Duane Morris Class Action Review - 2023 - Report - Page 24
Administration. Such efforts continued on multiple fronts in 2022, including with respect
to rules regarding businesses’ utilization of independent contractors and their use of the
tip credit.
As to the former, effective January 6, 2021, the DOL during the Trump Administration
adopted an Independent Contractor Rule that addressed the circumstances under
which a worker qualifies as an independent contractor. The Rule arguably made it
easier for companies, including companies operating in the gig economy, to utilize
independent contractors. Although the DOL under the Biden Administration withdrew
the Rule in May 2021, in March 2022, a federal district court in Texas found the DOL’s
withdrawal of the Rule unlawful. Although the DOL appealed the decision in May 2022,
it later abandoned the appeal and, instead, on October 13, 2022, the DOL issued a
proposed new rule on independent contractor status. It described the proposed
framework as “more consistent with longstanding judicial precedent” and stated that the
DOL “believes the new rule [will] preserve essential worker rights and provide
consistency for regulated entities.” The rule is likely to fuel further litigation in 2023 and
have a cascading impact on the workplace class action landscape as it impacts litigation
and potential recoveries.
The DOL’s efforts to regulate use of the tip credit have met similar controversy. The
FLSA, at 29 U.S.C. § 203(m), permits an employer to use the tips received by tipped
workers to satisfy a portion of its minimum wage obligation. In 1988, however, the DOL
added a rule (the 80/20 Rule) to its Field Operations Handbook that purported to require
employers to pay employees at the full minimum wage rate for time spent performing
non-tip-producing tasks that exceeded 20% of their workweek. Multiple courts
attempted to apply this guidance so as to require employers to separate tasks
performed by tipped workers into categories of tip-producing, non-tip-producing, and
unrelated tasks, and the ensuring litigation over these issues has plagued the hospitality
industry, in particular, over the past decade.
In November 2018, the DOL under the Trump Administration issued an opinion letter
withdrawing the 80/20 Rule and, in February 2019, it amended the Field Operations
Handbook to include a “reasonable time” standard, explaining that “an employer of an
employee who has significant non-tip related duties which are inextricably intertwined
with [his or her] tipped duties should not be forced to account for the time that employee
spends doing those intertwined duties.” In December 2020, the DOL issued the Tip
Regulations Final Rule. After twice delaying the effective date of the Final Rule, on
October 23, 2021, the DOL under the Biden Administration withdrew and replaced the
Final Rule. In doing so, the DOL resurrected the 80/20 Rule and purported to limit the
tip credit to non-tip-producing work that directly supports tip-producing work and does
not exceed “a continuous period” of 30 minutes. The new rule went into effect on
December 28, 2021. In 2022, the Restaurant Law Center and Texas Restaurant
Association filed suit seeking to invalidate the new final rule. On February 22, 2022, the
U.S. District Court for the Western District of Texas denied their much-watched
emergency motion seeking to enjoin nationwide enforcement of the new final rule but
did not issue a ruling on the merits, and the appeal remains pending in the Fifth Circuit.
The results are apt to fuel additional litigation in 2023.
23
© Duane Morris LLP 2023
Duane Morris Class Action Review – 2023