Nathan A Adams IV is a Partner in Holland & Knight's Tallahassee office
In two consolidated appeals styled National Rest. Ass'n v. U.S. Dep't of Labor, No. 16-920, 2018 WL 3096374 (June 25, 2018) and Wynn Las Vegas LLC v. Cesarz, No. 16-163, 2018 WL 3096373 (June 25, 2018), the U.S. Supreme Court denied without comment certiorari petitions challenging a U.S. Court of Appeals for the Ninth Circuit decision styled Oregon Rest. And Lodging Ass'n v. Perez, 816 F. 3d 1080 (9th Cir. 2016). The court in Perez upheld an Obama-era rule, 76 Fed. Reg. at 18,841-42 (Ap. 5, 2011) (codified at 29 C.F.R. §§531.52, 531.54 and 5531.59), which prohibited employers under the FLSA from pooling the tips of servers and other "front of the house" workers who were paid at least the full minimum wage and distributing a share to "back of the house" workers who do not typically receive tips.
As background, in December 2017, the U.S. Department of Labor (DOL) submitted a proposal to the White House Office of Management and Budget to rescind the rule. In April 2018, DOL announced that due to a March amendment to the FLSA, included in the 2018 Consolidated Appropriations Act, Pub. L. No. 115-141, Div. S, Tit. XII, §1201(c), 132 Stat. 348, employers who pay tipped workers the full federal minimum wage without claiming a tip credit can now include certain non-managerial workers who are not "customarily and regularly tipped" such as cooks and dishwashers in tip pools. The anticipated rescission of the Obama-era rule is still only proposed. The denial of certiorari leaves unresolved tension with Perez.
Meanwhile, in Pataky v. Brigantine, Inc., No. 17-cv-00352, 2018 WL 3020159 (S.D. Cal. June 18, 2018), the district court certified a class in settlement of a claim for violation of the California Business and Professions Code, section 17200 (Unfair Competition Law), based on violation of the FLSA's prohibition against forcing employees to share tips with employees who do not provide direct table service to customers in places where the kitchen staff does not customarily and regularly receive tips as a predicate offense.
Furthermore, the district court in Trawick v. Tri-Star Res. Gp., LLC, No. 17-00456, 2018 WL 2337285 (D. Hawaii May 23, 2018), in reliance upon Kilgore v. Outback Steakhouse of Fla., Inc., 160 F. 3d 294 (6th Cir. 1998), ruled that hosts may participate in tip pools. Like "bus persons," hosts are mentioned in 29 C.F.R. §531.54 as an example of restaurant employees who may receive tips from tip outs by servers. According to the court in Kilgore, "One can distinguish hosts from restaurant employees like dishwashers, cooks, or off-hour employees like an overnight janitor who do not directly relate with customers at all."
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