Full 9th Circuit Approves “20% Rule” for Tipped Employees

Many years ago, the U.S. Department of Labor (DOL) issued guidance known as the “20% Rule” or “80/20 Rule,” which provides that, where tipped employees spend in excess of 20% of their workweek on non-tip-earning tasks, no tip credit may be taken for the time spent in such duties. The 20% Rule has been the subject of much litigation in courts across the country. In September 2017, a three-judge panel of the Ninth Circuit Court of Appeals rejected the DOL’s guidance, finding that it was not entitled to any deference.1 A year later, on September 18, 2018, the full Ninth Circuit reversed the earlier three-judge panel decision, and held that the DOL guidance was entitled to deference,2 meaning that the 20% Rule is alive and well (at least in the Ninth Circuit).