Our firm is actively engaged in pursuing class actions consisting of tipped workers (usually restaurant employees) who receive tipped minimum wage for all work performed, even though some of that work isn't tip-producing. We first brought this issue to your attention (https://erbelaw.wordpress.com/2012/04/30/treatment-of-tipped-employees-under-minimum-wage-laws/) after we first began working on such cases at the end of 2011. Our work in 2011 began, and has continued today, because of a decision by the United States Court of Appeal for the Eighth Circuit (which includes Iowa) in which the court applied the 80/20 rule to tipped workers who have dual jobs, as described in more detail below. We've continuously monitored this area of wage law ever since because, as the number of these cases increases, so do the chances that the United States Supreme Court will step in and provide a final ruling on how the "dual worker" provisions of federal minimum wage law should be applied.
The "80/20 rule" instructs courts to consider how much time tipped employees spend on job duties that are incidental to their tip-producing job activities. If tipped employees spend less than 80% of their time on activities that cannot generate tips, then all such untipped labor must be compensated at the regular minimum wage of $7.25 per hour, while the rest of the employee's tip-producing work can be compensated at tipped minimum wage. This rule doesn't appear in a federal law or regulation; rather, it's drawn from the United States Department of Labor's Field Handbook.
The Eighth Circuit Court of Appeal was the first appellate court to apply that 80/20 rule to a "dual jobs" case under federal minimum wage law in the 2011 case of Fast v. Applebee's. Other federal courts have applied the 80/20 rule since then. But pushback against this rule has been growing because the rule's in an agency's field handbook and wasn't passed by Congress or as part of the regulatory rulemaking process.
First, in 2017 the Ninth Circuit Court of Appeals determined in Marsh v. J. Alexander’s, LLC that the 80/20 rule had assumed the effect of an official federal regulation, which requires a lot of work and time for an agency like the Department of Labor to enact, even though the 80/20 rule had never gone through that process and was merely a rule to be used by field investigators for the Department of Labor. The final effects of that decision are on hold however. The Ninth Circuit later granted a rehearing in Marsh to take another look at whether it was right to declare the Department of Labor's 80/20 rule invalid. The Ninth Circuit has yet to issue its opinion after reconsidering the case.
Then, on July 6, 2018, the Restaurant Law Center, a public policy affiliate of the National Restaurant Association, sued the Department of Labor and its Wage and Hour Division. The suit requests a declaration that the Department of Labor's 80/20 rule in its field handbook is unlawful and invalid. The suit challenges the Department of Labor's decision to implement the rule through its field handbook, rather than through the lengthy and complicated process required for adopting agency rules and making them an official federal regulation.
We'll continue monitoring these developments. If the Ninth Circuit stands on its decision that the Department of Labor's 80/20 rule is invalid and unenforceable, or if the Restaurant Law Center's suit results in a decision invalidating the 80/20 rule, we'll have what's called a "circuit split" among various federal appellate jurisdictions on an issue that has generated many class actions since 2011. Such a situation will increase the likelihood that the United States Supreme Court will review one of these 80/20 cases and definitively rule on whether the Department of Labor's 80/20 standard has any force of law or should be ignored by federal courts.