Takeaway: The U.S. Department of Labor's final rule governing when an employer may take the tip credit remains in effect for now, so employers of tipped employees employed in dual jobs should exercise care in complying with its requirements.

The U.S. Department of Labor's (DOL's) final rule on when an employer may take a tip credit for tipped workers who are employed in dual jobs under the Fair Labor Standards Act (FLSA)—commonly known as the "dual jobs" final rule—is a rational exercise of the department's authority, a federal district court in Texas has ruled.

The court denied the motion for summary judgment filed by the plaintiffs—a restaurant association and a restaurant industry legal group — and granted the DOL's corresponding motion for summary judgment. The plaintiff's motion for a temporary injunction staying the final rule was also denied.

Background

In October 2021, the DOL revised and added to a Trump administration regulation about when an employee works in a tipped occupation under 29 United States Code Section 203(t). Under the FLSA, a tipped employee is an "employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips." An employer can take a tip credit that allows it to offset such an employee's wages by the amount of tips, down to $2.13 per hour, so long as the employee's total earnings—wages plus tips—add up to the federal minimum wage of $7.25 per hour.

The final rule codified a long-standing informal...

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