Oregon Restaurant & Lodging Ass’n v. Perez, 2016 WL 706678 (9th Cir. 2016)

Pursuant to 29 U.S.C. § 203(m) of the Fair Labor Standards Act (“FLSA”), an employer may fulfill part of its hourly minimum wage obligation to a tipped employee with the employee’s tips. This practice is known as taking a “tip credit.” The employers in this case did not take a tip credit against their minimum wage obligation; however, the employers did require their employees to participate in tip pools that were comprised of both customarily tipped employees (e.g., servers and casino dealers) and non-customarily tipped employees (e.g., kitchen staff and casino floor supervisors). In 2011, the United States Department of Labor (“DOL”) promulgated a formal rule that prohibits tip pools that violate Section 203(m) regardless of whether the employer takes a tip credit. The lower courts in this case held that prior Ninth Circuit authority foreclosed the DOL’s ability to promulgate the 2011 rule and that the 2011 rule was invalid because it was contrary to Congress’s clear intent. In this opinion, the United States Court of Appeals for the Ninth Circuit reversed, holding that the DOL may regulate the tip pooling practices even of employers (including those involved in this case) who do not take a tip credit.