DOL withdraws 3 opinion letters on tipped employees

Background

The WHD withdrew the 1979, 1980, and 1985 opinion letters about the application of dual jobs regulations to tipped employees. Its new bulletin clarifies that the current dual jobs regulation focuses on whether an employee performs duties related to the employee’s tipped occupation, rather than imposing a specific percentage-based limit on the time an employee may spend performing related, non-tipped duties within that occupation.

The new bulletin follows a 2024 federal court decision that vacated the WHD’s 2021 dual jobs final rule. After that decision, the WHD removed the regulatory text adopted under the 2021 rule and reinstated the original dual jobs regulations.

For years, the tip credit wasn’t available when tipped employees devoted more than 20 percent of their time to non-tip-producing activities (cleaning, refilling napkin holders, etc.). This position came to be known as the “80/20” rule.

The new bulletin clarifies that no current WHD guidance relies on the former percentage-based limit on the time a tipped employee may spend performing related, non-tipped duties – the 80/20 rule. The WHD removed its 80/20 rule guidance from its Field Operations Handbook in January 2025.

What does a ‘tip credit’ mean?

Under the FLSA, employers may take a partial credit (tip credit) against their minimum wage payment obligation to a tipped employee based on tips received and retained by the employee.

In other words, employers may pay tipped employees a lower hourly wage because workers will likely earn additional money via customer tips for services performed. If, however, tipped workers don’t make enough money in tips to satisfy the minimum hourly wage, employers must pay them additional money to comply with FLSA standards. Currently, the FLSA’s hourly tipped wage is $2.13.

The FLSA defines tipped employees as employees who engage in an occupation in which they customarily and regularly receive more than $30 a month in tips.

What’s next?

Some courts might choose to disregard the WHD’s current interpretation and look instead to related case law that developed over the decades. State or local laws also might come into play.

The WHD is developing a notice of proposed rulemaking to amend various regulations for tipped employees under the FLSA. A proposed rule was scheduled for August, but the WHD missed that time frame. Public comments will be welcome on the proposed rule once it’s published in the Federal Register.

Key to remember: The WHD took another step toward removing the 80/20 rule for determining when employers may take a tip credit.