Restaurant Lobby Wants DOL Tip-Share Rule Reviewed by Justices

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By Jon Steingart

A coalition of hospitality business groups asked the U.S. Supreme Court Jan. 19 to review Department of Labor regulations that prohibit workers who get tips from sharing them with workers who don’t, according to a draft of the petition obtained by Bloomberg BNA ( Nat’l Rest. Ass’n v. DOL , U.S., docket number not available, petition for writ of certiorari 1/19/17 ).

“From our perspective, it has two big implications,” Angelo Amador, executive director of the Restaurant Law Center, told Bloomberg BNA Jan. 19. “One is with regards to regulation and the ability of agencies to regulate beyond what Congress has authorized them to do,” he said. The DOL adopted the regulations in 2011. The center is the legal arm of the National Restaurant Association, one of the petitioners.

The other objection is that the DOL’s interpretation of the Fair Labor Standards Act creates an unequal playing field by contrasting front-of-house workers such as waiters and bartenders who earn tips and back-of-house staff such as cooks and dishwashers who are prohibited from sharing in the largesse, Amador said.

Two-Tiered Wage Floor Called Problematic

Saru Jayaraman, co-founder and co-director of the Restaurant Opportunities Center, told Bloomberg BNA the main problem is the two-tiered wage floor that allows businesses to pay tipped workers less than the standard minimum wage. ROC is a worker advocacy organization.

“The intent of the law is that workers should be allowed to do what they want with their tips,” Jayaraman said. The lower minimum wage for tipped workers distorts their income because their payroll taxes on tip and hourly wage income are withheld from paychecks. This shrinks paychecks to low amounts, if any, increasing reliance on tips for income, she said.

“There needs to be very severe protections for workers that tips are their property. This could only exist in one-fair-wage states,” she said, using a term for states that have a uniform minimum wage. “We actually agree that tips should be allowed to be shared with the back of the house.”

‘Broad and Remedial’ Purpose Cited by 9th Cir

Joining the National Restaurant Association in filing the petition are the Oregon Restaurant & Lodging Association, the Washington Restaurant Association, and the Alaska Cabaret, Hotel, Restaurant and Retailers Association. The U.S. Court of Appeals for the Ninth Circuit turned down their challenge to the tip-share rules on Feb. 23, 2016.

The issue before the Ninth Circuit was whether the DOL exceeded its authority under the FLSA to prohibit tip-pooling when a business pays the standard minimum wage to tipped employees who might be eligible for the lower minimum wage. It found the DOL’s interpretation was reasonable in light of the law’s “broad and remedial” purpose.

The Ninth Circuit decided the association’s case in a consolidated ruling that also decided an appeal by Wynn Las Vegas LLC. Dealers at that company's Encore and Wynn casinos sued over a policy that required them to share tips with table game supervisors. Wynn filed a petition for Supreme Court review Aug. 1. It had an earlier deadline because its case didn’t involve a federal agency, the associations’ petition said.

The business groups’ request is part of a pledge to challenge workplace rules enacted during the Obama administration. The restaurant association announced Jan. 12 it was forming the Restaurant Law Center, made up of legal officers from leading restaurant companies. One of its charter members is CKE Restaurants Inc., parent company of Hardee’s and Carl’s Jr. The chief executive officer of CKE, Andrew Puzder, is President-elect Donald Trump’s pick for secretary of labor.

A DOL spokesman didn't respond to a request for comment Jan. 19.

Amador, based in Washington, and Paul DeCamp with Jackson Lewis P.C. in Reston, Va., represent the associations.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

For More Information

The petition is available at http://src.bna.com/lzp.

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