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On October 19th, 2026, the U.S. Department of Labor (DOL) released a new field assistance bulletin involving tipped employees. Specifically, the latest guidance addresses how the Fair Labor Standards Act (FLSA) treats related duties performed by tipped employees and also those who perform dual jobs for the same employer. Additionally, the information included basically ends the practice previously known as the “80/20” or “80/20/30” Rule for specific parts of the country. Earlier, in September, multiple DOL agencies released workplace opinion letters on critical topics to provide guidance and transparency for employees, job creators, and retirees.
What Is the Fair Labor Standards Act (FLSA)
Explicitly, the FLSA is the country’s primary federal wage and hour law and one of the five employment laws that all businesses must know. As such, the FLSA provides a minimum wage and overtime protections for virtually all U.S. workers. Generally, the FLSA requires private sector and government employers to pay a federal minimum wage of not less than $7.25 an hour and an overtime pay rate of one and one-half the regular pay rate for hours worked over 40 a week.
Background of the 80/20/30 Rule for Tipped Employees
Section 3(t) of the FLSA defines “tipped employees” as “any employees engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” However, employees in tipped occupations do not always perform duties that directly produce tips. Such non-tipped but directly supporting duties may include cleaning tables, making coffee, or washing dishes. Under the 80/20 rule, an employer can only take a tip credit in certain situations. Those situations include:
- if a tipped employee is performing tip-producing work or
- the tipped employee is performing work that supports tip-producingwork (as long as the tipped worker does not spend a substantial amount of time doing such work).
In addition, the rule defines a substantial amount of time as:
- More than 20 percent of the hours worked during the employee’s workweek; or
- A continuous period of time that exceeds 30 minutes.
In other words, for an employer to claim a tip credit, tipped employees had to engage in tip-producing work 80% of the time.
The basic concept was first drafted in 1966, when the FLSA permitted employers to pay tipped employees a lower minimum wage and take a tip credit to satisfy the FLSA’s minimum wage requirement. In 1967, the DOL issued a “dual jobs” regulation that recognized that an employee may be employed to perform two or more distinct jobs for the same employer. Consequently, a tip credit could only be taken for work in an occupation in which the employee customarily and regularly received at least $30 per month in tips.
Furthermore, opinion letters fleshing out the concept were issued in 1979, 1980, and 1985. However, the DOL did not formalize the rule until 1988 in its Field Operations Handbook. In that resource, the agency stated that the credit was not available when tipped employees spent more than 20% of their time on non-tip-producing activities. This idea became known as the “80/20 Rule.” Then, in 2021, the DOL issued a final regulation adding the 30-minute restriction on non-tip-producing work by tipped employees. Afterward, the rule was known as the “80/20/30” Rule.
Recent Updates to the “80/20/30” Rule
Eventually, in 2024, the U.S. Court of Appeals for the Fifth Circuit (Court) vacated the 80/20/30 Rule. Accordingly, the Court ruled that the 80/20/30 Rule was “inconsistent with the text of the FLSA, and was arbitrary and capricious.” Following that ruling, in 2025, the DOL removed any mention of the 80/20/30 Rule from its Field Operations Handbook. Instead, the agency replaced it with a reference to the 1967 dual jobs regulation, which the same Court found legal and compliant with the FLSA.
Overview of the Latest Field Assistance Bulletin
Markedly, the October 19 Field Assistance Bulletin, known as Field Assistance Bulletin No. 2026-1 (FAB), aligns the DOL’s guidance on tipped employees with dual jobs with current regulations.
The FAB withdraws the agency’s 1979, 1980, and 1985 opinion letters on applying dual jobs regulations to tipped employees. According to the DOL, the agency withdrew the three opinion letters because they no longer reflect its policy or interpretation of the FLSA. The FAB also clarifies that the current dual jobs regulation focuses on whether an employee performs duties related to the employee’s tipped occupation, rather than imposing a specific percentage-based limit on the time an employee may spend performing related, non-tipped duties within that occupation.
Employer Takeaways
In conclusion, it is important to note that even though the DOL has removed any mention of the 80/20/30 Rule from its Field Operations Handbook, the FLSA itself has not been updated. The same rules governing tipped employees still apply nationwide. The U.S. Court of Appeals for the Fifth Circuit ruling removes the rule only for states in the Fifth Circuit. Those states are Texas, Louisiana, and Mississippi. No matter where your business is located, this blog post serves as a timely reminder to all employers to follow the FLSA's rules. If you have questions, please consult your local labor office or seek advice from your legal counsel.
To support employers, WorkWise Compliance now offers monthly and annual compliance plans to help businesses meet their legal obligations under workplace laws, including virtual consulting services on key labor law compliance topics. These services can help impacted businesses address current and proposed DOL regulations on proper wage and hour and other labor practices.
