Picture a restaurant where servers also clean tables, stock supplies and handle food during busy shifts. Their pay may look straightforward on paper, but every hour still needs the correct treatment under the tip credit rules.
According to HRMorning, the Department of Labor has withdrawn three opinion letters that established the 80/20 approach. Our earlier okey.co.il report, originally based on HRMorning’s coverage, described the same change and its implications for payroll teams.
- Field Assistance Bulletin 2026-1 retires three opinion letters associated with the former 80/20 rule.
- The department no longer applies a percentage-based cap to related duties performed within a tipped occupation.
- Separate non-tipped work remains outside the scope of any tip credit.
- State requirements may be stricter, and some states do not allow tip credits at all.
- The DOL says it is preparing a proposed rule for tipped employees.
The old percentage threshold is gone
The withdrawn guidance had limited how employers could treat related duties that did not directly produce tips. Once those tasks exceeded 20% of a worker’s scheduled workweek, the rule restricted an employer’s ability to claim the tip credit for that time.
A federal appeals court invalidated the rule in August 2024. The Department subsequently removed the relevant material from its handbook in January 2025. The newest bulletin finishes the administrative cleanup by retiring the opinion letters that had remained available to employers and workers.
That doesn’t make the former threshold a safe benchmark. It means employers can no longer rely on those letters as authority for the 80/20 calculation. They must classify the work itself.
DOL tip credit rules now draw a job-duties line
The bulletin’s practical message is narrower than headlines about a “rule change” may suggest. The DOL is no longer enforcing percentage limits for related duties within a tipped occupation. It is not, however, allowing employers to label every task performed during a tipped shift as tip-producing work.
The distinction remains between related duties and a separate, non-tipped job. An employer cannot use the tip credit to pay for hours in that separate role simply because the employee already receives tips from other work.
That distinction requires judgment rather than a universal time calculation. Employers should examine the actual responsibilities attached to the position and the hours worked in each category. Payroll teams also need to apply the law of the state where the work happens.
State law matters here. According to HRMorning, individual states may impose stricter requirements or prohibit tip credits completely. A federal policy cannot safely replace a state-specific review.
Who should care about this withdrawal
Restaurant operators and hospitality employers face the most immediate compliance task. They should identify which duties belong to the tipped position, document any separate job and confirm the treatment of those hours under each applicable state law.
Payroll staff need a process for reviewing job descriptions and changes in scheduling. The process should identify when a worker begins performing additional responsibilities, rather than waiting for a dispute over a particular paycheck.
Tipped workers should also know how their duties affect compensation. A position with a higher base wage may lose value if time in a separate role is treated incorrectly. Keeping a record of assigned duties can help workers raise specific questions with their employer.
Why the headline still needs some scepticism
Removing a percentage threshold may simplify administration, but it doesn’t eliminate ambiguity. The phrase “related duties” still leaves room for disagreement about what belongs inside a tipped occupation and what constitutes separate work.
The risk is that some employers may read the bulletin as permission to treat all tasks as eligible for the credit. The source does not support that reading. Employers still need to distinguish related duties from separate employment, and state rules may narrow their options further.
The substance of the change is therefore procedural: fewer federal percentage calculations, but a continuing obligation to classify duties accurately. The unknown is how the forthcoming proposed rule will address that boundary in greater detail.
A practical checklist for changing duties
Say a server regularly begins handling a closing shift that includes washing dishes and organizing storage. The employer should document the added work and decide whether it is related to the tipped position or constitutes separate non-tipped employment.
A useful review includes:
- Listing the employee’s regular and newly assigned tasks.
- Separating duties connected to tipped service from clearly independent work.
- Recording hours by category when responsibilities change.
- Checking the applicable state requirements for every worksite.
- Reassessing overtime and tip-credit treatment when schedules change.
This example shows why a generic “80% service, 20% other” checklist no longer fits federal enforcement. The questions have shifted from “Has the percentage been exceeded?” to “What work is this employee actually performing?”
What to watch next
Watch for the DOL’s proposed rule on tipped employees. Its language could provide more detail about how duties should be classified and how employers should document the distinction.
For now, neither employers nor workers should treat the withdrawal as a complete resolution. Keep duty records current, review state law and avoid assuming that related and separate work can be combined under one federal percentage test.
Key takeaways
- The former 80/20 threshold no longer guides federal enforcement of related duties in tipped occupations.
- Separate non-tipped jobs still cannot have their hours covered by a tip credit.
- State laws may impose stricter conditions or prohibit tip credits altogether.
- Employers need clearer duty classifications, while workers should track changes in their responsibilities.
- A proposed federal rule may further explain how the new approach should operate.
Frequently asked questions
What does the DOL’s withdrawal of the 80/20 guidance mean?
The department no longer enforces a percentage limit for related duties within a tipped occupation, according to HRMorning.
Can an employer claim a tip credit for all hours worked by a tipped employee?
No. Hours spent in a separate, non-tipped job remain ineligible for the credit.
Are state tip credit requirements still relevant?
Yes. State rules may be stricter than federal requirements, and some states prohibit tip credits entirely.
What should employers review after Bulletin 2026-1?
They should review job duties, separate any non-tipped role, document how hours are treated and check the applicable state law.
Will the federal rules change again?
The DOL says it is developing a proposed rule for tipped employees, so further guidance may follow.