A Nevada federal court’s decision is consistent with other recent federal court decisions holding that an employee has no claim for allegedly misappropriated gratuities under § 203(m) of the FLSA if no tip credit is taken and the employee receives the full minimum wage before tips, as the FLSA does not create a property right in gratuities except by operation of that provision. Cesarz v. Wynn Las Vegas, LLC, 2014 U.S. Dist. LEXIS 3094 (D. Nev. 2014).
In Cesarz, plaintiff casino dealers brought suit alleging that defendants’ policy requiring dealers to submit their tips for redistribution amongst various classifications of employee through a tip pool was a violation of the FLSA. Plaintiffs unsuccessfully argued that the Department of Labor’s 2011 amendments to the relevant regulations, §§ 531.52 and 531.54, purporting to create a property right in tips under the statute, gave rise to a claim even where no tip credit was taken. Citing the recent Oregon Restaurant & Lodging decision invalidating those regulations under the Ninth Circuit’s 2010 Woody Woo decision, the former a case argued by Jackson Lewis Wage-and-Hour Practice Group leader and former USDOL Wage-and-Hour Administrator Paul DeCamp, the District Court agreed that while the DOL had the authority to issue the challenged regulations, the court was nevertheless bound to find there was no room for agency discretion to read § 203(m) of the FLSA to create a property right in tips outside the tip credit language of the statute, as set forth in Woody Woo.
While this developing authority supports the position articulated in Woody Woo, providing employer discretion in tip practices under the FLSA where no tip credit is taken, state laws also must be considered. Further, the holding in Woody Woo is persuasive but not binding authority outside the Ninth Circuit. Employers must review tip practices under applicable federal and state law, and monitor relevant developments such as the proposed federal minimum wage hike.