Fight over Vegas tokes leads to judicial rancor — and maybe to the Supreme Court
By David Raatz
Some gamblers like to tip blackjack dealers by making a bet for them.
If the player’s hand is a winner, both the player and dealer collect. This promotes a sense of harmony at the table — and maybe just enough karma to keep a hot streak going or reverse a streak of bad luck.
A fight on the Las Vegas Strip about what to do with the dealers’ winnings in such cases, along with other forms of tip money, has made its way to the federal courts, producing unusually sharp discord among judges.
The U.S. Supreme Court may yet decide whether the dealers and others who are tipped should keep all of the money or, as asserted by the operator of the Wynn and Encore casinos, the house can redistribute some of the revenue to others, including casino managers known as pit bosses.
A divided three-judge panel of the U.S. Court of Appeals for the 9th Circuit, with jurisdiction over Nevada and other western states, decided on Feb. 23 that pit bosses can’t be given a portion of dealers’ tips, or tokes as they’re called in Vegas. Pit bosses aren’t generally considered players’ friends.
Judge Harry Pregerson’s majority opinion acknowledged the U.S. Fair Labor and Standards Act was silent on the issue of what to do with tip money. But he noted an administrative rule issued by the U.S. Department of Labor in 2011 said tips belong to the employees who receive them.
On appeal, the case of Cesarz vs. Wynn Las Vegas is combined with Oregon Restaurant and Lodging Association vs. Perez, a lawsuit brought to invalidate the rule.
The casinos cited a 2010 case called Cumbie vs. Woody Woo, in which the 9th Circuit said employers could redistribute tip money because the FLSA didn’t prohibit the practice. But Pregerson, joined by Judge John Owens, concluded the new rule rendered the Cumbie opinion inapplicable and, therefore, ruled in favor of the dealers.
They regarded the rule as appropriately responding to “the statutory silence” identified in Cumbie by clarifying “tips are the property of the employee.” Pregerson wrote that this furthered the FLSA’s goal of protecting against “the evil of underpay.”
That prompted a rebuke by Judge N.R. Smith, accusing the majority judges of “ignoring” and “dodging” the Cumbie opinion. Smith’s dissent stated, “Colleagues, even if you don’t like circuit precedent, you must follow it.”
The casinos, represented at oral argument by Eugene Scalia, son of late U.S. Supreme Court Justice Antonin Scalia, sought a rehearing by all 29 active 9th Circuit judges.
On Sept. 6, the rehearing request was denied by a majority vote of the judges. In an uncommon action, 10 active judges signed a 25-page dissent to the denial of a rehearing, disparaging Pregerson’s opinion.
Authored by Judge Diarmuid O’Scannlain, the dissent began: “Our court today rejects the most elemental teaching of administrative law: agencies exercise whatever powers they possess because — and only because — such powers have been delegated to them by Congress. Flouting that first principle, the panel majority equates a statute’s ‘silence’ with an agency’s invitation to regulate.”
Eschewing the civil tone often employed even in strong dissents, O’Scannlain went on to call Pregerson’s opinion “extravagant,” “a caricature,” “entirely alien to our system of laws,” “specious,” “reckless,” “unsupported and indefensible” and “completely out of step with the most basic principles of administrative law.” He also noted the opinion created a “circuit split” — a dispute among federal appellate courts — which is a frequent basis for the U.S. Supreme Court accepting an appeal.
But considering the Supreme Court’s current 4–4 split on most labor and employment issues, in the absence of Justice Scalia or his replacement, Pregerson’s opinion is likely to stand. So, U.S. employers will continue to be prohibited from pooling tips with employees who don’t customarily receive tips.
Blackjack players can be assured the tokes they give to friendly dealers won’t make it to the pockets of scowling pit bosses, thus assuring karmic balance.
David Raatz is a lawyer and writer in Wailuku, Hawai`i.