Tips on Tips: 2025 Wage and Hour Compliance Update

As we enter 2025, employers must remain diligent in ensuring wage and hour compliance, as employee complaints have risen significantly over the past few years. The U.S. Department of Labor Wage and Hour Division reports that it recovered more than $237 million in back wages from employers in 2024 alone.[1] The Ohio Department of Commerce Division saw a 192% per month increase in wage and hour complaints after launching its paperless complaint process in 2022.[2]

Despite rising complaints, employers can protect themselves from owing back wages and additional monetary damages by ensuring their pay practices are legally compliant. Below are notable wage and hour updates, especially for tipped employees.

Ohio Minimum Wage Increase

Effective January 1, 2025, Ohio raised the minimum wage to $10.70 per hour for non-tipped employees and $5.35 per hour for tipped employees. The increase only applies to businesses with annual gross receipts greater than $394,000. Employers with annual gross receipts of less than $394,000 must offer at least the federal minimum wage, which is $7.25 per hour.

All Ohio employers must display the Ohio Minimum Wage Poster in a conspicuous place on the employer’s premises. The Ohio 2025 Minimum Wage poster can be found here. Additionally, employers subject to the Fair Labor Standards Act (“FLSA”) must post the FLSA Minimum Wage Poster in a conspicuous place at all of the employer’s establishments. The FLSA Minimum Wage Poster can be found here.

The Department of Labor Officially Retracts the “80/20” Rule for Tipped Employees

80/20 Rule

In 2021, the DOL formally implemented the “80/20” Rule. The Rule divided work into three categories, including:

1.     Direct tip-producing work (e.g., serving a table);

2.     Tip-supporting work (e.g., rolling silverware); and

3.     Work outside of the tipped occupation. 

The Rule allowed employers to institute a tip credit for tip-supporting work, as long as employees did not spend more than 30 continuous minutes or 20% of their time performing non-tipped duties.

Fifth Circuit Vacates Rule

In August 2024, the Fifth Circuit Court of Appeals vacated the rule, finding that it led to arbitrary assessments of tip-producing versus tip-supporting work. In response, the DOL formally withdrew the Rule on December 17, 2024.

What Does That Mean for You?

First and foremost, ensure that your business is paying its employees the proper amount. Notably, in Ohio, tipped employees’ combined base wage and tips must amount to at least the minimum wage rate.  

Second, employers no longer need to monitor the time tipped employees spend performing tip-producing versus tip-supporting work. Instead, the focus is on the employee's overall occupation. However, employers should be mindful that if a tipped employee performs work outside of their occupation, then they must be paid at least the regular minimum wage rate (e.g. if a server performs chef duties).

If you have any questions about wage and hour updates, Optimal Employee Relations is happy to discuss and assist so that your business stays legally compliant.

[1] Impact in Fiscal Year 2024, https://www.dol.gov/agencies/whd/data.

[2] Stolen Wages? Ohio Workers Now Have Easier, Faster Way to File a Complaint, https://com.ohio.gov/about-us/media-center/news/stolen-wages-ohio-#:~:text=Since%20the%20online%20process%20went,Hour%20Bureau%20Chief%20Steve%20Clegg.