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Federal Court In Georgia Rejects DOL Regulation, Rules FLSA Does Not Require That Employees Receiving Full Minimum Wage Retain All Tips

On July 26, 2016, Judge William S. Duffey of the United States District Court for the Northern District of Georgia issued a decision holding that an employer does not have to ensure tipped employees retain all of their tips if the company is not using the employee’s tips to satisfy part of the minimum wage pursuant to the FLSA’s “tip credit” provision, 29 U.S.C. § 203(m). In Malivuk v. AmeriPark, LLC, the plaintiff sued defendant AmeriPark, LLC (a provider of valet parking services) under the FLSA claiming that Ameripark illegally withheld tips paid to her and other valets. Malivuk v. AmeriPark, LLC, 2016 U.S. Dist. LEXIS 97093 (N.D. Ga. July 26, 2016).

In granting AmeriPark’s motion to dismiss plaintiff’s claims, the court held that the provisions of Section 203(m) of the FLSA (which require, among other things, that tipped employees paid a tip credit rate retain all of their tips) did not apply to plaintiff and the other valets because AmeriPark was not taking the tip credit (i.e., using some or all of the tips to satisfy the minimum wage). In other words, the court held that the requirement that tipped employees retain all of their tips only applies to those tipped employees who are paid a direct wage less than $7.25 per hour.

In so holding, the court expressly addressed and rejected the recent position taken by the United Stated Department of Labor (“DOL”) on this issue. In 2011, the DOL issued a regulation stating that, even if employers are not taking the “tip credit” with respect to tipped employees, those employers nevertheless must ensure that the tipped employees retain all of their tips. A panel of the Ninth Circuit Court of Appeals upheld the DOL’s new regulation as consistent with Section 3(m) in Oregon Rest. and Lodging Ass’n v. Perez, 816 F.3d 1080 (9th Cir. 2016) en banc petition filed April 6, 2016. In AmeriPark, Judge Duffey rejected the Ninth Circuit panel’s “flawed reasoning” in Oregon Rest. and refused to give deference to the DOL regulation, noting that “nearly every other court that has considered the DOL Regulation has invalidated it under [the Supreme Court’s decision in] Chevron, U.S.A., Inc. v. Natural Res. Defense Council, Inc.

While this decision supports the position that the specific requirements of 29 U.S.C. § 203(m) apply only when a tip credit is taken, and that the Department of Labor has overreached in attempting to interpret the statutory language differently, the law is still developing on this issue. Employers should continue to monitor developments in this and similar cases. It also remains important, as always, to confirm compliance with state law before implementing any wage-and-hour practice, whether relating to tipped workers or otherwise.

 Eric Magnus contributed to this post.

Jackson Lewis P.C. © 2020National Law Review, Volume VI, Number 210


About this Author

Justin R. Barnes, Jackson Lewis, Federal Employment Lawyer, Discrimination Allegations Attorney

Justin R. Barnes is a Principal in the Atlanta, Georgia, office of Jackson Lewis P.C. He represents employers in federal and state courts and before administrative agencies on a variety of labor and employment related issues, including collective and class action wage and hour disputes, labor arbitrations, allegations of discrimination, and employment-related contract disputes.

Mr. Barnes’ practice is focused primarily on defending complex wage and hour class and collective actions in state and federal courts across the...