ORLA Advocacy: Fighting for Tip Pooling
ORLA joins other industry associations in legal action against the Department of Labor on a recent rule prohibiting tip pooling for back-of-house workers. Read the latest update and options for restaurateurs to consider.
Tip Pooling has become a legal spider web, given the complicated state-by-state variations. Many jurisdictions have seen court battles with companies defending their tip pooling arrangements, and also have seen the courts sorting out the intricate details of what is and what is not considered a tip pool. In a recent move to further clarify the law, restaurant industry trade associations have filed a lawsuit against the U.S. Department of Labor (DOL) on behalf of restaurants and restaurant employees who share in tips and participate in tip pools. The lawsuit was brought by the Oregon Restaurant and Lodging Association, the Washington Restaurant Association, the Alaska CHARR and the National Restaurant Association, along with a Portland, Oregon restaurant and an employee of that restaurant.
The lawsuit, filed in the United States District Court in Portland, asks the court to declare recent DOL regulations prohibiting back-of-the-house (kitchen) workers from sharing in tips left by customers unlawful and not applicable to restaurants that pay employees who share the tips at least federal or the applicable (if higher) state minimum wage with no tip credit. The District court agreed with the restaurant side’s arguments, again. The case is now on appeal in the U.S. Ninth Circuit Court.
This lawsuit arose after ORLA’s victory in Cumbie v. Woody Woo, Inc. in 2010, allowing tip pooling in the Ninth Circuit, which includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. The Department of Labor published a conflicting “Final Rule” in the Federal Register (76 Federal Register 18832). This conflicting rule amends and implements new tip pooling regulations that conflict in certain areas with the law in some states included in the Ninth Circuit.
DOL’s conflicting regulations state in pertinent part:
Tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA. The employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted in section 3(m): As a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool.
The DOL defended its new regulation issued May 5, 2011 on the basis of three points: (1) that the Woody Woo case preceded the 2011 DOL regulation, and therefore was not under consideration or supposedly covered by the ruling; (2) the Woody Woo case was an unpublished decision and thus has no “precedential value;” and (3) that a court’s construction of the statute trumps an agency construction only if the prior court decision follows from the unambiguous terms of the statute and thus leaves no room for agency discretion.
ORLA is working closely with the National Restaurant Association (NRA) to seek declaratory judgment that will resolve the conflict between the Woody Woo decision and the DOL’s later published regulations. Such a judgment is a court decision in a civil case that declares the rights, duties, or obligations of one or more parties in a dispute. Such a judgment will resolve indeterminacy in the law or in its application to facts. A declaratory judgment is legally binding, but does not order any action by a party.
Oregon is not the only state fighting over tip pooling in the Ninth Circuit. In Nevada, the District Court in Las Vegas found the Wynn’s policy requiring dealers to split their tips with floor supervisors and pit bosses unlawful under Nevada. The Wynn originally enacted this policy five years ago to raise the salaries of its pit bosses and supervisors to the level of pay received by dealers. In order to pay their supervisors and pit bosses more, the Wynn (and its sister property the Encore) gave supervisors and pit bosses a $5,000 annual raise and a share of the dealers’ tips. The case will be appealed to the Nevada Supreme Court and any effects will be on hold until that case is decided.
ORLA believes that the Department of Labor has overstepped its bounds in revising regulations on tip pooling without regard to the previous 2010 court case Woody Woo. If the Ninth Circuit issues a declaratory judgment in our favor, upholding its previous Woody Woo decision, it could resolve the tip pooling issue for states in the Ninth Circuit for good.