DOL Officially Ends 80/20 Rule, Changing How Employers Track Non-Tipped Work

The “80/20” rule is officially off the table, for now.

The U.S. Department of Labor (DOL) Wage and Hour Division (WHD) withdrew the decades-old opinion letters behind the 80/20 rule and confirmed that WHD will no longer enforce time limits on duties performed within a tipped occupation.

The Oct. 19 Field Assistance Bulletin spells the official end of the 80/20 rule, struck down in 2024, that employers used when relying on the tip credit under the Fair Labor Standards Act (FLSA) to calculate tipped employee wages.

The relief may not last, however. In light of the midterm election results, legislative efforts to restore the 80/20 rule by statute could gain momentum. Restaurants, hotels, casinos and other hospitality employers should take advantage of the current flexibility while keeping an eye on Congress.

The Rise of the 80/20 Rule for Tipped Employee Work

The FLSA allows employers to pay a “tipped employee” a cash wage of $2.13 per hour and take a tip credit of up to $5.12 per hour, as long as tips bring the employee to at least the federal minimum wage.

Since 1988, WHD’s Field Operations Handbook limited the tip credit when tipped employees spent more than 20% of their time on related but non-tip-producing work, such as setting tables or making coffee. That guidance grew out of WHD opinion letters issued in 1979, 1980 and 1985.

In 2021, the Biden administration’s DOL went further and codified the 80/20 standard in a final rule that also barred the tip credit for any stretch of more than 30 continuous minutes of “directly supporting” work.

How Courts and the DOL Rolled Back the 80/20 Rule

In 2024, the Fifth Circuit vacated the 2021 rule. Applying Loper Bright, which ended Chevron deference, the court held that the rule was contrary to the FLSA’s text and arbitrary and capricious.

The 2021 rule asked whether an employee is “engaged in an occupation” that customarily and regularly receives tips. In the court’s view, that phrase referred to the job as a whole, and the statute “does not ask whether duties composing that given occupation are themselves each individually tip-producing.” The court said the rule replaced the occupation with “the timesheet.” It also observed that a server who has been setting and bussing tables could not sensibly stop being a tipped employee at minute 31 “even though the duty itself has not changed.”

The DOL then reinstated the 1967 regulation and, on Jan. 14, 2025, removed the 80/20 guidance from its Field Operations Handbook. The latest Field Assistance Bulletin, issued on Oct. 19, 2026, completed the process by withdrawing the 1979, 1980 and 1985 opinion letters. The Field Assistance Bulletin also stated that “any guidance that contemplates specific time limits on duties performed within a tipped occupation no longer reflects WHD policy.”

What This Means for Employers

Employers now need to determine if a task is part of the employee’s tipped occupation, not how much time the employee spends on it. Employers no longer need to track related side work against a 20% threshold or a 30-minute clock. Some limits remain, however:

• • • Separate jobs still require the full minimum wage. Under the 1967 dual jobs regulation, an employee who works in a genuinely separate, non-tipped occupation, such as a hotel maintenance worker who also waits tables, must receive the full minimum wage for that work.
    • Core tip credit requirements are unchanged. Employers must still pay at least $2.13 per hour in cash wages, make sure tips bring employees to the minimum wage, and satisfy the other conditions.
    • State law may be stricter. Many states have their own tip credit rules, and some prohibit the tip credit entirely.

The Midterms and the Risk of a Legislative Revival

Because the Fifth Circuit relied on the FLSA’s text, a future administration could not easily restore the 80/20 rule by regulation alone. But legislators could push for legislation to amend the FLSA’s tip credit provisions and reimpose time-based limits on related duties when the new Congress convenes. Any bill would still need to pass both chambers and be signed by the president or survive a veto. Employers should also watch the DOL’s planned proposed rule on tipped employees and developments in state legislatures.

Recommended Steps

• • • Update tip credit policies, timekeeping practices and manager training that still refer to 20% or 30-minute limits.
    • Make sure tipped employees are not routinely assigned to work in a separate, non-tipped occupation, such as dedicated maintenance or kitchen roles.
    • Confirm compliance with state and local tip credit rules.
    • Monitor the DOL’s forthcoming proposed rule and any federal or state legislation, and consider submitting comments or engaging through industry associations.

Contact Mark Fijman or any member of the Phelps labor and employment team with questions.