DOL withdraws controversial 80/20 rule for tipped employees

On December 17, 2024, the Department of Labor’s (DOL) Wage and Hour Division (WHD) issued a final rule withdrawing its controversial 80/20 rule for tipped employees under the Fair Labor Standards Act (FLSA) and restoring the original 1967 dual jobs rule. The withdrawal comes four months after the U.S. 5th Circuit Court of Appeals vacated the 80/20 rule nationwide.

Withdraw and restore

The now-withdrawn 80/20 rule caused significant administrative challenges for employers by attempting to require tipped employees to spend at least 80% of their time on directly tip-producing work and limit tip-supporting work to less than 20% of their time and not for more than 30 consecutive minutes. As a practical matter, tracking the time tipped employees spent on tip-producing work versus tip-supporting work created significant logistical challenges for most tip-credit employers. This requirement has now been withdrawn.

Under the restored dual jobs rule, the distinction isn’t between how much time a tipped employee spends on tip-producing work versus tip-supporting work but whether the employee is working in a tipped role. Under the dual jobs rule, employers that claim a tip credit for tipped employees can do so only when the employee works a tipped job (e.g. a job where they customarily and regularly receive at least $30 a month in tips). If they work dual jobs, the employer cannot claim a tip credit when the employee works a non-tipped job. This decision covers all employers claiming tip credits across the U.S.