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United States District Court for the Western District of Texas, Austin Division
February 22, 2022, Decided; February 22, 2022, Filed
Before the Court is Plaintiffs Restaurant Law Center ("RLC") and Texas Restaurant Association's ("TRA") (collectively "Plaintiffs") Emergency Motion for a Preliminary Injunction, (the "Motion"). (Dkt. 12). Defendants United States Department of Labor ("DOL"), Secretary Martin J. Walsh, and Administrator Jessica Loomin (collectively "Defendants") filed a response, (Dkt. 20), Plaintiffs filed a reply, (Dkt. 23), and the Court held a hearing on the Motion, (Dkt. 25). Having [*2] considered the briefing, the arguments made at the hearing, the evidence, and the relevant law, the Court will deny the Motion.
This is a challenge to a DOL regulation regarding wages for employees who receive tips as part of their earnings. Under the Fair Labor Standards Act ("FLSA"), a "tipped employee" is an "employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips." 29 U.S.C. § 203(t). For such employees, an employer can take a "tip credit" that allows them to offset the employee's wages by the amount of tips, down to $2.13 per hour, so long as the employee's total earnings—wages plus tips—add up to minimum wage. 29 U.S.C. § 203(m)(2)(A). The dispute in this case turns on the meaning of the statutory phrase "engaged in an occupation" and the term "occupation," both used in the definition of "tipped employee" but undefined in the FLSA.
Tipped employees, such as servers and bartenders, regularly engage in non-tipped work, including cleaning and preparation for service, which may complicate calculation of their wages. (Mot. Prelim. Inj., Dkt. 12, at 12). In 1967—the year after Congress amended the FLSA to include a tip credit—DOL promulgated regulations addressing such situations. See 29 C.F.R. § 531.50-60. These [*3] rules governed employees working in "dual jobs," where they perform both non-tipped and tipped labor, such as working in maintenance and as a server. The regulation distinguished working two separate jobs, where the top credit did not apply, from working one job with overlapping duties, where the credit did apply. In the latter category, all of an employee's activities were not required to be "directed toward producing tips." 29 C.F.R. § 531.56(e) (1967-2020). DOL claims that restaurants can use the tip credit and dual jobs regulation to subsidize non-tipped work and pay employees less across the board. (Resp., Dkt. 20, at 28). In response to this potential for exploitation, in 1988 DOL issued guidance, known as the 80/20 rule (not promulgated as a regulation), which built on statements in its previous opinion letters.1 (Id. at 14; WHD Field Operations Handbook ("FOH") Rev. 563 § 30d00(e), Dkt. 20, at 57). The guidance allowed a tip credit for time spent on duties related to the tipped occupation, even if those duties were not directly related to tip-generating activities. However, it limited this allowance to up to twenty percent of the employee's time. (Id.). In other words, only up to twenty percent of [*4] an employee's work could be in non-tipped activities for the employer to be entitled to take the tip credit for that employee.
The 80/20 guidance remained in place largely undisturbed2 until 2018. That year, DOL rescinded the rule through new guidance. (Resp., Dkt. 20, at 14; WHD Opinion Letter FLSA2018-27 (Nov. 8, 2018), Dkt 20, at 58; WHD FOH Rev. 767 (Feb. 15, 2019), Dkt. 20, at 62). The rescission was "met with near-universal rejection" in court. (Resp., Dkt. 20, at 2). In 2020, DOL finalized a rule codifying the rescission, but that rule never went into effect. (Resp., Dkt. 20, at 15; 85 Fed. Reg. 86756 (Dec. 30, 2020)). Instead, DOL withdrew the rule in 2021 and finalized a new rule effectively codifying the 80/20 guidance and adding new protections. (Resp., Dkt. 20, at 15). It issued a notice of proposed rulemaking on June 23, 2021. 86 Fed. Reg. 32818 (June 23, 2021). After making changes in response to comments from the restaurant industry and others, DOL issued a final rule (the "Rule") on October 29, 2021. 86 Fed. Reg. 60114 (Oct. 29, 2021). The Rule went into effect on December 28, 2021. (Resp., Dkt. 20, at 18).
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
2022 U.S. Dist. LEXIS 30368 *; 2022 WL 526243
RESTAURANT LAW CENTER and TEXAS RESTAURANT ASSOCIATION, Plaintiffs, v. UNITED STATES DEPARTMENT OF LABOR; MARTIN J. WALSH, Secretary of the United States Department of Labor, in his official capacity; and JESSICA LOOMAN, Acting Administrator of the Department of Labor Wage and Hour Division, in her official capacity, Defendants.
tipped, restaurant, costs, irreparable harm, occupation, injunction, preliminary injunction, regulation, final rule, non-tipped, employees, preparation, promulgated, conclusory, harms