and Submitted April 20, 2017 San Francisco, California
from the United States District Court for the District of
Arizona D.C. No. 2:14-cv-01038-SMM, 2:14-cv-00464-SMM,
2:14-cv-00465-SMM, 2:14-cv-00051-SMM, 2:14-cv-00766-SMM,
2:14-cv-00768-SMM, 2:14-cv-00769-SMM, 2:14-cv-01243-SMM,
2:14-cv-01244-SMM, 2:14-cv-00261-SMM, 2:14-cv-00262-SMM,
2:14-cv-00263-SMM, 2:14-cv-01467-SMM, 2:15-cv-01561-SMM
Stephen M. McNamee, Senior District Judge, Presiding
C. Sagafi (argued), Outten & Golden LLP, San Francisco,
California; Clifford P. Bendau II, The Bendau Law Firm,
Phoenix, Arizona; Jamie G. Sypulski, Law Office of Jamie
Golden Sypulski, Chicago, Illinois; Douglas M. Werman, Werman
Salas P.C., Chicago, Illinois; for Plaintiffs-Appellants.
DeCamp (argued), Jackson Lewis P.C., Reston, Virginia;
Stephanie M. Cerasano, Jackson Lewis P.C., Phoenix, Arizona;
for Defendant-Appellee P.F. Chang's China Bistro.
A. Selden (argued), Julie A. Pace, and Heidi Nunn-Gilman, The
Cavanagh Law Firm, Phoenix, Arizona, for Defendant-Appellee
W. Horton and Mary Leigh Pirtle, Bass Berry & Sims PLC,
Nashville, Tennessee; Eric M. Fraser, Osborn Maledon P.A.,
Phoenix, Arizona; for Defendant-Appellee J. Alexander's
L. Karr, Clark Hill PLC, Scottsdale, Arizona, for
Defendants-Appellees Arriba Enterprises Inc. and Lion's
Den Management LLC.
A. Miller, Ogletree Deakins Nash Smoak & Stewart P.C.,
Phoenix, Arizona, for Defendant-Appellant American
Caroline Larsen and Alexandra J. Gill, Ogletree Deakins Nash
Smoak & Stewart P.C., Phoenix, Arizona, for
Defendant-Appellee American Blue Ribbon Holdings LLC.
K. Marcus (argued), Senior Attorney; Paul L. Frieden, Counsel
for Appellate Litigation; Jennifer S. Brand, Associate
Solicitor; M. Patricia Smith, Solicitor of Labor; Office of
the Solicitor, United States Department of Labor, Washington,
D.C., for Amicus Curiae Secretary of Labor.
Before: Richard A. Paez and Sandra S. Ikuta, Circuit Judges,
and David A. Faber, [*] District Judge.
panel vacated the district court's final orders and
judgments in favor of the defendants in actions brought under
the Fair Labor Standards Act by former servers and bartenders
who alleged that their employers improperly claimed their
tips as a credit toward the required minimum wage.
with the Eighth Circuit, the panel held that the Department
of Labor's interpretation, in its Field Operations
Handbook, of 29 C.F.R. § 531.56(e), a regulation
addressing application of the FLSA's tip credit provision
to the situation in which an employee works for an employer
in two different jobs, did not merit controlling deference
because the DOL's interpretation was inconsistent with
the dual jobs regulation and attempted to create de facto a
new regulation. The panel held that no provision with the
force of law permitted the DOL to require employers to engage
in time tracking and accounting for minutes spent in diverse
tasks before claiming a tip credit.
panel held that the plaintiffs could not state a claim by
alleging that discrete "related" tasks or duties,
which were performed intermittently over the course of the
day and were intermingled with their duties directed at
generating tips, comprised a dual job when aggregated
together over the course of a workweek. The plaintiffs also
could not state a claim by alleging the performance of
"unrelated" duties that were similarly dispersed
and generally assigned.
panel vacated the district court's final orders and
judgments and remanded to allow the plaintiffs an opportunity
to propose new amended complaints in light of the panel's
and dissenting, Judge Paez wrote that he would follow the
Eighth Circuit and defer to the DOL's interpretation of
the regulation, 29 C.F.R. § 531.56(e). Judge Paez wrote
that the DOL's guidance was entitled to deference because
it interpreted the DOL's own ambiguous regulation and was
neither plainly inconsistent with that regulation nor
erroneous. Judge Paez would vacate and remand for further
proceedings on whether the defendants violated the FLSA by
paying their employees well below minimum wage for untipped
Fair Labor Standards Act of 1938 (FLSA) generally requires
employers to pay a cash wage of $7.25 per hour to their
employees. 29 U.S.C. § 206(a)(1)(c). But where an
"employee engage[s] in an occupation in which he
customarily and regularly receives more than $30 a month in
tips, " id. § 203(t), his employer may pay
a reduced cash wage and claim the employee's tips as a
credit towards the $7.25 per hour minimum, id.
§ 203(m). The plaintiffs in these consolidated appeals
are former servers and bartenders who allege that their
employers improperly claimed this credit, thereby failing to
pay the required minimum wage. In support of their theory of
the case, the employees rely on a regulation, 29 C.F.R.
§ 531.56(e), as most recently interpreted by the
Department of Labor (DOL). See Department of Labor Wage
and Hour Division, Field Operations Handbook § 30d00(f)
(2016). The district court held that the DOL's
interpretation of the regulation is not entitled to deference
and concluded that the employees failed to state claims for
minimum wage violations. We largely agree with the district
court's analysis of the deference question, but we vacate
and remand to allow the plaintiffs an opportunity to propose
amended pleadings in light of our holding.
November 2012 through April 2013, Alec Marsh worked as a
server for J. Alexander's, a restaurant in Phoenix,
Arizona. In May 2014, he filed a one-count
complaint alleging that J. Alexander's violated the
FLSA's minimum wage provision by failing to pay him an
appropriate wage. See 29 U.S.C. § 206(a)(1)(c).
understand Marsh's legal theory, one must first
understand the FLSA's scheme for guaranteeing a minimum
wage to employees, like Marsh, who routinely earn tips.
Although all employers must pay their employees a minimum
wage of at least $7.25 per hour, id., the FLSA
creates a special rule for how an employer can compensate a
"[t]ipped employee, " which is defined as "any
employee engaged in an occupation in which he customarily and
regularly receives more than $30 a month in tips, "
id. § 203(t). The applicable statute provides:
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 an 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.
Id. § 203(m). The practical effect of this
provision is that an employer must pay a tipped employee a
cash wage of $2.13, and can make up the difference between
$2.13 and the federal minimum wage by taking a credit for the
employee's tips (known as a "tip
credit"). Cumbie v. Woody Woo, Inc., 596
F.3d 577, 580 (9th Cir. 2010). If the $2.13 cash wage plus
the tips the employee actually received are insufficient to
meet the $7.25 per hour minimum wage, then the employer must
increase the cash wage to meet the minimum wage requirement.
Id. As a result, tipped employees always earn at
least the federal minimum wage.
FLSA's tip credit provision, 29 U.S.C. § 203(m), is
not the only pertinent part of this regulatory regime.
Through regulations interpreting § 203(t), the DOL has
addressed the application of the tip credit provision to the
situation in which an employee works for an employer in two
different jobs. This "dual jobs" regulation
Dual jobs. In some situations an employee is employed in a
dual job, as for example, where a maintenance man in a hotel
also serves as a waiter. In such a situation the employee, if
he customarily and regularly receives at least $30 a month in
tips for his work as a waiter, is a tipped employee only with
respect to his employment as a waiter. He is employed in two
occupations, and no tip credit can be taken for his hours of
employment in his occupation of maintenance man. Such a
situation is distinguishable from that of a waitress who
spends part of her time cleaning and setting tables, toasting
bread, making coffee and occasionally washing dishes or
glasses. It is likewise distinguishable from the counterman
who also prepares his own short orders or who, as part of a
group of countermen, takes a turn as a short order cook for
the group. Such related duties in an occupation that is a
tipped occupation need not by themselves be directed toward
29 C.F.R. § 531.56(e).
dual jobs regulation is also not the regime's end; the
DOL has promulgated internal agency guidance that places a
specific interpretive gloss on the regulation. The DOL's
most recent interpretation, which the DOL made public in
2016, is set out in its Wage and Hour Division's Field
Operations Handbook (FOH). The FOH states:
(1) When an individual is employed in a tipped occupation and
a non-tipped occupation, for example, as a server and janitor
(dual jobs), the tip credit is available only for the hours
spent in the tipped occupation, provided such employee
customarily and regularly receives more than $30.00 a month
in tips. See 29 CFR 531.56(e).
(2)29 CFR 531.56(e) permits the employer to take a tip credit
for time spent in duties related to the tipped occupation of
an employee, even though such duties are not by themselves
directed toward producing tips, provided such related duties
are incidental to the regular duties of the tipped employee
and are generally assigned to the tipped employee. For
example, duties related to the tipped occupation may include
a server who does preparatory or closing activities, rolls
silverware and fills salt and pepper shakers while the
restaurant is open, cleans and sets tables, makes coffee, and
occasionally washes dishes or glasses.
(3) However, where the facts indicate that tipped employees
spend a substantial amount of time (i.e., in excess
of 20 percent of the hours worked in the tipped occupation in
the workweek) performing such related duties, no tip credit
may be taken for the time spent in those duties. All related
duties count toward the 20 percent tolerance.
(4) Likewise, an employer may not take a tip credit for the
time that a tipped employee spends on work that is not
related to the tipped occupation. For example, maintenance
work (e.g., cleaning bathrooms and washing windows)
are not related to the tipped occupation of a server; such
jobs are non-tipped occupations. In this case, the employee
is effectively employed in dual jobs.
FOH § 30d00(f) (2016).
alleges that as a J. Alexander's employee, he
"customarily and regularly" received more than $30
a month in tips. As part of his job as a server, Marsh had
a range of duties in addition to serving customers. For
instance, Marsh brewed tea during every opening shift and as
needed, which took about ten minutes to complete each time,
for a total of forty minutes over the course of any given
workweek. He also brewed coffee for each customer who ordered
it, which took about five minutes to complete each time, and
added up to approximately eighty minutes of any given
workweek. Marsh also cut, arranged, and stocked lemons and
limes during every opening shift and throughout his shifts,
each session taking approximately five minutes, for a total
of forty minutes in any given workweek. Marsh cleaned the
soft drink dispensers and their nozzles, replaced soft drink
syrups, and stocked ice. Each task took about five minutes to
complete, and over the course of a workweek these tasks
respectively took twenty, ten, and forty minutes. J.
Alexander's also assigned Marsh cleaning duties, such as
wiping tables (five to twenty minutes each time, for a total
of one hour and forty minutes over the course of a week),
taking out trash (ten minutes each time, for a total of
twenty minutes over the course of a week), scrubbing walls
when the restaurant was slow (one hour over the course of the
week), sweeping floors (about ten minutes each time, for a
total of forty minutes over the course of a week), and
cleaning restrooms (ten minutes each time, for a total of
thirty minutes over the course of a week).
Alexander's took a tip credit for the entire time Marsh
spent at work, including the time he spent on duties that
were not directly connected with generating tips. Because
these "related duties" took up more than 20 percent
of Marsh's working hours, Marsh's first complaint
relied on the DOL's interpretation of the dual jobs
regulation, 29 C.F.R. § 531.56(e), to allege that J.
Alexander's improperly took a tip credit for the time
Marsh spent on the "related duties" described in
complaint was one of several filed in the district court
alleging the same theory of FLSA liability, so the cases were
consolidated before a single judge. A few months after
consolidation, Marsh moved for leave to file a proposed
amended complaint alleging in a second count that the
cleaning duties described in his complaint were
"unrelated" to his occupation and that J.
Alexander's was categorically not allowed to take a tip
credit for any of the time spent on those duties. Therefore,
consistent with the FOH § 30d00(f), Marsh alleged that
he should have been paid a cash wage of $7.25 per hour for
his time spent on the related and unrelated duties that were
not directed towards generating tips. Because J.
Alexander's had paid Marsh a cash wage of less than $7.25
per hour for the time spent on those duties, Marsh argued
that he was entitled to compensation for the difference
between the full minimum wage and the cash wage he was paid
for the time spent on tasks that did not generate tips.
Alexander's opposed Marsh's motion to amend the
complaint and moved to dismiss the original complaint. The
district court ruled on the motions in March 2015 and made
two key holdings. Most important, the district court held
that Marsh's complaint did not allege that he was working
dual jobs, as defined in the dual jobs regulation. It
rejected Marsh's reliance on the DOL's interpretation
of the regulation because the regulation was unambiguous, and
the DOL's interpretations of the regulation did not merit
deference. Alternatively, the district court also held that
"no minimum wage violation occurs so long as the
employer's total wage paid to an employee in any given
workweek divided by the total hours worked in the workweek
equal or exceeds the minimum wage rate." Because the
complaint failed to allege that Marsh's average hourly
wage (including tips) across any given workweek was below the
federal minimum wage, Marsh failed to state a claim. Given
this reasoning, the district court granted J. Alexander's
motion to dismiss and denied as futile Marsh's motion for
leave to amend.
timely appeal followed. We have jurisdiction under 28 U.S.C.
§ 1291. We review each final order in these appeals and
the questions of statutory and regulatory interpretation de
novo. See Christopher v. SmithKline Beecham Corp.,
635 F.3d 383, 389 (9th Cir. 2011), aff'd, 567
U.S. 142 (2012); Nolan v. Heald Coll., 551 F.3d
1148, 1153 (9th Cir. 2009) (summary judgment); Honey v.
Distelrath, 195 F.3d 531, 533 (9th ...