DOL Withdraws Tipped-Wage Rule

On Dec. 17, the U.S. Department of Labor (DOL) withdrew a tipped-wage rule that the 5th U.S. Circuit Court of Appeals had vacated in August 2024. 

We’ve gathered articles on the news from SHRM and other outlets.

Withdrawn Rule

The vacated—and now withdrawn—2021 rule, called the “80/20/30 rule,” had identified three categories of work:

• Tip-producing work that provides service to customers for which tipped employees receive tips.
• “Directly supporting” work that is performed in preparation of or to otherwise assist tip-producing customer service work.
• Work that is not part of the tipped occupation and that is neither tip-producing nor directly supporting.

Under the vacated and withdrawn rule, any time spent in the third category had to be compensated at full minimum wage, meaning that no tip credit could be taken. Time spent in the second category could be paid at a tip-credit rate, but only if the work was not performed for a substantial amount of time. “Substantial time” was defined as either more than 30 continuous minutes or more than 20% of the hours in the workweek for which the employer had taken a tip credit.

The 5th Circuit’s decision signaled the end of the 80/20/30 rule that took effect in December 2021. 

(SHRM and Littler)

Background on DOL Rule

The DOL’s vacated and now withdrawn 2021 rule had replaced a regulation adopted by the Trump administration that said workers could be paid the tipped minimum wage if they primarily performed tipped duties.

Two trade groups—the Restaurant Law Center and the Texas Restaurant Association—sued soon after the Biden administration adopted the 2021 rule. The groups were appealing a decision from a district court judge upholding the rule.

The 5th Circuit said the 2021 rule “draws a line for application of the tip credit based on impermissible considerations and contrary to the statutory scheme enacted by Congress.”

(Reuters)

Pre-2021 Language Restored

By withdrawing the 2021 rule, the DOL effectively restored the pre-2021 language of the “dual jobs” regulation for tipped employees under the Fair Labor Standards Act. This is a technical correction to conform to the recent federal appellate decision vacating the DOL 2021 final rule amending the long-standing regulation.

(Jackson Lewis)