Tipped servers and bartenders at P.F. Chang's China Bistro Inc. restaurant chain have challenged the company for failing to pay them the full minimum wage for "back-of-the-house work," such as washing dishes, preparing food, mopping the floor or cleaning bathrooms. They argued in briefs before the 9th U.S. Circuit Court of Appeals, which heard oral argument in April, that an employee who spends more than 20 percent of his or her time performing nontipped work related to being a server or bartender must be paid the full minimum wage for that time, citing the Department of Labor (DOL) Field Operations Handbook (FOH). And they maintained that they should receive the full minimum wage for nontipped work unrelated to their tipped jobs.
The employer cannot take the "tip credit" toward its minimum-wage obligation—the maximum tip credit being the difference between $2.13 under federal law and the federal minimum wage of $7.25 covered by tips—in such instances, they maintained. Otherwise, the employee would earn far less per hour than he or she otherwise would. Finally, the cooks and janitors who would normally perform the back-of-the-house work would be harmed since they would not be hired or would get fewer hours.
But the restaurant chain countered in its brief that the plaintiffs' case "is flawed at its core; tipped employees are tipped employees, period. The [DOL] secretary's subregulatory frolic and detour into the realm of tipped, nontipped, related and unrelated duties is not worthy of this court's deference."
The Courts Can't Agree
"At this point, the answer to who is right depends on which federal appeals circuit the employee is working in," said Brett Coburn, an attorney with Alston & Bird in Atlanta.
In 2007, a federal district court ruled that the FOH's 20 percent rule, which as part of the handbook was not subject to the public notice and comment period, was not entitled to deference, and the 11th Circuit affirmed. But in 2011 the 8th Circuit determined that the 20 percent rule was entitled to deference. Now the same question is before the 9th Circuit.
"Ultimately, this issue could very well make its way up to the Supreme Court at some point, given that there is already a circuit split," he said.
"Plaintiffs' lawyers sometimes want to latch onto the FOH as their silver bullet in these types of cases," said Jeffrey Glaser, an attorney with Seyfarth Shaw in Atlanta, in an interview with SHRM Online. "Keep in mind, though, the FOH is not a statute or regulation and courts do not always give it deference."
Unrelated and Excessive Related Work
The plaintiffs alleged that an employer that uses tipped employees to perform unrelated nontipped tasks—work that would normally be performed by a janitor or a cook—but still pays the employee only the federal tipped minimum wage of $2.13 per hour violates the Fair Labor Standards Act's (FLSA's) minimum-wage requirements.
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The plaintiffs also maintained that their performance of an excessive amount of related nontipped duties was another minimum-wage violation.
Kristen Romero, a former P.F. Chang's server, alleged she spent time performing nontipped tasks unrelated to being a server for which she should have received the full minimum wage rather than a tipped minimum wage. She also maintained that she spent more than 20 percent of her working time on nontipped tasks related to her server job and that she should have received full minimum wage for that time.
She contended that her unrelated work included:
- Bagging and taking out trash.
- Scrubbing walls.
- Sweeping floors.
- Washing and buffing all stainless steel appliances in the back of the house.
- Busing tables.
- Wiping chairs and booths in her section.
For her allegedly nontipped related work, she:
- Brewed tea and coffee.
- Set up and cleaned the soft drink dispenser and nozzles.
- Wiped water from the plates, stacked them and stocked them at three different plate stations.
- Prepped and/or topped off a variety of sauces.
Nathan Llanos, a former server, asserted that he had to spend nontipped unrelated work on trash removal, wall scrubbing and floor sweeping, as well as setting up patio furniture.
Andrew Fields, a former bartender, asserted that he performed such nontipped related duty as:
- Cutting and stocking fruit.
- Juicing limes and lemons.
- Plucking mint and sage.
- Cleaning the bar.
- Setting up and stocking the well and making sure ice and juices were stocked.
He alleged that putting away liquor was nontipped unrelated work.
Romero's, Llanos' and Fields' claims were part of nine cases consolidated for appeal under the lead case name Marsh v. J. Alexander's.
District Court Rejected 20 Percent Standard
P.F. Chang's challenged the 20 percent standard several ways, noted Alicia Anderson, an attorney with Nixon Peabody in Los Angeles. She said that the employer:
- Argued that the FLSA is clear and the court need not look to the handbook for interpretation.
- Maintained that the 20 percent standard is not entitled to deference because it is merely in an enforcement manual.
- Asserted that the 20 percent standard is inconsistent with the department's other interpretations, the FLSA and federal regulations.
The district court ruled that the plaintiffs failed to state claims under the minimum-wage provisions of the FLSA. On appeal in their brief, the plaintiffs asserted that employers directing tipped employees to perform nontipped duties, such as janitorial or food preparation duties, without paying a full minimum wage exploited their workforce.
DOL's O*Net System Contradicted Wage and Hour Division
However, P.F. Chang's urged the 9th Circuit to affirm. The restaurant chain noted that the Wage and Hour Division "has no particular experience or expertise differentiating and categorizing various tasks in a restaurant, aside from the patently incorrect assertion [in an opinion letter] that preparing salads is the work of a chef but not of a waitress."
By contrast, P.F. Chang's said that the DOL's Employment and Training Administration had identified many of the functions listed by the plaintiffs as in addition to their tipped work as characteristic of servers or bartenders. For example, DOL's O*NET system—a detailed and authoritative source for identifying and cataloging the tasks performed by a multitude of occupations—listed taking out the trash, performing cleaning duties, sweeping and mopping as among the job tasks for servers. And O*NET listed setting up food stations or dining areas as a server's responsibility. It also mentioned stocking the bar with liquor as a bartender's job.
"In sum, plaintiffs fail to allege anything other than that they performed exactly the kind of work that is normal for their occupations," P.F. Chang's asserted. O*NET "lists virtually all of the duties about which plaintiffs complain as part of their server (i.e., waiter and waitress) and bartender occupations."
Think About Who Does What
However, Coburn said, "This is an area of wage and hour law that is fraught with uncertainty and contains traps for the unwary. Employers need to be thoughtful about the tasks that they assign to tipped employees that are nontip-producing, the amount of time that such employees spend on such tasks, and how they document and record time spent performing such tasks."
In addition, employers should note that state regulations may be more restrictive and certain states may define a tipped employee differently, Anderson cautioned.
A decision in the consolidated cases is expected in the next five to 11 months.
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