A recent decision by the Ninth Circuit Court of Appeals (Court) in Marsh v. J. Alexander’s throws a wrench into the equation with respect to the guidance on the tip-credit provision of the Fair Labor Standards Act (FLSA) promulgated by the Department of Labor (DOL).
The nine consolidated cases at issue were brought by servers/bartenders against their former employers. Each employee claimed that his respective employer violated the tip-credit provision of the FLSA. The applicable provision of the FLSA provides, in part, that an employer may claim a credit towards minimum wage where that employee is in an occupation where he customarily and regularly receives more than $30 a month in tips. Further, if an employee is employed in dual jobs, the employer can only claim the tip credit for the employee’s hours of employment in his tipped position. However, even if an employee is performing additional duties related to the tipped occupation, the completion of these tasks alone does not mean the employee has dual jobs.
Confusion around this regulation stems from establishing a threshold of when a server completing multiple related tasks while still serving becomes employed in dual jobs. In response, the DOL issued its guidance on this regulation in the Field Operations Handbook (FOH). Specifically, this guidance states that the employer cannot use the tip-credit provision where the employee spends more than twenty percent of his time performing any “related duties” or where the employee is completing tasks that are unrelated to the tipped occupation.
Each employee argued that his respective employer improperly applied the tip-credit provision of the FLSA because the employer forced each to complete either too many “related duties” or tasks unrelated to the tipped occupation. These duties included brewing tea and coffee, stocking lemons and limes, cleaning soft drink dispensers, stocking ice and cleaning tables.
In its decision, the Court held that the DOL’s guidance outlined in the FOH did not deserve controlling deference. This interpretation was an attempt to create a de facto regulation and was inconsistent with the language of the FLSA. The Court noted that the guidance in the FOH tried to parse out three separate categories of duties within a single occupation. Further, the DOL should, in the Court’s mind, focus on the circumstances when an employee was employed in two occupations as is expressly contemplated by the FLSA.
In effect, the Court concluded, the guidance in the FOH created an alternative regulatory approach with new substantive rules. The Court held that an employee cannot rely on the aggregate amount of time he performed “related duties” intermittently with the duties directly related to the tipped occupation to argue that he held dual jobs. This decision is in direct conflict with the Eighth Circuit Court of Appeals, which gave deference to the guidance in the FOH. As such, the Court remanded the case to allow the employees to amend their pleadings in light of its decision. As similar cases arise in various circuits across the United States, the DOL’s response to the decision will likely be guided by whether other circuits give deference to such guidance. Further, it is important for business owners to keep apprised of whether the FOH guidance is the law of their land as the case law further develops.