Restaurant Groups’ Tip Rule Challenge to Return to Fifth Circuit

Two restaurant industry groups again are appealing a federal district court dismissal of their challenge to a US Labor Department rule limiting when employers can use the tip credit.

The Restaurant Law Center and the Texas Restaurant Association on Thursday appealed a ruling denying their request to block the Biden administration rule, which requires companies to pay some tipped workers the full minimum wage during their downtime.

The rule at issue, which went into effect in December 2021, requires employers to pay the full hourly minimum wage to tipped workers who earn the lower tip-credit wage if they perform non-tipped work for at least 20% of their hours a week, or for more than 30 minutes straight.

The Fair Labor Standards Act allows employers to pay tip-earning workers $2.13 an hour if they earn at least $30 a month in tips and make at least the minimum wage of $7.25 an hour at the end of the work week. Many states and localities have raised both the local hourly minimum wage and the lower tipped wage above those federal rates.

Last month, the groups were unable to convince Judge Robert Pitman of the US District Court for the Western District of Texas that the rule was out of line with the FLSA and should be set aside.

Thursday’s appeal takes the case back to the US Court of Appeals for the Fifth Circuit, which previously sided with the restaurant groups after finding that the lower court abused its discretion in finding no evidence they were irreparably harmed by the rule.

On remand, Pitman said even if the restaurant groups’ harm was irreparable, it didn’t outweigh the harm to the government and public that would come from putting the DOL rule on hold.

“We believe that the district court’s flawed analysis will not withstand appellate scrutiny, and we look forward to presenting our arguments to the Fifth Circuit,” the restaurant groups’ attorney, Paul DeCamp of Epstein Becker & Green PC, said in an emailed statement.

The case is: Rest. Law Ctr. v. DOL, W.D. Tex., No. 1:21-cv-01106, notice of appeal filed 8/3/23.