{"id":6969,"date":"2024-08-23T12:30:00","date_gmt":"2024-08-23T12:30:00","guid":{"rendered":"https:\/\/www.brightmine.com\/us\/?post_type=resources&p=6969"},"modified":"2026-02-05T04:32:14","modified_gmt":"2026-02-05T09:32:14","slug":"dol-tip-credit-rule-struck-down","status":"publish","type":"resources","link":"https:\/\/www.brightmine.com\/us\/resources\/hr-compliance\/wage-hour\/minimum-wage\/dol-tip-credit-rule-struck-down\/","title":{"rendered":"DOL tip credit rule struck down by 5th Circuit"},"content":{"rendered":"\n
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by Michael Cardman<\/strong>, Senior Legal Editor at Brightmine<\/p>\n<\/div>\n\n\n\n

A 2021 US Department of Labor (DOL) regulation<\/a> that made it more difficult for employers to claim a minimum wage tip credit was struck down today by a federal appellate court.<\/p>\n\n\n\n

The 5th Circuit Court of Appeals ruled<\/a> in Restaurant Law Center v. US Department of Labor<\/em> that the regulation is arbitrary and capricious “because it draws a line for application of the tip credit based on impermissible considerations and contrary to the statutory scheme enacted by Congress.”<\/p>\n\n\n\n

Often referred to as the “80\/20 plus 30 rule,” the regulation allowed employers to claim a tip credit only during the time their employees spend on tip-producing work or on directly supporting work that takes up no more than 20% of their workweek<\/a> and no more than 30 continuous minutes at any one time.<\/p>\n\n\n\n

Significantly, the 5th Circuit said the U.S. Supreme Court’s recent ruling<\/a> striking down the Chevron doctrine \u2014 which had required courts to defer to an administrative agency’s interpretation of a law if the text of the law is ambiguous and the agency’s interpretation is a reasonable one \u2014 made the appellate court “depart from the district court’s analysis at the very start.”<\/p>\n\n\n\n

Background<\/h2>\n\n\n\n

A Fair Labor Standards Act (FLSA) regulation<\/a> allows employers to claim the minimum wage tip credit for some of the time that a tipped employee spends in duties related to their occupation (known in the industry as “sidework”), even though the duties are not by themselves directed toward producing tips. For example, a waitperson who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is considered to be engaged in a tipped occupation even though these duties are not tip-producing.<\/p>\n\n\n\n

Longstanding DOL enforcement<\/a> guidance had prohibited an employer from taking a tip credit for time spent performing related duties \/ sidework if they took up more than 20% of an employee’s workweek. Commonly referred to as the “80\/20 rule,” it was the basis of several lawsuits.<\/p>\n\n\n\n

In 2018, under the Trump administration, the DOL issued an opinion letter, followed up by a field assistance bulletin<\/a> in 2019, superseding the 80\/20 rule. The DOL said it would no longer limit the amount of related duties \/ sidework that could be performed as long as the work was performed “contemporaneously with” or for a “reasonable time” before or after direct customer-service duties and all other requirements of the FLSA were met.<\/p>\n\n\n\n

In 2020, the DOL issued a final rule<\/a> that would have, among other things, codified this stance into a notice-and-comment regulation entitled to deference from the courts.<\/p>\n\n\n\n

Under the Biden administration, the DOL changed course. In 2021, it postponed<\/a> the Trump administration’s rule \u2014 withdrawing the “reasonable time” standard and replacing it with the 80\/20-plus-30 rule.<\/p>\n<\/div>\n\n\n\n

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About the author<\/h3>\n\n\n\n
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\"Michael<\/figure>\n<\/div>\n\n\n\n
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Michael Cardman<\/strong>
Senior Legal Editor, Brightmine<\/p>\n\n\n\n

Michael Cardman has more than 20 years of experience in publishing and has specialized in employment law for more than 15 years. As a member of the Brightmine editorial team, he focuses on wage and hour compliance, including minimum wage, overtime, employee classification, hours worked, independent contractors and child labor.<\/p>\n\n\n\n

Michael holds a Bachelor of Arts degree in English from the University of Virginia. Prior to joining Brightmine, he was the managing editor for Thompson Publishing Group’s library of HR publications. In this role, he was responsible for overseeing books, manuals and online tools covering a variety of topics such as wage and hour, employee leaves, employee benefits and compensation.<\/p>\n\n\n\n

Connect with Michael on LinkedIn<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n\n\n\n

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    The Court found the regulation to be arbitrary and capricious. 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