CHAVEZ. T & B MANAGEMENT, LLC, ET AL.

Filing 48

MEMORANDUM OPINION AND ORDER signed by JUDGE THOMAS D. SCHROEDER on 05/24/2017. The Motion to Dismiss 28 will be GRANTED and the first amended complaint 65 will be DISMISSED WITHOUT PREJUDICE in thirty days unless Plaintiffs file an amended comp laint within that time alleging sufficient facts to support their dual occupation claim. FURTHER that Defendant's motion to strike 22 and Plaintiffs' motion for conditional certification as a collective class 38 are DENIED WITHOUT PREJUDICE AS MOOT. (Coyne, Michelle)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
VANESSA CHAVEZ, AMY BERLAK,
BROOKE GRAHAM, and MELISSA
VARNER, on behalf of
themselves and all others
similarly situated,
Plaintiffs,
v.
T&B MANAGEMENT, LLC, and T&B
CONCEPTS OF HICKORY, LLC, each
d/b/a HICKORY TAVERN,
Defendants.

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1:16cv1019

MEMORANDUM OPINION AND ORDER
THOMAS D. SCHROEDER, District Judge.
This dispute involves a putative collective action by servers
and bartenders of Defendants (also collectively, “Hickory Tavern”)
who

operate

various

restaurants.

Plaintiffs

allege

that

Defendants have violated the tip-credit provisions of the Fair
Labor Standards Act (“FLSA” or the “Act”), 29 U.S.C. §§ 201 et
seq., by requiring these employees to spend more than twenty
percent of their workweek engaged in non-tippable activities.
Before the court are Defendants’ motion to dismiss the first
amended complaint (Doc. 28) and motion to strike a number of
consents by Plaintiffs to join the action on the ground they were
solicited before Plaintiffs sought certification of the collective
action under 29 U.S.C. § 216(b) (Doc. 22).

Also, Plaintiffs have

moved to conditionally certify the action as a collective.
38.)

(Doc.

The court heard argument on the pending motions on April 17,

2017, and they are ripe for consideration.
For the reasons that follow, the court will grant Defendants’
motion to dismiss the amended complaint, but Plaintiffs will be
permitted thirty days within which to file an amended complaint to
raise the dual occupation claim they contend they wish to pursue.
I.

BACKGROUND
Viewed

in

the

light

most

favorable

to

Plaintiffs,

the

allegations of the amended complaint show the following:
Defendants operate twenty-three casual dining restaurants
under the name “Hickory Tavern” throughout North Carolina, South
Carolina, Alabama, and Tennessee.

(Id. at 3, ¶ 9.)

Plaintiffs

are former Hickory Tavern employees who allege that the restaurant
chain engaged in a “systemic scheme of wage abuses” against its
tipped server employees.

(Id. at 2-3, ¶¶ 1-6.)

Specifically,

Plaintiffs contend that Hickory Tavern required its tipped server
employees to spend more than twenty percent of their workweek
performing related but non-tip-generating duties and tasks, which
they term “sidework,” 1 for which they were paid below minimum wage,

1

Plaintiffs divide their sidework into three categories:

“Pre-shift duties” include cutting and preparing garnishes; making
tea; portioning sugar for tea; preparing condiment cups; rolling
silverware into napkins; making coffee; stocking cups; filling ice bins;
stocking straws; and distributing trash cans. (Doc. 6 at 8, ¶ 33.)

2

in

violation

of

the

FLSA.

Plaintiffs

bring

this

action

collectively on behalf of themselves and the class of similarly
situated persons, defined as “[a]ll hourly tipped employees of
Hickory Tavern who work, or worked, as servers [or bartenders 2] at
any of Defendants’ Hickory Tavern restaurants from August 1, 2013
through the present, and who Defendants did not pay minimum wage
when their non-tip generating work exceeded twenty percent (20%)
of their workweek.”

(Id. at 5, ¶¶ 18, 19.)

In addition to sidework, the named Plaintiffs and proposed
class members operate in “a team oriented system” known as “The
Loop.”

(Id. at 9, ¶ 39.)

The Loop divides an employee’s daily

routine into five steps, functioning in a continuous cycle: (1)
greeting patrons, (2) serving them their first round, (3) providing
them with food and drinks, (4) bussing tables, and (5) preparing
silverware and performing general sidework.

(Id. at 10, ¶ 40.)

Once a server completes the fifth step, he or she begins the cycle

“Post-shift duties” include emptying trash; rolling silverware;
sweeping floors; stocking condiment shelves; cleaning coolers; washing
mats; cleaning shelves; filling condiment cups; cleaning tables;
cleaning tea urns; cleaning coffee makers/pots; cleaning counters;
cleaning stainless surfaces; taking inventory; cleaning wood surfaces;
cleaning parking lots; and picking up cigarette butts from parking lots.
(Id. at 8, ¶ 35.)
“Weekly tasks” include cleaning and replacing all salt shakers;
cleaning and replacing all pepper shakers; cleaning and replacing all
sugar caddies; pulling out booths to clean behind them; cleaning wood
surfaces; cleaning out all storage areas; cleaning out all walk-in areas;
cleaning soda gun nozzles; and cleaning ice bins. (Id. at 9, ¶ 37.)
2 All named Plaintiffs bring this action on behalf of servers.
(Id. at
5, ¶ 18.) In addition, Berlak and Varner bring this action on behalf
of bartenders. (Id. at 5, ¶ 19.)

3

again with the first step.

(Id. at 9-10, ¶¶ 40-47.)

The Loop

specifically instructs tipped employees to spend more than twenty
percent of their time doing work that does not generate tips for
themselves.

(Id. at 10, ¶ 42.)

Defendants also have a policy of

not pooling tips among servers, meaning that a server who assists
a fellow employee does not generate work for himself.

(Id. at 6,

¶ 26.)
As tipped employees, Plaintiffs were paid an hourly rate of
$2.13,

below

Defendants

the

Federal

supplemented

minimum

Plaintiffs’

credit,” as authorized by the FLSA.

wage

of

hourly

$7.25
rate

per

with

hour.
a

“tip

See 29 U.S.C. § 203(m).

Plaintiffs do not allege that they did not earn at least the
minimum wage for their total hours worked, but they claim they
spent

more

sidework.

than

twenty

percent

(Doc. 6 at 11, ¶ 50.)

of

their

workweek

completing

According to Plaintiffs, when

tipped employees perform sidework for more than twenty percent of
their workweek, the FLSA requires that the employer record the
sidework and page the employees minimum wage for it.
¶ 31.)

(Id. at 7,

Plaintiffs contend that Defendants’ failure to properly

record all time they engaged in sidework and to pay them minimum
wage for it violates the FLSA, and Plaintiffs seek the wage
difference - $5.12 per hour - for all sidework (not just that over
twenty percent) performed by them and the collective members. (Id.
at 11-12, ¶¶ 51, 53.)
4

In

June

2016,

Defendants

modified

their

compensation

practices, paying servers and bartenders $7.25 per hour to perform
“pre-shift and post-shift duties.”

(Id. at 12, ¶¶ 55-56.)

Plaintiffs filed this action against Defendants on August 1,
2016, alleging one count under the FLSA.

(Doc. 1 at 7-8, ¶¶ 34-

44; Doc. 6 at 13-15, ¶¶ 64-76.) They seek unpaid wages, liquidated
damages, attorney’s fees, prejudgment interest, and the costs of
this action.
II.

(Doc. 6 at 15.)

ANALYSIS
A.

Standard of Review

The purpose of a Rule 12(b)(6) motion is to “test[] the
sufficiency

of

a

complaint”

and

not

to

“resolve

contests

surrounding the facts, the merits of a claim, or the applicability
of defenses.”

Republican Party of N.C. v. Martin, 980 F.2d 943,

952 (4th Cir. 1992).

In considering a Rule 12(b)(6) motion, a

court “must accept as true all of the factual allegations contained
in the complaint,” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per
curiam),

and

all

reasonable

inferences

must

be

drawn

in

the

plaintiff’s favor, Ibarra v. United States, 120 F.3d 472, 474 (4th
Cir. 1997).

To be facially plausible, a claim must “plead[]

factual content that allows the court to draw the reasonable
inference that the defendant is liable” and must demonstrate “more
than a sheer possibility that a defendant has acted unlawfully.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp.
5

v. Twombly, 550 U.S. 544, 556 (2007)).
including

all

reasonable

inferences

While “the complaint,

therefrom,

[is]

liberally

construed in the plaintiff’s favor,” this “does not mean that the
court can ignore a clear failure in the pleadings to allege any
facts [that] set forth a claim.”

Estate of Williams-Moore v. All.

One Receivables Mgmt., Inc., 335 F. Supp. 2d 636, 646 (M.D.N.C.
2004) (citing McNair v. Lend Lease Trucks, Inc., 95 F.3d 325, 327
(4th Cir. 1996)). Mere legal conclusions are not accepted as true,
and “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.”

Iqbal,

556 U.S. at 678
B.

The Statute, Regulation, and Interpretive Guidance

Plaintiffs allege that the non-tip generating work (sidework
and The Loop tasks) they were required to perform violated the
FLSA because in the aggregate it habitually and regularly exceeded
twenty percent of their workweek.

(Doc. 6, ¶¶ 47-51.)

rely

Department

principally

on

the

U.S.

of

Plaintiffs

Labor

(“DOL”)

regulations, related agency opinion letters, a handbook, and a
“fact sheet.”

Defendants contend that Plaintiffs’ asserted twenty

percent rule is not founded on the FLSA but rather is based on
statements found only in agency documents that are not entitled to
deference.

(Doc. 29 at 15-18.)

As with any question of statutory authority, the court begins
with the FLSA’s text, which reads in relevant part:
6

In determining the wage an employer is required to pay
a tipped employee, the amount paid such employee by the
employee’s employer shall be an amount equal to –
(1) the
purposes
than the
employee

cash wage paid such employee which for
of such determination shall be not less
cash wage required to be paid such an
on August 20, 1996; and

(2) an additional amount on account of the tips
received by such employee which amount is equal to
the difference between the wage specified in
paragraph (1) and the wage in effect under section
206(a)(1) of this title.
The additional amount on account of tips may not exceed
the value of the tips actually received by an employee.
29 U.S.C. § 203(m).

The FLSA defines “tipped employee” to mean

“any employee engaged in an occupation in which he customarily and
regularly receives more than $30 a month in tips.”

Id. § 203(t).

In interpreting the phrase “more than $30 a month in tips,”
the DOL has issued the following regulation:
(e) Dual jobs.
In some situations an employee is
employed in a dual job, as for example, where a
maintenance man in a hotel also serves as a waiter. In
such a situation the employee, if he customarily and
regularly receives at least $30 a month in tips for his
work as a waiter, is a tipped employee only with respect
to his employment as a waiter. He is employed in two
occupations, and no tip credit can be taken for his hours
of employment in his occupation of maintenance man. Such
a situation is distinguishable from that of a waitress
who spends part of her time cleaning and setting tables,
toasting bread, making coffee and occasionally washing
dishes or glasses. It is likewise distinguishable from
the counterman who also prepares his own short orders or
who, as part of a group of countermen, takes a turn as
a short order cook for the group. Such related duties
in an occupation that is a tipped occupation need not by
themselves be directed toward producing tips.

7

29 C.F.R. § 531.56(e).
Since

promulgating

§ 531.56(e),

the

DOL

opinion letters interpreting the regulation.

has

issued

four

The DOL’s Wage and

Hour Division has also maintained a resource called the “Field
Operations Handbook” (“FOH” or “handbook”) and issued “Fact Sheet
#15,” which discuss the dual-occupation rule.
The first opinion letter was issued on March 28, 1980.

In

that letter, the DOL wrote that after-hours cleanup duties such as
cleaning

a

salad

bar,

placing

condiment

crocks

in

a

cooler,

cleaning and stocking a waitress station, cleaning and resetting
tables, and vacuuming “constitute tipped employment within the
meaning of the regulation,” noting that the DOL “might have a
different opinion if the facts indicated that specific employees
were routinely assigned, for example, maintenance-type work such
as floor vacuuming.”

(Doc. 29-1 at 3.)

In its second opinion letter, issued on December 20, 1985,
the DOL wrote that the tip credit did not apply when a single
waiter was made to prepare a restaurant to open for 1.5 to 2 hours
of a 5-hour shift.

(Doc. 29-2 at 4.) 3

3

The letter noted that

The preparatory activities included: inspecting dining room windows,
sills, and lights; setting the thermostat; checking and setting tables;
cleaning and filling shakers and ashtrays; stocking the waitress station
with glasses, cups, etc.; checking napkins, straws, etc. and their
cleanliness; set up glass-washing sink; preparing tea and coffee and
checking beverage dispensers; cut and clean vegetables for salad bar,
clean sneeze shield, and fill crocks with refrigerated and dry items;
placing vinegar, parmesan, and oil cruets on salad bar. (Id. at 3.)

8

“where the facts indicate that . . . tipped employees spend a
substantial amount of time performing general preparation work or
maintenance, we would not approve a tip credit for hours spent in
such activities.”

The letter further noted that “only one waiter

or waitress [was] assigned to perform all preparatory activities”
and

that

the

staff’s

responsibilities

“extend

to

the

entire

restaurant rather than to the specific area or customers . . .
they serve.”

(Id.)

Finding that the 1.5 to 2 hours of preparatory

time constituted “30% to 40% of the employee’s workday,” the DOL
concluded that “no tip credit may be taken for the hours spent by
an assigned waiter or waitress in opening responsibilities.” (Id.)
The DOL describes the FOH as “an operations manual that
provides Wage and Hour Division (WHD) investigators and staff with
interpretations of statutory provisions, procedures for conducting
investigations,

and

general

Operations

Handbook,

administrative
U.S.

DEP’T

guidance.”
OF

https://www.dol.gov/whd/FOH/ (last visited May 24, 2017).

Field
LABOR,
The DOL

further states that the “FOH reflects policies established through
changes in legislation, regulations, significant court decisions,
and the decisions and opinions of the WHD Administrator.” However,
the DOL then cautions that the FOH “is not used as a device for
establishing interpretative policy.”

Id.

The FOH was initially

maintained solely within the DOL and was published to fulfill the

9

DOL’s obligations under the Freedom of Information Act and “to
provide public access to information regarding DOL programs.” Id. 4
In 1988, the DOL amended the FOH to provide the following
about § 531.56(e):
Reg. 531.56(e) permits the taking of the tip credit for
time spent in duties related to the tipped occupation,
even though such duties are not by themselves directed
toward producing tips (i.e. maintenance and preparatory
or closing activities). For example a waiter/waitress,
who spends some time cleaning and setting tables, making
coffee, and occasionally washing dishes or glasses may
continue to be engaged in a tipped occupation even though
these duties are not tip producing, provided such duties
are incidental to the regular duties of the server
(waiter/waitress) and are generally assigned to the
servers.
However, where the facts indicate that
specific
employees
are
routinely
assigned
to
maintenance,
or
that
tipped
employees
spend
a
substantial amount of time (in excess of 20 percent)
performing general preparation work or maintenance, no
tip credit may be taken for the time spent in such
duties.
4

The DOL explains:
The Department of Labor (DOL) is publishing this FOH on the
Internet pursuant to its obligation under FOIA to make
available administrative staff manuals and instructions to
staff that affect members of the public, 5 U.S.C. 552(a)(2),
and as a public service to provide public access to
information regarding DOL programs. It is important to note
that there will often be a delay between the publication of
changes in legislation, regulations, significant court
decisions, and the decisions or opinions of the WHD
Administrator
and
the
modification
of
these
pages.
Therefore, these pages may not reflect current legislation,
regulations, significant court decisions, and decisions and
opinions of the WHD Administrator and no express or implied
guarantees are indicated. The Federal Register and the Code
of Federal Regulations (CFR) remain the official resources
for regulatory information published by the DOL. Any errors
in the FOH should be brought to the attention of the WHD.

Id.

10

(Doc. 29-3 at 2.) 5
On January 15, 2009, over twenty years after it amended the
FOH,

the

DOL

issued

a

third

opinion

letter,

writing

that

a

“barback,” a bartender’s assistant “who learns the profession of
bartending under the tutelage of a bartender and whose primary job
duty is to support the bartender,” is a tipped employee.
29-5 at 3.)

The barbacks at issue received their tips from tip

pools with the bartenders they supported.
On

(Doc.

January

16,

2009,

the

DOL

(Id.)

Acting

Wage

and

Hour

Act

Administrator signed a fourth opinion letter, explaining that FOH
§ 30d00(e) should not be construed to “limit[] . . . the amount of
duties related to a tip-producing occupation that may be performed,
so

long

as

they

are

performed

customer-service duties.”
that

“[t]hese

§ 30d00(e)”
forthcoming.”

5

(Doc. 29-4 at 4.)

principles

and

that

“[a]

(Id. at 5.)

contemporaneously

with

direct

The letter stated

supersede

our

statements

in

revised

FOH

statement

will

FOH
be

The letter cites two cases: Fast v.

The current copy of the FOH states that
where the facts indicate that tipped employees spend a
substantial amount of time (i.e., in excess of 20 percent of
the hours worked in the tipped occupation in the workweek)
performing such related duties, no tip credit may be taken
for the time spent in those duties. All related duties count
toward the 20 percent tolerance.

Chapter 30: Records, Minimum Wage, and Payment of Wages, U.S. DEP’T OF
LABOR, at 31, § 30d00(f)(3), https://www.dol.gov/whd/FOH/FOH_Ch30.pdf
(last visited May 24, 2017).

11

Applebee’s Int’l, Inc., 502 F. Supp. 2d 996 (W.D. Mo. 2007), order
vacated in part, No. 06-04146-CV-C-NKL, 2009 WL 4344562 (W.D. Mo.
Aug. 26, 2009), and supplemented, No. 06-4146-CV-C-NKL, 2010 WL
816639 (W.D. Mo. Mar. 4, 2010), aff’d, 638 F.3d 872 (8th Cir.
2011); and Pellon v. Bus. Representation Int’l, Inc., 528 F. Supp.
2d 1306, 1310 (S.D. Fla. 2007), aff’d, 291 F. App’x 310 (11th Cir.
2008).

Fast accepted § 30d00(e)’s twenty percent rule, and Pellon

rejected it.

The letter addressed the two cases, stating:

The [Pellon] court further held that under the Fast
ruling, “nearly every person employed in a tipped
occupation could claim a cause of action against his
employer if the employer did not keep [the employee
under] perpetual surveillance or require them to
maintain precise time logs accounting for every minute
of their shifts.”
Such a situation benefits neither
employees nor employer.
(Doc. 29-4 at 4 (quoting Pellon, 528 F. Supp. 2d at 1314).) 6

This

letter was apparently never mailed to the party requesting it
(perhaps because it was executed at the end of one administration’s
term), and the DOL formally withdrew the letter on March 2, 2009.
(Id. at 3.)
Finally, in support of its position, Plaintiffs’ amended
complaint

cites

DOL

“Fact

Sheet

#15”

that

“provides

general

information concerning the application of the FLSA to employees
who receive tips.”

(Doc. 6-5 at 1.)

6

The fact sheet advises that

The language in the second set of brackets appears in Pellon but is
omitted without comment in the letter.

12

it “is for general information and is not to be considered in the
same light as official statements of position contained in the
regulations.”

(Id. at 5.)

The publication reproduces much of the

language in § 30d00(f)(3), and Plaintiffs rely on the highlighted
language:
Dual Jobs: When an employee is employed by one employer
in both a tipped and a non-tipped occupation, such as an
employee employed both as a maintenance person and a
waitperson, the tip credit is available only for the
hours spent by the employee in the tipped occupation.
The FLSA permits an employer to take the tip credit for
some time that the tipped employee spends in duties
related to the tipped occupation, even though such
duties are not by themselves directed toward producing
tips. For example, a waitperson who spends some time
cleaning and setting tables, making coffee, and
occasionally washing dishes or glasses is considered to
be engaged in a tipped occupation even though these
duties are not tip producing. However, where a tipped
employee spends a substantial amount of time (in excess
of 20 percent in the workweek) performing related
duties, no tip credit may be taken for the time spent in
such duties.
(Id. at 3 (emphasis added).) 7
C.

The Twenty Percent Standard

The DOL is charged with enforcing the FLSA, Gonzales v.
Oregon,

546

U.S.

243,

256

(2006),

and

under

appropriate

circumstances its regulations are entitled to Chevron deference.
See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467

7

The fact sheet Plaintiffs cite was last updated in 2013, but the most
current copy contains identical language. See Fact Sheet #15, U.S. DEP’T
OF LABOR, at 2, https://www.dol.gov/whd/regs/compliance/whdfs15.pdf (last
visited May 24, 2017).

13

U.S. 837, 844 (1984).

Neither party disputes that § 531.56(e) is

entitled to Chevron deference. 8
The parties do contest, however, whether the two materials in
which the DOL has mentioned the twenty percent standard – the FOH
and Fact Sheet #15 on tipped employees – are entitled to deference
under

Auer

v.

Robbins,

which

provides

that

an

agency’s

interpretations of ambiguous terms in its own regulations are
controlling “unless plainly erroneous or inconsistent with the
regulation.”

519 U.S. 452, 461 (1997); see also Christensen v.

Harris Cty., 529 U.S. 576, 588 (2000).

Plaintiffs contend that

the FOH and Fact Sheet #15 clarify ambiguous terms of § 531.56(e)
(including the phrases “part of her time” and “occasionally”) and
are entitled to such deference; Defendants contend they are not
entitled to deference.
In order to be entitled to deference, the FOH and Fact Sheet
#15 must constitute interpretive guidance subject to Auer.

In

other words, the DOL must have intended for the two documents to

8

The Fourth Circuit has routinely adhered to the “workweek rule,” which
provides that there can be no FLSA minimum wage violation if the
employee’s total pay for a workweek divided by the total hours worked
yields an hourly rate above the minimum wage.
See Blankenship v.
Thurston Motor Lines, Inc., 415 F.2d 1193, 1198 (4th Cir. 1969); see
also Monahan v. Cty. of Chesterfield, Va., 95 F.3d 1263, 1282 (4th Cir.
1996) (applying the workweek rule in another FLSA context); Kirchgessner,
174 F. Supp. 3d at 1125 (applying the workweek rule to the FOH’s twenty
percent standard). Here, Plaintiffs fail to allege that their average
rate of pay in any given workweek fell or falls below the federal minimum
wage. But because the parties do not contest whether § 513.56(e) is a
valid interpretation of the FLSA, this court accepts, without deciding,
that § 531.56(e) is consistent with the workweek rule.

14

represent its official interpretation of § 513.56(e).

As noted

above, the DOL states that the FOH “is not used as a device for
establishing interpretative policy.”

Similarly, Fact Sheet #15

states that it “is for general information and is not to be
considered in the same light as official statements of position
contained in the regulations.”
at

4,

Fact Sheet #15, U.S. DEP’T

OF

https://www.dol.gov/whd/regs/compliance/whdfs15.pdf

visited May 24, 2017).

LABOR,
(last

These would be strange caveats to add to

documents intended to be interpretative guidance.

Because the

agency eschews such interpretative intent in these two documents,
the court finds that the FOH and Fact Sheet #15 are not the DOL’s
official interpretive guidance on the matter and are not entitled
to Auer deference.

See Probert v. Family Centered Servs. of

Alaska, Inc., 651 F.3d 1007, 1012 (9th Cir. 2011) (holding that
the FOH is not “a proper source of interpretive guidance” and
citing the FOH’s own language that “[i]t is not used as a device
for establishing interpretative policy” (citing Christensen, 529
U.S. at 587)); Kirchgessner v. CHLN, Inc., 174 F. Supp. 3d 1121,
1128 (D. Ariz. 2016) (applying Probert to the FOH’s language on
the twenty percent rule and concluding that it is not entitled to
Auer deference); cf. Shaliehsabou v. Hebrew Home of Greater Wash.,
Inc., 369 F.3d 797, 802 n.5 (4th Cir. 2004) (Luttig, J., dissenting
from the denial of rehearing en banc) (opining that the FOH is not
entitled to Chevron deference and noting the FOH’s disclaimer that
15

it is not to be used as interpretive guidance).
Only

one

court

has

expressly

taken

note

of

the

FOH’s

disclaiming language and deferred to the twenty percent rule
nevertheless.

See Irvine v. Destination Wild Dunes Mgmt., Inc.,

106 F. Supp. 3d 729, 732 (D.S.C. 2015). In that case, the defendant
argued only that the FOH was not entitled to deference because it
was not adopted through notice-and-comment rulemaking.
733.

Id. at

The court correctly rejected this argument, as a document

need not undergo notice-and-comment rulemaking to be afforded Auer
deference – that rule applies only to Chevron deference.

See

Christensen, 529 U.S. at 587 (“Here, however, we confront an
interpretation contained in an opinion letter, not one arrived at
after, for example, a formal adjudication or notice-and-comment
rulemaking.
like

Interpretations such as those in opinion letters —

interpretations

contained

in

policy

statements,

agency

manuals, and enforcement guidelines, all of which lack the force
of law — do not warrant Chevron-style deference.”).

In this case,

Defendants do not argue that the FOH or Fact Sheet #15 is invalid
because of the lack of notice-and-comment rulemaking; rather, the
contention is that the DOL disclaims the twenty percent rule as
its own interpretation of § 531.56(e).

(E.g., Doc. 29 at 8-9.)

Furthermore, Irvine allowed the plaintiffs’ claims to move forward
in part because they alleged a violation of the dual occupation
rule apart from a violation of the twenty percent rule.
16

106 F.

Supp. 3d at 735.

Here, as discussed further below, the amended

complaint alleges only a violation of the twenty percent rule.
Even

assuming

that

the

FOH

and

fact

sheet

are

proper

interpretive guidance, the Supreme Court has cautioned that Auer
deference “is . . . unwarranted when there is reason to suspect
that the agency’s interpretation ‘does not reflect the agency’s
fair

and

considered

judgment

on

the

matter

in

question.’”

Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2166
(2012) (quoting Auer, 519 U.S. at 462) (citing Chase Bank USA,
N.A. v. McCoy, 562 U.S. 195, 209 (2011)).
the

agency’s

interpretation

interpretation . . . .”

“This might occur when

conflicts

with

a

prior

Id. (citing Thomas Jefferson Univ. v.

Shalala, 512 U.S. 504, 515 (1994); see also G.G. ex rel. Grimm v.
Gloucester Cty. Sch. Bd., 822 F.3d 709, 719 (4th Cir. 2016),
vacated and remanded on other grounds, No. 16-273, 2017 WL 855755
(U.S. Mar. 6, 2017).

Indeed, “an agency’s interpretation of a

statute or regulation that conflicts with a prior interpretation
is entitled to considerably less deference than a consistently
held agency view.”

Miller v. AT & T Corp., 250 F.3d 820, 832 (4th

Cir. 2001) (quoting Shalala, 512 U.S. at 515).
Here, the FOH and Fact Sheet #15 contain statements that are
inconsistent with the DOL’s letter of January 16, 2009, which
acknowledges that “the FOH sections addressing the tip credit have
resulted in some confusion and inconsistent application” (Doc. 2917

4 at 3) and favorably quotes a judicial opinion rejecting the
twenty percent rule (id. at 4 (quoting Pellon, 528 F. Supp. 2d at
1310)).

The letter expressly “supersede[s] [the DOL’s] statements

in FOH § 30d00(e)” (id. at 5), stating that “[n]o limitation shall
be placed on the amount of [certain tasks listed on the website of
the Occupation Information Network] that may be performed . . . as
long as they are performed contemporaneously with the duties
involving direct service to customers or for a reasonable time
immediately before or after performing such direct-service duties”
(id. at 4).

Although the letter does not refer to Fact Sheet #15,

the two documents are inconsistent insofar as Fact Sheet #15 relies
on the twenty percent standard.
The DOL withdrew the January 16, 2009 letter in March of 2009,
simultaneously with its issuance.

(Id. at 3.)

But the letter’s

express conflict with the FOH and Fact Sheet #15 reflects the
agency’s inconsistent thought, leading the court to doubt that the
twenty

percent

rule

considered judgment.

articulated

therein

reflects

the

DOL’s

The DOL’s opinion letters in the 1980s

allowed employers to apply the tip-credit to an employee performing
related tasks, unless the employee worked dual jobs or engaged in
“a substantial amount of time in performing preparation work” for
the entire restaurant prior to opening or maintenance.
29-1; Doc. 29-2.)

(See Doc.

The DOL later introduced the twenty percent

rule in an internal handbook subsequently made available to the
18

public under the Freedom of Information Act.

In the January 16,

2009 opinion letter, the DOL conceded that its interpretations had
created confusion.

It denounced any limitation on related tasks

performed for a substantial time before or after direct service of
customers, superseding the FOH.
simultaneously

with

its

But the DOL retracted that letter
publication.

These

varying

interpretations have created confusion and inconsistency among the
courts. 9

Thus, the agency’s interpretations do not reflect the

9

Under the twenty percent rule, employers would be required to keep
records of how, precisely, their employees’ time is spent throughout the
day and whether their particular tasks fall within the category of
tippable work.
Plaintiffs make such a claim here, alleging that the
twenty percent rule obliges employers to record all such related work
by employees throughout the day so it can be apportioned and paid at
minimum wage.
That would appear to be a natural consequence of the
twenty percent rule for contemporaneously performed work. (E.g., Doc.
6 at 12, ¶ 58.) Title 29, U.S. Code, § 211(c) requires employers to
“make, keep, and preserve . . . records of the persons employed by him
and of the wages, hours, and other conditions and practices of employment
maintained by him, and [to] preserve such records for such periods of
time, and [to] make such reports therefrom to the Administrator as he
shall prescribe by regulation or order as necessary or appropriate for
the enforcement of the provisions of this chapter or the regulations or
orders thereunder.”
But § 211(c) is ordinarily thought to command
employers to track hours and wages to ensure compliance with the FLSA’s
requirement that employees be paid minimum wage and overtime for more
than 40 hours of work.
At least two courts have noted the obvious
impracticality of requiring employers to track their employees’
activities on a granular level throughout the day. See Pellon, 528 F.
Supp. 2d at 1313–14 (stating that, “Permitting Plaintiffs to scrutinize
every day minute by minute, attempt to differentiate what qualifies as
tipped activity and what does not, and adjust their wage accordingly
would create an exception that would threaten to swallow every rule
governing (and allowing) for tip credit for employers,” and noting such
a rule would be “infeasible”); Crate v. Q's Rest. Grp. LLC, No.
813CV2549T24EAJ, 2014 WL 10556347, at *4 (M.D. Fla. May 2, 2014) (quoting
Pellon, 528 F. Supp. 2d at 1313–14, and finding such an application to
be “infeasible”).
Nothing in the DOL’s other opinion letters is
consistent with imposing such a detailed recording requirement for
contemporaneously performed work as a tipped employee.

19

agency’s

fair

inappropriate.

and

considered

judgment,

making

Auer

deference

Christopher, 132 S. Ct. at 2166.

Plaintiffs have cited cases in which courts have held the
opposite, siding with employees seeking relief under the twenty
percent rule.

None of them is controlling, however, as the Fourth

Circuit has not addressed the twenty percent rule or whether the
FOH or the DOL’s fact sheets are entitled to Auer deference.
Further, in recognizing the twenty percent rule for non-tippable
work performed contemporaneously with tippable work, all but one
of these opinions simply ignored the FOH’s cautionary language
that “[i]t is not used as a device for establishing interpretative
policy.”

Many cases similarly omitted any analysis of the DOL

opinion letters discussed above.

See e.g., Cope v. Let’s Eat Out,

Inc., No. 6:16-CV-03050-SRB, 2016 WL 3466140, at *5 (W.D. Mo. June
21, 2016)

(relying

on

the

FOH,

without

addressing

the

FOH’s

cautionary language or the opinion letters, to deny defendant’s
motion for judgment on the pleadings); Volz v. Tricorp Mgmt. Co.,
No. 15-CV-0627-DRH-PMF, 2016 WL 146693, at *3 (S.D. Ill. Jan. 13,
2016) (relying on the Seventh Circuit’s decision in Driver and the
FOH, without citing its cautionary language or any DOL opinion
letter, to validate the twenty percent rule); Flood v. Carlson
Restaurants Inc., 94 F. Supp. 3d 572, 575 (S.D.N.Y. 2015) (relying
on

the

FOH

to

deny

defendant’s

motion

to

dismiss

without

acknowledging the FOH’s cautionary language or any DOL opinion
20

letter); Hart v. Crab Addison, Inc., No. 13-CV-6458 CJS, 2014 WL
5465480, at *1 (W.D.N.Y. Oct. 28, 2014) (same); Crate v. Q’s Rest.
Grp. LLC, No. 813CV2549T24EAJ, 2014 WL 10556347, at *5 (M.D. Fla.
May 2, 2014) (citing the FOH – but not its cautionary language or
any DOL opinion letter – and denying defendant’s motion to dismiss
in part); Driver v. AppleIllinois, LLC, 890 F. Supp. 2d 1008, 1029
(N.D. Ill. 2012) (relying on the FOH and Fast to grant plaintiff’s
motion

for

summary

judgment,

without

addressing

the

FOH’s

cautionary language or any DOL opinion letter).
Plaintiffs cite only a handful of cases in which courts
addressed the DOL’s twenty percent rule in its FOH, Fact Sheet
#15, or the now-withdrawn January 16, 2009 opinion letter.
these cases ignored the FOH’s disclaimer.
(deferring

to

the

FOH

under

Auer

Even

Fast, 638 F.3d at 879

after

finding

§ 531.56(e)

ambiguous); McLamb v. High 5 Hosp., 197 F. Supp. 3d 656, 663 (D.
Del. 2016) (recognizing the twenty percent rule on the bases that
(1) the cases that did not adopt the rule “appear to be outliers,”
(2) the opinion letters are not “proof that the substantial work
interpretation has been inconsistently applied since its creation
in

1988,”

and

regulation’s

(3)

“behavior

existence

has

by

no

the

DOL

bearing

on

prior
its

to

the

weight

subpost-

creation”); Langlands v. JK & T Wings, Inc., No. 15-13551, 2016 WL
2733092, at *2 (E.D. Mich. May 11, 2016) (denying defendant’s
motion to dismiss, citing the FOH, and noting that the DOL opinion
21

letters are not persuasive in light of the FOH because “[c]ourts
regularly follow the DOL’s interpretation of its own regulations”
and “[t]he fact that the [January 16, 2009 opinion letter] was
withdrawn is not a reason to ignore its prior interpretations”).
Indeed, in one case referenced by Plaintiffs, Schamis v. Josef’s
Table, LLC, the court denied a motion to dismiss without addressing
the issue of Auer deference at all, omitting any analysis of the
FOH or the DOL opinion letters. No. 12-80638-CIV, 2014 WL 1463494,
at *4-5 (S.D. Fla. Apr. 15, 2014); cf. Schaefer v. Walker Bros.
Enterprises, 829 F.3d 551 (7th Cir. 2016) (where the employer
treated the FOH as entitled to Auer deference, applying the twenty
percent rule but granting employer summary judgment).

Instead,

the court explained that it would need a factual record to make
such a determination.

Id.

Because these opinions fail to address

the FOH’s disclaimer and in some instances even the DOL’s opinion
letters,

they

are

less

than

complete

in

their

analysis

and

therefore less persuasive. 10

10

There are reasons the court should tread carefully in ensuring that a
statement urged by a plaintiff was intended to constitute interpretative
guidance, for to do otherwise may disserve the agency. For example,
wrongfully according an agency’s statement as interpretative guidance
could create an unnecessary conflict if the agency subsequently chooses
to issue an opinion letter that contradicts the agency’s prior statement
(as the DOL did for tipped employees in 2009).
See Thomas Jefferson
University, 512 U.S. at 515 (denying Auer deference to agency
interpretation that conflicts with prior interpretation); see also
Christopher, 132 S. Ct. at 2166 (citing id. for the same proposition).
The DOL should be free to provide its employees rules of thumb and
unofficial interpretations of the FLSA without binding itself to those

22

Of course, the fact that the FOH and fact sheet are not
official

interpretive

guidance

does

not

cannot bring a claim under § 531.56(e).

mean

that

Plaintiffs

The DOL’s opinion letters

provide that employers are liable for paying minimum wage to dual
occupation employees whose duties are (a) not only non-tippable
but unrelated to the tippable occupation (e.g., a waitress taking
time from the middle of her shift to drive a delivery van) or (b)
non-tippable, related to the tippable occupation, and take place
before or after tippable duties for “a substantial amount of time.”
Consequently, the court finds that Plaintiffs’ FLSA claim, as
presently articulated, fails to state a claim upon which relief
can be granted insofar as it is founded on the contention that all
non-tippable

work,

including

related

but

non-tippable

duties

performed contemporaneous with Plaintiffs’ shifts, violates the
FLSA

because

in

the

Plaintiffs’ workweek.

aggregate

it

exceeds

twenty

percent

of

Thus, Defendants’ motion to dismiss will be

granted, subject to the limitations to follow.
D.

Dual Occupation Claim

Plaintiffs’ inclusion of contemporaneous and related nontippable work in their claims does not necessarily doom them.

interpretations in court, especially when the agency explicitly
disclaims an intent to accord those rules any official interpretive
guidance. That conclusion should not be altered by the fact that the
DOL was made to publish that guidance through a FOIA request.

23

Section 531.56(e) provides that under certain circumstances
an employee tasked with performing a “dual job” or “occupation”
may not be eligible for treatment as a tipped employee as to the
other occupation.

The question under § 531.56(e) (and therefore

under the FLSA) is the extent to which the employee engages in
tasks outside his or her “occupation.”

See generally, e.g.,

Schaefer, 829 F.3d 551 (applying the dual occupation standard to
a tip-credit claim).

The regulation acknowledges that certain

“related duties in an occupation that is a tipped occupation need
not by themselves be directed toward producing tips.”
The DOL’s first two opinion letters on the matter indicate
that § 531.56(e)’s dual occupation provision is violated when
tipped employees spend a substantial amount of time performing
non-tippable work before and after periods of tippable work.

In

the first letter, issued March 28, 1980, the question raised was
whether

“certain

duties

performed

by

tipped

employees

in

a

restaurant after closing hours are considered to be tipped employee
duties” under the FLSA.

(Doc. 29-1 at 2.)

The DOL wrote that no

tip credit may be taken “where there is a clear dividing line
between the types of duties performed by a tipped employee.”
at 3.)

(Id.

It concluded that various after-hours cleanup duties

“constitute

tipped

employment

within

the

meaning

of

the

regulation” but noted that the DOL “might have a different opinion
if the facts indicated that specific employees were routinely
24

assigned,

for

vacuuming.”
The

example,

maintenance-type

work

such

20,

1985,

as

floor

(Id.)

second

letter,

issued

December

inquired

“whether salad bar and dining room set-up are duties related to a
tipped occupation.”

(Doc. 29-2 at 2.)

The DOL opined that “tip

credit could be taken for non-salad bar preparatory work or afterhours clean-up if such duties are incidental to the waiter[s’] or
waitress[es’s] regular duties and are assigned generally to the
waiter/waitress staff.”

(Id. at 4.)

But, the DOL noted, “where

the facts indicate that . . . tipped employees spend a substantial
amount of time performing general preparation work or maintenance,
we

would

not

activities.”

approve
(Id.)

a

tip

credit

for

hours

spent

in

such

Thus, the DOL opined, no tip credit may be

taken as to a single waiter who spent thirty to forty percent of
her shift preparing a restaurant to open.

(Id.)

court

WL

reached

this

result.

Crate,

2014

At least one

10556347,

at

*4

(permitting claim to proceed under § 531.56(e) if evidence showed
that waiters performed non-tipped functions during “discrete time
periods[,] such as before the restaurant opens to customers, after
the restaurant is closed to customers, or between the lunch and
dinner shifts”).
These opinion letters are entitled to Auer deference.
party contends otherwise.

No

Defendants’ argument that the DOL’s

“ever-changing” posture precludes Auer deference relates to the
25

FOH and Fact Sheet #15, not these letters.

(Doc. 29 at 20.)

Moreover, nothing in the withdrawn January 16, 2009 opinion letter
conflicts with these opinion letters.

The withdrawn letter stated

that “[w]e do not intend to place a limitation on the amount of
duties related to a tip-producing occupation that may be performed,
so

long

as

they

are

performed

contemporaneously

with

direct

customer-service duties and all other requirements of the Act are
met” or are performed “for a reasonable time immediately before or
after performing such direct-service duties.”

(Doc. 29-4 at 4.)

This is consistent with prior opinion letters.
These two opinion letters are official interpretive guidance.
See, e.g.,

In re Farmers Ins. Exch., Claims Representatives’

Overtime Pay Litig., 481 F.3d 1119, 1129 (9th Cir. 2007) (“We must
give deference to the DOL's interpretation of its own regulations
through, for example, Opinion Letters.”).
warranted

when

regulation.

an

agency

interprets

an

Auer deference is
ambiguous

term

in

a

Courts must defer to the DOL’s interpretation unless

it is “plainly erroneous or inconsistent with the regulation.”
Auer, 519 U.S. at 461.

Here, the opinion letters interpret the

terms “dual job,” “related duties,” and “part of the time.”
C.F.R. § 531.56(e).

29

Defendants do not argue that either letter

contains any language that is plainly erroneous or inconsistent
with those terms or the rest of the regulation.

26

Therefore, the

court will apply DOL’s interpretations in its opinion letters to
the consideration of Plaintiffs’ dual occupation claim.
“Federal Rule of Civil Procedure 8(a)(2) requires only ‘a
short and plain statement of the claim showing that the pleader is
entitled to relief.’”

Erickson v. Pardus, 551 U.S. 89, 93 (2007)

While “[s]pecific facts are not necessary,” the complaint must
“give the defendant fair notice of what the . . . claim is and the
grounds upon which it rests.’”

Id. (quoting Twombly, 550 U.S. at

555) (alteration in original); see also Karpel v. Inova Health
Sys. Servs., 134 F.3d 1222, 1227 (4th Cir. 1998) (“ Even under the
liberal standards of the Federal Rules of Civil Procedure, . . .
a plaintiff ‘must at least set forth enough details so as to
provide defendant and the court with a fair idea of the basis of
the

complaint

and

the

legal

grounds

claimed

for

recovery.’”

(quoting Self Directed Placement Corp. v. Control Data Corp., 908
F.2d 462, 466 (9th Cir. 1990))).
In this case, the only ground upon which the amended complaint
rests is the twenty percent rule.

(Doc. 6 at 13-15, ¶¶ 64-71.)

It is also the theory Plaintiffs offered in their briefing to
support their claim. (E.g., Doc. 35 at 20 (summarizing Plaintiffs’
argument that “Hickory Tavern violated the FLSA’s 20% Rule” and
that the Defendants’ legal authorities “are isolated cases that

27

ignore the national acceptance of the 20% Rule”)). 11

The only

mention of “dual occupation” appears in paragraph 30 of the amended
complaint, in which Plaintiffs merely describe where on Fact Sheet
#15 the language supporting the twenty percent standard is found.
(Doc. 6 at 7, ¶ 30.)

During the hearing on the pending motions,

Plaintiffs’ counsel argued that their claim under the twenty
percent rule was necessarily a dual jobs claim.
party

briefed

that

issue,

and

However, neither

Defendants

opposed

the

interpretation during the hearing.
Because the amended complaint lumps all non-tippable work
together, it is impossible to determine whether Plaintiffs have
set forth facts alleging a plausible dual jobs claim. For example,
the current complaint fails to identify which, if any, pre- and
post-shift work is claimed to be part of another occupation under
DOL’s dual occupation interpretations.

Allegations that non-

tippable work is “not related to generating tips” (e.g., id. at
11, ¶ 49) are alone insufficient because, as the DOL states, such
related duties “need not by themselves be directed toward producing
tips.”

(Doc. 29-1 at 3.)

Plaintiffs’ first amended complaint

11

Plaintiffs do cursorily refer to “claims of dual jobs and the 20%
Rule,” which is no more than a reference to § 531.56(e)’s plain language
that establishes the dual occupation rule, and state that they “allege
pursuant to the FLSA that when such work is done and exceeds 20% of
Plaintiffs’ workweek, they are essentially working ‘dual jobs.’” (Doc.
35 at 2, 10.) Of course, these merely restate Plaintiffs’ allegation
that a violation the twenty percent standard is necessarily a violation
of § 531.56(e).

28

therefore

fails

to

allege

a

claim

under

§ 531.56(e)’s

dual

occupation standard.
The court has found that, having determined that Plaintiffs
cannot sustain a claim merely on the twenty percent rule, the first
amended complaint is subject to dismissal.

However, because

Plaintiffs argue they intended to pursue a dual occupation claim
for pre-shift and post-shift work pursuant to § 513.56(e) and the
DOL’s guidance regarding it, Plaintiffs will be given thirty days
within which to file an amended complaint to articulate the dual
occupation claim they say they intend to pursue that is supported
by the FLSA, its regulations, and the DOL guidance. See Feuerstein
v. Simpson, 582 F. App’x 93, 97 (3d Cir. 2014) (“[C]ourts have
consistently held that leave to amend may be granted without a
formal motion.” (citing inter alia N.Y. State Elec. & Gas Corp. v.
Sec’y of Labor, 88 F.3d 98, 105 (2d Cir. 1996))).
III. CONCLUSION
For the reasons stated,
IT IS THEREFORE ORDERED that the motion to dismiss (Doc. 28)
will be GRANTED and the first amended complaint (Doc. 6) will be
DISMISSED WITHOUT PREJUDICE in thirty days unless Plaintiffs file
an amended complaint within that time alleging sufficient facts to
support their dual occupation claim.

29

IT IS FURTHER ORDERED that Defendant’s motion to strike (Doc.
22) and Plaintiffs’ motion for conditional certification as a
collective class (Doc. 38) are DENIED WITHOUT PREJUDICE AS MOOT.

/s/
Thomas D. Schroeder
United States District Judge
May 24, 2017

30