Recent Updates on Tip Pooling and Paid Leave

This week there were two important events that happened for the Wage Standards Division (WSD).  1. A 9th Circuit decision sided with the United States Dept. of Labor (USDOL) in their tip pooling appeal (see Oregon Restaurant v Perez; Cesarz v Wynn Las Vegas, February 23, 2016), and 2. The USDOL opened a comment period on a proposed rule for federal contractors that are now required to provide 7 days of sick leave to employees.

 9th Circuit restores tips to employees
The 9th Circuit issued their opinion in the appeal of two cases with similar issues, the appeal by the USDOL in the Oregon Restaurant v Perez, Secretary of Labor, and the Cesarz v Wynn Las Vegas.  The appellee in the Oregon case was the USDOL and the appellees in the Wynn Resort case were the employee casino dealers represented by Joseph Cesarz  for the class of employees similarly situated.

 The Oregon Restaurant and Lodging Association had sued the USDOL objecting to a rule (29 CFR5 31.52)  stating that only employees who are regularly tipped could participate in a tip pool.  The U.S. District Court of Oregon had sided with the Oregon Restaurant and Lodging Association, stating that tips belonged to the employer.  The 9th Circuit disagreed with the District Court of Oregon, and restored the practice of requiring tip pools to be legal only if shared with regularly tipped employees by declaring the USDOL's rule valid.

The casino dealers and servers at the Wynn Las Vegas had sued their employer in U.S. District Court of Nevada to keep their tips and not share their tips with other employees who were not regularly tipped, for example cooks and supervisors.  The District Court of Nevada sided with the employer allowing the tips to be parceled out as the employer saw fit.  The 9th Circuit disagreed with the District Court of Nevada and reversed the lower decision restoring the tips to the employee casino dealers and servers that earned the gratuities.


Notice of proposed rule for paid leave.
President Obama may be in his lame duck period, but he is continuing to advocate for employees in areas where he can still exercise control.  Through Executive Order 13706, issued September 15, 2015, President Obama has required companies that contract or subcontract with the federal government to provide at least 7 days of paid sick leave for the employee's illness, or for the care of sick family member, or for addressing certain concerns caused by domestic violence. An overview of the proposed rule can be found on the USDOL website.

 The proposed rule comment period opened yesterday, February 25, 2016, and will close March 28, 2016.  The proposed rule and the procedure to comment can be found on the USDOL website.

Why should Hawaii care about these two events?
Regarding the 9th Circuit case on tip pooling, Hawaii has to care because the federal rules are applied when there is no specific Hawaii law provided.  There are no specific statutes or rules that direct who can participate in a tip pooling arrangement, only rules about how a tip pooling arrangement can apply to a tip credit situation, (See Hawaii Administrative Rule 12-20-11).  For a period of time the WSD has had to modify responses to claims by employees of shared tip pools and based on this 9th Circuit case we will be following the federal standard that only regularly tipped employees may participate in a tipped pool arrangement.

The proposed rule will implement Executive Order 13706, and all federal contractors, including those working on federal projects in Hawaii will have to comply.  Hawaii has required Temporary Disability Insurance, Chapter 392, Hawaii Revised Statutes.  The TDI law is commonly referred to as Hawaii's sick leave law because it provides partial wage replacement for employees who become ill or are injured outside of the job and not covered under workers' compensation.  Federal contractors would be wise to comment on the proposed rule and how the TDI contractors provide their employees in Hawaii will be accommodated under the Executive Order.  As the order requires 7 days of sick leave, and the TDI law has a waiting period with only a partial wage replacement, will this suffice? 

What's next?
The 9th Circuit decision in Oregon Restaurant was decided by a 3 member panel in a 2 to 1 decision with the dissenting judge writing that the majority decision was against precedent and to overturn circuit precedent a full en banc bench should hear the case (en banc means eleven 9th Circuit judges, not just three).  This suggests that maybe this case is not quite over.

The federal rule's treatment of TDI for federal contractors with Hawaii employees may be an insight into how proponents of paid leave issues that keep reappearing in legislative measures will be resolved.  At this writing SB 2961 SD1 Relating to Family Leave, is still alive in this 2016 session. While this measure does not invoke TDI for paid leave of an employee's illness as some of the past measures have, it proposes a new system to provide paid leave for the care of a sick family member as the Executive Order requires.  Federal contractors would be wise to consider how their TDI will stack up against the Executive Order. 

Will keep you posted if we hear anything.