Belt v. P.F. Chang's China Bistro, Inc., 2:18-cv-03831

Background

Plaintiffs (servers at various P.F. Chang’s restaurants) allege they were paid the federal tipped wage (tip-credit rate) for all hours, while spending ~30–50% of each shift doing untipped work (related and unrelated duties).
Complaint challenges employer’s taking of the tip credit for hours spent performing untipped duties under the FLSA (and parallel Pennsylvania law).
The regulatory framework centers on 29 U.S.C. § 203(m)/(t), the DOL’s 1967 Dual Jobs regulation (29 C.F.R. § 531.56(e)), and the DOL’s long-standing “80/20” interpretation in the Field Operations Handbook (FOH).
In 2018–2019 the DOL issued a new Opinion Letter, revised FOH, and a Bulletin abandoning the 80/20 rule and stating no quantitative limit on related untipped duties so long as they are contemporaneous or reasonably before/after tipped duties.
P.F. Chang’s moved for judgment on the pleadings seeking dismissal of the claim that the employer cannot take the tip credit when employees spend more than 20% of time on untipped related duties; the court considered the motion under Rule 12(c).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an employee who spends significant time on untipped related duties remains a “tipped employee” for those hours under §203(t) and the Dual Jobs regulation	Belt et al.: the Dual Jobs regulation and longstanding DOL practice impose a limit (20%)—if untipped related work exceeds 20% of time, employer cannot take tip credit for that time	P.F. Chang’s: §203(t) unambiguously defines a tipped employee by tip receipts alone; the DOL’s 2018–19 guidance removes any 20% limit so the tip credit may apply	Court: §203(t) is ambiguous; Dual Jobs regulation merits Chevron deference and, read using textual, historical, and purpose-based tools, supports a 20% limit on untipped related work before losing tipped status for that time; denial of judgment on the pleadings
Whether Chevron deference applies to the Dual Jobs regulation	Plaintiffs: regulation fills an agency gap and warrants deference	P.F. Chang’s: regulation lacks notice-and-comment or is outdated/unentitled to deference	Court: Chevron deference applies to the Dual Jobs regulation (promulgated under DOL authority, long relied upon)
Whether DOL’s 2018–19 interpretation (no quantitative limit) warrants Auer/Skidmore deference	Plaintiffs: new DOL guidance is an unreasonable, unexplained reversal of the long-standing 80/20 policy and should not be deferred to	P.F. Chang’s: DOL’s current guidance clarifies FOH and should control	Court: DOL’s new interpretation is internally inconsistent, unreasonable, and a surprise reversal; it is not entitled to Auer or Skidmore deference
Remedyable claim at pleading stage	Plaintiffs: their complaint plausibly alleges >20% untipped related work, so claim proceeds	P.F. Chang’s: claim should be dismissed because tipped status depends solely on tips	Court: Plaintiffs plausibly state a claim; P.F. Chang’s motion for judgment on the pleadings denied

Key Cases Cited

Marsh v. J. Alexander’s LLC, 905 F.3d 610 (9th Cir. 2018) (en banc) (supports reading Dual Jobs regulation to allow a 20% limit and awards Chevron deference to the regulation)
Fast v. Applebee’s Int’l, Inc., 638 F.3d 872 (8th Cir. 2011) (upholds reasonableness of a 20% threshold under the Dual Jobs framework)
Kisor v. Wilkie, 139 S. Ct. 2400 (2019) (clarifies limits and conditions for Auer deference to agencies’ interpretations of their own ambiguous regulations)
Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (establishes framework for judicial deference to reasonable agency interpretations of ambiguous statutes)
Auer v. Robbins, 519 U.S. 452 (1997) (addresses deference to agency interpretations of their own regulations)