United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit

FILED April 28, 2023 No. 22-50145 Lyle W. Cayce Clerk

Restaurant Law Center; Texas Restaurant Association,

Plaintiffs—Appellants,

versus

United States Department of Labor; Honorable Martin J. Walsh, Secretary of the U.S. Department of Labor; Jessica Looman, Acting Administrator of the Department of Labor’s Wage and Hour Division, in her official capacity,

Defendants—Appellees.

Appeal from the United States District Court for the Western District of Texas USDC No. 1:21-CV-1106

Before Higginbotham, Duncan, and Engelhardt, Circuit Judges. Stuart Kyle Duncan, Circuit Judge: The Restaurant Law Center and the Texas Restaurant Association (“Plaintiffs”) challenge a Department of Labor regulation that refines how the federal minimum wage applies to tipped employees. The district court denied Plaintiffs a preliminary injunction on the sole ground that they failed to establish irreparable harm from complying with the new rule. We disagree. Case: 22-50145 Document: 00516731070 Page: 2 Date Filed: 04/28/2023

No. 22-50145

Because Plaintiffs sufficiently showed irreparable harm in unrecoverable compliance costs, we reverse and remand for further proceedings. I. The federal minimum wage is currently $7.25 per hour. 29 U.S.C. §§ 206(a)(1)(C), 213(a). There is an exception for “tipped employee[s],” meaning “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” Id. § 203(t). Tipped employees may be paid as low as $2.13 per hour, provided their tips fill out the rest of the minimum wage. Id. § 203(m)(2)(A). This is known as the “tip credit.” Over the past decades, the Department of Labor has fleshed out the contours of the tip-credit provision through regulations and other guidance. 1 In late 2021, the Department revised and added to a regulation about when an employee works in a “tipped occupation” under § 203(t). See 29 C.F.R. § 531.56(e), (f) (2021). In relevant part, the new rule permits an employer to take a tip credit, not only for an employee’s tip-producing work, but also for other work that “directly supports tip-producing work, provided that the employee does not perform that work for a substantial amount of time.” 29 C.F.R. § 531.56(f)(4). In turn, a “substantial amount of time” exists when: (i) The directly supporting work exceeds a 20 percent workweek tolerance, which is calculated by determining 20 percent of the hours in the workweek for which the employer has taken a tip credit. The employer cannot take a tip credit for any time spent on directly supporting work that exceeds the 20

1 See Fair Labor Standards Act Amendments of 1966, Pub. L. No. 89-601, § 602, 80 Stat. 830, 844 (1966) (delegating authority to Secretary of Labor); Tip Regulations Under the Fair Labor Standards Act (FLSA); Partial Withdrawal, 86 Fed. Reg. 60,114, 60,116–19 (Oct. 29, 2021) (discussing Department’s guidance “[o