Opinion ID: 759148
Heading Depth: 3
Heading Rank: 3

Heading: Customary and Reasonable Tip Out

Text: 45 Plaintiffs argue that Outback's tip-out requirement of three percent of total gross sales is excessive and thus not customary and reasonable. Plaintiffs rely on two opinion letters of the Administrator of the Wage and Hour Division of the Department of Labor (the Administrator) to support their claim that the size of the tip-out requirement must be customary and reasonable. We reject the plaintiffs' argument because neither the statute nor its regulations mention this requirement and the opinion letters do not cite to any part of the statute for this requirement. Additionally, the opinion letters are not entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). 46 The FLSA itself does not state that tip outs are limited to a customary or reasonable amount of an employees tips. The plaintiffs cite to no statutory language to support their argument. 47 Instead, the plaintiffs argue that two opinion letters of the Administrator establish this limitation and these opinions are binding on this court as administrative interpretation of the FLSA entitled to Chevron deference. The plaintiffs are correct that the two opinion letters attempt to limit the amount of tips an employer can require an employee to tip out. In Opinion Letter WH-380 issued on March 26, 1976, the Administrator stated [a] valid tip pooling arrangement ... cannot require waiters and waitresses to contribute a greater percentage of their tips than is customary and reasonable. Wage-Hour Administrator Opinion WH-380, Tip Pooling (March 26, 1976). Opinion Letter WH-468 further defines this prohibition: 48 For enforcement purposes, the Wage and Hour Division does not question contributions to a pool not exceeding 15% on an employee's tips, unless there is evidence that the percentage is designed to circumvent the FLSA's tip credit provisions. Where a percentage of total sales is used for funding a tip pool, the Division would not question contributions by any employee that do not exceed 15% of the tips actually received by that employee. A percentage of sales approach might not meet the Division's 15% standard in establishments where tips are low. FLSA, Section 3(m). 49 Wage-Hour Administrator Opinion WH-468 (March September 5, 1978). 50 The magistrate judge correctly refused to follow these two opinion letters. Plaintiffs' argument that these two opinion letters should receive Chevron deference is unavailing. This court has noted that courts do not accord Chevron deference to non-binding advisory opinions of an administrative agency. Mid-America Care Found. v. NLRB, 148 F.3d 638, 642 (6th Cir.1998); see also Reich v. Parker Fire Protection Dist., 992 F.2d 1023, 1026 (10th Cir.1993) (refusing to give Chevron deference to Wage and Hour Administrator Opinion Letters). 51 We also do not find any persuasive value in these opinion letters. As the Supreme Court noted in Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944), the opinions of the Administrator of the Wage and Hour Division of the Department of Labor have persuasive value if the position is thoroughly considered and well-reasoned: 52 We consider that the rulings, interpretations and opinions of the Administrator under [the FLSA], while not controlling under the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance. The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control. 53 Id. at 140. The opinion letters here fail to persuade us because they do not explain the statutory source for the limitation that they create. See Brock v. Louvers & Dampers, Inc., 817 F.2d 1255, 1258 (6th Cir.1987) (cautioning that unexplained agency constructions of their enabling statute have little persuasive value); Continental Cuisine, 751 F.Supp. at 803 (holding that a tip-out requirement that resulted in servers tipping out forty percent of their tips did not violate the FLSA and refusing to follow the opinion letters because [t]he Court can find no statutory or regulatory authority for the Secretary's opinion that contributions in excess of 15% of tips or 2% of daily gross sales are excessive). The opinion letters provide no reasoning or statutory analysis to support their conclusion that there is a reasonableness limit on how much an employer can require an employee to tip out. Opinion letter WH-380 cites no statutory provision or regulation to support its limitation. Opinion letter WH-468 at least cites to subsection 3(m) of the FLSA, 29 U.S.C. § 203(m). However, nothing in the language of this subsection appears to support this limitation. Subsection 203(m) neither limits the amount of a tip out to what is customary or reasonable nor states that a tip out should not exceed 15% of an employee's tips. 7 54 In the instant case, the plaintiffs do not argue that they ever received less than minimum wage for a week of work at Outback. See 29 U.S.C. § 206(a) (1994) (establishing a week as the unit of time that should be used in calculating whether an employee receives the minimum wage). Because we reject the plaintiffs' argument that the FLSA limits tip outs to amounts that are customary and reasonable, the amount the plaintiff-servers were required to tip out does not violate the FLSA.