The U.S. Department of Labor (DOL) recently withdrew a 2021 tipped-wage rule vacated by a federal appeals court in August 2024, officially reinstating the pre-2021 regulation for tipped employees under the Fair Labor Standards Act (FLSA).
The Now-Withdrawn “80/20/30” Rule
The vacated “80/20/30 rule” outlined three work categories for tipped employees:
- Tip-producing work providing direct service to customers
- “Directly supporting” preparatory or assistive work
- Non-tipped work unrelated to customer service
Non-tipped duties (category 3) had to be compensated at the full federal minimum wage. Category 2 work could be paid the tipped rate if performed for less than 30 consecutive minutes or 20% of the total workweek hours. This rule contradicted long-standing DOL guidance and was challenged by business groups.
Legal Dispute
The 80/20/30 rule, adopted under the Biden administration, was contested by the Restaurant Law Center and Texas Restaurant Association. A district court upheld the rule, but the 5th Circuit Court of Appeals vacated it in August 2024, leading to the DOL’s formal withdrawal in December.
Implications for Employers
With the rule nullified, employers of tipped staff have more flexibility in assigning duties without losing tip credit eligibility. However, some state or local jurisdictions may still embrace similar time-based limitations on non-tipped work.
For additional Employee Benefits resouces, contact INSURICA today.
Copyright © 2025 Smarts Publishing. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.
About the Author
Share This Story
Related Blogs
AI Powered Benefits Solutions: Navigating Rising Costs in 2026
Health benefit costs are projected to rise nearly 9% in 2026, putting significant pressure on employers to balance affordability with employee satisfaction. Against this backdrop, artificial intelligence (AI) is emerging as a transformative tool in the benefits space.
Understanding Home Renovation Risks
Whether you’re building a new home addition, adding a feature like a swimming pool, redoing a bathroom or upgrading an electrical system, understanding and addressing possible renovation risks is critical.
Understanding Your School Property Schedule
Your property schedule is one of the most important—and often overlooked—documents in your insurance program. While it may look like a simple list of buildings, values, and locations, this schedule plays a critical role in how your coverage responds when a loss occurs.