Eleventh Circuit Rejects Trump Administration's Opinion Letter And Effectively Reinstates 80/20 Rule For Non-Tipped Related Duties

Alerts / September 17, 2021

The battle over whether – and for how long – tipped workers may lawfully spend time performing “non-tipped” tasks continues to rage. On Wednesday, the Eleventh Circuit Court of Appeals delivered a ruling rejecting the 2018 Opinion Letter issued by the Trump administration’s Department of Labor (DOL), which had rescinded the use of the so-called 80/20 Rule and indicated that there was no time constraint on the amount of time tipped workers could spend performing such duties so long as they were performed contemporaneously with the workers’ tip-producing duties. While all the judges agreed to reverse the lower court’s summary judgment for the employer, there were stark differences and major disagreements between the rationale of the majority and concurring opinions – differences that might be a silver lining for employers disappointed with the Eleventh Circuit’s decision.

By way of review, the Fair Labor Standards Act (FLSA) permits employers to pay certain tipped employees, such as restaurant servers, an hourly wage below the minimum wage (i.e., a “tip credit wage”), so long as each employee receives sufficient tips to make up the difference. The DOL’s implementing regulations, however, contemplate situations in which employees may work “dual jobs” for a single employer, spending only a portion of their working time in a true tipped position and spending the rest of their time performing non-tipped work. Section 531.56(e) of the FLSA’s implementing regulations explains that while such dual-jobs employees may be paid a tip credit wage only for time spent performing work in the tip-producing job, employees can and may “occasionally” spend some portion of their tipped-job time performing “related duties” that in and by themselves do not produce tips. 

In the Eleventh Circuit’s recent decision, Rafferty v. Denny’s, Inc., the majority held that the dual-jobs regulation’s use of the word “occasionally” inherently imposed a time constraint on the amount of time that tipped employees can perform such non-tipped related duties and that the Trump administration’s Opinion Letter was an improper attempt to eliminate this limitation. In making this ruling, the court held that the Opinion Letter was not entitled to Auer deference (or even Skidmore deference). Auer and Skidmore address if, when, and how a federal agency’s actions are entitled to deference from the courts. In the majority’s view, while the dual-jobs regulation is ambiguous as to the amount of time a tipped employee can spend doing untipped but related duties, the Opinion Letter was not a “reasonable” interpretation of the regulation. The court held that the Opinion Letter “essentially rewrites the dual-jobs regulation to impose obstacles to achieving its original purpose.” Because the majority determined that it was not bound by the 2018 Opinion Letter, it underwent the task of “evaluat[ing] for [them]selves” the meaning of “occasionally” in the dual-jobs regulation and determined, in keeping with the Biden administration’s Notice of Proposed Rulemaking issued in June, that a tipped employee’s non-tipped related duties should be limited to 20 percent of an employee’s workweek. Thus, the court adopted the very 80/20 Rule that the Trump administration’s Opinion Letter was intended to eliminate.

The Eleventh Circuit also took issue with the Opinion Letter’s attempt to clarify what duties constitute related duties under the dual-jobs regulation and shed light on the type of activities it believes count for purposes of calculating the 20 percent. The court stated such duties tend to be “single step, easily executed food and drink preparations or readying serving items, such as silverware, plates and dishes for customers immediate use,” and noted “[t]he dividing line between related and unrelated duties falls where untipped duties no longer directly support tipped duties.” This appears to follow the proposed rule issued by the DOL in June. 

In a somewhat surprising move, the opinion sets a very low burden for employees to meet in order to establish a violation of the 80/20 Rule. In particular, the court held that in order to prove a violation, an employee does not need to identify any particular week in which he or she spent more than 20 percent of his or her time in non-tipped duties and does not need to provide any specifics about the time he or she spent performing these non-tipped duties. In the court’s eyes, because it is an employer’s duty under the FLSA to track an employee’s hours, wages and conditions of employment, an employee is only required to provide mere estimates of time spent in related or non-tipped duties.

Notably, in the concurrence, Judge Luck took issue with the majority’s Auer analysis, claiming that Auer deference was inappropriate because the dual-jobs regulation was not, in his view, ambiguous to begin with. In making this point, Judge Luck distinguished between terms that are “vague” but not “ambiguous.” He countered that “related” simply means “connected or associated,” and that “occasionally” means “now and then” or “sometimes.” In other words, neither of these terms is ambiguous, and thus the regulation speaks for itself with no need for interpretation by the DOL or the court. Thus, though Judge Luck joined the majority in rejecting the 2018 Opinion Letter, his analysis also served to reject the 80/20 Rule in its prior or reborn form. With this in mind, he called for remand for the purpose of allowing the district court to apply the plain meaning of the regulation – and not the 2018 Opinion Letter or the majority’s own interpretation.

The tension between the majority opinion and Judge Luck’s concurrence is indicative of the larger tension that both right- and left-leaning judges are facing in interpreting agency action and guidance. Therein lies the silver lining. Courts have struggled with Auer since a 2019 Supreme Court decision narrowing Auer deference. The growing battle over agency actions and interpretations – which are wont to differ depending on the administration in power – portends further judicial involvement. With these hot-button legal issues in mind, we will continue to monitor this case, which may be ripe for en banc review or even appeal to the Supreme Court of the United States.

Authorship credit: M.C. Cravatta, Caroline Landt, Kevin Shaughnessy

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