US appeals court scraps Biden tipped wages rule

In a significant legal development, the U.S. Court of Appeals for the Fifth Circuit has invalidated a rule established by the Biden administration intended to increase wages for tipped employees. The decision, announced on August 23, 2024, follows a recent U.S. Supreme Court ruling that limited the authority of federal agencies to issue regulations.

The contested rule, implemented by the U.S. Department of Labor in 2021, required employers to pay tipped workers the full federal minimum wage of $7.25 per hour for non-tipped tasks if those tasks constituted more than 20% of their working hours or lasted more than 30 consecutive minutes. This rule replaced a regulation from the Trump administration that allowed workers to be paid the lower tipped minimum wage of $2.13 per hour if their primary duties involved tipping.

The Fifth Circuit’s three-judge panel, based in New Orleans, unanimously sided with two restaurant industry trade groups—the Restaurant Law Center and the Texas Restaurant Association—who argued that the rule was contrary to federal labor law. The panel’s decision reverses a previous ruling by U.S. District Judge Robert Pittman, who had upheld the rule by applying the Chevron deference doctrine. This doctrine, established in a 1984 Supreme Court ruling, required courts to defer to federal agencies’ interpretations of ambiguous laws. However, the Supreme Court’s recent decision to eliminate the Chevron doctrine led the Fifth Circuit to apply its independent judgment in interpreting the Fair Labor Standards Act (FLSA).

U.S. Circuit Judge Jennifer Walker Elrod, writing for the panel, stated that the rule was “contrary to the Fair Labor Standards Act’s clear statutory text” and “not in accordance with law.” She noted that the rule improperly established criteria for applying the tip credit based on factors not permitted by the statutory framework set by Congress[1][2][5].

The Labor Department has not yet commented on the ruling, and it remains uncertain whether it will seek further review or appeal to the U.S. Supreme Court. Meanwhile, employers in the restaurant and hospitality industries, who have been required to comply with the rule’s distinctions between “tip-producing” and “tip-supporting” work, may find relief in the court’s decision.

Citations:
[1] https://www.allsides.com/news/2024-08-23-1615/politics-us-appeals-court-scraps-biden-tipped-wages-rule
[2] https://www.aol.com/news/us-appeals-court-scraps-biden-213630561.html
[3] https://www.wagehourblog.com/federal-appeals-court-vacates-department-of-labors-80-20-30-rule-regarding-tipped-employees
[4] https://today.westlaw.com/Document/I3e584ec0619911ef8def8febf80db2de/View/FullText.html?contextData=%28sc.Default%29&firstPage=true&transitionType=CategoryPageItem
[5] https://www.usnews.com/news/top-news/articles/2024-08-23/us-appeals-court-scraps-biden-tipped-wages-rule
[6] https://www.jacksonlewis.com/insights/fifth-circuit-strikes-down-dol-tip-credit-rule-what-it-means-employers
[7] https://www.reuters.com/legal/us-supreme-court/