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S.D.N.Y.: NYLL Unpaid Gratuities and FLSA Overtime Claims Not Precluded By LMRA or CBA; No Interpretation of CBA Required To Determine Whether Defendant Violated Law
Alderman v. 21 Club Inc.
Plaintiffs, unionized waitstaff who worked Defendant’s private banquets filed suit seeking the recover of unpaid tips, pursuant to the New York Labor Law, and unpaid overtime, pursuant to the FLSA. Plaintiffs specifically sought the portion of service charges charged by Defendant, but not paid to Plaintiffs as “tips” as required by New York law. The Defendant moved to dismiss, asserting that Plaintiffs’ claims for unpaid tips were precluded by the LMRA (the CBA stated that banquet waitstaff would receive the equivalent of 18% of the gross price of any banquet they worked). The Court denied Defendant’s Motion, because the claims were pendant not on the CBA, but on the NYLL.
The Court explained:
“As described earlier, plaintiffs’ first claim is under NYLL § 196-d for unpaid gratuities to plaintiffs who worked banquet events at the ’21’ Club. Defendants contend that this claim in reality is one under Section 301 of the LMRA, 29 U.S.C. § 185, which preempts the application of state labor law. Section 301 of the LMRA provides:
Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce … may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.
The Supreme Court has interpreted Section 301 “as a congressional mandate to the federal courts to fashion a body of federal common law to be used to address disputes arising out of labor contracts.” Allis-Chalmers Group v. Lueck, 471 U.S. 202, 209 (1985). When a state law claim alleges a violation of a labor contract or when the resolution of a state law claim depends on an interpretation of a collective bargaining agreement, Section 301 preempts that claim. See Hawaiian Airlines, Inc. v. Norris, 512 U.S. 246, 261 (1994). But if a state “prescribes rules or establishes rights and obligations that are independent of a labor contract, actions to enforce such independent rights or rules would not be preempted by section 301.” Vera v. Saks & Co., 335 F.3d 109, 115 (2d Cir.2003). Indeed, the “bare fact that a collective-bargaining agreement will be consulted in the course of state-law litigation plainly does not require the claim to be extinguished.” Livadas v.. Bradshaw, 512 U.S. 107, 124 (1994). In order to determine whether a state law claim is preempted because it requires interpretation of a collective bargaining agreement, the court must analyze whether the “legal character” of the state law claim is truly independent of the rights conferred under the collective bargaining agreement. Salamea v. Macy’s East, Inc., 426 F.Supp.2d 149, 153-54 (S.D.N .Y.2006).
In the present case, plaintiffs bring their gratuities claim under NYLL § 196-d and not under the CBA. Both § 196-d and the CBA give employees rights in respect to gratuities, although they are worded differently in ways that have significance in this case. Specifically, the CBA guarantees gratuities in the amount of 18% of the total bill for the function. Section 196-d guarantees to the employees whatever has been charged to provide gratuities, without reference to a specific percentage. It is necessary, therefore, for the court to define exactly what plaintiffs’ claim is and then to determine whether it fits under § 196-d or under the CBA or both.
The relevant portions of the complaint are paragraphs 21 and 22 in the factual allegations and paragraphs 33 and 34 stating the claim:
21. For private events, Defendants charged gratuities to the hosts of the events equal to a percentage of the cost of the events.
22. While Defendants distributed a potion of these gratuities to the service staff that worked these parties, Defendants did not distribute all of the gratuities. Thus, Defendants illegally retained substantial portions of the gratuities paid by private event hosts, instead of distributing them in their entirety to service staff.
33. Defendants received gratuities from customers for all private banquets.
34. Defendants retained portions of Plaintiffs’ tips and Class members’ tips.
On their face, the allegations of the complaint do not refer to 18%. However, they are not precise in excluding the possibility that in fact plaintiffs are seeking the 18% referred to in the CBA. But the court believes that the December 29, 2008 letter of union president Bill Granfield is relevant in construing the nature of the gratuities claim. This letter makes a demand that the ’21’ Club pay to employees “the difference between your service charge rate and the 18% gratuity rate contained in the contract.” The reference to “the contract” presumably means the CBA. Thus, in late 2008, the Union was claiming that the service charges were greater than the 18% referred to in the CBA and was demanding that the entire amount be paid to the employees.
The court concludes that the complaint should be taken on its own terms and cannot properly be construed as actually referring only to the 18%.
The complaint asserts that it is made under NYLL § 196-d. That statute provides:
No employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee. This provision shall not apply to the checking of hats, coats or other apparel. Nothing in this subdivision shall be construed as affecting the allowances from the minimum wage for gratuities in the amount determined in accordance with the provisions of article nineteen of this chapter nor as affecting practices in connection with banquets and other special functions where a fixed percentage of the patron’s bill is added for gratuities which are distributed to employees, nor to the sharing of tips by a waiter with a busboy or similar employee.
The first sentence of the statute prevents an employer from taking the gratuities received by an employee. The relevant part of the last sentence states that nothing in the statute affects the practice in connection with functions where a fixed percentage is added to the patron’s bill for gratuities which are distributed to employees. The statute is somewhat confusing because the assurance of the employee’s rights in the first sentence is followed by the latter portion of the last sentence which states that the statute is not applicable to functions where an amount is added to the patron’s bill for gratuities.
Plaintiffs cite authorities that they contend give them rights under the statute. It is not the province of the court on the present motion to resolve questions which may arise as to the exact construction of the statute. It is sufficient to say that, as far as state law is concerned, plaintiffs would surely be entitled to attempt to recover under the statute. What defenses there may be under state law, and how the issues are resolved, remains to be seen. One thing is clear under § 196-d, and that is that there is no reference to 18% or any limit of 18%.
On the question of whether plaintiffs’ gratuities claim should be construed as in reality coming under the CBA so that federal law applies, the language of the CBA was quoted earlier in this opinion. The CBA only guarantees 18%. Consequently, a claim for more than 18% is not properly one under the CBA. It is properly made under § 196-d.
The result is, and the court so holds, that the gratuities claim is not preempted by federal law.
The court notes the contention that the history of the Union submissions by way of grievances constitutes an admission that the gratuities claim in the present case properly falls within the ambit of the CBA. The court rejects this argument. The employees did not give up their right to assert a gratuities claim under § 196-d in the present action.”
The Court also ruled that Plaintiffs were not required to submit their claims to arbitration, based on the language in the CBA.
To read the entire opinion, click here.
N.D.Ill.: Idle Hours Are Compensable “Hours Worked” For Purposes Of Labor Management Relations Act (LMRA), Because Compensable Under FLSA
Laborers’ Pension Fund v. Eagle America Corp.
Plaintiffs Laborers’ Pension Fund and Laborers’ Welfare Fund of the Health and Welfare Department of the Construction and General Laborers’ District Council of Chicago and Vicinity, and James S. Jorgensen, Administrator (collectively “the Funds”), brought suit against Defendant Eagle America Corporation under ERISA, 29 U.S.C. § 1132(e), and the LMRA, 29 U.S.C. § 185(a). The Funds claimed that Eagle America violated ERISA and the LMRA by failing to make proper employee benefit contributions, failing to pay proper union dues, and failing to maintain a surety bond to guarantee the payment of wages and contributions for all “hours worked.” The case was before the Court on Plaintiffs’ Motion for Summary Judgment. Finding, in part, that Plaintiffs’ members were entitled to be paid for idle time, as “hours worked” under the FLSA, the Court granted Plaintiffs’ Motion for Summary Judgment.
Of interest here, the Court analyzed Plaintiffs’ claims for unpaid idle hours under the framework of the FLSA, determining such hours to be compensable as “hours worked” under the FLSA, thereby finding Defendant liable for unpaid wages and benefits to Plaintiffs.
“Before determining whether there is a genuine dispute as to the accuracy of the audit reports, the Court must analyze the controversy over whether Eagle America is responsible for contributions to the Funds for every hour that a covered employee showed up to work. The controversy essentially boils down to a dispute over whether the requirement that Eagle America make contributions for “each hour worked” covers hours when employees are at the job site waiting for appliances to be delivered or loading docks and elevators to become available.
Eagle America argues that these were not “hours worked” because its employees were idle during these hours due to causes that were “unavoidable” from the Company’s perspective. The Company points to the CBA provision requiring the Company to give four hours payment for time lost to employees reporting for work who are not put to work. The Company notes that the provision contains an exception for occasions when the Company cannot put employees to work for “unavoidable causes.” The parties agree that the Company often has no control over whether appliances, elevators, and docks are available. Thus, the Company argues, because the CBA does not require the Company to pay the employees for these “idle hours,” it need not make contributions for these hours.
The Funds argue that the provision regarding “unavoidable causes” is irrelevant. Instead, they look to federal rules interpreting the Fair Labor Standards Act (FLSA) for guidance on the issue of what constitutes an “hour worked.” According to those rules, which clarify the concepts of compensable time and time worked under the FLSA, “[a]n employee who is required to remain on call on the employer’s premises or so close thereto that he cannot use the time effectively for his own purposes is working while ‘on call.’ ” 29 C.F.R. 785.17 (emphasis added). Eagle America argues that even if the Court looks to the FLSA as a guide, the question of whether waiting time is to be considered working time is a “question of fact to be resolved by appropriate findings of the trial court,” Skidmore v. Swift, 323 U.S. 134, 136-37, 65 S.Ct. 161, 163, 89 L.Ed. 124 (1944), and urges the Court to deny summary judgment on that basis.
This lawsuit does not arise under the FLSA. However, in construing the terms of a contract, the Court will take the legal framework in place into account. Florida E. Coast Ry. Co. v. CSX Transp., Inc., 42 F.3d 1125, 1129 (7th Cir.1994). The Court may assume that the parties understood the law in effect at the time of the CBA’s execution and interpret the term accordingly. Id. at 1129-32 (construing settlement agreement not to apply in situations where it would be illegal). Thus, the Court will assume that the parties intended the CBA to require Eagle America to compensate its employees for all hours that are compensable under the FLSA.
The Skidmore Court refused to “lay down a legal formula” as to which “waiting hours” are compensable, holding that courts must address the issue as a case-specific question of fact. 323 U.S. at 136-37, 65 S.Ct. at 162-63. While the interpretive rule cited above is more specific, it does not bind the Court. Brigham v. Eugene Water & Elec. Bd., 357 F.3d 931, 940 (9th Cir.2004) (citing U.S. v. Mead Corp., 533 U.S. 218, 232, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001)). Nonetheless, courts have frequently looked to the rules for guidance in disputes under the FLSA, id. (compiling cases), and, as the rule suggests, the question of whether an employee must remain on or near the premises while waiting is often a factor in the courts’ determinations. See, e.g., Armour & Co. v. Wantock, 323 U.S. 126, 133-34, 65 S.Ct. 165, 168-69, 89 L.Ed. 118 (1944) (affirming judgment in favor of firefighters who could spend time on call playing cards and engaging in other “amusements,” but who were required to remain on premises); see also Owens v. Local No. 169, Ass’n of W. Pulp & Paper Workers, 971 F.2d 347, 351-54 (9th Cir.1992) (compiling factors, distinguishing cases in which employees had to remain on, near, or were frequently called back to premises). In cases where on-premises hours were not considered “working hours,” the workers were allowed to use their time on premises for long resting periods, eating, and engaging in recreational activities. See, e.g., Allen v. Atl. Richfield Co., 724 F.2d 1131, 1137 (5th Cir.1984) (reversing summary judgment to plaintiffs because they were “free to sleep, eat at no expense, watch movies, play pool or cards, exercise, read, or listen to music during their off-duty time”); Rousseau v. Teledyne Movible Offshore, Inc., 805 F.2d 1245, 1248 (5th Cir.1986) (affirming dismissal of claim by plaintiffs who were “free to sleep, eat, watch television, watch VCR movies, play pingpong or cards, read, listen to music, etc….[and] seldom or never did any physical work after their shift ended”).
In this case, Eagle America has provided no facts to call into dispute whether the “idle hours” spent on the jobsite by its employees were in fact “hours worked.” Instead, the Company points to the contract language regarding “unavoidable cause” and stresses that this is a question of fact. However, Eagle America cannot survive the summary judgment phase of these proceedings merely because there is a question of fact involved. The Court will deny summary judgment if there is a “genuine issue as to [a] material fact.” Fed.R.Civ.P. 56(c). Eagle America is correct that in instances of uncertainty regarding whether “hours waiting” are “hours working” the Court “must take account of the arrangement plaintiffs themselves chose.” Binges v. Sacred Heart St. Mary’s Hospitals, Inc., 164 F.3d 1056, 1059 (7th Cir.1999). In other words, the Court will look to the CBA in cases of uncertainty. However, given Eagle America’s failure to put forward any facts regarding the freedom its workers have while waiting for deliveries, loading docks, and elevators, the Court does not find uncertainty in this case.
Assuming for the moment that there is some level of uncertainty, however, and that the CBA is relevant, the Court does not stray from its decision. The Company reads the referenced CBA provision to apply to situations when employees are waiting for elevators and the like. However, the Court reads the provision differently. The provision, which appears under the heading “Reporting for Work,” applies to employees “reporting for work” but “not put to work.” The CBA generally requires Eagle America to pay these employees four hours’ worth of pay for “lost time.” Under the Company’s reading, employees would receive this four hours’ pay regardless of whether they were sent home immediately or were sent home after waiting on the jobsite for eight hours. Or, in the case at issue here, when the Company does not put an employee to work for an “unavoidable cause” such as a late delivery, the employee might be paid nothing for waiting eight hours. The provision makes much more sense if it applies only in situations when an employee is sent home and unable to work the hours that he or she expected to work and not in situations when the employee is required to remain on premises waiting for hours at a time or waiting for minutes between tasks for an entire day.
This reading of the provision finds support in the text of the provision itself. While the Company focuses on the fact that it need not provide any pay in instances of “other unavoidable cause,” the CBA also exempts the Company from paying employees when they are not put to work because of “weather conditions, fire, [or] accident.” In cases of inclement weather, however, the CBA requires the Company to pay employees for hours spent waiting for the weather to clear up. Moreover, in the provision regarding inclement weather, the CBA alternatively refers to “reporting pay” as “show up” pay. These provisions lend a great deal of support to the notion that the parties to the CBA intended for the “Reporting for Work” provisions to require four hours’ pay for employees who “show up” for work but are sent home. They also support the notion that the parties intended workers to get paid for hours spent waiting. Finally, the Court finds further support in the fact that the CBA provides specific exceptions for “weather conditions, fire, [or] accident,” but not for the circumstances at issue in this case. If all parties understood that employees would regularly be required to wait for elevators, loading docks, and deliveries, and they intended for those circumstances to be covered by this provision, it seems unlikely that they would not have included an explicit reference to those circumstances.
The FLSA overrides contracts, so agreements such as the CBA are only relevant in close cases. Dinges, 164 F.3d at 1059. Eagle America has not placed material facts in this case in dispute, and it is therefore not a close case. Furthermore, the Court’s interpretation of the CBA favors the Funds. Thus, even making all inferences in favor of the Company, the Court can resolve this question of fact on summary judgment.”
Thus, the Court granted summary judgment in favor of the Funds on the issue of liability.