Fifth Circuit Court of Appeals Overturns the DOL’s 80/20/30 Tip Credit Rule
On August 23, 2024, the Fifth Circuit Court of Appeals invalidated the US Department of Labor (the “DOL”) 80/20/30 rule, or Final Rule, for tipped employees, holding that it was arbitrary and capricious and contrary to the ordinary meaning of the Fair Labor Standards Act’s statutory language. Rest. L. Ctr. v. United States Dep't of Lab., No. 23-50562, 2024 WL 3911308 (5th Cir. Aug. 23, 2024)
With 80/20/30 thrown by the wayside, Federal law allows employers to take a tip credit against employee wages so long as an employee works a tipped occupation, customarily receiving more than $30 per week in tips, regardless of the time the employee spends on tip-supporting or non-tip producing duties.
Previously, under the now kaput Final Rule, employers could only pay a tipped wage if an employee spent at least 80% of their week performing tipped work, no more than 20% of their week performing non-tipped, guest-supporting work, and non-tipped, guest-supporting work could only be performed in 30-minute increments. Those days are gone.
While the Fifth Circuit decision simplifies things, employers remain subject to complicated compliance obligations under both state and federal wage and hour law.
