Quick Hits
- The U.S. Department of Labor recently updated its tipped-employee guidance to reflect the Fifth Circuit’s 2024 decision in Restaurant Law Center and the reinstatement of the original dual jobs regulation.
- The FAB withdraws outdated materials and clarifies how employers should distinguish tipped and non-tipped work.
- Among other things, the bulletin states that percentage-based limits on duties within a tipped occupation no longer reflect Department policy.
The Dual Jobs Regulation
The FAB summarizes the history of the dual jobs regulation and the interpretation of section 3(t) of the FLSA. Section 3(t) defines a “tipped employee” as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” 29 U.S.C. § 203(t). Because neither the term “occupation” nor the phrase “engaged in an occupation” is defined, the dual jobs regulation provides direction. 29 C.F.R. § 531.56(e). In its simplest form, the dual jobs regulation recognizes that an employee may work in two or more distinct roles, one of which is a tipped occupation and the other of which is not. The best example is that an individual employed by a hotel may work as both a server and a maintenance worker. The dual jobs regulation explains that the employer may take a tip credit against its minimum wage obligation only for the hours the employee spends in the tipped occupation (as a server); for the hours worked in the non-tipped occupation (as a maintenance worker), the employer must pay the full minimum wage or higher.
History of the 80/20 (and 30-Minute) Rule
The three now-withdrawn opinion letters (Opinion Letter FLSA-895 (Aug. 8, 1979), Opinion Letter WH-502 (Mar. 28, 1980), and Opinion Letter FLSA-854 (Dec. 20, 1985)) interpreted the dual jobs regulation more expansively by looking at the time spent performing non-tip-producing duties within a tipped occupation. Over time, the guidance evolved to provide that if a tipped employee spent more than a certain percentage of work time performing non-tip-producing duties (often referred to as “side work”), the employer could not take a tip credit for the time spent on those duties.
Then, in 1988, the Department revised the FOH, adding subsection 30d00(e) to reflect the guidance in the now-withdrawn opinion letters, and added a definitive percentage threshold for permissible time spent performing non-tip-producing work within the tipped occupation. The revision solidified the “80/20” rule, which provided that if an employee spends more than 20 percent of the workweek performing non-tip-producing work (or side work), no tip credit may be taken for that work.
Years later, under the Obama administration, the Department issued its 2021 Dual Jobs Final Rule, which codified the 80/20 rule and added a 30-continuous-minutes rule, under which any non-tip-producing work performed for more than 30 consecutive minutes had to be paid at the full minimum wage or higher. The rule was in effect only briefly. In August 2024, the Fifth Circuit concluded that the 2021 Dual Jobs Final Rule was inconsistent with the FLSA and vacated the revised regulatory text (then 29 C.F.R. §§ 531.56(e)–(f)). The Department’s original 1967 dual jobs regulation was officially reinstated later in 2024 and appropriately focuses on whether the employee performs tasks unrelated to his or her tipped occupation, not on the amount of time spent performing particular non-tip-producing duties within the tipped occupation.
Where We Are Now
To end confusion about the Department’s position on the 80/20 rule, the FAB confirms that any guidance contemplating a percentage-based limit on duties performed within a tipped occupation no longer reflects WHD policy. The appropriate question in determining whether an employee is a tipped employee who may be paid the tip credit wage rate is whether the employee performs tasks unrelated to his or her tipped occupation, not the amount of time spent on non-tip-producing tasks. The Department also references its recent regulatory agenda, highlighting that we can expect a notice of proposed rulemaking to amend various regulatory provisions related to tipped employees under the FLSA.
Employers should continue to distinguish between related duties performed as part of a tipped occupation for which a tip credit may be taken and work performed in a separate, non-tipped occupation for which no tip credit may be taken. Employers should also be aware that many states maintain their own 80/20 laws, and the majority of circuits outside the Fifth Circuit (which is comprised of federal districts in Texas, Louisiana, and Mississippi) that have issued opinions since Restaurant Law Center have concluded that they are not bound by the Fifth Circuit’s ruling and instead rely on their own circuit precedent to uphold and reinforce 80/20 principles.
Ogletree Deakins’ Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Wage and Hour and Hospitality blogs as additional information becomes available.
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