The U.S. Department of Labor’s rule limiting subminimum-wage payments to tip-earning workers is permissible under federal labor law, a Texas federal judge ruled on Thursday, declining restaurant industry groups’ competing bid for a win and renewed request to block the law. The rule, which took effect in December 2021, allows employers to pay tipped wages for no more than 30 consecutive minutes when a tipped worker is engaged in a nontip-producing task and also disallows tipped wages if a worker spends more than 20% of their workweek on tip-supporting work. The law also requires employers to pay full minimum wage, not a tipped wage, for nontipped duties like maintenance work, and put time limits on when employers can pay workers subminimum wages when they are engaged in side work that does not produce tips, such as a bartender preparing garnishes or a server cleaning the dining room.
Restaurant and other industry groups sued to block this rule, arguing that the Department misconstrued the FLSA in promulgating the rule. However, the judge agreed with the U.S. Department of Labor, finding that the Department’s rule was a “permissible construction” of the tip credit statute, which allows employers to pay workers subminimum wage based on the expectation they will make up the earnings in tips. The restaurant association is likely to appeal the court’s decision. In the meantime, employers are expected to adhere to the Department’s rule.