{"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":"2026-06-24T08:16:39","modified_gmt":"2026-06-24T13:16:39","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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Written by: <\/p>\n\n\n

Michael Cardman<\/a><\/div><\/div>\n\n\n\n
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Share<\/p>\n\n\n

<\/a><\/a><\/a><\/a><\/div><\/div>\n<\/div>\n<\/div>\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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Share<\/p>\n\n\n

<\/a><\/a><\/a><\/a><\/div><\/div>\n<\/div>\n\n\n\n
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\"Michael<\/div><\/div>\n\n\n\n
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Written by: <\/p>\n\n\n

Michael Cardman<\/a><\/div><\/div>\n<\/div>\n\n\n\n
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The Court found the regulation to be arbitrary and capricious. It also noted the influence the U.S. Supreme Court’s recent ruling striking down the Chevron doctrine had on its analysis.<\/p>\n","protected":false},"author":49,"featured_media":8262,"comment_status":"closed","ping_status":"closed","template":"resource-author","categories":[55],"tags":[],"topic":[63,73],"class_list":["post-6969","resources","type-resources","status-publish","has-post-thumbnail","hentry","category-hr-news","topic-employment-law-updates","topic-minimum-wage"],"yoast_head":"\nDOL tip credit rule struck down by 5th Circuit | Brightmine<\/title>\n<meta name=\"description\" content=\"The 5th U.S. Circuit Court of Appeals has struck down the DOL tip credit rule, finding it arbitrary and capricious.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.brightmine.com\/us\/resources\/hr-compliance\/wage-hour\/minimum-wage\/dol-tip-credit-rule-struck-down\/\" 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