On October 19, 2026, the US Department of Labor (DOL) withdrew three opinion letters from the 1970s and 1980s addressing when employers may take a tip credit for tipped employees who perform non-tip-producing duties. The withdrawal further distances the DOL from the former 80/20 Rule, under which employers could lose the tip credit when employees spent more than 20 percent of their time on certain supporting work.
Rather than focusing on a percentage of time spent on duties, the DOL’s current position focuses on the employee’s occupation as a whole—not whether every task performed during a shift directly produces tips. This development gives hospitality employers greater flexibility when assigning customary supporting duties (e.g., making coffee, rolling silverware, restocking service stations, or setting tables) to servers, bartenders, and other tipped employees. It does not, however, eliminate the federal Dual Jobs Rule or override more protective state or local wage laws.
The Federal Tip Credit
The Fair Labor Standards Act (FLSA) generally requires covered employers to pay employees at least the federal minimum wage of $7.25 per hour. For an employee engaged in a tipped occupation, the FLSA permits an employer to satisfy part of that obligation through a credit for tips received by the employee. At the federal level, an employer may pay a direct cash wage as low as $2.13 per hour and claim a tip credit for the difference, provided the applicable statutory requirements are met. A tipped employee is one who is engaged in an occupation in which the employee customarily and regularly receives more than $30 per month in tips.
Why the DOL Withdrew the Old Opinion Letters
Although the 80/20 Rule was invalidated and rescinded by the DOL, the three older opinion letters remained available as agency guidance. The DOL withdrew the letters because they no longer reflected Wage and Hour Division policy and could be misread as requiring duty-by-duty tip analysis or time limits on duties within a tipped occupation.
The withdrawal aligns the agency’s guidance with an occupation-based analysis. The central question now is whether the employee is performing tasks related to the tipped occupation—not whether every task directly generates tips or satisfies a particular percentage limitation. Accordingly, an employer does not necessarily lose the benefit of claiming the tip credit merely because a server performs supporting work.
The Dual Jobs Rule Remains in Effect
The withdrawal of the opinion letters does not eliminate the DOL’s Dual Jobs Rule. That regulation distinguishes between:
- An employee working in two separate occupations, only one of which is tipped
- A tipped employee performing related duties that are part of the tipped occupation, even though those duties do not directly generate tips
For example, an employee who works both as a hotel maintenance worker and as a server is employed in two occupations. The employer may take a tip credit for the employee’s work as a server, assuming all other requirements are satisfied, but not for hours spent working in the maintenance occupation. By contrast, duties such as cleaning and setting tables, making coffee, toasting bread, and occasionally washing dishes or glasses may remain part of a server’s tipped occupation. Under the current regulation, related duties within a tipped occupation need not independently produce tips in order to still qualify for the tip credit. The distinction therefore turns on whether the employee is performing work within the tipped occupation or has shifted into a separate, nontipped occupation.
Implications for Hospitality Employers
The withdrawal gives hospitality employers greater flexibility to assign customary supporting duties within a tipped occupation without applying a federal percentage or minute-by-minute test. Employers should not, however, treat every duty performed by a tipped employee as tip-credit eligible. Work belonging to a separate nontipped occupation must still be identified and paid at the full applicable minimum wage.
Before changing payroll or timekeeping practices, employers should review actual job duties, separate distinct occupations where appropriate, confirm compliance with tip-credit notice and tip-retention requirements, and evaluate stricter state or local rules that may apply.
Practical Steps for Hospitality Employers
Hospitality employers that claim a tip credit should consider the following measures:
- Review job duties. Confirm that supporting tasks are part of the tipped occupation.
- Separate distinct work. Track and pay nontipped occupations at the full applicable minimum wage.
- Confirm tip-credit compliance. Review notices, tip pools, wage calculations, and payroll records.
- Check local requirements. Identify stricter state or local rules before changing practices.
- Train managers. Explain which duties qualify for the tip credit and which do not.
If you have any questions regarding the content of this alert, please contact Cat Scott, partner, at cscott@barclaydamon.com; Jyla Serfino, law clerk, at jserfino@barclaydamon.com; or another member of the firm’s Labor & Employment Practice Area.