F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

O R E G O N R E S T A

U R A N T A N D L O D G I N G A S S O C I A T I O N , a non-profit Oreg on corporation; W A S H I N G T O N R E S T A U R A N T A S S O C I A T I O N , a nonprofit W ashing ton corporation; A L A S K A C A B A R

E T , H O T E L , R E S T A U R A N T & R E T A I L E R S A S S O C I A T I O N , a non-profit Alaska corporation; N A T I O N A L R E S T A U R A N T A S S O C I A T I O N , a nonprofit I llinois corporation; D A V I S S T R E E T T A V E R N L L C, an Oreg o n limited liability

company ; S U S A

N P O N T O N , an individual,

Plaintiffs-Appellees

,

v

.

T H O M A S P E R E Z , in his official capacity as Secretary of the U.S. Department of L abor; L A U R A F O R T M A N , in her official capacity as Deputy Administrator of the U.S. Department of L abor; U.S. D E P A R T M E N T O F L A B O R , Defendants-Appellants

. N o. 13-35765

D.C. No. 3:12-cv-01261- MOO R E G O N R E S T

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J O S E P H C E S A

R Z ; Q U Y N G O C T A

N G , individually and on behalf of all others similarly

situated, and all persons whose names are set forth in Ex h ibit A to the F irst Amended Complaint, Plaintiffs-Appellants

,

v

.

W Y N N L A S V E G

A S , L L C; A

N D R E W P A S C A L ; S T E V E W Y

N N , Defendants-Appellees. N o. 14-15243

D.C. No. 2:13-cv-00109- RCJ -CW H

ORDER

F iled September 6, 2016

B efore: Harry

Preg erson, N. Randy

Smith, and J ohn B . Owens, Circuit J udg es.

Order; Dissent by

J udg e O’ScannlainO R E G O N R E S T

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SUMMARY *

F air Labor Standards Act

The pan el denied a p etition for panel for rehearing

, a nd denied on behalf of the court a petition f or rehearing en banc.

I n its o pinion, filed F ebruary 23, 2016, the panel majority reversed the district courts’ decisions in favor of employ ers, and held that Cumbie v. W oody W oo, I nc ., 596 F

. 3 d 577 (9th Cir. 2010), did not foreclose the Department of L abor’s ability t o promulg ate subsequently a f ormal r ule that

ex tended the tip pooling restrictions of Section 203(m) of the F air L a bor Standards Act of 1938; and remanded for f urther proceeding s.

J udg e O ’ Scannlain, joined b y J udg es Koz inski, Gould, Tallman, B y

bee, Callahan, B ea, M. Smith, I ku t a and N.R. Smith, dissented from the denial of rehe a r i ng e n banc because the panel’s o pinion rejected court p r ecedents, a nd opened two circuit splits.

COUNSEL

J ohn S. Koppel (arg

ued) and Michael J ay Sing er, Attorney s, United States Departm en t of J ustice, Civil D ivision, W a shing ton, D.C.; Stuart F

. Delery

, Assistant Attorney General, O ffice o f the A ttorney General, W as hing ton, D.C.; S. Amand a M a r shall, U nited States Attorney
, United States

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.O R E G O N R E S T

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Attorney s’ Office, Or e g on, for Defendants-Appellants Thomas Perez , et al.

J oshua D. B uck (arg

ued), T hierman B uck, Reno, N evada; L eon Greenberg and Dana Snieg ocki, L eon Greenberg Professional Corporation, L a s Veg as, Nevada, for PlaintiffsAppellants J oseph Cesarz and Quy Ng oc Tang

.

Paul DeCamp (arg

u ed), J ackson L ewis P.C., Reston, Virg inia; Nicholas M. B eerman, Peter H. Nohle, and W illiam Robert Donovan, J r., J a ckson L ewis P.C., Seattle, W a shing ton; Scott Oberg Oborn, J a ckson L ewis P.C., Portland, O reg on, f

or Plaintiffs-Appellees Oreg on Restaurant and L odg ing Association, et al.

Eug ene Scalia (arg

ued) and A lex ander Cox
, G ibson Dunn & Crutcher L L P, W ashing ton, D.C.; Greg ory J

. K amer a nd B rian J

. Cohen, Kamer Z u c k er A bbott, L a s Veg as, Nevada, for Defendants-Appellees W y n n L as Veg as, L L C, et al.

ORDER

J u d ges Preg e rson and Owens h ave voted to d eny t h e petition for panel rehearing

. J udg e O wens has voted to deny the p e tition for rehearing e n b anc, and J udg e Preg erson has so recommended. J udg e N .R. Sm i th has voted to g rant the petition for panel rehearing a nd petition for rehearing en banc.

The full court w as advised of the petition for rehearing en banc. A judg e requested a vo t e o n wh ether to rehear the
matter e n b an c

. The matter failed to receive a majority o fO R E G O N R E S T

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votes of the nonrecu s ed a c t i ve judg es in favor of en banc consideration. F ed. R. App. P. 35.

The petition f

or panel re h earing and the petition for rehearing en banc are DENIED

.

T h e o r der filed o n A pril 1
, 2016 d eny ing rehearing i n Cesarz v

. W

ynn Las V

e gas is h ereby amended to refl e c t t h is subsequent en banc activity

, including the dissent from denial of rehearing

.

O ’ SCANNL AI

N, Circuit J u dg e, with whom KOZ I NSKI
, GOUL D, TAL L MAN, B Y B E E, CAL L AHAN, B EA, M. SMI T H, I KUTA, N.R. SMI T H, Circuit J udg es, j o i n , dissenting from the denial of rehearing en banc:

Our cour t t o d ay r ejects the most elemental teaching o f administrative law: ag encies ex ercise whatever powers t hey
possess because—and o nly because—such powers have been deleg ated to them by Cong ress. F louting that first principle, the panel m a

j o rity equates a statute’s “silence” with an ag ency ’s invitation to reg ulate, thereby reaching the startling conclusion that t h e Department of L abor can p rohibit any

wor k p lace practice Cong r ess has not “unambig uously a nd categ orically protected” throug h positive law. The dissenting opinio n h a d it rig ht; the panel majority ’ s ex travag ant theory i s more than the Constitution will bear. And it is more tha n

our own precedents will allow. B ecause the panel majority reads our precedents out of ex istence, and opens not one, but
two c ircuit splits in the process, I respectfully dissent from our refusal to rehear these consolidated cases en banc.O R E G O N R E S T

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I

A

H er e is a brief overview of the statutory and reg ulat o r y landscape. The F air L abor Standards A ct (F L SA), 29 U .S.C. § 201 et seq. , sets a minimum wag e employ ers must pay their employ e es, id. § 206(a). Employ ers who have “ t i p p ed employ e e[ s] ” can m e et the minimum-wag e requirement in either o f two way s. Id. § 203(m). F irst, they can simply pay such employ ees a c a s h wag e at or above the minimum. Id. Second, t h ey can pay a cash wag e below the minimum, but only if such e mploy ees receive enoug h money in tips to make
up the difference. Id. Em ploy ers who choose the second option are said to take a “tip credit

. ” I n a d d ition, for many decades it has been common pra ctice for employ ers across service industries to require the people who work for them to share tips with one another, a practice known as “tip pooling .” B ut not all employ e e s are alike

. S o m e, like
restaurant servers, 1 a

re “ customarily a

n d reg ularly tipped,” id. ; others, like the kitchen staff, a re not. Section 203(m) say s that if an employ er takes a tip c r e d i t t o satisfy its federal minimum-wag e o blig ations, it is not allowed to institute a tip pool comprising both ca t e g o r i es of employ ees. Id. So, if a restaura nt takes a tip credit, it cannot require its servers to share their tips with the kitchen staff (but it can require t he servers to share tips with their fellow servers).

Althoug h § 203(m) speaks directly about the tip-pooling practices of employ ers who take advantag e of the tip c redit, it say s absolutely nothing about tip pooling by e m p l o y e rs

1 W e u se th e term “ serv er” to in clu d e th e w aiters an d w aitresses serv in g tab les.O R E G O N R E S T

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who do not take a tip credit. I n Cumbie v. W oodie W oo, Inc.
, 596 F .3d 577, 578 ( 9th Cir. 2010), we addressed “whether a
restaurant violat e s the F air L abor Standards Act, when, despite pay

ing a cash wag e g reater than the minimum wag e , it re q u i r es its wait staff to participate in a ‘tip pool’ that redistributes some of their tips to the kitchen staff.” We h eld it does not; instead, the statute’s carefully c a l i b r a ted scope evidenced Cong r ess’s clear intent to leave employ ers who do

n o t take a tip credit free to arrang e their tip-pooling af f a i rs however they and their employ ees see fit. Id. at 580–83. So, if a restaurant g uarantees its employ e e s the federal minimum
wag e, the restaurant can (so far as federal labor law is concerned) force its servers to s hare their tips with the bussers, cooks, and dishwashers. S e c tion 203(m) does not apply here—it is simply indifferent to the fate of the servers’ tips.

Two backg round principles informe d Cumbie ’s construction o f the sta tute. F irst, it has been settled law for three-quarters o f a century that “[ i] n businesses where tipping is c u stomary , the tips, in the a bsence o f an e x plicit contrary understanding

, belong to the r ecipient. W here, however, such

an arrang ement is made, i n the absence of statutory interference, no reason is perceived for its invalidity .” Id. at 579 (quoting W

illiams v. Jacksonville Terminal Co.
, 3 1 5 U.S. 386, 397 (1942)) (alterations om i t ted) (emphasis d eleted).

“ W illiams establishes the default rule that an arrang e ment to turn over or to redistribute tips is presumptively valid.” Id. at 583. Second, the “ Supreme Co u r t h a s made it clear that an employ ment pract i c e does not violate the F L SA unless the F L SA prohibits it.” Id. (citing Christensen v. H arris Cty.
, 5 2 9 U.S. 576, 588 (2000) (“Unless the F L SA prohibi t s respondents from adopting its policy

, petitioners cannot show that Harris County

has violated the F L SA.”)).O R E G O N R E S T

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After ex amining the statute’s tex t a nd st r u c t u r e , id. at 580–81, w e determined that the “ plain tex t” of § 203(m) only “imposes conditions on taking a tip credit and does n ot state f r e e s t a n d i n g r e q u i r e m e n t s p e r t a i n i n g t o a l l t i p p e d employ e es,” id. at 581. A s a result, we concluded that the “F L SA does not restrict t i p p o o l i n g when no tip credit is taken.” Id. at 582. “Since W oo [ the employ er] did not take

a tip credit, we perceive[ d ] n o b asis for concluding that W o o’s tippooling a

r rang ement violated section 203(m).” Id. “Having concluded that nothing in the t e x t of the F L SA purports to restrict e mploy ee tip-pooling arrang ements when

no tip credit is taken, we perceive[ d] no statutory impediment to W oo’s” tip-pooling practice. Id. at 583.

B

W e decided Cumbie in 2010. Unhappy with o ur decision, in 2011 the D epartment of L abor issued n e w r e gulations addressing the very same issue. S ee U p d a t i ng Reg ulations I ssued U nder the F air L abor Standards Act, 76 Fe d

. R e g

. 18,832 (Apr. 5, 2011). The preamble to t h o s e reg ulations confes s e d that Cumbie advanced a “‘plain meaning ’ construction,” id. at 18,842, but neverthe l e ss voiced the Department’s opinion that Cumbie was wrong ly decided, id.
at 18,841–42. The Department then a nnounced that, statutory tex t a nd Cumbie notwithstanding

, henceforth “ tips are the property of the employ e e, and

. . . section [ 203(m)] sets forth the o n ly permitted uses of an employ ee’s tips—either throug h

a tip credit or a valid tip p ool—whether or not the employ er has elected the tip credit.” Id. at 18,842 (B y “valid” tip pool, the Department a

p parently means a tip pool consisting

ex c lusively of employ ees who a r e “customarily a

nd reg ularly tipped.”) The Department replaced this lang uag e:O R E G O N R E S T

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I n the absence of an ag reement to the contrary between the r ecipient an d a third party , a tip becomes the property of the person in
recog nition of whose service it is presented b y the customer.

with the following :

Tips are the property of the employ ee whether

or not the employ e r has taken a t i p c r edit under section [203(m)] of the F L SA. The employ er i s p r ohibited from using an employ ee’s tips, whether or not it has taken a tip credit, for a

n y reason other than that which is statutorily permitt ed in section [ 203(m)] : As a credit ag ainst its minimum wag e oblig ations to the employ ee, or in furtherance of a valid tip pool.

Compare 32 F e d. Reg

. 1 3,575, 13,580 (1967), with 29 C.F .R. § 531.52.

This new r eg ulation thus flips W illiams and Christensen

on their heads. I t takes the long standing rule that federal law permits employ ers to institute any tip-pooling arrang ement the F L SA does not prohibit, and turns it into a r ule that employ e rs may only institute a tip p ool if the F L SA ex pressly authoriz es it.

I I

The facts of these c onsolidated cases are straig htforward and undisputed. The Appellees are e mploy ers who pay all o f their employ ees a t or above the minimum wag e. Or. Rest. &O R E G O N R E S T

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Lodging Ass’n v. Perez
, 8 16 F

. 3d 1 080, 1 082 (9th Cir. 2016). That is, none of them takes a tip cr e d it. I n addition, the employ e rs have o pted to institute tip pools comprised of both customarily tipped emp loy ees and non-customarily tipped employ e es. Specifically

, W y nn L as V eg as requires its casino d e a lers to share a portion of their tips with casino f l o o r supervisors, while the employ ers represented by the O r e g on Restaurant and L odg ing Association require their servers to share a p ortion of their tips with the kitchen staff. Id. at 1085. The q uestion for us is w hether s u c h tip pools are p rohibited by § 203(m).

So far, so Cumbie

. The facts are the same. The statute is the same. B ut this time the panel holds that the tip-pooling
arrang ements just des cribed are illeg al. The only difference is that here we have a Depa rtment of L abor reg ulation declaring that it simply will not follow what Cumbie said was permitted. The problem for the Departme n t i s that the Supreme Court has prohibited an ag ency in its position from doing ex actly that. That is, “ a court’s i n t e r p r etation of a statute trumps an ag ency ’ s

. . . if t h e prior court holding ‘determined a statute’s clear meaning .’” Nat’l Cable & Telecomms. Ass’n v. Brand X Interne t S e rvs. , 545 U.S. 967, 984 (2005) (emphasis d eleted) (quoting Maislin Indus., U.S., Inc. v. Primary Steel, Inc. , 497 U.S. 116, 131 (1990)).

That is p recisely what we did in Cumbie : w e held that § 203(m) is c lear and unambig uous—and that it clearly a nd unambig uously permits e mploy ers who forg o a tip credit to arrang e t h ei r tip-pooling affairs however they see fit. W e said this ex plicitly no fewer than six times. Cumbie

, 596 F .3d
at 579 n.6 (“[ W ]e conclude that the meaning of the FL S A’s tip credit provision i s c l ea r

. . . .”); id. at 581 (“[ W ]e cannot reconcile [ Cumbie’s] interpretation with the plain tex t of [ theO R E G O N R E S T

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statute]

. . . .”); id. at 5 81 n .11 ( “ [ W ] e d o n ot resort to leg islative history to cloud a statutory tex t that i s c l e ar.” (quoting Ratzlaf v. United States
, 510 U.S. 135, 147–48 (1994))); id. at 582 ( describing Cumbie’s reading of § 2 03(m)

as “plainly erroneous”); id. at 5 82 (refusing to “depart[ ] from the pla i n l ang uag e of the statute” (quoting Ingalls Shipbuilding, Inc. v. D ir., Office of W orkers’ Comp. Programs
, 5 19 U.S. 2 48, 261 (1997))); id. a t 583 (reiterating that o ur statutory construction p r oceeded “[ a] bsent an ambig uity ”).

R e markably

, we even d eclined to consider then-ex isti n g Department of L abor reg ulations—as well as an amicus brief f i l e d b y t h e S e c r e t a r y o f L a b o r o n C u m b i e ’ s behalf—precisely b ecause “we conclude[ d] that the meaning of the F L SA’s tip credit provision is clear,” and h e n c e “we need not decide

. . . what level of deference [ the Department’s interpretations] merit.” I d. a t 579 n

. 6

. And, as if the substance of our holding were not already obvious bey ond doubt, we cited a Chevron Step One decision to illustrate our reasoning

. I

d. (ci t i n g Metro Leasing & D ev. Corp. v

. Comm’r
, 376 F .3d 1015, 1027 n.10 (9th Cir. 2 004) (“B ecause

we conclude that [ the] meaning o f t h e statute is clear, we need not decide whether this reg u lation should be upheld.”)).

Cumbie ’s te ac hing is straig htforward: § 203(m) simply does not p rotect an employ ee’s t i p s e x c ept when his or her employ e r takes a tip credit. H ence, § 203(m) unambig uously establishes that, so far as the F L SA is concerned, employ ers who forg o the tip credit must be left free to institute tip pools compri s ing servers and line cooks, casino dealers and floor supervisors, or whatever other combination of employ ees the affected parties decide.O R E G O N R E S T

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I I I

I t would take some mig hty fancy footwork to g et around Cumbie ; if Brand X doe s not f oreclose a contrary ag ency construction h ere, the doctrine is a dead letter. I ndeed, in the panel majority ’s attempt to danc e around Cumbie and its manifestly correct reading o f § 203(m), it has stumbled off a constitutional precipice.

A

The problems beg in at the beg inn i ng

. The majority

a cknowledg e s that “section 203(m) does not restrict the tip pooling prac t i c es o f employ e r s who do not take tip credits.” Or. Rest.
, 816 F .3d a t 1084. T h at was the holding of Cumbie

. As Cumbie e x plained, Cong r ess w rote § 203(m) ag ainst the long standing backg round norm that tip pooling is a matter o f private contract. 596 F

. 3d at 579. Thus, g i ven Cong ress’s deliberate c hoice to subject one a n d only one c l a s s o f employ e r to r eg ulation—namely

, employ ers who ta k e a tip credit—the clear implication is that all othe r employ ers remain free to a

rrang e their tip-pooling affairs without federal interference, just as they were before the statute was passed. And my colleag ues say they have “ no quarrel with Cumbie

. ” Or. Rest.
, 816 F .3d at 1 0 9 0

. S o we all ag ree that Cong ress has chosen not to reg u l a t e the tip-pooling p r a ctices o f employ e rs like the ones we have here; we all a g ree that such conduct indisputably f

a lls bey o n d the outer reaches of the F L SA. B ut then where does the panel m a j o r i t y think the Department of L abor g ets a uthority to ban the v e ry thing Cong r ess has decided not to interfere with?

He r e i s where the panel majority ’s analy sis g oes wrong , and dang erously so. The majority claims to p e r c e ive aO R E G O N R E S T

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“crucial distinction between statutory lang uag e that affirmativel y p rotects or prohibits a practice and statutory lang uag e that is silen t a b o u t that p ractice.” Or. Rest.
, 816 F .3d at 1087. F rom that p r em i s e , it concludes that the Department of L abor c an ban these employ ers’ tip pool i ng because § 203(m) does not “unambig uously and categ orically protect ” it; instead, the statute is simply “si l e n t about that practice.” Id. at 1086–87 (emphasis added). F or that reason alone, the panel majority holds, the D epartment h a s a free hand to pr o hibit it. Id. A s the majority say s, any time a st a t u te does not “ unambig uously protect[ ] or prohibit[ ] certain conduct,” the statute necessarily “leaves r oom for
ag ency discretion” to reg ulate such conduct as it sees f it. Id. at 1088.

This is a caricature of Che v r o n

. I ndeed, the notion is entirely alien to our sy stem of laws. 2

I n o ne sense, the panel majority is cor r e c t : § 203(m) is “silent” about whether employ e rs who do not take a tip credit
may require tip pooling , just like it is “ silent” about whether I can require m y l a w c lerks to wear business attire in chambers. Section 203(m) d o es not “unambig uously a nd categ orically protect” e ith e r p ractice. Does that mean the Department of L abor is free to prohibit them both? Of course not; obviously

, the F L SA c annot serv e a s a source o f

2 S ee, e.g

. , Yo u n g

sto wn S h eet & Tu b e Co

. v. S

a wyer , 3 4 3 U .S. 5 7 9
, 5 8 5 (1 9 5 2) (“ T h e Presid en t’ s p o w er, if an y , to issu e th e o rd er m u st s tem eith er f ro m a n a c t o f Co n g ress o r f ro m th e Co n stitu

tio n itself .”). T h e p o in t of Yo u n g sto wn is th at t

h e E x e c u t iv e m

u s t alw ay s d eriv e its au th o rity to act eith er f ro m an act o f C o n g ress or d irectly f ro m th e C o n s titu tio n ; Yo u n g sto wn n ecessarily

rej ects th e id ea t

h at th e Ex ecu tiv e m ay

in terf ere

w ith a g iv en in terest s i m p l y b ecau se Co n g ress h as n o t “ u n am b ig u o u sly

an d categ o rically

p ro tected ” it.O R E G O N R E S T

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authority to p rohibit activities it does not cover, just a s a statute read i n g “ N o dog s in the park” cannot be said to authoriz e a Parks D e partment to ban birds as well. The

reason is b asic but fundamental, and it has nothing to d o with
any sort of free-floating nondeleg ation presumption. Rather, the point is that a statute’s d eliberate non-interference with a class o f activity is n o t a “g ap” in the statute at all; it simply marks the point where Cong ress d ecided to stop authoriz ation
to reg ulate. And while I do not question that Cong ress has
g iven the Department “broad authority . . . to implement the F L SA,” Or. Rest

. , 816 F .3d at 1084, one d oes not

“ implement” a statute by ex panding its domain to all o w interference w ith conduct it con sciously left alone. The Department is in reality legislating

, y et that is a power the Constitution d oes n ot permit ex ecutive ag encies to ex ercise. 3

The problem here is that the majo r i ty has confused two very d ifferent ty

p es of statutory silence. S ometimes “[ statutory ] silence is meant to convey no t h ing more than a refusal to tie the ag ency ’s hands,” meaning that Cong r ess has
g iven the ag e ncy discretion to choose between policy o ptions

3 A s ev ery n o v ice learn s , t h e o f f icial t h e o r y o f th e ad m in istrativ e state b eg in s f ro m th e prem ise th at “ t

h e law m ak in g f u n ctio n b elo n g s to C o n g ress

. . . an d m ay n o t b e co n v ey ed to an o th er b r a n c h o r en tity .” Lo vin g v. Un ited S ta tes , 5 1 7 U.S. 7 4 8
, 7 5 8 (1 9 9 6 ). A g en cy ru lem ak in g resp ects th at

co n strain t so lo n g as i t rem ain s g u id ed b y an “ in tellig i b le p rin cip l e”

su p p lied b y Co n g ress. E.g

. , C ity o f Arlin g t o n v. FCC
, 1 3 3 S

. C t

. 1 8 6 3
, 1 8 7 3 n .4 (2 0 1 3 ). B u t th e p an el m aj o rity w ou ld ef f ectiv ely v ap o rize ev en th at f lim sy co n strain t by h o ld in g t h at an ag en cy n eed n o t j u s tif y a g iv en

ru le by tracin g i t to a v alid statu to ry g ran t o f a ut h o r i ty ; in s tead

, it n eed

o n ly d em o n strate th at Co n g ress h as n o t af f irm ativ ely v o iced o p p o sitio n to th e ru l e in q u estio n

. T h e m aj o rity ’ s v isio n m a ke s a f ear o f “ deleg atio n

ru n n in g rio t ” lo o k q u ain t b y co m p ariso n , A.L.A. S

ch ech ter Po u ltry Co rp

. v. Un ited S t

a tes , 2 9 5 U.S. 49 5
, 5 5 3 (1 9 3 5 ) (Card o zo , J
., co n cu rrin g ), f or it w o u ld d isp en se w i th

ev en th e p reten se o f

d eleg atio n

alto g eth er.O R E G O N R E S T

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C o n g r e s s itself h as placed on the table. Entergy Corp. v. Riverkeeper, I

nc. , 556 U .S. 208, 222 ( 2009). B ut “sometimes statutory silence, when viewed in contex t, is best interpreted

as limiting ag ency discretion.” Id. a t 223. I n other words, not all statutory silences are c reated equal. B ut y ou would never know that from the majority ’ s opinion. The majority s e ems to think ex ecutive ag encies have plenary power to r e gu late whatever they want, unless and until Cong ress affirmatively preempts them. W ith all due respect, that is a p r o f o undly misg uided understandingof administrative law.

An ag ency may not issue a g iven reg ulation unless it has

a “tex tual commitment of authori t y ” t o do so. W hitman v

. Am. Trucking Ass’ns, Inc.
, 531 U.S. 457, 468 (2001). I ndeed, it is ax iomatic that “ an ag e ncy literally has no power to act

. . . u nless and until Cong ress confers p ower upon it.” La. Pub. Serv. Comm’n v. F CC
, 476 U.S. 3 55, 374 (1986). Thus, it should g o without say ing that an ag ency “may not construe the statute in a way that completely nu llifies tex tually applicable provisions meant to limit i ts d iscretion.” A m

. Trucking

, 531 U.S. at 485. And “Cong ress knows to speak in plain terms when it wishes to circumscribe, and in capacious terms when it wishes to enlarg e, ag ency discretion.” City of Arlington , 133 S. Ct. at 1868.

Section 203(m) speaks in plain terms, not capacious ones. To illustrate the contrast, imag ine a statute that said, simply

, “Unfair tipping practices are p r ohibited. The Secretary may promulg a t e r

ules necessary to carry into e x ecution the foreg oing prohib ition.” N ow that would be a capacious
statute. I will stipulate that a reasonable person could read it
to prohibit tip pooling even by employ ers who do not take a tip credit; o n th e o ther hand, a reasonable person could read it not to interfere with such practice. Our hy pothetical statuteO R E G O N R E S T

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i s “silent” in the relevant sense: in the sense that w e mi gh t read it to cover the p r ac t i c e in question, but we a re not compelled to read it that way , so the choice is for the ag ency to make. B ut § 2 03(m) is nothing like that hy pothetical
statute. I t reg ulates tip pooling by o ne, and only one, specific class of employ er: the employ er wh o takes a tip credit. Hence, as we put it in Cumbie

, § 203(m) “does not restrict tip pooling when no tip credit is taken.” 596 F .3d at 582. There is no question, therefore, that § 203(m) stops s h o r t o f
reg ulating employ ers w ho d o not take a tip credit. The Department h a s n o power to put words in Cong ress’s mouth when Cong ress h as d eliberately chosen to stay q uiet in the face of activity

it knows is taking place.

Simply put, Cong ress intended to control, not to deleg ate, when employ ers may r e q uire tip pool ing

. And there can be

no question that the Department o f L a b o r has no power to

ex tend the statute bey ond its stopping p oint. As the Supreme Court has said time a

nd ag ain, “ an administrative ag e ncy ’s
power to r eg ulate

. . . must alway s be gr o u n d e d in a valid
g rant of authority from Cong ress. And ‘[ i] n our anx iety to effectuate the cong r essional purpose

. . . , we must take care
not to ex tend the scope of the statute bey ond the point where Cong r ess indicated it w ould stop.’” F DA v

. Brown & W illiamson Tobacco Corp.
, 529 U.S. 120, 161 (2000) (quot i n g U

n i t e d States v. Article of D rug

. . . Bacto-Unidisk

. . . , 394 U.S. 784, 800 (1969)).

Thus, as in Brown & W illiamson

, here “ C o n g ress has clearly precluded the [Dep a r t m e n t ] f r o m a s s erting jurisdiction
to regu late” tip pooling b y employ ers who do not take a tip credit. I d

. at 126. “Such authority is inconsistent with the intent that Cong ress has e x pressed in the [ F L SA’s] overall
reg ulatory scheme

. . . . I n lig ht o f this clear intent, theO R E G O N R E S T

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[ Department’s] assertion of jurisdict i on is impermissible.” Id. B ecause “the statutory tex t forecloses t h e ag e ncy ’s

a ssertion of authority ,” its a ttempt to prohibit tip pooling b y

em p loy ers like the ones before us “is u ltra vires.” City of Arlington , 133 S. Ct. at 1871, 1869.

The majority ’s reasoning flies in the f ac e of the above principles. To prop up its theory that an ag ency ’ s power to reg ulate surg e s like an ex p a n s i ve body of w ater, covering
every thing until it bumps up ag ainst a wall erected b y Cong r ess, the majority relies on Christensen v. Harris County
, 529 U.S. 576 (2000), and “ J udg e Souter’s [ sic]

c o n c urrence,” Or. Rest.
, 816 F .3d at 1088. B ut Christensen

a nd J ustice Souter’s concurrence g ive absolutely no suppo r t to the majority ’s radical idea that an a g en c y c a n reg ulate whatever it wants until Cong ress say s o ut loud that i t must stop. Christensen say s only what every

body already knows: if a statute c an reasonably be read eith e r to p ermit or to prohibit a g iven practice, then the a g ency has d i s cretion to choose which reading to enforce. 529 U.S. at 587–88; id. at 589 (Souter, J
., concurring ). B ut the whole q u e stion is whether a particular statute can be read either way

. Sometimes the answer is y es; other t i m e s t h e answer is no, depending o n the st a t u t e

. I n this c ase, Cumbie already said,

co rr e c tly

, that § 203(m) cannot b e r ead either way —it subjects to r e gu l a tion only e mploy ers who take a tip credit, and nobody else. 596 F .3d a t 582. The Depart m e n t h as no power to enlarg e the statute bey ond the point where Cong ress decided to stop reg ulating

. The Department, a nd my colleag ues along with it, have y et to grasp that “an ag e ncy ’s
power i s n o g reater than that deleg ated to it by Cong ress.” Lyng v. Payne , 476 U.S. 926, 937 (1986).O R E G O N R E S T

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B

I t should c ome as no surprise that our sister circuits have roundly and forcefully repudiated the specious theory o f
ag ency power our court now adopts. Those circuits have echoed ag ain and ag ain the b a sic reality that silence does not alway s c onstitute a g a

p an ag ency

may fill, but often reflects Cong r ess’s decision not to reg u late in a particular area at all, a decision that is binding on the ag ency

.

As the D.C. Circuit has ex plained, “[ w] ere c ourts to
presume a deleg ation of power absent an ex press withholding of such p owe r , ag encies would enjoy virtually limitless heg emony , a result plainly out of keeping with Chevron and quite likely with the Constitution as well.” Ry. Labor E x ecs. Ass’n v

. Nat’l Mediation Bd.

, 29 F

. 3d 655, 6 71 (D.C. Cir. 1994) (en banc) (as amended); id. at 659 (“[ T] h e B oard would h a ve us presume a deleg ation of power from Cong ress absent an ex press withholding of such p o wer. This comes close to say ing that the B oard has the power to do whatever it pleases merely by

virtue of its ex istence, a sug g estion that

we view to be incredible.”); id. a t 6 7 1 (“To sug g est, as the B oard effectively does, that Chevron step two is implicated
any time a statute d oes not ex p ressly n egate the ex istence of

a claimed a dministrative power ( i.e. when the statute is not written in ‘thou shalt not’ terms), is both flatly unfaithfu l to the principles of administrative law

. . . , a nd r efuted b y precedent.”); see also Aid Ass’n for Lutherans v. U.S. Postal Serv.
, 321 F

. 3d 1166, 1174–75 (D.C. Cir. 2003) (“[ T] he Postal Service’s position seems to be that the disputed
reg ulations a

re per m issible because the statute does not

ex p ressly f

oreclose the construction advanced by the ag ency

. W e reject this position as entirely untenable u nder we l l

-O R E G O N R E S T

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established case law.”); Motion Picture Ass’n of Am., Inc. v. FCC
, 309 F .3d 796, 805 (D.C. Cir. 2002) (same).

L ikewise, the Third Ci r cuit has recog niz ed that “[ e] v en where a statute is ‘silent’ o n the question at issue, such silence ‘does not c o nfer g ap-filling power on a n ag ency unless the question is in f act a g ap—an ambig uity tied up with the provisions of the s tatute.’” Coffelt v

. Fawkes

, 765 F .3d 197, 202 (3d Cir. 2014 ) ( q u oting Lin-Zheng v

. Attorney Gen. , 557 F

. 3 d

147, 156 (3d Cir. 2009) (en banc)).

The F ourth Circuit

, a s well, has held that “[ b] ecause we d o n ot p resume a d eleg ation of power simply f r om t h e absence of an e x press w ithholding of power, w e do not find that Ch e v r o n ’ s second step is implicated ‘any time a statute does not ex pressly negate the ex i s t e nce o f a claimed administrative power.’” Chamber of C o m merce v. NLRB
, 721 F

. 3d 152, 160 (4th Cir. 2013) (quoting Am. Bar Ass’n v

. FTC , 430 F .3d 457, 468 (D.C. Cir. 2005)).

The F ifth Circuit ag rees. See Texas v. United States
, 809 F .3d 134, 186 (5th Cir. 2015) (as revised) (“The dissent repeatedly claims that cong ressional silence has conferred on DHS the power to act. To the contrary , any s uch inaction cannot create such power.” (citation omitted)).

Same for the Seventh Circuit: “Courts ‘will not presume

a deleg ation of power based solely on the fact that there is not

an ex press withholding of such power.’” Sierra Club v

. EPA, 311 F .3d 853, 86 1 ( 7 t h Cir. 2002) ( quoting Am. Petroleum Inst. v. EPA , 52 F .3d 1113, 1120 (D.C. Cir. 1995)).

The Eleventh Circuit piles on: “[ I ] f c ong ressional silence is a sufficient basis upon which a n ag ency m a y b u i ld aO R E G O N R E S T

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rulemaking a

uthority

, the relationship between the e x ecutive and leg islative branches would u nderg o a fundamental chang e and ‘ag encies would enjoy virtually l i m i tless he g emony , a result plainly out of k eeping with Chevron

. . . and quite likely with the Constitution as well.’” Bayou Lawn & Landscape Servs. v

. Sec ’ y o f Labor

, 713 F .3d 1080, 1085 (11th Cir. 2013) (quoting Ethyl Corp. v. EPA
, 51 F .3d 1053, 1060 (D.C. Cir. 1995)).

No t i c e what the p anel majority has not p r o duced: a citation to a sing le case e n d orsing the ex travag a n t theory o f

ex e c utive lawmaking our court adopts today

. Meaning f ul silence?

At any rate we, too, once knew all of this. I n Martinez v

. W ells Fargo Home Mortgage, Inc.
, 598 F .3d 5 49, 554 n.5 (9th Cir. 2010), we were a sked to d e f e r to an ag e ncy ’s
reg ulation of c ertain bank “overcharg es” on the theory that the Real Estate Settlement Procedures A c t did “ not specifically address the situation at b a r ” a n d was therefore “sufficiently silent on the precise matter as to be ambig uous.” Nonsense, we said; statutory “‘silence’ on the subject o f overcharg es does not m ean that Cong ress’s actions were ambig uous on that subject. Cong ress simply did not leg islate
at all on o vercharg es.” Id. So, t o o , w i th tip pooling b y employ e rs who do not take a tip c r ed i t, or so I would have thoug ht.

Oh w ell. Add Martinez to t h e h eap of controlling authorities the panel majority has so casually tosse d as i de,O R E G O N R E S T

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placing us, here as elsewhere, directly a t odds with our colleag ues in the rest of the country

. 4

I V

A

Even if this case were fr am ed i n terms of Chevron Step Two, it would not make any difference to the analy

sis or the

o u t c o me. Precisely because the Department has not b e e n de l eg a ted authority to ban tip pooling by employ ers w ho forg o the tip c redit, the Department’s assertion of reg ulatory jurisdiction “is ‘manifestly c ontrary to the s t a tute,’ a nd

ex c e eds [ its] statutory a u t hority .” Sullivan v. Zebley

, 493 U.S. 521, 541 ( 1990) (quoting Chevron

, 467 U.S. at 844).

My panel-majority c olleag ues prov e t h e point themselves. Notwithstanding their conviction that t he Department o f L abor can reg ulate a

ny private a ctivity C o n gr ess has not “unambig uo u s ly and categ orically protect[ ed] ” throug h positive law, they

still undertake to reassure themselves that the Department’s interpretation of § 203(m) is “reasonable.” Or. Rest.
, 816 F .3d at 1089

. Yet their analy sis on this score i s s o perfunctory that it only confirms they must real l y believe w hat they h ave repeatedly said, namely

, that an ag ency does not need a discernible g rant of reg ulatory power over a g iven subject matter before it can insert itself into the affairs of ordinary

citiz ens.

4 “ Circu it sp l it” p erh ap s d o es n o t f u lly d escrib e th e resu ltin g stat e o f af f airs. It is m ore lik e w e h av e s p u n o u t of th e k n o w n leg al u n iv erse an d

are n o w o rb itin g alo n e in so m e co ld

, d ark co rn er o f a f ar- o f f g alax y , w

h ere

n o o n e can h ear th e scream “ sep aratio n

o f p o w ers.”O R E G O N R E S T

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Unsurprising ly

, the majority never mentio n s t h e tex t the Department is (purportedly ) ex ecuting

, not even once. Here is what the majority

offers instead:

F irst, that it w as r easonable for the Department of L abor
to c onclud e “t h a t, as written, [ §] 203(m) contain[ s] a ‘loophole’ that allow[ s] employ ers to ex ploit F L SA tipping provisions.” Id. W hich quite obviously beg s the question. B ut not only is it entirely question- b eg g ing

, it unwitting ly concedes t h at t h e statute “as written” limits the ag ency to reg ulating only those employ ers who take a tip c r e d i t

. A s

ex p l a ined above, an a g ency “may not construe the statute in

a way that com

p l e t e ly nullifies tex tually applicable provisions
meant to limit its discretion,” Am. Trucking

, 532 U.S. at 485, for otherwise it would b e ex ercising “the lawmaking function [ which] belong s to Cong ress

. . . and may not b e convey ed to another branch or entity ,” Loving , 517 U.S. 758.

Second, the majority in v o k e s the F L SA’s leg islative history

, even thoug h in Cumbie we ex plicitly refused to do so,

ex p laining that “[ o] f course, ‘we do not reso r t to leg islative history to c loud a statutory tex t that is cl e a r

. ’ ” 596 F .3d at 581 n.11 (quoting Ratzlaf

, 510 U.S. a t 147–48). I n any event, the primary source the majority qu o tes implicitly disavows the D epartment of L abor’s interpr e tation. The very Senate Comm i t tee Report the majority relies on ex plains that an “employ er will lose the benefit of [ the tip credit] ex ception if ti p p e d e mploy ees are required to share their tips with employ e es w h o do not customarily and reg ularly receive tips.” O r. Rest.
, 816 F .3d at 1089 (quoting S. Rep. N o

. 93- 690, a t 4 3 ( 1 9 74)). That statement makes sense only on the assumption that employ ers who f o rg o the tip c redit c an require tip pooling among customarily and non-custom ar ily tipped employ ees, just as Cumbie had said. All the majorityO R E G O N R E S T

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can muster in response is a more g eneral statement from the

same r eport that § 2 0 3(m) “requir[ e s]

. . . that all tips received be paid out to tipped employ ees.” Id. at 1090. T h at’s it. Even f ans o f leg islative history should hold their noses before allowing one v ag ue state m e nt from o ne committee report to trump not only the c lear tex t of the statute, but also the
express interpretation o

f that text as set out in the very same report.

Third and fi n a l l y , the majority say s that “the F L SA is a broad and r emedial a c t that Cong ress has frequently e x panded and ex tended.” I

d. Here we h ave y et o n e more frank admission that the Department of L abor is “ex p and[ ing ] a nd

ex tend[ ing ]
, ” not “ex ecuting ,” the statute Cong ress enacted. B ut notice that even on the majority ’s telling

, Congress is the

one empowered to ex pand and ex tend the statute; the Department o f L abor emphatically is not. A nd whatever the majority thinks “the purpose o f the F L SA” happens to be, id.

, the Supreme Court has told us that “the purpose of a statute includes not only what it sets out to chang e, but also what it resolves to leave alone,” W . Va. Univ. Hosps., Inc. v. Casey
, 499 U.S. 83, 98 (1991). I n this c as e t h e r e is no doubt that Cong r ess resolved to leave employ ers like the o nes before us alone, at least as far as their tip-pooling p r actices a re

c o n c erned. Neither we nor the Department h ave any power to “ex pand or ex tend” Cong r ess’s decision.

B

Predictably enoug h, such sho d d y reasoning has opened
y et another circuit split on this precise issue

. By d efy ing Cumbie and r e

j e c ting its obviously correct r eading o f § 2 0 3(m), the majority has created another split w it h theO R E G O N R E S T

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F ourth Circuit a

nd has set us on a collis i on course with several others.

Most immediately

, in Trejo v

. Ryman Hospitality Props., Inc

. , 795 F

. 3d 442 ( 4 th Cir. 2015), the F ourth Circuit

ex p ressly ag reed with Cumbie that “§ 203(m) ‘does not state f r e e s t a n d i n g r e q u i r e m e n t s p e r t a i n i n g t o a l l t i p p e d employ e es,’ but rather crea tes rig hts and oblig ations for employ e rs a t t empting to use tips as a credit ag ainst the minimum wag e.” Id. at 448 (quoting Cumbie

, 596 F .3d 581). According ly

, the F ourth Circuit held that “it is c lear that th[ e] langu age [ o f § 203(m)] c o uld g ive rise to a cause of action only if the employ er is u sing tips to satisfy its minimum w ag e requirements.” Id. F o r the reasons ex plain e d a b o v e, that holding necessarily forecloses the D epartment’s effort to b an tip pooling b y employ ers who do not take a tip credit. Brand X
, 545 U .S. a t 984 (“[ A] precedent holdin g a statute to be unambig uous forecloses a contrary ag e n cy c onstruction.”).

L ooking bey ond Trejo
, the forecast is not encourag ing for the p anel majority here. I n fact, “ [ r ] e l y i n g on Cumbie a nd other cases, nearly every court t h a t h as considered the DOL Reg ulation has invalidated it u nder Chevro n

. ” Malivuk v

. Ameripark, LLC
, No. 1:15-CV-2570-W SD, 2 0 16 W L 3 9 99878, at * 4 (N.D. Ga. J uly 26, 2016); see, e.g. , id. ; Brueningsen v. Resort Express Inc.
, No. 2:12-CV-00843-DN, 2015 W L 339671, at *5 (D. U t ah J a n

. 26, 2015); Mould v

. NJG Food Serv. Inc.
, N o

. CI V. J KB -13-1305, 2014 W L 2768635, at * 5 (D

. M d. J une 17, 2014); Stephenson v

. All Resort Coach, Inc.
, No. 2:12-CV-1097 TS, 2013 W L 4519781, at *8 (D. Utah A ug

. 26, 2013); see also Trinidad v

. Pret A M

anger ( USA) Ltd.

, 962 F

. S u pp. 2d 545, 563 (S.D.N.Y. 2013) (“B ecause the Court is hig hly skeptical that DOL ’s r e gu lations permissibly construe the statute, a ndO R E G O N R E S T

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because it is u ndisp u t ed that Pret paid its employ ees the minimum wag e without taking into a ccount the tip credit, the Court, in its discretion, declines to condit i o n ally certify a class based on plaintiffs’ tip-pooling claims.”).

The o nly c ourt in the land to misread Cumbie is o ur own!

V

Never let a statute g et in the w ay o f a tempting reg ulation. That, at any r ate, seems to b e t h e prevailing mood on our court. I c annot g o al o n g w i t h such a b reez y approach to the separation of powers, and I reg ret our decision to let stand the

m a jority ’ s catalog o f e rrors. The majority ig n ores bindi n g Supreme Court and circuit precedent, allows the Department of L a bor to d efy the clear a

nd u n am b i g uous limits on its discretion written into the F air L ab o r S t a ndards Act, a

nd
creates n ot one, but two circuit splits in the process. Amaz ing ly

, h owever, those mig ht be the least o f f ensive thing s about the panel majority ’ s opinion.

More reckless is the unsupported and indefensible idea that federal ag encies can r e g ulate any class of activity that Cong r ess has not “unambig uously and cate g orically protected” throug h posit ive law. Such notion is completely
out of step with the most b asic principles of administrative law, if not the rule of law itself.

I respectfully

dissent.