When a restaurant or bar does not take a tip credit, it pays servers at least minimum wage. May the employer still require tipped employees to pool the tips with other employees, or does that violate the FLSA? One would think the FLSA only requires employers to pay minimum wage and overtime, and does not regulate tip pools unrelated to minimum wage. Indeed, this is what the 9th Circuit Court of Appeals ruled in 2010 in Cumbie v. Woody Woo http://cdn.ca9.uscourts.gov/datastore/opinions/2010/02/23/08-35718.pdf. In response, the DOL formally adopted a rule that prohibited these tip pools.
So, did the DOL overstep its boundaries by extending its reach to tip pools that do not affect the workers’ minimum wage? Yesterday, two judges from the 9th Circuit decided by judicial fiat to overturn Cumbie v. Woody Woo, and enforced the 2011 DOL rule. Oregon Restaurant and Lodging Ass’n, et al. v. Perez et al. http://cdn.ca9.uscourts.gov/datastore/opinions/2016/02/23/13-35765.pdf.
But stay tuned! A three-judge panel of the 9th Circuit cannot overturn existing 9th Circuit precedent absent truly extraordinary circumstances. Despite this panel’s extensive discussion of the justification for overturning Woody Woo (don’t you just love saying “Woody Woo”?), the dissenting judge makes a compelling case that the panel cannot overturn that decision by itself. This case is likely to be reviewed by the full 9th Circuit, sitting en banc down the road, and hopefully we will see a more logical result.