The U.S. Department of Labor has formally withdrawn the guidance that historically supported the “80/20 Rule” for tipped employees. That change is important, but it does not automatically eliminate judicial decisions that previously applied the rule in employee wage-and-hour cases.

For tipped workers, the central issue remains straightforward: when an employer pays the reduced cash wage available through the federal “tip credit,” may the employer require workers to spend a substantial share of their shifts doing non-tipped work? In some jurisdictions, controlling appellate decisions have answered that question in a way that remains favorable to employees.

The Tip Credit and the 80/20 Rule

Under the Fair Labor Standards Act (FLSA), an employer may claim a tip credit and pay a lower direct cash wage to employees who customarily and regularly receive tips. The employer may use a portion of the employee’s tips to satisfy the federal minimum-wage obligation.

The dispute arises when an employer pays a worker at the tipped cash wage while assigning duties that do not generate tips. Traditional examples include extensive cleaning, food preparation, maintenance, stocking, or other back-of-house work.

The former 80/20 Rule generally provided that an employer could not take the tip credit for time when a tipped employee spent more than 20 percent of the workweek performing related but non-tip-producing duties. The rule developed from the Department’s interpretation of its “dual jobs” regulation, which distinguishes a worker’s tipped occupation from a genuinely separate, non-tipped job.

The Fifth Circuit’s Decision Does Not Govern Every Federal Court

In Restaurant Law Center v. U.S. Department of Labor, the Fifth Circuit invalidated the Department’s 2021 “80/20/30” regulation. That regulation combined the 20-percent restriction with a separate 30-minute limit on continuous non-tip-producing work. The Fifth Circuit reasoned that the rule improperly divided a single tipped occupation into individual tasks rather than focusing on whether the employee was performing a separate occupation.

That decision is binding on federal courts within the Fifth Circuit—Texas, Louisiana, and Mississippi. It is not, however, binding precedent in other circuits.

Likewise, the Department’s recent withdrawal of the opinion letters and its stated decision not to enforce fixed time limits are administrative positions. They may affect the Department’s enforcement approach, but they do not themselves overrule appellate decisions already issued by other federal circuits.

Eighth Circuit: Fast v. Applebee’s

The strongest employee-side appellate authority remains the Eighth Circuit’s decision in Fast v. Applebee’s International, Inc. There, tipped employees alleged that Applebee’s used the tip credit even when they spent more than 20 percent of their time on non-tip-producing duties.

The Eighth Circuit concluded that the Department’s interpretation of the dual-jobs regulation was entitled to deference and upheld the 20-percent limitation. The court recognized that a tipped employee may perform some related preparatory and maintenance duties, but held that the employer could not continue taking the tip credit when those duties consumed more than 20 percent of the employee’s work time.

For employees in the Eighth Circuit, Fast remains significant because it recognizes that related side work can become too substantial to be treated as merely incidental to a tipped job. The Eighth Circuit includes Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.

From a plaintiff’s perspective, Fast supports the argument that an employer bears wage liability when it claims a tip credit while routinely requiring servers, bartenders, or similar workers to devote more than one-fifth of their workweek to non-tip-producing tasks.

Ninth Circuit: Marsh v. J. Alexander’s

The Ninth Circuit reached a similar result in Marsh v. J. Alexander’s LLC. In that case, servers and bartenders alleged that they were paid at the tip-credit wage while performing non-tipped work that was either unrelated to their tipped roles or so extensive that it could not reasonably be characterized as incidental side work.

Sitting en banc, the Ninth Circuit held that the Department’s dual-jobs regulation and its then-existing guidance prevented an employer from using the tip credit for unrelated non-tipped work or for related but non-incidental duties exceeding 20 percent of a worker’s time.

Marsh is binding precedent in the Ninth Circuit, which includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington, as well as certain U.S. territories.

For employees, the legal significance of Marsh is that an employer cannot simply characterize every duty performed by a server or bartender as part of a tipped occupation. Work that is plainly unrelated to customer service—such as janitorial work—or related side work performed at a substantial level may support a claim that the employer improperly took a tip credit.

Tenth Circuit: Romero v. Top-Tier Colorado

The Tenth Circuit’s decision in Romero v. Top-Tier Colorado, LLC also supports an employee’s ability to challenge an improper tip credit. The court held that an employer does not satisfy its minimum-wage obligations merely because an employee’s wages and tips, combined, add up to the federal minimum wage.

Instead, the court explained that the threshold question is whether the employer was legally entitled to treat the employee’s tips as wages through the tip credit in the first place. Because the district court had not resolved that issue, the Tenth Circuit reversed dismissal of the employee’s claim.

Although Romero did not itself impose a final 80/20 liability determination, it is important plaintiff-side authority. It rejects the argument that an employer can defeat a tip-credit claim simply by showing that the employee’s total tips and direct wages exceeded the minimum wage. The employer’s entitlement to the tip credit must first be established.

The Tenth Circuit covers Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming.

Binding Precedent Versus the DOL’s Current Enforcement Position

The current legal landscape requires separating two different concepts:

The DOL’s revised enforcement stance may be cited by employers as support for a more flexible view of tipped side work. But an agency’s decision not to enforce a particular interpretation does not automatically nullify judicial precedent governing private FLSA litigation in a particular circuit.

What Employees Should Consider

Employees who were paid a tip-credit wage but regularly performed extensive non-tipped duties may still have viable wage claims, particularly in jurisdictions governed by Fast or Marsh. Relevant facts may include:

• The percentage of the workweek spent on non-tip-producing duties;
• Whether duties were related to serving or bartending, or instead resembled a separate job;
• Whether employees were required to perform cleaning, stocking, preparation, maintenance, or janitorial work at the tipped cash wage;
• Schedules, time records, side-work assignments, checklists, manager instructions, and payroll records; and
• The state where the work occurred and the controlling federal circuit precedent.

Bottom Line

The DOL’s retreat from the 80/20 Rule changes the agency’s enforcement position, but it does not convert the Fifth Circuit’s reasoning into nationwide binding law. Employees should carefully distinguish between administrative guidance and the appellate decisions that govern their claims.

In the Eighth and Ninth Circuits, Fast and Marsh remain especially important authority for tipped workers challenging the use of a tip credit for substantial non-tip-producing work. In the Tenth Circuit, Romero reinforces that an employer must establish its legal entitlement to the tip credit before relying on an employee’s total tips to defeat a minimum-wage claim.