Restaurant Law Center v. LABR, 66 F.4th 593

Background

The Fair Labor Standards Act allows a "tip credit": employers may pay tipped employees a cash wage lower than the federal minimum if tips make up the difference. 29 U.S.C. §§ 203(m), 203(t), 206.
In 2021 the DOL amended 29 C.F.R. § 531.56 to (a) codify an 80/20 (20% workweek) limit on non-tipped supporting work and (b) add a new rule disallowing the tip credit for any continuous period of directly supporting work that exceeds 30 minutes.
The Restaurant Law Center and Texas Restaurant Association sued, seeking a preliminary injunction against the new rule; the district court assumed likelihood on the merits but denied injunctive relief, finding Plaintiffs failed to show irreparable harm from compliance costs.
The DOL itself conceded some employers will incur ongoing management costs to ensure compliance and estimated annual nationwide compliance costs; Plaintiffs produced testimony estimating greater, ongoing monitoring and recordkeeping burdens for member restaurants.
The Fifth Circuit majority reversed the denial, holding nonrecoverable compliance costs can be irreparable and that Plaintiffs presented sufficient evidence (and the DOL conceded the possibility) of ongoing, unrecoverable costs tied to the 30-minute rule; the case was remanded for the district court to address the remaining injunction factors.
Judge Higginbotham dissented, arguing the district court’s factual findings were plausible, Plaintiffs’ evidence was speculative or vague, and the appellate majority improperly substituted its judgment for the trial court on credibility and factual issues.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether compliance costs from following a potentially invalid DOL rule constitute irreparable harm for preliminary injunction purposes	Compliance costs here are ongoing, nonrecoverable, and thus irreparable; DOL concedes some employers will incur such costs	Compliance costs are speculative or already incurred; DOL minimizes ongoing burdens (e.g., "10 minutes/week") and stresses no new recordkeeping requirement	Held for Plaintiffs: nonrecoverable compliance costs typically constitute irreparable harm and Plaintiffs offered sufficient evidence of ongoing, unrecoverable costs tied to the rule
Whether Plaintiffs produced sufficiently specific evidence of their members’ compliance burdens	Presented witness estimates of ongoing managerial hours, hiring, audits, and recordkeeping needs that exceed DOL’s estimates	Witness testimony was vague, self-serving, and lacked concrete documentary support; many costs likely already incurred	Held for Plaintiffs: trial court erred in dismissing Plaintiffs’ evidence as merely speculative; exact dollar precision not required—costs need only be more than de minimis
Whether the new 30-minute continuous-work limitation is materially different from prior 80/20 guidance and increases employer burden	The 30-minute rule is novel, independently restricts tip credit, affects 20% calculation, and thus creates new monitoring and recordkeeping burdens	Rule is similar to longstanding guidance; no new recordkeeping requirement; minute-to-minute tracking not required	Held for Plaintiffs: the 30-minute limit is a new, independent constraint that reasonably gives rise to additional compliance costs and likely recordkeeping needs
Whether the appellate court should defer to the district court’s credibility and factual findings when evaluating a preliminary injunction denial	Deference should not obscure clear legal precedent that nonrecoverable compliance costs are usually irreparable and the district court overlooked DOL concessions	Appellate court must give due regard to district court’s credibility findings and plausible factual determinations	Held: reversed district court as it abused its discretion by failing to account for binding precedent and DOL’s concession; remanded for consideration of remaining injunction factors (dissent would defer)

Key Cases Cited

Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 (2008) (Supreme Court standard for preliminary injunctions requires likelihood of irreparable harm)
Texas v. EPA, 829 F.3d 405 (5th Cir.) (irrecoverable compliance costs ordinarily constitute irreparable harm)
Louisiana v. Biden, 55 F.4th 1017 (5th Cir.) (complying with later-invalidated regulation typically causes irreparable, nonrecoverable costs)
Wages & White Invs., LLC v. FDA, 16 F.4th 1130 (5th Cir.) (financial injury can be irreparable when not recoverable in litigation)
BST Holdings, LLC v. OSHA, 17 F.4th 604 (5th Cir.) (same principle regarding irreparable compliance costs)
Enter. Int’l, Inc. v. Corporacion Estatal Petrolera Ecuatoriana, 762 F.2d 464 (5th Cir.) (irreparability inquiry focuses on recoverability, not magnitude)