Oregon Restaurant & Lodging v. Solis
948 F. Supp. 2d 1217
D. Or.2013Background
- Tip pooling allowed including non-tipped employees prior to 2011 rule changes.
- DOL issued 2011 regulations prohibiting use of tips to fund non-tipped employees and clarifying tip ownership.
- Plaintiffs challenge the regulations as invalid interpretations of the FLSA, arguing against broad tip-control rules when no tip credit is taken.
- FLSA 3(m) governs tip credits and the conditions under which tips may be used to satisfy minimum wage.
- Woody Woo (9th Cir.) held that 3(m) imposes conditions on tip credits and does not create a freestanding rule for all tipped employees.
- Court finds the new regulations invalid at Chevron Step One and GRANTS plaintiffs’ summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to regulate | Plaintiffs contend the DOL lacks authority to regulate tips absent a direct grant. | DOL has general rulemaking authority under 1974 amendments to implement 3(m). | DOL authority acknowledged; proceed to Step One. |
| Direct spoken intent in 3(m) | Woody Woo controls; 3(m) does not create a freestanding rule for all tipped employees. | Regulations fill gaps in silent areas and reflect the department’s interpretation. | Congress intentionally limited tip use with tip credit; no freestanding rule beyond 3(m). |
| Chevron Step One outcome | Statutory text is ambiguous about tips when no tip credit is taken. | Courts should defer to agency construction under Chevron in gap areas. | Congressional intent is clear; regulations invalid at Step One. |
| Impact of Woody Woo under Brand X | Woody Woo controls and precludes agency discretion here. | Woody Woo is not controlling under Brand X due to timing and scope. | Woody Woo leaves no room for agency discretion; regulations invalid at Step One. |
Key Cases Cited
- Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010) (interprets 3(m) and tip credit conditions)
- Woody Woo, Inc. v. City of Los Angeles, 596 F.3d 577 (9th Cir. 2010) (plain meaning of 3(m) requires tip-credit conditions)
- National Cable & Telecomm. Ass'n v. Brand X Internet Servs., 545 U.S. 967 (U.S. 2005) (preempts agency deference when statute unambiguous)
- City of Arlington v. FCC, 133 S. Ct. 1863 (S. Ct. 2013) (Chevron Step Zero/authority question clarified)
- Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (U.S. 2007) (explicit vs implicit gaps in statutory text)
- Barrentine v. Ark-Best Freight Sys. Inc., 450 U.S. 728 (U.S. 1981) (FLSA purpose to protect workers from substandard wages)
- Christensen v. Harris Cnty., 529 U.S. 576 (U.S. 2000) (agency interpretations are not allowed to add protections not in statute)
- Jacksonville Terminal Co., 315 U.S. 386 (U.S. 1942) (tipping law historically respected as employee property)