Trade groups challenge DOL’s new tip pool rule for restaurant employees

Restaurant trade organizations, an Oregon restaurant and one of its employees, a server, have filed a complaint for declaratory and injunctive relief against the U.S. Department of Labor (DOL), alleging that its interpretation of the Fair Labor Standards Act, forbidding restaurants from distributing a share of tips to non-tipped employees, regardless of whether the restaurants use the tips as a credit toward paying their employees minimum wage, conflicts with a Ninth Circuit decision and will force the restaurants to incur significant costs or subject them to litigation. Or. Restaurant & Lodging Ass’n v. Solis, No. 3:12-cv-01261 (U.S. Dist. Ct., D. Or., Portland Div., filed July 12, 2012).  

According to the Ninth Circuit ruling, restaurants can require that tips be shared with back-of-house and other non-tipped restaurant employees where the wait staff are paid at least full minimum wage and the restaurants do not take a tip credit. Cumby v. Woody Woo, Inc., No. 08-35718 (9th Cir. 2010). The complaint alleges that DOL has made clear that its interpretation will be applied nation-wide, including in the Ninth Circuit. The restaurant and server plaintiff allege that the restaurant’s mandatory tip pool was expanded to back-of-house employees at the server’s request and that no reductions in wages occurred to offset this change. They claim that the change has resulted in greater camaraderie among employees and a higher level of guest service and satisfaction.  

Alleging that DOL exceeded its authority in issuing the regulations interpreting the tip credit provisions of the fair labor law, violated the Administrative Procedure Act by failing to “put the public on notice that DOL was going to declare an absolute property right in tips,” and adopted regulations that are arbitrary, capricious and an abuse of discretion, the plaintiffs ask the court to declare the 2011 regulations unlawful, void and unenforceable and to set them aside. They also request an injunction to stop DOL from enforcing the rule, as well as costs and attorney’s fees.