Under the Fair Labor Standards Act (29 USC 203(m)), an employer must pay a tipped worker at least $2.13 per hour but may count tips the worker actually receives as a credit against the otherwise payable minimum wage of $7.25 per hour. A Dept. of Labor regulation (29 C.F.R. § 531.56(e)) provides that when a worker performs two distinct jobs for the employer, one tipped, the other not, the employer cannot take the tip credit against hours the employee works at the non-tipped job. A Dept. of Labor Handbook, most recently revised in 2012, gives further “guidance,” stating that if an employee working in a tipped occupation does any unrelated non-tipped work, no tip credit may be taken for that unrelated work, and that even if the untipped work is related to the tipped occupation, no tip credit may be taken for the time so spent if the untipped work occupies more than 20% of the employee’s work time. This en banc opinion holds that the Dept. of Labor regulation is entitled to Chevron deference and the Handbook to Auer deference. Taken together they prescribe when the tip credit may be taken. Since plaintiff restaurant workers alleged their employers took the tip credit for unrelated untipped work hours and for related untipped work exceeding 20% of their work time, they stated viable claims for violation of the FLSA.
Ninth Circuit Court of Appeals (Paez, J.; Graber & Ikuta, JJ., dissenting) (en banc); September 18, 2018; 2018 U.S. App. LEXIS 26387