Court Opinion

ID: 9622857
Source: CourtListenerOpinion
Date Created: 2023-08-22 06:24:25.599689+00
Date Added: 2024-06-11T17:32:47.346308
License: Public Domain

Coleman, A.C.J.
(concurring in part, dissenting in part)—The majority agrees that existing federal regulations, 29 C.F.R. §§ 531.52, .55(a),9 authorize employment agreements in which all tips become the property of the employer. Such agreements are known as the "tip back" method of compensation, which is the method by which *103Henry's valets were paid. These regulations were promulgated under the Fair Labor Standards Act of 1938 (FLSA). Prior to 1974 such agreements were clearly enforceable and were not deemed to conflict with section 203(m) of the FLSA, which at that time provided in pertinent part:
In determining the wage of a tipped employee, the amount paid such employee by his employer shall be deemed to be increased on account of tips by an amount determined by the employer, but not by an amount in excess of 50 per centum of the applicable minimum wage rate, except that in the case of an employee who (either himself or acting through his representative) shows to the satisfaction of the Secretary that the actual amount of tips received by him was less than the amount determined by the employer as the amount by which the wage paid him was deemed to be increased under this sentence, the amount paid such employee by his employer shall be deemed to have been increased by such lesser amount.
29 U.S.C. § 203(m). This arrangement is known as the "tip credit" method of compensation and was not the method by which Henry's valets were paid.
In 1974, section 203(m) of the FLSA was amended and now reads in pertinent part:
In determining the wage of a tipped employee, the amount paid such employee by his employer shall be deemed to be increased on account of tips by an amount determined by the employer, but not by an amount in excess of 40 per centum of the applicable minimum wage rate, except that the amount of the increase on account of tips determined by the employer may not exceed the value of tips actually received by the employee. The previous sentence shall not apply with respect to any tipped employee unless (1) such employee has been informed by the employer of the provisions of this subsection, and (2) all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.
29 U.S.C. § 203(m). The most significant changes decreased the amount an employer could credit against his obligation *104to pay the minimum wage (from 50 percent to 40 percent of the hourly rate), required employers to inform employees of the tip credit regulation, and mandated that all tips received by the employee (exempting pooling agreements) be retained by the employee. The majority now holds that C.F.R. §§ 531.52 and .55(a) conflict with section 203(m) as amended, rendering those regulations void and tip back agreements unenforceable.
The majority concedes that section 203(m) does not clearly disallow tip back agreements. It further acknowledges that "[n] either the language of section 3(m) as amended nor case law clearly nullifies the regulations or invalidates tip agreements." Majority opinion, at 96. Thus, the majority treats this issue as one of first impression and then reaches out for a result not at all compelled or even suggested by the language of the amendment.
It is undisputed that prior to the 1974 amendment, section 203(m) did not prohibit tip back agreements. Nothing in the amended section either refers to or expressly forbids such agreements. In fact, both before and after the amendment, section 203(m) only purports to regulate wage agreements of tipped employees. Historically employees under tip back agreements are not tipped employees. See 29 C.F.R. §§ 531.55, .59. See also Hodgson v. Bern's Steak House, Inc., 20 Wage & Hour Cas. 261, 268 (M.D. Fla. 1971). A legislature is presumed to be aware of and to have adopted judicial constructions of a statute, unless it affirmatively expresses a contrary intent. Blitz v. Donovan, 740 F.2d 1241, 1245 (D.C. Cir. 1984); see also State v. McCullum, 98 Wn.2d 484, 492-93, 656 P.2d 1064 (1983). Moreover, it is the court's obligation to reconcile different statutes pertaining to the same subject matter. Jones v. St. Louis-San Francisco Ry., 728 F.2d 257, 262 (6th Cir. 1984); King Cy. v. Taxpayers, 104 Wn.2d 1, 8-9, 700 P.2d 1143 (1985). Thus, when amending a statute, if Congress intends to expressly disallow a practice that existing interpretations expressly allowed, courts expect Congress to specify in explicit language its intent to disallow such practices. See *105Babcock v. School Dist. 17, 57 Wn.2d 578, 580-81, 358 P.2d 547 (1961) (existing statute is not repealed by subsequent legislation unless legislative intent was to repeal the earlier act or both acts are clearly inconsistent and repugnant and cannot be reconciled). Section 203(m) as amended can be harmonized with the C.F.R. sections at issue by interpreting section 203(m) no more broadly than its express application to tip credit agreements and by continuing to give effect to 29 C.F.R. §§ 531.52 and .55(a), which permit tip back agreements.
The majority attempts to justify its result by classifying Henry's valets as tipped employees in an attempt to bring them within the scope of the 1974 amendment, which is expressly limited to regulating the wages of tipped employees. I reject this approach. In the first place, prior to the amendment, section 203(m) was not construed to be in conflict with the regulations permitting tip back agreements. There is nothing in the language of the amendment to suggest that Congress intended to broaden the scope of the term "tipped employee" to include what was previously excluded, i.e., employees under tip back agreements. Under the regulations, employees who return all of their tips to their employer are not considered tipped employees because no part of their income derives from tips. 29 C.F.R. §§ 532.55, .59. See also 29 U.S.C. 203(t) ("tipped employee" is one who receives more than $30 per month in tips). Thus, there is no reason now to suddenly find, as the majority does, that employees under tip back agreements are tipped employees.
The majority adopts a "customer's intent" analysis to determine whether an employee is a tipped employee. A customer's intent, however, to direct a tip toward a particular service person has nothing to do with whether a tip back arrangement between the employee and employer is legal, much less whether Congress intended to disallow such agreements by regulating tip credit agreements. The customer's intent is irrelevant. In an effort to buttress its position, the majority looks to the legislative history of the *1061974 amendment, which in part provides: "Whether a tip is to be given and its amount, are matters determined solely by the customer, and generally he has the right to determine who shall be the recipient of his gratuity." S. Rep. No. 690, 93d Cong., 2d Sess. 42 (1974). If the definition of a tip is determined by the customer's intent, then why does section 203(m) as amended expressly provide that tip pooling agreements are not disallowed? 29 U.S.C. § 203(m) ("this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips"). A customer may well decide to tip a specific amount based upon the customer's preference for a particular employee. In fact, it is not uncommon for customers to request seating in a area served by a particular favored employee. If tip back agreements are disallowed because, as the majority argues, they convert the tip into the employer's receipt "by an agreement that is unknown to the customer", then why are tip pooling agreements, which are just as unknown to the customer, also not disallowed?
The majority contends the word "generally" in the tip definition ("generally [the customer] has the right to determine who shall be the recipient") justifies exempting tip pooling agreements from the definition; why is it not just as reasonable to say the qualification "generally" also justifies exempting tip back agreements? It is apparent that the majority has allowed its legal analysis to be influenced by its personal dislike of tip back agreements, a dislike which I share to some extent. The correct legal analysis, however, in the absence of a clear indication that Congress intended to disallow this practice, is to continue defining tipped employees as those who retain tips. Under a tip back agreement, employees earn an hourly wage and no portion of their income is derived from tips; there being no expression of Congressional intent to disallow such agreements, employees who do not retain their tips are not tipped employees. If employees working under tip back agreements are not tipped employees, then the 1974 amendment *107cannot affect those agreements since it applies only to wage agreements of tipped employees.
Finally, the majority argues that the purpose of the 1974 amendment was to require that an employee retain all tips. There is no support for this astonishing conclusion. The amended language is designed to regulate the situation in which employers take a tip credit toward their obligations to pay the minimum wage. In amending section 203(m), Congress prohibited employers from collecting tips from employees if the employer intended to take a tip credit. If the employer takes no credit and pays the full minimum wage, the section is inapplicable. Congress may wish by legislation to adopt a policy such as the one suggested by the majority, but it has nowhere expressed its intent to disallow tip back agreements, and it is not within the province of this court to substitute its judgment for that of Congress in this area.
Because of my view that the 1974 amendment of section 203(m) regulates tip credit arrangements and does not apply to tip back agreements, I would uphold the validity of the tip back agreement between Henry's and the valets. I would, therefore, reverse the judgment of the trial court and remand with instructions to enter judgment in favor of Henry's. The issue of attorney's fees to respondent under those circumstances would be moot. Because of Judge Williams' partial dissent, I note that I agree with Judge Winsor's analysis as to the propriety of allowing evidence on the good faith defense and his affirmance of the denial of liquidated damages.
With the exception noted, I respectfully dissent.

 29 C.F.R. § 531.52 provides in part: "In the absence of an agreement to the contrary between the recipient and a third party, a tip becomes the property of the person in recognition of whose service it is presented by the customer. Only tips actually received by an employee as money belonging to him which he may use as he chooses free of any control by the employer, may be counted in determining whether he is a 'tipped employee' within the meaning of the Act and in applying the provisions of section 3(m) which govern wage credits for tips."
29 C.F.R. § 531.55(a) provides in part: " [W]here the employment agreement is such that amounts presented by customers as tips belong to the employer and must be credited or turned over to him, the employee is in effect collecting for his employer additional income from the operations of the latter's establishment. . . . [P]lainly the employee is not receiving tips within the meaning of section 3(m) and 3(t). The amounts received from customers are the employer's property, not his, and do not constitute tip income to the employee."