One of the most sweeping applications of the Supreme Court’s landmark case clipping the executive branch’s power took direct aim at Joe Biden’s pro-labor legacy. The ruling could foreshadow more to come, union leaders say.
The conservative 5th Circuit Court of Appeals has used its newly expanded power to interpret laws to knock down a 2021 Department of Labor rule limiting when employers can pay workers less than minimum wage.
“I think this case represents a very clean pattern for other conservative courts to follow,” administrative law scholar Craig Green told NOTUS. “Where there’s a very complicated, unclear statutory regime that the agency has basically administered for some period of time and decades and decades of it are chopped away, burned away.”
Under the overturned 2021 Department of Labor rule, employers paying less than minimum wage couldn’t expect workers to spend more than 20% of their shift or more than 30 consecutive minutes doing non-tipped work.
Employers can cut costs by having tipped workers do work they would otherwise have to pay minimum wage for, said Elyanna Calle, president of the labor union Restaurant Workers United.
“It’s easy for bosses to take advantage of their workers, and in this industry where margins are tight and all owners and managers are so concerned about labor costs, they’re going to try to cut corners whenever possible — especially if there’s no law against it,” said Calle, who is also a restaurant worker in Texas where employers can pay tipped workers $2.13 an hour.
A Texas district court had previously upheld the 2021 protection. Last month, the 5th Circuit Court of Appeals reversed the decision, pointing to the Supreme Court’s Loper Bright ruling overturning Chevron deference — the 40-year precedent of deferring to government agencies’ interpretation of ambiguous laws.
“The Supreme Court’s intervening opinion in Loper Bright requires us to depart from the district court’s analysis at the very start,” the 5th Circuit judges wrote unanimously. One was appointed by George W. Bush, another by Barack Obama and the third by Donald Trump.
“Congress cannot have intended the tip credit to turn on so fine a distinction. It asked only whether the employee is engaged in an occupation in which he receives tips,” the judges wrote. (The so-called “tip credit” is what employers pay workers making tips less than minimum wage.)
The Restaurant Law Center, a part of a restaurant trade association representing employers, brought the challenge to the rule. It was also buoyed by amicus briefs from a handful of other corporate trade groups and from 11 Republican state attorneys general who argued that the rule “infringes the States’ power to regulate wages within the framework Congress designed.”
A group of nonprofits defending the rule in an animus filed by a Democracy Forward attorney argued that tossing the 20% of time on non-tipped work limit “would cost tipped workers more than $700 million per year.”
The Biden-era 20% rule is similar to an Obama-era rule tossed by Trump — though Biden Department of Labor regulators did add some new provisions.
Conservative legal scholars say these kinds of 180 turns between presidential administrations are part of why they pushed for Chevron to be overturned.
“One of the bad things about Chevron is it made it easier to flip-flop; it’s harder to flip-flop after Loper Bright,” administrative law scholar Richard Pierce said.
Critics say it takes power away from government agencies, led by political appointees, and into the hands of unaccountable judges. The 5th Circuit ruling tossed the 20% provision but also carved into past precedent on defining tipped workers.
The Harris-Walz or Trump-Vance administration could encounter challenges implementing their agendas in the face of newly emboldened courts. Both camps have promised to eliminate taxes on tips.
But Biden’s presidency, in particular, has been the “most pro-union since Franklin Roosevelt,” International Brotherhood of Teamsters’ Jason Vazquez told NOTUS, though he attributes much of Biden’s legacy to messaging more than tangible changes than courts can toss out since major shifts need congressional action.
The latest ruling does, however, mark a hit to Biden’s wins on labor, and there are a series of other pro-union regulations that could be impacted by Loper Bright, including National Labor Relations Board rules on expedited union elections, bargaining requirements and joint employers.
There is some unique deference for NLRB rules that could shield it from the sweeping overhaul the 5th Circuit handed the Department of Labor rule. But for conservative judges who want to take a hammer to Biden-era regulations, including labor protections, the 5th Circuit ruling may have laid out the clearest path to do it.
“The 5th Circuit pretty frequently invalidates any kind of progressive regulatory initiatives,” Vazquez said. “It was kind of surprising they explicitly relied on Loper Bright in the decision, but ultimately, I think that was just kind of a convenient tool for them to use.”
—
Claire Heddles is a NOTUS reporter and an Allbritton Journalism Institute fellow.