A federal appeals court has thrown out the Biden Administration’s “80/20 Rule” rule governing the payment of tipped employees, finding it contrary to the language of the Fair Labor Standards Act (FLSA). In Restaurant Law Center v. U.S. Department of Labor, a unanimous three-judge panel of the U.S. Court of Appeals for the Fifth Circuit invalidated the rule on August 23, 2024.
For many years, DOL guidance prohibited an employer from taking a tip credit for employees who spent more than 20 percent of their time on work that does not generate tips. The 2021 version of the 80/20 Rule required employers to carefully track and differentiate among tip-producing, tip-supporting, and non-tip-producing work.
Citing Loper Bright Enterprises v. Raimondo, in which the U.S. Supreme Court recently overturned the longstanding Chevron deference doctrine, the Fifth Circuit found that the Labor Department’s interpretation of the FLSA in fashioning the 80/20 rule rendered the law’s text meaningless because it focused on individual job duties instead of the job itself.
Members of the Center for Workplace Compliance (CWC), our affiliated nonprofit membership association, can read more here.