In our last post, we discussed an ongoing legal battle between the United States Department of Labor and members of the restaurant industry in the Northwest. The case involves tip sharing arrangements at restaurants in which servers are required to pool either part or all of their tips together, and the resulting amount is redistributed among both servers and other restaurant staff. In 2011, the Labor Department made a rule saying that while tip pools were permissible, kitchen workers and other restaurant staff who are not normally tipped (chefs, line cooks, dishwashers, janitors, and busboys among others) are not allowed to participate in such arrangements.
Does the Tip Sharing Rule Contravene Ninth Circuit Precedent?
In this post, we will examine some of the legal arguments on both sides of this debate. As Law360 reported, the plaintiffs in this case, the members of the restaurant industry, claim that the Labor Department’s rule contravenes a finding by the Ninth Circuit court (which covers Oregon, where the federal case is being heard) in Cumbie v. Woody Woo Inc., which says that the Fair Labor Standards Act (FLSA) allows employers to collect servers’ tips and redistribute them among both tipped and non-tipped staff as long as workers make more than minimum wage and the employer was not using tips to make the minimum wage. (In certain instances, employers are allowed to pay their workers a minimum cash wage of $2.13 per hour as long as the employee makes the $7.25 per hour federal minimum wage when tips are included – in these instances, tip pools are not permissible.)
Does the Labor Department Have the Authority to Make the Rule?
In addition to the argument that the Labor Department’s rule is wrong, the plaintiffs are arguing that it did not even have the authority to put out such a rule in the first place. A recent Supreme Court decision, City of Arlington v. Federal Communications Commission, weighs heavily into the debate on this point. In Arlington, the Supreme Court held that when there is ambiguity in a statute that concerns an agency’s rulemaking authority, deference should be given to the agency’s interpretation of that ambiguity. In this case, the Department of Labor uses Arlington to argue that, under the FLSA, it has broad authority to make rules regarding labor standards and its rules excluding certain workers from tip pools cannot be ignored just because FLSA does not give it specific authority to make such a rule.
The plaintiffs, on the other hand, argue that Arlington is completely irrelevant to the case at hand, because the FLSA is not ambiguous, as it was in that case. When there is a lack of ambiguity about an agency’s authority in the statute itself, the plaintiffs claim, the statute’s clear provisions are what rule the case. Since the FLSA is clear, plaintiffs argue that the Department of Labor deserves no deference in its interpretation of its own authority.
This case is an interesting mix of local and national issues. While it most directly affects the restaurant workers in Oregon and other parts of the Northeast who have brought the case, it can have strong implications for the limits of the Department of Labor’s authority in making rules that affect employees in all fields across the country. Workers in Oregon would do well to pay close attention to the results of the case.
If you or someone you know has an issue with a Labor Department rule that you feel is unfair or unwarranted, please contact one of our experienced attorneys to help you evaluate your claim.