US appeals court overturns Biden-leaning salary rule Reuters

By Nate Raymond

(Reuters) – A U.S. appeals court on Friday struck down a rule passed by President Joe Biden’s administration aimed at increasing wages for tipped workers, citing a recent U.S. Supreme Court ruling that limited the ability of federal agencies to issue regulations.

A three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans unanimously sided with two restaurant industry trade groups in finding that the U.S. Department of Labor’s 2021 rule was contrary to federal labor law.

The Labor Department had no immediate comment.

The rule required employers to pay tipped workers the federal minimum wage of $7.25 an hour, and not the lower minimum wage of $2.13 for tipped work, for non-tipped tasks that take up more than 20 percent of their time, or 30 consecutive minutes.

The rule replaced a regulation passed during former Republican President Donald Trump’s administration that said workers could be paid the minimum wage with tips if they primarily perform tipped tasks.

Two trade groups, the Restaurant Law Center and the Texas Restaurant Association, filed a lawsuit in Texas shortly after the Biden-era rule passed, appealing a ruling by U.S. District Judge Robert Pittman that upheld rule last year.

Pittman concluded that federal wage law was ambiguous about how tipped workers should be paid for non-tipped tasks and that the Labor Department’s interpretation was entitled to so-called “ Chevron (NYSE:) deference” according to a 1984 US Supreme Court ruling.

That doctrine required courts to defer to federal agencies’ interpretations of the laws they administer when those statutes are ambiguous.

But the 6-3 conservative U.S. Supreme Court threw out the Chevron doctrine in June and said courts should apply their independent judgment when interpreting ambiguous laws.

U.S. Circuit Judge Jennifer Walker Elrod, writing for a three-judge panel, cited that ruling in refusing to accept the department’s interpretation of the Fair Labor Standards Act.

Elrod said the rule is contrary to the text of the law and “draws a line at applying the tip credit based on impermissible considerations and contrary to the statutory scheme enacted by Congress.”

“Because the Final Rule is contrary to the plain statutory text of the Fair Labor Standards Act, it is inconsistent with the law,” she wrote for a panel that included two Republican-appointed judges and one Democratic representative.