Restaurant Law Center v. LABR, 120 F.4th 163

The Department of Labor (DOL) issued a 2021 Final Rule limiting when employers can take a "tip credit" for paying sub-minimum wage to "tipped employees" under the Fair Labor Standards Act (FLSA).
The tip credit allows employers to pay tipped workers as little as $2.13/hour if tips top up pay to minimum wage; the FLSA defines a "tipped employee" as one regularly earning over $30/month in tips.
The Final Rule implemented longstanding DOL guidance (the "80/20 rule"), restricting tip credits for employees who spend over 20% of their time, or more than 30 consecutive minutes, on non-tip-producing but related duties.
The Restaurant Law Center and Texas Restaurant Association challenged the rule, arguing it was contrary to the statute and arbitrary/capricious.
The district court granted summary judgment to DOL, applying Chevron deference, and held the rule as a reasonable interpretation. The Fifth Circuit appeal followed, and the Supreme Court’s overruling of Chevron occurred pending this case.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Final Rule is contrary to the text of the FLSA	The FLSA ties tip credit eligibility to the occupation as a whole, not specific duties or time spend on tasks	"Engaged in an occupation" lets DOL define the scope, including by time/task restrictions tied to tip-producing work	The Final Rule is contrary to the FLSA’s text; "engaged in an occupation" refers to the job as a whole
Whether the Final Rule is arbitrary and capricious under the APA	The Rule draws arbitrary lines not contemplated by Congress (e.g., 20% cap, 30-min cutoff) and ignores occupational realities	The FLSA’s ambiguity permits DOL to set such boundaries, which prevent employer abuse	The Rule is arbitrary and capricious; it uses improper criteria for drawing those lines
Validity of Chevron deference (applied by the district court)	Chevron is no longer good law (per Loper Bright); courts must independently interpret the FLSA	Chevron previously justified deference to agency interpretation	Chevron overruled; courts decide questions of law independently
Remedy for unlawful agency action	The Rule should be vacated nationwide	DOL did not oppose remand without vacatur as alternative	Remedy is vacatur (not mere remand)

Marsh v. J. Alexander's LLC, 905 F.3d 610 (9th Cir. 2018) (addressed DOL’s historical tip credit guidance and deference)
Fast v. Applebee’s Int’l, Inc., 638 F.3d 872 (8th Cir. 2011) (upheld DOL 80/20 guidance under Auer deference)
Judulang v. Holder, 565 U.S. 42 (2011) (arbitrary and capricious standard for agency action)
Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (articulated arbitrary and capricious review for agency rules)
West Virginia v. EPA, 597 U.S. 697 (2022) (major questions doctrine)
Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (deference doctrine, overruled by Loper Bright)