                   FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


ALEC MARSH,                        No. 15-15791
         Plaintiff-Appellant,
                                       D.C. No.
              v.                 2:14-cv-01038-SMM

J. ALEXANDER’S LLC,
         Defendant-Appellee.



CRYSTAL SHEEHAN,                   No. 15-15794
          Plaintiff-Appellant,
                                       D.C. No.
              v.                 2:14-cv-00464-SMM

ROMULUS INCORPORATED,
DBA International House of
Pancakes,
          Defendant-Appellee.
2              MARSH V. J. ALEXANDER’S


SILVIA ALARCON,                     No. 15-16561
          Plaintiff-Appellant,
                                        D.C. No.
              v.                  2:14-cv-00465-SMM

ARRIBA ENTERPRISES
INCORPORATED, DBA Arriba
Mexican Grill,
         Defendant-Appellee.



SAROSHA HOGAN; NICHOLAS             No. 15-16659
JACKSON; SKYLAR VAZQUEZ;
THOMAS ARMSTRONG; PHILIP               D.C. Nos.
TODD; MARIA HURKMANS,             2:14-cv-00051-SMM
         Plaintiffs-Appellants,   2:14-cv-00766-SMM
                                  2:14-cv-00768-SMM
              v.                  2:14-cv-00769-SMM
                                  2:14-cv-01243-SMM
AMERICAN MULTI-CINEMA,            2:14-cv-01244-SMM
INC., DBA AMC Theatres
Esplanade 14,
          Defendant-Appellee.
               MARSH V. J. ALEXANDER’S                 3


NATHAN LLANOS, an                     No. 16-15003
individual,
            Plaintiff-Appellant,         D.C. No.
                                   2:14-cv-00261-SMM
               v.

P.F. CHANG’S CHINA BISTRO,
INC.,
         Defendant-Appellee.



KRISTEN ROMERO, an                   No. 16-15004
individual,
            Plaintiff-Appellant,         D.C. No.
                                   2:14-cv-00262-SMM
               v.

P.F. CHANG’S CHINA BISTRO,
INC.,
         Defendant-Appellee.



ANDREW FIELDS, an individual,        No. 16-15005
          Plaintiff-Appellant,
                                         D.C. No.
               v.                  2:14-cv-00263-SMM

P.F. CHANG’S CHINA BISTRO,
INC.,
         Defendant-Appellee.
4                MARSH V. J. ALEXANDER’S


ALTO WILLIAMS,                          No. 16-15118
          Plaintiff-Appellant,
                                          D.C. No.
                v.                  2:14-cv-01467-SMM

AMERICAN BLUE RIBBON
HOLDINGS, LLC,
         Defendant-Appellee.



STEPHANIE R. FAUSNACHT,                 No. 16-16033
          Plaintiff-Appellant,
                                          D.C. No.
                v.                  2:15-cv-01561-SMM

LION’S DEN MANAGEMENT
LLC, DBA Denny’s,                        OPINION
         Defendant-Appellee.



        Appeals from the United States District Court
                 for the District of Arizona
    Stephen M. McNamee, Senior District Judge, Presiding

       Argued and Submitted En Banc March 20, 2018
                 San Francisco, California
              MARSH V. J. ALEXANDER’S                      5

               Filed September 18, 2018

 Before: Sidney R. Thomas, Chief Judge, and Susan P.
Graber, M. Margaret McKeown, Kim McLane Wardlaw,
   William A. Fletcher, Richard A. Paez, Johnnie B.
  Rawlinson, Consuelo M. Callahan, Sandra S. Ikuta,
Morgan Christen and Andrew D. Hurwitz, Circuit Judges.

                Opinion by Judge Paez;
Partial Concurrence and Partial Dissent by Judge Graber;
                 Dissent by Judge Ikuta
6                  MARSH V. J. ALEXANDER’S

                          SUMMARY *


                          Labor Law
    The en banc court reversed district courts’ dismissals of
actions under the Fair Labor Standards Act concerning tip
credits toward servers’ and bartenders’ wages.

    The FLSA permits employers to take a tip credit for
employees in tipped occupations. Plaintiffs alleged that their
employers abused the tip credit provision by paying them a
reduced tip credit wage and treating them as tipped
employees when they were engaged in either (1) non-tipped
tasks unrelated to serving and bartending, such as cleaning
toilets; or (2) non-incidental tasks related to serving or
bartending, such as hours spent cleaning and maintaining
soft drink dispensers in excess of 20% of the workweek.

    The en banc court held that the Department of Labor
foreclosed an employer’s ability to engage in this practice by
promulgating a dual jobs regulation, 29 C.F.R. § 531.56(e),
and subsequently interpreting that regulation in its 1988
Field Operations Handbook, known as the “Guidance.” The
en banc court concluded that the regulation was entitled to
Chevron deference. Agreeing with the Eighth Circuit, the en
banc court held that the agency’s interpretation in the
Guidance was entitled to Auer deference because the
regulation was ambiguous and the Guidance’s interpretation
was both reasonable and consistent with the regulation. The
en banc court concluded that the plaintiffs had stated a claim
under the FLSA for minimum wage violations. The en banc

    *
      This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
                 MARSH V. J. ALEXANDER’S                      7

court reversed the district courts’ judgments and remanded
for further proceedings.

    Concurring in part and dissenting in part, Judge Graber
wrote that plaintiffs stated a claim that their employers failed
to pay them appropriate wages for non-tipped work
unrelated to their jobs. Judge Graber wrote that she would
affirm in part on the ground that plaintiffs failed to state a
claim regarding wages for non-tipped work related to their
jobs.

    Dissenting, Judge Ikuta, joined by Judge Callahan, wrote
that deference to the agency was improper because the
agency’s purported interpretation effectively eliminated an
employer’s statutory right to take a tip credit. Judge Ikuta
wrote that this legislative act was accomplished without
compliance with the Administrative Procedure Act, resulting
in an unfair and unexpected imposition of liability on
employers.
8              MARSH V. J. ALEXANDER’S

                      COUNSEL

Jahan C. Sagafi (argued), Outten & Golden LLP, San
Francisco, California; Clifford P. Bendau II, The Bendau
Law Firm, Phoenix, Arizona; Jamie G. Sypulski, Law Office
of Jamie Golden Sypulski, Chicago, Illinois; Douglas M.
Werman, Werman Salas P.C., Chicago, Illinois; for
Plaintiffs-Appellants.

Paul DeCamp (argued), Jackson Lewis P.C., Reston,
Virginia; Stephanie M. Cerasano, Jackson Lewis P.C.,
Phoenix, Arizona; for Defendant-Appellee P.F. Chang’s
China Bistro.

David A. Selden, Julie A. Pace, and Heidi Nunn-Gilman,
The Cavanagh Law Firm, Phoenix, Arizona, for Defendant-
Appellee Romulus, Inc.

Robert W. Horton and Mary Leigh Pirtle, Bass Berry & Sims
PLC, Nashville, Tennessee; Eric M. Fraser, Osborn Maledon
P.A., Phoenix, Arizona; for Defendant-Appellee
J. Alexander’s LLC.

Karen L. Karr, K. Leone Karr Law Office, Scottsdale,
Arizona, for Defendants-Appellees Arriba Enterprises Inc.
and Lion’s Den Management LLC.

Tracy A. Miller and Alexandra J. Gill, Ogletree Deakins
Nash Smoak & Stewart P.C., Phoenix, Arizona, for
Defendant-Appellant American Multi-Cinema Inc.

Caroline Larsen and Alexandra J. Gill, Ogletree Deakins
Nash Smoak & Stewart P.C., Phoenix, Arizona, for
Defendant-Appellee American Blue Ribbon Holdings LLC.
                MARSH V. J. ALEXANDER’S                  9

Sarah K. Marcus (argued), Senior Attorney; Paul L. Frieden,
Counsel for Appellate Litigation; Jennifer S. Brand,
Associate Solicitor; M. Patricia Smith, Solicitor of Labor;
Office of the Solicitor, United States Department of Labor,
Washington, D.C., for Amicus Curiae Secretary of Labor.
10                 MARSH V. J. ALEXANDER’S

                             OPINION

PAEZ, Circuit Judge:

    Congress enacted the Fair Labor Standards Act
(“FLSA”) in 1938 in response to a national concern that the
price of American development was the exploitation of an
entire class of low-income workers. President Roosevelt,
who pushed for fair labor legislation, famously declared:
“The test of our progress is not whether we add more to the
abundance of those who have much; it is whether we provide
enough for those who have too little.” S. Rep. No. 93-690,
at 4 (1974). The FLSA thus safeguards workers from
poverty by preventing employers from paying substandard
wages in order to compete with one another on the market.
See id. And yet, the plaintiffs in these consolidated cases
allege that the defendant employers have done exactly that.

    The FLSA permits employers to take a tip credit for
employees in tipped occupations. See 29 U.S.C. § 203(m).
The tip credit offsets an employer’s obligation to pay the
hourly minimum wage; employers may therefore pay as little
as $2.13 per hour to tipped employees under federal law.
29 C.F.R. § 531.59. If the employee’s tip credit wage and
tips do not meet minimum wage, however, the employer
must make up the difference. See 29 U.S.C. § 203(m).

    Alec Marsh and thirteen other former servers and
bartenders 1 allege that their employers abused the tip credit

    1
      The thirteen other servers and bartenders are Crystal Sheehan (No.
15-15794); Silvia Alarcon (No. 15-16561); Sarosha Hogan, Nicholas
Jackson, Skylar Vazquez, Thomas Armstrong, Philip Todd, and Maria
Hurkmans (No. 15-16659); Nathan Llanos (No. 16-5003); Kristen
Romero (No. 16-15004); Andrew Fields (No. 16-15005); Alto Williams
(No. 16-15118); and Stephanie Fausnacht (No. 16-16033). In addition to
                    MARSH V. J. ALEXANDER’S                             11

provision by paying them the reduced tip credit wage and
treating them as tipped employees when they were engaged
in either (1) non-tipped tasks unrelated to serving or
bartending, such as cleaning toilets; or (2) non-incidental
tasks related to serving or bartending, such as hours spent
cleaning and maintaining soft drink dispensers in excess of
20% of the workweek. Using the tip credit in such a manner
effectively makes tips—intended as gifts to servers for their
service—payments to employers instead, who use these tips
to minimize their obligations to pay employees the full
minimum wage for time spent working in a non-tipped
occupation. 2 Furthermore, by using servers as dishwashers,

J. Alexander’s, the other defendants include the International House of
Pancakes (No. 15-15794); Arriba Mexican Grill (No. 15-16561); AMC
Theatres Esplanade 14 (No. 15-16659); P.F. Chang’s China Bistro, Inc.
(Nos. 16-15003/04/05); American Blue Ribbon Holdings, LLC (No. 16-
15118); and Denny’s (No. 16-16033). These cases have been
consolidated on appeal. Because Marsh’s suit is the lead case, we refer
to the plaintiffs collectively as “Marsh.” We refer to the defendants
collectively as “Defendants.”

    2
      In the dissent’s view, employers do not abuse tipped employees as
long as the employees receive minimum wage. Dissent at 58 n.2. But,
the DOL was entitled to conclude otherwise. Congress has gradually
increased the minimum wage over the years to “eliminate[e] labor
conditions detrimental to the maintenance of the minimum standard of
living necessary for health, efficiency, and general well-being of
workers.” H.R. Rep. No. 89-1366, at 2 (1966) (emphasis added). The
minimum wage is meant to be a floor, not a ceiling: it is the bare
minimum necessary to secure “the very lowest standards” of living. Id.
at 6. By crediting a server’s tips towards their obligations to pay full
minimum wage for time employees spend working in a non-tipped
occupation, employers deprive servers the full value of their tips, which
are the property of the employee, see 29 C.F.R. § 531.52, and make it
significantly more difficult for the server to earn a living beyond
minimum wage. The dissent’s protestations to the contrary miss the
forest for the trees: the issue is not whether tipped employees are entitled
to the full minimum wage plus their tips, the issue is whether employers
12                  MARSH V. J. ALEXANDER’S

bussers, janitors, and cooks, employers can allegedly
eliminate or significantly reduce their need to hire full-time
janitors and cooks, who—as non-tipped workers—are
entitled to the full minimum hourly wage and therefore cost
more to employ.

    We conclude today that the Department of Labor
(“DOL”) foreclosed an employer’s ability to engage in this
practice by promulgating a dual jobs regulation in 1967,
29 C.F.R. § 531.56(e), and subsequently interpreting that
regulation in its 1988 Field Operations Handbook. We agree
with Marsh that both the regulation and the agency’s
interpretation are entitled to deference. Because Marsh has
stated a claim under the FLSA for minimum wage violations,
we reverse the district court’s judgments and remand for
further proceedings consistent with this opinion.

                                    I.

    Alec Marsh worked as a server at J. Alexander’s, a chain
restaurant with at least one location in Phoenix, Arizona,
from November 2012 to April 2013. 3 Marsh typically
worked around thirty-two hours per week, but spent almost
half his time on tasks that did not produce tips, such as
cutting and stocking fruit, cleaning the soft drink dispenser

may use an employee’s tips to cover their own obligation to pay full
minimum wage for time an employee spends in a non-tipped occupation.
     3
      Marsh filed a motion in the district court for leave to file a first
amended complaint, which the court denied on grounds of futility. The
proposed amended complaint provided additional details related to
Marsh’s weekly tasks not included in the original complaint. Where
necessary for the sake of clarity, we have incorporated details from the
proposed amended complaint in our recitation of the facts. Because the
rest of the consolidated cases on appeal share a similar factual
background, we do not separately recount them here.
                 MARSH V. J. ALEXANDER’S                   13

and nozzles, replacing soft drink syrups, stocking ice, taking
out the trash, scrubbing the walls, and cleaning the
restrooms. These tasks often took place out of customer
view, either before the restaurant had opened or after it had
closed. For example, Marsh was required to stock ice, brew
tea, and cut and stock fruit every opening shift and to wipe
down tables and collect and take out the trash every closing
shift. In return for his labor, J. Alexander’s paid Marsh an
hourly tip credit wage of $4.65 per hour in 2012 and
$4.80 per hour in 2013 pursuant to Arizona law. See Ariz.
Rev. Stat. § 23-363 (2007).

    Marsh filed suit, alleging that J. Alexander’s use of the
tip credit wage violated the FLSA’s minimum wage
requirements. See 29 U.S.C. § 206(a). Marsh’s complaint
alleged that, pursuant to the DOL’s dual jobs regulation, he
was a dual job employee working in multiple occupations—
one tipped, and the others not—because J. Alexander’s
required him to complete tasks unrelated to his tipped
occupation, such as cleaning the restrooms, and to spend
well over 20% of his time per week on tasks related to his
occupation that did not in and of themselves produce tips,
such as brewing coffee. Marsh alleged that although J.
Alexander’s was entitled to pay him a tip credit wage for the
time he spent working in his tipped occupation as a server, it
was not entitled to continue paying him the tip credit wage
for time spent working in an untipped occupation.

    Under this theory, J. Alexander’s violated the FLSA’s
minimum wage requirements when it failed to pay Marsh the
full hourly minimum wage for time spent working in an
untipped occupation. Marsh requested compensation equal
to the difference between the wages he was paid and
Arizona’s minimum wage.
14               MARSH V. J. ALEXANDER’S

     A few months after filing his complaint, Marsh moved
for leave to file a first amended complaint. The proposed
first amended complaint detailed how much time Marsh
spent completing each untipped task in a given workweek
and estimated his compensation for time engaged in a non-
tipped second occupation at $3.00 per hour. As the original
complaint, the amended complaint alleged two violations of
the FLSA and the dual jobs regulation: the first for failing to
pay Marsh the full minimum wage for time spent in excess
of 20% of his workweek on non-tipped, related duties; and
the second for failing to pay Marsh full minimum wage for
time spent on unrelated duties.

    J. Alexander’s moved to dismiss the original complaint.
The district court granted the motion, denied Marsh’s motion
to file an amended complaint, and dismissed Marsh’s suit
with prejudice. The court concluded that Marsh failed to
state an FLSA claim as a matter of law for three reasons:
(1) Marsh could not state a minimum wage violation
pursuant to United States v. Klinghoffer Bros. Realty Corp.,
285 F.2d 487 (2d Cir. 1960), as long as he was paid
minimum wage per workweek, irrespective of how much he
was actually paid per hour; (2) the dual jobs regulation,
29 C.F.R. § 531.56(e), is unambiguous and does not
recognize that servers like Marsh work in different
occupations when the non-tipped tasks are related to the
tipped occupation; and (3) even if the dual jobs regulation is
ambiguous, the DOL’s interpretation of the regulation in its
1988 Field Operations Handbook (the “Guidance”)—which
treats the performance of related duties in excess of 20% of
an employee’s workweek as a different occupation—is not
entitled to Auer deference.

    Marsh timely appealed. A divided panel of this court
agreed with the district court that the DOL’s interpretation
                    MARSH V. J. ALEXANDER’S                           15

of its dual jobs regulation was not entitled to deference. See
Marsh v. J. Alexander’s LLC, 869 F.3d 1108 (9th Cir. 2017).
The panel majority concluded that the Guidance’s focus on
duties and tasks was inconsistent with the dual jobs
regulation’s focus on jobs and characterized the Guidance as
less an interpretation entitled to Auer deference than a de
facto new regulation masquerading as an interpretation. See
id. at 1121–24. The panel majority, however, vacated the
district court’s dismissal of the suit and remanded to give
Marsh an opportunity to file an amended complaint. See id.
at 1127.

    A majority of the non-recused active judges voted to
grant Marsh’s petition for rehearing en banc. See Marsh v.
J. Alexander’s LLC, 882 F.3d 777 (9th Cir. 2018). We
reverse the district court’s judgments and conclude, as the
Eighth Circuit did in Fast v. Applebee’s Int’l, Inc., 638 F.3d
872 (8th Cir. 2011), that the Guidance is entitled to Auer
deference.

                                   II.

    We have jurisdiction pursuant to 28 U.S.C. § 1291. We
review de novo the district court’s final orders and its
interpretation of the relevant statutory and regulatory
provisions. 4 See Shaver v. Operating Eng’rs Local 428



    4
       The district court granted motions to dismiss in six of the cases,
judgment on the pleadings in two of the cases, and summary judgment
in one case. Our review of the district court’s final orders and
interpretation of the FLSA and the dual jobs regulation is de novo for all
nine cases. See, e.g., Kotrous v. Goss-Jewett Co. of N. Cal., 523 F.3d
924, 929 (9th Cir. 2008) (judgment on the pleadings); Kalantari v. NITV,
Inc., 352 F.3d 1202, 1204 (9th Cir. 2003) (summary judgment).
16                 MARSH V. J. ALEXANDER’S

Pension Tr. Fund, 332 F.3d 1198, 1201 (9th Cir. 2003)
(motion to dismiss).

                                 III.

    This case revolves around several statutory and
regulatory provisions and agency guidance governing the
payment of wages to tipped employees: the FLSA, the dual
jobs regulation, and the Guidance. Although the FLSA
guarantees all workers a federal minimum wage of $7.25 per
hour, see 29 U.S.C. § 206(a)(1)(c), employers may pay
tipped employees a reduced tip credit wage below the hourly
minimum wage, see id. § 203(m). 5 A tipped employee is
“any employee engaged in an occupation in which he
customarily and regularly receives more than $30 a month in
tips.” Id. § 203(t). Employers may therefore take up to a
$5.12 tip credit against the full hourly minimum wage and
pay tipped employees as little as $2.13 per hour in cash
     5
      Section 203(m), which created the alternative pay scheme for
tipped employees, provides, in relevant part:

         In determining the wage an employer is required to
         pay a tipped employee, the amount paid such
         employee by the employee’s employer shall be an
         amount equal to—

              (1) the cash wage paid such employee which for
         purposes of such determination shall be not less than
         the cash wage required to be paid such an employee
         on August 20, 1996; and

             (2) an additional amount on account of the tips
         received by such employee which amount is equal to
         the difference between the wage specified in
         paragraph (1) and the wage in effect under section
         206(a)(1) of this title.
                    MARSH V. J. ALEXANDER’S                           17

wages so long as the employee’s tips bring him or her up to
minimum wage. 6 See Fast, 638 F.3d at 874–75. If, however,
a server’s tips fall short of covering the minimum wage, the
employer must increase the employee’s cash wage to make
up the difference. See Cumbie v. Woody Woo, Inc., 596 F.3d
577, 580 (9th Cir. 2010).

    Seeking to clarify the meaning of a “tipped employee”
under the statute—including what constitutes an
“occupation” that “customarily and regularly” receives
tips—the DOL promulgated several regulations in 1967.
One of these regulations, 29 C.F.R. § 531.56, explains that
“[a]n employee employed full time or part time in an
occupation in which he does not receive more than $30 a
month in tips customarily and regularly is not a ‘tipped
employee’ within the meaning of [the FLSA]” and that a
calendar month need not be used to determine whether an
employee meets the $30-a-month benchmark.               Id.
§ 531.56(a), (b). The DOL also included a provision in this
regulation directly addressing situations in which an
employee is employed in dual jobs, one tipped and one not.
This dual jobs regulation states in full:

         Dual jobs. In some situations an employee is
         employed in a dual job, as for example, where
         a maintenance man in a hotel also serves as a
         waiter. In such a situation the employee, if
         he customarily and regularly receives at least
         $30 a month in tips for his work as a waiter,
         is a tipped employee only with respect to his
         employment as a waiter. He is employed in

    6
      Arizona state law caps the tip credit at $3.00 instead of $5.12. See
Ariz. Rev. Stat. § 23-363(C) (2007). This difference is irrelevant to
whether Marsh has stated a claim under the FLSA as a matter of law.
18               MARSH V. J. ALEXANDER’S

        two occupations, and no tip credit can be
        taken for his hours of employment in his
        occupation of maintenance man. Such a
        situation is distinguishable from that of a
        waitress who spends part of her time cleaning
        and setting tables, toasting bread, making
        coffee and occasionally washing dishes or
        glasses. It is likewise distinguishable from
        the counterman who also prepares his own
        short orders or who, as part of a group of
        countermen, takes a turn as a short order
        cook for the group. Such related duties in an
        occupation that is a tipped occupation need
        not by themselves be directed toward
        producing tips.

29 C.F.R. § 531.56(e) (emphases added).

    The dual jobs regulation initially generated some
confusion among employers, who were unsure whether their
tipped employees qualified as dual job employees. The DOL
consequently issued several opinion letters in an attempt to
delineate the boundaries of the dual jobs regulation. The
DOL ultimately released a guidance addressing the dual jobs
regulation in its Wage and Hour Division’s Field Operations
Handbook (“FOH”) in 1988, which the DOL revised in
2012. See FOH § 30d00(e) (1988) (the “Guidance”). Judge
Ikuta calls the Guidance a new rule promulgated by the
DOL, but it is clearly an interpretation in line with that of the
DOL’s prior opinion letters. The most recent version of the
Guidance states:

        (1) When an individual is employed in a
        tipped occupation and a non-tipped
        occupation, for example, as a server and
         MARSH V. J. ALEXANDER’S                   19

janitor (dual jobs), the tip credit is available
only for the hours spent in the tipped
occupation, provided such employee
customarily and regularly receives more than
$30.00 a month in tips. See 29 CFR
531.56(e).

(2) 29 CFR 531.56(e) permits the employer
to take a tip credit for time spent in duties
related to the tipped occupation of an
employee, even though such duties are not by
themselves directed toward producing tips,
provided such related duties are incidental to
the regular duties of the tipped employees
and are generally assigned to the tipped
employee. For example, duties related to the
tipped occupation may include a server who
does preparatory or closing activities, rolls
silverware and fills salt and pepper shakers
while the restaurant is open, cleans and sets
tables, makes coffee, and occasionally
washes dishes or glasses.

(3) However, where the facts indicate that
tipped employees spend a substantial amount
of time (i.e., in excess of 20 percent of the
hours worked in the tipped occupation in the
workweek) performing such related duties,
no tip credit may be taken for the time spent
in those duties. All related duties count
toward the 20 percent tolerance.

(4) Likewise, an employer may not take a tip
credit for the time that a tipped employee
spends on work that is not related to the
20                  MARSH V. J. ALEXANDER’S

         tipped occupation.          For example,
         maintenance work (e.g., cleaning bathrooms
         and washing windows) are not related to the
         tipped occupation of a server; such jobs are
         non-tipped occupations. In this case, the
         employee is effectively employed in dual
         jobs.

FOH § 30d00(f) (2016) (emphases added). 7



     7
      This formulation represents the DOL’s current interpretation of the
dual jobs regulation and may be found online at
https://www.dol.gov/whd/FOH/FOH_Ch30.pdf. The 20% benchmark
has been in place since the Guidance was first issued in 1988. The 1988
version of the Guidance provided in full:

              Reg 531.56(e) permits the taking of the tip credit
         for time spent in duties related to the tipped
         occupation, even though such duties are not by
         themselves directed toward producing tips (i.e.
         maintenance and preparatory or closing activities). For
         example a waiter/waitress, who spends some time
         cleaning and setting tables, making coffee, and
         occasionally washing dishes or glasses may continue
         to be engaged in a tipped occupation even though these
         duties are not tip producing, provided such duties are
         incidental to the regular duties of the server
         (waiter/waitress) and are generally assigned to the
         servers. However, where the facts indicate that
         specific employees are routinely assigned to
         maintenance, or that tipped employees spend a
         substantial amount of time (in excess of 20 percent)
         performing preparation work or maintenance, no tip
         credit may be taken for the time spent in such duties.

Brief for the Secretary of Labor as Amicus Curiae in Support of
Plaintiffs-Appellees at 13, Fast v. Applebee’s Int’l, Inc., 638 F.3d 872
                    MARSH V. J. ALEXANDER’S                           21

    The Guidance thus clearly contemplates that a server
who performs unrelated tasks, such as cleaning restrooms, is
a dual job employee entitled to the full minimum hourly
wage for her unrelated work. The Guidance also clearly lays
out that a server is a dual job employee if her related tasks
occupy more than 20% of her hours in a workweek.

    The dissent takes issue with the 2012 update to the
Guidance 8 and asserts that this was the first time the agency
“provided that employers could not take a tip credit for any
time employees spent on tasks that did not directly relate to
serving customers.” Dissent at 61–62. This presumes, of
course, that prior to 2012, the DOL would have permitted
employers to take a tip credit even for hours a server spent
on tasks unrelated to their tipped occupation. As we discuss
infra, the dual jobs regulation squarely forecloses that line of
argument by distinguishing between a tipped employee who
spends some time completing related, but untipped work,
and a dual job employee who works as a maintenance man
part of the time and a server the rest. 29 C.F.R. § 531.56(e).
Accordingly, if both the Guidance and the dual jobs
regulation are entitled to deference, then Marsh has alleged



(8th Cir. 2011) (Nos. 10-1725/26), 2010 WL 3761133 (quoting FOH
§ 30d00(e) (1988)).
    8
       The dissent’s characterization of the Guidance as a “Time-
Tracking Rule” is a novel one. Dissent at 62. Neither the district court
nor the parties referred to the Guidance in this manner. Indeed, the prior
panel opinion—which was authored by Judge Ikuta—never mentioned
this “Time-Tracking Rule.” See Marsh v. J. Alexander’s LLC, 869 F.3d
1108 (9th Cir. 2017), reh’g en banc granted by Marsh v. J. Alexander’s
LLC, 882 F.3d 777 (9th Cir. 2018) (referring to the Guidance as “the
FOH § 30d00(f),” “the FOH,” and “the guidance”).
22                  MARSH V. J. ALEXANDER’S

facts sufficient to make out an FLSA minimum wage
violation claim. We turn to those questions. 9

                                   A.

    Defendants first contend that the dual jobs regulation is
not entitled to deference under Chevron, U.S.A., Inc. v. Nat.
Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984). We
disagree.

                                   1.

    As an initial matter, it is beyond question that the DOL
promulgated the dual jobs regulation, 29 C.F.R. § 531.56, in
the exercise of its congressionally delegated authority. See
United States v. Mead Corp., 533 U.S. 218, 226–27 (2001).
Congress amended the FLSA in 1966 by defining “tipped
employee” for the first time, see 29 U.S.C. § 203(t), and
adding a formula for calculating the wage of a tipped
employee, see id. § 203(m). See Fair Labor Standards
Amendments of 1966, Pub. L. No. 89-601, § 101, 80 Stat.
830, 830. The 1966 Amendments authorized the Secretary
of Labor “to promulgate necessary rules, regulations, or
orders with regard to the amendments made by this Act.” Id.

     9
       We are not the first circuit to grapple with these questions. The
Eighth Circuit addressed similar claims brought by tipped employees in
Fast v. Applebee’s Int’l Inc., 638 F.3d 872 (8th Cir. 2011). The
employers in Fast, however, conceded that the dual jobs regulation was
entitled to Chevron deference. See id. at 877. The Eighth Circuit focused
instead on whether the Guidance was entitled to Auer deference. The
court concluded that because the dual jobs regulation was ambiguous and
included temporal considerations, the Guidance was not plainly
erroneous or inconsistent with the regulation and was therefore entitled
to deference. See id. at 879–80. Accordingly, the district court did not
err when it denied the employer’s motion for summary judgment. See
id. at 882.
                MARSH V. J. ALEXANDER’S                   23

at § 603, 80 Stat. at 844. Shortly thereafter, the DOL issued
a notice of proposed rulemaking aimed at “expand[ing]
29 CFR Part 531 to make provisions responsive” to the “Fair
Labor Standards Amendments of 1966,” specifically the
newly amended sections 203(m) and 203(t) regarding tipped
employees. 32 Fed. Reg. 222, 222 (Jan. 10, 1967). This
process eventually produced the dual jobs regulation,
29 C.F.R. § 531.56(e). See 32 Fed. Reg. 13,575 (Sept. 27,
1967).

    Defendants nonetheless urge us to conclude that
Chevron deference is inapplicable in this instance because
the dual jobs regulation was promulgated without adequate
notice and an opportunity to comment. This argument,
however, is decades too late. See Perez-Guzman v. Lynch,
835 F.3d 1066, 1077 (9th Cir. 2016), cert. denied, 138 S. Ct.
737 (2018) (“Procedural challenges to agency rules under
the Administrative Procedure Act are subject to the general
six-year limitations period in the U.S. Code.”); see also
28 U.S.C. § 2401(a). The dissent may object to the way the
DOL promulgated the dual jobs regulation, but as a matter
of law, such procedural challenges to the regulation here are
indisputably untimely and beyond our scope of review.
Dissent at 58–60. We therefore conclude that Mead’s
requirements have been met. 533 U.S. at 226–27.

                             2.

    Applying the Chevron framework, we next ask whether
“Congress has directly spoken to the precise question at
issue.” 467 U.S. at 842. We conclude that it has not.

   Section 203(t) defines a tipped employee as “any
employee engaged in an occupation in which he customarily
and regularly receives more than $30 a month in tips.”
29 U.S.C. § 203(t). The FLSA, however, does not separately
24              MARSH V. J. ALEXANDER’S

define “occupation.” Id. Nor does the statute shed light on
the meaning of “customarily and regularly.” Id. Counsel for
Defendants urge us to conclude that the use of the word
“occupation” in section 203(t) was not “intended to do a lot
of work” and that the statute is therefore “not ambiguous.”
United States Court of Appeals for the Ninth Circuit, 15-
15791 Alec Marsh v. J. Alexander’s LLC, YouTube (Mar.
20, 2018) at 47:10–47:15; 49:45–49:51. We decline to treat
Congress’s choice of words so dismissively; to the contrary,
we must presume that Congress’s choice of words is
deliberate. See Univ. of Tex. Sw. Med. Ctr. v. Nassar,
570 U.S. 338, 353 (2013). Accordingly, we agree with the
Eighth Circuit that where, as here, Congress has crafted an
ambiguous statute and tasked the DOL with implementing
the ambiguous provisions, we must “defer to the agency’s
regulation so long as it is not arbitrary, capricious, or
manifestly contrary to the statute.” Fast, 638 F.3d at 876
(internal quotation marks omitted).

    Contrary to Defendants’ assertions, the FLSA’s
legislative history does not “evince an unambiguous
congressional intention” to treat all employees as tipped
employees, regardless of their tasks or time spent on
untipped tasks. Chem. Mfrs. Ass’n v. Nat. Res. Def. Council,
Inc., 470 U.S. 116, 129 (1985). At most, Congress suggested
in a Senate report—published seven years after the DOL
promulgated its dual jobs regulation—that “[i]n
establishments where the employee performs a variety of
different jobs, the employee’s status as one who
‘customarily and regularly receives tips’ will be determined
on the basis of the employee’s activities over the entire
workweek.” S. Rep. No. 93-690, at 43 (1974). Under
Defendants’ view, this sentence indicates that section 203(t)
unambiguously allows employers to take a tip credit for
every hour an employee spends working, as long as the
                 MARSH V. J. ALEXANDER’S                   25

employee’s total tips exceed $30 per month—even if the
employee engages in tipped work only 10% of the time. See
United States Court of Appeals for the Ninth Circuit, 15-
15791 Alec Marsh v. J. Alexander’s LLC, YouTube (Mar.
20, 2018) at 34:43–35:45.

    But this sentence does not bear the weight Defendants
put on it. Critically, the legislation accompanying the 1974
report did not make any changes to section 203(t). Further,
the report expressly recognized “the ethical question
involved in crediting tips toward the minimum wage” and
emphasized that tipped employees “should have stronger
protection to ensure the fair operation” of the tip credit
provision. S. Rep. No. 93-690 at 42–43. Neither the plain
language of the statute nor its legislative history suggest—
much less clearly demonstrate—that section 203(t) is
unambiguous.

                              3.

    Having concluded that the FLSA “is silent or
ambiguous” with respect to the treatment of employees who
make more than $30 a month in tips but who may be engaged
in multiple occupations, we consider “whether the agency’s
answer is based on a permissible construction of the statute.”
Chevron, 467 U.S. at 843. We conclude that it is.

    The 1966 amendments to the FLSA were intended to
“improve living standards by eliminating substandard
working conditions in employment” and to bring the law up
to date with the “advancing economy,” which had outpaced
the FLSA’s worker protections. H.R. Rep. No. 89-1366, at
10 (1966). Later amendments to the FLSA stressed the
importance of guaranteeing “a fair day’s pay for a fair day’s
work.” H.R. Rep. No. 93-913, at 8 (1974). The dual jobs
regulation, which was promulgated to give effect to new
26                 MARSH V. J. ALEXANDER’S

statutory provisions addressing tipped employees, was
neither an arbitrary reversal of a prior agency position nor
“manifestly contrary to the statute.” Chevron, 467 U.S. at
844. Confronted with a gap in the FLSA’s coverage of dual
job employees, the DOL reasonably exercised its authority
to fill that gap by ensuring that employees working in tipped
and untipped occupations would not be shortchanged by
their employers.

    Defendants concede that under the FLSA, if some of an
employee’s tasks were outside the scope of a tipped
occupation, the employee would be engaging in non-tipped
employment for which the employer would not be entitled to
take a tip credit. See United States Court of Appeals for the
Ninth Circuit, 15-15791 Alec Marsh v. J. Alexander’s LLC,
YouTube (Mar. 20, 2018) at 35:05–35:45. That is precisely
the kind of situation the dual jobs regulation addresses.

    The dual jobs regulation establishes that an employee is
entitled to the full minimum wage for any time spent in a
non-tipped occupation. See 29 C.F.R. § 531.56(e). Thus, an
employee who serves as both a maintenance man and a
waiter in a hotel “is a tipped employee only with respect to
his employment as a waiter.” Id. This provision prevents
employers from paying maintenance workers as little as
$2.13 an hour, simply because they also happen to work as
servers. Having concluded that the dual jobs regulation “is
a reasonable choice within a gap left open by Congress, the
challenge must fail.” 10 Chevron, 467 U.S. at 866.


     10
       We note that in many of the challenges to the Guidance, the
employers do not contest that the dual jobs regulation is entitled to
Chevron deference. See, e.g., Fast, 638 F.3d at 877; Knox v. Jones Grp.,
201 F. Supp. 3d 951, 961 n.8 (S.D. Ind. 2016); Chavez v. T&B Mgmt.,
                    MARSH V. J. ALEXANDER’S                          27

                                   B.

    Our inquiry, however, does not end with the dual jobs
regulation. For Marsh to state a claim under the FLSA, we
must also conclude that the Guidance—which establishes
the 20% related duties benchmark and separates occupations
by duties—is entitled to judicial deference under either Auer
v. Robbins, 519 U.S. 452 (1997), or Skidmore v. Swift & Co.,
323 U.S. 134 (1944). See Indep. Training & Apprenticeship
Program v. Cal. Dep’t of Indus. Relations, 730 F.3d 1024,
1035 (9th Cir. 2013). Because the dual jobs regulation is
ambiguous and the Guidance’s interpretation is both
reasonable and consistent with the regulation, we agree with
the Eighth Circuit that the Guidance is entitled to Auer
deference. 11 See Fast, 638 F.3d at 880–81.

                                   1.

    “[W]here an agency interprets its own regulation, even if
through an informal process, its interpretation of an
ambiguous regulation is controlling under Auer unless
‘plainly erroneous or inconsistent with the regulation.’”
Bassiri v. Xerox Corp., 463 F.3d 927, 930 (9th Cir. 2006)
(quoting Auer, 519 U.S. at 461). “Under this standard, we
defer to the agency’s interpretation of its [ambiguous]

LLC, No. 1:16cb1019, 2017 WL 2275013, at *5 (M.D.N.C. May 24,
2017). In cases where defendants have disputed whether Chevron
applied, the argument has not been successful. See, e.g., Flood v.
Carlson Rests. Inc., 94 F. Supp. 3d 572, 583 n.9 (S.D.N.Y. 2015);
Goodson v. OS Rest. Servs., LLC, No. 5:17-cv-10-Oc-37PRL, 2017 WL
1957079, at *6 (M.D. Fla. May 11, 2017).

    11
       The Eighth Circuit deferred to an earlier version of the Guidance,
see FOH § 30d00(e) (1988). The differences between the current version
of the Guidance and its predecessor, however, are immaterial because
both utilize the 20% benchmark.
28                  MARSH V. J. ALEXANDER’S

regulation unless an ‘alternative reading is compelled by the
regulation’s plain language or by other indications of the
[agency’s] intent at the time of the regulation’s
promulgation.’” Id. at 391 (emphasis and second alteration
in original) (quoting Thomas Jefferson Univ. v. Shalala,
512 U.S. 504, 512 (1994)). Interpretations that “do[] not
reflect the agency’s fair and considered judgment of the
matter in question” or unfairly surprise regulated parties are
not entitled to Auer deference. Christopher v. SmithKline,
567 U.S. 142, 155–56 (2012) (quoting Auer, 519 U.S. at
462).

   [S]We agree with Marsh that the dual jobs regulation is
ambiguous. 12 The dual jobs regulation, like the FLSA, does

     12
       Unlike with Chevron deference, there is no preliminary analysis
that precedes Auer’s two-step analysis. Cf. Oregon Rest. and Lodging
Ass’n v. Perez, 815 F.3d 1080, 1086 n. 3 (9th Cir. 2016) (acknowledging
that United States v. Mead Corp., 533 U.S. 218 (2001) created a
“Chevron step zero” that precedes the Chevron test). There is certainly
no mandatory “threshold question” regarding whether the interpretation
in question is a “legislative rule” as opposed to an interpretation. Dissent
at 64. The dissent’s reliance on Mission Group Kansas, Inc. v. Riley,
146 F.3d 775 (10th Cir. 1998), and Director, OWCP v. Mangifest,
826 F.2d 1318 (3d Cir. 1987), to establish the boundaries of Auer
deference is puzzling. Dissent at 64–65. For one, neither case mentions
Auer—indeed, Mangifest predates Auer by over nine years. For another,
the Supreme Court has never adopted a pre-Auer test that asks at the
outset whether an interpretation is a regulation in disguise. In fact, the
Supreme Court’s case law seems to suggest the exact opposite. In
Christensen v. Harris County, 529 U.S. 576 (2000), the Supreme Court
held that if a court determines at step one of Auer that a regulation is
unambiguous, the court cannot defer to the agency’s position because
that would sanction the de facto creation of a new regulation to override
a previously existing one. Id. at 588. The dissent’s citation to Gonzales
v. Oregon, 546 U.S. 243 (2006), does nothing to make up the paucity of
case law supporting the dissent’s interpretation of Auer, in part because
the dissent omits critical context in describing the Court’s holding.
                    MARSH V. J. ALEXANDER’S                           29

not offer a precise definition for “occupation.” Instead, the
regulation relies on a series of examples to illustrate the
difference between a tipped employee and a dual job
employee engaged in both a tipped and an untipped
occupation. See 29 C.F.R. § 531.56(e). The regulation
explains that a person working as both a maintenance man
and a server is obviously “employed in two occupations,”
such that “no tip credit can be taken for his hours of
employment in his occupation of maintenance man.” Id.
But it does not explain how to classify the person’s
occupation—whether through official title, expected duties,
or some other method. See Fast, 638 F.3d at 877.

    The second half of the dual jobs regulation suggests that
the DOL likely intended to tie a person’s occupation to his
or her duties. See 29 C.F.R. § 531.56(e) (explaining that the
maintenance man/server’s situation is “distinguishable from
that of a waitress who spends part of her time cleaning and
setting tables, toasting bread, making coffee and
occasionally washing dishes or glasses”). But like a door
leading to more doors, this clarification only produces more

Gonzales made clear that Auer deference was inappropriate because the
supposedly ambiguous regulation at issue simply parroted the statute. Id.
at 257. Because “[a]n agency does not acquire special authority to
interpret its own words when, instead of using its expertise and
experience to formulate a regulation, it has elected merely to paraphrase
the statutory language,” the Court concluded that Auer deference was
inapplicable to the interpretive rule at issue. This is a well-established
exception to Auer deference that has no bearing on this case. None of
the Defendants argue that the dual jobs regulation merely parrots the
language of the FLSA, nor could they given the obvious differences.

    The Defendants were free to separately challenge whether the
Guidance should have gone through notice-and-comment rulemaking.
That they did not means this argument is waived. See infra p. 37 n.19.
30                  MARSH V. J. ALEXANDER’S

questions. As the Eighth Circuit recognized, although the
regulation establishes that a server who spends “part of her
time” cleaning tables and “occasionally” washing dishes is
not a dual job employee, see id., the regulation does not
define either ambiguous, temporal term. 13 See Fast,
638 F.3d at 877. If a server spends 10% of her time washing
dishes, does that qualify as “occasional”? What about 30%?
The regulation’s silence on this point is compelling evidence
of its ambiguity. We therefore disagree with Judge Graber’s
reading of the regulation. See Partial Concur. at 48–49. Had
the DOL intended to unambiguously foreclose servers from
being dual job employees regardless of the amount of time
they spend on related, but untipped duties, the regulation
would not include the temporal limitations it does. Instead,
the dual jobs regulation would have read: “Such a situation
is distinguishable from that of a waitress who spends her
time serving customers or completing related, but untipped
tasks, such as cleaning and setting tables, toasting bread, and
making coffee.”        By restricting related duties with
limitations such as “occasionally,” “part of [the] time,” and
“tak[ing] a turn,” the dual jobs regulation necessarily
distinguishes between single-job employees who only
occasionally complete related tasks, and dual-job employees




     13
        Similarly, the regulation’s reference to a “counterman who also
prepares his own short orders or who, as part of a group of countermen,
takes a turn as a short order cook for the group,” 29 C.F.R. § 531.56(e)
(emphasis added), as one example of a non-dual job employee offers no
details on the meaning of “taking a turn.” There must be a point at which
the counterman is no longer just taking a turn as a short order cook but
instead actually working as a short order cook. The regulation, however,
is devoid of even a hint as to what that point might be.
                    MARSH V. J. ALEXANDER’S                          31

who regularly do. 14 What the regulation leaves undefined is
the point at which this transformation occurs.

    The same is true of the regulation’s reference to “related
duties,” 29 C.F.R. § 531.56(e), which suggests two
distinctions: one between related and unrelated duties; and
the other between duties related to a tipped occupation and
duties that are part and parcel of a tipped occupation. The
regulation states that cleaning tables, washing dishes,
making coffee, and toasting bread are all duties related to a
server’s occupation, but offers no guidance as to other
duties, such as cleaning the restroom or chopping fruits and
vegetables in the kitchen. See id. The regulation also leaves
open the possibility that when a tipped employee engages in
tasks related to her tipped occupation—but which are not
actually synonymous with her tipped occupation—more
than occasionally or part of the time, those related tasks form
a separate, untipped job for which the employer is not
entitled to take a tip credit. These interpretive gaps,
including the regulation’s failure to “define ‘related duties,’”
Fast, 638 F.3d at 877, all serve as additional evidence of the
regulation’s ambiguity.




     14
        Consider, for instance, a server who spends 90% of her time
wiping down tables, for which she receives no tips, and the remaining
10% of her time assisting customers. Under Judge Graber’s view, the
dual jobs regulation would unambiguously consider this server a single-
job, tipped employee because it is immaterial whether the server is
spending her time on tipped duties or related duties. Partial Concur. at
51–53. We think this example is plainly inconsistent with the text of the
dual jobs regulation. A server who spends 90% of her time on related
duties is not spending “part of her time” on such tasks any more than she
is “occasionally” engaging in untipped work.
32                  MARSH V. J. ALEXANDER’S

                                   2.

    Having concluded that the dual jobs regulation is
ambiguous, we next consider whether the Guidance is
“plainly erroneous or inconsistent with the regulation.”
Auer, 519 U.S. at 461 (internal quotation marks omitted).
The DOL’s interpretation is consistent with nearly four
decades of interpretive guidance and with the statute and the
regulation itself. Together, these factors strongly counsel in
favor of applying Auer deference to the Guidance.

    The dual jobs regulation relies on two undefined factors
to determine whether an employee is a dual-job employee:
(1) the relatedness of an employee’s duties to a tipped
occupation and (2) the amount of time an employee spends
on completing related but untipped duties. See 29 C.F.R.
§ 531.56(e) (clarifying that an employee who spends “part
of her time” on duties “related” to her tipped occupation that
are not themselves “directed toward producing tips” is not a
dual jobs employee). In the decades following the
regulation’s promulgation, the DOL continuously
endeavored to provide employers with further guidance on
the regulation in the form of opinion letters. These efforts
eventually culminated in the creation of the Guidance in the
DOL’s Field Operations Handbook (“FOH”) in 1988. 15 See
Brief for the Secretary of Labor as Amicus Curiae, Dkt. No.

     15
        The FOH is an “operations manual that provides Wage and Hour
Division (WHD) investigators and staff with interpretations of statutory
provisions, procedures for conducting investigations, and general
administrative guidance.” See Wage & Hour Div., Dep’t of Labor, Field
Operations      Handbook      (Aug.     31,    2017),     available     at
https://www.dol.gov/whd/FOH/index.htm. The FOH “reflects policies
established through changes in legislation, regulations, significant court
decisions, and the decisions and opinions of the WHD Administrator.”
Id.
                    MARSH V. J. ALEXANDER’S                          33

45, at 16 (hereinafter “DOL Amicus Brief”) (“The FOH
interpretation was based on, and is consistent with, the prior
opinion letters.”).

    The Guidance attempts to address the regulation’s
ambiguity by establishing three definitions, each of which
builds on an interpretation of the regulation. First, the
Guidance limits “related duties” to those that are “incidental
to the regular duties of the tipped employees and are
generally assigned to the tipped employees.”             FOH
§ 30d00(f)(2) (2016). Second, the Guidance establishes that
a tipped employee who spends a “substantial amount of
time,” defined as “in excess of 20 percent of the hours
worked in the tipped occupation in the workweek,” on such
related duties may not be paid the reduced tip credit wage.
Id. § 30d00(f)(3). “All related duties count toward the
20 percent tolerance,” meaning that a server need not spend
all of that time on one related task, such as washing dishes,
to qualify as a dual job employee. Id. Third, the Guidance
makes explicit the regulation’s suggestion that occupations
are defined by their tasks. See id. § 30d00(f)(4) (“For
example, maintenance work (e.g., cleaning bathrooms and
washing windows) are not related to the tipped occupation
of a server; such jobs are non-tipped occupations.”).
Accordingly, the Guidance recognizes that a server is no
longer engaged in a tipped occupation once she starts
cleaning bathrooms and washing windows, because those
tasks fall within the purview of a separate, non-tipped
occupation. 16 See id.


    16
       Contrary to the dissent’s position, an agency need not explicitly
identify in its guidance each ambiguous word it is defining in order to
provide a valid interpretation of an ambiguous regulation. Dissent at 20–
22. There is no “magic words” requirement under Auer. At any rate, the
34                  MARSH V. J. ALEXANDER’S

    Citing Probert v. Family Centered Servs. of Alaska, Inc.,
651 F.3d 1007 (9th Cir. 2011), Defendants contend that the
Guidance is not entitled to deference because the FOH
includes a disclaimer that it “is not used as a device for
establishing interpretive policy.” Id. at 1012. Defendants’
argument fails because the DOL has adopted the Guidance’s
interpretation in its amicus brief. See DOL Amicus Brief at
16; Fast, 638 F.3d at 877. It is well-settled law that courts
may afford an agency’s interpretation Auer deference if the
interpretation is advanced through an amicus brief. See
Auer, 519 U.S. at 461; Barrientos v. 1801–1825 Morton
LLC, 583 F.3d 1197, 1214 (9th Cir. 2009) (“Further, an
agency’s litigation position in an amicus brief is entitled to
deference if there is no reason to suspect that the
interpretation does not reflect the agency’s fair and
considered judgment on the matter.” (internal quotation
marks omitted)).

    We similarly reject as unpersuasive Defendants’ brief
argument that the Guidance is not entitled to Auer deference
because employers in this country did not have “notice that
they must pay an employee . . . based on an agency’s internal
advice given to its field investigators.” Christopher v.


dissent’s claim that “the Rule fails to clarify any of the phrases in the
dual job regulation” because the agency failed to identify each
ambiguous term it was defining is unsupported by the facts. Dissent at
73. In its 2010 amicus brief adopting the Guidance, the DOL explained
that the Guidance was intended to “affix[] a specific limit to the
regulation’s tolerance for the ‘occasional’ performance of such related
duties,” “identify a number of duties related to the tipped occupation,”
and elaborate on the difference between a tipped and non-tipped
occupation. See Brief for the Secretary of Labor as Amicus Curiae in
Support of Plaintiffs-Appellees at 9, 11–12, 29 n.9, Fast v. Applebee’s
Int’l, Inc., 638 F.3d 872 (8th Cir. 2011) (Nos. 10-1725/26), 2010 WL
3761133.
                    MARSH V. J. ALEXANDER’S                           35

SmithKline Beecham Corp., 567 U.S. 142 (2012), held that
Auer deference is not warranted when an agency’s
interpretation would “impose potentially massive liability”
without first providing regulated parties “fair warning of the
[prohibited] conduct.” Id. at 155–56. There, the Court
recognized that preventing “unfair surprise[s]” outweighed
the “general merits of Auer deference,” particularly where
the agency’s interpretation postdated the regulated parties’
conduct. Id. at 156, 159; see also Indep. Training &
Apprenticeship Program v. Cal. Dep’t of Indus. Relations,
730 F.3d 1024, 1035 (9th Cir. 2013) (“[T]he Court has
deemed Auer deference unsuitable when such deference
would result in ‘unfair surprise’ to one of the litigants.”).

    Here, in contrast, the Guidance has been in place since
1988 and was published to the Internet pursuant to the
Electronic Freedom of Information Act Amendments of
1996. See Wage & Hour Div., Dep’t of Labor, Field
Operations Handbook (Aug. 31, 2017), available at
https://www.dol.gov/whd/FOH/index.htm. The DOL also
adopted the Guidance’s interpretation and the 20%
benchmark in its amicus brief to the Eighth Circuit in Fast,
which was filed on September 15, 2010—two years before
Marsh began his employment with J. Alexander’s. See Brief
for the Secretary of Labor as Amicus Curiae in Support of
Plaintiffs-Appellees, Fast v. Applebee’s Int’l, Inc., 638 F.3d
872 (8th Cir. 2011) (Nos. 10-1725/26), 2010 WL 3761133.
Defendants were therefore on notice at least as of September
15, 2010—if not before 17—that their conduct was not in
compliance with the dual jobs regulation.


    17
       It may be that employers “have had access to the DOL’s view on
the 20 percent rule for decades,” as Plaintiffs claim, which would further
cut against unfair surprise. On the record before us, however, it is
36                  MARSH V. J. ALEXANDER’S

    As a result, unlike the plaintiffs in SmithKline, Marsh’s
theory of liability rests on an interpretation that predates
Defendants’ conduct. This is not a case where the instant
suit represents the first and only time the DOL has advanced
the interpretation at hand. See, e.g., Emp’r Sols. Staffing
Grp. II, LLC v. Office of Chief Admin. Hearing Officer,
833 F.3d 480, 488–90 (5th Cir. 2016) (concluding Auer
deference was unwarranted because the proffered
interpretation emerged from a single decision by the ALJ in
the instant case). Nor is this a case where the agency failed
to issue “interpretative guidance indicating [its] current
position,” Perez v. Loren Cook Co., 803 F.3d 935, 943 (8th
Cir. 2015) (en banc), considering the DOL adopted the
Guidance in its 2010 amicus brief. Further, as we discuss
later, the DOL has regularly promulgated regulations that
use the 20% benchmark to distinguish between substantial
and incidental amounts of time. We therefore conclude that




unclear when the Guidance was first published online—only that it must
have been after 1996. See Wage & Hour Div., Dep’t of Labor, Field
Operations     Handbook       (Aug.      31,     2017),    available    at
https://www.dol.gov/whd/FOH/index.htm (explaining that the DOL
chose to publish its FOH “on the Internet pursuant to its obligation under
FOIA [Freedom of Information Act] to make available administrative
staff manuals and instructions to staff that affect members of the public,
5 U.S.C. 552(a)(2),” which was amended in 1996 to requires agencies to
make such records available by computer telecommunications or other
electronic means); see also H. Rep. No. 104-795, at 20 (1996) (clarifying
that the 1996 amendments to 5 U.S.C. 552(a)(2) were intended to ensure
that agency information would be made available “online”). It is
therefore impossible to say, as the dissent does, that “th[e] 20-percent
cap was not made public until decades later, when the DOL included it
in an amicus brief.” Dissent at 61. We therefore do not reach whether
Defendants were on notice before September 15, 2010.
                    MARSH V. J. ALEXANDER’S                            37

the Guidance did not unfairly surprise Defendants as of
September 15, 2010. 18

    Defendants next contend that the Guidance is not entitled
to deference because its 20% limitation on related duties is
inconsistent with the dual jobs regulation itself. 19 We
disagree. As the Eighth Circuit recognized in Fast, “[b]y
using the terms ‘part of the time’ and ‘occasionally,’ the

    18
       The dissent asserts that it was “not until 2016 that employers
learned they could not take a tip credit for any time” spent on unrelated
tasks. Dissent at 82–83. The text of the dual jobs regulation, however,
belies the dissent’s timeline, as does the DOL’s opinion letter dating
back to 1985. See U.S. Dep’t of Labor, Wage & Hour Div., Opinion
Letter FLSA-854 (Dec. 20, 1985), available at 1985 WL 1259240, at 2
(“[S]alad preparation activities are essentially the activities performed
by chefs and no tip credit may be taken for the time [the employer’s
servers] spent in preparing vegetables for the salad bar.”); see also supra
pp. 28–29, 62; infra pp. 40–41. Moreover, Marsh alleged in his first
complaint, which was filed in 2014, that “[i]n addition to tipped work,
Defendant regularly and consistently required Plaintiff to perform non-
tipped work unrelated to this tipped occupation, for which Plaintiff was
paid at the reduced tip credit rate, in willful violation by Defendant of
the FLSA.” If Marsh was aware of these limitations on the tip credit well
before 2016, it is a fair assumption that his employer was as well.

    19
        Although several of the Defendants briefly assert in one sentence
that the Guidance has created a new cause of action and therefore violates
the separation of powers principle, they have offered no supporting
authority for that proposition and have failed to elaborate on their point.
As such, this argument is waived. See Navajo Nation v. U.S. Forest
Serv., 535 F.3d 1058, 1079 n.26 (9th Cir. 2008) (en banc) (“It is well-
established that a bare assertion in an appellate brief, with no supporting
argument, is insufficient to preserve a claim on appeal.”). Accordingly,
we express no opinion as to whether the 20% rule is legislative, rather
than interpretive, and therefore subject to the Administrative Procedure
Act’s notice and comment requirement. See 5 U.S.C. § 553(b); see also
Hoctor v. U.S. Dep’t of Agric., 82 F.3d 165 (7th Cir. 1996); Catholic
Health Initiatives v. Sebelius, 617 F.3d 490 (D.C. Cir. 2010).
38               MARSH V. J. ALEXANDER’S

regulation clearly places a temporal limit on the amount of
related duties an employee can perform and still be
considered to be engaged in the tip-producing occupation.”
638 F.3d at 879 (internal alterations omitted); see also Knox
v. Jones Grp., 201 F. Supp. 3d 951, 961 (S.D. Ind. 2016)
(applying Auer deference because “[t]hrough its use of the
terms ‘part of the time’ and ‘occasionally,’ the dual-jobs
regulation embodies temporal limitations regarding the
performance of related, non-tipped duties” (internal
alteration omitted)); Flood v. Carlson Rests. Inc., 94 F.
Supp. 3d 572, 583 (S.D.N.Y. 2015) (explaining that “district
courts across the country have likewise endorsed the twenty
percent rule”).

    The dual jobs regulation states that a server who
occasionally washes dishes is not a dual job employee. See
29 C.F.R. § 531.56(e). The Guidance states that a server
who spends 20% of her time or less washing dishes is not a
dual job employee. See FOH § 30d00(f)(3). There is
nothing inconsistent between these two statements because
the regulation does not limit the meaning of “occasionally”
beyond its ordinary meaning of “now and then; here and
there; sometimes.” Fast, 638 F.3d at 879–80 (quoting
Webster’s Third New Int’l Unabridged Dictionary 1560
(1986)). True, the DOL could arguably have set the limit
higher, but it did not and we are not at liberty to disturb the
agency’s “fair and considered judgment on the matter in
question.” Auer, 519 U.S. at 462.

   Furthermore, the DOL’s 20% threshold is consistent
with its treatment of other temporal limitations. This, too,
counsels in favor of applying Auer deference. See Fast,
638 F.3d at 881 (deferring to the Guidance in part because
the 20% threshold draws from numerous other FLSA
provisions); cf. Friedman v. Sebelius, 686 F.3d 813, 825
                    MARSH V. J. ALEXANDER’S                            39

(D.C. Cir. 2012) (granting the agency’s interpretation Auer
deference even though “the regulations elsewhere
distinguish between ‘acts’ and ‘omissions,’” and the agency
interpreted a regulation’s use of only “acts” to include both
acts and omissions). The DOL adopted the 20% rule in order
to ensure conformity with “various other FLSA provisions,
interpretations, and enforcement positions setting a
20 percent tolerance for work that is incidental to but distinct
from the type of work to which an exemption applies.”20
DOL Amicus Brief at 19 n.6. Because the DOL has
consistently utilized the 20% threshold to distinguish
between substantial and incidental or occasional work in a
variety of contexts, it is especially appropriate to defer to the
Guidance.

    We find similarly unpersuasive Defendants’ contention
that the Guidance’s focus on duties is “patently inconsistent”
with the dual jobs regulation’s “occupation-based analysis.”
Defendants’ argument rests on an artificial distinction

    20
        See, e.g., 29 U.S.C. § 213(c)(6)(G) (permitting 17-year-old
employees to drive automobiles or trucks on public roadways as part of
their employment so long as the driving is “occasional and incidental,”
defined as “no more than 20 percent of an employee’s worktime in any
workweek”); 29 C.F.R. § 552.5 (explaining that “[c]asual babysitting
services may include the performance of some household work not
related to caring for the children: Provided, however, That such work is
incidental, i.e., does not exceed 20 percent of the total hours worked on
the particular babysitting assignment” (emphasis in original)); 29 C.F.R.
§ 552.6(b) (“The term companionship services also includes the
provision of care . . . if it does not exceed 20 percent of the total hours
worked per person and per workweek.”); 29 C.F.R. § 786.150 (“For
enforcement purposes, the amount of nonexempt work will be
considered substantial if it occupies more than 20 percent of the time
worked by the employee during the workweek.”); 29 C.F.R. § 786.1
(same); 29 C.F.R. § 786.100 (same); 29 C.F.R. § 786.200 (same).
40                  MARSH V. J. ALEXANDER’S

between occupations and duties. One cannot define the
former without some reference to the latter. 21            See
Occupation, Black’s Law Dictionary (10th ed. 2014)
(defining “occupation” to mean “an activity or pursuit in
which a person engages” (emphasis added)). The tip credit
regulation states that “[a]n employee who receives tips . . . is
a ‘tipped employee’ . . . when, in the occupation in which he
is engaged, the amounts he receives as tips [exceed the
requisite amount].” 29 C.F.R. § 531.56(a) (emphasis
added). The dual jobs regulation—a sub-provision of the tip
credit regulation—elaborates that a tipped employee who
occasionally performs “related” but untipped “duties” is not
employed in “two occupations,” but that a server who works
as a maintenance man is. Id. § 531.56(e).

    The dual jobs regulation therefore contemplates a
difference between tipped and untipped occupations, as
defined by an employee’s duties. The Guidance makes that
distinction explicit by sorting the duties accordingly: (1) an
employee who engages in duties “directed toward producing
tips” or spends 20% of her workweek or less on duties
related to “the regular duties of the tipped employees” works
in a tipped occupation and may receive the reduced tip credit
cash wage; (2) on the other hand, an employee who engages
in untipped “work that is not related to the tipped
occupation” or spends more than 20% of her workweek on
related duties that are not themselves directed toward
producing tips must be treated as working in an untipped
occupation and paid the full hourly minimum wage. FOH
§ 30d00(f) (emphasis added). The Guidance, far from


     21
       To paraphrase Shakespeare, a dishwasher by any other name—
even a “server”—is still a dishwasher if she spends a substantial part of
her time washing dishes.
                    MARSH V. J. ALEXANDER’S                          41

creating a de facto new rule, closely hews to the framework
suggested by the dual jobs regulation.

     We also reject Defendants’ argument that Auer
deference is inappropriate here because the DOL’s position
has changed throughout the years. Before adopting the
Guidance in 1988, the DOL issued a number of opinion
letters to employers elaborating on the dual jobs regulation.
Those opinion letters consistently emphasized the temporal
nature of the dual jobs regulation. For instance, although the
DOL explained in a 1980 opinion letter 22 that servers who
spent part of their time cleaning the salad bar and vacuuming
the dining room carpet after closing time could be
considered tipped employees, the agency was careful to note
that it “might have a different opinion if the facts indicated
that specific employees were routinely assigned, for
example, maintenance-type work such as floor vacuuming.”
U.S. Dep’t of Labor, Wage & Hour Div., Opinion Letter
WH-502 (Mar. 28, 1980), available at 1980 WL 141336
(emphasis added). In a 1985 letter, the DOL reiterated that
a server who spent “part of his or her time” on tasks such as
toasting bread or making coffee could be treated as engaging
in a single tipped occupation. U.S. Dep’t of Labor, Wage &

    22
         The DOL also issued an opinion letter in 1979 instructing an
employer not to take a tip credit for any time a server spent preparing
vegetables for the salad bar before the restaurant opened. See U.S. Dep’t
of Labor, Wage & Hour Div., Opinion Letter FLSA-895 (Aug. 8, 1979).
The DOL reasoned that because the salad preparation activities described
were “essentially the activities performed by chefs,” the situation
paralleled the dual jobs regulation’s hypothetical maintenance
man/waiter example. Id. Accordingly, there was no need for a time
analysis because the employee engaged in a second occupation any time
she was tasked with performing unrelated duties, regardless of the time
spent on such activities. See id. (rejecting the employer’s argument that
because the work was “de minimis,” the employer was entitled to the tip
credit).
42                 MARSH V. J. ALEXANDER’S

Hour Div., Opinion Letter FLSA-854 (Dec. 20, 1985),
available at 1985 WL 1259240 (emphasis added). In that
letter, the DOL advised the employer that it could not take a
tip credit for any hours a server spent performing preparatory
activities that consumed “a substantial portion of the waiter
or waitress’ workday.” Id. The DOL focused in particular
on the fact that the preparatory tasks typically consumed
30% to 40% of a given employee’s workday—a sign that the
tasks were not “incidental to the [waiter] or waitress regular
duties.” Id. We therefore agree with the Eighth Circuit that
the Guidance “incorporates answers provided in prior
opinion letters” and that the DOL’s position has remained
consistent over the years. 23 Fast, 638 F.3d at 878; see also
DOL Amicus Brief at 24–25 (“The FOH interpretation was
based on, and is consistent with, the prior opinion letters.”).

    As a last-ditch attempt to dismantle the Guidance,
Defendants protest that the 20% limitation is not entitled to
Auer deference because it is “unworkable.” But, the DOL
could have reasonably concluded otherwise. Employers are
ultimately responsible for assigning duties and
responsibilities. The allegations that would trigger a FLSA
wage violation claim require more than de minimis claims

     23
        The DOL issued an unpublished opinion letter in 2009 that
“rejected the 20 percent tolerance for related, non-tipped duties.” DOL
Amicus Brief at 25 n.9. This letter, however, was withdrawn after two
months with instructions that it not be relied upon as a statement of
agency policy. Several courts addressing the 2009 opinion letter have
therefore deemed it inconsequential, as do we. See, e.g., Irvine, 106 F.
Supp. 3d at 735; Soto v. Wing ‘R Us Romeoville, Inc., No. 15-cv-10127,
2016 WL 4701444, at *3 n.3 (N.D. Ill. Sept. 8, 2016); cf. Rivera,
735 F.3d at 899 n.4 (deferring to the DOL’s interpretation despite a
“brief[]” change in agency interpretation because “[t]he withdrawal of
the brief-lived 2008 interpretation expressly stated that the 2008
interpretation may not be relied upon as a statement of agency policy”
(internal quotation marks omitted)).
                 MARSH V. J. ALEXANDER’S                    43

based on seconds or minutes spent rolling silverware or
sweeping a customer’s shattered glass. See Schaefer v.
Walker Bros. Enters., Inc., 829 F.3d 551, 555 (7th Cir. 2016)
(“[T]he possibility that a few minutes a day were devoted to
keeping the restaurant tidy does not require the restaurants
to pay the normal minimum wage rather than the tip-credit
rate for those minutes.”). Marsh has alleged far more than
the occasional request to tend to related but untipped tasks:
he has alleged a continuous practice of assigning him tasks
such as cutting lemons and limes, cleaning soft drink
dispensers, wiping tables, and taking out the trash.
Moreover, Marsh was able to provide information on when
he was expected to complete each task: “every opening
shift,” “after most closing shifts,” or “after each shift.” The
scheduled nature of these tasks makes them all the more easy
to track.

    As several district courts have concluded, it is not
impracticable for an employer to keep track of time spent on
related tasks by requiring employees to clock in any time
spent rolling silverware or cleaning the restaurant before and
after the restaurant closes or when business is slow. See,
e.g., Irvine v. Destination Wild Dunes Mgmt., Inc., 106 F.
Supp. 3d 729, 734 (D.S.C. 2015) (“In any case, since
employers, in order to manage employees, must assign them
duties and assess completion of those duties, it is not a real
burden on an employer to require that they be aware of how
employees are spending their time before reducing their
wages by 71%.”); Barnhart v. Chesapeake Bay Seafood
House Assocs., LLC, Civil No. JFM-16-01277, 2017 WL
1196580, at *6 (D. Md. Mar. 31, 2017). Unlike the Plaintiffs
in Pellon v. Bus. Representation Int’l, Inc., 528 F. Supp. 2d
1306 (S.D. Fla. 2007), Marsh does not concede that it is
“impractical or impossible” to track his tasks. Id. at 1313–
14. To the contrary, he asserts, consistent with several
44                 MARSH V. J. ALEXANDER’S

district court decisions, that “[s]egregating duties is simple,”
because employers already have the ability to input codes for
employees to clock in and out at different pay rates, see
Driver v. AppleIllinois, LLC, 890 F. Supp. 2d 1008, 1033
(N.D. Ill. 2012), and because employers are already required
to maintain records of each hour an employee receives tips
and each hour she does not, see 29 C.F.R. § 516.28(a). 24

    In short, the DOL’s opinion letters, Guidance, and
amicus brief positions have long established that discerning
whether a person is employed in both a tipped and untipped
occupation under the dual jobs regulation requires some
consideration of both the time an employee spends on a
given task and the type of task involved. Because the
interpretation that the DOL advances in its Guidance and
amicus brief is “entirely consistent with its past views,” Auer
deference is warranted. Chase Bank USA, N.A. v. McCoy,
562 U.S. 195, 210 (2011).

                                 IV.

    We also decline to affirm the district court’s flawed
application of United States v. Klinghoffer Bros. Realty
Corp., 285 F.2d 487 (2d Cir. 1960). Klinghoffer held that
requiring workers to work overtime without pay does not
violate the FLSA’s minimum wage requirements as long as
the average hourly pay for the week is equivalent to the
minimum wage. See id. at 490 (concluding that the
requirements of 29 U.S.C. § 206(a) are met “[i]f the total
wage paid to each guard in this case during any given week
     24
      The dissent complains that the Guidance “significantly expands
employers’ time-tracking obligations,” but it acknowledges that the
technology to track an employee’s duties on shift is already available.
Dissent at 81. We therefore fail to see how the Guidance is
impracticable.
                    MARSH V. J. ALEXANDER’S                          45

. . . divided by the total time he worked that week” produces
an average hourly wage equal to minimum wage); see also
Adair v. City of Kirkland, 185 F.3d 1055, 1063 (9th Cir.
1999) (same).

    Marsh, however, has not brought a claim based on failure
to pay overtime. To the contrary, he has alleged that he was
paid the tip credit cash wage—an amount significantly
below minimum wage—for each hour he spent engaged in a
non-tipped occupation. His claim is functionally no
different than that alleged by an employee who works as a
server for one employer and a janitor for another, but sues
only the second employer for paying him the tip credit wage
every week. Klinghoffer is thus inapplicable.

                                  V.

    Contrary to the dissent’s suggestions, the DOL did not
embark on a fifty-year undercover mission spanning
multiple administrations to erode the FLSA’s tip credit
provision. 25 Dissent at 63–64. There are no rogue agencies
or tales of intrigue to be found in this case. The reality is
much less exciting: confronted with an undefined reference
to “tipped employees” in the FLSA, the DOL promulgated
the dual jobs regulation to clarify that dual job employees do
    25
        The dissent frames the DOL’s actions as “cut[ting] back on
employers’ opportunity to take a tip credit.” Dissent at 60–61. Based
on this characterization, the dissent seems to suggest that the FLSA was
enacted to protect employers and not employees. It was not. See H.R.
Rep. No. 89-1366, at 6 (1966) (“The [FLSA] was a response to call upon
a Nation’s conscience, at a time when the challenge to our democracy
was the tens of millions of citizens who were denied the greater part of
what the very lowest standards of the day called the necessities of life;
when millions of families in the midst of a great depression were trying
to live on income so meager that the pall of family disaster hung over
them day by day.”).
46                MARSH V. J. ALEXANDER’S

not count as tipped employees in certain circumstances.
Employers had six years to challenge this regulation. See
28 U.S.C. 2401(a). They did not. Instead, they sought
clarification on the dual jobs regulation, which the DOL
provided first through its opinion letters and then through the
Guidance.

    Congress did not intend to give employers a blank check
when it enacted the FLSA’s tip credit provision.
Recognizing this and foreseeing the possibility that
employers could misuse this provision to withhold wages
from dual job employees like Marsh, who are titled “servers”
or “bartenders,” but who function in actuality as bussers,
janitors, and chefs at least part of the time, the DOL
promulgated the dual jobs regulation and issued an
interpretative guidance. Together, these two provisions
clarify the boundaries of acceptable tip credit use and ensure
that a server’s tips serve as a gift to the server, as opposed to
a cost-saving benefit to the employer. Although the agency
had a number of options available to resolve this issue, it is
neither appropriate nor reasonable for us to override the
DOL’s dual jobs regulation and its Guidance where, as here,
the latter is consistent with the former and both are consistent
with the purpose of the FLSA.

    We therefore conclude that Marsh has stated two claims
for relief under the FLSA: first, that he is entitled to the full
hourly minimum wage for the substantial time he spent
completing related but untipped tasks, defined as more than
20% of his workweek; and second, that he is entitled to the
same for time he spent on unrelated tasks. 26


     26
     Because Crystal Sheehan has alleged a willful violation of the
FLSA, see 29 U.S.C. § 255(a), the statute of limitations may not have
                   MARSH V. J. ALEXANDER’S                          47

    REVERSED AND REMANDED.



GRABER, Circuit Judge, concurring in part and dissenting
in part:

    Plaintiff Alec Marsh claims that Defendant J.
Alexander’s LLC failed to pay him appropriate wages both
for non-tipped work related to his job as a server and for
non-tipped work unrelated to his job as a server. The
majority opinion concludes that both claims are cognizable
and that the district court thus erred in dismissing Plaintiff’s
case. In my view, though, only the latter claim—that
Defendant denied Plaintiff wages for work unrelated to his
tipped occupation—should survive. Accordingly, I would
affirm in part and reverse in part.

    I agree with the majority opinion that Defendant’s
procedural challenge to 29 C.F.R. § 531.56(e) (the “dual
jobs” regulation) is untimely. Perez-Guzman v. Lynch,
835 F.3d 1066, 1077 (9th Cir. 2016). I also agree that, as a
substantive matter, the “dual jobs” regulation warrants
deference under Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 843–44 (1984). As the
majority opinion notes, then, Plaintiff’s claims rise or fall on
whether we owe deference, under Auer v. Robbins, 519 U.S.
452, 461 (1997), to the interpretations of that regulation
contained in the Department of Labor’s (“DOL”) Field
Operations Handbook.




expired as to her claims. Her suit is remanded for the district court to
address this question in the first instance.
48               MARSH V. J. ALEXANDER’S

    Importantly, the Field Operations Handbook (“FOH”)
provides two methods for determining when an employee is
engaged in “dual jobs” for purposes of the regulation. FOH
§ 30d00(f) (2016) (the “Guidance”). The first looks to the
amount of time that an employee spends doing work that
relates to the employee’s tipped work but that does not
produce tips. Under this method, if an employee spends
more than 20% of his or her time engaged in related—but
non-tipped—duties, the employee is engaged in “dual jobs.”
The second method classifies an employee as working in
“dual jobs” if the employee performs “work that is not
related to [the employee’s] tipped occupation.” Id.
§ 30d00(f)(4) (emphasis added).

    Plaintiff’s two claims track those two methods. That is,
he claims that he was denied wages both for work related to
his job as a server and for work unrelated to his job as a
server. If both of the DOL’s interpretations of what
constitutes a “dual job” under the regulation were entitled to
deference, then both of Plaintiff’s claims would be
cognizable.

    The majority opinion concludes that both interpretations
do, indeed, warrant deference and that, as a result, both
claims survive. But, in my view, only one interpretation
comports with the regulation—the interpretation that
focuses on work unrelated to an employee’s tipped
occupation. The other interpretation contained in the
Guidance—the one that focuses on the amount of time spent
engaged in related but non-tipped work—is not entitled to
Auer deference. Plaintiff has thus stated a claim only insofar
as he asserts that Defendant denied him wages for work
unrelated to his job as a server. I would affirm the dismissal
of Plaintiff’s claim that Defendant denied him wages for
non-tipped work related to his occupation as a server, but I
                 MARSH V. J. ALEXANDER’S                    49

would reverse the dismissal of Plaintiff’s claim that
Defendant denied him appropriate wages for non-tipped
work unrelated to his job as a server.

A. Auer governs this case.

     This case requires us to do something that we have done
for decades: determine whether an agency, in interpreting
its own regulation, exceeded the bounds of its authority. We
have a two-step test for making that determination. Auer,
519 U.S. at 461. We first ask whether the regulation in
question is ambiguous. Id. If so, at the second step, we defer
to the agency’s interpretation of its regulation so long as the
interpretation is not “plainly erroneous or inconsistent with
the regulation.” Id. (internal quotation marks omitted).

    That test makes good sense. Agencies know the purpose
of their own regulations. Martin v. Occupational Health &
Safety Review Comm’n, 499 U.S. 144, 151 (1991). And
because “applying an agency’s regulation to complex or
changing circumstances calls upon the agency’s unique
expertise and policymaking prerogatives,” the Supreme
Court presumes that agencies’ delegated lawmaking powers
include the power to interpret their own regulations. Id. It
is thus entirely reasonable to defer to an agency’s
interpretation of its own words—given, of course, that we
diligently examine agency action for plain error or
inconsistency with the regulation.

    Auer provides an appropriate and sufficient mechanism
for accomplishing that task. Its two steps ensure that
agencies stay within the confines of their own regulations—
regulations that must, themselves, fill gaps that Congress
meant to leave for the agencies to fill. Chevron, 467 U.S. at
842–43. Our job, which Auer helps us do, is to ensure that—
like nesting dolls—every agency interpretation fits neatly
50              MARSH V. J. ALEXANDER’S

within an agency regulation that fits neatly within the
authority that Congress has granted to the agency. So long
as we faithfully apply Auer (and its companion, Chevron),
we perform that function and avoid the separation of powers
concerns that the dissenting opinion describes.

B. The Guidance’s interpretation focusing on related work
   does not warrant Auer deference.

    The “dual jobs” regulation is no model of clarity. But it
plainly forecloses the DOL’s interpretation that an employee
spending a certain amount of time doing related, but non-
tipped, work qualifies as working a dual job. The regulation
provides in full:

           Dual jobs.       In some situations an
       employee is employed in a dual job, as for
       example, where a maintenance man in a hotel
       also serves as a waiter. In such a situation the
       employee, if he customarily and regularly
       receives at least $30 a month in tips for his
       work as a waiter, is a tipped employee only
       with respect to his employment as a waiter.
       He is employed in two occupations, and no
       tip credit can be taken for his hours of
       employment in his occupation of
       maintenance man. Such a situation is
       distinguishable from that of a waitress who
       spends part of her time cleaning and setting
       tables, toasting bread, making coffee and
       occasionally washing dishes or glasses. It is
       likewise     distinguishable       from      the
       counterman who also prepares his own short
       orders or who, as part of a group of
       countermen, takes a turn as a short order cook
       for the group. Such related duties in an
                MARSH V. J. ALEXANDER’S                   51

       occupation that is a tipped occupation need
       not by themselves be directed toward
       producing tips.

29 C.F.R. § 531.56(e).

    Viewing that regulation as a whole, it determines
whether an employee performs “dual jobs” by looking to
whether the employee performs tasks unrelated to his or her
tipped occupation. That is, the regulation has nothing to do
with the amount of time that an employee spends engaged in
non-tipped tasks related to the tipped occupation.

    The regulation’s first example—on which the remainder
of the regulation is premised—makes that focus clear. It
describes a situation in which an employee performs two
different functions: that of a “maintenance man” and that of
“waiter.” The example says nothing about the amount of
time that the employee spends doing each kind of work.
That is, the given employee would qualify as having “dual
jobs” (only one of which is a tipped occupation) no matter
how he split his time between the two jobs. We know, then,
that he qualifies as having “dual jobs” not because he spends
a certain amount of time as a maintenance man and a certain
amount of time as a waiter, but because he performs tasks
that are unrelated to one another.

    The other two examples—the “counterman” and the
“waitress” examples—confirm the regulation’s focus on that
distinction. Importantly, the regulation presents those two
examples as foils to the first example. See 29 C.F.R.
§ 531.56(e) (explaining that the situation of the maintenance
man/waiter “is distinguishable from that of a waitress who
spends part of her time cleaning and setting tables, toasting
bread, making coffee and occasionally washing dishes or
glasses” and that the same situation “is likewise
52              MARSH V. J. ALEXANDER’S

distinguishable from the counterman who also prepares his
own short orders or who, as part of a group of countermen,
takes a turn as a short order cook for the group” (emphases
added)). That is, they are not separate examples of instances
in which a person works “dual jobs.” The examples, instead,
merely illuminate when employees have “dual jobs” by
describing instances in which an employee is not engaged in
“dual jobs.”

    Read in context, the waitress example does not permit
the conclusion that a waitress might work “dual jobs”
because she spends a certain amount of time doing non-
tipped tasks related to her work as a waitress. Rather, it
stands for the notion that she is not performing two jobs,
because her non-tipped work—unlike the waiter’s work as a
maintenance man—relates to her tipped occupation. So,
too, with the counterman example. Accordingly, the
majority opinion errs in arguing that the “temporal” words
found exclusively in those counterexamples muddle the
regulation’s focus on unrelated work. Maj. op. at 27–31.

    The regulation’s final sentence puts to rest any
ambiguity. That sentence states, in reference to the
counterexamples and in clear terms, that “[s]uch related
duties in an occupation that is a tipped occupation need not
by themselves be directed toward producing tips.” 29 C.F.R.
§ 531.56(e) (emphasis added). That final reference to
“related duties” makes clear that the three examples exist to
demonstrate the distinction between an employee who is
engaged in duties related to an occupation that produces tips
and an employee who is engaged in a job that is unrelated to
a tipped occupation. The regulation’s final sentence thus
confirms that one cannot reasonably read the waitress and
counterman examples as standing for the notion that a
                 MARSH V. J. ALEXANDER’S                   53

certain amount of related, non-tipped work constitutes a
separate job.

    To defeat that reading, the majority opinion comes up
with a hypothetical employee of its own. The majority
opinion argues that, if one reads the regulation as focused
exclusively on work unrelated to a tipped occupation, the
regulation would wrongly categorize a “server who spends
90% of her time wiping down tables . . . and the remaining
10% of her time assisting customers” as working in a single,
tipped job. Maj. op. at 31 n.14. That hypothetical, even if it
points out a poor policy choice, does not change the focus of
the “dual jobs” regulation itself.         Congress has set
requirements that must be met before an employer may take
the tip credit. The employee must be a “tipped employee,”
29 U.S.C. § 203(m), must “customarily and regularly
receive[] more than $30 a month in tips,” id. § 203(t), and
must effectively make the minimum wage, Cumbie v. Woody
Woo, Inc., 596 F.3d 577, 580 (9th Cir. 2010). The DOL, by
promulgating regulations like the one at issue in this case,
has elaborated on those requirements. Those regulations
might, or might not, prevent employers from taking
advantage of the tip credit with respect to employees like the
one in the hypothetical. But they are the regulations that the
DOL has chosen. Should the DOL wish to avoid, with
certainty, results like the one that the majority opinion
describes, the agency is free to create, through notice and
comment, a new regulation providing that a certain amount
of related work becomes a new job. But the “dual jobs”
regulation, in its current form, does not do so.

   In conclusion, the regulation, in its current form,
conflicts with the Guidance’s interpretation with respect to
work related to a tipped occupation, FOH § 30d00(f)(3).
Accordingly, the Guidance does not warrant Auer deference
54               MARSH V. J. ALEXANDER’S

on that point. Plaintiff thus cannot state a claim that
Defendant wrongly denied him appropriate wages for the
time that he spent doing work related to his role as a server,
and the district court correctly dismissed that claim.

C. The Guidance’s interpretation focusing on unrelated
   work warrants Auer deference.

    Because the DOL’s other interpretation of what
constitutes a “dual job” is entitled to deference, Plaintiff’s
other claim—that Defendant denied him wages for work
unrelated to his job as a server—passes muster. The
Guidance’s interpretation that an employee qualifies as
working “dual jobs” if the employee engages in “work that
is not related to [the employee’s] tipped occupation”
warrants deference for the following reasons. FOH
§ 30d00(f)(4).

    At Auer’s first step, the dual jobs regulation is
ambiguous on the point that the Guidance attempts to
address. The regulation, even with its clear focus on whether
work is related or unrelated to tipped work, is unclear as to
how “unrelated” an employee’s duties must be to qualify the
employee as working “dual jobs.” Must the employee
perform entirely different functions? Or does performing
any duty unrelated to a tipped occupation count as working
a dual, non-tipped job? Must the employee perform the
duties at different times of day—maintenance work in the
morning, and waiter work in the afternoon—to qualify as
having “dual jobs”? Or is it enough to perform unrelated
duties at any time?

    The Guidance answers those questions by explaining
that an employee who performs any “work that is not related
to [the employee’s] tipped occupation . . . is effectively
employed in dual jobs.” FOH § 30d00(f)(4) (emphasis
                    MARSH V. J. ALEXANDER’S                          55

added). Although that interpretation is not the only one that
the regulation would permit, it is not plainly erroneous or
inconsistent with the regulation. The regulation’s focus on
whether an employee performs non-tipped “related duties”
permits the DOL to determine at what point “related duties”
rise to the level of unrelatedness to constitute a separate job.
The Guidance’s interpretation to that effect thus deserves
Auer deference, and Plaintiff should have been allowed to
move forward with his case, arguing that he was denied
wages for work unrelated to his job as a server.

     The counterman example does not, as the dissenting
opinion suggests, plainly foreclose the Guidance’s
“unrelated work” test. True, as the dissenting opinion notes,
if the Guidance categorized the counterman’s work as a short
order cook as unrelated to his work as a counterman, the
Guidance would stand at odds with the regulation. But the
Guidance does not provide a definition of “unrelated work”
that conflicts with the counterman example. 1 That example
thus does nothing to discredit the Guidance’s test.

    In summary, I would affirm the district court’s dismissal
of Plaintiff’s claim that Defendant denied him wages for
non-tipped work related to his occupation as a server, but I
would reverse the district court with respect to Plaintiff’s
claim that Defendant denied him appropriate wages for non-
tipped work unrelated to his job as a server.



    1
      The dissenting opinion quotes the provision concerning “related
duties” found in FOH subsection 30d00(f)(2), and cites subsection
30d00(f)(3), to suggest that the Guidance conflicts with the regulation’s
counterman example. Diss. op. at 72 (emphasis added). But unrelated
work does not fall within FOH subsections 30d00(f)(2) and (f)(3) at all.
Rather, subsections 30d00(f)(1) and (f)(4) govern unrelated work.
56                 MARSH V. J. ALEXANDER’S



IKUTA, Circuit Judge, joined by CALLAHAN, Circuit
Judge, dissenting:

     In the guise of interpreting a regulation (that itself is far
afield from the statute at issue), the Department of Labor
(DOL) created detailed and specific legislation that
effectively eliminated an employer’s statutory right to take a
tip credit. This legislative act was accomplished without
compliance with the Administrative Procedure Act (APA)
— indeed without any notice to the regulated community at
all, resulting in an unfair and unexpected imposition of
staggering liability on employers. By deferring to the
agency, and thus letting it improperly assume legislative
authority, the majority fails in its duty to check the agency’s
attempt to “exploit ambiguous laws as license for [its] own
prerogative.” Gutierrez-Brizuela v. Lynch, 834 F.3d 1142,
1152 (10th Cir. 2016) (Gorsuch, J., concurring). Because
the DOL’s purported interpretation is no interpretation at all,
and the majority’s holding to the contrary raises the worst
dangers of improper Seminole Rock and Auer deference, I
dissent. 1

                                  I

   In order to understand what the DOL has accomplished
by means of its undercover legislative enactment,

     1
      See Bowles v. Seminole Rock & Sand Co., 325 U.S. 410,414 (1945)
(holding that the “administrative interpretation” of a regulation
“becomes of controlling weight unless it is plainly erroneous or
inconsistent with the regulation”); see also Auer v. Robbins, 519 U.S.
452, 461 (1997) (reaffirming Seminole Rock). This principle of
deference to agency interpretations is referred to hereafter as “Auer
deference.”
                MARSH V. J. ALEXANDER’S                   57

erroneously upheld by the majority as an interpretation of a
regulation, it is necessary to understand a bit of historical
background.

    The Fair Labor Standards Act of 1938 (FLSA) generally
requires employers to pay a cash wage of $7.25 per hour to
their employees. 29 U.S.C. § 206(a)(1)(c). As originally
enacted, the FLSA did not apply to tipped occupations. In
1966, however, Congress amended the FLSA to extend its
coverage to workers employed in the hotel and restaurant
industries. Or. Rest. & Lodging Ass’n v. Perez, 816 F.3d
1080, 1083 (9th Cir. 2016). Because the 1966 amendments
brought many traditionally tipped employees within the
FLSA’s protection, Congress designed the amendments “to
permit the continuance of existing practices with respect to
tips.” S. Rep. No. 89-1487 (1966), as reprinted in 1966
U.S.C.C.A.N. 3002, 3014.

    Among other changes, the 1966 amendments added
§ 203(m) and § 203(t).     See Fair Labor Standards
Amendments of 1966, Pub. L. No. 89-601, § 101, 80 Stat.
830, 830. Section 203(m) allows employers to take a tip
credit against the minimum wage requirement for tipped
employees. 29 U.S.C. § 203(m). Section 203(t) states, in
full:

       (t) “Tipped employee” means any employee
       engaged in an occupation in which he
       customarily and regularly receives more than
       $30 a month in tips.

Id. § 203(t). Read together, §§ 203(m) and (t) allow an
employer to take a credit against the minimum wage for
employees who are engaged in an occupation in which they
are already compensated by tips. See id. §§ 203(m), (t). If
the tip credit applies, the employee is guaranteed the
58                   MARSH V. J. ALEXANDER’S

minimum wage, but may keep tips above the minimum
wage. Id. § 203(m). 2

    After Congress amended FLSA to include employees in
tipped occupations, the DOL promulgated, via notice and
comment, regulations that basically tracked the statute. See
32 Fed. Reg. 222-227, § 531.56(a)–(d) (Jan. 10, 1967),
currently promulgated at 29 C.F.R. § 531.56(a)–(d). These
regulations interpreted § 203 by explaining how to calculate
the amount of tips received by the employee. Id.

    But after circulating these proposed regulations for
public comment, and months after the notice-and-comment
period ended, the DOL unexpectedly added the “dual jobs”
regulation. See 32 Fed. Reg. 13,575, 13,580 (Sept. 28,
1967), currently promulgated at 29 C.F.R. § 531.56(e).
Unlike the regulations issued for public comment, the dual
jobs regulation did not track the statute. Instead, without
explanation, the regulation introduced the never-before-seen
concept of “dual jobs.” Id. The regulation states:

         (e) Dual jobs. In some situations an employee
         is employed in a dual job, as for example,

     2
       The majority argues that employers “deprive servers the full value
of their tips” by “crediting a server’s tips towards their obligations to pay
full minimum wage for time employees spend working in a non-tipped
occupation,” and that it is wrong for an employer to use an employee’s
tips to pay minimum wage for “time an employee spends in a non-tipped
occupation.” Maj. Op. at 11 n.2. These statements merely assume the
majority’s conclusion that the statutory term “occupation” refers to
minutes spent on tasks that generate tips, rather than referring to a job
(such as a waiter, bartender, or short order cook) in which (as set forth in
the relevant statute) the employee “customarily and regularly receives
more than $30 a month in tips.” 29 U.S.C. § 203(t). There is no dispute
that the plaintiffs here held a job in which they received over the
threshold amount of tips.
                 MARSH V. J. ALEXANDER’S                   59

       where a maintenance man in a hotel also
       serves as a waiter. In such a situation the
       employee, if he customarily and regularly
       receives at least $30 a month in tips for his
       work as a waiter, is a tipped employee only
       with respect to his employment as a waiter.
       He is employed in two occupations, and no
       tip credit can be taken for his hours of
       employment in his occupation of
       maintenance man. Such a situation is
       distinguishable from that of a waitress who
       spends part of her time cleaning and setting
       tables, toasting bread, making coffee and
       occasionally washing dishes or glasses. It is
       likewise     distinguishable     from       the
       counterman who also prepares his own short
       orders or who, as part of a group of
       countermen, takes a turn as a short order cook
       for the group. Such related duties in an
       occupation that is a tipped occupation need
       not by themselves be directed toward
       producing tips.

29 C.F.R. § 531.56(e).

    The eleventh-hour addition of § 531.56(e) in the final
rule was not the sort of deviation from the proposed rule that
is allowed under the APA as a “logical outgrowth of the
proposals on which the public had the opportunity to
comment.” Hall v. EPA, 273 F.3d 1146, 1163 (9th Cir. 2001)
(quoting Health Ins. Ass’n of Am., Inc. v. Shalala, 23 F.3d
412, 421 (D.C. Cir. 1994)). Rather, the proposed regulation
never hinted at the idea of dual jobs. See 32 Fed. Reg. 222-
1227 (Jan 10, 1967); Envtl. Integrity Project v. EPA.,
425 F.3d 992, 996 (D.C. Cir. 2005) (“The ‘logical
60                  MARSH V. J. ALEXANDER’S

outgrowth’ doctrine does not extend to a final rule that finds
no roots in the agency’s proposal because ‘[s]omething is not
a logical outgrowth of nothing[.]’”) (first alteration in
original) (quoting Kooritzky v. Reich, 17 F.3d 1509, 1513
(D.C. Cir. 1994)). Instead, § 531.56(e) was the first sign of
a slow but certain erosion of the tip credit rule.

    In the years following the regulation, the DOL issued
several opinion letters addressing the dual jobs regulation.
These letters provided case-by-case guidance as to when
there is a “clear dividing line” between the types of duties
performed by tipped and non-tipped employees such that an
employee should be deemed to hold two distinct jobs. 3

   Apparently not satisfied with this case-by-case approach,
the DOL decided to give its field investigators more
expansive authority to cut back on employers’ opportunity

     3
       U.S. Dep’t of Labor, Wage & Hour Div., Opinion Letter FLSA–
895 (Aug. 8, 1979) (hereinafter, “1979 Letter”) (holding that an
employee who was required to report to work two hours before doors
were opened to the public to prepare vegetables for a salad bar had two
occupations, waitress and chef); U.S. Dep’t of Labor, Wage & Hour
Div., Opinion Letter WH–502 (Mar. 28, 1980), available at 1980 WL
141336, at *1 (hereinafter, “1980 Letter”) (holding that employees hired
as waiters and waitresses, but who were also required to “clean the salad
bar, place the condiment crocks in the cooler, clean and stock the
waitress station, clean and reset the tables . . . and vacuum the dining
room carpet, after the restaurant is closed,” were engaged in two different
occupations because there was no “clear dividing line between the types
of duties performed by a tipped employee, such as between maintenance
duties and waitress duties”); U.S. Dep’t of Labor, Wage & Hour Div.,
Opinion Letter FLSA–854 (Dec. 20, 1985), available at 1985 WL
1259240, at *2–3 (hereinafter, “1985 Letter”) (holding that an employee
who was hired as a waiter but was assigned to arrive at the restaurant at
least two hours before opening to perform general preparatory duties was
employed in two different occupations).
                    MARSH V. J. ALEXANDER’S                             61

to take a tip credit. Therefore, in 1988, the DOL
promulgated a new rule in its internal and unpublished Field
Operations Handbook (FOH). 4 See U.S. Dep’t of Labor,
Wage & Hour Division, Field Operations Handbook (FOH)
30d00(e) (1988) (hereinafter, “FOH”). This new rule strictly
limited an employer’s statutory right to take a tip credit by
applying a specific numerical cap apparently pulled from
thin air. It said: “[W]here the facts indicate that specific
employees are routinely assigned to maintenance, or that
tipped employees spend a substantial amount of time (in
excess of 20 percent) performing general preparation work
or maintenance, no tip credit may be taken for the time spent
in such duties.” Id. This 20-percent cap was not made public
until decades later, when the DOL included it in an amicus
brief filed in the Eighth Circuit in 2010. See Sec’y of Labor’s
Amicus Br., Fast v. Applebee’s Int’l, Inc., 638 F.3d 872 (8th
Cir. 2011) (Nos. 10-1725, 10-1726), 2010 WL 3761133. 5

    In 2012, the DOL added a new subsection to its rule (in
addition to the 20-percent cap) which further limited the
availability of a tip credit. See FOH 30d00(f)(4) (2012). The
new subsection provided that employers could not take a tip
credit for any time employees spent on tasks that did not
    4
       Ironically, the Field Operations Handbook states it “is not used as
a device for establishing interpretive policy.” FOH, Foreword, available
at https://www.dol.gov/whd/FOH/index.htm; see also Probert v. Family
Centered Servs. of Alaska, Inc., 651 F.3d 1007, 1012 (9th Cir. 2011)
(“[I]t does not appear to us that the FOH is a proper source of interpretive
guidance.”).

    5
      In the amicus brief filed in this appeal, the DOL states that it
published the 20-percent cap rule in the 2010 amicus brief. Given the
DOL’s failure to identify any earlier publication of this rule, the
majority’s statement that “[i]t is therefore impossible to say” whether the
FOH was made public at an earlier date, Maj. Op. at 36 n.17, is
disingenuous.
62              MARSH V. J. ALEXANDER’S

directly relate to serving customers. Id. As a result, an
employer would have to further track employees’ time to
distinguish between related and unrelated duties. The
additional subsection was not made public until the DOL
included it in the amicus brief filed in this very case. The
current version of the DOL’s instructions, which will be
referred to here as the DOL Time-Tracking Rule (or the
Rule), states in full:

       (1) When an individual is employed in a
       tipped occupation and a non-tipped
       occupation, for example, as a server and
       janitor (dual jobs), the tip credit is available
       only for the hours spent in the tipped
       occupation, provided such employee
       customarily and regularly receives more than
       $30.00 a month in tips. See 29 CFR
       531.56(e).

       (2) 29 CFR 531.56(e) permits the employer
       to take a tip credit for time spent in duties
       related to the tipped occupation of an
       employee, even though such duties are not by
       themselves directed toward producing tips,
       provided such related duties are incidental to
       the regular duties of the tipped employee and
       are generally assigned to the tipped
       employee. For example, duties related to the
       tipped occupation may include a server who
       does preparatory or closing activities, rolls
       silverware and fills salt and pepper shakers
       while the restaurant is open, cleans and sets
       tables, makes coffee, and occasionally
       washes dishes or glasses.
                 MARSH V. J. ALEXANDER’S                    63

       (3) However, where the facts indicate that
       tipped employees spend a substantial amount
       of time (i.e., in excess of 20 percent of the
       hours worked in the tipped occupation in the
       workweek) performing such related duties,
       no tip credit may be taken for the time spent
       in those duties. All related duties count
       toward the 20 percent tolerance.

       (4) Likewise, an employer may not take a tip
       credit for the time that a tipped employee
       spends on work that is not related to the
       tipped occupation.          For example,
       maintenance work (e.g., cleaning bathrooms
       and washing windows) are not related to the
       tipped occupation of a server; such jobs are
       non-tipped occupations. In this case, the
       employee is effectively employed in dual
       jobs.

FOH § 30d00(f) (Dec. 1, 2016).

    In a nutshell, rather than interpreting the dual jobs
regulation, the DOL Time-Tracking Rule effectively
replaces the concept of a tipped occupation with a new
regulatory framework. The Rule requires the employer to
count the number of minutes the employee spends on:
(1) serving customers; (2) performing duties related to
serving customers; and (3) performing duties not directly
related to serving customers. The Rule then allows an
employer to take a tip credit for the minutes an employee
spends on tasks in the first category, but not for the tasks in
the second category if they take more than 20 percent of the
employee’s time on the job, and never for tasks in the third
category. Clearly, this guidance does not constitute an
64               MARSH V. J. ALEXANDER’S

interpretation of the dual jobs regulation; it is a completely
different approach to the tip credit.

                              II

    Given the undercover nature of the DOL’s approach, we
should first consider a threshold question: Is the Time-
Tracking Rule actually an interpretation of the dual jobs
regulation to which Auer deference applies? Or is it a
legislative rule, not entitled to such deference? In failing to
address this issue, the majority misses a key element of the
necessary analysis. See Christensen v. Harris County.,
529 U.S. 576, 588 (2000) (holding that it is improper to defer
to an agency’s position if doing so would “permit the
agency, under the guise of interpreting a regulation, to create
de facto a new regulation”).

                              A

    Under Seminole Rock, an agency’s interpretation of its
own regulation is generally controlling “unless it is plainly
erroneous or inconsistent with the regulation.” 325 U.S. at
414; see also Auer, 519 U.S. at 461. But by its own terms,
this deference applies only when an agency proffers an
interpretation of its own regulation. Id. Deferential review
under Auer is not appropriate “when the disputed
administrative action does not represent an actual
interpretation of the agency’s own regulations.” Mission
Grp. Kansas, Inc. v. Riley, 146 F.3d 775, 781 (10th Cir.
1998); see also Dir., Office of Workers’ Comp. Programs,
U.S. Dep’t of Labor v. Mangifest, 826 F.2d 1318, 1324 n.12
(3d Cir. 1987) (“We therefore believe that even in the case
of interpretations of regulations, we must distinguish
                    MARSH V. J. ALEXANDER’S                           65

between a position and a reasoned interpretation and defer
only to the latter.” (emphasis added)). 6

    Courts have made clear that an agency’s substantive
pronouncements are not entitled to Auer deference, even if
they purport to be interpretations of a regulation. In
Gonzales v. Oregon, for instance, the Supreme Court
declined to defer to the Attorney General’s pronouncement
that using controlled substances to assist suicide was not a
legitimate medical practice, even though the Attorney
General claimed this pronouncement was an “interpretive
rule” interpreting a 1971 regulation. 546 U.S. 243, 254–58
(2006). The Court reasoned that the relevant statute did not
decide the assisted suicide issue, the 1971 regulation merely
restated the statutory language, and “[s]ince the regulation
gives no indication how to decide [the assisted suicide] issue,
the Attorney General’s effort to decide it now cannot be
considered an interpretation of the regulation.” Id. at 257.
Because the Attorney General’s pronouncement was not an
interpretation of the regulation, it was owed no deference. 7
Id. at 257–58.


    6
      Following the decision in Seminole Rock, both the Supreme Court,
see Thomas Jefferson, 512 U.S. at 512; Auer, 519 U.S. at 461, and
appellate courts, see Mission Group, 146 F.3d at 780; Mangifest,
826 F.3d at 1323, considered the scope of judicial deference to agency
interpretations of their own regulations. The majority’s statement that it
is “puzzling” for the dissent to rely on pre-Auer opinions, Maj. Op. at 28
n.12, ignores the history of the very rule it purports to apply.

    7
      The majority attempts to limit Gonzales to its facts, arguing that
because the DOL’s dual jobs regulation does not merely parrot the
language of the FLSA, Gonzales does not apply. Maj. Op. at 28–29 n.12.
But this dismissive approach fails to engage with the Supreme Court’s
reasoning regarding when an agency’s pronouncements are not entitled
to deference.
66               MARSH V. J. ALEXANDER’S

    For the same reason, a court may not defer to a
substantive rule masquerading as an interpretation even
when the rule is consistent in some way with the regulation.
“[M]ere linguistic consistency between the rule and the
regulations cannot establish that the former is within the
interpretive scope of the latter.” Mission Grp., 146 F.3d at
781. For instance, where a regulation uses open-ended
language (such as a regulation requiring regulated entities to
comply with “any additional conditions” specified by the
agency), the agency may not subsequently issue a rule
imposing substantive conditions on those entities “and claim
authorization for that action under the plain terms of” the
regulation. Id. at 778, 781–82. “Such a practice would make
a mockery of Chevron, the APA, and judicial review.” Id.
at 782.

    The reason for requiring courts to determine, in the first
instance, whether an agency’s pronouncement is a legitimate
interpretation or merely a disguised substantive rule is clear.
Under the APA, a substantive rule must be promulgated
pursuant to notice-and-comment rulemaking. 5 U.S.C.
§ 553. Agencies may not make an end-run around this
requirement by promulgating an ambiguous regulation, and
then, without notice and comment, issuing a substantive rule
that purports to resolve the regulation’s ambiguities. Such
an approach would allow an agency to “bootstrap its way
into the equivalent of Chevron deference” for its unreviewed
position on what a regulation requires. Matthew C.
Stephenson & Miri Pogoriler, Seminole Rock’s Domain,
79 Geo. Wash. L. Rev. 1449, 1464 (2011); see also Mission
Grp., 146 F.3d at 782 (warning that absent judicial review,
“agencies could simply replace statutory ambiguity with
regulatory ambiguity, thus creating Chevron deference for
any administrative action that might be squeezed within the
unrestricted terms of a promulgated regulation”). The mere
                    MARSH V. J. ALEXANDER’S                             67

fact that an agency has promulgated an ambiguous
regulation does not mean that the agency has a blank check
to promulgate substantive laws in the guise of interpretation.
Christensen, 529 U.S. at 588. Accordingly, a court must
differentiate “between a reasoned interpretation of a
regulation’s language and a mere position about what the
regulations require.” Mangifest, 826 F.2d at 1324.

    Instead of giving careful consideration to the significant
concerns raised by an agency’s promulgation of substantive
rules in the guise of interpretation — concerns that have been
noted by both the Supreme Court and our sister circuits —
the majority asserts it has no obligation to do so because the
Court has not enunciated a rule directly on point or created a
“mandatory” threshold question. Maj. Op. at 28–29 n.12.
But appellate courts do not just excerpt language from
Supreme Court decisions and apply it by rote; rather, we
must strive to understand the Court’s theory and reasoning,
and work out how its jurisprudence applies in new contexts.
By avoiding that duty here, the majority mistakenly fails to
address the threshold question whether the Time-Tracking
Rule qualifies as an interpretation. 8



    8
      The majority also errs in claiming that the defendants waived this
argument. Maj. Op. at 28–29 n.12, 37 n.19. The defendants argued that
the Time-Tracking Rule was invalid because through it the agency
created “a new regulation or law” without opportunity for public
comment, and thus violated the separation of powers “by making law
disguised as an informal commentary,” and creating “new causes of
action.” This is more than sufficient to raise the issue to the Court, which
in any event may “identify and apply the correct legal standard, whether
argued by the parties or not.” Thompson v. Runnels, 705 F.3d 1089, 1098
(9th Cir. 2013).
68                 MARSH V. J. ALEXANDER’S

                                  B

    Because a court must analyze whether an agency is
interpreting an existing regulation or creating a new
substantive rule in order to determine whether Auer
deference applies, it is necessary to understand the
difference between interpretive and substantive rules. 9

    “[T]he critical feature of interpretive rules is that they are
‘issued by an agency to advise the public of the agency’s
construction of the statutes and rules which it administers.’”
Perez v. Mortg. Bankers Ass’n, 135 S. Ct. 1199, 1204 (2015)
(quoting Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 99
(1995)). “[I]nterpretive rules merely explain, but do not add
to, the substantive law that already exists in the form of a
statute or legislative rule.” Hemp, 333 F.3d at 1087. This
means that the substance of the interpretive rule “must flow
fairly from the substance” of the existing law. Catholic
Health Initiatives v. Sebelius, 617 F.3d 490, 494 (D.C. Cir.
2010) (quoting Robert A. Anthony, “Interpretive” Rules,
“Legislative” Rules, and “Spurious” Rules: Lifting the
Smog, 8 Admin. L. J. Am. U. 1, 6 n.21 (1994)).

    By contrast, legislative rules “create rights, impose
obligations, or effect a change in existing law pursuant to
authority delegated by Congress.” Hemp, 333 F.3d at 1087.
Such a rule has several hallmarks. First, it has the “force of
law,” meaning that “in the absence of the rule, there would

     9
      Under the APA, 5 U.S.C. § 553(d)(a), an agency “need not follow
the notice and comment procedure to issue an interpretive rule.” Hemp
Indus. Ass’n v. Drug Enf’t Admin., 333 F.3d 1082, 1087 (9th Cir. 2003).
But when an agency issues a legislative rule without following the APA
procedure, it is invalid, id.; N.H. Hosp. Ass’n v. Azar, 887 F.3d 62, 70
(1st Cir. 2018), and therefore cannot receive deference under Auer, see
Auer, 519 U.S. at 461; Christensen, 529 U.S. at 587–88.
                 MARSH V. J. ALEXANDER’S                     69

not be an adequate legislative basis for enforcement action.”
Id. (internal quotation marks omitted). Second, a rule is
legislative if it does not afford an agency any significant
discretion over enforcement. See Barahona-Gomez v. Reno,
167 F.3d 1228, 1235 (9th Cir. 1999); Mada-Luna v.
Fitzpatrick, 813 F.2d 1006, 1013–14 (9th Cir. 1987). If an
agency issues a directive that “establishes a binding norm
that so fills out the statutory scheme that upon application
one need only determine whether a given case is within the
rule’s criterion, it effectively replaces agency discretion with
a new binding rule of substantive law.” Mada-Luna,
813 F.2d at 1014 (emphasis and internal quotation marks
omitted). Another indicator of a legislative rule is that it
states a principle “in numerical terms, that cannot be derived
from a particular record.” Catholic Health, 617 F.3d at 495
(internal quotation marks omitted). This is because “[a] rule
that turns on a number is likely to be arbitrary” and “[w]hen
agencies base rules on arbitrary choices they are legislating.”
Id. (quoting Hoctor v. U.S. Dep’t of Agric., 82 F.3d 165,
170–71 (7th Cir. 1996) (alteration in original)). For
example, a rule requiring that an enclosure for dangerous
animals be surrounded by an eight-foot high perimeter fence
is legislative when the underlying regulation merely requires
structurally sound containment of dangerous animals.
Hoctor, 82 F.3d at 171.

                               C

    In deciding whether a rule interprets an existing
regulation or creates a new regulation, Christensen, 529 U.S.
at 587–88, it is necessary to first examine the existing
regulation at issue.
70               MARSH V. J. ALEXANDER’S

                              1

    Here, the underlying dual jobs regulation merely requires
employers to discern whether an employee is working in two
distinct jobs, based on a common-sense understanding of
what it means to have two jobs. The regulation gives one
example of a person in a dual job: a maintenance man in a
hotel who also serves as a waiter. 29 C.F.R. § 531.56(e).
This first example involves jobs that are ordinarily
understood to involve different types of duties. While a
maintenance man has a range of duties associated with
keeping buildings or equipment in good repair, a waiter has
a range of duties associated with serving customers at their
tables in a restaurant. In common usage, these constitute
distinct jobs.

    Next, the regulation gives two examples of a person in a
single tipped occupation: a waitress who “spends part of her
time cleaning and setting tables, toasting bread, making
coffee and occasionally washing dishes or glasses,” and a
counterman who “as part of a group of countermen, takes a
turn as a short order cook for the group.” Id. The waitress
and counterman examples are consistent with the everyday
understanding that a job is comprised of a cluster of tasks
typically associated with that job. A waitress is engaged in
a single job so long as the range of duties she performs is
typical for a waitress job (e.g., some cleaning, some food
preparation), and a counterman is engaged in a single job so
long as his range of duties is typical for that job (e.g.,
cooking some of his own orders, or taking a turn as a chef)
and his fellow countermen share in those duties. Id.

    As these examples teach, if the employer has hired a
person for one job (such as waitress or counterman), but that
job includes a range of tasks not necessarily directed towards
producing tips, the person is still considered a tipped
                 MARSH V. J. ALEXANDER’S                     71

employee engaged in a single job so long as the person
“customarily and regularly receives at least $30 a month in
tips.” Id.; cf. Schaefer v. Walker Bros. Enters., Inc., 829 F.3d
551, 555 (7th Cir. 2016) (“At some restaurants busboys
remove dishes after diners have finished, while at others the
servers perform this chore. So it is not helpful to ask . . .
whether cooks or busboys or janitors do one or another task
at other restaurants.”).

                               2

    There is no reasonable view of the Time-Tracking Rule
that permits the conclusion that it is an interpretation of the
dual jobs regulation.

    First, the Rule does not attempt to explain or derive a
general principle from the regulation’s example of what
constitutes two distinct jobs — a maintenance man and a
waiter. Instead, the Rule effectively disregards this example
and takes a different approach, holding that an employee is
engaged in dual jobs: (1) if the employee has spent any time
at all on tasks not related to obtaining tips; or (2) if the
employee has spent time on tasks related to obtaining tips
(but not directly serving customers), and this time in the
aggregate accounts for 20 percent or more of the hours
worked. Obviously, this description of time spent in
different tasks over the course of the day is not a description
of distinct jobs. There is no job that can be described
as more-than-20-percent-of-time-spent-on-untipped-related
tasks, nor is there a job that can be described as the five or
ten minutes spent here and there on unrelated tasks.

   The Rule also effectively disregards the regulation’s
examples of when an employee is engaged in a single job,
despite being involved in a multitude of tasks. Under the
dual jobs regulation, a waitress doing typical waitress duties
72               MARSH V. J. ALEXANDER’S

remains a waitress, even if (in five-minute increments
throughout her workweek) she spends 60 percent of her time
waiting tables, 10 percent cleaning tables, 10 percent
toasting bread, 10 percent making coffee, and 10 percent
washing dishes. See 29 C.F.R. § 531.56(e). The dual jobs
regulation — and common sense — tells us that the waitress
is 100 percent engaged in the single tipped occupation of
waitressing — she is not 60 percent a waitress, 10 percent a
janitor, 10 percent a baker, 10 percent a barrista, and
10 percent a dishwasher. The Rule holds exactly the
opposite: because such a waitress spends more than
20 percent of her time in tasks that are not themselves tipped,
she is both engaged in the tipped occupation of waitress and
engaged in the untipped occupation of . . . something else?

    Similarly, the dual jobs regulation contemplates that an
employee who has a job as a counterman, which may include
both serving customers at the counter and working as a chef
preparing short orders, is engaged in a single tipped
occupation. See id. But because the Rule defines “related
duties” to mean duties that “are not by themselves directed
toward producing tips” and that meet certain other criteria,
FOH § 30d00(f)(2), the time a counterman spends working
as a chef preparing short orders (which is not a tip-generating
task) is not part of the job of counterman if the cooking duty
takes up more than 20 percent of the counterman’s time. See
FOH § 30d00(f)(3). In other words, if the counterman
spends more than 20 percent of his time preparing short
orders, then under the Rule he has two jobs, even though the
dual jobs regulation says he has only one. See 29 C.F.R.
§ 531.56(e).

   Despite this clear disjunction between the Rule and the
regulation, the majority argues that the Rule must be upheld
because the dual jobs regulation is ambiguous, and the Rule
                 MARSH V. J. ALEXANDER’S                    73

is not “plainly erroneous or inconsistent with the regulation.”
Maj. Op. at 32 (quoting Auer, 519 U.S. at 461). The majority
errs, however, because the Rule could qualify as a
permissible interpretation of the dual jobs regulation only if
the Rule could be fairly derived from the regulation. The
majority fails to show how the Rule’s specific time-tracking
requirements “flow fairly” from the dual jobs regulation,
Catholic Health, 617 F.3d at 494, rather than being “a mere
position about what the regulations require,” Mangifest,
826 F.2d at 1324.

    First, the Rule fails to clarify any of the phrases in the
dual job regulation that the majority claims are ambiguous.
The majority states that the dual jobs regulation is
ambiguous because it “does not offer a precise definition for
‘occupation’” and only provides examples. Maj. Op. at 28–
29. But the Rule does not clarify this supposed ambiguity.
Rather than construe the word “occupation,” the Rule uses
the undefined term “tipped occupation” and focuses on the
time employees spend in specified duties related or unrelated
to the “tipped occupation.” FOH § 30d00(f)(3)–(4). The
Rule’s time-tracking framework is obviously not a definition
of an “occupation”; at a minimum, the term “occupation”
does not mean how often a person performs a task. See
Occupation, Webster’s Third New International Dictionary
1560 (3d ed. 2002) (defining the word to mean a “craft,
trade, profession, or other means of earning a living”).

    Second, the majority states that the dual job regulation is
ambiguous because it does not explain what it means by the
phrases “part of her time” and “occasionally” in the sentence
explaining that a waitress does not have a dual job if she
“spends part of her time cleaning and setting tables, toasting
bread, making coffee and occasionally washing dishes or
glasses.” Maj. Op. at 29–30; 29 C.F.R. § 531.56(e). But the
74               MARSH V. J. ALEXANDER’S

Rule does not provide guidance on what “part of her time”
and “occasionally” mean in this context. Instead the Rule
states merely that no tip credit may be taken for “duties
related to the tipped occupation of an employee” (without
providing any guidance on what constitutes such “related”
duties) for those employees who “spend a substantial amount
of time (i.e., in excess of 20 percent of the hours worked in
the tipped occupation in the workweek) performing such
related duties,” and that no tip credit may be taken on work
“that is not related to the tipped occupation.” FOH
§ 30d00(f)(2)–(4). These detailed instructions do not “flow
fairly,” Catholic Health, 617 F.3d at 494, from the terms
“part of her time” and “occasionally” in the dual jobs
regulation.

    The majority attempts to camouflage this failure of
interpretation by arguing that “an agency need not explicitly
identify in its guidance each ambiguous word it is defining
in order to provide a valid interpretation of an ambiguous
regulation.” Maj. Op. at 33 n.16. But this is contrary to the
very nature of an interpretation: if the purported
interpretation does not address some ambiguity in the
regulation, what is the interpretation interpreting? It is not
enough for an agency’s statement to be consistent with a
regulation or express the agency’s position about what the
regulation requires; rather, it must be a reasoned
interpretation of the regulatory language. Mangifest,
826 F.2d at 72–74 & n.12.

    Finally, the majority points out that the dual jobs
regulation states that “related duties in an occupation that is
a tipped occupation need not by themselves be directed
toward producing tips,” 29 C.F.R. § 531.56(e), but contends
that this rule is ambiguous because it does not define the
term “related duties.” Maj. Op. at 31. But as noted above,
                    MARSH V. J. ALEXANDER’S                          75

the Rule does not define “related duties” either; it provides
no guidance on how closely “related” to customer service a
duty must be to constitute a “related duty.” See FOH
§ 30d00(f)(3).10    Accordingly, the Rule provides no
guidance for interpreting the terms the majority identifies as
ambiguous in the dual jobs regulation.

    The majority not only fails to show that the Rule
construes ambiguous terms, it also fails to justify the Rule’s
time-tracking framework as a fair interpretation of the dual
jobs regulation as a whole. First, the regulation’s example
of a waitress “who spends part of her time cleaning and
setting tables, toasting bread, making coffee and
occasionally washing dishes or glasses,” 29 C.F.R.
§ 531.56(e), establishes that an employee is not engaged in
dual jobs merely because the employee has multiple duties.
The Rule flips this determination, holding that an employee
is engaged in dual jobs when the employee has multiple
duties and spends more than 20 percent of the time on related
but untipped duties. FOH § 30d00(f)(3)–(4). This reversal
of the regulation’s example finds no support in the language
of the regulation.

    Similarly, the dual jobs regulation’s example of a
counterman “who also prepares his own short orders or who,
as part of a group of countermen, takes a turn as a short order
cook for the group” establishes that an employee is not
engaged in dual jobs merely because the employee takes a
turn as a short order cook. 29 C.F.R. § 531.56(e). The

    10
        Judge Graber agrees that the Rule’s interpretation of “related
work” does not warrant deference, and that the dual jobs regulation
“plainly forecloses the DOL’s interpretation that an employee spending
a certain amount of time doing related, but non-tipped, work qualifies as
working a dual job.” Graber Conc. Diss. at 50.
76                  MARSH V. J. ALEXANDER’S

regulation goes on to say that “[s]uch related duties in an
occupation that is a tipped occupation need not by
themselves be directed toward producing tips.” Id. The Rule
again flips this determination, so that a counterman who
engages in work as a short order cook is engaged in dual jobs
if the counterman’s work as a short order cook is unrelated
to tips (or takes more than 20 percent of his time). FOH
§ 30d00(f)(3)–(4). As noted above, this reversal of the
regulation’s example contradicts the regulation because,
under the regulation, working as a “short order cook for the
group” is part of the single, tipped occupation of a
counterman. See 29 C.F.R. § 531.56(e). The majority has
failed to show how either of the Rule’s reversals of the
regulation “flow fairly from the substance” of the
regulation.11 See Catholic Health, 617 F.3d at 494.


     11
       Because the Time-Tracking Rule provides a comprehensive
approach to the tip credit, it is unlikely that subsection 4 of the Rule,
FOH § 30d00(f)(4), is severable from the rest of the Rule, as Judge
Graber suggests. Graber Conc. Diss. at 54–55. But even if subsection 4
is read by itself, it is not entitled to Auer deference. Subsection 4
provides:

          Likewise, an employer may not take a tip credit for the
          time that a tipped employee spends on work that is not
          related to the tipped occupation. For example,
          maintenance work (e.g., cleaning bathrooms and
          washing windows) are not related to the tipped
          occupation of a server; such jobs are non-tipped
          occupations. In this case, the employee is effectively
          employed in dual jobs.

This is not an interpretation of the dual jobs regulation because, like
subsection (3), subsection (4) adopts a minute-by-minute approach that
contradicts the regulation’s occupation-based analysis. While the
regulation applies only when an employee holds two distinct jobs, such
as a maintenance man and a waiter, subsection (4) classifies the minutes
                    MARSH V. J. ALEXANDER’S                            77

                                    D

    Rather than being an interpretation of the dual jobs
regulation, the Time-Tracking Rule has all the indicia of a
legislative rule. See supra at 68–69. Without the Rule and
its time-tracking requirements “there would not be an
adequate legislative basis for enforcement action,” Hemp,
333 F.3d at 1087 (internal quotation marks omitted), merely
because an employer takes a tip credit when an employee
spends time on a range of duties typically included in a
tipped occupation. Nor does the Rule give the DOL any
discretion in enforcement. See Barahona-Gomez, 167 F.3d
at 1235. An employer would be subject to liability whenever
a minute-by-minute calculation of how employees spend
their time during the course of the day shows that, per the
Time-Tracking Rule, an employee was not paid minimum
wages for minutes spent on related duties exceeding the 20-
percent cap or for minutes spent on duties not related to tips.

    Further, the DOL’s derivation of a 20-percent cap on
related duties is precisely the type of arbitrary, numerical
choice that should have been made through notice and
comment. Catholic Health, 617 F.3d at 495; Hoctor, 82 F.3d

an employee spends on tasks that are “not related to the tipped
occupation” as a distinct job, regardless of the nature of the tasks or the
amount of time spent performing them. The regulation’s assurance that
a waitress may perform multiple tasks (including washing dishes or
glasses and cleaning tables) and still be employed in a single waitress
job, is at odds with subsection (4)’s statement that a server who spends
any time washing windows is “effectively employed in dual jobs.” Nor
does subsection (4) clarify any ambiguous terms in the dual jobs
regulation; rather, it adds to the confusion by failing to explain why time
spent washing windows, but not time spent washing dishes, is “not
related” to the tipped occupation. Because subsection (4) merely
presents the agency’s position, rather than an interpretation of the
regulation, it is not entitled to deference.
78               MARSH V. J. ALEXANDER’S

at 170–71. The majority argues that the DOL had the
authority to establish a 20-percent cap, because it is
“consistent with its treatment of other temporal limitations,”
in regulations it previously promulgated. Maj. Op. at 38.
But the majority’s examples of the DOL’s prior temporal
limitations were either legislatively enacted or promulgated
through notice-and-comment rulemaking. See Maj. Op. at
39 n.20; 29 U.S.C. § 213(c)(6); 29 C.F.R. §§ 552.5,
552.6(b), 786.1, 786.100, 786.150, 786.200. Accordingly,
the majority’s examples actually compel the opposite
conclusion: the DOL recognized that a rule establishing a
numerical 20-percent cap is a legislative rule that must be
promulgated through the normal rulemaking process.

    In short, the Time-Tracking Rule is purely a legislative
rule: “under the guise of interpreting a regulation,” the DOL
has created “de facto a new regulation.” Christensen,
529 U.S. at 587–88. As such, the Rule is not entitled to Auer
deference. Moreover, because the DOL did not issue it
through notice-and-comment rulemaking, it is invalid.

                             III

    By mistakenly upholding the DOL’s legislative rule as
an interpretation that is owed Auer deference, the majority
runs squarely into the problems that the APA was enacted to
prevent.

                              A

    First, the DOL failed to get necessary input from the
regulated public. “[T]he point of notice-and-comment
rulemaking is that public comment will be considered by an
agency and the agency may alter its action in light of those
comments.” Hall, 273 F.3d at 1163 (9th Cir. 2001). The
APA’s notice requirement is intended to “improve[] the
                 MARSH V. J. ALEXANDER’S                   79

quality of agency rulemaking by ensuring that agency
regulations will be tested by exposure to diverse public
comment.” Small Refiner Lead Phase-Down Task Force v.
EPA., 705 F.2d 506, 547 (D.C. Cir. 1983) (internal
quotations omitted).

    Because it never sought or received such input, the DOL
promulgated a Rule that not only eviscerates the statutory tip
credit, but is unworkable as a practical matter. The facts of
this case illustrate why the complexity of the time-tracking
requirement makes it unreasonable. Here, Marsh claims that
he brewed tea during every opening shift and as needed,
which took about ten minutes to complete each time, for a
total of forty minutes over the course of any given
workweek. He also brewed coffee for each customer who
ordered it, which took about five minutes to complete each
time, and added up to approximately eighty minutes of any
given workweek. Marsh cut, arranged, and stocked lemons
and limes during every opening shift and throughout his
shifts, each session taking approximately five minutes, for a
total of forty minutes in any given workweek. Marsh
cleaned the soft drink dispensers and their nozzles, replaced
soft drink syrups, and stocked ice. Each task took about five
minutes to complete, and over the course of a workweek
these tasks respectively took twenty, ten, and forty minutes.
J. Alexander’s also assigned Marsh cleaning duties, such as
wiping tables (five to twenty minutes each time, for a total
of one hour and forty minutes over the course of a week),
taking out trash (ten minutes each time, for a total of twenty
minutes over the course of a week), scrubbing walls when
the restaurant was slow (one hour over the course of the
week), sweeping floors (about ten minutes each time, for a
total of forty minutes over the course of a week), and
cleaning restrooms (ten minutes each time, for a total of
thirty minutes over the course of a week). Given this
80                 MARSH V. J. ALEXANDER’S

distribution of multiple varied tasks over the course of a day,
“nearly every person employed in a tipped occupation could
claim a cause of action against his employer if the employer
did not keep the employee under perpetual surveillance or
require them to maintain precise time logs accounting for
every minute of their shifts.” Pellon v. Bus. Representation
Int’l, Inc., 528 F. Supp. 2d 1306, 1314 (S.D. Fla. 2007),
aff’d, 291 F. App’x 310 (11th Cir. 2008).

    The majority claims that the Rule is not unworkable in
this context, Maj. Op. at 42–44, but each of its arguments
fails. First, the majority argues that defendants’ concerns are
misplaced because “[t]he allegations that would trigger a
FLSA wage violation claim require more than de minimis
claims based on seconds or minutes spent rolling silverware
or sweeping a customer’s shattered glass.” Maj. Op. at 42–
43. But Marsh and the other plaintiffs base their damages
claims on exactly these sorts of allegations: minutes spent
performing various tasks throughout the work day. And
Marsh’s claims are exactly the sort addressed by the Rule,
which insists that an employer must aggregate all “related
duties” as part of “the 20 percent tolerance” and pay
minimum wage for all time spent on such duties if over
20 percent, as well as pay minimum wage for all time spent
on work “not related to the tipped occupation.” FOH
§ 30d00(f)(3)–(4). Cf. Sandifer v. U.S. Steel Corp., 571 U.S.
220, 234 (2014) (rejecting the argument that a de minimis
exception applied in a particular FLSA context, such that a
court could ignore “a few seconds or minutes of work
beyond the scheduled working hours” (quoting Anderson v.
Mt. Clemens Pottery Co., 328 U.S. 680, 692 (1946))).12


     12
       The majority’s reliance on Schaefer, Maj. Op. at 42–43, as
standing for this proposition that the FLSA has a de minimis exception
                    MARSH V. J. ALEXANDER’S                           81

    The majority next argues that it is not impracticable for
an employer to keep track of time spent on various duties,
because an employee could clock in and out, using different
input codes, when engaged in different tasks, such as before
and after the restaurant closes or when business is slow.
Maj. Op. at 42–43. This assertion is belied by Marsh’s
claims, which are primarily based on five and ten minute
tasks performed throughout his shifts. Contrary to the
majority’s argument, many of these tasks were not
“scheduled,” Maj. Op. at 43, but occurred “as needed.” The
variable nature of such duties further increases the difficulty
of tracking Marsh’s time spent on each task.

    Finally, the majority also claims that the Rule is not
impracticable, “because employers are already required to
maintain records of each hour an employee receives tips and
each hour she does not, see 29 C.F.R. § 516.28(a).” Maj.
Op. at 44. But the cited regulation requires employers to
track only the “[h]ours worked each workday in any
occupation in which the employee does not receive tips,”
29 C.F.R. § 516.28(a)(4) (emphasis added), and the “[h]ours
worked each workday in occupations in which the employee
receives tips,” 29 C.F.R. § 516.28(a)(5) (emphasis added).
Employers do not have to track related duties within a tipped
occupation — and certainly not duties as granular as brewing
coffee or rolling silverware in napkins. See id. Thus the
Time-Tracking Rule significantly expands employers’ time-
tracking obligations.



is misplaced. In Schaefer, it was undisputed that the servers spent less
than 20 percent of their time in related, untipped duties, and the only de
minimis exception allowed by the court was for the negligible amount of
time (minutes a day) that servers spent dusting picture frames. 829 F.3d
at 555.
82                 MARSH V. J. ALEXANDER’S

                                  B

    Second, the DOL’s creation of a legislative rule without
notice and comment — indeed, without any notice at all —
imposed an unfair surprise on the regulated community. The
Supreme Court has made clear that an agency cannot
“impose potentially massive liability” on the regulated
community without giving fair notice and forewarning.
Christopher v. SmithKline Beecham Corp., 567 U.S. 142,
155 (2012).

    In Christopher, the Court considered an action in which
pharmaceutical sales representatives sued their employers
for overtime wages based on their claim they were not
exempt “outside salesmen.” Id. While the case was pending
before the Supreme Court, the DOL reinterpreted an
ambiguous regulation to further support the employees’
claims. Id. at 154. The Court concluded that such
interpretation was not entitled to Auer deference for several
reasons, all of which apply here. Id. at 155–59.

    For one, Christopher noted that the employees
“invoke[d] the DOL’s interpretation of ambiguous
regulations to impose potentially massive liability on
respondent for conduct that occurred well before that
interpretation was announced.” Id. at 155–56; see also Auer,
519 U.S. at 461–63. The same concern applies here. As
noted above, the DOL announced its 20-percent rule in an
amicus brief in 2010, and did not announce the full Time-
Tracking Rule until this appeal.1 3 While the 2010 version of


     13
       Therefore, the majority errs in claiming that notice predates the
defendants’ conduct. Maj. Op. at 36. Although the DOL internally
revised the Time-Tracking Rule in 2012, it did not publicize the revised
                    MARSH V. J. ALEXANDER’S                            83

the FOH imposed the 20-percent cap on related work, it was
not until 2016 that employers learned they could not take a
tip credit for any time — no matter how minimal — an
employee spends performing a task “not related to the tipped
occupation.”14 § 30d00(f)(4). According to the Rule, any
unrelated work (which it still leaves undefined) transforms
the employee from a tipped employee to one employed in
dual jobs. The unexpected liability such a “surprise
switcheroo” can cause is evident here. See Envtl. Integrity
Project, 425 F.3d at 996 (holding that notice-and-comment
requirements prevent agencies from “pull[ing] a surprise
switcheroo on regulated entities”). Marsh claims he is
entitled to minimum wage for the 17.33 hours he spent each
week performing tasks related to serving, and for the
5.5 hours he spent performing unrelated tasks. Multiplying
the alleged unpaid wages for these hours over the entire time
Marsh was employed, and aggregating the claims of all




guidance until it filed its amicus brief in this appeal in 2016 — more than
two years after Marsh filed his initial complaint.
    14
         The majority contends that the DOL’s 1985 opinion letter
provides notice to employers that they could not take a tip credit for any
unrelated work. Maj. Op. at 37 n.18. This is incorrect: the opinion letters
articulated a multi-factor test for determining when an employee was
engaged in two different occupations. Among other factors, the DOL
considered whether there was a “clear dividing line” between two
different types of duties, such as when one set of duties was performed
in a distinct part of the workday. See 1980 Letter (articulating the “clear
dividing line” standard); see also 1979 Letter (concluding that an
employee has dual jobs where the duties unrelated to tip generation were
temporally separated from tip-generating duties). In addition, the DOL
considered whether an employer assigned a set of distinct duties to a
single employee and whether these duties occupied a significant portion
of the employee’s time. See 1985 Letter; 1980 Letter.
84               MARSH V. J. ALEXANDER’S

similarly situated employees, it is reasonable to assume that
large employers will face staggering damages claims.

    An analogous concern expressed by Christopher is that
misplaced Auer deference “would seriously undermine the
principle that agencies should provide regulated parties fair
warning of the conduct [a regulation] prohibits or requires”
and “result in precisely the kind of unfair surprise against
which our cases have long warned.” Christopher, 567 U.S.
at 156 (alteration in original) (internal quotation marks
omitted); see also Indep. Training & Apprenticeship
Program v. Cal. Dep’t of Indus. Relations, 730 F.3d 1024,
1035 (9th Cir. 2013) (declining to defer to agency
interpretations “where an agency pulls the rug out from
under litigants that have relied on a long-established, prior
interpretation of a regulation”). In Christopher, the fact that
“the DOL never initiated any enforcement actions” or
“otherwise suggested that it thought the industry was acting
unlawfully,” highlighted the lack of notice. 567 U.S. at 157.

    Again, the same factors apply here. As it has done on
many earlier occasions, the DOL issued its Time-Tracking
Rule through an unpublished internal manual, and then
sought controlling deference via an amicus brief. See E.I.
Du Pont De Nemours & Co. v. Smiley, No. 16-1189, 2018
WL 3148557, at *1 (U.S. June 28, 2018) (Gorsuch, J.,
respecting the denial of certiorari) (noting the DOL’s
“aggressive” attempts to establish policy via amicus briefs
in private litigation); Deborah Thompson Eisenberg,
Regulation by Amicus: The Department of Labor’s Policy
Making in the Courts, 65 Fla. L. Rev. 1223, 1243–50 (2013)
(summarizing the DOL campaign to define the FLSA via
interpretations advanced in amicus briefs and the resulting
“wild flip-flops in the DOL’s position on certain issues
during a short period of time”); Stephenson & Pogoriler,
                 MARSH V. J. ALEXANDER’S                     85

supra, at 1493 (“[G]ranting [Auer] deference to litigation
briefs exacerbates the self-delegation problem by giving the
agency even more freedom and incentive to promulgate
open-ended rules to be clarified only later[.]”). Moreover, as
the district court noted, the DOL has never initiated
enforcement litigation based on the 20-percent rule, even
though it initially circulated the FOH to investigators in
1988. Like in Christopher, there are massive numbers of
tipped employees, and “the nature of their work has not
materially changed for decades.” 567 U.S. at 158. Yet,
despite consistent industry practices, the DOL never brought
any enforcement action. Where, as here “an agency’s
announcement of its interpretation is preceded by a very
lengthy period of conspicuous inaction, the potential for
unfair surprise is acute.” Id.

    In short, the DOL’s failure to engage in notice and
comment before issuing the Time-Tracking Rule as its
authoritative interpretation of the dual jobs regulation, raises
the precise concerns that led the Supreme Court to reject
Auer deference to stealth DOL rulemaking. Id. at 158–59.
The majority errs in failing to do likewise.

                              IV

    In recent years, a number of Supreme Court justices have
noted grave concerns about the propriety and
constitutionality of deferring to agency interpretations. See,
e.g., Perez, 135 S. Ct. at 1210–11 (Alito, J., concurring in
part and concurring in judgment); id. at 1211–13 (Scalia, J.,
concurring in the judgment); id. at 1213–25 (Thomas, J.,
concurring in the judgment); Decker v. Nw. Envtl. Def. Ctr.,
568 U.S. 597, 615–16 (2013) (Roberts, C.J., concurring);
Talk Am., Inc. v. Mich. Bell Tel. Co., 564 U.S. 50, 67–69
(2011) (Scalia, J., concurring). As Justice Scalia observed,
“[i]t seems contrary to fundamental principles of separation
86                  MARSH V. J. ALEXANDER’S

of powers to permit the person who promulgates a law to
interpret it as well.”15 Talk America, 564 U.S. at 68 (Scalia,
J., concurring).

     The majority’s mistaken willingness to give Auer
deference to the DOL’s legislative rulemaking in the guise
of deferring to an “interpretation” highlights these concerns.
By taking a hands-off approach to the DOL’s arrogation of
power, the majority allows the DOL to promulgate what
essentially amounts to secret legislation that eliminates the
benefit conferred on employers by Congress and then
enforce the rule via surprise amicus filings in private
litigation — all without political accountability, input from
the regulated community via notice and comment, or
independent judicial review.         See Gutierrez-Brizuela,
834 F.3d at 1152 (Gorsuch, J., concurring) (“[W]hen
unchecked by independent courts exercising the job of
declaring the law’s meaning, executives throughout history
[have] sought to exploit ambiguous laws as license for their
own prerogative.”). This accumulation of power “subjects
regulated parties to precisely the abuses that the Framers
sought to prevent,” Perez, 135 S. Ct. at 1213 (Thomas, J.,
concurring in the judgment), and raises separation of power
concerns, id. at 1220–21; Talk America, 564 U.S. at 68
(Scalia, J., concurring).


     15
        It is no help to argue, as Judge Graber does, that “[a]gencies know
the purpose of their own regulations.” Graber Conc. Diss. at 49. The
“implied premise of this argument — that what we are looking for is the
agency’s intent in adopting the rule — is false.” Decker, 568 U.S. at 618
(Scalia, J., concurring in part and dissenting in part). Because “[o]nly
the text of a regulation goes through the procedures established by
Congress for agency rulemaking,” it is the text that has “the force and
effect of law, not the agency’s intent.” Perez, 135 S. Ct. at 1223–24
(Thomas, J., concurring in the judgment).
                MARSH V. J. ALEXANDER’S                  87

    Allowing agencies to invent rules without notice
“frustrates the notice and predictability purposes of
rulemaking, and promotes arbitrary government.” Talk
America, Inc., 564 U.S. at 69 (Scalia, J., concurring). Here
the DOL did just that, issuing a legislative rule that
eviscerates a benefit conferred by Congress and results in a
nightmare for the regulated community. Because there is no
basis to defer to the DOL’s promulgation of this rule under
Auer or any other theory, I dissent.
