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Big Win For Restaurants as Ninth Circuit Rejects DOL's 20% Rule

September 6, 2017 Posted in Legal Updates Share

Restaurant employers and others who deal with tipped employees should pay close attention to the September 6 decision by the U.S. Court of Appeals for the Ninth Circuit in Marsh v. J. Alexander's.  

In Marsh, the Ninth Circuit reviewed a district court's dismissal of several lawsuits claiming that servers were ineligible for the subminimum tipped wage because they had been assigned too much sidework.  These claims rested on the Department of Labor's so-called "20% rule," which attempted to separate the duties of tipped employees into "tip-producing" and "non-tip-producing" categories and impose a 20% limit on the latter.  

The Ninth Circuit refused to grant any deference to the Department of Labor's 20% rule.  It found that the DOL's so-called "interpretation" of the statute was actually an impermissible attempt to create a new regulation without going through notice-and-comment rulemaking, and that the compliance burdens it created were both unreasonable and contrary to the FLSA itself.  

This is a huge win for restaurant employers, who have been dealing with a wave of lawsuits founded on the DOL's unreasonable interpretation of the FLSA.  Importantly, it creates a circuit split between the Ninth Circuit and the Eighth Circuit, which sets the stage for the Supreme Court to resolve the issue.  

Marsh v. J. Alexander's.pdf