Restaurant industry associations and others have filed a lawsuit in Oregon federal court, asserting that Department of Labor (“DOL”) regulations interpreting the Fair Labor Standards Act (“FLSA”) unlawfully prohibit back-of-the-house kitchen workers from sharing in tips left by restaurant customers when the employer does not take a tip credit against minimum wage. Oregon Restaurant and Lodging Ass’n v. Solis et al., No. 3:12-cv-01261 (D. Or. filed July 12, 2012). The plaintiffs claim the DOL exceeded its authority in issuing these regulations, and that the regulations are inconsistent with the plain language of the FLSA as well as the U.S. Court of Appeals for the Ninth Circuit ruling in Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010). In that case, the Ninth Circuit, with jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington, held that the FLSA does not restrict employer-mandated employee tip-pooling arrangements when no tip credit is taken by the employer. In other words, according to Woody Woo, an employer in the Ninth Circuit is not prohibited by the FLSA from instituting a tip pool that includes back-of-the-house workers if the employees who share in tips are paid the full minimum wage and no tip credit is taken by the employer.
When the DOL issued its regulations in April 2011 conflicting with Woody Woo, the DOL stated it believed that court decision was wrongly decided. However, despite concerns raised by restaurant groups and at least one United States senator over the regulations and the confusion they create for employers, the DOL, on February 29, 2012, issued a field assistance bulletin to the agency’s staff, declaring that it “will enforce nationwide the 2011 final rule explaining that a tip is the sole property of the tipped employee regardless of whether the employer takes a tip credit[.]”