DOL Confirms 80/20 Tip Credit Rule Is Gone, Withdraws 3 Opinion Letters

DOL Confirms 80/20 Tip Credit Rule Is Gone, Withdraws 3 Opinion Letters

The Labor Department's Wage and Hour Division issued Field Assistance Bulletin No. 2026-1 on October 19, 2026. It withdraws three opinion letters on tipped employees dating to 1979, 1980 and 1985, and states that no WHD guidance setting time limits on duties inside a tipped occupation reflects agency policy.

Information last verified on October 23, 2026. This is a developing story; we update it as the record changes.

Jurisdiction scope: This article covers federal enforcement guidance under the Fair Labor Standards Act, issued by the U.S. Department of Labor's Wage and Hour Division. State and local tip credit law is a separate body of law, is often stricter than the federal floor, and is not changed by this bulletin. For the current state figures, see state minimum wage rates for 2026.

What Happened

On October 19, 2026, Wage and Hour Division Administrator Andrew B. Rogers issued Field Assistance Bulletin No. 2026-1. It withdraws three WHD opinion letters that addressed whether an employee counts as a tipped employee under section 3(t) of the Fair Labor Standards Act and how the agency's dual jobs regulation applies: Opinion Letter FLSA-895 (Aug. 8, 1979), Opinion Letter WH-502 (Mar. 28, 1980) and Opinion Letter FLSA-854 (Dec. 20, 1985). The bulletin also confirms that the version of section 30d06(e) of WHD's Field Operations Handbook carrying the 80/20 related-duties guidance, withdrawn on January 14, 2025 by FOH Revision 785, no longer reflects the Division's policy or its reading of the Act. Those letters and the handbook provision built on them, the bulletin tells WHD staff, "should no longer be relied upon as WHD enforcement guidance." A Part 531 rulemaking on tipped employees is in development.

The bulletin is addressed to Regional Administrators, Deputy Regional Administrators, Directors of Enforcement and District Directors. That audience is the point. A Field Assistance Bulletin is sub-regulatory guidance: it tells the Department's own investigators how to work a case. It does not amend the FLSA, it does not change a word of the Code of Federal Regulations, and it does not bind a federal judge deciding a private wage suit.

The 80/20 test was never a statute and never, until 2021, a regulation. WHD built it into the Field Operations Handbook in 1988 at section 30d00(e), by FOH Revision 563, consolidating the three letters now withdrawn. As FAB 2026-1 describes the 1985 letter, a tip credit "could be taken for non-salad bar preparatory work or after-hours clean-up if such duties are incidental to the [servers'] regular duties and are assigned generally to the [server] staff," but not where tipped employees "spend a substantial amount of time in performing general preparation work or maintenance." On the facts the employer presented, 30 to 40 percent of a server's workday counted as substantial. The 1988 handbook turned that judgment into a number: more than 20 percent, and the tip credit was unavailable for the time.

In 2021 the Department codified the approach. The 2021 Dual Jobs Rule, published at 86 FR 60114 on October 29, 2021 (regulatory text at 60158) and effective December 28, 2021, added 29 C.F.R. 531.56(f) and required the full minimum wage whenever non-tipped work that "directly supports" tip-producing work exceeded 20 percent of the workweek or 30 continuous minutes.

The Fifth Circuit struck that rule down in 2024, and the Department then unwound it in stages. It published a technical amendment titled "Tip Regulations Under the Fair Labor Standards Act (FLSA); Restoration of Regulatory Language" at 89 FR 101884, effective on its December 17, 2024 publication date, removing the 2021 regulatory text and reinstating the regulation as it read before the rule took effect. WHD then pulled the 80/20 language out of the Field Operations Handbook on January 14, 2025. FOH 30d06 as it now reads tracks the 1967 regulation and contains no percentage and no minute count anywhere.

So by the time this bulletin issued, the 80/20 test had already been vacated in court, deleted from the CFR and removed from the handbook. What FAB 2026-1 adds is the formal withdrawal of the three source letters, which had stayed posted and citable through all of it, plus one broader sentence of policy:

"This FAB confirms that any guidance that contemplates specific time limits on duties performed within a tipped occupation no longer reflects WHD policy." Field Assistance Bulletin No. 2026-1, at 5-6

What the Law Actually Says

Two statutory provisions

Section 3(t) defines the category. Under 29 U.S.C. 203(t), a "tipped employee" means "any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips." Congress fixed that figure at $20 in the 1966 amendments, raised it to $30 in 1977, and has not revisited it since.

Section 3(m)(2)(A) is the tip credit itself. It sets what an employer must pay a tipped employee as the sum of two clauses: "the cash wage paid such employee which for purposes of such determination shall be not less than the cash wage required to be paid such an employee on August 20, 1996," plus "an additional amount on account of the tips received by such employee which amount is equal to the difference between the wage specified in clause (i) and the wage in effect under section 206(a)(1) of this title."

Note that the statute names no dollar figure. The cash wage required on August 20, 1996 was $2.13. The wage in effect under 29 U.S.C. 206(a)(1) is $7.25 an hour. The difference, $5.12, is the maximum tip credit, and the same subsection adds that the tip-based amount "may not exceed the value of the tips actually received by an employee." Two further conditions ride along: the employer must have informed the employee of the subsection's provisions, and the employee must have retained all tips, subject to a lawful pool among employees who customarily and regularly receive tips.

Read the operative words in section 3(t) carefully, because the whole dispute turns on them. The statute asks whether an employee is "engaged in an occupation" in which tips customarily and regularly exceed $30 a month. It does not ask what task the employee is performing at a given moment, and it does not ask whether that task produces a tip.

The 1967 dual jobs regulation

The regulation is 29 C.F.R. 531.56(e). FAB 2026-1 says the 1967 version governs, and the published CFR bears that out: paragraph (e) in the annual edition revised as of July 1, 2025 is word for word identical to paragraph (e) in the 2020 edition, the section's source note runs from 32 FR 13575 (Sept. 28, 1967) through 89 FR 101887 (Dec. 17, 2024), and paragraph (f) is simply absent. The text below is the current text, and it is the text the Department and the Fifth Circuit both identify as the 1967 regulation:

"In some situations an employee is employed in a dual job, as for example, where a maintenance man in a hotel also serves as a waiter. In such a situation the employee, if he customarily and regularly receives at least $30 a month in tips for his work as a waiter, is a tipped employee only with respect to his employment as a waiter. He is employed in two occupations, and no tip credit can be taken for his hours of employment in his occupation of maintenance man. Such a situation is distinguishable from that of a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses. It is likewise distinguishable from the counterman who also prepares his own short orders or who, as part of a group of countermen, takes a turn as a short order cook for the group. Such related duties in an occupation that is a tipped occupation need not by themselves be directed toward producing tips." 29 C.F.R. 531.56(e)

The regulation draws one line, and it runs between occupations rather than through a clock. On one side is a worker holding two separate jobs for the same employer. Hours in the non-tipped job get no tip credit and must be paid at the full minimum wage. On the other side is a worker in a single tipped occupation who performs duties related to it that do not themselves generate a tip. Those hours stay inside the tipped occupation, and the closing sentence says so outright: such related duties "need not by themselves be directed toward producing tips."

A percentage test asks a different question, namely how much of the shift went to work that produced no tips. The regulation never asks it. Its own vocabulary is qualitative, not quantitative: the examples describe a waitress who "spends part of her time" on side work and who "occasionally" washes dishes. Those words are not nothing, but they are not a stopwatch either. WHD's current handbook provision, FOH 30d06(b), repeats them rather than converting them into a figure, saying a tipped employee remains engaged in the tipped occupation when performing related non-tipped duties "occasionally" or for "part of the time."

What the Fifth Circuit held

Restaurant Law Center v. U.S. Department of Labor, 120 F.4th 163 (5th Cir. 2024), No. 23-50562, came up from the Western District of Texas, USDC No. 1:21-CV-1106. The Restaurant Law Center and the Texas Restaurant Association challenged the 2021 Dual Jobs Rule. Chief Judge Jennifer Walker Elrod wrote for a panel that also included Circuit Judge Graves and District Judge Ashe of the Eastern District of Louisiana, sitting by designation. The panel granted the government's petition for panel rehearing, withdrew its August 23, 2024 opinion and substituted the opinion filed October 29, 2024.

The holding was that the rule failed the Administrative Procedure Act twice:

"Because the Final Rule is contrary to the Fair Labor Standards Act's clear statutory text, it is not in accordance with law. And because it imposes a line-drawing regime that Congress did not countenance, it is arbitrary and capricious." Restaurant Law Center v. U.S. Department of Labor, No. 23-50562 (5th Cir. Oct. 29, 2024)

On the statutory point the court was blunt: "The FLSA does not ask whether duties composing that given occupation are themselves each individually tip-producing." If a core duty of a server is bussing and setting up tables, the court wrote, "the server is undoubtedly engaged in his occupation. It does not matter whether he is tipped or not for those duties." The rule's line, it added, "discounts many core duties of an occupation when those duties do not themselves produce tips." As a remedy the court reversed the district court, rendered summary judgment for the trade associations, and vacated "the Final Rule insofar as it modifies 29 C.F.R. 531.56 as promulgated in 1967."

Then comes the sentence that most summaries of this story leave out:

"As a final point, in no way does our holding bear on the validity of the dual-jobs regulation, which is not challenged here." Restaurant Law Center v. U.S. Department of Labor, No. 23-50562 (5th Cir. Oct. 29, 2024)

The court kept the 1967 regulation and said why: "'Dual' really means dual. The 1967 regulation envisioned two unrelated and separate occupations: maintenance work and waitressing." What it rejected was the attempt to run the dual jobs framework down inside a single occupation, task by task and minute by minute. The dual jobs rule survived. The percentage test did not.

One attribution point is worth flagging, because it affects how far this decision reaches. FAB 2026-1 describes the court as having "held that 'percentage-based' approaches" focused on time spent are "inconsistent with the statute." The passage the bulletin pins at 120 F.4th 174 is the passage where the court distinguishes the surviving 1967 regulation from the vacated rule, quoting Judge Graber's partial dissent in Marsh v. J. Alexander's LLC, 905 F.3d 610 (9th Cir. 2018) (en banc), for the point that the dual jobs regulation "focusses on whether the employee performs tasks unrelated to his or her tipped occupation," not the "amount of time" spent on untipped tasks. The judgment itself ran against the 2021 rule. The broader reading of that passage is WHD's, offered as persuasive authority rather than as the court's mandate.

Analysis: Why This Matters

The following is analysis from the Recording Law Editorial Team.

Read structurally, FAB 2026-1 is mostly housekeeping with one substantive sentence attached, and the sentence is the part worth attention.

The housekeeping was overdue. The three withdrawn letters were zombie authority. Their regulatory offspring had been vacated, the CFR text had been deleted and the handbook provision had been pulled, yet the letters themselves stayed posted on a government website where any party to a wage dispute could point at them as the agency's published view. Withdrawing them closes that gap, and the bulletin concedes the real reason, stating that the letters "no longer reflect Division policy and, in some respects, do not accurately state the law."

The substantive sentence is broader than the thing it cleans up. It does not say the 80/20 guidance is withdrawn, which was already true. It says that any guidance contemplating specific time limits on duties performed within a tipped occupation no longer reflects WHD policy. That is a statement about a category, not a provision. It reaches the 20 percent figure, the 30 continuous minutes figure, and any future attempt to reconstruct either from an older letter or a regional practice.

What it cannot reach is a courtroom. WHD can bind its investigators; it cannot bind a judge. And the appellate decisions that engaged most directly with 80/20 arose in private suits under deference doctrines rather than in enforcement actions. The Eighth Circuit in Fast v. Applebee's International, Inc., 638 F.3d 872 (8th Cir. 2011), and the en banc Ninth Circuit in Marsh gave WHD's sub-regulatory guidance Auer deference and treated it as a permissible reading of the dual jobs regulation. The Eleventh Circuit in Rafferty v. Denny's, Inc., 13 F.4th 1166 (11th Cir. 2021), declined to defer to the 2018 guidance that had rescinded 80/20, holding it was not a reasonable interpretation of the regulation. Meanwhile the Supreme Court overruled Chevron in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), the decision the Fifth Circuit leaned on here. How courts outside the Fifth Circuit now read the 1967 regulation, with the guidance those earlier cases deferred to no longer in existence, is a question the present record does not answer.

The practical change inside an investigation is a change in the kind of question being asked. A percentage is auditable: pull the schedules, add the side-work minutes, compare to the workweek. A relational test is not. Asking whether a duty belongs to this occupation or constitutes a different occupation requires judgment about what a job consists of, and it produces fewer clean answers in both directions. An employer loses a bright line that told it when it was safe. A worker loses a bright line that told her when she was owed. Neither side gets certainty from the trade.

The stakes are structural rather than marginal, because the tip credit is leveraged. At $2.13 in cash against a $7.25 obligation, just over 70 percent of the federal minimum wage for those hours rides on tips. Every hour correctly or incorrectly classified as inside the tipped occupation moves that leverage.

The shape of this episode will also look familiar to anyone who followed the salary-threshold fight. An ambitious wage rule, litigation in Texas, vacatur, a technical amendment restoring older regulatory text, then sub-regulatory cleanup after the fact. That is nearly the same sequence that produced the 2024 overtime rule that courts vacated, where the Department ultimately restored the 2019 thresholds by technical amendment. The recurring lesson in both is procedural: the durable instrument is a regulation that survives review, and sub-regulatory guidance is only ever as strong as the regulation underneath it.

Which is presumably why the Department now says it is going back to notice and comment. That is the route Judge Ikuta's dissent in Marsh argued should have been used for the 20 percent cap in the first place, on the view that it functioned as a legislative rule rather than an interpretive one.

How This Affects You

None of the following is advice about any particular job or payroll practice. It is the general shape of the federal rule as of October 23, 2026.

The protection that remains strongest is the occupation line. Where an employer has a worker performing a separate non-tipped job, the tip credit cannot be applied to those hours, and the regulation's own example is the hotel maintenance worker who also waits tables. Maintenance hours get the full minimum wage. That rule was not challenged in the Fifth Circuit and was not touched by this bulletin.

The arithmetic also still has to work. A tip credit is only valid if cash wages plus tips actually reach the full minimum wage for the workweek; if they do not, the employer owes the shortfall. Section 3(m)(2)(A) further conditions the credit on the employee having been informed of the subsection's provisions and on the employee having retained all tips, subject to a lawful tip pool. Separately, 29 U.S.C. 203(m)(2)(B) bars an employer from keeping tips received by its employees for any purpose, including letting managers or supervisors keep a portion, whether or not a tip credit is taken. Deductions from a paycheck are a distinct question with its own rules, covered in our explainer on which paycheck deductions are legal and which are not.

State law is where much of the actual money sits, and this bulletin does not reach it. Some states require employers to pay the full state minimum wage before tips, so no tip credit is available at all. Others set a cash wage above the federal $2.13, define tipped employment differently, or regulate side work directly. We are deliberately not printing per-state figures here, because they change on each state's own schedule and a stale number costs a reader real money. WHD publishes a state-by-state table of tipped minimum wages and tells readers to confirm with the relevant state labor office, which is the authority on its own state's law.

Where someone believes a federal violation has occurred, the Wage and Hour Division takes complaints by phone at 1-866-487-9243 and through its complaints page at dol.gov. The agency states that complaints are confidential, that "the name of the complainant, the nature of the complaint, and whether a complaint exists may not be disclosed," and that an employer cannot retaliate against a worker for filing a complaint or cooperating with an investigation. For general background on how wage recovery works, see our guide to filing an unpaid wage claim. Because employment in most states is terminable at will, the remedies available after a firing that follows a complaint depend heavily on which exception applies, which is the subject of our overview of at-will employment and its exceptions.

What Happens Next

The bulletin closes by pointing at a rulemaking. "As noted in the Department's most recent regulatory agenda," it states, "the Department is developing a notice of proposed rulemaking to amend various regulatory provisions in Subpart D of Part 531, related to tipped employees under the Act." It adds that once a proposal publishes, the Department "will welcome comments on any proposed rule impacting tipped employees."

What that proposal will contain is not public. The bulletin does not describe its content and gives no target publication date, and we are not going to guess at either. Until a proposed rule appears in the Federal Register, the operative texts are the ones set out above: 29 U.S.C. 203(m)(2)(A) and 203(t), the 1967 version of 29 C.F.R. 531.56(e), and FOH 30d06 as revised January 14, 2025. We will update this page when a proposal publishes.

This is general legal information, not legal advice. It covers federal enforcement guidance under the Fair Labor Standards Act issued by the U.S. Department of Labor's Wage and Hour Division. It does not cover the tip credit, minimum wage or side-work rules of any individual state, and it reflects sources verified on October 23, 2026. Laws change and this story is developing; consult a lawyer licensed in your jurisdiction about your specific situation.

Related articles

• Minimum wage by state for 2026
• How the 2024 overtime rule was vacated and the $35,568 threshold restored
• Final paycheck deadlines and penalties by state
• Whistleblower protections and how to report

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Last updated: 2026-10-23. This is a developing story; details verified as of 2026-10-23.

Frequently Asked Questions

Is the 80/20 tip credit rule still in effect?

Not as federal enforcement policy. WHD removed the 80/20 related-duties guidance from its Field Operations Handbook on January 14, 2025, and Field Assistance Bulletin No. 2026-1 (Oct. 19, 2026) confirms that no guidance setting specific time limits on duties performed within a tipped occupation reflects WHD policy. The underlying 2021 regulation that codified the test was vacated by the Fifth Circuit and removed from the CFR effective December 17, 2024.

Did FAB 2026-1 change the law?

No. A Field Assistance Bulletin is sub-regulatory guidance directed to the Wage and Hour Division's own investigators. It does not amend the Fair Labor Standards Act, it alters no text in the Code of Federal Regulations, and a court deciding a private FLSA suit is not bound by it.

Can an employer now assign unlimited side work to a tipped employee?

Federal enforcement guidance no longer measures related, non-tip-producing duties against a percentage or a minute count. The tip credit still cannot be applied to hours worked in a separate non-tipped occupation under 29 C.F.R. 531.56(e), the employee's cash wage plus tips must still reach the full minimum wage for the workweek, and state law may impose its own limits that this federal bulletin does not touch.

What is the federal tipped minimum wage in 2026?

An employer taking the tip credit must pay a direct cash wage of at least $2.13 per hour and may claim a maximum tip credit of $5.12 per hour against the $7.25 federal minimum wage set by 29 U.S.C. 206(a)(1). If tips do not actually bring the employee to $7.25, the employer owes the difference.

Which opinion letters were withdrawn?

Three: Opinion Letter FLSA-895 (Aug. 8, 1979), Opinion Letter WH-502 (Mar. 28, 1980) and Opinion Letter FLSA-854 (Dec. 20, 1985). All three addressed whether an employer could take a tip credit for preparatory, cleaning and stocking work performed by servers.

What did Restaurant Law Center v. Department of Labor decide?

In Restaurant Law Center v. U.S. Department of Labor, 120 F.4th 163 (5th Cir. 2024), the Fifth Circuit held the Department's 2021 Dual Jobs Rule both contrary to the FLSA's text and arbitrary and capricious, and vacated it. The panel expressly reserved the 1967 dual jobs regulation, writing that "in no way does our holding bear on the validity of the dual-jobs regulation, which is not challenged here."

Does this change my state's tip credit rules?

No. State tip credit law is separate from federal enforcement guidance. Several states require employers to pay the full state minimum wage before tips, others set a cash wage above the federal $2.13, and some regulate side work directly. WHD publishes a state-by-state table of tipped minimum wages and advises confirming with the relevant state labor office, which is the authority on its own law.

Is someone a tipped employee because of their job title?

No. Section 3(t) of the FLSA 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." The regulation adds that individual tip receipts control, so a newly hired server is not a tipped employee merely because other servers at the establishment clear the threshold. 29 C.F.R. 531.56(c).