NATIONAL RESTAURANT ASSOCIATION, et al., Plaintiffs, v. Hilda L. SOLIS, Secretary, U.S. Department of Labor, et al., Defendants.
Civil Action No. 11-1116 (ABJ)
United States District Court, District of Columbia.
May 29, 2012.
AMY BERMAN JACKSON, District Judge.
Adam Christopher Siple, Maria Van Buren, United States Department of Justice, Washington, DC, for Defendants.
MEMORANDUM OPINION
AMY BERMAN JACKSON, District Judge.
Plaintiffs National Restaurant Association, Counsel of State Restaurant Associations, Inc., and National Federation of Independent Businesses bring this action against defendants Hilda L. Solis, in her official capacity as Secretary of the U.S. Department of Labor; Nancy Leppink, in her official capacity as Acting Administrator of the U.S. Department of Labor; and the U.S. Department of Labor (“the Department” or “DOL“). Plaintiffs allege that defendants violated the Administra-
I. BACKGROUND
The FLSA requires employers covered by the statute to pay hourly employees a minimum wage.
A. Statutory and Regulatory Background
In 1966, Congress passed the amendment to FLSA that first enabled employ-1ers to takе advantage of a tip credit. Pub.L. No. 89-601 § 101(a), 80 Stat. 830 (1966). The following year, the Department promulgated its first regulation implementing section 3(m).
In determining the wage an employer is required to pay a tipped employee, the amount paid such employee by the employee‘s employer shall be an amount equal to—
(1) the cash wage paid such employee which for purposes of such determination shall be not less than the cash wage required to be paid such employee on August 20, 1996; and
(2) an additional amount on account of the tips received by such employee which amount is equal to the difference between the wage specified in paragraph (1) and the wage in effect under section 206(a)(1) of this title.
The additional amount on account of tips may not exceed the value of the tips actually received by an employee. The preceding [two] sentences shall not apply with respect to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection, and all tips received by such employee have been retained by the employee, except that this subsection shall
not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.
B. The Proposed Rule
Although Congress enacted the requirement that employers inform their employees prior to taking the tip credit in 1974, the Department did not initiate further rulemaking until 2008. On July 28, 2008, the Department published a Notice of Proposed Rulemaking (“NPRM“), which stated in its preamble:
In this proposed rule, the Department of Labor ... proposes to revise regulations issued pursuant to the Fair Labor Standards Act of 1938 (FLSA) ... that have become out of date because of subsequent legislation or court decisions. These proposed revisions will conform the regulations to FLSA Amendments passed in 1974, 1977, 1996, 1997, 1998, 1999, 2000, and 2007....
Updating Regulations Issued Under the Fair Labor Standards Act (“Proposed Rule“), 73 Fed.Reg. at 43654 (July 28, 2008) (to be codified at 29 C.F.R. pts. 4, 531, 553, 778, 779, 780, 785, 786, & 790). The agency was clear about the broad scope of the undertaking: “The Department requests comments on all issues related to this notice of proposed rulemaking.”
Section 3(m) was one of several statutory provisions specifically identified in the NPRM as being a particular subject of the announced rulemaking. The NPRM included a section entitled “Tipped Employees,” and the notice expressly referred to the 1974 amendments:
Section 13(e) of the Fair Labor Standards Act Amendments of 1974 amended the last sentence of section 3(m) by providing that an employer could not take a tip credit unless: “(1) [its] employee has been informed by the employer of the provisions of this subsection....”
Courts have disallowed the use of the tip credit for lack of notice even “where the employee has actually received and retained base wages and tips that together amply satisfy the minimum wage requirements,” remarking that “[i]f the penalty for omitting notice appears harsh, it is also truе that notice is not difficult for the employer to provide.” Reich v. Chez Robert, Inc., 28 F.3d 401, 404 (3d Cir.1994) (citing Martin v. Tango‘s Restaurant, 969 F.2d 1319, 1323 (1st Cir.1992)). Although written notice is frequently provided, it is not required to satisfy the employer‘s notice burden. Compare Kilgore v. Outback Steakhouse of Florida, Inc., 160 F.3d 294, 299 (6th Cir.1998) (written notice provided to all applicants as matter of course), with Pellon v. Business Representation Int‘l, Inc., 528 F.Supp.2d 1306, 1310-11 (S.D.Fla.2007), appeal docketed, No. 08-10133 (11th Cir. Jan. 8, 2008) (section
3(m)‘s requirement was met through verbal notice that plaintiff would be paid $2.13 plus tips, combined with prominent display of FLSA poster explaining tip credit). Additionally, while employees must be “informed” of the employer‘s use of the tip credit, the employer need not “explain” the tip credit. See Kilgore, 160 F.3d at 298 (“[A]n employer must provide notice to the employees, but need not necessarily ‘explain’ the tip credit * * * ‘[I]nform’ requires less from an employer than the word ‘explain.’ “); cf. Bonham v. Copper Cellar Corp., 476 F.Supp. [98] at 101 & n. 6 [(E.D.Tenn.1979)] (“vague references to conversations about the minimum wage” are insufficient to establish section 3(m) notice).
Pursuant to section 3(m), an employer is not eligible to take the tip credit unless it has informed its employees that it intends to avail itself of the tip wage credit. Such notice shall be provided in advance of the employer‘s use of the tip credit; the notice need not be in writing, but must communicate to employees that the employer intends to treat tips as satisfying part of the employer‘s minimum wage obligation.
C. The Final Rule
On April 5, 2011, the Department of Labor issued a final rule regarding the FLSA‘s tip credit provision. Updating Regulations Issued Under the Fair Labor Standards Act (“Final Rule“), 76 Fed.Reg. 18832 (Apr. 5, 2011) (codified at C.F.R. pts. 516, 531, 553, 778, 779, 780, 785, 786, & 790). The introductory summary explained:
Upon careful reexamination of the terms of the [FLSA], its legislative history, and a review of the public comments, the Department is revising its interpretation from the NPRM of the level of explanation that employers must provide when informing tipped employees about the tip credit pursuant to section 3(m).
Pursuant to section 3(m), an employer is not eligible to take the tip credit unless it has informed its tipped employees in advance of the employer‘s use of the tip credit of the provisions of section 3(m) of the Act, i.e.: The amount of the cash wage that is to be paid to the tipped employee by the employer; the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer, which amount may not exceed the value of the tips actually received by the employee; that all tips received by the tipped employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements in this section.
D. The Lawsuit Before This Court
Plaintiffs are national trade and industry associations whose members employ
Plaintiffs filed this lawsuit on June 16, 2011, claiming that defendants violated the APA when promulgating
- Count I alleges that defendants violated section 553 of the APA by failing to provide the public with sufficient notice and opportunity to comment on the tip notice requirements contained in the 2011 Final Rule. Compl. ¶¶ 38-49. Essentially, plaintiffs argue that the agency was bound to re-notice the final rule for another round of public comment given its variance from the original proposal.
- Count II alleges that defendants violated section 701 of the APA because the regulation is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance” with the FLSA tip credit provision,
29 U.S.C. § 203(m) , because “it conflicts with the DOL‘s previously announced positions and established case law, and [is] based on DOL‘s unsupported assertion ... that the changes will not result in any additional compliance costs.”Id. ¶¶ 50-57. - Count III alleges that defendants violated section 701 of the APA because the regulation is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with Executive Orders 12866 and 13563,” which “require agencies to review existing and proposed regulations to identify whether they may be made more effective or less burdensome.”
Id. ¶¶ 58-66.3 - Count IV alleges that defendants “violated Sections 604, 605, and 611 of the APA by failing to conduct an adequate regulatory flexibility analysis[.]”
Id. ¶¶ 67-74.
Plaintiffs seek an order vacating
II. STANDARD OF REVIEW
A. Motion to dismiss
“To survive a [Rule 12(b)(6)] motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted); accord Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In Iqbal, the Supreme Court reiterated the two principles underlying its decision in Twombly: “First, the tenet that a cоurt must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” 556 U.S. at 678, 129 S.Ct. 1937. And “[s]econd, only a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at 679, 129 S.Ct. 1937.
When considering a motion to dismiss under Rule 12(b)(6), the complaint is construed liberally in plaintiff‘s favor, and the Court should grant plaintiff “the benefit of all inferences that can be derived from the facts alleged.” Kowal v. MCI Commc‘ns Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994). Nevеrtheless, the Court need not accept inferences drawn by plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the Court accept plaintiff‘s legal conclusions. See Browning v. Clinton, 292 F.3d 235, 242 (D.C.Cir.2002); Kowal, 16 F.3d at 1276. In ruling upon a motion to dismiss for failure to state a claim, a court may ordinarily consider only “the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, and matters about which the Court may take judicial notice.” Gustave-Schmidt v. Chao, 226 F.Supp.2d 191, 196 (D.D.C.2002) (citations omitted).
B. Cross motions for summary judgment
Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The party seeking summary judgment bears the “initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (internal quotation marks omitted). To defeat summаry judgment, the non-moving party must “designate specific facts showing there is a genuine issue for trial.” Id. at 324, 106 S.Ct. 2548 (internal quotation marks omitted). The mere existence of some factual dispute is insufficient to preclude summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is “genuine” only if a reasonable fact-finder could find for the non-moving party; a fact is only “material” if it is capable of affecting the outcome of the litigation. Id. at 248, 106 S.Ct. 2505; Laningham v. U.S. Navy, 813 F.2d 1236, 1241 (D.C.Cir.1987). In assessing a party‘s motion, “[a]ll underlying facts and inferences are analyzed in the light most favorable to the non-moving party.” N.S. ex rel. Stein v. District of Columbia, 709 F.Supp.2d 57, 65 (D.D.C.2010), citing Anderson, 477 U.S. at 247, 106 S.Ct. 2505.
“The rule governing cross-motions for summary judgment ... is that neither party waives the right to a full trial on the merits by filing its own motion; each side concedes that no material facts are at issue only for the purposes of its own motion.” Sherwood v. Washington Post, 871 F.2d 1144, 1148 n. 4 (D.C.Cir.1989), quoting McKenzie v. Sawyer, 684 F.2d 62, 68 n. 3 (D.C.Cir.1982). In assessing each party‘s motion, “[a]ll underlying facts and inferences are analyzed in the light most favor-
Defendants have moved to dismiss under Rule 12(b)(6), or, in the alternative, for summary judgment under Rule 56(a). Because plaintiffs concede Count III of the complaint, that claim will be dismissed under Rule 12(b)(6). Because Counts I, II, and IV turn, at least in some measure, on the Administrative Record submitted in connection with the motion for summary judgment, the Court will analyze those claims under Rule 56(a).
III. ANALYSIS
A. DOL‘s Notice and Comment procedure was sufficient.
The APA requires that a notice of proposed rulemaking must contain “either the terms of substance of the proposed rules or a description of the subjects and issues involved.”
Because comments received by the agency are expected to shape the outcome of a final rule, a final rule need nоt be identical to the proposed rule. Small Refiner Lead Phase-Down Task Force v. EPA (“Small Refiner“), 705 F.2d 506, 546 (D.C.Cir.1983). Indeed, “[t]he whole rationale of notice and comment rests on the expectation that the final rules will be somewhat different and improved from the rules originally proposed by the agency.” Trans-Pac. Freight Conf. of Japan/Korea v. Fed. Mar. Comm‘n, 650 F.2d 1235, 1249 (D.C.Cir.1980). It is not “uncommon for a final rule to contain new provisions that are ‘substantially different’ from those in the proposed rule.” Select Specialty Hospital-Akron, LLC v. Sebelius, 820 F.Supp.2d 13, 23 (D.D.C.2011), quoting Health Ins. Ass‘n of Am., Inc. v. Shalala, 23 F.3d 412 at 421 (D.C.Cir.1994). “A standard that required otherwise would obligate an agency to engage in successive rounds of notice and comment any time a final rule differs from what it proposed, greatly impeding and delaying an agency‘s ability to address a problem.” Id., citing Am. Med. Ass‘n v. United States, 887 F.2d 760, 768 (7th Cir.1989).
Plaintiffs claim here, though, that the final rule adopted by the agency “deviates so greatly” from the proposed rule that the notice “failed to appropriately structure the issue and afford the public a reason-able opportunity to comment.” Pls.’ Mem. in Supp. of Cross-Mot. for Summ. J. and Opp. to Defs.’ Mot. to Dismiss, or, in the Alternative, Mot. for Summ. J. (“Pls.’ Mem./Opp.“) [Dkt. # 23] at 12 (citation omitted). Both plaintiffs and defendants direct the Court to the D.C. Circuit‘s opinion in Conn. Light & Power Co. v. Nuclear Reg. Comm‘n, 673 F.2d 525, 533 (D.C.Cir.1982), which they agree sets out the appropriate test. In that case, the court explained:
Drawing on this language, the parties submit that the question the Court must answer is whether the final rule was the “logical outgrowth” of the rule in the NPRM. But that is only part of the analysis. According to Conn. Light & Power, the operative question is whether the original notice “adequately frame[d] the subjects for discussion.” Id. That makes sense because the inquiry grows directly out of the language of the APA, which requires the agency to put interested parties on notice of either the substanсe of the proposed rule or the subject matter of the rulemaking.
1. The NPRM adequately framed the subject of the rulemaking.
The NPRM adequately framed the subject of the rulemaking as required by the APA and Conn. Light & Power: the notice specifically apprised the public of the agency‘s intention to promulgate a rule implementing the unambiguous statutory requirement that employers notify employees of the provisions of the statute concerning the tip credit.
On the very first page of the NPRM, the agency announced that the objective of the rulemaking was to “conform the regulations to FSLA amendments passed in 1974” as well as later amendments. Proposed Rule, 73 Fed.Reg. at 43654. In the “Tipped Employees” section of the notice, the NPRM again specifically invoked the 1974 amendments and quoted the language of the 1974 legislation that provided: “an employer could not take a tip credit unless ... [its] employee has been informed by the employer of the provisions of this subsection....”
Plaintiffs argue that because the text of the originally proposed regulation only provided that “an employer is not eligible to take the tip credit unless it has informed its employees that it intends to avail itself of the tip wage credit,”
Plaintiffs contend nonetheless that the notice did not adequately inform the public that the agency was contemplating requiring employers to make more specific disclosures. Pls.’ Mem./Opp. at 13 (asserting that the NPRM “gives no hint that DOL was contemplating imposing significant additional notice requirements[ ] and does not ask the public to comment on what additional notice requirements should be imposed“). But the APA does not require that the NPRM include this level of detail. What is required is that the NPRM “adequately framе the subjects for discussion,” Conn. Light & Power Co., 673 F.2d at 533, so that the notice “affords exposure to diverse public comment, fairness to affected parties, and an opportunity to develop evidence in the record.” Nat‘l Ass‘n of Psychiatric Health Sys., 120 F.Supp.2d at 39 (quoting Nat‘l Mining Ass‘n, 116 F.3d at 531). The NRPM clearly meets that test here. After all, the agency did solicit comments “on all issues related to this notice of proposed rulemaking,” Proposed Rule, 73 Fed.Reg. at 43655 (emphasis added). And the volume of comments it received—from both employees and management—addressing the nature of the information to be provided to employees, see, e.g., Administrative Record (“A.R.“) [Dkt. # 29] at 427 (comments from Epstein Becker & Green, P.C. (“Epstein Becker“)), A.R. at 124 (comments from AFL-CIO), A.R. at 150-51 (comments from National Employment Law-5yers Association (“NELA“)), is a strong indication that interested parties plainly understood what was at stake,6 and that plaintiffs’ claim that commenters “didn‘t anticipate” that there could be a notice requirement beyond what was originally proposed, Tr. at 39, rings hollow. Thus, the Court finds that the NPRM “adequately framed” the issue of how employеes should be informed of the provisions of section 3(m) as a subject for discussion in the rulemaking.
While the Court believes that the key Conn. Light & Power test has thus been satisfied, it will also consider the question posed by the parties: whether the final rule is a logical outgrowth or a reasonable development of the proposed rule. This question must be answered on a case-by-case basis because the D.C. Circuit has provided “no precise definition of what counts as a ‘logical outgrowth[.]’ ” Nat‘l Ass‘n of Psychiatric Health Sys., 120 F.Supp.2d at 40, citing Nat‘l Mining Ass‘n, 116 F.3d at 531. Therefore, the Court must examine the specific facts of this case to determine whether the final rule was a logical outgrowth of the one proposed.
It is true that in this case, the final rule is more specific than the proposed rule in the sense that it requires employers to make five specific disclosures, which were not itemized in the proposed rule.7 Plaintiffs argue that they therefore did not have a meaningful opportunity to provide comments on the particular disclosures that are now required under the final rule. Pls.’ Mem./Opp. at 13. Neither party has pointed to any precedent where the final rule chosen by the agency is more specific than, as opposed to more stringent than or different from, the proposed rule.8
a. The final rule flows directly from the announced purpose of the rulemaking.
The purpose of the rulemaking was “to revise regulatiоns issued pursuant to [FLSA] ... that have become out of date because of subsequent legislation or court decisions.” Proposed Rule, 73 Fed.Reg. at 43654. DOL stated that the revisions would “conform the regulations to [the] FLSA amendments,”
Epstein Becker, which identified itself as a firm that “represented the employer in Pellon v. Business Representation Int‘l, Inc., one of the leading cases discussed in the proposed regulations addressing the tip credit,” admonished the agency that the proposed regulation “cannot be reconciled with the statutory language.” A.R. at 426-27. It observed:
The proposed [rule] substantially modifies the existing regulation. These modifications are necessary to update the regulation to reflect [the] subsequent statutory amendments. However, the portion of [the] proposed [rule] that prescribes the content of the tip credit notice deviates from the statutory language. The proposed regulation requires only that the tip credit notice communicate the employer‘s “intent” to use tips to satisfy part of the employer‘s minimum wage obligation. There is nothing, however, in [section 3(m)] to suggest that the employer needs to communicate to its employees its intent to use or not use the tip credit. Thus, the current version of the proposed regulation imposes content requirements for the tip credit notice that are foreign to the statute, and fails to require content that is mentioned in statute.
Based on comments such as these, DOL revised the proposed rule to track more closely the requirements of section 3(m), which was the purpose the agency an-
b. The final rule tracks the language of section 3(m).
While defendants acknowledge that the final rule is more detailed than the proposed rule, Defs.’ Mem. at 1, they point out that the five disclosures required by the final rule are derived directly from the statutory text of section 3(m). Defs.’ Reply in Supp. of Mot. to Dismiss, or, in the Alternative, for Summ. J. and Opp. to Pls.’ Cross-Mot. for Summ. J. [Dkt. # 26] (“Defs.’ Reply“) at 12 (“Just as the statute requires an employer to inform a tipped employee of five items before the employer may take the tip credit, so too does DOL‘s regulation do just that and no more.“) A side-by-side comparison of section 3(m) and the final regulation illustrates this point:
| “In determining the wage an employer is required to pay a tipped employee, the amount paid such employee by the employee‘s employer shall be an amount equal to— | “[A]n employer is not eligible to take the tip credit unless it has informed its tipped employees in advance of the employer‘s use of the tip credit provisions of section 3(m) of the Act, i.e.: The amount of the cash wage that is to be paid to the tipped employee by the employer;” |
| (1) the cash wage paid such employee which for purposes of such determination shall be not less than the cash wage required to be paid such employee on August 20, 1996;” | |
| “(2) an additional amount on account of the tips received by such employee which amount is equal to the difference between the wage specified in paragraph (1) and the wage in effect under section 206(a)(1) of this title.” | “the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer[ ]” |
| “The additional amount on account of tips may not exceed the value of the tips actually received by an employee.” | “which amount may not exceed the value of the tips actually received by the employee[ ]” |
| “The preceding [two] sentences shall not apply with respeсt to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection,” | “and that the tip credit shall not apply to any employee who has not been informed of these requirements in this section[ ]” |
| “and all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.” | “that all tips received by the tipped employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips[.]” |
In other words, as plaintiffs concede, Tr. at 29, the final rule does not require employers to do anything other than what they were already obligated to do under section 3(m), which is “inform employees of the provisions of this subsection.”
c. The purpose of the notice and comment process was sеrved here.
As noted above, “[t]he whole rationale of notice and comment rests on the expectation that the final rules will be somewhat different and improved from the rules originally proposed by the agency.” Trans-Pac. Freight Conf. of Japan/Korea, 650 F.2d at 1249. Here, the agency heard from many groups that read the NPRM as an opportunity to weigh in on the proposed form and content of the information to be provided to employees. Organizations speaking on behalf of employees urged the agency to require employers to explain the tip credit requirement, and in some cases, went so far as suggesting that the employers provide a clear written explanation of the tip credit. See, e.g., A.R. at 150-51 (comments from NELA). And comments calling for specificity and clear directives were not limited to the employee side. The U.S. Chamber of Commerce commented that “[t]he Chamber agrees with
B. The Final Rule is not arbitrary and capricious.
Under the APA, a court may set aside agency action that is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
Plaintiffs contend that the final rule is arbitrary and capricious “because it conflicts with the DOL‘s previously announced positions and established case law[.]” Compl. ¶ 52. Specifically, plaintiffs take issue with the regulation because, in their view, it conflicts with Kilgore, 160 F.3d 294, which they characterize as “established and settled law, followed by all or the majority of federal courts [that] have considered the issue of adequate notice under Section 3(m).”
In justifying the final rule, DOL stated: “The Department has concluded that notice of the specific provisions of [section] 3(m) is required to adequately inform the employee of the requirements of the tip credit.” Final Rule, 76 Fed.Reg. at 18844. Because DOL “considered the relevant factors and articulated a ‘rational connection between the facts found and the choice made,’ ” the Court finds that the final rule is not arbitrary and capricious. Nat‘l Ass‘n of Clean Air Agencies, 489 F.3d at 1228, quoting Allied Local & Reg‘l Mfrs. Caucus, 215 F.3d at 68.
First and foremost, the agency‘s conclusion is consistent with—and probably compelled by—the statute. See Final Rule, 76 Fed.Reg. at 18844 (“Accordingly, based on the express provisions of the statute ... the Department agrees with the commenters stating that an employer must inform a tipped employee before it utilizes tip credit, of the following....“) (emphasis added).
Second, it is clear from the announcement of the final rule that DOL based its conclusion that notice of the specific provi-
DOL also took note of comments submitted from the management side, including the U.S. Chamber of Commerce and Littler Mendelson.
Plaintiffs contend in their papers that the rule is arbitrary and capricious be-
And, in any event, the final rule did not vary from Kilgore. The theory plaintiffs advanced when briefing the matter was that Kilgore held that employers are not required to “explain” the tip credit; the statute simply requires them to “inform” employees about the law. Pls.’ Mem./Opp. at 20. But the final rule does no more than that, and indeed, plaintiffs conceded that point at oral argument. Tr. at 29 (“THE COURT: Where does the reg[ulation] itself stray beyond information into explanation? [COUNSEL FOR PLAINTIFFS]: It does not.“).12
Given the express terms of the statute, DOL‘s thorough consideration of the comments submitted in this case, and the dеferential standard of review that applies here, the Court concludes that the final rule promulgated by DOL was not arbitrary and capricious.
C. DOL did not violate the APA by certifying that the rule will not have a significant economic impact on small entities.
Plaintiffs argue that defendants violated the APA by failing to conduct a regulatory flexibility analysis in connection with the final rule. Pls.’ Mem./Opp. at 22-26. Under the Regulatory Flexibility Act (“RFA“), when an agency proposes or promulgates a new rule, it is required to conduct a “regulatory flexibility analysis ... describ[ing] the impact of the ... rule on small entities.”
In announcing the final rule, DOL made the requisite certification:
[B]ecause the final rule will not impose any measurable costs on employers, both large and small entities, the Department has determined that it would not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act.... The Department certified to the Chief Counsel for Advocacy to this effect at the time the NPRM was published. The Department received no contrary comments that questioned the Department‘s analysis or conclusions in
this regard. Consequently, the Department certifies once again pursuant to 5 U.S.C. [§] 604 that the revisions being implemented in connection with promulgating this final rule will not have a significant economic impact on a substantial number of small entities. Accordingly, the Department need not prepare a regulatory flexibility analysis.
Final Rule, 76 Fed.Reg. at 18853. Plaintiffs contend that this certification was arbitrary and capricious because it was made without the benefit of comments about the compliance costs associated with the new rule. Pls.’ Mem./Opp. at 25 (noting that there is nothing in the administrative record indicating that DOL “considered the substantial costs to small businesses of providing the required notice or the costs of additional recordkeeping” or that DOL “contеmplated the potential economic exposure to many small businesses to regulatory violations and enforcement actions.“) Plaintiffs submit that if they had had proper notice of the rule prior to its promulgation, they would have “overwhelmed the agency with information about the cost behind this proposal.” Tr. at 20.
But the original rule would have required employers to inform employees of their intention to take the tip credit, so it is difficult to understand why the final rule‘s requirement that employers inform employees of the additional requirements of section 3(m) would impose a significant financial burden. After all, employers are given the opportunity to choose whether to inform employees by distributing a written policy, as was done in Kilgore, or whether to advise them orally. In response to the Court‘s questions on this point at the hearing, plaintiffs explained that the final rule is particularly burdensome because it requires employers to inform employees whenever the tip credit changes, so a poster or one-time written informаtion sheet will not do. Tr. at 37 (contending that “our clients and really all restaurant em-ployers have been deprived of the opportunity to explain to the Department and show the Department the cost associated with [the proposed] rule ...“). But the regulations in existence prior to the promulgation of the final rule already required successive communications with employees when the tip credit changed.
Furthermore, the D.C. Circuit has held that the requirements of the RFA are “purely procedural.” Nat‘l Tel. Coop. Ass‘n v. FCC, 563 F.3d 536, 540 (D.C.Cir.2009), citing U.S. Cellular Corp. v. FCC, 254 F.3d 78, 88 (D.C.Cir.2001). The court reasoned that although the RFA “directs agencies to state, summarize, and describe, the Act in and of itself imposes no substantive constraint on agency decision-making.” Id. Here, DOL complied with the requirements of the RFA when it concluded that no regulatory flexibility analysis was neсessary because the rule would not have an impact on a substantial number of small entities. Final Rule, 76 Fed.Reg. at 18853.
IV. CONCLUSION
For the reasons set forth above, the Court will deny plaintiffs’ cross motion for summary judgment [Dkt. # 24] and will grant defendants’ motion to dismiss, or, in the alternative for summary judgment [Dkt. # 15]. Accordingly, judgment will be entered for defendant on Counts I, II, and IV. Count III will be dismissed as conceded. A separate order will issue.
AMY BERMAN JACKSON
UNITED STATES DISTRICT JUDGE