Daily Thread Blog - Thread HCM

eAlert! Federal 80/20/30 Tip Credit Rule Thrown Out

Written by HR Pros at HR Support Center | Aug 29, 2024 7:36:31 PM

Law Alert

August 23, 2024

On August 23, 2024, the Fifth Circuit Court of Appeals vacated the DOL’s so-called “80/20/30” tip credit rule. The decision applies nationwide.

In short, the rule required employers to pay tipped employees the full minimum wage—without a tip credit—for work time that was not directly tip-producing but was only tip-supporting if that work took more than 30 continuous minutes or constituted more than 20% of their workweek.

Using a waiter as an example, tip-producing work would include serving patrons, while tip-supporting work would include bussing tables.

Takeaways for Employers

The decision significantly simplifies the application of the tip credit under federal law. Employers no longer need to distinguish between tip-producing and tip-supporting work or monitor the time spent performing tip-supporting duties.

However, employers are still subject to local or state laws that are more beneficial to employees or that prohibit tip credits entirely. And as was the case before, employers can’t take a tip credit when an employee performs tasks unrelated to their tipped occupation. For example, if a hotel waiter also does maintenance work, time spent on maintenance is not subject to the tip credit.

The DOL may appeal this decision. We’ll provide an alert if there are any significant updates.

The Fifth Circuit Court of Appeals’ decision in Restaurant Law Center v. U.S. Department of Labor was issued on August 23, 2024.