and Submitted En Banc March 20, 2018 San Francisco,
Appeals from the United States District Court for the
District of Arizona D.C. Nos. 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,
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, Julie A. Pace, and Heidi Nunn-Gilman, The Cavanagh
Law Firm, Phoenix, Arizona, for Defendant-Appellee Romulus,
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, K. Leone Karr Law Office, Scottsdale, Arizona, for
Defendants-Appellees Arriba Enterprises Inc. and Lion's
Den Management LLC.
A. Miller and Alexandra J. Gill, Ogletree Deakins Nash Smoak
& Stewart P.C., Phoenix, Arizona, for Defendant-Appellant
American Multi-Cinema Inc.
Caroline Larsen and Alexandra J. Gill, Ogletree Deakins Nash
Smoak & Stewart P.C., Phoenix, Arizona, for
Defendant-Appellee American Blue Ribbon Holdings LLC. Sarah
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: Sidney R. Thomas, Chief Judge, and Susan P. Graber,
M. Margaret McKeown, Kim McLane Wardlaw, William A. Fletcher,
Richard A. Paez, Johnnie B. Rawlinson, Consuelo M. Callahan,
Sandra S. Ikuta, Morgan Christen and Andrew D. Hurwitz,
banc court reversed district courts' dismissals of
actions under the Fair Labor Standards Act concerning tip
credits toward servers' and bartenders' wages.
FLSA permits employers to take a tip credit for employees in
tipped occupations. Plaintiffs alleged that their employers
abused the tip credit provision by paying them a reduced tip
credit wage and treating them as tipped employees when they
were engaged in either (1) non-tipped tasks unrelated to
serving and bartending, such as cleaning toilets; or (2)
non-incidental tasks related to serving or bartending, such
as hours spent cleaning and maintaining soft drink dispensers
in excess of 20% of the workweek.
banc court held that the Department of Labor foreclosed an
employer's ability to engage in this practice by
promulgating a dual jobs regulation, 29 C.F.R. §
531.56(e), and subsequently interpreting that regulation in
its 1988 Field Operations Handbook, known as the
"Guidance." The en banc court concluded that the
regulation was entitled to Chevron deference.
Agreeing with the Eighth Circuit, the en banc court held that
the agency's interpretation in the Guidance was entitled
to Auer deference because the regulation was
ambiguous and the Guidance's interpretation was both
reasonable and consistent with the regulation. The en banc
court concluded that the plaintiffs had stated a claim under
the FLSA for minimum wage violations. The en banc court
reversed the district courts' judgments and remanded for
in part and dissenting in part, Judge Graber wrote that
plaintiffs stated a claim that their employers failed to pay
them appropriate wages for non-tipped work unrelated to their
jobs. Judge Graber wrote that she would affirm in part on the
ground that plaintiffs failed to state a claim regarding
wages for non-tipped work related to their jobs.
Judge Ikuta, joined by Judge Callahan, wrote that deference
to the agency was improper because the agency's purported
interpretation effectively eliminated an employer's
statutory right to take a tip credit. Judge Ikuta wrote that
this legislative act was accomplished without compliance with
the Administrative Procedure Act, resulting in an unfair and
unexpected imposition of liability on employers.
enacted the Fair Labor Standards Act ("FLSA") in
1938 in response to a national concern that the price of
American development was the exploitation of an entire class
of low-income workers. President Roosevelt, who pushed for
fair labor legislation, famously declared: "The test of
our progress is not whether we add more to the abundance of
those who have much; it is whether we provide enough for
those who have too little." S. Rep. No. 93-690, at 4
(1974). The FLSA thus safeguards workers from poverty by
preventing employers from paying substandard wages in order
to compete with one another on the market. See id.
And yet, the plaintiffs in these consolidated cases allege
that the defendant employers have done exactly that.
FLSA permits employers to take a tip credit for employees in
tipped occupations. See 29 U.S.C. § 203(m). The
tip credit offsets an employer's obligation to pay the
hourly minimum wage; employers may therefore pay as little as
$2.13 per hour to tipped employees under federal law. 29
C.F.R. § 531.59. If the employee's tip credit wage
and tips do not meet minimum wage, however, the employer must
make up the difference. See 29 U.S.C. § 203(m).
Marsh and thirteen other former servers and
bartenders allege that their employers abused the tip
credit provision by paying them the reduced tip credit wage
and treating them as tipped employees when they were engaged
in either (1) non-tipped tasks unrelated to serving or
bartending, such as cleaning toilets; or (2) non-incidental
tasks related to serving or bartending, such as hours spent
cleaning and maintaining soft drink dispensers in excess of
20% of the workweek. Using the tip credit in such a manner
effectively makes tips-intended as gifts to servers for their
service-payments to employers instead, who use these tips to
minimize their obligations to pay employees the full minimum
wage for time spent working in a non-tipped
occupation. Furthermore, by using servers as
dishwashers, bussers, janitors, and cooks, employers can
allegedly eliminate or significantly reduce their need to
hire full-time janitors and cooks, who-as non-tipped
workers-are entitled to the full minimum hourly wage and
therefore cost more to employ.
conclude today that the Department of Labor ("DOL")
foreclosed an employer's ability to engage in this
practice by promulgating a dual jobs regulation in 1967, 29
C.F.R. § 531.56(e), and subsequently interpreting that
regulation in its 1988 Field Operations Handbook. We agree
with Marsh that both the regulation and the agency's
interpretation are entitled to deference. Because Marsh has
stated a claim under the FLSA for minimum wage violations, we
reverse the district court's judgments and remand for
further proceedings consistent with this opinion.
Marsh worked as a server at J. Alexander's, a chain
restaurant with at least one location in Phoenix, Arizona,
from November 2012 to April 2013. Marsh typically worked
around thirty-two hours per week, but spent almost half his
time on tasks that did not produce tips, such as cutting and
stocking fruit, cleaning the soft drink dispenser and
nozzles, replacing soft drink syrups, stocking ice, taking
out the trash, scrubbing the walls, and cleaning the
restrooms. These tasks often took place out of customer view,
either before the restaurant had opened or after it had
closed. For example, Marsh was required to stock ice, brew
tea, and cut and stock fruit every opening shift and to wipe
down tables and collect and take out the trash every closing
shift. In return for his labor, J. Alexander's paid Marsh
an hourly tip credit wage of $4.65 per hour in 2012 and $4.80
per hour in 2013 pursuant to Arizona law. See Ariz.
Rev. Stat. § 23-363 (2007).
filed suit, alleging that J. Alexander's use of the tip
credit wage violated the FLSA's minimum wage
requirements. See 29 U.S.C. § 206(a).
Marsh's complaint alleged that, pursuant to the DOL's
dual jobs regulation, he was a dual job employee working in
multiple occupations- one tipped, and the others not-because
J. Alexander's required him to complete tasks unrelated
to his tipped occupation, such as cleaning the restrooms, and
to spend well over 20% of his time per week on tasks related
to his occupation that did not in and of themselves produce
tips, such as brewing coffee. Marsh alleged that although J.
Alexander's was entitled to pay him a tip credit wage for
the time he spent working in his tipped occupation as a
server, it was not entitled to continue paying him the tip
credit wage for time spent working in an untipped occupation.
this theory, J. Alexander's violated the FLSA's
minimum wage requirements when it failed to pay Marsh the
full hourly minimum wage for time spent working in an
untipped occupation. Marsh requested compensation equal to
the difference between the wages he was paid and
Arizona's minimum wage.
months after filing his complaint, Marsh moved for leave to
file a first amended complaint. The proposed first amended
complaint detailed how much time Marsh spent completing each
untipped task in a given workweek and estimated his
compensation for time engaged in a non-tipped second
occupation at $3.00 per hour. As the original complaint, the
amended complaint alleged two violations of the FLSA and the
dual jobs regulation: the first for failing to pay Marsh the
full minimum wage for time spent in excess of 20% of his
workweek on non-tipped, related duties; and the second for
failing to pay Marsh full minimum wage for time spent on
Alexander's moved to dismiss the original complaint. The
district court granted the motion, denied Marsh's motion
to file an amended complaint, and dismissed Marsh's suit
with prejudice. The court concluded that Marsh failed to
state an FLSA claim as a matter of law for three reasons: (1)
Marsh could not state a minimum wage violation pursuant to
United States v. Klinghoffer Bros. Realty Corp., 285
F.2d 487 (2d Cir. 1960), as long as he was paid minimum wage
per workweek, irrespective of how much he was actually paid
per hour; (2) the dual jobs regulation, 29 C.F.R. §
531.56(e), is unambiguous and does not recognize that servers
like Marsh work in different occupations when the non-tipped
tasks are related to the tipped occupation; and (3) even if
the dual jobs regulation is ambiguous, the DOL's
interpretation of the regulation in its 1988 Field Operations
Handbook (the "Guidance")-which treats the
performance of related duties in excess of 20% of an
employee's workweek as a different occupation-is not
entitled to Auer deference.
timely appealed. A divided panel of this court agreed with
the district court that the DOL's interpretation of its
dual jobs regulation was not entitled to deference. See
Marsh v. J. Alexander's LLC, 869 F.3d 1108 (9th Cir.
2017). The panel majority concluded that the Guidance's
focus on duties and tasks was inconsistent with the dual jobs
regulation's focus on jobs and characterized the Guidance
as less an interpretation entitled to Auer deference
than a de facto new regulation masquerading as an
interpretation. See id. at 1121-24. The panel
majority, however, vacated the district court's dismissal
of the suit and remanded to give Marsh an opportunity to file
an amended complaint. See id. at 1127.
majority of the non-recused active judges voted to grant
Marsh's petition for rehearing en banc. See Marsh v.
J. Alexander's LLC, 882 F.3d 777 (9th Cir. 2018). We
reverse the district court's judgments and conclude, as
the Eighth Circuit did in Fast v. Applebee's
Int'l, Inc., 638 F.3d 872 (8th Cir. 2011), that the
Guidance is entitled to Auer deference.
jurisdiction pursuant to 28 U.S.C. § 1291. We review de
novo the district court's final orders and its
interpretation of the relevant statutory and regulatory
provisions. See Shaver v. Operating Eng'rs
Local 428 Pension Tr. Fund, 332 F.3d 1198, 1201
(9th Cir. 2003) (motion to dismiss).
case revolves around several statutory and regulatory
provisions and agency guidance governing the payment of wages
to tipped employees: the FLSA, the dual jobs regulation, and
the Guidance. Although the FLSA guarantees all workers a
federal minimum wage of $7.25 per hour, see 29
U.S.C. § 206(a)(1)(c), employers may pay tipped
employees a reduced tip credit wage below the hourly minimum
wage, see id. § 203(m). A tipped employee is
"any employee engaged in an occupation in which he
customarily and regularly receives more than $30 a month in
tips." Id. § 203(t). Employers may
therefore take up to a $5.12 tip credit against the full
hourly minimum wage and pay tipped employees as little as
$2.13 per hour in cash wages so long as the employee's
tips bring him or her up to minimum wage. See
Fast, 638 F.3d at 874-75. If, however, a server's
tips fall short of covering the minimum wage, the employer
must increase the employee's cash wage to make up the
difference. See Cumbie v. Woody Woo, Inc., 596 F.3d
577, 580 (9th Cir. 2010).
to clarify the meaning of a "tipped employee" under
the statute-including what constitutes an
"occupation" that "customarily and
regularly" receives tips-the DOL promulgated several
regulations in 1967. One of these regulations, 29 C.F.R.
§ 531.56, explains that "[a]n employee employed
full time or part time in an occupation in which he does not
receive more than $30 a month in tips customarily and
regularly is not a 'tipped employee' within the
meaning of [the FLSA]" and that a calendar month need
not be used to determine whether an employee meets the
$30-a-month benchmark. Id. § 531.56(a), (b).
The DOL also included a provision in this regulation directly
addressing situations in which an employee is employed in
dual jobs, one tipped and one not. This dual jobs regulation
states in full:
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) (emphases added).
dual jobs regulation initially generated some confusion among
employers, who were unsure whether their tipped employees
qualified as dual job employees. The DOL consequently issued
several opinion letters in an attempt to delineate the
boundaries of the dual jobs regulation. The DOL ultimately
released a guidance addressing the dual jobs regulation in
its Wage and Hour Division's Field Operations Handbook
("FOH") in 1988, which the DOL revised in 2012.
See FOH § 30d00(e) (1988) (the
"Guidance"). Judge Ikuta calls the Guidance a new
rule promulgated by the DOL, but it is clearly an
interpretation in line with that of the DOL's prior
opinion letters. The most recent version of the Guidance
(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 employees 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
(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) (emphases added).
Guidance thus clearly contemplates that a server who performs
unrelated tasks, such as cleaning restrooms, is a dual job
employee entitled to the full minimum hourly wage for her
unrelated work. The Guidance also clearly lays out that a
server is a dual job employee if her related tasks occupy
more than 20% of her hours in a workweek.
dissent takes issue with the 2012 update to the
Guidance and asserts that this was the first time
the agency "provided that employers could not take a tip
credit for any time employees spent on tasks that did not
directly relate to serving customers." Dissent at 61-62.
This presumes, of course, that prior to 2012, the DOL would
have permitted employers to take a tip credit even for hours
a server spent on tasks unrelated to their tipped occupation.
As we discuss infra, the dual jobs regulation
squarely forecloses that line of argument by distinguishing
between a tipped employee who spends some time completing
related, but untipped work, and a dual job employee who works
as a maintenance man part of the time and a server the rest.
29 C.F.R. § 531.56(e). Accordingly, if both the Guidance
and the dual jobs regulation are entitled to deference, then
Marsh has alleged facts sufficient to make out an FLSA
minimum wage violation claim. We turn to those
first contend that the dual jobs regulation is not entitled
to deference under Chevron, U.S.A., Inc. v. Nat. Res.
Def. Council, Inc., 467 U.S. 837, 842-43 (1984). We
initial matter, it is beyond question that the DOL
promulgated the dual jobs regulation, 29 C.F.R. §
531.56, in the exercise of its congressionally delegated
authority. See United States v. Mead Corp., 533 U.S.
218, 226-27 (2001). Congress amended the FLSA in 1966 by
defining "tipped employee" for the first time,
see 29 U.S.C. § 203(t), and adding a formula
for calculating the wage of a tipped employee, see
id. § 203(m). See Fair Labor Standards
Amendments of 1966, Pub. L. No. 89-601, § 101, 80 Stat.
830, 830. The 1966 Amendments authorized the Secretary of
Labor "to promulgate necessary rules, regulations, or
orders with regard to the amendments made by this Act."
Id. at § 603, 80 Stat. at 844. Shortly
thereafter, the DOL issued a notice of proposed rulemaking
aimed at "expand[ing] 29 CFR Part 531 to make provisions
responsive" to the "Fair Labor Standards Amendments
of 1966," specifically the newly amended sections 203(m)
and 203(t) regarding tipped employees. 32 Fed. Reg. 222, 222
(Jan. 10, 1967). This process eventually produced the dual
jobs regulation, 29 C.F.R. § 531.56(e). See 32
Fed. Reg. 13, 575 (Sept. 27, 1967).
nonetheless urge us to conclude that Chevron
deference is inapplicable in this instance because the dual
jobs regulation was promulgated without adequate notice and
an opportunity to comment. This argument, however, is decades
too late. See Perez-Guzman v. Lynch, 835 F.3d 1066,
1077 (9th Cir. 2016), cert. denied, 138 S.Ct. 737
(2018) ("Procedural challenges to agency rules under the
Administrative Procedure Act are subject to the general
six-year limitations period in the U.S. Code."); see
also 28 U.S.C. § 2401(a). The dissent may object to
the way the DOL promulgated the dual jobs regulation, but as
a matter of law, such procedural challenges to the regulation
here are indisputably untimely and beyond our scope of
review. Dissent at 58-60. We therefore conclude that
Mead's requirements have been met. 533 U.S. at
the Chevron framework, we next ask whether
"Congress has directly spoken to the precise question at
issue." 467 U.S. at 842. We conclude that it has not.
203(t) defines a tipped employee as "any employee
engaged in an occupation in which he customarily and
regularly receives more than $30 a month in tips." 29
U.S.C. § 203(t). The FLSA, however, does not separately
define "occupation." Id. Nor does the
statute shed light on the meaning of "customarily and
regularly." Id. Counsel for Defendants urge us
to conclude that the use of the word "occupation"
in section 203(t) was not "intended to do a lot of
work" and that the statute is therefore "not
ambiguous." United States Court of Appeals for the Ninth
Circuit, 15-15791 Alec Marsh v. J. Alexander's
LLC, YouTube (Mar. 20, 2018) at 47:10-47:15;
49:45-49:51. We decline to treat Congress's choice of
words so dismissively; to the contrary, we must presume that
Congress's choice of words is deliberate. See Univ.
of Tex. Sw. Med. Ctr. v. Nassar, 570 U.S. 338, 353
(2013). Accordingly, we agree with the Eighth Circuit that
where, as here, Congress has crafted an ambiguous statute and
tasked the DOL with implementing the ambiguous provisions, we
must "defer to the agency's regulation so long as it
is not arbitrary, capricious, or manifestly contrary to the
statute." Fast, 638 F.3d at 876 (internal
quotation marks omitted).
to Defendants' assertions, the FLSA's legislative
history does not "evince an unambiguous congressional
intention" to treat all employees as tipped employees,
regardless of their tasks or time spent on untipped tasks.
Chem. Mfrs. Ass'n v. Nat. Res. Def. Council,
Inc., 470 U.S. 116, 129 (1985). At most, Congress
suggested in a Senate report-published seven years after the
DOL promulgated its dual jobs regulation-that "[i]n
establishments where the employee performs a variety of
different jobs, the employee's status as one who
'customarily and regularly receives tips' will be
determined on the basis of the employee's activities over
the entire workweek." S. Rep. No. 93-690, at 43 (1974).
Under Defendants' view, this sentence indicates that
section 203(t) unambiguously allows employers to take a tip
credit for every hour an employee spends working, as long as
the employee's total tips exceed $30 per month-even if
the employee engages in tipped work only 10% of the time.
See United States Court of Appeals for the Ninth
Circuit, 15-15791 Alec Marsh v. J. Alexander's
LLC, YouTube (Mar. 20, 2018) at 34:43-35:45.
this sentence does not bear the weight Defendants put on it.
Critically, the legislation accompanying the 1974 report did
not make any changes to section 203(t). Further, the report
expressly recognized "the ethical question involved in
crediting tips toward the minimum wage" and emphasized
that tipped employees "should have stronger protection
to ensure the fair operation" of the tip credit
provision. S. Rep. No. 93-690 at 42-43. Neither the plain
language of the statute nor its legislative history suggest-
much less clearly demonstrate-that section 203(t) is
concluded that the FLSA "is silent or ambiguous"
with respect to the treatment of employees who make more than
$30 a month in tips but who may be engaged in multiple
occupations, we consider "whether the agency's
answer is based on a permissible construction of the
statute." Chevron, 467 U.S. at 843. We conclude
that it is.
1966 amendments to the FLSA were intended to "improve
living standards by eliminating substandard working
conditions in employment" and to bring the law up to
date with the "advancing economy," which had
outpaced the FLSA's worker protections. H.R. Rep. No.
89-1366, at 10 (1966). Later amendments to the FLSA stressed
the importance of guaranteeing "a fair day's pay for
a fair day's work." H.R. Rep. No. 93-913, at 8
(1974). The dual jobs regulation, which was promulgated to
give effect to new statutory provisions addressing tipped
employees, was neither an arbitrary reversal of a prior
agency position nor "manifestly contrary to the
statute." Chevron, 467 U.S. at 844. Confronted
with a gap in the FLSA's coverage of dual job employees,
the DOL reasonably exercised its authority to fill that gap
by ensuring that employees working in tipped and untipped
occupations would not be shortchanged by their employers.
concede that under the FLSA, if some of an employee's
tasks were outside the scope of a tipped occupation, the
employee would be engaging in non-tipped employment for which
the employer would not be entitled to take a tip credit.
See United States Court of Appeals for the Ninth
Circuit, 15-15791 Alec Marsh v. J. Alexander's
LLC, YouTube (Mar. 20, 2018) at 35:05-35:45. That is
precisely the kind of situation the dual jobs regulation
dual jobs regulation establishes that an employee is entitled
to the full minimum wage for any time spent in a non-tipped
occupation. See 29 C.F.R. § 531.56(e). Thus, an
employee who serves as both a maintenance man and a waiter in
a hotel "is a tipped employee only with respect to his
employment as a waiter." Id. This provision
prevents employers from paying maintenance workers as little
as $2.13 an hour, simply because they also happen to work as
servers. Having concluded that the dual jobs regulation
"is a reasonable choice within a gap left open by
Congress, the challenge must fail."
Chevron, 467 U.S. at 866.
inquiry, however, does not end with the dual jobs regulation.
For Marsh to state a claim under the FLSA, we must also
conclude that the Guidance-which establishes the 20% related
duties benchmark and separates occupations by duties-is
entitled to judicial deference under either Auer v.
Robbins, 519 U.S. 452 (1997), or Skidmore v. Swift
& Co., 323 U.S. 134 (1944). See Indep. Training
& Apprenticeship Program v. Cal. Dep't of Indus.
Relations, 730 F.3d 1024, 1035 (9th Cir. 2013). Because
the dual jobs regulation is ambiguous and the Guidance's
interpretation is both reasonable and consistent with the
regulation, we agree with the Eighth Circuit that the
Guidance is entitled to Auer
deference. See Fast, 638 F.3d at 880-81.
an agency interprets its own regulation, even if through an
informal process, its interpretation of an ambiguous
regulation is controlling under Auer unless
'plainly erroneous or inconsistent with the
regulation.'" Bassiri v. Xerox Corp., 463
F.3d 927, 930 (9th Cir. 2006) (quoting Auer, 519
U.S. at 461). "Under this standard, we defer to the
agency's interpretation of its [ambiguous] regulation
unless an 'alternative reading is compelled by
the regulation's plain language or by other indications
of the [agency's] intent at the time of the
regulation's promulgation.'" Id. at 391
(emphasis and second alteration in original) (quoting
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512
(1994)). Interpretations that "do not reflect the
agency's fair and considered judgment of the matter in
question" or unfairly surprise regulated parties are not
entitled to Auer deference. Christopher v.
SmithKline, 567 U.S. 142, 155-56 (2012) (quoting
Auer, 519 U.S. at 462).
agree with Marsh that the dual jobs regulation is
ambiguous. The dual jobs regulation, like the FLSA,
does not offer a precise definition for
"occupation." Instead, the regulation relies on a
series of examples to illustrate the difference between a
tipped employee and a dual job employee engaged in both a
tipped and an untipped occupation. See 29 C.F.R.
§ 531.56(e). The regulation explains that a person
working as both a maintenance man and a server is obviously
"employed in two occupations," such that "no
tip credit can be taken for his hours of employment in his
occupation of maintenance man." Id. But it does
not explain how to classify the person's
occupation-whether through official title, expected duties,
or some other method. See Fast, 638 F.3d at 877.
second half of the dual jobs regulation suggests that the DOL
likely intended to tie a person's occupation to his or
her duties. See 29 C.F.R. § 531.56(e)
(explaining that the maintenance man/server's 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"). But like a door leading to more doors, this
clarification only produces more questions. As the Eighth
Circuit recognized, although the regulation establishes that
a server who spends "part of her time" cleaning
tables and "occasionally" washing dishes is not a
dual job employee, see id., the regulation does not
define either ambiguous, temporal term. See Fast, 638 F.3d at 877. If a
server spends 10% of her time washing dishes, does that
qualify as "occasional"? What about 30%? The
regulation's silence on this point is compelling evidence
of its ambiguity. We therefore disagree with Judge
Graber's reading of the regulation. See Partial
Concur. at 48-49. Had the DOL intended to unambiguously
foreclose servers from being dual job employees regardless of
the amount of time they spend on related, but untipped
duties, the regulation would not include the temporal
limitations it does. Instead, the dual jobs regulation would
have read: "Such a situation is distinguishable from
that of a waitress who spends her time serving customers or
completing related, but untipped tasks, such as cleaning and
setting tables, toasting bread, and making coffee." By
restricting related duties with limitations such as
"occasionally," "part of [the] time," and
"tak[ing] a turn," the dual jobs regulation
necessarily distinguishes between single-job employees who
only occasionally complete related tasks, and dual-job
employees who regularly do. What the regulation leaves undefined is
the point at which this transformation occurs.
same is true of the regulation's reference to
"related duties," 29 C.F.R. § 531.56(e), which
suggests two distinctions: one between related and unrelated
duties; and the other between duties related to a tipped
occupation and duties that are part and parcel of a tipped
occupation. The regulation states that cleaning tables,
washing dishes, making coffee, and toasting bread are all
duties related to a server's occupation, but offers no
guidance as to other duties, such as cleaning the restroom or
chopping fruits and vegetables in the kitchen. See
id. The regulation also leaves open the possibility that
when a tipped employee engages in tasks related to her tipped
occupation-but which are not actually synonymous with her
tipped occupation-more than occasionally or part of the time,
those related tasks form a separate, untipped job for which
the employer is not entitled to take a tip credit. These
interpretive gaps, including the regulation's failure to
"define 'related duties, '" Fast,
638 F.3d at 877, all serve as additional evidence of the
concluded that the dual jobs regulation is ambiguous, we next
consider whether the Guidance is "plainly erroneous or
inconsistent with the regulation." Auer, 519
U.S. at 461 (internal quotation marks omitted). The DOL's
interpretation is consistent with nearly four decades of
interpretive guidance and with the statute and the regulation
itself. Together, these factors strongly counsel in favor of
applying Auer deference to the Guidance.
dual jobs regulation relies on two undefined factors to
determine whether an employee is a dual-job employee: (1) the
relatedness of an employee's duties to a tipped
occupation and (2) the amount of time an employee spends on
completing related but untipped duties. See 29
C.F.R. § 531.56(e) (clarifying that an employee who
spends "part of her time" on duties
"related" to her tipped occupation that are not
themselves "directed toward producing tips" is not
a dual jobs employee). In the decades following the
regulation's promulgation, the DOL continuously
endeavored to provide employers with further guidance on the
regulation in the form of opinion letters. These efforts
eventually culminated in the creation of the Guidance in the
DOL's Field Operations Handbook ("FOH") in
1988. See Brief for
the Secretary of Labor as Amicus Curiae, Dkt. No. 45, at 16
(hereinafter "DOL Amicus Brief") ("The FOH
interpretation was based on, and is consistent with, the
prior opinion letters.").
Guidance attempts to address the regulation's ambiguity
by establishing three definitions, each of which builds on an
interpretation of the regulation. First, the Guidance limits
"related duties" to those that are "incidental
to the regular duties of the tipped employees and are
generally assigned to the tipped employees." FOH §
30d00(f)(2) (2016). Second, the Guidance establishes that a
tipped employee who spends a "substantial amount of
time," defined as "in excess of 20 percent of the
hours worked in the tipped occupation in the workweek,"
on such related duties may not be paid the reduced tip credit
wage. Id. § 30d00(f)(3). "All related
duties count toward the 20 percent tolerance," meaning
that a server need not spend all of that time on one related
task, such as washing dishes, to qualify as a dual job
employee. Id. Third, the Guidance makes explicit the
regulation's suggestion that occupations are defined by
their tasks. See id. § 30d00(f)(4) ("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.").
Accordingly, the Guidance recognizes that a server is no
longer engaged in a tipped occupation once she starts
cleaning bathrooms and washing windows, because those tasks
fall within the purview of a separate, non-tipped
Probert v. Family Centered Servs. of Alaska, Inc.,
651 F.3d 1007 (9th Cir. 2011), Defendants contend that the
Guidance is not entitled to deference because the FOH
includes a disclaimer that it "is not used as a device
for establishing interpretive policy." Id. at
1012. Defendants' argument fails because the DOL has
adopted the Guidance's interpretation in its amicus
brief. See DOL Amicus Brief at 16; Fast,
638 F.3d at 877. It is well-settled law that courts may
afford an agency's interpretation Auer deference
if the interpretation is advanced through an amicus brief.
See Auer, 519 U.S. at 461; Barrientos v.
1801-1825 Morton LLC, 583 F.3d 1197, 1214 (9th Cir.
2009) ("Further, an agency's litigation position in
an amicus brief is entitled to deference if there is no
reason to suspect that the interpretation does not reflect
the agency's fair and considered judgment on the
matter." (internal quotation marks omitted)).
similarly reject as unpersuasive Defendants' brief
argument that the Guidance is not entitled to Auer
deference because employers in this country did not have
"notice that they must pay an employee . . . based on an
agency's internal advice given to its field
investigators." Christopher v. SmithKline
Beecham Corp., 567 U.S. 142 (2012), held that
Auer deference is not warranted when an agency's
interpretation would "impose potentially massive
liability" without first providing regulated parties
"fair warning of the [prohibited] conduct."
Id. at 155-56. There, the Court recognized that
preventing "unfair surprise[s]" outweighed the
"general merits of Auer deference,"
particularly where the agency's interpretation postdated
the regulated parties' conduct. Id. at 156, 159;
see also Indep. Training & Apprenticeship Program v.
Cal. Dep't of Indus. Relations, 730 F.3d 1024, 1035
(9th Cir. 2013) ("[T]he Court has deemed Auer
deference unsuitable when such deference would result in
'unfair surprise' to one of the litigants.").
in contrast, the Guidance has been in place since 1988 and
was published to the Internet pursuant to the Electronic
Freedom of Information Act Amendments of 1996. See
Wage & Hour Div., Dep't of Labor, Field
Operations Handbook (Aug. 31, 2017), available
at https://www.dol.gov/whd/FOH/index.htm. The DOL also
adopted the Guidance's interpretation and the 20%
benchmark in its amicus brief to the Eighth Circuit in
Fast, which was filed on September 15, 2010-two
years before Marsh began his employment with J.
Alexander's. See Brief for the Secretary of
Labor as Amicus Curiae in Support of Plaintiffs-Appellees,
Fast v. Applebee's Int'l, Inc., 638 F.3d 872
(8th Cir. 2011) (Nos. ...