Property Developers Push for Open Drinking on City Streets

338. Restaurant Assn. Asks Justices To Review Tip-Pool Rule

Source: Law360

By Braden Campbell

January 19, 2017

The National Restaurant Association on Thursday urged the U.S. Supreme Court to hear a suit challenging a Department of Labor rule that bars restaurants from sharing servers' tips with kitchen staff, saying that allowing the rule would greatly expand agency powers past what Congress intended.

The petition for certiorari relies heavily on a dissent by a group of Ninth Circuit judges who recommended the court rehear en banc the restaurant advocacy group's failed challenge of the controversial tip pool rule.

The group argued that the DOL overstepped its authority under the Fair Labor Standards Act and that a circuit split was created after the Ninth Circuit upheld the rule, which bars restaurants from redistributing servers' tips to back-of-house staff regardless of whether these arrangements are valid under a separate FLSA provision allowing tip pools.

"The Ninth Circuit's ruling conflicts with not only the Fourth Circuit's interpretation of the statutory language but with the interpretation that the Ninth Circuit itself gave in its 2010 decision in Cumbie v. Woody Woo Inc.," Jackson Lewis PC's Paul DeCamp, who represents the NRA, said in a statement accompanying the petition's filing. "It is incumbent on the U.S. Supreme Court to render a decision on this matter against the Department of Labor's regulatory overstep."

The FLSA lets restaurants take a tip credit that allows them to pay wait staff at less than minimum wage when the difference between their cash wage and the minimum wage is made up through tips. The statute bars management who take a tip credit from making front-of-house employees share their tips with back-of-house employees such as cooks and dishwashers but says nothing about whether management that does not take the tip credit can institute such tip pools.

In 2010, the Ninth Circuit affirmed dismissal of Cumbie, in which a waitress alleged that her employer, which did not take the tip credit, violated the FLSA by requiring her to share tips with back-of-house staff. The next year, the DOL issued the challenged rule, which bars restaurants that don't take the tip credit from making wait staff share tips with the back of the house.

The NRA avoided making new arguments for the Supreme Court to take up the case, instead citing and recapping arguments from dissents in the original Ninth Circuit challenge and subsequent en banc rehearing petition as well as casino magnate Steve Wynn's parallel cert petition seeking to have his challenge, which was decided alongside the NRA's, heard by the Supreme Court.

The NRA argues that the Ninth Circuit panel's February decision allowing the rule conflicts with circuit precedent and creates a conflict with a 2013 Fourth Circuit decision allowing tip pools where restaurants do not take the tip credit. The Fourth and Ninth Circuit rulings rely on "divergent and irreconcilable interpretations of [the] FLSA," and the Ninth Circuit established in two prior cases that "unless the FLSA prohibits a pay practice, that practice is lawful," the NRA argues.

"Congress imposed no freestanding restrictions on tip pooling untethered to the tip credit," the group said.

The NRA also argues that the ruling far expands executive authority past what Congress intended by allowing federal agencies to issue rules on areas where a statute is silent.

"The Ninth Circuit's decision adopts a dangerous and wholly unprecedented approach to construing federal agency authority to interpret statutes, one that substantially aggrandizes the power of the executive branch at the expense of Congress and the courts," the NRA argues.

The Justice Department did not immediately respond Thursday to a request for comment.

The NRA is represented by Angelo Amador of the Restaurant Law Center and Paul DeCamp of Jackson Lewis PC.

Attorney information for the DOL was not available Thursday.

The case is National Restaurant Association et al. v. Department of Labor in the U.S. Supreme Court. The case number was not available Thursday.