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The United States Court of Appeals for the Fifth Circuit issued a ruling on August 23, 2024, vacating a 2021 Final Rule of the Department of Labor (DOL) which limited the circumstances under which employers can claim a “tip credit” for “tipped employees” under the Fair Labor Standards Act (FLSA). This decision is likely one of many to come following the Supreme Court’s earlier decision to overturn the Chevron doctrine, which often required federal courts to defer to federal agencies, such as the DOL.
The FLSA permits employers to take a “tip credit” when paying any “tipped employee”—a term defined