The US Court of Appeals for the Fifth Circuit has vacated a Labor Department rule requiring employers to pay tipped workers full wages for their downtime, nearly three years after its implementation. The ruling represents a substantial victory for the Restaurant Law Center and Texas Restaurant Association, which contended that the rule was detrimental to their members’ financial sustainability.
In the judgment, Circuit Judge Jennifer Walker Elrod noted, “The Final Rule fails under the Administrative Procedure Act twice over.” Elrod further argued that the rule is inconsistent with the Fair Labor Standards Act (FLSA) and should therefore be invalidated. This decision effectively removes the requirement for employers to compensate tipped workers at the federal minimum wage rate during periods when they are not engaged in tip-generating tasks.
The invalidated rule had been a point of contention since its inception, with proponents advocating for greater worker protection and opponents warning of its potential economic impact on the hospitality industry. For more detailed coverage, see Bloomberg Law’s report.