On July 6, 2023, the U.S. District Court for the Western District of Texas issued a decision in Restaurant Law Center, et al. v. U.S. Dep’t of Labor that affirmed the validity of a recently promulgated Department of Labor, or DOL, final rule designed to regulate when employers are entitled to take a tip credit to satisfy a portion of tipped employees’ wages. The final rule, issued on October 29, 2021, and known as the “Dual Jobs” or “80-20-30” rule, imposes new burdens that lawyers advising employers whose operations include tipped employees should be aware of to ensure their practices comply with the rule.

By way of background, the Fair Labor Standards Act, or FLSA, permits employers to satisfy a portion of their minimum wage obligations (the current federal minimum wage is $7.25 per hour) to tipped employees by allocating a tip credit toward the minimum wage. Accordingly, employers may lawfully pay tipped employees an hourly rate as low as $2.13 per hour as long as the employee’s tips make up the difference.