By Nate Raymond
(Reuters) – A U.S. appeals court on Friday rejected a rule adopted 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 New Orleans-based 5th U.S. Circuit Court of Appeals unanimously sided with two restaurant industry trade groups in finding that a 2021 rule issued by the U.S. Department of Labor conflicts with federal labor law.
The Labor Department had no immediate comment.
The rule requires employers to pay tipped workers the federal minimum wage of $7.25 per hour, not the $2.13 minimum wage for tipped work, for non-tipped tasks that take more than 20% of their time or 30 consecutive minutes.
The rule replaced a regulation adopted during the administration of former Republican President Donald Trump that said workers could be paid the minimum wage if they primarily performed tipped duties.
Two trade groups, the Restaurant Law Center and the Texas Restaurant Association, filed a lawsuit in Texas shortly after the rule was adopted under Biden, appealing a decision by U.S. District Judge Robert Pittman that upheld the 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 what is called “ Chevron (NYSE:) Respect” under a 1984 U.S. Supreme Court ruling.
This principle has required courts to rely on federal agencies’ interpretations of the laws they administer when those laws are ambiguous.
But the 6-3 conservative U.S. Supreme Court struck down the Chevron Doctrine in June, saying courts must apply their own judgment when interpreting ambiguous laws.
U.S. Circuit Judge Jennifer Walker Elrod, writing for a three-judge panel, cited that ruling in declining to accept the department’s interpretation of the Fair Labor Standards Act.
Elrod said the rule runs counter to the letter of the law and “sets a precedent for applying the tip credit based on impermissible considerations and is inconsistent with the statutory scheme approved by Congress.”
“Because the final rule conflicts with the clear statutory text of the Fair Labor Standards Act, it is not in accordance with the law,” she wrote for the panel, which includes two Republican-appointed judges and one Democratic-appointed judge.
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