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Outback may have unlawfully taken tip credit for ‘side work’ tasks

By Lorene D. Park, J.D.

Refusing to reject the DOL’s 20 percent rule, a federal district court in Florida denied Outback Steakhouse’s motion to dismiss state-law claims by an employee who alleged that the restaurant unlawfully applied the tip credit against the minimum wage paid for “side work” (nontipped) tasks in excess of 20% of the employee’s total working time (Eldridge v. OS Restaurant Services, LLC aka Outback Steakhouse of Florida, LLC, May 18, 2017, Moody, J., Jr.).

Side tasks. Outback classified the plaintiff as a tipped employee within the meaning of the FLSA and paid him the subminimum wage permitted by Florida law. He claimed Outback unlawfully applied the tip credit against the minimum wage paid to him for side work tasks, including: stocking and icing milk and cream; stocking coffee, tea, glasses, straws, and other items for the bar; putting garnishes on ice; cleaning and adjusting beer kegs; performing inventory checks; setting up and cleaning table tops, chairs, and the wait station; and performing maintenance and janitorial duties, such as putting out trash cans, cleaning, wiping bathroom sinks and checking for supplies, dusting lamps and shelves, sweeping, and mopping.

Lawsuit. Filing suit under the FLSA, Florida Minimum Wage Act (FMWA), and the Florida Constitution Article X § 24, the employee asserted that Outback should have compensated him the full minimum wage for the time he spent performing more than 20 percent of his time on these nontipped tasks. Outback moved to dismiss the FMWA and Florida Constitution claims, arguing that the DOL’s 20 percent rule is not binding authority and should be rejected.

Applicable law. Under Florida law, for employees who meet the FLSA’s requirements for the tip credit, employers “may credit towards satisfaction of the [m]inimum [w]age tips up to the amount of the allowable FLSA tip credit in 2003.” Under federal regulation 29 C.F.R. § 531.56(e), if an employee is engaged in two occupations, one tipped and one not, the employer may not take a tip credit for the hours spent in the nontipped occupation. However, a waitress who spends part of her time cleaning or making coffee is still subject to the tip credit.

DOL’s 20 percent rule applied. The DOL has interpreted this regulation in a field operations handbook, stating that employees who spend more than 20 percent of their time performing general preparation work or maintenance are not subject to a tip credit for the time spent performing those duties. Though Outback argued this nonbinding authority should not be followed, the court noted that district courts within the Eleventh Circuit have agreed with the Eighth Circuit, which held in Fast v. Applebee’s that: “the DOL’s interpretation contained in the Handbook—which concludes that employees who spend ‘substantial time’ (defined as more than 20 percent) performing related but nontipped duties should be paid at the full minimum wage for that time without the tip credit—is a reasonable interpretation of the regulation….”

The court also pointed out that two other judges in the middle district of Florida have found the DOL interpretation highly persuasive. In Crate v. Q’s Rest. Grp. LLC, the court explained that the DOL clarifies the ambiguity contained in 29 C.F.R. § 531.56(e) “by delineating how much time a tipped employee can engage in related, non-tip-producing activity before such time must be compensated directly by the employer at the full minimum wage rate.” The other opinion, issued earlier this month, involved another case against Outback. The court there also refused Outback’s invitation to reject the 20 percent rule.

With this in mind, the court refused to reject the DOL’s 20 percent rule and denied Outback’s motion to dismiss.