Labor Department Drops Tipped Employee Rule
Tipped workers may see changes in job duties as federal regulators remove percentage-based limits on non-tip work.
Updated on Oct. 27, 2026 in Employment
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Should federal regulations set specific time limits for non-tip-producing work by service employees?
The Department of Labor has withdrawn its guidance on the 80/20 rule, which previously restricted how much non-tip-producing work a tipped employee could perform. This shift affects how service industry employers and workers manage job duties following a federal court ruling.
Why it matters
The change aligns federal guidance with a court ruling that vacated recent agency restrictions, altering how businesses define and compensate tipped roles. It ends a period of regulatory uncertainty regarding which tasks qualify as part of a tipped occupation.
Under the Fair Labor Standards Act, workers receiving at least $30 a month in tips are classified as tipped employees. The agency has now dropped the 80/20 rule that previously limited the time spent on duties unrelated to tip-producing work.
The players
Department of Labor
The federal agency responsible for labor standards and enforcing fair compensation laws for workers.
Fifth Circuit Court of Appeals
The federal court with jurisdiction over Texas, Louisiana, and Mississippi that issued the ruling vacating the 2021 dual jobs rule.
The details
The Department of Labor withdrew its prior opinion letters and Field Operations Handbook provisions to comply with a 2024 Fifth Circuit Court of Appeals ruling. Employers are now directed to focus on whether an employee performs tasks directly related to their tipped occupation, rather than applying time-based percentages to specific duties. This reversion reinstates the regulatory framework that existed under the 1967 dual jobs rule.
Timeline
The original dual jobs regulation was established in 1967.
The Fifth Circuit Court of Appeals vacated the 2021 Dual Jobs Final Rule in August 2024.
The Department of Labor issued a new Field Assistance Bulletin on October 19, 2026.
Money Landscape
This move represents a return to a long-standing historical standard for tip-based labor classifications after years of regulatory flux. It marks a formal pivot away from the more restrictive 2021 standards that had previously sought to limit non-tipped work hours.
Workers in the service industry should be aware that employer policies regarding job duties may shift as companies adjust to the reinstated 1967 regulatory framework. If you are a tipped employee, consult with a qualified professional to understand how your specific job description aligns with these updated federal standards.
The takeaway
The federal government has removed the percentage-based cap on non-tip-producing tasks for service workers. Employees should monitor their official job descriptions and discuss any changes to their expected daily duties with a qualified professional or their human resources department.
Further reading
For more on shifting workplace rules, visit Employment.
Live Poll
Should federal regulations set specific time limits for non-tip-producing work by service employees?
