How Will Ending the 80/20 Rule Affect Tipped Employees?


Since 2011, the Department of Labor (DOL) observed a policy known as the “80/20” tip credit rule. Applying to tipped employees like restaurant servers, it was intended to ensure that employers observed the Fair Labor Standards Act (FLSA) by fully compensating tip-based employees for their time spent on unrelated tasks.

Now that the DOL has officially rescinded the 80/20 rule in an internal opinion letter, what impact will it have on tipped employees? At Donati Law, PLLC, our Memphis wage and hour violation lawyers have represented many tipped employees who were not fairly compensated under the 80/20 rule, and we can help you understand your rights in light of this policy change.

Continued Confusion on 80/20 Tip Credit Rule

In service-based industries, American employers can legally pay workers less than minimum wage and claim a “tip credit” – provided that their employees are receiving enough compensation from tips to make up the difference. To hold employers accountable for paying tipped employees appropriately, the Obama-era DOL instituted the 80/20 tip credit rule. If an employee spent 20% or more of their time doing “non-tip-generating activities,” they would be eligible for minimum wage during those hours.

However, many employers complained that the 80/20 tip credit rule was too confusing, as it didn’t clearly define all the tasks considered to be non-tip-generating. There was widespread legal disagreement about how directly a specific task could impact tip prospects. As a result, the 80/20 tip credit rule spawned hundreds of civil lawsuits against employers.

Ramifications of Removing the 80/20 Rule

Claiming that the 80/20 tip credit rule was too confusing for everyone, the DOL has now effectively eliminated this policy, and attempted to offer some clarity in Opinion Letter FLSA2018-27. But although removing the rule may bring relief to employers, it also means they will have to be even more diligent about correctly classifying and tracking employee hours to comply with the FLSA.

Employers will now have to determine if each employee has “dual jobs.” If a waiter spends time cleaning tables, that would still be considered a tip-generating-activity, as it is part of his core job description. However, if that same waiter also performs maintenance work, he could be eligible for minimum wage during those hours. It’s easy to see how unfair employers could use this broad definition to their advantage, purposely classifying certain tasks to avoid losing their tip credit.

Fearless Representation for Wage and Hour Violations

If you believe that your employer has failed to properly account for your dual job, you could still have grounds to sue them under the Fair Labor Standards Act. Our Memphis employment lawyers are passionate about helping workers who have been paid unfairly, and we can apply more than 35 years of experience to your case.

Contact us today or call at (901) 209-5500 for a consultation with our compassionate attorneys!

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