Executive Summary: On October 19, 2026, the U.S. Department of Labor (DOL) issued Field Assistance Bulletin No. 2026-1, formally withdrawing three opinion letters that served as the foundation for the so-called “80/20 Rule” governing tipped employees under the Fair Labor Standards Act (FLSA). The DOL also confirmed that its current enforcement guidance does not impose a percentage-based limit on the time a tipped employee may spend performing related, non-tip-producing duties. Instead, the inquiry focuses on whether the employee’s duties are related to the employee’s tipped occupation.
Background
The FLSA permits employers that meet certain requirements to take a tip credit toward their federal minimum wage obligations for tipped employees. A “tipped employee” is an employee engaged in an occupation in which the employee customarily and regularly receives more than $30 per month in tips. Under current federal law, an employer taking the tip credit must pay at least $2.13 per hour in direct cash wages and may claim up to $5.12 per hour as a tip credit, provided the employee receives enough tips to earn at least the federal minimum wage.
The DOL’s “dual jobs” regulation, 29 C.F.R. § 531.56(e), recognizes that an employee may perform two separate occupations for the same employer. An employer may take the tip credit only for the time the employee works in the tipped occupation. The regulation also recognizes, however, that tipped employees may perform related duties that do not themselves produce tips, such as when a server cleans and sets tables, makes coffee, or occasionally washes dishes.
Through opinion letters issued in 1979, 1980, and 1985, the DOL developed what became known as the 80/20 Rule. Under that approach, an employer generally could not take the tip credit when an employee spent more than 20% of the employee’s weekly working time performing related, non-tip-producing duties. In 2021, the DOL incorporated that framework into a final regulation and added a 30-minute limit on continuous non-tip-producing work.
The Fifth Circuit Vacates the 80/20/30 Rule
In 2024, the U.S. Court of Appeals for the Fifth Circuit vacated the 2021 rule in Restaurant Law Center v. U.S. Department of Labor, 120 F.4th 163 (5th Cir. 2024). The court held that the rule conflicted with the FLSA’s text by focusing on the discrete tasks an employee performed rather than the employee’s occupation. The court also found that the rule’s time-based framework was arbitrary and capricious.
Following that decision, the DOL restored the original dual jobs regulation and removed the 80/20 guidance from its Field Operations Handbook.
DOL Formally Withdraws the 80/20 Guidance
Field Assistance Bulletin No. 2026-1 takes another step away from the 80/20 framework. The DOL formally withdrew Opinion Letters FLSA-895, WH-502, and FLSA-854, explaining that they no longer reflect the agency’s policy or interpretation of the FLSA and, in some respects, do not accurately state the law. The bulletin also confirms that the former Field Operations Handbook provision implementing the 80/20 Rule should no longer be relied upon as DOL enforcement guidance.
Under the DOL’s current position, there is no percentage-based limit on the time a tipped employee may spend performing related, non-tip-producing duties within the tipped occupation. The relevant question is whether the employee is performing duties related to the tipped occupation or working in a separate, non-tipped occupation.
What Happens Now?
The DOL is developing a proposed rule to amend the regulations applicable to tipped employees under the FLSA and intends to invite public comments after the proposal is published. Although the 80/20 Rule is no longer part of the DOL’s enforcement guidance, employers should continue to distinguish between related duties performed as part of a tipped occupation and work performed in a separate, non-tipped occupation. Employers should also remain mindful of applicable state law and judicial precedent, where courts may continue to consider pre-2021 decisions applying the 80/20 framework.
The Bottom Line
For employers that rely on the tip credit, particularly in the restaurant and hospitality industries, the bulletin provides additional clarity regarding the DOL’s current enforcement position. The DOL will focus on whether an employee’s duties are related to the tipped occupation rather than applying a percentage-based limit to related, non-tip-producing work.
Employers should review the duties performed by tipped employees, confirm that they are not taking a tip credit for work performed in a separate, non-tipped occupation, and monitor the DOL’s forthcoming proposed rule.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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