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Restaurant Industry Association Files Suit Challenging “80/20” Rule

The Restaurant Law Center, a public policy affiliate of the National Restaurant Association, has filed suit against the Department of Labor and its Wage and Hour Division, seeking to declare unlawful the DOL’s 2012 revision to its Field Operations Handbook, purporting to establish, through sub-regulatory guidance, the “80/20” tip credit rule or “20% Rule.” Restaurant Law Center v. U.S. Dept. of Labor, No. 18-cv-567 (W.D. Tex. July 6, 2018). The 80/20 Rule seeks to limit the availability of the tip credit when tipped employees spend more than 20% of their time performing allegedly non-tip generating duties. One of several problems in applying such a rule is identifying what is, and what is not, an allegedly “tip-generating” duty.

The lawsuit alleges that the DOL improperly created the 80/20 Rule by surreptitiously adding it to the Field Operations Handbook used by its agents, rather than abiding by the rulemaking process, thereby violating the Administrative Procedure Act. Noting that the Rule “spawned a nationwide wave of collective and class actions against the restaurant industry,” the lawsuit seeks to have it declared invalid and unenforceable. Last year, a panel of the Ninth Circuit Court of Appeals held as much in Marsh v. J. Alexander’s, LLC, 869 F.3d 1108 (9th Cir. 2017), noting that the purported guidance had become a “de facto [] new regulation masquerading as an interpretation.” However, the Ninth Circuit subsequently granted a rehearing before the full Court of Appeals. The case was argued in March 2018 before the full panel but the Court has yet to issue its opinion. In 2011, the Eighth Circuit deferred to the Rule. Fast v. Applebee’s InternationalInc., 638 F.3d 872 (8th Cir. 2011). If the full Ninth Circuit affirms its panel decision, or the Fifth Circuit ultimately holds the 80/20 Rule invalid on an appeal of the just-filed lawsuit, a circuit court split would arise, with the case on a path to the Supreme Court. This is one to watch.

Jackson Lewis P.C. © 2018

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About this Author

Jeffrey Brecher, Jackson Lewis, Management Arbitration Lawyer, Labor Litigation Attorney
Principal

Jeffrey W. Brecher is a Principal in the Long Island, New York, office of Jackson Lewis, and is Practice Group Leader of the firm's Wage and Hour practice. He has litigated hundreds of cases, defending management at arbitration, before state and federal administrative agencies and at trial.

Mr. Brecher regularly advises clients on compliance with various state and federal laws affecting the workplace, including discrimination and related claims arising under Title VII, Family and Medical Leave Act, Americans with...

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Principal

Stephanie L. Adler-Paindiris is a Principal and Office Litigation Manager for the Orlando, Florida, office of Jackson Lewis P.C. She is Co-Leader of the firm's Class Actions and Complex Litigation practice group. Her practice focuses exclusively on the representation of employers at the trial and appellate level in state and federal courts, as well as proceedings before administrative judges and agencies.

Ms. Adler-Paindiris has conducted over a dozen trials before juries and judges in state and federal courts. In addition, Ms. Adler has participated in arbitrations and administrative hearings before the Florida Division of Administrative Hearings. Ms. Adler-Paindiris has successfully defended appeals before many federal appellate courts.

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