalia et al., No. 2:21–cv–00258 (E.D. Pa.). 

9 Id., ¶¶ 87–89. 

10 Id. ¶ 87 (citing Belt, 401 F. Supp. 3d at 526). 

11 Id. ¶ 128. 

12See, e.g., Belt, 401 F. Supp. 3d at 533; Flores, 

2019 WL 5454647, at *6. 

13Commonwealth of Pennsylvania v. Scalia, at 

¶ 131; see also id. ¶ 129 (‘‘The Department never 

provides a precise definition of ‘contemporaneous,’ 

simply stating that it means ‘during the same time 

as’ before making the caveat that it ‘does not 

necessarily mean that the employee must perform 

tipped and non-tipped duties at the exact same 

moment in time.’ ’’) 

14See id. ¶ 127; see also id. ¶ 41 (noting that 

many courts awarded Auer deference to the 80/20 

guidance). 

15 Id. ¶¶ 127–28. 

16 Id. ¶ 115. 

17 Id. ¶¶ 114–15. 

18 Id. at § I(C)(i), ¶¶ 108–9. 

19 Id. ¶ 105. 

is presumed to be related to a tipproducing occupation if it is listed as a 

task of the tip-producing occupation in 

O*NET. See id. at 86771. The 2020 Tip 

final rule included a qualitative 

discussion of the potential economic 

impacts of the rule’s revisions to the 

dual jobs regulations but ‘‘[did] not 

quantify them due to lack of data and 

the wide range of possible responses by 

market actors that [could not] be 

predicted with specificity.’’ Id. at 86776. 

The Department noted that one 

commenter, the Economic Policy 

Institute (EPI), provided a quantitative 

estimate of the economic impact of this 

portion of the rule but concluded that 

its estimate was not reliable. See id. at 

86785. This final rule was published 

with an effective date of March 1, 2021, 

see id. at 86756; however, as explained 

below, the Department has extended the 

effective date for this part of the rule 

until December 31, 2021. 

E. Legal Challenge to the 2020 Tip Final 

Rule 

On January 19, 2021, before the 2020 

Tip final rule went into effect, Attorneys 

General from eight states and the 

District of Columbia filed a complaint in 

the United States District Court for the 

Eastern District of Pennsylvania, in 

which they argued that the Department 

violated the Administrative Procedure 

Act in promulgating the 2020 Tip final 

rule, including that portion amending 

the dual jobs regulations. (Pennsylvania 

complaint or Pennsylvania litigation). 8

The Pennsylvania complaint alleges that 

this portion of the 2020 Tip final rule is 

contrary to the FLSA. Specifically, the 

complaint alleges that the rule’s 

elimination of the 20 percent limitation 

on the amount of time that tipped 

employees can perform related, nontipped work contravenes the FLSA’s 

definition of a tipped employee: An 

employee ‘‘engaged in an occupation in 

which [they] customarily and regularly’’ 

receive tips, 29 U.S.C. 203(t).9

According to the complaint, ‘‘when 

employees ‘spend more than 20 percent 

of their time performing untipped 

related work’ they are no longer 

‘engaged in an occupation in which 

[they] customarily and regularly 

receive[ ] . . . tips.’ ’’ 10

The complaint also alleges that that 

this portion of the 2020 Tip final rule is 

arbitrary and capricious for several 

reasons. First, the complaint alleges that 

the 2020 Tip final rule’s new test for 

when an employer can continue to take 

a tip credit for a tipped employee who 

performs related, non-tipped duties 

relied on ‘‘ill-defined’’ terms— 

‘‘contemporaneously with’’ and ‘‘a 

reasonable time immediately before or 

after tipped duties’’ 11—which some 

district courts have also found to be 

unclear when construing the 2018–2019 

guidance.12 According to the complaint, 

the 2020 Tip final rule failed to 

‘‘provide any guidance as to when—or 

whether—a worker could be deemed a 

dual employee during a shift or how 

long before or after a shift constitutes a 

‘reasonable time.’ ’’ 13 The complaint 

also alleges that the Department failed 

to offer a valid justification for replacing 

the 80/20 guidance with a new test for 

when an employer can take a tip credit 

for related, non-tipped duties. The 

complaint disputes the Department’s 

conclusion in the 2020 Tip final rule 

that its former 80/20 guidance was 

difficult to administer, noting that 

courts consistently applied and, in 

many cases, deferred to the 80/20 

guidance.14 The complaint argues that 

the 2020 Tip final rule’s new test, in 

contrast, will invite ‘‘a flood of new 

litigation’’ due to its ‘‘murkiness’’ and 

its reliance on ‘‘ill-defined’’ terms.15

The complaint further alleges that the 

rule’s use of O*NET to define ‘‘related 

duties’’ is ‘‘itself’’ arbitrary and 

capricious because O*NET ‘‘seeks to 

describe the work world as it is, not as 

it should be’’ and ‘‘does not objectively 

evaluate whether a task is actually 

related to a given occupation.’’ 16

According to the complaint, the use of 

O*NET to define related, non-tipped 

duties ‘‘dramatically expand[ed] the 

universe of duties that can be performed 

by tipped workers,’’ thereby authorizing 

employer ‘‘conduct that has been 

prohibited under the FLSA for 

decades.’’ 17 Lastly, the complaint 

alleges that the Department ‘‘failed to 

consider or quantify the effect’’ that this 

portion of the rule ‘‘would have on 

workers and their families’’ in the rule’s 

economic analysis and ‘‘disregarded’’ 

the data and analysis provided by a 

commenter on the NPRM for the 2020 

Tip final rule, the EPI.18 The complaint 

claims that these asserted flaws in the 

Department’s economic analysis are 

evidence of a ‘‘lack of reasoned 

decision-making.’’ 19

F. Delay and Partial Withdrawal of the 

2020 Tip Final Rule 

On February 26, 2021, the Department 

delayed the effective date of the 2020 

Tip final rule until April 30, 2021, to 

provide the Department additional 

opportunity to review and consider the 

questions of law, policy, and fact raised 

by the rule, as contemplated by the 

Regulatory Freeze Memorandum and 

OMB Memorandum M–21–14. See 86 

FR 11632. Commenters who supported 

the proposed 60-day delay of the 2020 

Tip final rule, including numerous 

advocacy organizations and the 

Attorneys General who filed the 

Pennsylvania lawsuit, urged the 

Department to specifically reconsider 

the portion of the 2020 Tip final rule 

that revised the Department’s dual jobs 

regulations. Id. at 11633. EPI supported 

the proposed delay because it would 

give the Department time to reassess the 

Department’s economic analysis of this 

portion of the 2020 Tip final rule, which 

it argued was flawed. Id. On March 25, 

2021, the Department proposed to 

further delay the effective date of three 

portions of the 2020 Tip final rule, 

including the portion of the rule that 

amended the Department’s dual jobs 

regulations to address the FLSA tip 

credit’s application to tipped employees 

who perform tipped and non-tipped 

duties, until December 31, 2021. See 86 

FR 15811 (Partial Delay NPRM). The 

Department received comments on the 

merits of the delay and on the merits of 

the 2020 Tip final rule itself. On April 

29, 2021, the Department finalized the 

proposed partial delay. See 86 FR 22597 

(Partial Delay final rule). 

III. Discussion of Comments on the 

Partial Delay Rule 

A. Comments Regarding the 2020 Tip 

Final Rule’s Revisions to the Dual Jobs 

Regulations 

Commenters who supported the 

Partial Delay NPRM raised multiple 

concerns with the substance of the dual 

jobs portion of the 2020 Tip final rule. 

In their comments in support of the 

Partial Delay NPRM, the Attorneys 

General who filed the Pennsylvania 

complaint and worker advocacy 

organizations raised legal and policy 

concerns similar to those raised in the 


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20WHD–2019–0004–0420. 

21WHD–2019–0004–0453. 

22WHD–2019–0004–0504. 23WHD–2019–0004–0519. 

24WHD–2019–0004–0515. 

25WHD–2019–0004–0524. 

26WHD–2019–0004–0516. 

27WHD–2019–0004–0520. 

28WHD–2019–0004–0523. 

Pennsylvania lawsuit: That the new test 

for when an employer can take a tip 

credit for related, non-tipped duties will 

encourage employers to shift more nontipped work to tipped employees, 

depressing tipped employees’ wages 

and possibly eliminating non-tipped 

jobs, that the new test does not reflect 

the statutory definition of a tipped 

employee, that the terms used in the 

new test are so amorphous that they will 

lead to extensive litigation, and that 

O*NET is not an appropriate tool to 

determine related duties. See 86 FR 

22600. In its comment supporting the 

Partial Delay NPRM, EPI stated that the 

2020 Tip final rule’s revision to the dual 

jobs regulations created a ‘‘less 

protective’’ standard for tipped wages, 

replacing a firm 20 percent limitation on 

the amount of related, non-tipped duties 

that tipped employees could perform 

while being paid the tipped wage of 

$2.13 per hour with ‘‘vague and much 

less protective’’ language. Id. EPI noted 

that because these new regulatory terms, 

such as ‘‘reasonable time,’’ are not 

defined, they create an ‘‘ambiguity that 

would [be] difficult to enforce’’ and 

would create ‘‘an immense loophole 

that would be costly to workers.’’ Id. 

Commenters who supported the 

Partial Delay NPRM also raised 

concerns with how the dual jobs portion 

of the 2020 Tip final rule was 

promulgated, specifically, that the 

economic analysis may not have 

adequately estimated the impact of this 

portion of the rule. EPI suggested that 

the 2020 Tip final rule’s economic 

analysis was flawed because it did not 

sufficiently estimate the economic 

impact on workers—as EPI did in a 

comment it submitted in the 2020 Tip 

rulemaking, which concluded that the 

rule ‘‘would allow employers to capture 

more than $700 million annually from 

workers.’’ See id. at 22600–01. The 

Attorneys General 20 and the National 

Employment Law Project (NELP) 21 also 

argued in their comments in support of 

the Partial Delay NPRM that the 

Department’s failure to quantitatively 

estimate the impact of the dual jobs 

portion of the 2020 Tip final rule or to 

consider the estimates of the rule’s 

impact submitted by EPI and other 

groups in the course of that rulemaking 

is evidence that the rulemaking process 

was flawed. See id. at 22601. 

The Department also received 

comments on the substance of the 2020 

Tip final rule from organizations that 

opposed the Partial Delay NPRM. The 

NRA 22 and Littler Mendelson’s 

Workplace Policy Institute (WPI) 23

argued that the 2020 Tip final rule 

reflects a better interpretation of the 

statutory term ‘‘tipped employee’’ than 

the 80/20 guidance because the FLSA 

refers to tipped employees being 

‘‘engaged in an occupation’’ in which 

they receive tips, 29 U.S.C. 203(t), and 

therefore does not create any distinction 

between the tipped and non-tipped 

duties of the employee. See id. at 22602. 

WPI also argued that the 2020 Tip final 

rule, by removing the 20 percent 

limitation on related duties and using 

O*NET to define related duties, would 

be easier for employers to administer, 

and both WPI and the NRA argued that 

the 2020 Tip final rule would avoid the 

litigation that the 80/20 guidance 

generated. See id. Additionally, the 

NRA argued that EPI’s criticism of the 

2020 Tip final rule was flawed because 

its impact analysis used the 

Department’s 80/20 guidance as its 

baseline instead of the Department’s 

2018–2019 guidance. See id. More 

generally, the NRA noted that the 

restaurant industry has been ‘‘uniquely 

hurt’’ by the pandemic and stated that, 

in this challenging economic 

environment, restaurants need ‘‘clear 

guidelines’’ and ‘‘predictability.’’ See 

NRA. 

In the Partial Delay final rule, the 

Department stated that it shares the 

concerns of commenters who supported 

the proposed partial delay that the new 

test articulated in the 2020 Tip final rule 

for when an employer can take a tip 

credit for a tipped employee who 

performs related, non-tipped work may 

be contrary to the FLSA. Specifically, 

the Department stated that it shared 

commenters’ concerns that the new test 

may not accurately identify when a 

tipped employee who is performing 

non-tipped duties is still engaged in a 

tipped occupation under section 3(t) of 

the statute. See 86 FR 22606. 

Additionally, the Department stated that 

it shares commenters’ concerns that the 

economic analysis may not have 

adequately estimated the impact of this 

portion of the rule and that allowing 

this portion of the rule to go into effect 

without further consideration of its 

impact could potentially lead to a loss 

of income for workers in tipped 

industries. See id. at 22606–07. 

B. Recommendations for Future 

Rulemaking 

Commenters who supported the 

Partial Delay NPRM also urged the 

Department to engage in further 

rulemaking to better address the issue of 

when an employer can continue to take 

a tip credit for tipped employees who 

perform tipped and non-tipped work. 

All of the advocacy organizations that 

supported the Partial Delay NPRM 

urged the Department to withdraw the 

portion of the 2020 Tip final rule that 

revised its dual jobs regulations and to 

re-propose revisions no less protective 

of workers than the 80/20 guidance. See, 

e.g., NELP; 24 Restaurant Opportunities 

Center United (ROC United); 25 National 

Urban League; 26 National Women’s Law 

Center; 27 One Fair Wage.28 EPI also 

encouraged the Department to create a 

rule that is ‘‘stronger’’ than the previous 

80/20 guidance ‘‘that further clarifies, 

and limits, the amount of non-tipped 

work for which an employer can claim 

a tip credit.’’ See 86 FR 22600. EPI 

suggested that the Department could, 

among other things, consider tightening 

the definitions of related and unrelated 

duties, propose to adopt standards such 

as those adopted in states such as New 

York that, for example, bar an employer 

from taking a tip credit on any day 

during which a tipped employee spends 

more than 20 percent of their time in a 

non-tipped occupation, and/or 

promulgate enhanced notice and 

recordkeeping requirements. See id. 

In its comments supporting the Partial 

Delay, NELP also stated that a delayed 

effective date of the dual jobs portion of 

the rule would give the Department the 

opportunity to consider how the rule 

‘‘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, valet, 

personal services and retail, in addition 

to restaurants and hospitality.’’ See id. 

at 22601. 

Although WPI opposed the proposed 

delay of the dual jobs portion of the 

2020 Tip final rule, it included some 

recommendations for the Department to 

consider in the event that it ultimately 

proposed to withdraw and revise this 

portion of the rule. WPI stated that any 

alternative should include ‘‘concrete 

guidance on where the lines are to be 

drawn,’’ adding that, in its view, ‘‘there 

has been no clear definition of what 

duties are ‘tipped’ as opposed to merely 

‘related’ or ‘non-tipped.’’ See id. at 

22602. WPI further stated that any 

‘‘quantitative limit’’ on duties that a 

tipped employee can perform ‘‘must 

precisely identify which duties fall on 

either side of the line,’’ recognize that 


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29Commonwealth of Pennsylvania v. Scalia, at 

¶ 128. 

30More detailed information about O*NET’s data 

collection can be found at https://

www.onetcenter.org/ombclearance.html. 

occupations can evolve over time, and 

draw upon O*NET as a resource. See id. 

IV. Need for Rulemaking 

Delaying the effective date of this 

portion of the 2020 Tip final rule has 

provided the Department the 

opportunity to consider whether 

§ 531.56(e) of the 2020 Tip final rule 

accurately identifies when a tipped 

employee who is performing non-tipped 

duties is still engaged in a tipped 

occupation, such that an employer can 

continue to take a tip credit for the time 

the tipped employee spends on such 

non-tipped work, and whether the 2020 

Tip final rule adequately considered the 

possible costs, benefits, and transfers 

between employers and employees 

related to the adoption of the standard 

articulated therein. It has also allowed 

the Department to further consider the 

comments it received on this portion of 

the rule in response to its February 5, 

2021 proposal to delay the effective date 

of the 2020 Tip final rule and its March 

25, 2021 proposal to delay the effective 

date of this portion of the rule and to 

evaluate the legal concerns with this 

portion of the rule that were raised in 

the Pennsylvania complaint. 

In light of the comments received on 

both delay NPRMs and the allegations 

raised in the Pennsylvania complaint, as 

well as a review and reconsideration of 

questions of law, policy, and fact, the 

Department believes that it is necessary 

to revisit that portion of the 2020 Tip 

final rule addressing whether an 

employee who is performing non-tipped 

duties is still engaged in a tipped 

occupation. Specifically, the 

Department is concerned that the lack of 

clear guidelines in the 2020 Tip final 

rule both failed to achieve its goal of 

providing certainty for employers and 

created the potential for abuse of the tip 

credit to the detriment of low-wage 

tipped workers. In this NPRM, the 

Department has further reviewed data 

provided by commenters, including 

conducting a thorough analysis on 

transfer estimates using that data. The 

Department requests comment on 

withdrawing the dual jobs portion of the 

2020 Tip final rule. 

A. The 2020 Tip Final Rule Did Not 

Define Its Key Terms 

As noted above, the Department 

stated that one of its reasons for 

departing from the 80/20 guidance in 

the 2020 Tip final rule was that it 

‘‘generated extensive, costly litigation.’’ 

85 FR 86761. In their comments in 

opposition to the Partial Delay NPRM, 

the NRA and WPI argued that the 2020 

Tip final rule created a standard that 

was less susceptible to litigation than 

the 80/20 guidance. 86 FR 22606. 

However, the Pennsylvania litigants 

noted that the 2020 Tip final rule does 

not clearly define either 

‘‘contemporaneously’’ or the phrase ‘‘for 

a reasonable time immediately before or 

after’’ and thus is ‘‘certain to cause a 

flood of new litigation.’’ 29 Commenters 

who supported the Partial Delay NPRM 

echoed this concern. See 86 FR 22600. 

After consideration, the Department 

believes that the lack of clear definitions 

of these key terms may undermine the 

stated goals of the 2020 Tip final rule. 

For example, although the 2020 Tip 

final rule posited that the requirement 

that related duties be performed 

‘‘contemporaneously’’ is ‘‘not difficult 

to administer in practice,’’ the 

Department now believes that the rule’s 

failure to provide a clear definition of 

the term may undermine the utility of 

the rule. See 85 FR 86768. Instead, as 

the Pennsylvania litigants noted, the 

2020 Tip final rule both stated that the 

term ‘‘contemporaneously’’ means 

‘‘during the same time as’’ and also that 

it ‘‘does not necessarily mean that the 

employee must perform tipped and nontipped at the exact same moment in 

time.’’ Id. These potentially conflicting 

definitions may have caused confusion 

for employers and tipped employees 

alike. Additionally, by stating that a task 

that is performed ‘‘contemporaneously’’ 

does not have to be performed at the 

same time, the Department blurred the 

distinction between tasks performed 

contemporaneously and those 

performed ‘‘for a reasonable time 

immediately before or after’’ the 

performance of tipped duties. See, e.g., 

id. at 86769 (describing a scenario in 

which a bellhop works 48 minutes of 

every hour on tipped duties and 12 

minutes of every hour on related, nontipped duties as illustrating the new 

regulatory concept of work that is 

performed ‘‘for a reasonable time 

immediately before or after’’ the 

performance of tipped duties). 

Although the 2020 Tip final rule 

stated that related duties could be 

performed ‘‘for a reasonable time 

immediately before or after’’ performing 

tipped duties, the rule also did not 

provide a specific definition for the term 

‘‘reasonable.’’ In justifying the 

Department’s decision to use the term, 

the 2020 Tip final rule stated that ‘‘the 

concept of reasonableness is a 

cornerstone of modern common law and 

is familiar to employers in a variety of 

contexts.’’ See 85 FR 86768. Even if 

employers are familiar with the general 

concept of ‘‘reasonableness,’’ it is not 

clear from the 2020 Tip final rule how 

reasonableness would be defined in the 

context of that rule—determining how 

long a tipped employee could perform 

non-tipped, related duties—and the 

reference to common law implicitly 

acknowledged that those boundaries 

would be left to the courts to draw. 

The Department believes that because 

the 2020 Tip final rule did not define 

these key terms, the 2020 Tip final rule 

will invite rather than limit litigation in 

this area, and thus may not support one 

of the rule’s stated justifications for 

departing from the 80/20 guidance. 

Furthermore, a key justification for the 

2020 Tip final rule was that it would be 

easier for employers to administer—but 

the absence of clear guidelines regarding 

the boundaries of ‘‘reasonable’’ means 

that employers would still face 

uncertain litigation risk. As noted 

above, the Department seeks comments 

on the merits of withdrawing the dual 

jobs portion of the 2020 Tip final rule; 

in particular, it seeks comments on the 

extent to which definitions of the key 

terms used in the dual jobs portion of 

the 2020 Tip final rule provide clarity 

and certainty, as compared with the 

proposed terminology the Department 

proposes herein. 

B. Concerns About Using O*NET To 

Identify ‘‘Related’’ Duties 

In addition to not specifically 

defining key terms, the Department is 

concerned that the 2020 Tip final rule’s 

reliance on O*NET to identify ‘‘related’’ 

duties may be flawed. As discussed 

above, the 2020 Tip final rule uses 

occupational task listings from O*NET 

to identify which non-tipped duties, 

when performed for a limited or at a 

certain time, are part of an employees’ 

tipped occupation. O*NET, however, is 

a tool for career exploration. See 

www.onetonline.org. It was not created 

to identify employer’s legal obligations 

under the FLSA. The Department now 

believes that O*NET may not be an 

appropriate instrument to delineate the 

duties that are part of a tipped 

occupation for which an employer may 

take a tip credit. 

O*NET uses data obtained in part by 

asking employees which duties their 

employers are requiring them to 

perform.30 As a result, when employers 

require tipped employees to perform the 

work of a non-tipped occupation, 

O*NET may reflect these duties on the 

task list for their tipped occupation even 

though they are not the tasks of the 

tipped occupation. For example, the 


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31WHD–2019–0004–0456. 

32WHD–2019–0004–0438. 

33WHD–2019–0004–0491. 

34Specifically, the Pennsylvania litigants noted 

that according to the BLS’s May 2020 Occupational 

Employment and Wages Statistics (OEWS) survey, 

average annual incomes for servers in 

Massachusetts, Pennsylvania, and Illinois were 

$32,970, $25,380, and $23,340, respectively; for nail 

technicians, average annual incomes were $28,620, 

$21,630, and $24,580. See Commonwealth of 

Pennsylvania v. Scalia, ¶ 150. According to the May 

2020 OEWS, average annual incomes in 

Massachusetts, Pennsylvania, and Illinois were 

$70,010, $53,950, and $58,070, respectively. See 

BLS, May 2020 State Occupational Employment 

and Wage Estimates Massachusetts, https://

www.bls.gov/oes/current/oes_ma.htm#00-0000; 

May 2020 State Occupational Employment and 

Wage Estimates Pennsylvania, https://www.bls.gov/ 

oes/current/oes_pa.htm; May 2020 State 

Occupational Employment and Wage Estimates 

Illinois, https://www.bls.gov/oes/current/oes_

il.htm#00-0000. BLS notes that its ‘‘May 2020 

estimates do not fully reflect the impact of the 

COVID–19 pandemic.’’ Technical Notes for May 

2020 OES Estimates, https://www.bls.gov/oes/ 

current/oes_tec.htm. 

35WHD–2019–0004–0515. 

36WHD–2019–0004–0503. 

37WHD–2019–0004–0520. 

38WHD–2019–0004–0524. 

39WHD–2019–0004–0516. 

Pennsylvania litigants noted that, at the 

time of their complaint, O*NET 

included cleaning bathrooms as tasks of 

servers, notwithstanding the 

Department’s longstanding position that 

these duties are not part of the tipped 

occupation of a server. See Complaint, 

Commonwealth of Pennsylvania et al. v. 

Scalia et al., No. 2:21–cv–00258, ¶ 117 

(E.D. Pa., Jan. 19, 2021); see also Br. for 

Department of Labor as Amicus, at 18, 

18 n.6, Fast v. Applebee’s Int’l, Inc., 638 

F.3d 872 (8th Cir. 2011). At the same 

time, as commenters on the 2019 NPRM 

noted, O*NET may not reflect all of the 

duties that are part of a tipped 

occupation. See Inspire Brands; 31

National Restaurant Association.32

In response to concerns that O*NET 

may not accurately capture the nontipped duties that are part of tipped 

occupations, the 2020 Tip final rule 

provided that a non-tipped duty is 

merely presumed to be related to a tipproducing occupation if it is listed as a 

task of the tip-producing occupation in 

O*NET. See 85 FR 86771. Regarding 

this presumption, the Department 

specified that when ‘‘industry-wide 

practices and trends demonstrate that a 

listed duty is not actually related to the 

tipped occupation, or that an unlisted 

duty is actually related to that 

occupation, then employers would not 

be able to rely on O*NET’’ in that case. 

See id. at 86772. As a result, the 

Department acknowledged, the 

regulation in the final rule does not 

afford the ‘‘certainty’’ that the 

Department sought to provide when it 

proposed to codify its subregulatory 

guidance in the 2019 NPRM. Id. 

After further consideration, the 

Department has determined that this 

uncertainty could potentially harm both 

employers and employees. Although 

WPI noted in its comment to the Partial 

Delay NPRM that employers can simply 

review O*NET’s task lists to determine 

if a particular non-tipped duty is related 

to a tipped occupation, this is not 

necessarily the case under the 2020 Tip 

final rule; as noted above, ‘‘industrywide practices and trends’’ may show 

that a task not listed on O*NET is a 

related duty. See id. at 86722. The 

Department now believes, however, that 

the rule’s reference to ‘‘industry-wide 

practices and trends’’ is insufficient 

guidance for employers or employees to 

determine whether a duty is ‘‘actually 

related to the tipped occupation,’’ 

notwithstanding its inclusion in (or 

absence from) O*NET. As a result, the 

Department believes that the 2020 Tip 

final rule may not provide clarity in 

defining ‘‘related duties,’’ and fails to 

support the rule’s stated justification for 

departing from the previous 80/20 

guidance because it was ‘‘difficult to 

administer’’ due to the problems with 

‘‘categorizing of tasks.’’ See id. at 86770. 

Given this, the Department is proposing 

a new functional test for identifying 

which non-tipped duties, when 

performed for a limited time, can be part 

of an employee’s tipped occupation. 

The Department seeks comments on the 

use of O*NET in the dual jobs portion 

of the 2020 Tip final rule. 

C. Harm to Workers 

The Department shares the concerns 

raised in comments to the Partial Delay 

that enacting the dual jobs portion of the 

2020 Tip final rule could harm tipped 

employees and non-tipped employees in 

industries that employ significant 

numbers of tipped workers. The 

Department is particularly concerned 

that the lack of clearly defined limits 

regarding when employers can continue 

to take a tip credit for tipped employees 

who perform related, non-tipped work 

could lead to employers shifting more 

non-tipped work to employees in tipped 

occupations. This concern is 

particularly acute during the COVID–19 

pandemic, when, as ROC United noted 

in its comment on the Partial Delay 

NPRM, many restaurants may have 

shifted a significant portion of their 

tipped employees to perform more nontipped work.33 In their complaint, the 

Pennsylvania litigants cited to data from 

the Bureau of Labor Statistics (BLS) 

showing that servers in Massachusetts, 

Pennsylvania, and Illinois earn less than 

half the average annual income of 

workers in each state; for nail 

technicians, annual incomes were 

between 40 and 43 percent of the state 

average.34 If employers require tipped 

workers to perform more non-tipped 

work outside their tipped occupation, 

these low-wage workers’ earnings could 

be reduced even further. As NELP and 

other advocacy organizations noted, if 

employers shift non-tipped work to 

tipped employees for whom they take a 

tip credit, this could also harm 

employees in non-tipped occupations. 

Specifically, this could ‘‘drive down 

wages for—or even eliminate—back-ofhouse positions in restaurants, and 

related maintenance and prep jobs in 

other workplaces like hotels, carwashes 

and parking lots, and service 

establishments.’’ See NELP; 35 see also 

Oxfam; 36 NWLC; 37 ROC United; 38

National Urban League.39

As the NRA noted in its comment on 

the Partial Delay NPRM, employers in 

the restaurant industry have also been 

hit hard by COVID–19. The Department 

appreciates the strong desire of 

restaurants, particularly small and 

independently-owned restaurants, for 

certainty as they recover from the 

impact of the pandemic. However, as 

noted above, the Department is 

concerned that the 2020 Tip final rule’s 

test for when an employer can continue 

to take a tip credit for related, nontipped duties did not provide such 

certitude: The rule uses terms that may 

not be sufficiently clearly defined and 

may have failed to provide certainty 

when defining ‘‘related duties.’’ Upon 

consideration of the comments received 

regarding the Partial Delay NPRM, the 

Department believes that revisions to 

the dual jobs portion of the 2020 Tip 

final rule are needed to better protect 

workers and to provide clarity to 

employers and workers alike. The 

Department seeks additional comments 

on the potential economic impact of the 

dual jobs portion of the 2020 Tip final 

rule on workers. The Department also 

seeks comments on whether the dual 

jobs portion of the 2020 Tip final rule 

provides enough clarity to employers 

and workers regarding when employers 

can continue to take a tip credit for nontipped duties performed by tipped 

employees. 

V. Proposed Regulatory Revisions 

The Department proposes to 

withdraw and amend the dual jobs 

regulation at § 531.56(e) to define when 

an employee is engaged in a tipped 

occupation for purposes of section 3(t) 

of the FLSA. As explained above, 

section 3(t) of the FLSA defines a 


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40WHD–2019–0004–0504. 

41See supra note 4. 42See supra note 3. 

‘‘tipped employee’’ for whom an 

employer may take a tip credit as ‘‘any 

employee engaged in an occupation in 

which he customarily and regularly 

receives more than $30 a month in 

tips.’’ 29 U.S.C. 203(t). As also 

explained above, since it was first 

promulgated in 1967, § 531.56(e) has 

recognized that an employee may be 

employed by the same employer in both 

a tipped occupation and in a non-tipped 

occupation. 

A straightforward dual jobs scenario 

exists when an employee is hired by the 

same employer to perform more than 

one job, only one of which is in a tipped 

occupation: For example, when an 

employee is employed by the same 

employer to work both as a server and 

a maintenance person. A dual jobs 

scenario also exists when an employee 

is hired to do one job but is required to 

do work that is not part of that 

occupation: For example, when an 

employee is hired as a server but is 

required to do building maintenance. 

Yet another dual jobs scenario exists 

where an employee is hired to work in 

a tipped occupation but is assigned to 

perform non-tipped work that directly 

supports the tipped producing work for 

such a significant amount of time that 

the work is no longer incidental to the 

tipped occupation and thus, the 

employee is no longer employed in the 

tipped occupation. From 1988 to 2018, 

the Department’s guidance, in 

recognition of the fact that every tipped 

occupation usually includes a limited 

amount of related, non-tipped work, 

provided a tolerance whereby 

employers could continue to take a tip 

credit for a period of time when a tipped 

employee performed non-tipped work 

that was related to the tipped 

occupation. The Department’s guidance 

also recognized, however, that it was 

necessary to cap the tolerance at a 

certain amount of non-tipped work, 

because at some point, if a tipped 

employee performs too much nontipped work, even if that work were 

related to the tipped occupation, the 

work was no longer incidental to the 

tipped work and thus the employee was 

no longer engaged in a tipped 

occupation. As the Department 

explained in legal briefs defending its 

80/20 guidance, particularly where the 

FLSA permits employers to compensate 

their tipped employees as little as $2.13 

an hour directly, providing protections 

to ensure that this reduced direct wage 

is only available to employers when 

employees are actually engaged in a 

tipped occupation within the meaning 

of section 3(t) of the statute is essential 

to prevent abuse. 

As noted above, past criticisms of the 

Department’s 80/20 guidance from 

employer representatives included that 

the policy was contrary to the FLSA, 

and that it was difficult for employers 

to administer because it required 

employers to monitor employees’ duties 

and did not provide sufficient guidance 

for employers to determine whether a 

particular non-tipped duty was 

‘‘related’’ to the tip-producing 

occupation. In comments received on 

the Partial Delay Rule, for instance, the 

NRA expressed its support for the 2020 

Tip final rule’s revision to the dual jobs 

regulation because, in its view, the new 

test avoided this problem and was 

consistent with the plain statutory text 

of the FLSA, which permits employers 

to take a tip credit based on whether an 

employee is employed to work in a 

tipped occupation, not whether the 

employee is performing certain kinds of 

duties within the tipped occupation.40

However, as the Eighth Circuit 

recognized in Applebee’s, Congress did 

not define ‘‘occupation’’ or what it 

means to be ‘‘engaged in an occupation’’ 

in section 3(t), leaving that for the 

Department to interpret. See Applebee’s, 

638 F.3d at 879. In other enforcement 

contexts, the Department recognizes that 

job titles alone cannot be determinative, 

see, e.g., 29 CFR 541.2; thus, merely 

because someone is hired to work as a 

server does not mean that they are 

always ‘‘engaged in the occupation’’ of 

a server. Furthermore, as explained 

above, the dual jobs test set forth in the 

2020 Tip final rule also distinguished 

between related and unrelated duties, 

and therefore did not fully address the 

concern advanced by the NRA about the 

kinds of duties a tipped employee 

performs. 

Additionally, many courts upheld the 

80/20 guidance because it provided an 

essential backstop to prevent abuse of 

the tip credit and, conversely, criticized 

the dual jobs test set forth in the 

Department’s 2018–2019 guidance, 

which was largely codified by the 2020 

Tip final rule, as being more difficult to 

administer than the 80/20 guidance.41

Like some commenters that supported 

the Partial Delay rule and the 

Pennsylvania litigants, courts have 

found that the parameters of the 2020 

Tip final rule’s test are so broad and 

indeterminate that they do not 

sufficiently define when an employee is 

employed in a tipped occupation within 

the meaning of section 3(t) of the FLSA, 

and that O*NET is not an appropriate 

tool to use to identify related duties 

because it catalogues the duties that 

employees have been required to 

perform rather than the duties that fall 

within the definition of an occupation.42

The Department believes that it is 

important to retain the longstanding 

regulatory dual jobs language addressing 

a straightforward dual jobs situation, 

where one employee is employed to 

perform two separate jobs, only one of 

which is in a tipped occupation. The 

Department also believes that it is 

important for its regulations to address 

the dual jobs scenario where a tipped 

employee is performing so much nontipped work even though that nontipped work is performed in support of 

the tipped work, that the work is no 

longer incidental and thus the employee 

is no longer employed in a tipped 

occupation. The Department rejects the 

argument put forth by the NRA and WPI 

that a regulation that analyzes a tipped 

employee’s duties and determines when 

a tip credit should be permitted and not 

permitted is inconsistent with the 

statutory language of 3(t), which says 

that an employer can take a tip credit for 

an employee who is employed in a 

tipped occupation. This argument fails 

to take into account the multiple 

scenarios outlined above, where an 

employer hires someone into a tipped 

occupation but then requires them to 

perform work outside of the occupation 

or requires the employee to perform so 

much non-tipped work that it can no 

longer be considered part of the tipped 

occupation. 

Because concerns about its dual jobs 

tests have been identified over the 

years—both with its prior subregulatory 

guidance and the 2020 Tip final rule— 

the Department in this rulemaking is 

proposing a new test that the 

Department believes will address the 

concerns articulated about its prior 

tests, will be easier to administer, 

provide employers with more certainty, 

reduce litigation, and will protect 

tipped workers against abusive pay 

practices. In developing this proposed 

test, the Department also took into 

consideration the recommendations of 

organizations that commented on the 

Partial Delay NPRM, including the 

recommendation of numerous advocacy 

organizations that the Department repropose a test no less protective than 

the 80/20 guidance and WPI’s 

recommendation that the Department 

‘‘precisely identify’’ the duties for 

which employers can and cannot take a 

tip credit if it engages in further 

rulemaking. The Department believes 

that its proposed test will better identify 

when an employer can continue to take 

a tip credit for the time tipped 


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employees spend on tasks that do not 

themselves produce tips but support the 

tip-producing work, and when an 

employer cannot take a tip credit for 

this work because the time spent 

performing these tasks is so great that 

work is no longer incidental and thus 

the employee is no longer engaged in a 

tipped occupation. Congress delegated 

to the Department the authority to 

determine what it means to be ‘‘engaged 

in an occupation’’ that customarily and 

regularly receives tips. See Fair Labor 

Standards Amendments of 1966, Public 

Law 89–601, § 101, § 602, 80 Stat. 830, 

830, 844 (1966). The Department has 

decades of outreach, compliance 

assistance, stakeholder engagement, and 

enforcement experience in this area and 

has relied on that experience to develop 

a proposed test that provides clarity in 

determining what work an employer 

may take a tip credit for and also the 

flexibility to address unique workplaces 

and changing occupations. 

Additionally, the Department believes 

the proposed test, because it provides 

clear and specific guidance, will ensure 

fair and consistent application of the tip 

credit in instances where tipped 

employees perform non-tipped duties in 

support of their tipped work. 

The new test proposed in this 

rulemaking permits an employer to 

continue to take a tip credit for its 

tipped employees when they are 

performing work that is part of the 

tipped occupation. Work that is part of 

the tipped occupation includes any 

work that produces tips, as well as any 

work that directly supports the tipproducing work, provided the directly 

supporting work is not performed for a 

substantial amount of time. To address 

the criticisms of its past rules that the 

Department has used largely undefined 

terms such as ‘‘related duties’’, or used 

unhelpful tools such as O*NET, to 

determine the sorts of duties that fall 

within the tipped occupation, the new 

test proposed in this rulemaking 

provides a number of examples to 

illustrate the kinds of tasks that would 

be included in each category of work 

covered by the regulation: Work that is 

part of the tipped occupation, which 

includes a non-substantial amount of 

directly supporting work, as well as 

work that is not part of the tipped 

occupation. 

A. Proposed § 531.56(e)—Dual Jobs 

Proposed § 531.56(e) would retain the 

longstanding regulatory dual jobs 

language which provides that when an 

individual is employed in a tipped 

occupation and a non-tipped 

occupation, the tip credit is available 

only for the hours the employee spends 

working in the tipped occupation. The 

Department also proposes to make this 

section gender-neutral by using terms 

such as ‘‘server’’ and ‘‘maintenance 

person.’’ 

B. Proposed § 531.56(f) 

Proposed § 531.56(f) defines what it 

means for an employee to be engaged in 

a tipped occupation under section 3(t) 

of the FLSA. Specifically, an employee 

is engaged in a tipped occupation when 

they either perform work that produces 

tips, or perform work that directly 

supports the tip-producing work, 

provided the directly supporting work is 

not performed for a substantial amount 

of time. Because an employer may not 

take a tip credit for work that is not part 

of the tipped occupation, proposed 

§ 531.56(f) defines the relevant term 

‘‘tipped occupation’’ specifically and 

provides examples of tasks that fall into 

those categories. 

The Department believes that these 

examples will assist employers and 

employees in understanding the 

parameters of those terms and will help 

ensure consistent application of the test. 

The proposed regulation lists tasks in 

three occupations—servers, bartenders, 

and nail technicians—that would fall 

within the three categories of work set 

out in the regulations. For example, the 

proposed regulations explain that a 

server’s tip-producing work includes 

waiting on tables, work that directly 

supports the server’s tip-producing 

work includes cleaning the tables to 

prepare for the next customers, and 

work which is not part of a server’s 

occupation includes food preparation 

and cleaning bathrooms. A bartender’s 

tip-producing work includes making 

and serving drinks and talking to 

customers, work that directly supports 

the work includes preparing fruit to 

garnish the prepared drinks, and work 

that is not part of a bartender’s 

occupation includes preparing food and 

cleaning the dining room. Finally, the 

proposed rule explains that a nail 

technician’s tip-producing work 

includes performing manicures and 

pedicures, work that directly supports 

the work of a nail technician includes 

cleaning pedicure baths between 

customers, and work that is not part of 

the nail technician’s occupation 

includes ordering supplies for the nail 

salon. While not an exhaustive list, the 

Department believes that these 

examples set clear parameters for how 

those three categories of work are 

defined and applied. 

Proposed § 531.56(f)(1)(i) would 

permit an employer to take a tip credit 

for the employee’s performance of work 

that is part of the tipped occupation, 

defined as work that produces tips. As 

explained above, the proposed 

regulation provides specific examples of 

tip-producing work for three specific 

occupations, which illustrate that tipproducing work in many instances is 

work which requires direct service to 

customers. In addition to the tasks listed 

in the proposed regulation, other 

examples of tip-producing work would 

include a parking attendant’s work 

parking and retrieving cars, and 

accepting payment for the same, a hotel 

housekeeper’s work cleaning hotel 

rooms, and bussers’ tip-producing work 

would include filling water glasses and 

clearing dishes from tables. However, 

not all tip-producing work involves 

direct customer service. A busser’s tipproducing work, for example, would 

also include work, such as putting new 

linens on tables that is done in support 

of other tipped employees, such as 

servers. The Department recognizes that 

tipped employees in different 

occupations may have different tipproducing work and requests comment 

on its definition of tip-producing work 

and these examples, and seeks input on 

other occupations and examples that the 

Department should consider. 

Proposed § 531.56(f)(1)(ii) and (1)(iii) 

would address when and to what extent 

an employer can continue to take a tip 

credit for a tipped employee’s work that 

does not itself generate tips but that 

supports the tip-producing work of the 

tipped occupation because it assists a 

tipped employee to perform the work 

for which the employee receives tips. As 

proposed, § 531.56(f)(1)(ii) defines this 

supportive work as work that directly 

supports tip-producing work, and 

explains that this work can be 

considered to be part of the tipped 

occupation provided that it is not 

performed for a substantial amount of 

time. 

The Department believes that defining 

this as work that ‘‘directly supports’’ the 

tip-producing work is more specific and 

therefore more helpful than referring to 

these tasks as duties that are related to 

the tipped occupation. The Department 

believes that the ‘‘related duties’’ 

terminology used in past tests may have 

inadvertently caused confusion because 

it could be interpreted to encompass 

duties that are only remotely related to 

the tipped occupation, particularly 

because the Department provided only a 

few examples of the type of work the 

Department intended to include in this 

term. In contrast, the proposed new 

rule’s limited tolerance for non-tipped 

work that ‘‘directly supports’’ tipproducing work, which in turn is 

defined as work that assists a tipped 

employee to perform the work for which 


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43See, e.g., 29 U.S.C. 213(c)(6) (permitting 17- 

year-olds to drive under certain conditions, 

including that the driving be ‘‘occasional and 

incidental,’’ and defining ‘‘occasional and 

incidental’’ to, inter alia, mean ‘‘no more than 20 

percent of an employee’s worktime in any 

workweek’’); 29 CFR 786.100, 786.150, 786.1, 

786.200 (nonexempt work for switchboard 

operators, rail or air carriers, and drivers in the 

taxicab business will be considered ‘‘substantial if 

it occupies more than 20 percent of the time worked 

by the employee during the workweek’’); 29 CFR 

552.6(b) (defining ‘‘companionship services’’ that 

are exempt from FLSA requirements to include 

‘‘care’’ only if such ‘‘care . . . does not exceed 20 

percent of the total hours worked per person and 

per workweek’’). 

44See, e.g., Alverson v. BL Rest. Operations LLC, 

No. 16–849, 2017 WL 3493048, at *5–6 (W.D. Tex. 

Aug. 8, 2017), rep. & rec. adopted, 2018 WL 

1057045 (W.D. Tex. Feb. 22, 2018); White v. NIF 

Corp., No. 15–322, 2017 WL 210243, at *4 (S.D. Ala. 

Jan. 18, 2017); Romero v. Top-Tier Colorado LLC, 

274 F. Supp. 3d 1200, 1206 (D. Colo. 2017); Knox 

v. Jones Group, 201 F. Supp. 3d 951, 960–61 (S.D. 

Ind. 2016); Langlands v. JK & T Wings, Inc., No. 15– 

13551, 2016 WL 2733092, at *3 (E.D. Mich. May 11, 

2016); Irvine v. Destination Wild Dunes Mgmt., Inc., 

106 F. Supp. 3d 729, 733–34 (D.S.C. 2015); Flood 

v. Carlson Restaurants Inc., 94 F. Supp. 3d 572, 

582–84 (S.D.N.Y. 2015); Schaefer v. Walker Bros. 

Enters., No. 10–6366, 2014 WL 7375565, at *3 (N.D. 

Ill. Dec. 17, 2014); Holder v. MJDE Venture, LLC, 

No. 08–2218, 2009 WL 4641757, at *3–4 (N.D. Ga. 

Dec. 1, 2009). 

45The courts reasoned that this limitation is 

consistent with the qualifiers ‘‘occasionally,’’ ‘‘part 

of [the] time,’’ found in § 531.56(e). See, e.g., Belt, 

401 F. Supp. 3d at 536–37; Rorie, 485 F. Supp. 3d 

at 1042; Berger, 430 F. Supp. 3d at 412; Roberson, 

2020 WL 7265860, at *7–*8. 

the employee receives tips, provides a 

more concrete and specific definition of 

the term. 

The examples included in the 

proposed regulatory text are not the 

only tasks that the Department would 

consider to be directly supporting work 

under the new test. For example, work 

that directly supports the work of a 

server would also include folding 

napkins, preparing silverware, and 

garnishing plates before serving the food 

to customers. Sweeping under tables 

would be considered to be directly 

supporting work if it is performed in 

and limited to the dining room because 

keeping the serving area clean assists 

the performance of a server’s tipproducing work. Likewise, work that 

directly supports the work of a 

bartender would also include wiping 

down the surface of the bar and tables 

in the bar area, cleaning bar glasses and 

implements used to make drinks behind 

the bar, arranging the bottles behind the 

bar, and briefly retrieving from a 

storeroom a particular beer, wine, or 

liquor, and supplies such as ice and 

napkins. Work that directly supports the 

work of a nail technician would also 

include cleaning manicure tools, 

cleaning the floor of the nail salon, and 

scheduling client appointments and 

taking customer payments. Work that 

directly supports the tip-producing 

work of a parking attendant would 

include moving cars in a parking lot or 

parking garage to facilitate the parking 

of patrons’ cars. Work that directly 

supports the tip-producing work of a 

hotel housekeeper would include 

stocking the housekeeping cart. These 

examples illustrate the nexus between 

the tip-producing work and the 

supporting work that is required to 

conclude that the supporting work 

directly supports the tip-producing 

work within the meaning of the 

proposed regulation. The proposed test 

allows for some flexibility in 

determining the nexus between the tipproducing work and the directly 

supporting work. The Department seeks 

comment on these examples and seeks 

input on other occupations and 

examples that the Department should 

consider. 

Proposed § 531.56(f)(1)(iii) would 

define substantial amount of time to 

include two categories of time. Under 

proposed § 531.56(f)(1)(iii), an employee 

has performed work that directly 

supports tip-producing work for a 

substantial amount of time if the tipped 

employee’s directly supporting work 

either (1) exceeds 20 percent of the 

hours worked during the employee’s 

workweek or (2) is performed for a 

continuous period of time exceeding 30 

minutes. Under proposed 

§ 531.56(f)(1)(iii)(A), if a tipped 

employee spends more than 20 percent 

of their workweek performing directly 

supporting work, the employer cannot 

take a tip credit for any time that 

exceeds 20 percent of the workweek. 

Under proposed § 531.56(f)(1)(iii)(B), if 

a tipped employee spends a continuous, 

or uninterrupted, period of time 

performing directly supporting work 

that exceeds 30 minutes, the employer 

cannot take a tip credit for that entire 

period of time that was spent on such 

directly supporting work. The 

Department believes that these two 

measurements of time reflect the 

manner in which tipped employees are 

most likely to conduct non-tipped, 

directly supporting work: On the one 

hand, tipped employees may do an 

incidental amount of non-tipped, 

directly supporting work that is 

interspersed with their tip-producing 

work throughout the workday, and on 

the other hand, tipped employees may 

be assigned non-tipped, directly 

supporting work for distinct blocks of 

time. The Department believes that 

measuring a ‘‘substantial amount of 

time’’ in this way provides a uniform 

and accurate measure of when a tipped 

employee is still engaged in a tipped 

occupation such that an employer can 

pay a reduced cash wage for the time 

spent on that work, but requests 

comment on this proposed test. 

The first prong of the Department’s 

proposed test provides a tolerance that 

permits an employer to continue taking 

a tip credit for some part of the work 

that its tipped employees perform 

which directly supports their tipproducing work. However, the 

Department is proposing in its test to 

limit the amount of this non-tipped 

work, in recognition that if a tipped 

employee engages in a substantial 

amount of such work, the employee is 

no longer employed in a tipped 

occupation. The Department has thus 

proposed, in part, to define ‘‘substantial 

amount of time’’ as meaning more than 

20 percent of the hours worked in a 

workweek. A 20 percent limitation is 

consistent with various other FLSA 

provisions, interpretations, and 

enforcement positions setting a 20 

percent tolerance for work that is 

incidental to but distinct from the type 

of work to which an exemption 

applies.43 The Department believes this 

tolerance is also reasonable and 

consistent with the Department’s 

previous practice under the 80/20 

guidance. 

As explained above, prior to 2018, 

federal courts deferred to the 

Department’s 80/20 guidance, including 

both the Eighth and the Ninth Circuits. 

See Applebee’s, 638 F.3d at 879–81; 

Marsh, 905 F.3d at 623; see also Driver 

v. AppleIllinois, LLC, 739 F.3d 1073, 

1075 (7th Cir. 2014) (describing 

underlying substantive legal issues by 

relying on Department’s 80/20 guidance 

and Applebee’s). District courts also 

deferred to and relied on the 

Department’s interpretation of the dual 

jobs regulation.44 Even after the 

Department rescinded the 80/20 

guidance, most federal courts to 

consider the issue have declined to 

defer to the new interpretation. As 

explained above, many of those district 

courts independently determined that a 

20 percent tolerance is a reasonable 

interpretation of the dual jobs 

regulation.45 The Department thus 

believes that 20 percent of an 

employee’s workweek is an appropriate 

tolerance for non-tipped work that is 

part of the tipped employee’s 

occupation. The Department seeks 

comments, however, on whether a 

different portion of the employee’s 

workweek would be appropriate or if 

another metric would be more 

appropriate. 

In addition to the 20 percent 

limitation, the proposed regulation also 

defines ‘‘substantial amount of time’’ to 


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include any continuous period of time 

that exceeds 30 minutes. This proposal 

addresses concerns with the 80/20 

guidance, which the Department 

identified in the 2020 Tip final rule, that 

the guidance did not adequately address 

the scenario where an employee 

performs non-tipped, directly 

supporting work for an extended period 

of time, and thus essentially ceases to be 

employed in the tipped occupation for 

that entire block of time. See 85 FR 

86769. The 2020 Tip final rule provided 

an example of a bellhop who performed 

tipped duties for 8 hours, and worked 

for an additional 2 hours ‘‘cleaning, 

organizing, and maintaining bag carts.’’ 

The Department noted that under the 

80/20 guidance, the employer could 

potentially take a tip credit for the entire 

2 hour block of time, even though the 

bellhop was ‘‘engaged in a tipped 

occupation (bellhop) for 8 hours and a 

non-tipped occupation (cleaner) for 2 

hours.’’ Id. The proposed regulation 

addresses this concern by requiring 

employers to pay employees the full 

cash minimum wage whenever they 

perform non-tipped work, albeit work 

that directly supports tipped work, for 

a continuous block of time that exceeds 

30 minutes. The Department’s proposal 

that an employer cannot take a tip credit 

for the entire block of time spent on 

non-tipped work when the work is 

performed for more than 30 minutes, 

rather than time that exceeds the 30 

minute standard, is premised on the 

concept that the work is being 

performed for such a significant, 

continuous period of time that the 

tipped employee’s work is no longer 

being done in support of the tipproducing work, such that the employee 

is not engaged in a tipped occupation 

for that entire period. 

Particularly because the FLSA’s tip 

credit provision permits employers to 

compensate their tipped employees as 

little as $2.13 an hour in direct cash 

wages, it is important to ensure that this 

reduced direct wage is available to 

employers only when employees are 

actually engaged in a tipped occupation 

within the meaning of section 3(t) of the 

statute. The tip credit provision allows 

employers to pay a reduced cash wage 

based on the assumption that a worker 

will earn additional money from 

customer-provided tips—at least $5.12 

per hour in tips. When an employer 

assigns an employee to perform nontipped duties continuously for a 

substantial period of time, such as more 

than 30 minutes, however, the 

employee’s non-tipped duties are not 

being performed in support of the 

tipped work, and the employee is no 

longer earning tips during that time. 

Therefore, the employee is not engaged 

in a tipped occupation. 

Under the Department’s proposed 

§ 531.56(f)(1)(iii)(B), if a tipped 

employee performs non-tipped, directly 

supporting work for a continuous period 

of time that exceeds 30 minutes, the 

employer cannot take a tip credit for the 

entire period of time the non-tipped 

work is performed. Thus, an employer 

may take a tip credit for time a server 

performs directly supporting work such 

as cleaning the dining room at the end 

of the day and preparing the tables for 

the next day’s service, but only if that 

time does not exceed 30 minutes. An 

employee who performs non-tipped, 

directly supporting work for more than 

30 minutes does so for a substantial 

amount of time. The Department 

believes that a threshold of 30 minutes, 

the majority of any given work hour, is 

an appropriate time marker for 

determining when an employee 

continuously performing non-tipped 

work is no longer performing incidental 

work but instead has ceased to be 

engaged in their tipped occupation for 

that entire period. The Department 

seeks comments, however, on whether a 

different period of time would better 

approximate this transition, and on how 

to best define a substantial amount of 

time for which the employer should no 

longer be permitted to pay a cash wage 

as low as $2.13 an hour. 

The proposed rule also recognizes the 

different situation where an employee 

performs incidental, non-tipped work 

for shorter periods of time. As described 

above, when an employee performs nontipped work that directly supports the 

tip-producing work for 30 minutes or 

less, proposed § 531.56(f)(1)(iii)(A) 

provides a general tolerance that 

permits the employer to take a tip credit 

for that work before it exceeds 20 

percent of the workweek. This tolerance 

is provided for ease of administration, 

and in recognition of the fact, as noted 

above, that most tipped occupations 

involve an incidental amount of nontipped work that supports the tipproducing activities and is interspersed 

with those activities. Such work may 

also be less foreseeable than when an 

employer assigns an employee to 

perform non-tipped directly supporting 

work continuously for a period of more 

than 30 minutes, further justifying the 

tolerance. 

The proposed regulation addresses 

concerns raised in the 2020 Tip final 

rule that the timeframe used to 

determine compliance under the 

Department’s previous 80/20 guidance 

was unclear. See 85 FR 86770. The 20 

percent tolerance applies to increments 

of directly supporting work spanning 30 

continuous minutes or less, and is 

calculated on a workweek basis. Once 

an employee spends more than 20 

percent of the workweek on directly 

supporting work, the employer cannot 

take a tip credit for any additional time 

spent on directly supporting work in 

that workweek and must pay the full 

minimum wage for that time. If an 

employee spends more than 30 

continuous minutes on work that 

directly supports the tip-producing 

work, the employer may not take a tip 

credit and must pay the full minimum 

wage for that entire continuous period 

of time. Any time paid at the full 

minimum wage would not count 

towards the 20 percent workweek 

tolerance. For example, if a server is 

required to perform an hour of directly 

supporting work at the end of each of 

her five 8-hour shifts, each of those 

hours spent performing directly 

supporting work must be paid at the full 

minimum wage and would not count 

towards the 20 percent workweek 

tolerance. If that same server also 

performs 20 minutes of directly 

supporting work three times each shift, 

for a total of 1 hour per day, the 

employer could take a tip credit for the 

rest of the server’s supporting work 

because the 5-hour total did not reach 

the 20 percent tolerance for a 40-hour 

workweek. 

The Department believes that the 

requirement limiting employer’s ability 

to pay a reduced cash wage for nontipped, directly supporting work to less 

than a substantial amount of time, as 

discussed above, will not be onerous for 

employers to implement. The preamble 

to the 2020 Tip final rule criticized the 

previous 80/20 guidance, discussing the 

perceived need for employers to 

‘‘precisely’’ track employees’ time spent 

on non-tipped related duties in order to 

comply with a percentage-of-time 

limitation on those duties, and 

employer’s concerns that such tracking 

was difficult. See 85 FR 86769–70. 

Upon further review and consideration, 

however, the Department believes that 

the limitations on performing nontipped work included in the proposed 

rule allow employers ample ability to 

assign to their tipped employees a nonsubstantial amount of non-tipped duties 

that directly support the tip-producing 

work, without needing to account for 

employees’ duties minute-by-minute. 

Twenty percent of an employee’s 

workweek is a significant amount of 

time—equal to a full 8 hour workday in 

a 5-day, 40-hour workweek. Particularly 

because the proposed guidance provides 

examples illustrating the type of work 


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46See 58 FR 51735, 51741 (Oct. 4, 1993). 

that is part of the tipped occupation, 

including work that is tip-producing 

and work that directly supports the tipproducing work, employers should be 

able to proactively identify work that 

counts toward the tolerance and assign 

work to tipped employees accordingly, 

to avoid going over this tolerance. 

Similarly, a continuous, uninterrupted 

block of 30 minutes or more is a 

significant amount of time, and does not 

require the minute-by-minute 

micromanaging with which the 2020 

Tip final rule expressed concern. In 

addition, as noted above, employers are 

likely to assign such work in a 

foreseeable manner. As a general matter, 

‘‘since employers, in order to manage 

employees, must assign them duties and 

assess completion of those duties, it is 

not a real burden on an employer to 

require that they be aware of how 

employees are spending their time.’’ 

Irvine v. Destination Wild Dunes Mgmt., 

Inc., 106 F. Supp. 3d 729, 734 (D.S.C. 

2015); see also Marsh, 905 F.3d at 631 

(‘‘[I]t is not impracticable for an 

employer to keep track of time spent on 

related tasks.’’). Far from being an 

arbitrary burden, showing that a tipped 

employee does not perform a substantial 

amount of non-tipped work is how an 

employer can properly justify claiming 

a tip credit rather than directly paying 

the full minimum wage. 

Finally, proposed § 531.56(f)(2) would 

clarify that an employer cannot take a 

tip credit for the time a tipped employee 

spends performing work that is not part 

of the tipped occupation, defined as any 

work that does not generate tips and 

does not directly support tip-producing 

work. In addition to the work identified 

in the examples, work that is not part of 

the tipped occupation of a hotel 

housekeeper would include cleaning 

non-residential parts of a hotel, such as 

a spa, gym, or the restaurant. Work that 

is not part of the tipped occupation of 

a busser would include, for example, 

cleaning the kitchen of the restaurant. 

Under the proposed rule, all time 

performing any work that is not part of 

the tipped occupation must be paid at 

the full minimum wage. The 

Department seeks comment on this part 

of its proposed test, including whether 

the list of examples appropriately 

identify work that is not part of the 

tipped occupation. 

The Department requests comments 

on its proposed revisions to § 531.56(e) 

and all aspects of the new proposed 

§ 531.56(f). 

C. Proposed § 10.28(b) 

The Department also proposes to 

amend the provisions of the Executive 

Order 13658 regulations, which address 

the hourly minimum wage paid by 

contractors to workers performing work 

on or in connection with covered 

federal contracts. See E.O. 13658, 79 FR 

9851 (Feb. 12, 2014). The Executive 

Order also established a tip credit for 

workers covered by the Order who are 

tipped employees pursuant to section 

3(t) of the FLSA. The Department 

proposes to amend § 10.28(b) consistent 

with its proposed revisions to 

§ 531.56(e) and (f) and seeks comment 

on these proposed revisions. 

VI. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) and its attendant regulations 

require an agency to consider its need 

for any information collections, their 

practical utility, as well as the impact of 

paperwork and other information 

collection burdens imposed on the 

public, and how to minimize those 

burdens. The PRA typically requires an 

agency to provide notice and seek 

public comments on any proposed 

collection of information contained in a 

proposed rule. This proposed rule does 

not contain a collection of information 

subject to Office of Management and 

Budget approval under the PRA. 

VII. Executive Order 12866, Regulatory 

Planning and Review; and Executive 

Order 13563, Improved Regulation and 

Regulatory Review 

Under Executive Order 12866, OMB’s 

Office of Information and Regulatory 

Affairs (OIRA) determines whether a 

regulatory action is significant and, 

therefore, subject to the requirements of 

the Executive Order and OMB review.46

Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ 

as a regulatory action that is likely to 

result in a rule that may: (1) Have an 

annual effect on the economy of $100 

million or more, or adversely affect in 

a material way a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

state, local or tribal governments or 

communities (also referred to as 

economically significant); (2) create 

serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. OIRA has determined that this 

proposed rule is economically 

significant under section 3(f) of 

Executive Order 12866. 

Executive Order 13563 directs 

agencies to, among other things, propose 

or adopt a regulation only upon a 

reasoned determination that its benefits 

justify its costs; that it is tailored to 

impose the least burden on society, 

consistent with obtaining the regulatory 

objectives; and that, in choosing among 

alternative regulatory approaches, the 

agency has selected those approaches 

that maximize net benefits. Executive 

Order 13563 recognizes that some costs 

and benefits are difficult to quantify and 

provides that, when appropriate and 

permitted by law, agencies may 

consider and discuss qualitatively 

values that are difficult or impossible to 

quantify, including equity, human 

dignity, fairness, and distributive 

impacts. The analysis below outlines 

the impacts that the Department 

anticipates may result from this 

proposed rule and was prepared 

pursuant to the above-mentioned 

executive orders. 

A. Background 

In 2018 and 2019, the Department 

issued new guidance providing that the 

Department would no longer prohibit an 

employer from taking a tip credit for the 

time an employee performs related, nontipped duties—as long as those duties 

are performed contemporaneously with, 

or for a reasonable time immediately 

before or after, tipped duties. See WHD 

Opinion Letter FLSA2018–27 (Nov. 8, 

2018); FAB 2019–2 (Feb. 15, 2019); 

WHD FOH 30d00(f). This guidance thus 

removed the 20 percent limitation on 

related, non-tipped duties that existed 

under the Department’s prior 80/20 

guidance. On December 30, 2020, the 

Department published the 2020 Tip 

final rule to largely incorporate this 

2018–2019 guidance into its regulations. 

The Department uses the 2018–2019 

guidance as a baseline for this analysis 

because this is what WHD has been 

enforcing since the 2018–2019 guidance 

was issued and is similar to the policy 

codified in the 2020 Tip final rule. 

In this NPRM, the Department 

proposes to withdraw the dual jobs 

portion of the 2020 Tip final rule and to 

re-propose new regulatory language that 

it believes will provide more clarity and 

certainty for employers, and will better 

protect employees. Specifically, the 

Department is proposing to amend its 

regulations to clarify that an employer 

may not take a tip credit for its tipped 

employees unless the employees are 

performing work that is part of their 

tipped occupation. This includes work 

that produces tips, as well as work that 

directly supports the tip-producing 


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47 Jones, Maggie R. (2016), ‘‘Measuring the Effects 

of the Tipped Minimum Wage Using W–2 Data,’’ 

CARRA Working Paper Series, U.S., Census Bureau, 

Working Paper 2016–03, https://www.census.gov/ 

content/dam/Census/library/working-papers/2016/ 

adrm/carra-wp-2016-03.pdf. 

48 Department of Labor, Wage and Hour Division, 

‘‘Minimum Wages for Tipped Employees,’’ Updated 

January 1, 2021. https://www.dol.gov/agencies/ 

whd/state/minimum-wage/tipped. 

49An establishment is a single physical location 

where one predominant activity occurs. A firm is 

an establishment or a combination of 

establishments, and can operate in one industry or 

multiple industries. See BLS, ‘‘Quarterly Census of 

Employment and Wages: Concepts,’’ https://

www.bls.gov/opub/hom/cew/concepts.htm. 

work, provided that the directly 

supporting work is not performed for a 

substantial amount of time. Under the 

Department’s proposal, work that 

‘‘directly supports’’ tip-producing work 

is work that assists a tipped employee 

to perform the work for which the 

employee receives tips. In the proposed 

regulatory text, the Department explains 

that an employee has performed work 

that directly supports tip-producing 

work for a substantial amount of time if 

the tipped employee’s directly 

supporting work either (1) exceeds, in 

the aggregate, 20 percent of the hours 

worked during the employee’s 

workweek or (2) is performed for a 

continuous period of time exceeding 30 

minutes. In order to analyze this 

regulatory change, the Department has 

quantified costs, provided an analysis of 

transfers, and provided a qualitative 

discussion of benefits. These impacts 

depend on the interaction between the 

policy proposed in this NPRM and any 

underlying market failure—perhaps 

most notably in this case, the 

monopsony power created for 

employers if their workers receive a 

substantial portion of their 

compensation in the form of tips.47

B. Costs 

The Department believes that this 

proposed rule would result in three 

types of costs to employers: Rule 

familiarization costs, adjustment costs, 

and management costs. Rule 

familiarization and adjustment costs 

would be one-time costs following the 

promulgation of the final rule. 

Management costs would likely be 

ongoing costs associated with 

complying with the rule. 

1. Potentially Affected Entities 

The Department has calculated the 

number of establishments that could be 

affected by this proposed rule using 

2019 data from the Bureau of Labor 

Statistics (BLS) Quarterly Census of 

Employment and Wages (QCEW). 

Because this rule relates to the 

situations in which an employer is able 

to take a tip credit under the FLSA, it 

is unlikely that employers in states 

without a tipped minimum wage or 

employers in states with a direct cash 

wage of over $7.25 would be affected by 

this proposal, because they are already 

paying their staff the full FLSA 

minimum wage for all hours worked. 

Therefore, the Department has dropped 

the following states from the pool of 

affected establishments: Alaska, 

Arizona, California, Colorado, 

Connecticut (Drinking Places (Alcoholic 

Beverages) only), Hawaii, Minnesota, 

Montana, Nevada, New York, Oregon, 

and Washington.48

Because the QCEW data only provides 

data on establishments, the Department 

has used the number of establishments 

for calculating all types of costs. The 

Department acknowledges that for some 

employers, the costs associated with 

this proposed rule could instead be 

incurred at a firm level, leading to an 

overestimate of costs.49 Presumably, the 

headquarters of a firm could conduct 

the regulatory review for businesses 

with multiple locations, but could also 

require businesses to familiarize 

themselves with the proposed rule at 

the establishment level. The Department 

welcomes comments on whether these 

costs would be incurred at a firm or 

establishment level. 

The Department limited this analysis 

to the industries that were 

acknowledged to have tipped workers in 

the 2020 Tip final rule, along with a 

couple of other industries that have 

tipped workers, which is consistent 

with using the 2018–2019 guidance as 

the baseline. These industries are 

classified under the North American 

Industry Classification System (NAICS) 

as 713210 (Casinos (except Casino 

Hotels)), 721110 (Hotels and Motels), 

721120 (Casino Hotels), 722410 

(Drinking Places (Alcoholic Beverages)), 

722511 (Full-Service Restaurants), 

722513 (Limited Service Restaurants), 

722515 (Snack and Nonalcoholic 

Beverage Bars), and 812113 (Nail 

Salons). See Table 1 for a list of the 

number of establishments in each of 

these industries. The Department 

understands that there may be entities 

in other industries with tipped workers 

who may review this rule, and 

welcomes data and information on other 

industries that should be included in 

this analysis. 

The Department has calculated that in 

states that allow employers to pay a 

lower direct cash wage to tipped 

workers and in the industries 

mentioned above, there are 470,894 

potentially affected establishments. 


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Table 1. Number of Establishments in Affected Industries 

Industry Establishments 

NAICS 713210 (Casinos (except Casino Hotels)) 211 

NAICS 721110 (Hotels and Motels) 41.768 

NAICS 721120 (Casino Hotels) 175 

NAICS 722410 (Drinking Places (Alcoholic Beverages)) 30,313 

NAICS 722511 (Full-Service Restaurants) 171.296 

NAICS 722513 (Limited Service Restaurants) 173.509 

NAICS 722515 (Snack and Nonalcoholic Beverage Bars) 39,698 

NAICS 812113 (Nail Salons) 13,924 

Total 470,894 

Source: BLS Quarterly Census of Employment and Wages, 2019 
Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Proposed Rules 32833 

50BLS Occupational Employment and Wage 

Statistics (OEWS), May 2019 National Occupational 

Employment and Wage Estimates, https://

www.bls.gov/oes/2019/may/oes_nat.htm. Data for 

2020 are now available, but the Department believes 

that it is more appropriate to use 2019 data for the 

analysis, because wages could have been affected by 

structural changes associated with the COVID–19 

pandemic. The Department has aligned the year of 

the cost data with the pre-pandemic data used in 

the transfer analysis discussed later. 

51The benefits-earnings ratio is derived from the 

Bureau of Labor Statistics’ Employer Costs for 

Employee Compensation data using variables 

CMU1020000000000D and CMU1030000000000D. 

2. Rule Familiarization Costs 

Regulatory familiarization costs 

represent direct costs to businesses 

associated with reviewing the new 

regulation. The Department believes one 

hour per entity, on average, to be an 

appropriate review time for this 

proposed rule. This estimate does not 

include any time employers spend 

adjusting their business or pay 

practices; that is discussed in the 

adjustment cost section below. Many 

employers are familiar with a 20 percent 

tolerance, which is part of what is being 

proposed in this rule, since the 

Department enforced a 20 percent 

tolerance for 30 years prior to the 2018– 

2019 guidance, albeit in a different way. 

The Department believes that some 

employers in the industries listed above 

do not have any tipped employees, or 

do not take a tip credit, and would 

therefore not review the rule at all. This 

review time therefore represents an 

average of employers who would spend 

less than one hour or no time reviewing, 

and others who would spend more time. 

The Department welcomes comments 

on how much time employers would 

spend reviewing this proposed rule. 

The Department’s analysis assumes 

that the rule would be reviewed by 

Compensation, Benefits, and Job 

Analysis Specialists (Standard 

Occupational Classification (SOC) 13– 

1141) or employees of similar status and 

comparable pay. The median hourly 

wage for these workers was $31.04 per 

hour in 2019.50 The Department also 

assumes that benefits are paid at a rate 

of 46 percent and overhead costs are 

paid at a rate of 17 percent of the base 

wage, resulting in a fully loaded hourly 

rate of $50.60.51 The Department 

estimates that regulatory familiarization 

costs would be $23,827,236 (470,894 

establishments × $50.60 × 1 hour). The 

Department estimates that all regulatory 

familiarization costs would occur in 

Year 1. 

3. Adjustment Costs 

The Department expects that 

employers may incur adjustment costs 

associated with this rule. They may 

adjust their business practices and 

staffing to ensure that workers do not 

spend more than 20 percent of their 

time on directly supporting work, and 

that directly supporting work does not 

exceed more than 30 minutes 

continuously. Additionally, as a result 

of this proposed rule, some duties that 

are currently considered related, nontipped duties of a tipped employee, for 

which employers may take a tip credit 

under certain conditions, could now be 

considered duties that are not part of a 

tipped occupation, for which employers 

cannot take a tip credit. Accordingly, 

some employers may also adjust their 

business practices and staffing to 

reassign such duties from tipped 

employees to employees in non-tipped 

occupations. Some employers may also 

adjust their payroll software to account 

for these changes, and may also provide 

training for managers and staff to learn 

about the changes. The Department 

welcomes comments on the types of 

adjustment costs that employers could 

incur as a result of this rule. 

The Department uses the same 

number of establishments (470,894) as 

discussed in the rule familiarization 

section above, and also assumes that the 

adjustments would be performed by 

Compensation, Benefits, and Job 

Analysis Specialists (SOC 13–1141) or 

an employee of similar position and 

comparable pay, with a fully loaded 

wage of $50.60 per hour. The 

Department estimates that these 

adjustments would take an average of 

one hour per entity. For employers that 

would need to make adjustments, the 

Department expects that these 

adjustments could take more than one 

hour. However, the Department believes 

that many employers likely would not 

need to make any adjustments at all, 

because either they do not have any 

tipped employees, do not take a tip 

credit, or the work that their tipped 

employees perform complies with the 

requirements set forth in this proposed 

rule. Therefore, the hour of adjustment 

costs represents the average of the 

employers who would spend more than 

one hour on adjustments, and the many 

employers who would spend no time on 

adjustments. The Department welcomes 

data on the amount of time employers 

who need to make adjustments would 

spend. The Department also welcomes 

information about how many businesses 

already manage their staff in a manner 

that is in compliance with the 

requirements set forth in this proposed 

rule, and would therefore not need to 

make any adjustments. The Department 

estimates that adjustment costs would 

be $23,827,236 (470,894 establishments 

× $50.60 × 1 hour). The Department 

estimates that all adjustment costs 

would occur in Year 1. 

4. Management Costs 

The Department also believes that 

some employers may incur ongoing 

management costs, because in order to 

make sure that they can continue to take 

a tip credit for all hours of an 

employee’s shift, they will have to 

ensure that tipped employees are not 

spending more than 20 percent of their 

time on directly supporting work per 

workweek, or more than 30 minutes 

continuously performing such duties. 

The Department does not believe that 

these costs will be substantial, because 

if employers are able to make the 

upfront adjustments to scheduling, there 

is less of a need for ongoing monitoring. 

For example, if employers stop 

assigning work to tipped employees that 

will no longer be considered part of the 

tipped occupation under this proposed 

rule, this will be a one-time change that 

does not necessitate ongoing 

monitoring. Additionally, employers 

may have also incurred similar 

management costs under the 2018–2019 

guidance, because in order to take a tip 

credit for all hours, they would have 

had to ensure that tipped employees did 

not perform duties not related to their 

tipped occupation, and that employees’ 

related, non-tipped work was 

contemporaneous with or for a 

reasonable time before or after the 

tipped work. 

The Department estimates that 

employers would spend, on average, 10 

minutes per week on management costs 

in order to comply with this proposed 

rule. The Department expects that many 

employers will not spend any time on 

management tasks associated with this 

rule, because they do not claim a tip 

credit for any of their employees, or 

their business is already set up in a way 

where the work their tipped employees 

perform complies with the requirements 

set forth in this proposed rule (such as 

a situation where the tipped employees 

perform minimal directly supporting 

work). Therefore, this estimate of 10 

minutes is an average of those 

employers who would spend more time 

on management tasks, and the many 

employers who would spend no time on 

management tasks. The Department 

welcomes comments on how much time 

employers would spend per week 

managing their employees to ensure that 

they comply with this proposed rule. 

The Department therefore calculates 

that the average annual time spent will 

be 8.68 hours (0.167 hours × 52 weeks). 

The Department’s analysis assumes 

that the management tasks would be 


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52BLS Occupational Employment and Wage 

Statistics (OEWS), May 2019 National Occupational 

Employment and Wage Estimates, https://

www.bls.gov/oes/2019/may/oes_nat.htm. 

53Shierholz, H. and D. Cooper. 2019. ‘‘Workers 

will lose more than $700 million annually under 

proposed DOL rule.’’ Available at https://

www.epi.org/blog/workers-will-lose-more-than-700- 

million-dollars-annually-under-proposed-dol-rule/. 54As explained above, the 2020 Tip final rule— 

which is not yet in effect—provided that a nontipped duty is merely presumed to be related to a 

tip-producing occupation if it is listed as a task of 

the tip-producing occupation in O*NET. 

55This methodology of estimating an outside 

wage option was used in the Department’s 2020 Tip 

Regulations under the Fair Labor Standards Act 

(FLSA) final rule to determine potential transfer of 

tips with the expansion of tip pooling. 

performed by Food Service Managers 

(SOC 11–9051) or employees of similar 

status and comparable pay. The median 

hourly wage for these workers was 

$26.60 per hour in 2019.52 The 

Department also assumes that benefits 

are paid at a rate of 46 percent and 

overhead costs are paid at a rate of 17 

percent of the base wage, resulting in a 

fully loaded hourly rate of $43.36 

($26.60 + $12.24 + $4.52). The 

Department estimates that management 

costs would be $177,227,926 (470,894 

establishments × $43.36 × 8.68 hours). 

The Department estimates that these 

management costs would occur each 

year. 

5. Cost Summary 

The Department estimates that costs 

for Year 1 would consist of rule 

familiarization costs, adjustment costs, 

and management costs, and would be 

$224,882,399 ($23,827,236 + 

$23,827,236 + $177,227,926). For the 

following years, the Department 

estimates that costs would only consist 

of management costs and would be 

$177,227,926. Additionally, the 

Department estimated average 

annualized costs of this proposed rule 

over 10 years. Over 10 years, it would 

have an average annual cost of $183.6 

million calculated at a 7 percent 

discount rate ($151.1 million calculated 

at a 3 percent discount rate). All costs 

are in 2019 dollars. 

C. Transfers 

1. Introduction 

As previously discussed, the 

Department recognizes the concerns that 

it did not adequately assess the impact 

of the dual jobs provision of the 2020 

Tip final rule. Therefore, for this 

proposed rule, the Department provides 

the following analysis of the transfers 

associated with the proposed changes to 

its dual jobs regulations, pursuant to 

which employers would not be able to 

take a tip credit for a substantial amount 

of directly supporting work, defined as 

20 percent of a tipped employee’s 

workweek or a continuous period of 

more than 30 minutes. The Department 

has performed two different transfer 

analyses for this proposed rule. The first 

analysis refines a methodological 

approach similar to the one described 

by the Economic Policy Institute (EPI) in 

response to the Department’s NPRM for 

the 2020 Tip final rule, which proposed 

to codify the Department’s 2018–2019 

guidance, which replaced the 80/20 

approach with a different related duties 

test. See 84 FR 53956.53 This analysis 

helps demonstrate the range of potential 

transfers that may result from this 

proposed rule. The second analysis is a 

retrospective analysis that looks at 

changes to total hourly wages following 

the 2018–2019 guidance to help inform 

whether changes would occur in the 

other direction following this proposed 

rule. 

Both of the Department’s analyses 

discuss the transfers from employees to 

employers that may have occurred from 

the removal of the 80/20 approach, and 

assumes that the direction of these 

transfers would be reversed under this 

proposed rule, which, similar to the 80/ 

20 guidance, includes a 20 percent 

tolerance on directly supporting work. 

The proposed rule would also preclude 

employers from taking a tip credit for a 

continuous period of more than 30 

minutes of directly supporting work. 

2. Potential Transfer Analysis 

Under the approach outlined in the 

2020 Tip final rule, and as originally put 

forth in the 2018–2019 guidance, 

employers can take a tip credit for 

related, non-tipped duties so long as 

they are performed ‘‘contemporaneously 

with’’ or for ‘‘a reasonable time 

immediately before or after tipped 

duties.’’ Additionally, the 2018–2019 

guidance uses the Occupational 

Information Network (O*NET) to 

determine whether a tipped employee’s 

non-tipped duties are related to the 

employee’s tipped occupation.54 As 

explained above, the Department is 

concerned that the terms 

‘‘contemporaneously with’’ and ‘‘a 

reasonable time immediately before or 

after tipped duties’’ do not provide clear 

limits on the amount of time workers 

can spend on non-tipped tasks for 

which an employer is permitted to take 

a tip credit. Under the 2018–2019 

guidance, transfers would have arisen if 

employers required tipped employees 

for whom they take a tip credit, such as 

servers and bartenders, to perform more 

related, non-tipped duties, such as 

cleaning and setting up tables, washing 

glasses, or preparing garnishes for plates 

or drinks, than they would have under 

the prior 80/20 guidance. Because 

employers would be taking a tip credit 

for these additional related, non-tipped 

duties instead of paying the full 

minimum wage, tipped employees 

would earn less pay because they would 

be spending less time on tip-producing 

duties, such as serving customers. 

However, to retain the tipped workers 

that they need, employers would have 

needed to pay these workers as much as 

their ‘‘outside option,’’ that is, the 

hourly wage that they could receive in 

their best alternative non-tipped job 

with a similar skill level requirement to 

their current position. For each tipped 

employee, the Department assumed that 

by assigning non-tipped work, an 

employer could have only lowered the 

tipped employee’s total hourly pay rate 

including tips if the employee’s current 

pay rate was greater than the predicted 

outside-option wage from a non-tipped 

job.55 As a measure of the upper bound 

of the amount of tips that employers 

could have reallocated to pay for 

additional hours of work, the 

Department estimated the difference 

between a tipped worker’s current 

hourly wage and the worker’s outsideoption wage. 

The Department is specifically 

contemplating an example in which, 

prior to 2018, a restaurant employed 

multiple dishwashers and multiple 

bartenders. The dishwashers earned a 

direct cash wage of $7.25 per hour and 

spent all of their time washing dishes 

and doing other kitchen duties. The 

bartenders earned a direct cash wage of 

$2.13 per hour and spent all of their 

time tending bar. Following the removal 

of the 80/20 approach in the 2018–2019 

guidance, the restaurant decided to 

employ fewer dishwashers, and instead 

hire one additional bartender and have 

the bartenders all take turns washing bar 

glasses throughout their shifts, adding 

up to more than 20 percent of their time. 

In this situation, the bartenders are each 

earning fewer tips because they are 

spending less time on tip-producing 

duties, such as preparing drinks, and 

more time on non-tip-producing duties, 

such as washing bar glasses. The 

employers’ wage costs have also 

decreased, as they are paying more 

workers a direct cash wage of $2.13 

instead of $7.25. This results in a 

transfer from employees to employers. 

This transfer would be reversed 

following the reinstatement of a time 

limit on directly supporting work in this 

proposed rule. The Department is 

requesting comments and data on how 

prevalent staffing changes like this were 

following the 2018–2019 guidance of 


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56See Current Population Survey, U.S. Census 

Bureau, https://www.census.gov/programs-surveys/ 

cps.html (last visited April 28, 2021); The 

Department used the Center for Economic and 

Policy Research. 2020. CPS ORG Uniform Extracts, 

Version 2.5. Washington, DC, http:\\cedprdata.org/ 

cps-uniform-data-extracts/cps-outgoing-rotationgroup/cps-org-data/ (last visited April 27, 2021). 57 In the CPS, these occupations correspond to 

Bartenders (Census Code 4040) and Waiters and 

Waitresses (Census Code 4110). The industries 

correspond to Restaurants and Other Food Services 

(Census Code 8680) and Drinking Places, Alcoholic 

Beverages (Census Code 8690). 

58The Department considered the additional set 

of occupations: SOC 39–5090 (Miscellaneous 

Personal Appearance Workers), SOC 39–5012 

(Hairdressers, hairstylists, and cosmetologists), SOC 

39–5011 (Barbers), SOC 53–6021 (Parking 

Attendants), SOC 37–2012 (Maids and 

Housekeeping Cleaners), and SOC 31–9011 

(Massage Therapists). Workers in these occupations 

reported usually earning overtime pay, tips, and 

commissions (OTTC) less often than in the tipped 

occupations that the Department included in its 

analysis (15.2 percent compared to 56.1 percent). 

Additionally, a considerably lower proportion of 

workers in this additional set of occupations 

reported earning a direct wage below the federal 

minimum wage per hour (1.2 percent compared to 

27.8 percent). 

59Workers considered not affected by the 20 

percent limitation were those in the following states 

that either do not allow a tip credit or require a 

direct cash wage of at least $7.25 as of 2019: Alaska, 

Arizona, California, Colorado, Connecticut 

(Bartenders only), Hawaii, Minnesota, Montana, 

Nevada, New York, Oregon, and Washington. 

60The Department made this assumption because 

tipped employees are generally paid hourly and 

because the CPS does not include information on 

tips received for nonhourly workers. Without 

knowing the prevalence of tipped income among 

nonhourly workers, the Department cannot 

accurately estimate potential transfers from these 

workers. However, the Department believes the 

transfer from nonhourly workers will be small 

because only 10 percent of wait staff and bartenders 

in restaurants and drinking places are nonhourly 

and the Department believes nonhourly workers 

have a lower probability of receiving tips. 

61The Department was unable to determine 

whether these workers were earning a direct cash 

wage below $2.13 because their employers were not 

complying with the minimum wage requirements of 

the FLSA, or whether the data was incorrect. 

62According to BLS Current Population Survey 

data, in 2018, workers in service occupations 

worked an average of 35.2 hours per week. See 

https://www.bls.gov/cps/aa2018/cpsaat23.htm. 

the 2020 Tip Final Rule. The 

Department also requests comments on 

whether employers would make staffing 

changes following this proposed rule. 

a. Defining Tipped Workers 

The Department used individual-level 

microdata from the 2018 Current 

Population Survey (CPS), a monthly 

survey of about 60,000 households that 

is jointly sponsored by the U.S. Census 

Bureau and BLS. Households are 

surveyed for four months, excluded 

from the survey for eight months, 

surveyed for an additional four months, 

and then permanently dropped from the 

sample. During the last month of each 

rotation in the sample (month 4 and 

month 16), employed respondents 

complete a supplementary 

questionnaire in addition to the regular 

survey. These households and questions 

form the CPS Outgoing Rotation Group 

(CPS–ORG) and provide more detailed 

information about those surveyed.56 The 

Department used 2018 CPS–ORG data to 

avoid any unintentional impacts from 

the issuance of the 2018–2019 guidance. 

Because this analysis first looks at 

transfers that could have occurred 

following the 2018–2019 guidance, and 

uses that estimate to inform what the 

transfers would be following this rule, 

all data tables in this analysis include 

estimates for the year 2018, with dollar 

amounts inflated to $2019 using the 

GDP deflator and further refinements as 

discussed below. 

The Department included workers in 

two industries and in two occupations 

within those industries. The two 

industries are classified under the North 

American Industry Classification 

System (NAICS) as 722410 (Drinking 

Places (Alcoholic Beverages)) and 

722511 (Full-Service Restaurants); 

referred to in this analysis as 

‘‘restaurants and drinking places.’’ The 

two occupations are classified under 

BLS Standard Occupational 

Classification (SOC) codes SOC 35–3031 

(Waiters and Waitresses) and SOC 35– 

3011 (Bartenders).57 The Department 

considered these two occupations 

because they constitute a large 

percentage of the workers in these 

occupations receive tips (see Table 2 for 

shares of workers in these occupations 

who may receive tips). The Department 

understands that there are other 

occupations in these industries beyond 

servers and bartenders with tipped 

workers, such as SOC 35–9011 (Dining 

Room and Cafeteria Attendants and 

Bartender Helpers) and SOC 35–9031 

(Hosts and Hostesses, Restaurant, 

Lounge, and Coffee Shop). Additionally, 

there may also be some tipped workers 

in other industries who may be affected 

such as nail technicians, parking 

attendants, and hotel housekeepers.58

The Department welcomes comments 

on which occupations would be 

affected, and therefore should be 

included in the analysis. 

Table 2 presents the total number of 

bartenders and wait staff in restaurants 

and drinking places. The number of 

workers is then limited to those 

potentially affected by the changes 

proposed in this NPRM. This excludes 

workers in states that do not allow a tip 

credit, workers in states that requires a 

direct cash wage of at least $7.25, and 

workers in other states who are paid a 

direct cash wage of at least the full 

FLSA minimum wage of $7.25 (i.e., 

employees whose employers are not 

taking a tip credit under the FLSA).59 As 

alluded to above, because this proposed 

rule relates to the situations in which an 

employer takes a tip credit, it is unlikely 

that employees of employers that cannot 

or otherwise do not take a tip credit 

would be affected by this proposal. Both 

of these populations were also excluded 

from the analysis of potential transfers. 

The Department also assumed that 

nonhourly workers are not tipped 

employees and excluded these workers 

from the potentially affected 

population.60 Lastly, workers earning a 

direct wage below $2.13 per hour were 

dropped from the analysis.61 This 

results in 630,000 potentially affected 

workers in these industries and 

occupations. 

The CPS asks respondents whether 

they usually receive overtime pay, tips, 

and commissions (OTTC), which allows 

the Department to estimate the number 

of bartenders and wait staff in 

restaurants and drinking places who 

receive tips. CPS data are not available 

separately for overtime pay, tips, and 

commissions, but the Department 

assumes very few bartenders and wait 

staff receive commissions, and the 

number who receive overtime pay but 

not tips is also assumed to be 

minimal.62 Therefore, the Department 

assumed bartenders and wait staff who 

responded affirmatively to this question 

receive tips. Table 2 presents the share 

of potentially affected bartenders and 

wait staff in restaurants and drinking 

places who reported that they usually 

earned OTTC in 2018: Approximately 

86 percent of bartenders and 78 percent 

of wait staff. 


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63For workers who had missing values for one or 

more of these explanatory variables we imputed the 

missing value as the average value for tipped/nontipped workers. 

64These states are Alaska, Arizona, California, 

Connecticut (bartenders only), Hawaii, Minnesota, 

Montana, Nevada, New York, Oregon, and 

Washington. 

65For a full list of all occupations on O*NET, see 

https://www.onetcenter.org/reports/ 

Taxonomy2010.html. 66Because of the uncertainty in the estimate of 

the percentile ranking of the worker’s current wage, 

the Department used the midpoint percentile for 

workers in each decile. For example, workers 

whose current wage was estimated to be in the zero 

to tenth percentile range were assigned the 

predicted fifth percentile outside-option wage, 

those with wages estimated to be in the eleventh to 

twentieth percentile were assigned the predicted 

fifteenth percentile outside-option wage, etc. 

TABLE 2—BARTENDERS AND WAIT STAFF IN RESTAURANTS AND DRINKING PLACES

Occupation 

Total 

workers 

(millions) 

Potentially 

affected 

workers 

(millions) a

Potentially affected workers 

who report earning OTTC 

Workers 

(millions) Percent 

Total ................................................................................................................. 2.28 0.63 0.50 79.4 

Bartenders ................................................................................................ 0.37 0.09 0.07 85.5 

Waiters/Waitresses ................................................................................... 1.91 0.54 0.42 78.4 

Source: CEPR, 2018 CPS–ORG. 

aExcludes workers in states that do not allow a tip credit, workers in states that require a direct cash wage of at least $7.25, and workers in 

other states who are paid a direct cash wage of at least the full FLSA minimum wage of $7.25 (i.e., employers whose employers are not using a 

tip credit). Also excludes nonhourly workers. 

Occupations: Bartenders (Census Code 4040) and Waiters and Waitresses (Census Code 4110). 

Industries: Restaurants and other food services (Census Code 8680) and Drinking places, alcoholic beverages (Census Code 8690).

Of the 500,000 bartenders and wait 

staff who receive OTTC, only 310,000 

reported the amount received in OTTC. 

Therefore, the Department imputed 

OTTC for those workers who did not 

report the amount received in OTTC. As 

shown in Table 3, 69 percent of 

bartenders’ earnings (an average of $339 

per week) and 68 percent of wait staff’s 

earnings (an average of $251 per week) 

were from overtime pay, tips, and 

commissions in 2018. For workers who 

reported receiving tips but did not 

report the amount, the ratio of OTTC to 

total earnings for the sample who 

reported their OTTC amounts (69 or 68 

percent) was applied to their weekly 

total income to estimate weekly tips. 

TABLE 3—PORTION OF INCOME FROM OVERTIME PAY, TIPS, AND COMMISSIONS FOR BARTENDERS AND WAIT STAFF IN

RESTAURANTS AND DRINKING PLACES

Occupation 

Those who report the amount earned in OTTC 

Workers 

Average 

weekly 

earnings 

Average 

weekly 

OTTC 

Percent of 

earnings 

attributable 

to OTTC 

Total ................................................................................................................. 309,690 $386.44 $262.56 68 

Bartenders ................................................................................................ 40,354 491.03 338.67 69 

Waiters and waitresses ............................................................................ 269,335 370.77 251.16 68 

Source: CEPR, 2018 CPS–ORG, inflated to $2019 using the GDP deflator. 

Occupations: Bartenders (Census Code 4040) and Waiters and Waitresses (Census Code 4110). 

Industries: Restaurants and other food services (Census Code 8680) and Drinking places, alcoholic beverages (Census Code 8690).

b. Outside-Option Wage 

The Department assumed that 

employers only reduce the hourly wage 

rate of tipped employees for whom they 

are taking a tip credit if the tipped 

employee’s total hourly wage, including 

the tips the employee retains, are greater 

than the ‘‘outside-option wage’’ that the 

employee could earn in a non-tipped 

job. To model a worker’s outside-option 

wage, the Department used a quartile 

regression analysis to predict the wage 

that these workers would earn in a nontipped job. Hourly wage was regressed 

on age, age squared, age cubed, 

education, gender, race, ethnicity, 

citizenship, marital status, veteran 

status, metro area status, and state for a 

sample of non-tipped workers.63 The 

Department restricted the regression 

sample to non-tipped workers earning at 

least the applicable state minimum 

wage (inclusive of OTTC), and those 

who are employed. This analysis 

excludes workers in states where the 

law prohibits employers from taking a 

tip credit or that require a direct cash 

wage of at least $7.25.64

In calculating the outside-option wage 

for tipped workers, the Department 

defined the comparison sample as nontipped workers in a set of occupations 

that are likely to represent outside 

options. The Department determined 

the list of relevant occupations by 

exploring the similarity between the 

knowledge, activities, skills, and 

abilities required by the occupation to 

that of servers and bartenders. The 

Department searched the O*NET system 

for occupations that share important 

similarities with wait staff and 

bartenders—the occupations had to 

require ‘‘customer and personal service’’ 

knowledge and ‘‘service orientation’’ 

skills.65 The list was further reduced by 

eliminating occupations that are not 

comparable to the wait staff and 

bartender occupations in terms of 

education and training, as wait staff and 

bartender occupations do not require 

formal education or training. See 

Appendix Table 1 for a list of these 

occupations. 

The regression analysis calculates a 

distribution of outside-option wages for 

each worker. The Department used the 

same percentile for each worker as they 

currently earn in the distribution of 

wages for wait staff and bartenders in 

restaurants and drinking places in the 

state where they live.66 This method 


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67Predicted overtime pay is calculated as (1.5 × 

base wage) × weekly hours worked over 40. 

68A worker’s reservation wage is the minimum 

wage that the worker requires to participate in the 

labor market. It roughly represents the worker’s 

monetary value of an hour of leisure. If the worker’s 

reservation wage is greater than their outside option 

wage, the worker may exit the labor market if tips 

are reduced. 

69See for example Kahn, S. 1997. ‘‘Evidence of 

Nominal Wage Stickiness from Microdata.’’ The 

American Economic Review. 87(5): 993–1008. 

Hanes, C. 1993. ‘‘The Development of Nominal 

Wage Rigidity in the Late 19th Century.’’ The 

American Economic Review 83(4): 732–756. 

Kawaguchi, D. and F. Ohtake. 2007. ‘‘Testing the 

Morale Theory of Nominal Wage Rigidity.’’ ILR 

Review 61(1): 59–74. Kaur, S. 2019. ‘‘Nominal Wage 

Rigidity in Village Labor Markets.’’ American 

Economic Review 109(10): 3585–3616. 

70See Section VI.E. for a more detailed discussion 

of the effects of the COVID–19 pandemic. 

assumes that a worker’s position in the 

wage distribution for wait staff and 

bartenders reflects their position in the 

wage distribution for the outside-option 

occupations. 

c. Potential Transfer Calculation 

After determining each tipped 

worker’s outside-option wage, the 

Department calculated the potential 

reduction in pay as the lesser of the 

following three numbers: 

• The positive differential between a 

worker’s current earnings (wage plus 

tips) and their predicted outside-option 

wage, 

• the positive differential between a 

worker’s current earnings and the state 

minimum wage, and 

• the total tips earned by the worker. 

The second number is included for 

cases where the outside-option wage 

predicted by the analysis is below the 

state minimum wage, because the 

worker cannot earn less than their 

applicable state minimum wage in nontipped occupations. The third number is 

included because the maximum 

potential tips that can be transferred 

from an employee cannot be greater 

than their total tips. Total tips for each 

worker were calculated from the OTTC 

variable in the CPS data. The 

Department subtracted predicted 

overtime pay to better estimate total 

tips.67 For workers who reported 

receiving OTTC, but did not report the 

amount they earned, the Department 

applied the ratio of tipped earnings to 

total earnings for wait staff or bartenders 

(see Table 2). 

To determine the aggregate annual 

potential total tip transfer, the 

Department multiplied the weighted 

sum of weekly tip transfers by 45.2 

weeks—the average weeks worked in a 

year for wait staff and bartenders in the 

2018 CPS Annual Social and Economic 

Supplement. The resulting annual 

estimate of the upper bound of potential 

transfers from tipped employees to 

employers is $714 million). This 

estimate is an upper bound, because 

following the 2018–2019 guidance, an 

employer could have, at most, had a 

tipped worker do more related nontipped work until their overall earnings 

reached their outside option wage. In 

order to further refine this estimate, and 

adjust down this upper bound, the 

Department requests data on how much 

related non-tipped work tipped 

employees were performing prior to the 

2018–2019 guidance and how that 

changed with the removal of the 80/20 

approach. The Department requests 

information on whether employers 

increased the number of employees for 

which they took a tip credit, and 

decreased the number of employees for 

which they paid a direct cash wage of 

at least $7.25. The Department also 

requests data about how the amount of 

time that employees spend on directly 

supporting work would change 

following the requirements proposed in 

this rule. 

The above analysis looks only at how 

the hourly earnings would change. It 

may also be informative to see how 

weekly earnings would change. 

Lowering the total hourly earnings of 

employees will either: 

1. Lower the weekly earnings of these 

employees if their weekly hours worked 

remain the same; or 

2. Require that these employees work 

more hours per week to earn the same 

amount per week. 

The workers for whom potential pay 

reductions could have occurred had 

average weekly earnings of $473; on 

average, their weekly earnings could 

have been reduced by as much as $105, 

assuming their hours worked per week 

remained the same. 

As noted above, this transfer estimate 

is based on the Department’s 2019 

proposal to codify the 2018–2019 

guidance, which removed the 20 

percent limitation on related, nontipped duties, into the Department’s 

regulations. The Department believes 

that this transfer analysis both 

underestimates and overestimates 

potential transfers. This estimate may be 

an underestimate because it does not 

include all possible occupations and 

industries for which there may be 

transfers. Additionally, it does not 

include workers with tipped jobs that 

are not listed as their main job in the 

CPS–ORG data. Additionally, the 

Department believes that transfers that 

would result from this proposed rule 

may exceed the transfers that would 

occur from reinstating the previous 80/ 

20 guidance. As noted above, under this 

proposal, employers would be 

prohibited from taking a tip credit for a 

substantial amount of directly 

supporting work, defined as 20 percent 

of the tipped employee’s workweek or a 

continuous period of more than 30 

minutes. 

The Department believes that these 

estimates are also an overestimate, 

because they assume that every 

employer that takes a tip credit and for 

whom it was economically beneficial 

would lower the hourly rate (including 

tips) of tipped employees to their 

outside-option wage. In reality, even 

when it is seemingly economically 

beneficial from this narrow perspective, 

many employers may not have changed 

their non-tipped task requirements with 

the removal of the 20 percent limitation 

because it would have required changes 

to the current practice to which their 

employees were accustomed. There are 

reasons it is not appropriate to assume 

that all employers are able to extract all 

the earnings above the outside-option 

wage of their employees for whom they 

take a tip credit. For example, 

decreasing workers’ hourly earnings 

might reduce morale, leading to lower 

levels of efficiency or customer service. 

The reduction in workers’ earnings may 

also lead to higher turnover, which can 

be costly to a company. Part of this 

turnover may be due to workers’ wages 

falling below their reservation wage and 

causing them to exit the labor force.68 In 

support of this, researchers have found 

evidence of downward nominal wage 

stickiness, meaning that employees 

rarely experience nominal wage 

decreases with the same employer.69

Although in this case the direct wage 

paid by the employer would not change, 

these tipped employees’ total hourly 

pay including tips would decrease due 

to the employer requiring more work on 

non-tipped tasks leading to earning 

fewer tips per hour. While some 

empirical evidence, such as the Kahn 

paper cited above, indicates that 

employers are unlikely to make changes 

in work requirements that would lower 

employees’ nominal hourly earnings, 

this evidence may not hold in low-wage 

industries such as food service and in 

times of structural changes to the 

economy, such as during the COVID–19 

pandemic.70 Additionally, even if 

employers may be constrained from 

having current employees take on more 

non-tipped work, they could institute 

these changes for any newly hired 

employees, so the reduction in average 

earnings would be over a longer-term 

time horizon. 

The Department believes that another 

potential reason these transfer estimates 


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71National Women’s Law Center, ‘‘Women in 

Tipped Occupations, State by State,’’ May 2019. 

https://nwlc.org/wp-content/uploads/2019/06/ 

Tipped-workers-state-by-state-2019.pdf. 

72Sylvia A. Allegretto and David Cooper, 

‘‘Twenty-three Years and Still Waiting for Change: 

Why It’s Time to Give Tipped Workers the Regular 

Minimum Wage,’’ July 10, 2014. https://

files.epi.org/2014/EPI-CWED-BP379.pdf. 

73See supra note 3 (identifying cases in which 

courts declined to defer to the 2018–19 guidance). 

may be an overestimate is because of the 

interaction with the tip pooling 

provisions of the 2020 Final Rule. The 

2020 Tip final rule codified the 

Consolidated Appropriations Act (CAA) 

amendments from 2018, which allowed 

employers to institute mandatory 

‘‘nontraditional’’ tip pools to include 

both front-of-the-house and back-of-thehouse workers, as long as they paid all 

employees a direct cash wage of at least 

$7.25. See 85 FR 86765. The portions of 

the 2020 Tip final rule addressing tip 

pooling went into effect on April 30, 

2021. See 86 FR 22598. Following this 

change, some employers may have been 

incentivized to no longer take a tip 

credit, and pay all of their employees 

the full minimum wage. For these 

employees, the dual jobs analysis is no 

longer relevant, because they are already 

earning at least $7.25 for all hours 

worked. To the extent that employers 

responded to the CAA amendments by 

electing to stop taking a tip credit in 

order to institute a nontraditional tip 

pool, the Department believes that the 

transfers predicted in this analysis may 

be an overestimate. 

However, the Department does not 

know to what extent this overestimate 

has occurred, because data is lacking on 

how many employers stopped taking a 

tip credit to expand their tip pools 

following the CAA amendments. 

Employers may not have acted on new 

incentives to shift away from their 

current tip credit arrangements. 

Additionally, some states and local 

areas may not allow employer-mandated 

tip pooling, so employers in these areas 

would not have made adjustments 

following the change in tip pooling 

provisions. Moreover, there is 

uncertainty about the future trajectory of 

state employment regulations; if statelevel prohibitions on mandatory tip 

pooling were to become more 

widespread, the scope of the tip pooling 

provisions’ impacts could decrease and, 

in turn, the scope for this NPRM’s 

impacts could increase (thus potentially 

making the $714 million estimate less of 

an overstatement farther in the future 

than in the near-term). Lastly, the CAA 

amendments were enacted in March 

2018, so although the Department 

expects that it may have taken 

employers time to implement changes to 

their pay practices, any employers that 

stopped taking a tip credit in order to 

institute a nontraditional tip pool 

directly following the CAA amendments 

could have already been excluded from 

the transfer calculation. The Department 

does not know if employers would have 

changed their usage of the tip credit 

following the CAA amendments, or 

waited to make the change until the 

codification of the CAA in the 2020 Tip 

final rule. As noted above, the tip 

pooling provisions of the 2020 Tip final 

rule went into effect on April 30, 2021. 

The Department also looked at the 

share of workers earning a direct wage 

of less than $7.25 in 2018 and 2019, and 

found no statistically significant 

difference between those two years. 

Because of this, and for all of the 

reasons discussed above, the 

Department has not quantified the 

reduction in transfers associated with 

the fact that the CAA allowed employers 

to institute nontraditional tip pools that 

include back-of-the-house workers. 

However, it welcomes comments on the 

extent to which employers stopped 

taking a tip credit in order to expand 

their tip pools to include back-of-thehouse workers. 

The transfer estimate may also be an 

overestimate because it assumes that the 

2018–2019 guidance, and the 2020 Tip 

final rule, completely lacked a 

limitation on non-tipped work. As 

discussed above, there was a limit put 

forth in this approach, but it was not 

clearly defined. 

The Department was unable to 

determine what proportion of the total 

tips estimated to have been potentially 

transferred from these workers were 

realistically transferred following the 

replacement of its prior 80/20 guidance 

with the 2018–2019 guidance. The 

Department assumes that the likely 

potential transfers were somewhere 

between a lower bound of zero and an 

upper bound of $714million, depending 

on interactions between federal and 

state-level policies. The Department 

believes that the reasons the estimate is 

an overestimate outweigh the reasons 

the estimate is an underestimate, but 

requests comments and data to help 

inform this assumption. Therefore, the 

Department believes that this proposed 

rule would result in transfers from 

employers to employees, but at a 

fraction of the upper bound of transfers. 

The Department does not have data to 

determine what percentage of the 

maximum possible transfers is likely to 

result from this proposed rule, and 

welcomes comments and data to help 

inform this analysis. 

If the proposal results in transfers to 

tipped workers, it could also lead to 

increased earnings for underserved 

populations. Using data from the 

American Community Survey, the 

National Women’s Law Center found 

that about 70 percent of tipped workers 

are women and 26 percent of tipped 

workers are women of color.71 Tipped 

workers also have a poverty rate of over 

twice that of non-tipped workers.72

3. Retrospective Transfer Analysis 

(Extrapolated Forward) 

Because the 80/20 guidance was 

withdrawn through guidance published 

in November 2018 and February 2019, 

the Department also looked at whether 

employees’ wages and tips changed 

following the 2018–2019 guidance to 

help inform the analysis of transfers 

associated with this proposed rule. If 

there was a significant drop in tips, it 

could mean that employers were having 

employees do more non-tipped work in 

response to the guidance. 

The Department used the 2018 and 

2019 CPS–ORG data to estimate 

earnings of tipped workers for whom 

their employers are taking a tip credit. 

Comparisons were restricted to 

observations in the months of FebruaryNovember in each year to compare 

before and after the guidance. The 

Department looked at the difference in 

tips per hour, total hourly wages (direct 

wages plus tips), and weekly earnings in 

2018 and 2019. None of the differences 

in values between these two periods 

was statistically significant. The 

Department also ran linear regressions 

on these three variables using the set of 

controls used in the outside-option 

wage regressions discussed above (state, 

age, education, gender, race/ethnicity, 

citizenship, marital status, veteran, 

metro area) and also found that none of 

the differences were statistically 

significant. 

This lack of a significant decline in 

tips and total wages could imply that 

employers had not directed employees 

to do more non-tipped work following 

the guidance, and that there would also 

be little to no transfers associated with 

the requirement put forth in the 

proposed rule. However, it is also 

possible that employers had made no 

changes in response to the guidance, but 

would have shifted employees’ duties 

following the 2020 Tip final rule. As 

noted above, federal courts largely 

declined to defer to the Department’s 

2018–2019 guidance, and this may have 

influenced employer’s decisions as 

well.73 Additionally, it may be that the 

time period is too short to really observe 


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74 Jones, Maggie R. (2016), ‘‘Measuring the Effects 

of the Tipped Minimum Wage Using W–2 Data,’’ 

CARRA Working Paper Series, U.S., Census Bureau, 

Working Paper 2016–03, https://www.census.gov/ 

content/dam/Census/library/working-papers/2016/ 

adrm/carra-wp-2016-03.pdf; Wessels, Walter John 

(1997), ‘‘Minimum Wages and Tipped Servers,’’ 

Economic Inquiry 35: 334–349, April 1997. 

75One Fair Wage, ‘‘Service Workers’ Experience 

of Health & Harassment During COVID–19’’, 

November 2020. https://onefairwage.site/wpcontent/uploads/2020/11/OFW_COVID_

WorkerExp_Emb-1.pdf. 

76BLS Current Employment Statistics, https://

www.bls.gov/ces/. Series ID CES7072251101. 77Carolina Gonzales, ‘‘Restaurant Closings Top 

110,000 With Industry in ‘Free Fall,’ ’’ December 7, 

2020. https://www.bloomberg.com/news/articles/ 

2020-12-07/over-110-000-restaurants-have-closedwith-sector-in-free-fall. 

78Statistics of U.S. Businesses 2017, https://

www.census.gov/data/tables/2017/econ/susb/2017- 

susb-annual.html, 2016 SUSB Annual Data Tables 

by Establishment Industry. 

a meaningful difference. The 

Department chose not to examine data 

from 2020, as average hourly wages 

during that year increased as low-wage 

workers in the leisure and hospitality 

industry were out of work due to the 

COVID–19 pandemic, making 

meaningful comparisons difficult. 

Furthermore, as noted elsewhere in this 

regulatory impact analysis, other tiprelated policy changes occurred in 2018, 

thus creating challenges in estimating 

impacts attributable to each such policy. 

The Department welcomes comments 

and data on this analysis, specifically 

whether employers made changes in 

response to the 2018–2019 guidance, or 

whether they were planning to make 

changes until after the 2020 Tip final 

rule. 

D. Benefits and Cost Savings 

The Department believes that one 

benefit of this proposed rule is 

increased clarity for both employers and 

workers. In the 2020 Tip final rule, the 

Department said that it would not 

prohibit an employer from taking a tip 

credit for the time a tipped employee 

performs related, non-tipped duties, as 

long as those duties are performed 

contemporaneously with, or for a 

reasonable time immediately before or 

after, tipped duties. However, the 

Department did not define 

‘‘contemporaneously’’ or a ‘‘reasonable 

time immediately before or after.’’ If the 

2020 Tip final rule’s revisions to the 

dual jobs regulations had gone into 

effect, the Department believes that the 

lack of clear definitions of these terms 

could have made it more difficult for 

employers to comply with the 

regulations and more difficult for WHD 

to enforce them. The reinstatement of 

the historically used 20 percent work 

week tolerance of work that does not 

produce tips but is part of the tipped 

occupation, together with the 30 

continuous minute limit on directly 

supporting work, along with examples 

and explanations, will make it easier for 

employers to understand their 

obligations under the Fair Labor 

Standards Act, and will ensure that 

workers are paid the wages that they are 

owed. 

Under this proposed rule, employers 

will also no longer need to refer to 

O*NET to determine whether a tipped 

employee’s non-tipped duties are 

related to their tipped occupation. The 

duties listed in O*NET could change 

over time, so an employer would have 

had to make sure to regularly review the 

site to ensure that they are in 

compliance. This proposed rule could 

result in cost savings related to 

employers’ time referencing O*NET. 

The Department welcomes comments 

on other cost savings associated with 

the clarity provided by this rule. 

As noted previously in this regulatory 

impact analysis, the phenomenon of 

tipping can create monopsony power in 

the labor market. As a result, the 

relationship between minimum wages 

for tipped employees and employment 

of such workers has been estimated by 

some to be quadratic—with employment 

increasing over some range of minimum 

wage increases and decreasing over a 

further range.74 Although this NPRM 

does not change the minimum direct 

cash wage that must be paid when an 

employer claims a tip credit, one way 

that an employer could comply with the 

requirements proposed in this rule is to 

pay tipped workers a direct cash wage 

of at least $7.25 for all hours worked. 

An employer could discontinue taking a 

tip credit if they found it more 

beneficial not to limit the amount of 

directly supporting work performed by 

a tipped employee. The Department 

welcomes comments on the likelihood 

of this outcome and data that would 

help facilitate quantification of such 

changes. 

The Department also welcomes 

comments and data on additional 

benefits of this proposed rule. 

E. Note on the Effects of the COVID–19 

Pandemic 

The Department notes that this 

analysis relies on data from 2018 and 

2019, which is prior to the COVID–19 

pandemic. Because many businesses 

were shut down during 2020 or had to 

change their business model, especially 

restaurants, the economic situation for 

tipped workers likely changed due to 

the pandemic. For example, a survey 

from One Fair Wage found that 83 

percent of respondents reported that 

their tips had decreased since COVID– 

19, with 66 percent reporting that their 

tips decreased by at least 50 percent.75

This reduction in tips received could 

result in a decrease in the amount of 

transfers calculated above. 

The labor market has likely changed 

for tipped workers during the pandemic, 

and could continue to change following 

the recovery from the pandemic, 

especially in the restaurant business. 

The full-service restaurant industry lost 

over 1 million jobs since the beginning 

of the pandemic, 76 and by the end of 

2020, over 110,000 restaurants had 

closed permanently.77 These industry 

changes could impact workers’ wages, 

as well as their ability and willingness 

to change jobs. There may also be other 

factors such as safety influencing 

workers’ choice of workplace, which 

could distort labor market assumptions 

and behavior. Workers that value the 

security and safety of their job could be 

less willing to leave for another job, 

even if their net earnings decreased, and 

this could have an impact on the 

outside-option analysis. 

The Department welcomes data and 

information on how tipped workers 

were affected by the pandemic, and how 

the analysis discussed in this proposed 

rule would be adjusted to account for 

these changes. 

VIII. Regulatory Flexibility Act (RFA) 

Analysis 

The Regulatory Flexibility Act of 1980 

(RFA), 5 U.S.C. 601 et seq., as amended 

by the Small Business Regulatory 

Enforcement Fairness Act of 1996, 

Public Law 104–121 (1996), requires 

federal agencies engaged in rulemaking 

to consider the impact of their proposals 

on small entities, consider alternatives 

to minimize that impact, and solicit 

public comment on their analyses. The 

RFA requires the assessment of the 

impact of a regulation on a wide range 

of small entities, including small 

businesses, not-for-profit organizations, 

and small governmental jurisdictions. 

Accordingly, the Department examined 

this proposed rule to determine whether 

it would have a significant economic 

impact on a substantial number of small 

entities. The most recent data on private 

sector entities at the time this NPRM 

was drafted are from the 2017 Statistics 

of U.S. Businesses (SUSB).78 The 

Department limited this analysis to the 

industries that were acknowledged to 

have tipped workers in the 2020 Tip 

final rule. These industries are classified 

under the North American Industry 

Classification System (NAICS) as 

713210 (Casinos (except Casino Hotels), 

721110 (Hotels and Motels), 721120 

(Casino Hotels), 722410 (Drinking 


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Places (Alcoholic Beverages)), 722511 

(Full-Service Restaurants), 722513 

(Limited Service Restaurants), 722515 

(Snack and Nonalcoholic Beverage 

Bars), and 812113 (Nail Salons). As 

discussed in Section IV.B.1, there are 

470,894 potentially affected 

establishments. The QCEW does not 

provide size class data for these detailed 

industries and states, but the 

Department calculates that for all 

industries nationwide, 99.8 percent of 

establishments have fewer than 500 

employees. If we assume that this 

proportion holds true for the affected 

states and industries in our analysis, 

then there are 469,952 potentially 

affected establishments with fewer than 

500 employees. 

The Year 1 per-entity cost for small 

business employers is $477.56, which is 

the regulatory familiarization cost of 

$50.60, plus the adjustment cost of 

$50.60, plus the management cost of 

$376.36. For each subsequent year, costs 

consist only of the management cost. 

See Section IV.B for a description of 

how the Department calculated these 

costs. The Department has provided 

tables with data on the impact on small 

businesses, by size class, for each 

industry included in the analysis. 

BILLING CODE 4510–27–P 


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Table 4. 

NAICS 713210 - Casinos (Except Casino Hotels) 

Number of Firms Average First First Year 

Number as Percent of Small Total Number Annual Receipts per Year Cost per Firm 

of Firms Firms of Employees Receipts Firm Cost per as Percent of 

in lndustrv Firm Receiots 

Firms with 0-4 

10 18.9% 18 $5,209,000 $520,900 $478 0.09% employees 

Firms with 5-9 0 0.0% 0 $0 $0 $478 0.00% employees 

Firms with 10-19 0 0.0% 0 $0 $0 $478 0.00% employees 

Firms with <20 12 22.6% 29 $5,419,000 $451,583 $478 0.11% 

employees 

Firms with 20-99 0 0.0% 0 $0 $0 $478 0.00% employees 

Firms with 100-499 26 49.1% 6,264 $761,372,000 $29,283,538 $478 0.00% employees 

Firms with <500 53 100.0% 6,743 $817,192,000 $15,418,717 $478 0.00% employees 

Firms with >500 

24 45.3% 20,148 $4,914,882,000 $204,786,750 $478 0.00% employees 

Source: U.S. Census Bureau Statistics of U.S. Businesses, 2017 SUSB Annual Data Tables by Establishment Industry 

Table 5 

NAICS 721110 - Hotels and Motels 

Number of Firms as Average First First Year 

Number Percent of Small Total Number Annual Receipts per 

Year Cost per Firm 

of Firms Firms of Employees Receipts Firm Cost per as Percent of 

in Industrv Firm Receiots 

Firms with 0-4 10,947 35.1% 17,143 $4,371,463,000 $399,330 $478 0.12% employees 

Firms with 5-9 4,818 15.5% 32,968 $8,336,706,000 $1,730,325 $478 0.03% employees 

Firms with 10-19 7,167 23.0% 100,872 $8,336,706,000 $1,163,207 $478 0.04% employees 

Firms with <20 22,934 73.6% 150,997 $15,921,106,000 $694,214 $478 0.07% employees 

Firms with 20-99 7,160 23.0% 240,673 $20,671,674,000 $2,887,105 $478 0.02% employees 

Firms with 100-499 1,081 3.5% 150,879 $14,128,738,000 $13,070,063 $478 0.00% 

emPloYees 

Firms with <500 31,175 100.0% 542,549 $50,721,518,000 $1,626,993 $478 0.03% 

employees 

Firms with >500 

1,630 5.2% 512,075 $62,705,672,000 $38,469,737 $478 0.00% employees 

Source: U.S. Census Bureau Statistics of U.S. Businesses, 2017 SUSB Annual Data Tables by Establishment Industry 
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Table 6 

NAICS 721120 - Casino Hotels 

Number of Finns as Average First First Year 

Number Percent of Small Total Number Annual Receipts per 

Year Cost per Frrm 

of Finns Finns of Employees Receipts Finn Cost per as Percent of 

in lndustrv Finn Receiots 

Firms with 0-4 3 6.5% 0 $0 $0 $478 0.00% employees 

Firms with 5-9 0 0.0% 0 $0 $0 $478 0.00% employees 

Firms with 10-19 0 0.0% 0 $0 $0 $478 0.00% employees 

Firms with <20 8 17.4% 14 $8,215,000 $1,026,875 $478 0.05% employees 

Firms with 20-99 3 6.5% 195 $14,229,000 $4,743,000 $478 0.01% 

emolovees 

Firms with 100-499 27 58.7% 7,177 $860,044,000 $31,853,481 $478 0.00% employees 

Firms with <500 46 100.0% 8,217 $1,007,450,000 $21,901,087 $478 0.00% employees 

Firms with >500 84 182.6% 118,524 $18,217,851,000 $216,879,179 $478 0.00% emolovees 

Source: U.S. Census Bureau Statistics of U.S. Businesses, 2017 SUSB Annual Data Tables by Establishment Industry 

Table 7 

NAICS 722410 - Drinking Places (Alcoholic Beverages) 

Number of Finns as Average First First Year 

Number Percent of Small Total Number Annual Receipts per 

Year Cost per Frrm 

of Finns Finns of Employees Receipts Finn Cost per as Percent of 

in lndustrv Finn Receiots 

Firms with 0-4 13,749 50.8% 26,626 $2,881,174,000 $209,555 $478 0.23% employees 

Firms with 5-9 6,707 24.8% 44,050 $2,715,239,000 $404,837 $478 0.12% employees 

Firms with 10-19 3,729 13.8% 49,361 $2,715,239,000 $728,141 $478 0.07% employees 

Firms with <20 24,187 89.3% 120,064 $8,241,853,000 $340,755 $478 0.14% employees 

Firms with 20-99 2,741 10.1% 96,465 $5,063,067,000 $1,847,161 $478 0.03% employees 

Firms with 100-499 138 0.5% 14,534 $859,303,000 $6,226,833 $478 0.01% employees 

Firms with <500 27,088 100.0% 232,886 $14,249,073,000 $526,029 $478 0.09% 

emolovees 

Firms with >500 64 0.2% 4,151 $372,813,000 $5,825,203 $478 0.01% employees 

Source: U.S. Census Bureau Statistics of U.S. Businesses, 2017 SUSB Annual Data Tables by Establishment Industry 
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Table 8 

NAICS 722511 - Full-Service Restaurants 

Number of Fimis as Average First First Year 

Number Percent of Small Total Number Annual Receipts Receipts per 

Year Cost per Finn 

of Finns Finns of Employees Finn Cost per as Percent of 

in Industrv Finn Receipts 

Firms with 0-4 43,191 30.0% 69,719 $12,037,880,000 $278,713 $478 0.17% empJoyees 

Firms with 5-9 26,370 18.3% 179,617 $23,155,092,000 $878,085 $478 0.05% employees 

Firms with 10-19 30,904 21.4% 429,712 $23,155,092,000 $749,259 $478 0.06% employees 

Firms with <20 100,465 69.7% 679,048 $47,196,499,000 $469,781 $478 0.10% empJoyees 

Firms with 20-99 41,179 28.6% 1,549,506 $72,425,782,000 $1,758,804 $478 0.03% employees 

Firms with 100-499 2,504 1.7% 330,685 $16,855,317,000 $6,731,357 $478 0.01% employees 

Firms with <500 144,148 100.0% 2,559,239 $136,477,598,000 $946,788 $478 0.05% employees 

Firms with >500 2,441 1.7% 1,276,925 $61,492,598,000 $25,191,560 $478 0.00% empJoyees 

Source: U.S. Census Bureau Statistics of U.S. Businesses, 2017 SUSB Annual Data Tables by Establislnnent Industry 

Table 9 

NAICS 722513 - Limited Service Restaurants 

Number of Finns as Average First First Year 

Number Percent of Small Total Number Annual Receipts Receipts per 

Year Cost per Finn 

of Finns Finns of Employees Finn Cost per as Percent of 

in lndustrv Finn Receiots 

Firms with 0-4 39,481 37.1% 69,109 $9,918,230,000 $251,215 $478 0.19% empJoyees 

Firms with 5-9 20,041 18.8% 133,363 $14,262,156,000 $711,649 $478 0.07% empJoyees 

Firms with 10-19 20,256 19.0% 276,233 $14,262,156,000 $704,095 $478 0.07% empJoyees 

Firms with <20 79,778 74.9% 478,705 $32,962,211,000 $413,174 $478 0.12% empJoyees 

Firms with 20-99 22,427 21.1% 826,711 $40,270,656,000 $1,795,633 $478 0.03% employees 

Firms with 100-499 4,243 4.0% 659,080 $33,702,776,000 $7,943,148 $478 0.01% employees 

Firms with <500 106,448 100.0% 1,964,496 $106,935,643,000 $1,004,581 $478 0.05% employees 

Firms with >500 

2,591 2.4% 1,283,835 $66,321,227,000 $25,596,768 $478 0.00% employees 

Source: U.S. Census Bureau Statistics of U.S. Businesses, 2017 SUSB Annual Data Tables by Establislnnent Industry 
Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Proposed Rules 32843 

79See 2 U.S.C. 1501. 

80Calculated using growth in the Gross Domestic 

Product deflator from 1995 to 2019. Bureau of 

Economic Analysis. Table 1.1.9. Implicit Price 

Deflators for Gross Domestic Product. 

BILLING CODE 4510–27–C 

As shown in the tables above, costs 

for small business entities in these 

industries are never more than 0.3 

percent of annual receipts. Therefore, 

this rule will not have a significant 

economic impact on a substantial 

number of small entities. 

IX. Unfunded Mandates Reform Act of 

1995 

The Unfunded Mandates Reform Act 

of 1995 (UMRA) 79 requires agencies to 

prepare a written statement for rules 

with a federal mandate that may result 

in increased expenditures by state, 

local, and tribal governments, in the 

aggregate, or by the private sector, of 

$165 million ($100 million in 1995 

dollars adjusted for inflation) or more in 

at least one year.80 This statement must: 

(1) Identify the authorizing legislation; 

(2) present the estimated costs and 

benefits of the rule and, to the extent 

that such estimates are feasible and 


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Table 10 

NAICS 722515 - Snack and Nonalcoholic Beverage Bars 

Number of Finns as Average First First Year 

Number Percent of Small Total Number Annual Receipts per 

Year Cost per Finn 

of Finns Finns of Employees Receipts Finn Cost per as Percent of 

in lndustrv Finn Receiots 

Firms with 0-4 12,657 43.6% 16,075 $2,029,785,000 $160,369 $478 0.30% 

emolovees 

Firms with 5-9 6,176 21.3% 42,046 $3,772,007,000 $610,752 $478 0.08% 

emolovees 

Firms with 10-19 6,291 21.7% 83,512 $3,772,007,000 $599,588 $478 0.08% 

emolovees 

Firms with <20 25,124 86.6% 141,633 $7,833,377,000 $311,789 $478 0.15% 

emolovees 

Firms with 20-99 3,528 12.2% 107,810 $5,072,661,000 $1,437,829 $478 0.03% 

emolovees 

Firms with 100-499 362 1.2% 37,996 $2,070,085,000 $5,718,467 $478 0.01% 

emolovees 

Firms with <500 29,021 100.0% 287,716 $14,984,672,000 $516,339 $478 0.09% 

emolovees 

Firms with >500 

343 1.2% 164,169 $10,774,588,000 $31,412,793 $478 0.00% emolovees 

Source: U.S. Census Bureau Statistics of U.S. Businesses, 2017 SUSB Annual Data Tables by Establishment Industry 

Table 11 

NAICS 812113 - Nail Salons 

Number of Finns as Average First First Year 

Number Percent of Small Total Number Annual Receipts per 

Year Cost per Finn 

of Finns Finns of Employees Receipts Finn Cost per as Percent of 

in lndustrv Finn Receiots 

Firms with 0-4 9,688 74.7% 16,512 $2,059,539,000 $212,587 $478 0.22% 

emolovees 

Firms with 5-9 2,455 18.9% 15,647 $448,685,000 $182,764 $478 0.26% 

emolovees 

Firms with 10-19 701 5.4% 8,883 $448,685,000 $640,064 $478 0.07% 

emolovees 

Firms with <20 12,858 99.1% 41,188 $3,395,814,000 $264,101 $478 0.18% 

emolovees 

Firms with 20-99 95 0.7% 2,367 $119,640,000 $1,259,368 $478 0.04% 

emolovees 

Firms with 100-499 0 0.0% 0 $0 $0 $478 0.00% 

emolovees 

Firms with <500 12,970 100.0% 44,111 $3,532,063,000 $272,326 $478 0.18% 

emolovees 

Firms with >500 

0 0.0% 0 $0 $0 $478 0.00% emolovees 

Source: U.S. Census Bureau Statistics of U.S. Businesses, 2017 SUSB Annual Data Tables by Establishment Industry 
32844 Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Proposed Rules 

81See 2 U.S.C. 1532(a)(4). 82According to the Bureau of Economic Analysis, 

2019 GDP was $21.43 trillion. https://www.bea.gov/ 

system/files/2020-02/gdp4q19_2nd_0.pdf. 

relevant, its estimated effects on the 

national economy; (3) summarize and 

evaluate state, local, and Tribal 

government input; and (4) identify 

reasonable alternatives and select, or 

explain the non-selection, of the least 

costly, most cost-effective, or least 

burdensome alternative. 

A. Authorizing Legislation 

This final rule is issued pursuant to 

the Fair Labor Standards Act, 29 U.S.C. 

201, et seq. 

1. Assessment of Costs and Benefits 

For purposes of the UMRA, this 

proposed rule includes a federal 

mandate that would result in increased 

expenditures by the private sector of 

more than $156 million in at least one 

year, but will not result in any increased 

expenditures by state, local, and Tribal 

governments. 

The Department determined that the 

proposed rule would result in Year 1 

total costs for the private sector of 

$224.9 million, for regulatory 

familiarization, adjustment costs, and 

management costs. The Department 

determined that the proposed rule 

would result in management costs of 

$177.2 million in subsequent years. 

Furthermore, the Department estimates 

that there may substantial transfers 

experienced as UMRA-relevant 

expenditures by employers. 

UMRA requires agencies to estimate 

the effect of a regulation on the national 

economy if such estimates are 

reasonably feasible and the effect is 

relevant and material.81 However, OMB 

guidance on this requirement notes that 

such macroeconomic effects tend to be 

measurable in nationwide econometric 

models only if the economic effect of 

the regulation reaches 0.25 percent to 

0.5 percent of Gross Domestic Product 

(GDP), or in the range of $53.6 billion 

to $107.2 billion (using 2019 GDP).82 A 

regulation with a smaller aggregate 

effect is not likely to have a measurable 

effect in macroeconomic terms, unless it 

is highly focused on a particular 

geographic region or economic sector, 

which is not the case with this rule. 

The Department’s RIA estimates that 

the total costs of the final rule will be 

$224.9 million. Given OMB’s guidance, 

the Department has determined that a 

full macroeconomic analysis is not 

likely to show that these costs would 

have any measurable effect on the 

economy. 

X. Executive Order 13132, Federalism 

The Department has (1) reviewed this 

delay in accordance with Executive 

Order 13132 regarding federalism and 

(2) determined that it does not have 

federalism implications. The rule will 

not have substantial direct effects on the 

States, on the relationship between the 

national government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. 

XI. Executive Order 13175, Indian 

Tribal Governments 

This rule will not have substantial 

direct effects on one or more Indian 

tribes, on the relationship between the 

Federal Government and Indian tribes, 

or on the distribution of power and 

responsibilities between the Federal 

Government and Indian tribes. 

APPENDIX TABLE 1—LIST OF OCCUPATIONS INCLUDED IN THE OUTSIDE-OPTION REGRESSION SAMPLE

Amusement and Recreation Attendants. 

Bus Drivers, School or Special Client. 

Bus Drivers, Transit and Intercity. 

Cashiers. 

Childcare Workers. 

Concierges. 

Door-To-Door Sales Workers, News and Street Vendors, and Related Workers. 

Driver/Sales Workers. 

Flight Attendants. 

Funeral Attendants. 

Hairdressers, Hairstylists, and Cosmetologists. 

Home Health Aides. 

Hotel, Motel, and Resort Desk Clerks. 

Insurance Sales Agents. 

Library Assistants, Clerical. 

Maids and Housekeeping Cleaners. 

Manicurists and Pedicurists. 

Massage Therapists. 

Nursing Assistants. 

Occupational Therapy Aides. 

Office Clerks, General. 

Orderlies. 

Parking Lot Attendants. 

Parts Salespersons. 

Personal Care Aides. 

Pharmacy Aides. 

Pharmacy Technicians. 

Postal Service Clerks. 

Real Estate Sales Agents. 

Receptionists and Information Clerks. 

Recreation Workers. 

Residential Advisors. 

Retail Salespersons. 

Sales Agents, Financial Services. 

Sales Representatives, Wholesale and Manufacturing, Except Technical and Scientific Products. 

Secretaries and Administrative Assistants, Except Legal, Medical, and Executive. 

Social and Human Service Assistants. 


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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Proposed Rules 32845 

APPENDIX TABLE 1—LIST OF OCCUPATIONS INCLUDED IN THE OUTSIDE-OPTION REGRESSION SAMPLE—Continued 

Statement Clerks. 

Stock Clerks, Sales Floor. 

Subway and Streetcar Operators. 

Taxi Drivers and Chauffeurs. 

Telemarketers. 

Telephone Operators. 

Tellers. 

Tour Guides and Escorts. 

Travel Agents. 

Travel Guides. 

List of Subjects 

29 CFR Part 10 

Administrative practice and 

procedure, Construction industry, 

Government procurement, Law 

enforcement, Reporting and 

recordkeeping requirements, Wages. 

29 CFR Part 531 

Wages. 

For the reasons set forth above, the 

Department proposes to amend title 29, 

parts 10 and 531, of the Code of Federal 

Regulations as follows: 

PART 10—ESTABLISHING A MINIMUM 

WAGE FOR CONTRACTORS 

■ 1. The authority citation for part 10 

continues to read as follows: 

Authority: 4 U.S.C. 301; section 4, E.O 

13658, 79 FR 9851; Secretary of Labor’s 

Order No. 01–2014 (Dec. 19, 2014), 79 FR 

77527 (Dec. 24, 2014). 

■ 2. Amend § 10.28 by revising 

paragraph (b)(2) and adding paragraph 

(b)(3) to read as follows: 

§ 10.28 Tipped employees. 

* * * * * 

(b) * * * 

(2) Dual jobs. In some situations an 

employee is employed in dual jobs, as, 

for example, where a maintenance 

person in a hotel also works as a server. 

In such a situation the employee, if the 

employee customarily and regularly 

receives at least $30 a month in tips for 

the work as a server, is engaged in a 

tipped occupation only when employed 

as a server. The employee is employed 

in two occupations, and no tip credit 

can be taken for the employee’s hours of 

employment in the occupation of 

maintenance person. 

(3) Engaged in a tipped occupation. 

An employee is engaged in a tipped 

occupation when the employee 

performs work that is part of the tipped 

occupation. An employer may only take 

a tip credit for work performed by a 

tipped employee that is part of the 

employee’s tipped occupation. 

(i) Work that is part of the tipped 

occupation. Any work performed by the 

tipped employee that produces tips is 

part of the tipped occupation. Work that 

directly supports tip-producing work is 

also work that is part of the tipped 

occupation provided it is not performed 

for a substantial amount of time. 

(A) Tip-producing work. Any work for 

which tipped employees receive tips is 

tip-producing work. A server’s tipproducing work includes waiting tables; 

a bartender’s tip-producing work 

includes making and serving drinks and 

talking to customers; a nail technician’s 

tip-producing work includes performing 

manicures and pedicures. 

(B) Directly supports. Work that 

directly supports tip-producing work is 

also part of the tipped occupation 

provided that it is not performed for a 

substantial amount of time. Work that 

directly supports the work for which 

employees receive tips is work that 

assists a tipped employee to perform the 

work for which the employee receives 

tips. Work performed by a server that 

directly supports the tip-producing 

work includes, for example, preparing 

items for tables so that the servers can 

more easily access them when serving 

customers or cleaning the tables to 

prepare for the next customers. Work 

that directly supports the work of a 

bartender would include slicing and 

pitting fruit for drinks so that the 

garnishes are more readily available to 

bartenders as they mix and prepare 

drinks for customers. Work that directly 

supports the work of a nail technician 

would include cleaning the pedicure 

baths between customers so that the nail 

technicians can begin customers’ 

pedicures without waiting. 

(C) Substantial amount of time. An 

employer can take a tip credit for the 

time a tipped employee spends 

performing work that is not tipproducing, but directly supports tipproducing work, provided that the 

employee does not perform that work 

for a substantial amount of time. For the 

purposes of this section, an employee 

has performed work for a substantial 

amount of time if: 

(1) For any workweek, the directly 

supporting work exceeds 20 percent of 

the hours worked during the employee’s 

workweek. If a tipped employee spends 

more than 20 percent of the workweek 

on directly supporting work, the 

employer cannot take a tip credit for any 

time that exceeds 20 percent of the 

workweek; or 

(2) For any continuous period of time, 

the directly supporting work exceeds 30 

minutes. If a tipped employee performs 

directly supporting work for a 

continuous period of time that exceeds 

30 minutes, the employer cannot take a 

tip credit for any of that continuous 

period of time. 

(ii) Work that is not part of the tipped 

occupation. Work that is not part of the 

tipped occupation is any work that does 

not generate tips and does not directly 

support tip-producing work. If a tipped 

employee is required to perform work 

that is not part of the employee’s tipped 

occupation, the employer may not take 

a tip credit for that time. For example, 

preparing food or cleaning the bathroom 

is not part of a server’s occupation. 

Preparing food or cleaning the dining 

room is not part of a bartender’s 

occupation. Ordering supplies for the 

nail salon is not part of a nail 

technician’s occupation. 

* * * * * 

PART 531—WAGE PAYMENTS UNDER 

THE FAIR LABOR STANDARDS ACT 

OF 1938 

■ 3. The authority citation for part 531 

continues to read as follows: 

Authority: 29 U.S.C. 203(m) and (t), as 

amended by sec. 3(m), Pub. L. 75–718, 52 

Stat. 1060; sec. 2, Pub. L. 87–30, 75 Stat. 65; 

sec. 101, sec. 602, Pub. L. 89–601, 80 Stat. 

830; sec. 29(B), Pub. L. 93–259, 88 Stat. 55 

sec. 3, sec. 15(c), Pub. L. 95–151, 91 Stat 

1245; sec. 2105(b), Pub. L. 104–188, 110 Stat 

1755; sec. 8102, Pub. L. 110–28, 121 Stat. 

112; and sec. 1201, Div. S., Tit. XII, Pub. L. 

115–141, 132 Stat. 348. 

■ 4. Amend § 531.56 by revising 

paragraph (e) and adding paragraph (f) 

to read as follows: 

§ 531.56 ‘‘More than $30 a month in tips.’’ 

* * * * * 


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32846 Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Proposed Rules 

(e) Dual jobs. In some situations an 

employee is employed in dual jobs, as, 

for example, where a maintenance 

person in a hotel also works as a server. 

In such a situation if the employee 

customarily and regularly receives at 

least $30 a month in tips for the 

employee’s work as a server, the 

employee is engaged in a tipped 

occupation only when employed as a 

server. The employee is employed in 

two occupations, and no tip credit can 

be taken for the employee’s hours of 

employment in the occupation of 

maintenance person. 

(f) Engaged in a tipped occupation. 

An employee is engaged in a tipped 

occupation when the employee 

performs work that is part of the tipped 

occupation. An employer may only take 

a tip credit for work performed by a 

tipped employee that is part of the 

employee’s tipped occupation. 

(1) Work that is part of the tipped 

occupation. Any work performed by the 

tipped employee that produces tips is 

part of the tipped occupation. Work that 

directly supports tip-producing work is 

also work that is part of the tipped 

occupation provided it is not performed 

for a substantial amount of time. 

(i) Tip-producing work. Any work for 

which tipped employees receive tips is 

tip-producing work. A server’s tipproducing work includes waiting tables; 

a bartender’s tip-producing work 

includes making and serving drinks and 

talking to customers; a nail technician’s 

tip-producing work includes performing 

manicures and pedicures. 

(ii) Directly supports. Work that 

directly supports tip-producing work is 

also part of the tipped occupation 

provided that it is not performed for a 

substantial amount of time. Work that 

directly supports the work for which 

employees receive tips is work that 

assists a tipped employee to perform the 

work for which the employee receives 

tips. Work performed by a server that 

directly supports the tip-producing 

work includes, for example, preparing 

items for tables so that the servers can 

more easily access them when serving 

customers or cleaning the tables to 

prepare for the next customers. Work 

that directly supports the work of a 

bartender would include slicing and 

pitting fruit for drinks so that the 

garnishes are more readily available to 

bartenders as they mix and prepare 

drinks for customers. Work that directly 

supports the work of a nail technician 

would include cleaning all the pedicure 

baths between customers so that the nail 

technicians can begin customers’ 

pedicures without waiting. 

(iii) Substantial amount of time. An 

employer can take a tip credit for the 

time a tipped employee spends 

performing work that is not tipproducing, but directly supports tipproducing work, provided that the 

employee does not perform that work 

for a substantial amount of time. For the 

purposes of this section, an employee 

has performed work for a substantial 

amount of time if: 

(A) For any workweek, the directly 

supporting work exceeds 20 percent of 

the hours worked during the employee’s 

workweek. If a tipped employee spends 

more than 20 percent of the workweek 

on directly supporting work, the 

employer cannot take a tip credit for any 

time that exceeds 20 percent of the 

workweek; or 

(B) For any continuous period of time, 

the directly supporting work exceeds 30 

minutes. If a tipped employee performs 

directly supporting work for a 

continuous period of time that exceeds 

30 minutes, the employer cannot take a 

tip credit for any of that continuous 

period of time. 

(2) Work that is not part of the tipped 

occupation. Work that is not part of the 

tipped occupation is any work that does 

not generate tips and does not directly 

support tip-producing work. If a tipped 

employee is required to perform work 

that is not part of the employee’s tipped 

occupation, the employer may not take 

a tip credit for that time. For example, 

preparing food or cleaning the bathroom 

is not part of a server’s occupation. 

Preparing food or cleaning the dining 

room is not part of a bartender’s 

occupation. Ordering supplies for the 

nail salon is not part of a nail 

technician’s occupation. 

Jessica Looman, 

Principal Deputy Administrator, Wage and 

Hour Division. 

[FR Doc. 2021–13262 Filed 6–21–21; 11:15 am] 

BILLING CODE 4510–27–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket Number USCG–2021–0416] 

RIN 1625–AA00 

Safety Zone; Sabine River, Orange, TX 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard is proposing 

to establish a temporary safety zone for 

certain navigable waters of the Sabine 

River, extending the entire width of the 

river, adjacent to the public boat ramp 

located in Orange, TX. The safety zone 

is necessary to protect persons and 

vessels from hazards associated with a 

high-speed boat race competition in 

Orange, TX. Entry of vessels or persons 

into this zone would be prohibited 

unless authorized by the Captain of the 

Port Marine Safety Unit Port Arthur or 

a designated representative. We invite 

your comments on this proposed 

rulemaking. 

DATES: Comments and related material 

must be received by the Coast Guard on 

or before July 8, 2021. 

ADDRESSES: You may submit comments 

identified by docket number USCG– 

2021–0416 using the Federal 

eRulemaking Portal at https://

www.regulations.gov. See the ‘‘Public 

Participation and Request for 

Comments’’ portion of the 

SUPPLEMENTARY INFORMATION section for 

further instructions on submitting 

comments. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions about this proposed 

rulemaking, call or email Mr. Scott 

Whalen, Marine Safety Unit Port Arthur, 

U.S. Coast Guard; telephone 409–719– 

5086, email Scott.K.Whalen@uscg.mil. 

SUPPLEMENTARY INFORMATION: 

I. Table of Abbreviations 

CFR Code of Federal Regulations 

DHS Department of Homeland Security 

FR Federal Register 

NPRM Notice of proposed rulemaking 

§ Section 

U.S.C. United States Code 

II. Background, Purpose, and Legal 

Basis 

On April 29, 2021, the Coast Guard 

published a temporary safety zone to 

protect persons and vessels from the 

hazards associated with high speed boat 

races in Orange, TX (86 FR 22610). That 

event was cancelled due to weather. On 

May 19, 2021 the City of Orange, TX 

notified the Coast Guard that they 

rescheduled the races for September 18 

and 19, 2021, in the same location, 

adjacent to the public boat ramp in 

Orange, TX. The Captain of the Port Port 

Arthur (COTP) has determined that 

potential hazards associated with high 

speed boat races would be a safety 

concern for spectator craft and vessels 

in the vicinity of these race events. 

The purpose of this rulemaking is to 

ensure the safety of vessels and the 

navigable waters of the Sabine River 

adjacent to the public boat ramp in 

Orange, TX before, during, and after the 

scheduled event. The Coast Guard is 

proposing this rulemaking under 


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