Fifth Circuit Vacates DOL 80/20 Tip Rule, Restaurants Face Compliance Questions

A federal appeals court on January 14, 2026 vacated the Department of Labor’s regulatory interpretation known as the 80/20 rule, creating immediate uncertainty for restaurants that have relied on the guideline to determine when employers may take a tip credit for hours that include non-tip tasks.

The Fifth Circuit concluded the DOL’s framework improperly focused on discrete task time percentages instead of the statutory text, and directed a return to a duties-based interpretation that evaluates whether an employee’s job as a whole is a tipped occupation. That duties-based approach is generally more favorable to employers because it looks to overall job duties rather than whether non-tip work exceeds a bright-line cutoff.

For front-of-house workers such as servers and bartenders, the practical stakes are high. The tip credit lets employers pay less than the regular minimum wage and count employee tips toward satisfying pay obligations. Under the 80/20 rule, the DOL had provided a clear, time-based safety valve for when employers must stop taking that credit; the appeals court’s ruling removes that bright-line test and returns the legal standard to a holistic duties inquiry. That shift could widen the circumstances in which restaurants may claim a tip credit, but it also raises legal risk because state laws and prior litigation may still enforce stricter standards.

Restaurants face several immediate questions. Employers that used the 80/20 guideline to set schedules, assign side work and structure tip pools will need to reassess payroll and recordkeeping. Workers who performed non-tip tasks such as food running, bussing, or prep may see disputes over whether time on those duties disqualifies tip-credit pay. Employers and advocates alike will be watching for guidance from the DOL or further appeals and litigation that could restore or reframe the rule.

The decision does not change state-level requirements. Several states maintain their own rules on tip credits and tip pools that are more protective of workers and remain in force. Given the legal complexity and potential for litigation, restaurants should consult employment counsel before altering tip-credit policies or tip-pool practices.

This ruling resets the regulatory landscape for tipped pay and thrusts long-running questions about who does what on the clock back into the spotlight. For restaurateurs and staff, the next steps are practical: review payroll practices, check applicable state laws, document duties and schedules, and prepare for guidance or new cases that will further define how tipped work is measured.