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Tipped Workers Due Full Minimum Wage for Untipped Jobs: 9th Cir. (1)

BNA Labor & Employment on Bloomberg Law—Jon Steingart

Restaurant servers and bartenders at International House of Pancakes, Denny’s, and P.F. Chang’s China Bistro restaurants who say their employers underpaid them had their case revived by the U.S. Court of Appeals for the Ninth Circuit Sept. 18.

“This decision will help millions of waitresses, waiters, bartenders, and other hard-working servers get paid a decent wage and reasonable tips, and it will push back on unemployment rates for janitors, prep cooks, and others who don’t earn tips,” Jahan Sagafi, an attorney who argued for the workers, told Bloomberg Law by email Sept. 18.

Although the federal minimum wage is $7.25 an hour, a business can pay a tipped employee as little as $2.13 as long as gratuities push their earnings up to the standard minimum wage. The workers, however, said their employers impermissibly paid them the tipped minimum for time they spent on untipped duties.

The workers filed their case in part under a Labor Department regulation that addresses the minimum wage for workers who split their time between tipped and untipped jobs for the same employer. If an employee gets at least $30 per month in tips in the first job but not the second, the employer may take advantage of the subminimum wage only for the first job. The regulation uses as an example a situation in which a hotel waiter also acts as a maintenance worker but only gets tips while waiting tables.

The Fair Labor Standards Act is ambiguous with respect to minimum wage requirements for employees who work under these circumstances, the full Ninth Circuit found. It upheld the DOL’s interpretation as “a permissible construction of the statute.”

The decision brings the Ninth Circuit into agreement with the U.S. Court of Appeals for the Eighth Circuit, which in 2011 OK’d the DOL guidance in a case involving Applebee’s International Inc. employees.

“The Court’s 9-2 administrative law analysis modestly respects the checks and balances of the three branches of government, allowing the DOL to interpret Congress’s intent to prevent regulated entities from sneaking through the cracks,” Sagafi, who is with Outten & Golden LLP in San Francisco, said. “We’re pleased that the 9th Circuit has stayed so faithful to Congress’s intent in enacting the FLSA to protect workers from employers that try to save money at their expense.”

Paul DeCamp, an attorney in the Washington, D.C., office of Epstein Becker & Green P.C., who represented P. F. Chang’s and argued for the businesses, told Bloomberg Law Sept. 18 his client “does not have a comment at this time.” DeCamp also represents the National Restaurant Association’s legal arm, the Restaurant Law Center, in a separate challenge to the DOL’s guidance.

In the present case, a three-judge panel of the Ninth Circuit in September 2017 held that the DOL interpretation was an “alternative regulatory approach” that courts were free to ignore because it wasn’t consistent with the FLSA or the agency’s regulations. The full Ninth Circuit voided that panel decision’s precedential value in February when it said it would rehear the case en banc. In the Ninth Circuit, an en banc hearing means the case is heard in front of 11 judges, instead of the usual three-judge panel.

Judge Richard A. Paez wrote the court’s opinion, joined by Judges Sidney R. Thomas, M. Margaret McKeown, Kim McLane Wardlaw, William A. Fletcher, Johnnie B. Rawlinson, Morgan Christen, and Andrew D. Hurwitz .

Judge Susan P. Graber wrote a separate opinion that distinguished between an untipped position that’s related to tipped work and untipped positions that are unrelated to tipped work. A job that’s unrelated to a worker’s tipped position, such as a waiter who also performs maintenance work, should be held to the standard minimum wage. But a tipped worker who performs related tasks, such as a waitress who spends part of her time cleaning and setting tables, may be paid the lower tipped minimum, she said.

In a dissent, Judge Sandra S. Ikuta , joined by Judge Consuelo M. Callahan , said the DOL’s guidance shouldn’t be considered authoritative because the agency didn’t comply with requirements to notify the public and invite comments on it.

The case is Marsh v. J. Alexander’s LLC, 9th Cir., No. 15-15791, dismissal reversed 9/18/18.