Oregon Rest. & Lodging Ass'n v. Perez, No. 13-35765 (9th Cir. 2016)
Annotate this CaseEmployer-Appellees required their employees to participate in tip pools. Unlike the tip pools contemplated by section 203(m) of the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. 203(m), however, these tip pools were comprised of both customarily tipped employees and non-customarily tipped employees. In 2010, the court held in Cumbie v. Woody Woo, Inc. that this type of tip pooling arrangement does not violate section 203(m), because section 203(m) was silent as to employers who do not take a tip credit. In 2011, shortly after Cumbie was decided, the DOL promulgated a formal rule that extended the tip pool restrictions of section 203(m) to all employers, not just those who take a tip credit. The United States District Court for the District of Oregon held that Cumbie 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. The United States District Court for the District of Nevada followed suit. Applying Chevron, the court concluded that Congress has not addressed the question at issue because section 203(m) is silent as to the tip pooling practices of employers who do not take a tip credit. There is no convincing evidence that Congress’s silence, in this context, means anything other than a refusal to tie the agency’s hands. In exercising its discretion to regulate, the DOL promulgated a rule that is consistent with the FLSA’s language, legislative history, and purpose. Having decided that the regulation withstands Chevron review, the court reversed both judgments and remanded for further proceedings.
Court Description: Fair Labor Standards Act. The panel reversed the district courts’ decisions in favor of employers, and held that Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010), did not foreclose the Department of Labor’s ability to promulgate subsequently a formal rule that extended the tip pooling restrictions of Section 203(m) of the Fair Labor Standards Act of 1938 (“FLSA”); and remanded for further proceedings. Under 29 U.S.C. § 203(m), an employer may fulfill part of its hourly minimum wage obligation to a tipped employee with the employee’s tips by taking a tip credit; and the tip pool is valid if it is comprised exclusively of employees who are “customarily and regularly” tipped. In 2010, in Cumbie, the court held that a tip pooling arrangement comprised of both customarily tipped employees and non-customarily tipped employees did not violate section 203(m) of the FLSA because section 203(m) was silent as to employers who do not take a tip credit. In 2011, the Department of Labor promulgated a formal rule that extended the tip pool 4 OREGON REST. & LODGING ASS’N V. PEREZ restrictions of section 203(m) to all employers, not just to those who take a tip credit. 76 Fed. Reg. 18,832, 18,841–42 (April 5, 2011). The district courts in these cases held that Cumbie foreclosed the Department of Labor’s ability to promulgate the 2011 rule and that the 2011 rule was invalid because it was contrary to Congress’s clear intent. The panel held that the Department of Labor may regulate the tip pooling practices of employers who do not take a tip credit. The panel disagreed with the district courts’ applications of Cumbie and their analyses under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). The panel held that FLSA section 203(m)’s clear silence as to employers who do not take a tip credit left room for the Department of Labor to promulgate the 2011 rule. The panel concluded that step one of the Chevron analysis was satisfied. At Chevron step two, the panel concluded that the Department of Labor’s interpretation in the 2011 rule was reasonable. The panel held that the Department of Labor’s regulation withstood Chevron review. Judge N.R. Smith dissented because he would hold that the cases are controlled by the holding in Cumbie, and he would affirm the district courts. OREGON REST. & LODGING ASS’N V. PEREZ 5
The court issued a subsequent related opinion or order on September 6, 2016.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.