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Employment Law Update: DOL Withdraws Decades-Old Tip Credit Opinion Letters and Confirms End of 80/20 Rule

Date: October 29, 2026
Employers of tipped workers no longer need to track how much time servers, bartenders, and similar staff spend on side work to keep their tip credit, according to a Field Assistance Bulletin issued by the U.S. Department of Labor's Wage and Hour Division (WHD) on October 19, 2026 (FAB No. 2026-1). The Bulletin confirmed that the long-standing "80/20 rule" is dead. Going forward, the issue of eligibility for the tip credit will look solely to the question of whether an employee is working in a tipped job, including the related duties that come with it, and not how many minutes the employee spends on other tasks that do not earn tips.

That is welcome news for restaurants, bars, hotels, casinos, clubs, salons, and other businesses with tipped staff. The 80/20 rule has long dictated who could roll silverware or handle opening and closing side work, and it has fueled a steady stream of class and collective actions seeking back wages. Because tip credit liability adds up across every hour worked, even small missteps could be costly.
 

The Change in Brief

Under the Fair Labor Standards Act, employers may pay tipped employees a cash wage as low as $2.13 per hour and count tips toward the rest of the federal minimum wage. This is known as the "tip credit." Since the 1980s, WHD guidance said that employers lost the tip credit if a tipped employee spent more than 20% of their time on non-tip-producing work such as prep and cleaning. A 2021 rule added a 30-minute limit, but the Fifth Circuit struck that rule down in 2024. WHD dropped the 80/20 guidance from its handbook in January 2025.

The new bulletin finishes the job. It withdraws three old opinion letters (from 1979, 1980, and 1985) that underpinned the 80/20 rule, and confirms that WHD will no longer apply any time-based limits on duties within a tipped job. DOL also says it is preparing a proposed rule on tipped employees, which will be open for public comment in the near future.
 

What Employers Should Keep in Mind

The change gives employers more flexibility, but it does not eliminate all risk:
 

Separate jobs still require full minimum wage. If a tipped employee also works a genuinely different job, such as maintenance, the employer must pay the full minimum wage for that time.

Courts and states may differ. The bulletin reflects WHD's enforcement policy and does not bind courts or private plaintiffs, and many state and local laws impose stricter tip credit rules or ban tip credits altogether.

More changes are coming. Watch for DOL's proposed rule on tipped employees and consider weighing in during the comment period.

Whiteford's Labor and Employment Practice Group advises employers of tipped workers on tip credit compliance, pay practice audits, and wage and hour litigation, and will continue to monitor developments in this area.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.