Ruling Could Pave Way for Hospitality Industry to Distribute Tips to Cooks, Dishwashers and Other Non-Tipped Employees
Author: Michael Cardman, XpertHR Legal Editor
June 17, 2013
A federal court declined to defer to a US Department of Labor (DOL) regulation in a recent ruling, potentially affecting a large number of employers in the hospitality industry. The DOL regulation requires that employees retain all tips they receive, regardless of whether their employer claims those tips as a credit toward the minimum wage under the Fair Labor Standards Act (FLSA). +29 CFR 531.52.
As a result, the DOL forbids restaurants and other employers in the hospitality industry from arrangements in which they pay tipped employees such as wait staff or bartenders a cash wage at or above the minimum wage and then redistribute their tips among a wider pool of employees that includes non-tipped staff such as cooks or dishwashers.
However, the federal district court held that Congress did not intend that the FLSA's tip pool requirements should apply to employers that do not claim a tip credit, and therefore the court declined to defer to the DOL regulation. Or. Rest. & Lodging v. Solis, +2013 U.S. Dist. LEXIS 80396 (D. Ore. June 7, 2013).
For now, the ruling is a binding precedent only in Oregon, but there is good reason to believe it may gain wider traction.
The DOL is expected to appeal the case to the 9th Circuit, which is likely to uphold the lower court's decision since it has already held that the FLSA "imposes conditions on taking a tip credit and does not state freestanding requirements pertaining to all tipped employees" (in Cumbie v. Woody Woo, Inc., +596 F.3d 577 (9th Cir. Or. 2010), the ruling that prompted DOL to revise 29 CFR 531.52 in 2011).
Should that happen, employers in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon or Washington that distribute tips would have some protection from lawsuits filed in federal courts, but could still be subject to DOL enforcement actions.