Restaurant Groups Urge High Court To Review Tip Pool Rule
By Braden Campbell
September 13, 2016
A handful of restaurant associations recently urged the U.S. Supreme Court to take up an appeal of a Ninth Circuit ruling that the U.S. Department of Labor can stop employers from tip pooling, saying that the rule hurts minority workers and that a circuit split on the agency’s rulemaking puts restaurants in a costly bind.
The National Restaurant Association, the National Federation of Independent Business and other hospitality groups filed an amici curiae brief last week, piggybacking on Wynn Las Vegas’ August petition for the high court to decide whether the DOL acted within its statutory authority when it barred restaurants from including kitchen staff in tip pools. A separate suit filed by the trade groups against the DOL was consolidated in the Wynn suit.
In their brief, the groups argued that the regulation disproportionately favors mostly white, female restaurant service staff by taking money out of the pockets of minority, male kitchen workers and that complying with the “unsettled” rule – which has been rejected by some courts and allowed by others – forces restaurants to choose between costly lawsuits or upending traditional industry pay practices, which is likewise expensive.
“The department’s regulations are ill-conceived and backward,” the trade groups said. “This regulatory frolic and detour presents an especially appropriate candidate for this court’s timely intervention to prevent any further damage to the restaurant industry and the many jobs it creates in communities across the country.”
Wynn’s petition asks the court to settle a disagreement between the Ninth, Federal and Fourth circuits over whether the Fair Labor Standards Act allows the DOL to issue rules covering areas in which the empowering statute is silent, as was the case here.
The Ninth Circuit in February held in a published opinion on a suit by Wynn casino dealers that the DOL is within its rights to bar employers from using tip pools by expanding existing prohibitions to cover all restaurants. The decision reversed two rulings by district courts in separate cases that were consolidated in the appellate case – an Oregon federal court decision in the trade groups’ case and a Nevada federal court decision in the Wynn case. A split Ninth Circuit panel declined last week to rehear the consolidated cases, with one panel member and nine other circuit members dissenting over perceived failures of the ruling.
The restaurant associations also took issue with the decision, writing in their brief that the rule has led to a wave of class action lawsuits against restaurants uncertain of the best way to comply, given the circuit split.
“The issue is not going away, and only the definitive guidance that this court can bring will resolve the matter,” the associations said. “The only real questions are how much money litigants will have to spend on lawyers’ fees and how much time the federal courts will have to devote to class actions involving this issue, in the meantime.”
The groups also argued that the rule confers a “uniquely privileged status” for the majority white dining room staff by requiring all tips go their way while depriving more ethnically diverse kitchen workers – whom they claim are already paid worse than their service counterparts – of a share.
“The last thing that agencies of the federal government should be doing is building obstacles to African-American and Hispanic male workers achieving higher levels of income,” the associations said. “Yet that is precisely what the department’s regulations accomplish.”
In an interview with Law360 on Tuesday, an attorney for the restaurant associations, Paul DeCamp of Jackson Lewis PC, called the issue one “of great importance to restaurants across the country” and urged the Supreme Court to provide some clarity.
“The Ninth Circuit, quite frankly, got this issue completely wrong,” DeCamp said. “Ten judges in the Ninth Circuit agreed that the court’s opinion botched this issue badly, and at this point, now only the Supreme Court can fix it.”
On Monday, the restaurant groups asked the Ninth Circuit to stay the Labor Department’s appeal of the underlying Oregon federal court decision in their suit, pending a decision on Wynn’s petition in the consolidated case. The stay was granted on uesday.
Attorneys for the restaurant groups and representatives for the U.S. Department of Justice did not immediately respond to requests for comment on Tuesday.
Joseph Cesarz and Quy Ngoc Tang and the other casino dealers are represented by Leon Greenberg and Dana Sniegocki of Leon Greenberg PC.
The associations are represented by Angelo Amador of the National Restaurant Association and Paul DeCamp of Jackson Lewis PC.
The writ of certiorari is Wynn Las Vegas LLC and Steve Wynn v. Joseph Cesarz and Quy Ngoc Tang et al., case number 16-163, in the Supreme Court of the United States. The appeal circuit cases are Oregon Restaurant and Lodging Association et al. v. U.S. Department of Labor, case number 13-35765, and Joseph Cesarz et al. v. Wynn Las Vegas LLC et al., case number 14-15243, both in the U.S. Court of Appeals for the Ninth Circuit.