DOL rescinds tip guidance as 14 attorneys general push back

By Olivia Hart

The U.S. Department of Labor rescinded three opinion letters cited in the Biden administration’s final tip rule, withdrawing decades-old guidance and shifting federal enforcement toward whether workers’ duties relate to their tipped occupations.

The withdrawal follows the Fifth Circuit’s 2024 invalidation of the rule that revived the 80/20 standard. George Whipple, host of The National Law Review’s weekly briefing, said the department referenced that ruling and noted the guidance could be “misread.” The briefing gave no separate employer compliance deadline.

What changes in tip-credit enforcement?

Federal enforcement now asks whether a worker’s duties relate to the worker’s tipped occupation. It no longer focuses on calculating percentages under the rescinded guidance. HR and payroll teams therefore need to connect actual job duties with tipped status rather than rely only on a percentage test.

In July, the Department of Labor announced new rulemaking to address tip credits for dual-role employees. The announcement leaves employers with an open question: how will the agency treat workers who both receive tips and perform duties outside a tipped occupation? Any answer may depend on the rulemaking and the agency’s new enforcement approach.

The three withdrawn letters no longer supply the cited enforcement framework, but the briefing described no replacement tip-credit standard. That distinction matters for employers reviewing job descriptions, pay practices and workforce classifications. Employers should separate the old opinion letters from DOL’s pending work on dual-role employees.

How are 14 states responding to federal enforcement changes?

Fourteen state attorneys general issued joint guidance stating that disparate-impact liability remains legal and enforceable under state and applicable federal civil-rights laws. Their action responds to the federal government’s move to end disparate-impact enforcement and provides a contrary enforcement position from 14 states.

The guidance defines disparate impact through a facially neutral policy that excludes a protected group when the employer cannot show that the policy is job-related. Employers therefore face a two-part assessment: whether the policy excludes a protected group and whether they can establish its job-relatedness.

The joint guidance does not impose any new obligations on employers, according to Whipple. It instead confirms the 14 attorneys general’s enforcement position. Several states have also enacted amendments to civil-rights laws or regulations that codify disparate-impact liability.

For HR teams, the practical change is jurisdictional rather than a new nationwide standard. Selection practices may face claims under more than one legal authority, depending on the jurisdiction and applicable federal law. Employers should identify where disparate-impact claims can arise instead of treating the federal enforcement shift as eliminating exposure.

What did the Eleventh Circuit decide about qui tam claims?

In September, the U.S. Court of Appeals for the Eleventh Circuit held that the False Claims Act’s qui tam provisions do not violate the Appointments Clause in Article II. Qui tam provisions permit whistleblowers to bring cases in the name of the U.S. government.

The ruling reverses a 2024 decision by the U.S. District Court for the Middle District of Florida that would have invalidated the provisions. For employers, the decision preserves the False Claims Act’s whistleblower mechanism in the Eleventh Circuit, subject to two unresolved constitutional questions.

The appeals court directed that same district court to decide whether the qui tam provisions violate the Constitution’s Vesting and Take Care Clauses. The Third Circuit is considering the same arguments, so the issue could reach the U.S. Supreme Court. The briefing left both questions unresolved.

For employer compliance teams, the continued availability of that whistleblower route keeps reporting and investigation processes relevant. The appeals court has resolved the Appointments Clause challenge, not the two constitutional questions still before the courts.

What should employers track next?

Three tracks remain open. The first is DOL’s dual-role tip-credit rulemaking, announced in July. The second is state enforcement of disparate-impact liability under the joint guidance from 14 attorneys general.

The third is the Middle District of Florida’s analysis of the Vesting and Take Care Clauses, alongside the Third Circuit’s review of the same arguments. Those decisions could determine whether the qui tam provisions survive constitutional review.

Until those tracks develop, employers should treat the withdrawal of the three opinion letters as a change in enforcement analysis, not a complete resolution of tip-credit rules. The same caution applies to disparate-impact claims and qui tam litigation. The next checkpoints are the dual-role proposal, state-level enforcement and court decisions on the two remaining clauses.