Category: Wage & Hour Litigation

By Gerald L. Maatman, Jr., Brandon Spurlock, and Nicolette J. Zulli

Duane Morris Takeaways: As the threat of wage & hour collective actions continue to pose litigation risks for businesses, especially given the typically low threshold to obtain FLSA condition certification, a recent Georgia federal court opinion offers a positive lesson for companies facing such actions where plaintiffs are unable to show that other similarly situated workers want to join the lawsuit. In Parker v. Perdue Foods, LLC, No. 5:22-CV-268, 2024 U.S. Dist. LEXIS 45542 (M.D. Ga. Mar. 14, 2024), Judge Tilman E. Self of the U.S. District Court for Middle District of Georgia denied Plaintiff’s motion for conditional certification in an FLSA 216(b) collective action on the grounds that Plaintiffs failed to demonstrate that other similarly situated workers desired to opt-in to the lawsuit.

Case Background

Perdue, “the third largest boiler chicken company in the country,” contracts with approximately 1,300 so-called “growers” — farmers who raise chickens for Perdue — throughout the nation.  Id. at *2. Parker, a former grower for Perdue, filed a lawsuit seeking relief under the Fair Labor Standards Act (“FLSA”). He claimed that growers were entitled to at least the federal minimum wage and overtime pay, which Perdue did not pay them. Id. at *3. Specifically, Parker alleged that he often worked over 60 hours per week, was expected to be on call 24 hours a day, and, after paying for expenses, he was making a fraction of the federal minimum wage. Id. at *2 (internal quotations and citations omitted). Parker claimed that he and other growers nationwide were misclassified as independent contractors, when they were in fact employees. Id. at *3.

The parties engaged in six months of targeted discovery on conditional certification issues, including extensive written discovery, a Rule 30(b)(6) deposition, and the depositions of Parker and the sole opt-in plaintiff to the action. Id.

Plaintiffs sought to conditionally certify a proposed collective action that included at least 1,300 growers who raised chickens for Perdue under a Perdue Poultry Producer Agreement in the past three years. Id. at *5. Plaintiffs also sought the Court’s approval for a proposed notice to be sent to potential collective action members who met this definition, as well as Perdue’s disclosure of a list of individuals in the potential collective action so that notice could be sent. Id. at *6.

Perdue objected to conditional certification because, among other things, Plaintiffs failed to provide sufficient evidence to show that other growers in the nationwide collective action wished to opt-in. Id. Plaintiffs argued that the opt-in consent filed by the only opt-in plaintiff indicated that other growers desired to join the suit and would join if given notice, and that one or two opt-in plaintiffs are sufficient to permit conditional certification in the Eleventh Circuit. Id.

The Court’s Decision

Judge Self agreed with Perdue. He held that Plaintiffs failed to meet their burden of showing that there were a substantial number of growers who desired to opt-in to the collective action. Id. at *14. Accordingly, the Court denied Plaintiffs’ motion for conditional certification and dismissed the opt-in plaintiff from the suit without prejudice. Id.

The Court addressed the merits of Perdue’s objection under the first prong of the analysis of Dybach v. Florida Dep’t of Corrections, 942 F.2d 1562, 1567 (11th Cir. 1991). Dybach held that Plaintiffs bear the burden of showing that the individuals in the proposed collective action (1) “desire to opt-in” to the collective action and (2) are “similarly situated.” Because the Court found Plaintiffs failed to meet their burden on the first prong, it did not reach the issue of whether members of the proposed collective action were similarly situated. Id. at *6-7.

Importantly, the Court applied a somewhat heightened standard of scrutiny in this case because the Parties had already engaged in six (6) months of discovery focused on conditional certification. Id. at *7. The Court explained that although it typically applies a fairly lenient standard for conditional certification, the rationale for that standard disappears once a plaintiff has had an opportunity to conduct discovery. Id. In other words, the standard may become less lenient as the litigation progresses. Id.

The Court also highlighted that despite Plaintiffs having six months to conduct discovery and gather evidence for conditional certification, the only evidence they presented suggesting that other growers desired to opt-in to the case was (i) a single opt-in and (ii) statements from Parker and the opt-in that they believe other growers would be interested in joining the lawsuit. Id. at *10. Specifically, the Court noted that “one opt-in is insufficient to show substantial interest” in a proposed collective action “of over 1,300 individuals in 11 locations in nine (9) states across the country, even under the most lenient of standards.” Id. (emphasis added).

In addition to being unpersuaded by Plaintiffs’ position, which aimed to establish a bright line rule regarding the number of opt-in consents sufficient to satisfy its burden, the Court found that the declarations filed by Parker and the opt-in (stating that they believe other growers would be interested in joining the collective action) were speculative and thus insufficient. Id. at *11-12. Furthermore, the Court noted that in their depositions, both Parker and the opt-in conceded that they were not aware of any growers who wish to join the action. Id. at *12.

In the end, the Court opined that “[b]ottom line: two out of 1300+ just isn’t enough” for conditional certification. Id. at *13.

Implications For Employers

Perdue Foods provides specific and valuable insight for employers on how best to defend against conditional certification in cases where (1) the parties have engaged in discovery on conditional certification issues; and (2) the number of opt-ins who have consented to the action are nominal in comparison to the size of the proposed collective action. The decision provides a roadmap for employers as to FLSA conditional certification following the parties’ engagement in extensive pre-certification discovery targeted toward conditional certification. Namely, that the court may apply a heightened standard of scrutiny in such circumstances, thereby requiring Plaintiffs to show that more than just “one or two” opt-ins are interested in joining the action.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther

Duane Morris Takeaways: In Chamber of Commerce of the U.S.A. et al. v. NLRB et al., No. 6:23-CV-00553, 2024 WL 1045231 (E.D. Tex. Mar. 8, 2024), Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas granted the Plaintiffs motion for summary judgment and denied the Defendants cross-motion for summary judgment. Under the NLRB’s 2023 joint employer rule, even companies who exercise just “indirect control” over the employees of another entity could be considered a joint employer under federal labor laws. The Court held that the NLRB’s 2023 joint employer rule did not provide a meaningful two-part test to determine joint employer status, and that the NLRB’s reason for rescinding the 2020 Rule was arbitrary and capricious.  Accordingly, the Court vacated the 2023 Rule and reinstated the 2020 Rule. 

This ruling is a huge win for businesses, as it reinstates the 2020 Rule’s heightened “substantial direct and immediate control” standard for determining joint-employer status.

Case Background

In 2020, the NLRB issued a joint-employer final rule, providing that an entity “is a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment” (the “2020 Rule”).  Id. at 12 (quoting 29 C.F.R. § 103.40(a) (2020)).  Under the 2020 Rule, a company is a joint employer when it exercises “substantial direct and immediate control” over one or more of the following “essential terms or conditions of employment” – “wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.”  Id. at 12-13 (quoting 29 C.F.R. § 103.40(a), (c)(1) (2020)).

In 2023, the NLRB rescinded the 2020 Rule and enacted a new joint-employer final rule (the “2023 Rule”).  Id. at 14.  The 2023 Rule defined a joint employer as an entity that exercised “reserved control” or “indirect control” over one of seven terms and conditions of employment, including: “(1) work rules and directions governing the manner, means, and methods of the performance, and (2) working conditions related to the safety and health of employees.”  Id. (29 C.F.R. § 103.40(d)-(e)).

In 2023, Plaintiffs sued the Defendants, challenging the 2023 Rule on two grounds: (i) that it is inconsistent with the common law; and (ii) that it is arbitrary and capricious.  Id. at 14-15.

In response, the Defendants cross-moved for summary judgment on the Plaintiffs claims, alleging that the 2023 Rule was based on, and is governed by, common law principles, that it is not arbitrary and capricious, and that the Board acted lawfully in rescinding the 2020 Rule.  Id. at 20.

The Court’s Decision

The Court granted the Plaintiffs motion for summary judgment, and denied Defendants cross-motion for summary judgment, thereby “vacating the 2023 Rule, both insofar as [the 2023 Rule] rescind[ed] the [2020 Rule] and insofar as it promulgate[d] a new version of [the 2020 Rule].”  Id. at 30.

First, the Court focused on the main dispute between the parties, i.e., whether the 2023 Rule had a meaningful two-step test to determine an entity’s joint employer status, or the 2023 Rule only had one step for all practical purposes.  Id. at 20-21.  The Defendants argued that the 2023 Rule’s joint-employer injury had the following steps: (i) “an entity must qualify as a common-law employer of the disputed employees”; and (ii) “only if the entity is a common-law employer, then it must also have control over one or more essential terms and conditions of employment.”  Id.  The Court disagreed, finding that “an entity satisfying step one, along with some other entity doing so, will always satisfy step two,” since “an employer of a worker under the common law of agency must have the power to control ‘the material details of how the work is to be performed,” and the Defendants proposed step two included “work rules and directions governing the manner, means and methods of the performance of duties.”  Id. at 22-23 (internal citations omitted).

The Court then analyzed whether the Board lawfully rescinded the 2020 Rule.  It opined that “to survive arbitrary-and-capricious review, agency action must be ‘reasonable and reasonably explained.”  Id. at 28-29.  The Court held that the Board did not provide a “reasonable or reasonably explained” purpose for rescinding the 2020 Rule, and therefore, its recension was arbitrary and capricious.  Id. at 29.  Since “vacatur of an agency action is the default rule” in the Fifth Circuit when such rule “is found to be discordant with the law or arbitrary and capricious”, the Court vacated the 2023 Rule.  Id. at 30.

Implications For Employers

The Court’s vacatur of the 2023 Rule in Chamber of Commerce of USA et al. v. NLRB et al. is an important victory for employers. The 2023 Rule would have made “virtually every entity that contracts for labor . . . a joint employer.” Id. at 25. Moreover, the 2020 Rule, in addition to imposing the heightened “substantial direct and immediate control standard,” provides integral guidance for what actions are considered joint, and what actions are not.  The Court’s decision to reinstate the 2020 Rule, therefore, is also a significant win for employers.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown

Duane Morris Takeaways: On March 12, 2024, in Parker v. Battle Creek Pizza, Inc. No. 22-2119 (6th Cir. Mar. 12, 2024), a three-judge panel of the Sixth Circuit addressed the issue of what standard applies for calculating reimbursements of vehicle expenses owed under the FLSA to delivery drivers who use their own vehicles for their jobs. The consolidated appeal arose from dueling opinions of U.S. District Courts in Michigan and Ohio on the same issue.

The Sixth Circuit concluded that neither the IRS standard mileage rate (the approach of the court in Michigan), nor an employer’s “reasonable approximation” of vehicle costs (the approach of the court in Ohio), satisfies an employer’s minimum wage obligations under the FLSA. The Sixth Circuit vacated the district court opinions and sent the cases back to their respective courts for further proceedings on remand. The Sixth Circuit’s decision is essential reading for all businesses with delivery drivers, particularly those defending minimum wage claims involving drivers’ expenses, a hot-button litigation issue percolating in courts across the country.

Case Background

To set the stage, the FLSA requires payment of the minimum wage (currently $7.25 an hour) to employees “free and clear.” In the U.S. Department of Labor regulations interpreting the statute, 29 C.F.R. § 531.35 states that employers cannot shift business expenses to their employees if doing so causes the employees’ wages to drop below the minimum wage. In another section of the FLSA regulations, the DOL addresses how to calculate an employee’s “regular rate of pay” for overtime calculations when the employer reimburses an employee’s business expenses. In that regulation at 29 C.F.R. § 778.217(c), the DOL says employers may “reasonably approximate” the amount of the expenses to be reimbursed. The DOL regulations say nothing, however, about how to calculate such an approximation, and whether the analysis applies to wages owed other than overtime wages.

The district court in Parker v. Battle Creek Pizza, Inc., 20-CV-00277 (W.D. Mich. Apr. 28, 2022), held that use of the IRS mileage rate satisfied the FLSA. The court deferred to the DOL’s Field Operations Handbook, the internal manual that guides investigators for the Wage and Hour Division. In the Field Operations Handbook. The DOL takes the enforcement position at § 30c15(a) that employers may, in lieu of reimbursing an employee’s actual expenses, use the IRS standard business mileage rate to determine the amount of reimbursement owed to employees for FLSA purposes. By contrast, the district court in Bradford v. Team Pizza, Inc., 20-CV-00060 (S.D. Ohio Oct. 19, 2021), rejected the IRS mileage rate in favor of an employer’s “reasonable approximation” of the drivers’ expenses.

The IRS standard business mileage rate, currently $.67 a mile, is intended to represent gasoline, depreciation, maintenance, repair and other fees pertaining to vehicle upkeep. Employers’ “reasonable approximation” of an employee’s costs in using their personal vehicles to perform work typically is lower than the IRS rate.

The Sixth Circuit’s Ruling

The Sixth Circuit highlighted the basic requirement of the FLSA to pay employees at least the minimum wage for hours worked. As the Sixth Circuit stated, when an employee’s hourly wage is the minimum $7.25 an hour, any underpayment of the employee for costs they expended to benefit the employer necessarily causes them to receive less than the minimum wage.

Although it acknowledged the difficulty of calculating vehicle expenses on an employee-by-employee basis, the Sixth Circuit reasoned that any “approximation” of an employee’s personal vehicle costs — whether it be the employer’s own calculation or the IRS’s standard business mileage rate — is contrary to the FLSA where it results in an employee receiving less than the minimum wage.

The Sixth Circuit declined to defer to the DOL’s interpretation in the FLSA regulations or the agency’s Field Operations Handbook. It emphasized that the FLSA regulation supporting the “reasonable approximation” method — 29 C.F.R. § 778.217(c) — addressed overtime calculations, not minimum wage. The Sixth Circuit also found use of the IRS standard business mileage rate to be fatally flawed. As it explained, the IRS’s rate, though more generous in application than the “reasonable approximation” method, disfavors high-mileage drivers like delivery drivers and fails to account for regional and other differences inherent in maintaining a vehicle. Id. at 6.

The Sixth Circuit did not announce a new standard to replace the two approaches it rejected. However, it offered a three-part framework for the district courts to consider on remand. Similar to the burden-shifting framework in Title VII disparate treatment cases, the Sixth Circuit suggested that an FLSA plaintiff might present prima facie proof that a reimbursement was inadequate. The employer would then bear the burden to show that the amount it reimbursed bore a reasonable relationship to the employee’s actual costs. The plaintiff would have an opportunity to attack the employer’s reasoning while bearing the ultimate burden to prove failure to receive minimum wages.

Implications For Employers

Although the Sixth Circuit’s ruling in Parker is binding only on federal courts in Ohio, Michigan, Tennessee and Kentucky, the opinion may prompt courts around the country to reconsider reliance on the DOL’s “reasonable approximation” standard and the IRS’s standard business mileage rate when evaluating minimum wage claims of delivery drivers. Considering that FLSA claims asserting underpayment for vehicle expenses already is a favorite topic of the plaintiffs’ class action bar, we expect the opinion to unleash a flood of new lawsuits in this area. All businesses with delivery drivers ought to keep a close watch on how the Michigan and Ohio district courts apply the Sixth Circuit’s ruling on remand.

A silver lining in the decision may well be the notion that as calculating the appropriateness of reimbursement is required on a driver-by-driver basis, such claims seem difficult to ever certify.

The opinion in Parker is also significant in light of the Supreme Court’s forthcoming ruling on the viability of the Chevron doctrine, the framework in which courts generally defer to agencies’ interpretation of federal statutes. In rejecting the DOL’s interpretation of the FLSA, the reasoning in Parker may be a harbinger of future rulings under the FLSA and a panoply of other statutory schemes if the Supreme Court abandons Chevron deference.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown

Duane Morris Takeaways: On February 29, 2024, in Miller II v. SBK Delivery, LLC, No. 2:21-CV-04744 (S.D. Ohio Feb. 29, 2024), Judge Michael H. Watson of the U.S. District Court for the Southern District of Ohio applied the Sixth Circuit’s standard in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023,) to decertify a collective action of delivery drivers seeking unpaid overtime under the FLSA.  As one of the first decertification rulings applying the Clark standard, the Court’s opinion is required reading for businesses litigating FLSA claims before courts in the Sixth Circuit.

Case Background

On September 22, 2021, the plaintiff in Miller II filed a Complaint against the defendant, SBK Delivery, LLC. The defendant contracted with multiple package carriers to provide delivery drivers. The package carriers paid the defendant for each package the drivers delivered. The defendant then paid each driver a percentage of the payment it received from the package carrier. The plaintiff asserted claims of unpaid overtime under the FLSA and Ohio law as well as a breach of contract claim. The plaintiff filed the FLSA claims on behalf of a proposed collective action of drivers who entered into independent contractor agreements with the defendant to provide services as delivery drivers.

On February 9, 2022, the Court approved the parties’ joint stipulation to conditionally certify and issue notice to a collective action consisting of current and former delivery drivers who performed work for the defendant between September 22, 2018 and the present who worked over 40 hours per workweek and were classified as independent contractors.

Nineteen (19) individuals filed consents to join the lawsuit as prospective opt-in plaintiffs.

On March 22, 2023, the defendant filed a motion to decertify the collective action. Prior to the close of briefing on the decertification motion, on May 19, 2023, the Sixth Circuit issued its pivotal decision in Clark.

In Clark, the Sixth Circuit articulated a “strong likelihood” standard for facilitating notice to potential opt-in plaintiffs pursuant to 29 U.S.C. § 216(b) of the FLSA. Under the new standard, only after demonstrating a “strong likelihood” that similarly situated other employees exist may opt-in plaintiffs become parties to the named plaintiff’s lawsuit.

Following the Sixth Circuit’s ruling, the parties filed supplemental briefing to address the similarly-situated status of the collective under Clark.

The Court’s Ruling

Because the parties had stipulated to conditional certification prior to the Sixth Circuit’s ruling in Clark, the Court had not had an earlier opportunity to rule on the plaintiff’s similarly-situated status relative to those in the collective action prior to the issuance of notice to potential opt-in plaintiffs.

Applying the Clark standard to the plaintiff’s claims for the first time, the Court held that the plaintiff failed to show a strong likelihood that he was in fact “similarly situated” to the putative opt-in plaintiffs.

The Court reasoned that it was not enough for the plaintiff to show that he was subject to the same alleged FLSA-violating policy of misclassification as an independent contractor of the defendant. The plaintiff also needed to establish that the question of the amount and extent of alleged unpaid overtime could be determined on a collective-wide basis.

The Court found the plaintiff dissimilar from the opt-ins in multiple key respects, including with respect to the route assignment a driver chose, since each route assignment had different start times, end times and duration. Based on individual differences in whether a driver worked overtime hours, the Court reasoned that evidence of the named plaintiff’s hours worked would not be representative of the claims of the opt-in plaintiffs. Accordingly, the Court concluded that it would need to analyze individually each opt-in plaintiff’s overtime claims to determine liability, which would be completely contrary to the purpose of the collective action mechanism.

As a result of the Court’s application of Clark, it held that the plaintiff’s FLSA claims must proceed on an individual basis only. For these reasons, the Court dismissed each of the opt-in plaintiff’s claims without prejudice.

Implications For Employers

The Court’s ruling in Miller II demonstrates that the Clark standard is a game changer for FLSA litigants in district courts within the Sixth Circuit.

To satisfy the “strong likelihood” iteration of the similarly-situated standard for FLSA certification, plaintiffs must show more than the existence of a common policy or practice that allegedly violates the FLSA. The ruling highlights the opportunity the Clark standard affords to defendants to whittle down the scope of an FLSA lawsuit significantly by marshaling facts of dissimilarity between the named plaintiff and others. To maximize the ability to prevail on a certification ruling under the Clark standard, companies ought to devote significant resources to managing FLSA compliance risks on the front end, before any litigation arises.

By Gerald L. Maatman, Jr., Alex W. Karasik, and Nicolette J. Zulli

Duane Morris Takeaways: In Ayala v. Nissan N. Am., Inc., No. 23-11027, 2024 U.S. App. LEXIS 2965 (11th Cir. Feb. 8, 2024), the Eleventh Circuit unanimously upheld a District Court’s decision granting Nissan’s motion for summary judgment in a wage & hour class and collective action. It held that none of the eight factors for determining joint employment weighed in favor of the company. The Eleventh Circuit further affirmed the District Court’s denial of both Rule 23 class action certification and conditional certification of the collective action under the FLSA.

The Eleventh Circuit’s opinion offers a treasure trove of insights regarding the crucial joint employer issue — particularly for employers who operate in a business-partnership dynamic where one entity (e.g., a manufacturer or staffing company) maintains oversight and/or indirect influence over the employees of the other entity (e.g., a car dealership or contractor) that handles payroll and/or hiring and firing processes.

Case Background

Two automotive service employees (“Technicians”) working at Florida Nissan dealerships filed suit against Nissan, alleging violations of the FLSA and the Florida Minimum Wage Act (“FMWA”), for failure to pay wages as required by law. Id. at *3. They also sought conditional certification as a collective action pursuant to the FLSA, 29 U.S.C. § 216(b), as well as certification of a class action under Rule 23.

The Technicians alleged they performed vehicle repair and maintenance on behalf of Nissan at the dealerships but were not compensated as required by law. Id. Specifically, they pointed to Nissan’s Assurance Products Resource Manual (“APRM”) and Dealership Agreements, which determined how much Nissan paid dealerships for warranty work conducted by technicians, regardless of how long the work took.  Pursuant to the APRM and the Dealership Agreements, Nissan agreed with each dealership to reimburse the dealership according to the “flat-rate” system. Id. at *3.

The Technicians argued that — when the warranty work took longer than the “flat-rate time” determined by Nissan, thus limiting Nissan’s reimbursement to the dealership — the result is that they were underpaid by the dealership. Id. at *4. As a result, the Technicians asserted that Nissan was a joint employer, which Nissan opposed. The District Court agreed with Nissan and granted its motion for summary judgment. The Technicians appealed. Id. at *2.

The Eleventh’s Circuit’s Decision

The Eleventh Circuit affirmed the District Court’s order granting summary judgment and denying class certification under Rule 23 and conditional certification of a collective action under 29 U.S.C. § 216(b). Id. at *20.

On appeal, the Technicians argued that the District Court erred in granting summary judgment, because it failed to consider all admissible record evidence that they presented. Id. at *2. They further argued that the District Court erred in denying their motions for certification. First, the Eleventh Circuit rejected the Technicians’ argument that summary judgment was improper, after applying the eight-factor test under Layton v. DHL Express (USA), Inc., 686 F.3d 1172 (11th Cir. 2012), which is guided by five principles that are focused on indicators of “economic dependence,” for evaluating whether an employment relationship exists under the FLSA. These factors include: (1) The nature and degree of control of the workers; (2) The degree of supervision, direct or indirect, of the work; (3) The power to determine the pay rates or the methods of payment of the workers; (4) The right, directly or indirectly, to hire, fire, or modify the employment conditions of the workers; (5) Preparation of the payroll and payment of wages; (6) Ownership of the facilities where work occurred; (7) Performance of a specialty job integral to the asserted joint employer’s business; (8) The relative investments of the asserted joint employer in equipment and facilities used by the workers. Id. at *6-7.

The Eleventh Circuit held that none of these factors weighed in favor of a finding that Nissan was a joint employer of the Technicians. Id. at *22. Its analysis greatly emphasized the Technicians’ (i) failure to identify any specific, substantive content in Nissan’s 233-page APRM or its Anomalous Repair Control Program, and (ii) their reliance on conclusory and uncorroborated allegations in declarations and affidavits. The Eleventh Circuit opined that this was  insufficient to show the District Court failed to consider relevant evidence. Id. at *8, *16. The Eleventh Circuit relied primarily upon a comparison to its prior decisions in Layton, Aimable v. Long & Scott Farms, 20 F.3d 434 (11th Cir. 1994), and Martinez-Mendoza v. Champion Int’l Corp., 340 F.3d 1200 (11th Cir. 2003), ultimately concluding that the relevant factors in this case weigh more heavily against joint employment. Id. at *18.

The Eleventh Circuit also rejected the Technicians’ argument that the District Court erred in denying both certification of a class action under Rule 23 and conditional certification of a collective action under § 216(b). The Eleventh Circuit opined that the putative class members would be employed by different dealers, making the inquiries about their pay “highly individualized and unwieldy.” Id. at *23. This, in turn, meant that the employees would not be similarly situated (as required for a collective action under the FLSA) and that there would not be sufficient common facts (as required for a class action under Rule 23). Id.

Implications For Employers

The Ayala decision is notable in that it offers a novel glimpse into the Eleventh Circuit’s approach to construing the language of employer policies to determine joint-employer status. To that end, the decision not only calls for employers to assess their business relationships to those it considers employees versus contractors, but also highlights the importance of constructing written policies and procedures with an eye toward the eight factors used to determine joint employer status.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Gregory Tsonis

Duane Morris Takeaways: Complex wage & hour litigation has long been a focus of the plaintiffs’ class action bar. The relatively low standard by which plaintiffs can achieve conditional certification under the Fair Labor Standards Act (FLSA), often paired with state law wage & hour class claims, offers a potent combination by which plaintiffs can pursue myriad employment claims. To that end, the class action team at Duane Morris is pleased to present the second edition of the Wage & Hour Class And Collective Action Review – 2024. This new publication analyzes the key wage & hour-related rulings and developments in 2023 and the significant legal decisions and trends impacting wage & hour class and collective action litigation for 2024. We hope that companies and employers will benefit from this resource and assist them with their compliance with these evolving laws and standards.

Click here to download a copy of the Wage & Hour Class And Collective Action Review – 2024 eBook.

Stay tuned for more wage & hour class and collective action analysis coming soon on our weekly podcast, the Class Action Weekly Wire.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther

Duane Morris Takeaways: In Martinez v. Fedex Ground Package System, Inc., No. 20-CV-1052, 2024 WL 418801 (D.N.M. Feb. 5, 2024), Judge Steven C. Yarbrough of the U.S. District Court for the District of New Mexico granted the intervention motion of 16 putative class members to join the lawsuit,  The Court held that the plaintiff-intervenors met the standard for permissive intervention under Rule 24(b)(2).  The Court’s decision in this case serves as an important reminder that Rule 23 and Rule 24 employ two separate commonality standards, and that class action cases are not automatically over when a court denies class certification.

Case Background

On October 12, 2020, Plaintiffs Fernandez Martinez and Shawnee Barrett (collectively, “Plaintiffs”) filed suit against Defendant Fedex Ground Package System, Inc. (“Fedex”), alleging that Fedex misclassified them as independent contractors and failed to pay them and putative class members overtime wages in violation of the New Mexico Minimum Wage Act (“NMMWA”).

On November 8, 2022, Plaintiffs moved to certify a class of all current or former New Mexico FedEx drivers who were paid a day rate without overtime compensation.  On October 27, 2023, the Court denied Plaintiffs’ motion on the basis that Plaintiffs failed to demonstrate that common questions predominated over individualized issues pursuant to Rule 23(b)(3).  Martinez v. FedEx Ground Package Sys., No. 20-CV-1052, 2023 WL 7114678 (D.N.M. Oct. 27, 2023).

On December 15, 2023, a group of 16 putative class members (the “Intervenors”) filed a motion to intervene as plaintiffs in the Lawsuit under Rule 24.  Martinez, 2024 WL 418801, at 1. In their motion, the Intervenors alleged that they, like Plaintiffs, were “current or former New Mexico FedEx delivery drivers who were paid the same amount of money regardless of how many hours they worked in a day, resulting in no premium payment for overtime hours worked in violation of the [NMMWA].”  Id.

The Court’s Decision

The Court granted the Intervenors’ motion.  Id. at 2.  It held that the Intervenors presented sufficient “questions of law and fact in common with the main action” under Rule 24.  Id.

The Court noted that permissive intervention under Rule 24 is appropriate where (i) a federal statute creates a conditional right, or (ii) where the “intervenor has a claim or defense that shares with the main action a common question of law or fact.”  Id.

In its opposition, FedEx asserted that because the Intervenors were employed by independent service providers (“ISPs”) to deliver packages on behalf of FedEx, and were not employed by FedEx directly, FedEx was not liable under the NMMWA for allegedly unpaid overtime.  Id.  Further, FedEx argued that the commonality requirement of Rule 24 was not met because the Court already found the absence of a common question when it denied class certification.  Id.

While the Court recognized that it denied class certification under Rule 23’s commonality requirement, it was not persuaded by FedEx’s arguments.  The Court underscored that under Rule 24, “rather than asking whether a question is susceptible to resolution ‘in one stroke,’ courts must ask whether intervenors present ‘questions of law and fact in common with’ the main action.”  Id.

The Court concluded that the “existing plaintiffs and every intervenor [would] assert that certain common aspects of [FedEx’s] contracts with ISPs [made FedEx] a joint employer and, consequently, jointly liable for any [NMMWA] violations.”  Id.  Accordingly, the Court ruled that the Intervenors satisfied the Rule 24 commonality standard and were permitted to join the lawsuit as plaintiffs.  Id. at 3.

Implications For Companies

The decision in Martinez v. FedEx serves as an important reminder for defendants that class actions are not necessarily over once class certification is denied – and some members of the putative class may take a run at joining the lawsuit per Rule 24.  Additionally, it underscores the distinct commonality analyses under Rule 23 and Rule 24.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown

Duane Morris Takeaways: In Hogan v. Cleveland Ave Restaurant, Inc. d/b/a Sirens, et al., 15-CV-2883 (S.D. Ohio Sept. 6, 2023), Chief Judge Algenon L. Marbley of the U.S. District Court for the Southern District of Ohio authorized notice to potential opt-in plaintiffs and conditionally certified a collective action of thousands of adult club dancers in a case asserting violations of the Fair Labor Standards Act (“FLSA”) and Ohio law, including claims of unpaid minimum wages, unlawfully withheld tips, and unlawful deductions and/or kickbacks. For good measure, the Court also granted class certification on the plaintiffs’ state law claims. The opinion is a must-read for employers in the Sixth Circuit facing — or hoping to avoid facing — class and collective wage & hour claims.

Case Background

On October 6, 2015, the named plaintiff Hogan filed the lawsuit as a class and collective action asserting violations of the FLSA and Ohio law. After amending the complaint in May 2017 to add additional defendants, on May 14, 2020, Hogan filed a Second Amended Class and Collective Action Complaint, the operative complaint, with a second named plaintiff, Valentine.

In the operative complaint, the named plaintiffs asserted claims against seven adult entertainment clubs and their owners and managers as well as two club associations and an individual defendant with which the clubs were associated. The plaintiffs later settled their claims against one of the seven clubs.

The allegations in the operative complaint center on the clubs’ use of a landlord-tenant system by which the defendant clubs charged dancers “rent” to perform at the clubs for tips from customers in lieu of paying them wages for hours worked.

On September 26, 2022, the plaintiffs moved for certification of their claims as a class and collective action. The parties concluded briefing on the motion five months before May 2023, when the Sixth Circuit issued its pivotal decision in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023). In Clark, the Sixth Circuit ushered in a new, more employer-favorable standard for deciding motions for conditional certification pursuant to 29 U.S.C. § 216(b) of the FLSA.

The District Court’s Decision

First, the court articulated the standard by which it would decide the plaintiffs’ motion for court-supervised notice of their FLSA claims.  The court described the Sixth Circuit’s opinion in Clark as “maintain[ing] the two-step process for FLSA collective actions but alter[ing] the calculus.” Slip Op. at 7. Whereas pre-Clark case law authorized notice at step one of the two-step process after only a modest showing of similarly-situated status, the standard post-Clark demands that plaintiffs show a “strong likelihood” exists that there are others similarly situated to the named plaintiffs with respect to the defendants’ alleged violations of the FLSA prior to authorizing notice.  Defendants after Clark retain the ability, after fact discovery concludes, to demonstrate that the named plaintiffs in fact are not similarly- situated to any individual who files a consent to join the lawsuit as a so-called opt-in plaintiff. Also unchanged by Clark is the standard for determining similarly-situated status for FLSA purposes.

The court in Hogan concluded that the plaintiffs adequately demonstrated a “strong likelihood” that they are in fact similar to the proposed group of dancers who too were classified as “tenants” of the six defendant clubs who paid rent to lease space at the clubs to earn tips from customers without receiving any wages from the defendant clubs.

In support of their motion, the plaintiffs submitted sworn declarations, deposition testimony, and documentary evidence of the defendants’ policies and practices with respect to dancers. The court found that the plaintiffs showed that the clubs maintained a system in which the defendants acted together to require dancers to pay rent for leasing space, often documented in lease agreements, instead of being paid as employees for performing work.

Among the defendants’ arguments opposing the plaintiff’s motion, the court considered, but ultimately rejected, the defendants’ argument that arbitration provisions in the lease agreements should preclude court-authorized notice of the FLSA claims. The court cited Clark for the proposition that it may consider as a relevant factor the defense of mandatory arbitration agreements in deciding whether to authorize notice of FLSA claims. Homing in on the facts, the court reasoned that members of the potential collective action did not all sign the lease agreements and that those who signed the lease agreements had the option to agree to forgo arbitration of their claims.  According to the court, the defendants would have a stronger basis to defeat court-authorized notice if they could show that all dancers had to sign the lease agreement and the lease agreement made arbitration mandatory.

In addition, the court evaluated whether the plaintiffs satisfied the Rule 23 standards for seeking to certify a class of dancers on their state law claims. The court concluded that the plaintiffs met the requirements for class certification under Rule 23(b)(3), because questions of law or fact common to class members predominated over any questions affecting only individual members (the predominance inquiry), and that a class action was superior to other available methods for fairly and efficiently adjudicating the case (the superiority inquiry).

As to predominance, the court reasoned that the issue of the defendants’ alleged unlawful system of treating dancers as tenants rather than paying them wages predominated over individualized issues such as whether a particular dancer signed a lease agreement. As to superiority, the court concluded that the relatively small size of each dancer’s wage claim demonstrated that individuals would have little incentive to pursue their claims alone.  Finding no factors pointing against class treatment of the claims, the court concluded that treating the claims as a class action was the superior method for adjudicating liability efficiently.

Implications For Employers

Hogan is the latest in a series of opinions applying the Sixth Circuit’s novel “strong likelihood” standard to plaintiffs’ efforts to expand the scope of their FLSA claims to potential opt-in plaintiffs. The developing case law in this area reflects a highly fact-specific approach to deciding whether plaintiffs have made the necessary showing to unlock court-authorized notice of their claims to potential opt-in plaintiffs.  The opinion in Hogan is significant in that it grapples with the “strong likelihood” standard alongside the well-established test for certifying a class pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown

Duane Morris Takeaways: In Hutt v. Greenix Pest Control, LLC, et al., No. 2:20-CV-1108 (S.D. Ohio July 12, 2023), U.S. District Judge Sarah D. Morrison denied plaintiff’s motion for court-supervised notice to potential opt-in plaintiffs under 29 U.S.C. § 216(b) in one of the first applications of the Sixth Circuit’s new standard for ruling on such motions in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023). 

On May 19, 2023, the Sixth Circuit replaced the long-standing lenient test for facilitating notice under the Fair Labor Standards Act (FLSA) with a more rigorous test akin to the standard used to obtain a preliminary injunction.  Whereas under the prior framework a plaintiff need only make a “modest factual showing” that other employees are “similarly situated,” Clark requires plaintiffs to demonstrate a “strong likelihood” that “similarly situated” employees exist to warrant notifying other potential plaintiffs about the lawsuit.  

The Court’s opinion in Hutt sends a clear message that the “strong likelihood” evidentiary standard has teeth.  The ruling is a boon for employers defending FLSA claims on behalf of multiple employees. 

Case Background

In Hutt, the plaintiff, a former pest control technician, filed a Complaint against his former employer, Greenix, on February 28, 2020.  The plaintiff sought to recover unpaid minimum wages and overtime wages allegedly owed to him under the FLSA.  He alleged that Greenix failed to pay him an overtime rate of pay for overtime hours worked, did not pay for certain tasks performed “off the clock” and took improper deductions from his pay.  In his Complaint, the plaintiff alleged that approximately 186 other pest control technicians were subject to the same wage violations as he had experienced.

On February 27, 2022, the plaintiff filed a motion for conditional certification.  The plaintiff sought to issue notice to all pest control technicians employed at any of Greenix’s four facilities in Ohio during the three-year period before he filed the Complaint.  In support of the motion, the plaintiff relied on his own declaration, various pleadings, and Greenix’s responses to written discovery requests.  Greenix opposed the motion.  Although the motion was fully briefed, the Court held the motion in abeyance pending the Sixth Circuit’s ruling in Clark.

Following the Sixth Circuit’s ruling in Clark, the Court ordered the parties in Hutt to brief the issue of whether the plaintiff could satisfy the new, stricter standard to facilitate notice under 29 U.S.C. § 216(b).  In the plaintiff’s supplemental brief, he argued that he had submitted enough evidence to satisfy the new standard.  The plaintiff emphasized Greenix’s prior statement in a discovery response that each of its Ohio facilities had consistent pay policies.  In its supplemental brief, Greenix asserted that its statement did not mean that all putative class members perform the same job duties or work the same schedules, among other arguments.

The Court’s Decision

The Court held that the plaintiff fell short of the evidentiary showing necessary to demonstrate a “strong likelihood” that there is a group of potential plaintiff employees “similarly situated” to him under the standard in Clark.

First, the Court explained the FLSA is silent as to the procedure for a plaintiff to advance claims with others who are “similarly situated.”  In the absence of statutory guidance, courts have exercised their discretion to set the procedure governing collective treatment of FLSA claims.

For this reason, the Court analyzed the two-step standard announced in Clark.  The first step evaluates whether the plaintiff has shown a “strong likelihood” that other employees are similarly-situated to the plaintiff.  Overcoming the first step requires a plaintiff to submit evidence that the plaintiff’s FLSA injury “resulted from a corporate-wide decision” to violate the FLSA, not human error or a rogue manager.

Under the second step, the plaintiff must prove, by a preponderance of the evidence, that the employees who have opted to join the lawsuit are similarly situated to the plaintiff.  If the plaintiff makes that showing, the opt-in plaintiffs become actual parties to the lawsuit and proceed with the named plaintiff to trial.  As the Court reasoned, the Sixth Circuit’s opinion in Clark left the second step of the analysis relatively unchanged from the prior standard.

In assessing the plaintiff’s status as similarly-situated to others, the Court opined that no single factor is determinative.  Among the relevant factors are whether the named plaintiff performed the same tasks and was subject to the same policies as the potential other plaintiffs, whether the potential other plaintiffs are subject to individualized defenses, and whether other potential plaintiffs have submitted affidavits.

In applying the Clark standard, the Court found insufficient the plaintiff’s reliance on hearsay statements in his own declaration, including what co-workers allegedly told him, to argue that Greenix had company-wide pay practices.  Further, the plaintiff put forth no evidence of the company’s actual compensation plan.  The Court explained that even if the plaintiff proved that Greenix has a company-wide compensation plan, that fact alone would not prove company-wide FLSA violations.  In essence, the Clark standard required the plaintiff to show more.

Therefore, the Court denied the plaintiff’s motion seeking court-supervised notice to potential plaintiffs pursuant to 29 U.S.C. § 216(b) of the FLSA.

Implications For Employers

The ruling in Hutt has persuasive value to other district courts in Ohio, Tennessee, Michigan and Kentucky.  Gone are the days of plaintiffs in the Sixth Circuit winning the right to send notice to dozens, hundreds, or even thousands of other employees on hearsay evidence alone.  The Court roundly rejected the notion that a sole declaration from the named plaintiff is enough to obtain court-sanctioned notice.  It remains to be seen how other courts will apply Hutt to a different set of facts.

Given the emerging trend among federal courts across the country in rejecting the lenient two-step standard, the decision in Hutt is an indicator of a major shift in leverage from plaintiffs to defendants in FLSA litigation.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Shaina Wolfe

Duane Morris Takeaways: On July 6, 2023, in Restaurant Law Center, et al. v. U.S. Department of Labor, No. 1:21-CV-1106 (W.D. Tex. July 5, 2023) (ECF No. 67), federal district judge Robert Pitman of the U.S. District Court for the Western District of Texas denied the Restaurant Groups’ motion for preliminary injunction as to the new “80/20 Rule” – after being reversed by the Fifth Circuit several months prior – and denied the Restaurant Groups’ motion for summary judgment and granted the Department of Labor’s (“DOL”) motion for summary judgment. Judge Pitman determined that the DOL’s decision to construct and enforce the Final Rule was a permissible construction of the Fair Labor Standards Act (“FLSA”) and is not arbitrary and capricious.  ECF 67 at 28.  The ruling is nowhere close to the end of this litigation and the service and hospitality industry should pay close attention to what comes next as the Restaurant Law Center will inevitably appeal the district court’s decisions to the Fifth Circuit and as the U.S. Supreme Court has decided to reconsider the authority of agencies during the next term.  The next set of decisions will be part of a broader analysis of the rules regarding tip credit, and more generally, the DOL’s authority.

The Final Rule

In late 2021, the DOL revived and revised the 80/20 Rule by providing that employers can utilize the tip credit only so long as 80 percent or more of the work is tip-producing, and not more than 20 percent is “directly supporting work.” See 29 C.F.R. § 531.56. Under the Final Rule, no tip credit can be taken for any non-tipped work. “Tip-producing work” is defined as work the employee performs directly providing services to customers for which the employee receives tips (i.e., taking orders and serving food). “Directly supporting work” is defined as work that is performed by a tipped employee in preparation of or to otherwise assist tip-producing customer service work (i.e., rolling silverware and setting tables). Non-tipped work includes preparing food or cleaning the kitchen, dining room, or bathrooms.

The Final Rule also includes a new requirement that an employer cannot utilize the tip credit when an employee performs more than 30 consecutive minutes of “directly supporting work.”  Directly supporting work done in intervals of less than 30 minutes scattered throughout the workday would not invalidate the tip credit, subject to the 80/20 Rule. However, employers must pay minimum wages for “directly supporting work” performed after the lapse of the first 30 continuous minutes.

Procedural Background

In December 2021, the Restaurant Law Center challenged the Final Rule in the U.S. District Court in the Western District of Texas, on the grounds that, among other things, it violated the Fair Labor Standards Act.  Restaurant Law Center, No. 1:21-CV-1106 at 4. The Texas federal district court denied the preliminary injunction after finding that the Plaintiffs failed to show that they would suffer irreparable harm absent the preliminary injunction. Id.

On April 28, 2023, the Fifth Circuit reversed the Texas federal district court, finding that the Restaurant Groups “sufficiently showed irreparable harm in unrecoverable compliance costs . . . .” Rest. L. Ctr. v. U.S. DOL, 66 F.4th 593, 595 (5th Cir. 2023).  Significantly, the Fifth Circuit noted that that compliance costs would likely be necessary to track the number of minutes worked on nontipped labor and that the new 30-minute rule would impose additional monitoring costs. Id. The Fifth Circuit remanded the case for further proceedings. Id. [Our previous blog post on that ruling is here.]

The Texas Federal District Court’s Decision on Summary Judgment

At the second go-around, the district court had two fully-briefed motions, including: (1) the Restaurant Groups’ motion for preliminary injunction; and (2) the parties’ cross-motions for summary judgment. The district court denied the Restaurant Groups’ motion for summary judgment and granted the DOL’s cross-motion for summary judgment after finding that, contrary to the Restaurant Groups’ assertions, the DOL’s decision to construct and implement the Final Rule was a permissible construction of the FLSA and is not arbitrary and capricious. Id. at 28.  In addition, the Texas federal district court denied the Restaurant Groups’ motion for preliminary injunction after finding that the Restaurant Groups did not succeed, and were likely not to succeed, on the merits of the case, that the balance of equities did not tip in the Restaurant Groups’ favor, and that an injunction was not in the public interest. Id.

In determining the Final Rule’s validity, the district court used a two-step framework articulated in Chevron, USA, Inc. v. Natural Resources Def. Council, Inc., 467 U.S. 837 (1984). Id. at 8. Under Chevron, if a statute has a gap that needs to be filled, Congress gave the agency administering the rule, rather than courts, authority to resolve it. Id. The district court found that Chevron deference applied to the case because Congress “delegated authority to the agency generally to make rules carrying the force of law,” and that the Final Rule “was promulgated in the exercise of that authority.”  Id. at 10.

The federal district court also analyzed the FLSA’s text, structure and purpose, and legislative history, and found that, contrary to the Restaurant Group’s assertions, the statute was ambiguous. Id. at 17. The district court explained that “Congress has crafted an ambiguous statute and tasked DOL with implementing the ambiguous provisions,” and the Court “must defer to the agency’s regulation so long as it is not arbitrary, capricious, or manifestly contrary to the statute.” Id. at 17. The district judge further found that the Final Rule “accomplishes” the purposes of the FLSA “by adopting a ‘functional test’ to determine when an employee may be considered engaged in a tipped occupation.” Id. at 19.

Significantly, the district court also considered whether the Major Questions Doctrine was triggered, as discussed in West Virginia v. EPA, 142 S. Ct. 2587 (2022). Id. at 24.  The district court found that the Major Questions Doctrine was not triggered because an agency action was only considered to be of “vast economic significance” if it requires “billions of dollars in spending.’”  Id. at 25.  The district court found that the DOL “pointed out that the average annual cost of the Rule in this case is $183.6 million” and explained that this amount was “far less than the billions considered in the cited cases.  Id. The district court further opined that the “DOL has been interpreting the tip credit provision of the FLSA, as well as its other provisions, for decades.”  Id.

The Texas Federal District Court’s Decision on the Preliminary Injunction

In addition, as instructed by the Fifth Circuit, the district court reconsidered the Restaurant Groups’ Motion for Preliminary Injunction.  At the outset, the district court noted that “[a]lthough a failure to show likelihood of success on the merits is grounds alone for denial of a preliminary injunction, the Court will address the two remaining Rule 65 factors pursuant to the Fifth Circuit’s mandate to ‘proceed expeditiously to consider the remaining prongs of the preliminary injunction analysis.’” Id. at 26 (citing Rest. L. Ctr., 66 F.4th at 600). Despite the Fifth Circuit’s finding that Restaurant Groups will suffer irreparable harm because their compliance costs are non-recoverable, Rest. L. Ctr, 66 F.4th at 595, in balancing the equities, the district court essentially found the opposite – – that the Restaurant Groups, again, failed to show irreparable harm from complying with the Final Rule.  See id. at 26-27.

Significantly, the Fifth Circuit previously disagreed with the DOL’s assertion that “employers need not engage in ‘minute to minute’ tracking of an employee’s time in order to ensure that they qualify for the tip credit.”  Rest. Law Ctr., 66 F.4th at 599 (“No explanation is given (nor can we imagine one) why an employer would not have to track employee minutes to comply with a rule premised on the exact number of consecutive minutes an employee works.”).  Contrary to the Fifth Circuit, the district court agreed with the DOL and found that “restaurants must already monitor the amount of time employees spend on non-tipped labor under the 80/20 rule, and the new 30-minute rule does not impose a new form of monitoring.”  ECF 67 at 26.  In addition, the district court noted that it is not clear that the Rule imposes significantly greater costs than restaurants incurred under the preexisting guidance because the Restaurant Groups failed to “provide an estimate of this additional monitoring.”  Id.  In essence, contrary to the Fifth Circuit’s Order, the district court, again, “emphasized the weakness of [the Restaurant Groups’] evidence.”  Rest. Law Ctr., 66 F.4th at 598 (“For instance, the court found [the Restaurant Groups] claimed ongoing costs “to be overstate[d]” because the rule does not require “the level of detailed monitoring of which [the Restaurant Groups] warn. . . [this point is] meritless”).

Further, the district court explained that eighteen months had passed since the parties filed their briefs on the preliminary injunction, and that the Rule took effect on December 28, 2021 and has remained in place.  Id.  Without citing to any evidentiary support, the district court noted that “[r]estaurants and DOL have complied with the Rule since that time.”  Id. at 27.

Moreover, similar to the district’s court’s first order, which was reversed by the Fifth Circuit, the district court explained “that even if there are ongoing management costs, the most significant compliance costs associated with the Rule were familiarization and adjustment costs, which have now already been incurred, and that granting an emergency motion to rescind the Rule now cannot undo these costs, and may very well force restaurants to incur additional costs adjusting to the policy that takes its place.”  Id. Ultimately, the district court found that the Restaurant Groups’ “compliance costs do not outweigh the substantial harm that DOL may endure from essentially starting from scratch on a rule that serves to codify long-standing guidance.”  Id.

Thus, the district court found that even if Restaurant Groups showed a likelihood of success on the merits, “neither the balance of equities nor the public interest would support a nationwide preliminary injunction.”  Id. at 28.

Implications For The Service & Hospitality Industry

The fight to end and/or limit the Department of Labor’s authority and promulgation of the tip credit rule is far from over.  Although the Texas federal district court sent a clear indication that it did not agree with the Fifth Circuit’s decision, and that it would not disturb the Department of Labor’s authority, the service and hospitality industry should be watchful for what has yet to come.  The Restaurant Law Center will undoubtedly appeal both of the Texas federal district court’s rulings, and the Fifth Circuit has already indicated that preventing enforcement of the Final Rule may be on the horizon.  Moreover, the Supreme Court’s decision to reconsider the Chevron doctrine in Loper Bright Enterprises v. Gina Raimondo, Case No. 22-451 – which will be heard in the next term – to the extent that it narrows or eliminates federal courts’ deference to agencies’ decisions, could substantially impact the agenda the Department of Labor can pursue.  The service and hospitality industry should stay tuned for the Fifth Circuit’s rulings in Restaurant Law Center and Supreme Court’s forthcoming ruling Loper Bright Enterprises.