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By: Brad Adler
In April 2011, the United States Department of Labor issued new tip credit regulations. Among other things, the DOL concluded that tips are the property of the employee and that an employer may never keep any part of an employee’s tips, even if the employer does not take a tip credit. By such regulation, the DOL also determined that, even when an employer does not use a tip credit, the employer still may not include non-tipped employees in a tip pool. In Oregon Restaurant and Lodging v. Hilda L. Solis, 2013 WL 2468298 (D. Or. 2013), various hospitality industry groups sued the U.S. Department of Labor to challenge the validity of these revised regulations.
In a June, 2013 opinion, a district court from the U.S. District of Oregon ruled that the DOL’s amended tip-pool regulations are invalid because they conflict with the clear intent of Congress in the FLSA. Specifically, the Oregon District Court determined that the FLSA does not impose any restrictions on an employer’s use of tips when the employer is not taking a tip credit. Rather, the FLSA only imposes limitations on the use of tips on those employers who take a tip credit. While this is only a district court decision, considering a prior Ninth Circuit Court of Appeals opinion reaching a similar conclusion (Cumbie v. Woody Woo, Inc.), employers are more fully equipped to argue that they have wide discretion in handling tips if they do not take any type of tip credit.