DOL Withdraws 2021 Tipped-Wage Rule
The U.S. Department of Labor (DOL) recently withdrew a 2021 tipped-wage rule vacated by a federal appeals court in August 2024, officially reinstating the pre-2021 regulation for tipped employees under the Fair Labor Standards Act (FLSA).
The Now-Withdrawn “80/20/30” Rule
The vacated "80/20/30 rule" outlined three work categories for tipped employees:
- Tip-producing work providing direct service to customers
- “Directly supporting” preparatory or assistive work
- Non-tipped work unrelated to customer service
Non-tipped duties (category 3) had to be compensated at the full federal minimum wage. Category 2 work could be paid the tipped rate if performed for less than 30 consecutive minutes or 20% of the total workweek hours. This rule contradicted long-standing DOL guidance and was challenged by business groups.
Legal Dispute
The 80/20/30 rule, adopted under the Biden administration, was contested by the Restaurant Law Center and Texas Restaurant Association. A district court upheld the rule, but the 5th Circuit Court of Appeals vacated it in August 2024, leading to the DOL’s formal withdrawal in December.
Implications for Employers
With the rule nullified, employers of tipped staff have more flexibility in assigning duties without losing tip credit eligibility. However, some state or local jurisdictions may still embrace similar time-based limitations on non-tipped work.
This Just In ... DOL Withdraws 2021 Tipped-Wage Rule
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