Fifth Circuit Ends 80/20/30 Rule

On Friday, August 23, 2024, the Fifth Circuit issued a decision invalidating the DOL final rule which limited when employers may claim a tip credit, commonly referred to as the 80/20/30 Rule.

As you may know, under the Fair Labor Standards Act employers in most states are permitted to claim a "tip credit" when paying the wages of any tipped employee. The tip credit enables the employer to pay less than the standard minimum wage under the theory that the employee will make at least the regular minimum wage when taking tips into consideration.

2021 Final Rule

The DOL promulgated a final rule in 2021 which stated that an employer may only claim a tip credit when the employee is performing "directly tip-producing work" (such as a server taking orders from customers), or when an employee is performing "directly supporting work" (such as setting or bussing tables). However, under this rule, if more than 20% of an employee's work week was spent on "directly