A US appeals court has invalidated a rule implemented by President Joe Biden’s administration aimed at increasing wages for tipped workers. The 5th US Circuit Court of Appeals in New Orleans ruled unanimously against the Department of Labor’s 2021 regulation, citing a recent US Supreme Court decision that limits federal agencies’ regulatory powers.
The contested rule mandated that employers pay tipped workers the federal minimum wage of $7.25 per hour for non-tipped duties that exceed 20% of their work time or 30 consecutive minutes, rather than the lower tipped minimum wage of $2.13. This rule replaced a previous regulation from the Trump administration allowing workers to be paid the tipped minimum wage if their duties were primarily tipped-related.
Two industry trade groups, the Restaurant Law Center and the Texas Restaurant Association, challenged the rule in court. They appealed a decision by US District Judge Robert Pittman, who had upheld the rule, arguing that the Labor Department’s interpretation deserved deference under the Chevron doctrine, which had previously guided judicial review of agency regulations.
However, the Supreme Court’s June ruling, which abolished the Chevron doctrine, shifted the standard, requiring courts to apply their own judgment to ambiguous laws. US Circuit Judge Jennifer Walker Elrod, writing for the panel, found the Labor Department’s rule inconsistent with the Fair Labor Standards Act and contrary to the statute’s clear text.
Elrod’s decision, supported by two Republican-appointed judges and one Democratic appointee, underscored that the rule did not align with the law’s intended framework.
