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US Department of Labor Issues Final Rule on Tipped Workers

On October 28, 2021, the US Department of Labor (DOL) issued its Final Rule on tipped workers, establishing when tipped employees can be paid less than the federal minimum wage, an issue that has been in a state of flux over the last several years. The Final Rule will take effect on December 28, 2021. Lake Effect’s prior blog on this issue provides additional information and history on this topic.

Background: Under the Fair Labor Standards Act (FLSA), employers must pay employees no less than the current minimum wage of $7.25/hour. However, the FLSA allows employers to take a “tip credit” for employees who normally earn at least $30/month in customer tips. This means that employers may pay tipped employees a reduced minimum wage of $2.13/hour, instead of $7.25/hour, if they make sure that the employees earn at least $5.12/hour in tips, thus reaching the statutory minimum of $7.25/hour.

The Issue: Although this seems a straight-forward rule, its application becomes challenging when a tipped employee like a waiter spends some work time completing non-tipped work, like wiping down tables or folding napkins. Because the employee does not earn customer tips while performing such duties, the DOL has historically scrutinized an employer’s ability to take the tip credit (i.e., pay the lower hourly rate of $2.13/hour) for all of the employee’s work hours. The question has lingered, “When does an employee’s non-tipped work becomes so time consuming that the employer should lose the tip credit and pay the full federal minimum wage to that employee?”

DOL’s Answer: The DOL’s Final Rule identifies three categories of work that may be performed by tipped employees and specifies the FLSA pay requirements for each:

tip producing work that provides service to customers and for which tips are normally received (i.e., a server provides table service, or a bartender makes and serves drinks): an employer may take the full tip credit and pay an employee $2.13/hour for this work, assuming the employee’s tips make up the remainder of the minimum wage requirement.
directly supporting work performed by a tipped employee in preparation for tip-producing work (i.e., a server refills condiments and rolls silverware, or a bartender slices fruit for drinks): the “80/20 principle” applies. If a tipped employee spends more than 20% of their work week performing directly supporting work, the employer must pay them the full minimum hourly wage of $7.25/hour for that work. In addition, if an employee spends more than 30 continuous minutes performing directly supporting work, the employer must pay full minimum wage for any time that exceeds 30 minutes. This rule applies regardless of whether the 80/20 rule applies to the employee’s overall work week.
- Directly supporting work” includes idle time spent waiting to serve customers.
- If an employee performs dual jobs for an employer, one that normally produces tips and one that does not, only time spent performing the tipped job is considered in applying the 80/20 work week principle.
work that is not part of or supportive of the employee’s tipped occupation (i.e., server prepares food and cleans bathrooms, or bartender cleans the dining room): an employer must pay the employee the full minimum wage of $7.25/hour for all time spent on this work.

Challenges Ahead: Although intended to provide clarity on the issue of tipped employees, DOL’s Final Rule will require many employers to revamp their employee scheduling, timekeeping, and task-tracking processes. It will be especially important for employers to closely monitor employee time spent on “directly supporting work” so that they can properly apply the 80/20 and 30-minute continuous duration rules. To avoid uncertainty and minimize administrative burdens, some employers might consider foregoing the tip credit altogether. Your partners at Lake Effect can help assess your pay practices and navigate the new FLSA rules for tipped employees.

Lake Effect is here to answer your questions about federal and state wage and hour laws that impact employers across all industries. We continue to monitor important legal and HR developments, as well as COVID-related updates from federal, state, and local authorities. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

Human Resources / Legal - 11/03/2021

Dane County Face Covering Emergency Order #4

Public Health Madison & Dane County has issued Face Covering Emergency Order #4. The new order is effective November 5, 2021. The only change from the previous order (see Lake Effect’s summary of the previous orders here) is to extend the face covering requirements until November 27, 2021. At this time, PHMDC plans to let its face covering requirements expire as of 12:01 a.m. on November 27 and not issue additional face covering orders.

Lake Effect is here to answer your questions about how local and state public health orders apply to employers. We continue to monitor important legal and HR developments, as well as COVID-related updates from federal, state, and local authorities. Please keep watching our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

COVID-19 Resources / Legal - 11/01/2021

EEOC Provides Additional Guidance on Religious Objections to Vaccine Mandates

On October 25, 2021, the EEOC updated its COVID-19 Technical Assistance to specifically address religious objections to employer vaccine mandates. The update provides employers with additional guidance regarding their Title VII obligation to accommodate employees who request exceptions to vaccination requirements based upon religious beliefs. Key updates in Section L. Vaccinations – Title VII and Religious Objections to COVID-19 Vaccine Mandates include the following:

Employees must tell their employer if they are requesting an exception to a COVID-19 vaccination requirement based upon a “sincerely held religious belief.” Employers should inform employees about proper procedures for requesting such an exception, and employees need not use any “magic words” to express the request.
An employer should normally assume a request for religious accommodation is based upon a sincerely held religious belief. However, if there is an objective basis for questioning the religious nature or sincerity of an employee’s belief, an employer may seek additional information. An employee who fails to cooperate with a reasonable request for additional information jeopardizes a later claim that they were improperly denied an accommodation.
Title VII protects nontraditional religious beliefs, but it does not protect social, political, or economic views or personal preferences. Objections to COVID-19 vaccination requirements that are based on these views or nonreligious concerns about the possible effects of the vaccine do not qualify as “religious beliefs” under Title VII.
An employer may consider factors bearing on an employee’s credibility when assessing the sincerity of the employee’s stated religious belief, including the consistency of the employee’s prior actions, the timing of a request, etc. The employer may also ask for an explanation of how the employee’s religious belief conflicts with the employer’s vaccination requirement.
If an employer shows it is unable to reasonably accommodate an employee’s religious beliefs without suffering “undue hardship,” it is not obligated to provide the accommodation under Title VII. Requiring the employer to bear more than a “de minimis” cost constitutes an undue hardship. Such costs can include direct monetary costs, as well as an indirect burden on the employer’s business, including the risk of spreading COVID-19 to other employees or members of the public. Undue hardship must be assessed based upon specific facts of each situation.
An employer who grants some employees a religious accommodation from a vaccine requirement for religious reasons is not required to grant the same accommodation to all employees. The determination is made on a case-by-case basis. Furthermore, an employer need not grant the religious accommodation preferred by an employee if there is another that would resolve the conflict between the vaccination requirement and the religious belief.

If an exception is granted, employers should put in place measures to protect the unvaccinated employee, other employees, and the public, as noted in Section K.6 of the EEOC guidance. Possible accommodations include wearing of face masks, frequent COVID-19 testing, change in work location or duties.

Employers who receive employee requests for exceptions to vaccination requirements based upon religious beliefs should work closely with HR and legal counsel to assess their accommodation obligations under Title VII.

Lake Effect continues to monitor important legal and HR developments, including COVID-related updates from federal, state, and local authorities. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

COVID-19 Resources / Legal - 10/26/2021

Provisions of Final Tip Pool Rule Effective November 23, 2021

The U.S. Department of Labor’s latest final tip pool rule provisions will take effect on November 23, 2021. For further discussion on other provisions of the final rule that were implemented in April 2021, please see Lake Effect’s prior blog on this topic.

The following provisions of the final tip pool rule will take effect on November 23, 2021:

Managers and supervisors may keep tips they receive for services provided “solely” by the manager or supervisor and “directly” to customers. This clarification to the traditional prohibition on managers and supervisors receiving tips in a tip pool or tip sharing arrangement recognizes the reality that managers and supervisors are often called upon to perform tipped duties in the course of their workday. This means, for example, when a bar manager is working as a bartender to fill in for an absent bartender or during a slow shift, the bar manager may keep tips received directly from patrons at the bar. Similarly, when a salon manager receives tips from a client for a haircut done by the salon manager, the salon manager may keep the tips.
Managers and supervisors may contribute some of their tips received from their “sole” and “direct” work into mandatory tip pools or sharing, but they may not receive any tips from a tip pooling or tip sharing arrangement. Further, an employer may require (or may allow) managers and supervisors to contribute part of their “sole” and “direct” tips into tip pooling or sharing arrangements, but, again, managers and supervisors may not keep or receive employees’ tips, or other managers’ and supervisors’ tips, in any arrangement.
Employers may face fines up to $1,100 for each instance that the Department of Labor finds an employer took an employee’s tips, regardless of whether the violation was repeated or willful. This now encompasses employer behavior that is in “reckless disregard” of the FLSA regulations and situations when an employer should have explored if its behavior was compliant but failed to do so.

Human Resources / Legal - 10/13/2021

Dane County Face Covering Emergency Order #3

Public Health Madison & Dane County has issued Face Covering Emergency Order #3. The new order is effective October 8, 2021. The only change from the previous order (see Lake Effect’s summary of the previous orders here) is to extend the face covering requirements through November 5, 2021.

COVID-19 Resources / Legal - 10/04/2021

Dane County Face Covering Emergency Order #2

Public Health Madison & Dane County (PHMDC) has issued Face Covering Emergency Order #2, effective September 10, 2021 through October 8, 2021.

The new order is substantially the same as the previous order issued last month. The only changes are two exceptions have been added to the situations in which an individual may remove their face covering. Those two additional situations are:

While playing a wind instrument that has a cover on it as long as all individuals in the room are spaced six feet apart from one other
While presenting or performing a religious, political, media, educational, artistic, cultural, musical, theatrical, or any other type of presentation for an audience as long as
- everyone at the presentation or performance is fully vaccinated, and
- the presenters or performers maintain at least six feet from all attendees

All other requirements from the previous order remain in effect, including the requirement that employers develop a policy providing and requiring face masks, and post a sign mandating a face covering indoors.

COVID-19 Resources / Legal - 09/09/2021

Employers Take Heed: Deadline is Near for COBRA Premium Assistance Notices

As detailed in Lake Effect's prior blog post, the American Rescue Plan Act of 2021 (ARPA) includes provisions requiring employers to temporarily subsidize the cost of COBRA continuation coverage for certain “Assistance Eligible Employees” from April 1, 2021 through September 30, 2021. Employers or plan issuers must pay premiums on behalf of such individuals and will be reimbursed through a COBRA premium assistance tax credit.

Pursuant to ARPA’s specific requirements, employers and plan issuers are also required to provide Assistance Eligible Individuals with a Notice of Expiration of Premium Assistance 15-45 days before the recipient’s premium assistance expires. For individuals still receiving the premium subsidy, this means that the expiration notice must be provided no later than September 15, 2021. Failure to meet this deadline may result in penalties. Employers should ensure that these notices are sent out in timely manner by internal HR staff, health plan issuers, or COBRA administrators.

Lake Effect is here to answer your questions about COBRA compliance, as well as other state and federal employment law issues. We continue to monitor important legal and HR developments, as well as COVID-related updates from federal, state, and local authorities. Please keep watching our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

Legal - 09/04/2021

IL Passes Law Restricting Non-Competes and Non-Solicitation Agreements

On August 13, 2021 Illinois Governor Pritzker signed into law broad restrictions on employee non-competes and non-solicitation agreements. The non-solicit restrictions apply to employer’s customers, as well as other employees.

The new law applies to agreements executed with an employee on or after January 1, 2022. As of that date, the law bans:

Non-competes with employees earning $75,000 or less
- The income threshold increases by $5000 every five years until it reaches $90,000
Non-solicitation agreements with employees earning $45,000 or less
- The income threshold increases by $2500 every five years until it reaches $52,500
Non-competes and non-solicitation agreements with an employee who is terminated, laid off, or furloughed due to COVID-19 or “circumstances that are similar to the COVID-19 pandemic”
- However, a non-compete will be enforceable if the employer includes in the agreement payment to the employee covering the employee’s salary from the date of termination through the period of enforcement minus compensation earned from subsequent employment during that period

In addition, an enforceable non-compete or non-solicitation agreement must:

Include a provision advising the employee to consult with an attorney before signing
Provide the employee at least 14 days to review the agreement before signing it
Offer “professional or financial benefits” or two years of employment as consideration for signing the agreement
- “Professional or financial benefits” are not defined in the statute but generally include benefits such as a bonus or promotion

Illinois’ new law is part of a national trend to more tightly regulate the circumstances under which employers can restrict an employee’s post-termination activities. California bans all non-competes, with limited exceptions, and tightly restricts non-solicitation agreements. Nevada recently enacted legislation banning non-competes with hourly workers. Under Washington law, non-competes are enforceable only if, among other things, the employee earns more than $100,000 per year (adjusted annually). Washington D.C.’s law banning non-competes for virtually all employees will likely become effective some time in 2022. President Biden’s recent Executive Order charging the Federal Trade Commission to explore options to limit the “unfair use” of non-competes also reflects this growing opposition towards these types of agreements.

Employers should work closely with employment law counsel to review applicable state laws on non-competes and non-solicitation agreements, especially for remote employees working outside of Wisconsin. An advance review may enhance the effectiveness and enforceability of your agreements. See our previous blog on other state law considerations with remote workers.

Lake Effect is here to answer your state and federal employment law and HR questions related to these and other employment agreements. We continue to monitor important legal and HR developments, as well as COVID-related updates from federal, state, and local authorities. Please keep watching our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

Legal - 08/26/2021

Updated OSHA Guidance to Continue Workplace Health and Safety Measures

On August 13, 2021, the Occupational Safety and Health Administration (OSHA) updated its guidance for all employers to reflect the CDC’s July 27, 2021 recommendations on masks and testing for fully-vaccinated individuals. As with the prior guidance on COVID-19, this updated OSHA guidance is not a standard or regulation and creates no new legal obligations. However, the guidance is likely to be relied on to measure employer compliance with OSHA’s “General Duty Clause.” That clause requires employers to provide a workplace free from recognized hazards that cause or are likely to cause death or serious harm.

To reduce the risk of spreading COVID-19 among employees, especially the Delta variant, OSHA recommends that employers:

Require all employees, including those who are fully vaccinated, to wear a face covering, or other appropriate PPE, when indoors with other people in areas of substantial or high transmission.
Encourage or require all customers, visitors, and guests to wear face coverings when indoors in areas of substantial or high transmission.
Adopt policies that require employees to get vaccinated or, if they remain unvaccinated, get regularly tested for COVID-19 plus continue wearing a face covering and physical distancing.
Require fully vaccinated employees who have been exposed to COVID-19 to be tested three to five days after exposure and wear a face mask when indoors for 14 days unless they test negative.

The above precautions are in addition to measures included in OSHA’s previous guidance. See Lake Effect’s blog on OSHA’s guidance for employers.

Employers should work closely with legal counsel and HR to implement an updated COVID-19 workplace program consistent with this new OSHA guidance and any applicable local guidance and orders. Lake Effect is here to help you through this process.

We continue to monitor important legal and HR developments, as well as COVID-related updates from federal, state, and local authorities. Please keep watching our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

COVID-19 Resources / Legal - 08/18/2021

Dane County Face Covering Emergency Order

Public Health Madison & Dane County (PHMDC) has issued a new Public Health Order, effective August 19, 2021 through September 16, 2021. The new order requires individuals to wear face masks indoors, employers to develop a policy providing and requiring face masks, and organizations to post a sign mandating face masks indoors.

To address the rise in positive COVID cases, individuals age two years and older must wear face masks when in an enclosed space in Dane County with people outside their household, including while using public transportation. PHMDC defines a face covering as:

a piece of cloth or other material that is worn to cover the nose and mouth completely. A face covering must be secured to the head with ties, ear loops, or elastic bands that go behind the head and must fit snuggly but comfortably against the side of the face. Cloth face coverings must be made with two or more layers of breathable fabric that is tightly woven (i.e., fabrics that do not let light pass through when held up to a light source). A face covering does not include bandanas, single layer neck gaiters, face shields, goggles, scarves, ski masks, balaclavas, shirt or sweater collars pulled up over the mouth and nose, or masks with slits, exhalation valves, or punctures.

Limited exceptions to the mask requirement are allowed when an individual is eating and drinking, undergoing a service requires temporary removal of the mask (e.g. dental services), communicating with someone who is deaf or hard of hearing and who cannot communicate with a mask, swimming, following safety or security guidelines that require removal of the mask, and other similar circumstances. In addition, individuals with medical or mental health conditions that prevent them from wearing face masks are exempt from the requirement. When addressing such exemptions, employers should put in place other safety precautions to protect the health and safety of employees, customers, and other members of the public .

Employers must develop a written protective measure policy and procedure that provides employees with face masks and requires face masks indoors to comply with the order.

Employers must also post in visible locations signs requiring masks indoors. Employers may use PHMDC’s sign or develop their own.

COVID-19 Resources / Legal - 08/17/2021

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