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S.D.Fla.: Employer Need Not Pay Employee MW For All Hours Worked to Take Advantage of Tip Credit
Goldin v. Boce Group, L.C.
This case was before the court on defendant’s motion to dismiss, for failure to state a claim. The plaintiff’s theory of relief for minimum wage violations arose from the fact that while he worked 51 hours per week, each week, Defendants paid Plaintiff the required reduced minimum wage for only forty hours, and failed to pay him at all for the additional eleven hours of overtime. Plaintiff claimed that because Defendants “did not pay Plaintiff the required amount for every hour he worked,” they were not permitted to take advantage of the tip credit at all and must disgorge the entire tip credit. Inasmuch as the FLSA requires that employers who seek to take the tip credit must pay tipped minimum wage in order to do so, this theory would seem to make perfect sense, however the court disagreed and dismissed the case.
The court reasoned:
“There is no basis in the FLSA for the relief Plaintiff seeks. The FLSA clearly lays out the prerequisites an employer must meet in order to claim the tip credit. There are only two: (1) the employer must inform the employee that the employee will be paid the reduced minimum wage; and (2) all tips received by the employee must be retained by the employee. 29 U.S.C. § 203(m). There is no “condition precedent” that the reduced cash wage be paid for every hour worked before an employer is entitled to claim the statutorily-mandated tip credit. See id. Congress could, and did, write into the FLSA express conditions precedent to the application of the tip credit. The Court declines to read a condition precedent into the statute where Congress did not create one. In re Tennyson, 611 F.3d 873, 877 (11th Cir.2010) (stating that where statute is “clear, unambiguous, and does not result in any absurd consequences,” the Court “will not … read into the text of the statute an unstated purpose.”).
In addition, the FLSA very clearly lays out the remedies available to employees who are subject to FLSA violations by employers. Successful FLSA plaintiffs are entitled to recover “the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and [ ] an additional equal amount as liquidated damages.” 29 U.S.C. § 216(b). Congress wrote specific remedies into the statute. Congress did not choose to include as a remedy disgorgement of the tip credit where the plaintiff is a tipped employee. The Court will not write this additional remedy into the statute where Congress did not see fit to do so. See In re Tennyson, 611 F.3d at 877.
In addition, two other divisions of court in this District have rejected Plaintiff’s theory on almost identical facts. See Muldowney v. Mac Acquisition, LLC, Case No. 09–22489–CIV, 2010 WL 520912 (S.D.Fla. Feb. 9, 2010) (Huck, J.); Perez v. Palermo Seafood, Inc., Case No. 07–21408–CIV, 2008 WL 7505704 (S.D.Fla. May 8, 2008) (O’Sullivan, M.J.). In both cases, a tipped employee who was paid the reduced minimum wage for some hours claimed their employers were not entitled to claim the tip credit because they were not paid for “off-the-clock work.”
In Palermo Seafood, Magistrate Judge O’Sullivan found no textual support in the statute for the plaintiff’s position, observing: “The cases that have disallowed the tip credit have done so because the employer failed to comply with one, or both, of the following requirements: (1) the employee receive proper notice of the tip credit and (2) that the employee is not required to share his or her tips with non-tipped employees.” 2008 WL 7505704 at *2. Accordingly, Judge O’Sullivan found tip credit should apply to the plaintiff’s regular shift hours, for which she was compensated at the reduced minimum wage. Id. at *1.
In Muldowney, Judge Huck came to the same conclusion:
Section 203(m) merely prescribes the method for calculating a tipped employee’s wages and sets forth two explicit requirements that must be met for an employer to claim the tip credit, both of which are satisfied in this case. The statute says nothing about unpaid wages due to off-the-clock hours. Further, by rejecting Plaintiff’s interpretation, she is not left without a remedy: she can seek unpaid wages for her alleged off-the-clock hours under state law or other sections of the FLSA. Therefore, the Court finds that Defendants are entitled to the tip credit for hours where Plaintiff was paid the specified reduced cash wage.2010 WL 520912 at *1.
The Court agrees with these two well-reasoned decisions. However, this does not mean, as Plaintiff argues, that employers are therefore not required to pay employees the minimum wage for every hour worked. Of course employers must compensate employees at the required rate for every hour worked, and of course the failure to do so is a violation of the FLSA. 29 U.S.C. § 206(a)(1) (providing minimum wage amounts); 29 U.S.C. § 215(a)(2) (creating cause of action for violation of minimum wage and overtime provisions).”
It should be noted that this decision and the 2 decisions on which it relies were all rendered in the Southern District of Florida. As tipped employee cases continue to become more and more prevalent though, as a result of tremendous amount of abuses of tipped workers in various industries, it will be interesting to see if courts outside of the Southern District of Florida have a different take, based on the text of 203(m).
Click Goldin v. Boce Group, L.C. to read the entire order.
Florida Sued For Failing To Raise Minimum Wage, In Accordance With The Florida Constitution, Miami Herald Reports
The Miami Herald reports that:
“Two legal groups sued Florida’s labor agency Monday, claiming the state failed to raise the state’s minimum wage by six cents per hour this year to keep up with inflation.
The lawsuit claimed the Agency for Workforce Innovation violated the Florida Constitution by keeping it at the $7.25 federal rate, where it was last year, instead of raising it to $7.31 on Jan. 1.
About 188,000 minimum wage workers could be effected. At stake is up to $128 this year for a full-time employee working a 40-hour week. If all those the minimum-wage employees worked 40-hour weeks the extra six cents would add up to $15 million.”
Go to the Miami Herald to read the entire story.
New Study Dispells The Fallacy That The Minimum Wage Is Bad For Workers, NY Times Reports
In what has turned into a hot-button issue in this year’s election cycle, the NY Times discusses the myth, often profferred by conservatives, that the minimum wage hurts workers.
The Times reports that:
“An important new study exploiting this opportunity will appear this month in The Review of Economics and Statistics. The economists Arindrajit Dube of the University of Massachusetts Amherst, T. William Lester of the University of North Carolina at Chapel Hill, and Michael Reich of the University of California, Berkeley, closely analyze employment trends for several categories of low-wage workers over a 16-year period in all counties sharing a common border with a county in another state where minimum wage increases followed a different trajectory.
They report that increases in minimum wages had no negative effects on low-wage employment and successfully increased the income of workers in food services and retail employment, as well as the narrower category of workers in restaurants.
The study successfully addresses a number of criticisms previously leveled at the case-study approach and points to flaws in all previous studies that have found negative employment effects.
The level of technical discussion is daunting, but if you don’t want to grapple with concepts like “spatially correlated fictitious placebo minimum wages” you can watch a video instead — Arindrajit Dube clearly explains the issues in a 12-minute interview. He emphasizes that higher minimum wages tend to reduce worker turnover, benefiting both workers and employers.”
Go to the New York Times website to read the entire article.
Pennsylvania Laborers Like New Law That Defines “Employees,” Pittsburgh Post-Gazette Reports
The Pittsburgh Post-Gazette reports that a new law defining who is an employee (versue independent contractor) is being greated enthusiastically by Pennsylvania workers:
“Union laborers are claiming victory now that Gov. Ed Rendell has signed a law aimed at curtailing construction companies’ ability to skirt taxes — and cut its own costs and liability — by labeling its workers independent contractors.
By classifying their workers as “independent contractors” instead of employees, companies can avoid paying unemployment compensation and workers’ compensation taxes.
Avoiding those taxes, according to labor groups, reduces employer costs and allows such companies to underbid contracting companies that are following the letter of the law.
The new law — formerly House Bill 400 and now Act 72 — is called the Construction Workplace Misclassification Act. Contracting companies that violate the act could be subject to fines and criminal prosecution. There’s also an “acting in concert” provision, which would penalize anyone who knowingly hires a contractor that is in violation of the act.
“It really will start to separate responsible contractors from irresponsible contractors,” said Jason Fincke, executive director of the Builders Guild of Western Pennsylvania, a labor management and contractor association group.
The point of the law isn’t to eliminate the use of independent contractors in the construction industry, he said.
“If there’s a service that you need that you don’t normally provide, you would get someone to do that for you,” Mr. Fincke said. “That’s a legitimate independent contractor.”
The law applies to the construction field only, to the regret of the Teamsters, who had hoped the law would be expanded to include truck drivers (and other kinds of workers) as well. The Teamsters have been fighting with Moon-based FedEx Ground, which classifies its drivers independent contractors. FedEx says its drivers are “small business owners” because they own their own equipment.”
To read the entire article go to Pittsburgh Post-Gazette.
Oregon State Minimum Wage To Rise By .10¢ Per Hour In January, Stateman Journal Reports
StatemanJournal.com is reporting that Oregon is set to raise the State Minimum Wage by .10¢ per hour in January.
“Oregon’s minimum wage will rise to $8.50 per hour on Jan. 1, State Labor Commissioner Brad Avakian said Monday.
The 10-cent increase mirrors a 1.15 percent increase in the Consumer Price Index since August 2009. Oregon’s minimum wage rate has been $8.40 per hour since January 2009.
Washington, where the minimum wage is currently $8.55 per hour, will announce its adjustment on Sept. 30.”
According to the story, “Ballot Measure 25, enacted by Oregon voters in 2002, requires a minimum wage adjustment annually based on changes in inflation as measured by the Consumer Price Index. The Commissioner of the Bureau of Labor and Industries is directed to adjust the minimum wage for inflation every September, rounded to the nearest five cents.”
To read the entire article, click here.
S.D.Ohio: Inclusion Of Maître D’ In Tip Pool Not Necessarily Illegal; Evidence Demonstrated Maître D’ Lacked Management Duties To Make Him An FLSA Employer, If He Did Not Hire Or Fire
Strange v. Wade
This case was before the court on plaintiff’s motion for summary judgment regarding a variety of issues. Although the court granted the motion in some respects, as discussed here, it denied the motion with respect to plaintiff’s claim that defendant’s inclusion of the maître d’ in its tip pool was illegal and invalidated the tip pool. The court held that on the record before it, it was not possible to conclude that the maître d’ was a management employee rather than a properly tipped service employee.
Discussing this issue the court reasoned:
“The FLSA expressly prohibits employers from participating in employee tip pools. “Congress, in crafting the tip credit provision of section 3(m) of the FLSA did not create a middle ground allowing an employer both to take the tip credit and share employees’ tips.” Chung v. New Silver Place Rest., Inc., 246 F.Supp.2d 220, 230 (S.D.N.Y.2002); Wajcman v. Investment Corp. of Palm Beach, No. 07-80912-CIV, 2008 WL 783741, *3 (S.D.Fla. March 20, 2008) (“The theory here is that employees who exercise substantial managerial authority over the day to day operations of the business are functionally the ‘employers’ themselves”). Where employers participate in a tip pool, the pool is invalid. See Ayres v. 127 Restaurant Corp., 12 F.Supp.2d 305 (S.D.N.Y.1998) (tip pool violated FLSA where general manager, who had authority to suspend, hire and fire employees and analyze payroll costs, was allowed to participate in the pool).
Plaintiff argues that Pigall’s tip pool was invalid because Brown was a manager and shared in the pool. (Doc. 22-1.) In support of its argument, Plaintiff points to Brown’s guaranteed compensation, his participation in the opening of the restaurant, his authority to train, schedule and supervise the wait staff, and his authority to hire and fire employees. (Id.) Plaintiff cites to the depositions of Brown and de Cavel, wherein both men testified that Brown was considered part of the restaurant’s management team. (de Cavel Dep. 50:13-14; Brown Dep. 59:17-22.) These facts, Plaintiff argues, unequivocally establish that Brown was an employer for purposes of the FLSA. See Ayres, 12 F.Supp.2d at 307-08 (general manager of restaurant, who had full authority to suspend or terminate employees, supervised wait staff, made hiring decisions, assumed responsibility for budget and received weekly salary of $2000 was not an employee who “customarily and regularly received tips” under the FLSA).
Defendants agree that Brown participated in the tip pool but argue that he was not a manager and, thus, the tip pool was not invalid by virtue of the fact that Brown participated in it. Defendants point to Dole v. Continental Cuisine, Inc., 751 F.Supp. 799 (E.D.Ark.1990), to support their contention that Brown cannot be considered an employer under the Act. In Continental Cuisine, the individual in question was the maître d’ of the restaurant alleged to have violated the FLSA. 751 F.Supp. at 802-03. The maître d’ was responsible for setting up the dining room, seating and greeting customers, serving the first drink to customers, scheduling shifts for the wait staff, interviewing applicants for positions as waiters and waitresses, and recommending that persons be hired or fired. Id. at 800. Because the maître d’ did not have final authority to hire and fire employees, set wages, control restaurant operations, or control payroll, he was not considered an employer for purposes of the FLSA. Id. at 803. Defendants argue that, similar to the maître d’ in Continental Cuisine, Brown did not have the requisite managerial authority to be considered an employer under the Act.
The Court agrees with Defendants that there is a genuine issue of material fact as to whether Brown is an employer under the FLSA. Although the parties appear to agree on many of the duties that Brown performs, there is conflicting testimony regarding whether Brown had full authority to hire and fire workers and how much control Brown exercised at the restaurant. For example, although Brown testified that he made final hiring decisions, he acknowledged that he was “not at liberty to hire someone” without de Cavel first meeting with that person. (Brown dep. 53:3-54:15.) Meanwhile, de Cavel testified that Brown was part of his management team and “fire[d] a few people without [his] agreement” (de Cavel dep. 50:13-14; 20:9-10). Conversely, Brown testified that he had no responsibility “for any decision that involved spending money.” (Brown dep. 51:19-20.) Based on the current record, and construing all facts in favor of Defendants, the Court believes that genuine issues of material fact preclude summary judgment on this issue. Plaintiff’s motion for summary judgment regarding the validity of the restaurant’s tip pool is DENIED.”
To read the entire decision, click here.
EDITOR’S NOTE: In a recent decision going one step further, a court in the Northern District of Texas held on similar evidence, that as a matter of law, the inclusion of a maître d’ did not render a tip pool illegal. Rudy v. Consolidated Restaurant Companies, Inc., 2010 WL 3565418 (N.D.Tex. Aug. 18, 2010).
It is clear from both of these decisions that while there is room for the argument that inclusion of a maître d’ may render an otherwise valid tip pool invalid, it is a very fact intensive issue and plaintiff attorneys would be wise to fully develop their factual record on issues of hiring/firing powers if they prosecute these claims.
Click here, to read more about the rules, regulations and laws applicable to Tipped Employees.
11th Cir.: FLSA Means What It Says; When An Enterprise Grosses $500,000 Per Annum And Two Or More Employees Handle Goods That Previously Traveled In Interstate Commerce, There Is Enterprise Coverage
Polycarpe v. E&S Landscaping Service, Inc.
This consolidated appeal was before the Court after each one of the six (6) cases was dismissed for lack of enterprise coverage. In five (5) of the six (6) cases there was proof that the Defendants had gross revenues of $500,000.00 per year or more. Thus, the only question is whether otherwise “local” businesses came under the coverage of the FLSA, due to the fact that each had two (2) or more employees who handled goods or products that had previously traveled in interstate commerce (the “handling clause”). Answering in the affirmative, the Eleventh Circuit ended a battle of statutory misinterpretation that had gained steam in the past few years, and read the statute as written. In so doing, the Court rejected the “coming to rest” doctrine in the context of enterprise coverage and made clear the doctrine only applies in the individual coverage context.
In each instance, the Court held that the district courts below incorrectly relied on the “coming to rest” doctrine and misinterpreted the ultimate consumer exception in concluding that Plaintiffs could not show enterprise coverage under the FLSA. In some instances, the Court also noted that the district court failed to consider whether the evidence that Plaintiffs presented raised a genuine and important question of fact under the handling clause; instead of analyzing that portion of the FLSA, the district court mistakenly relied on the interpretive framework of an individual-coverage case.
To read the entire opinion, click here.
D.Nev.: FLSA Precluded Nevada State Law Class Action
Daprizio v. Harrah’s Las Vegas, Inc.
This case was before the Court on Defendant’s Motion to Dismiss Plaintiffs’ state law claims on several grounds. As discussed here, the Court ruled that the FLSA precludes Nevada State Law Class Action claims.
“The Court finds that the FLSA precludes the state law class action. The conflict between the two mass action schemes involves the mechanisms by which parties become members of a suit. Defendant argues that “allowing the parallel claims to be pursued concurrently would allow the application of the collective action opt-out mechanism of Rule 23, invoked by the state law claims, to govern what Congress intended to be a more limited situation of opt-in collective action [under the FLSA].” (Mot. Dismiss 13, ECF No. 2). The Court agrees. The FLSA states that, “No employee shall be a party plaintiff to any such action unless he gives consent in writing to become such a party and such consent is filed in the court in which such action is brought.” 29 U.S.C. § 216(b). This is the “opt-in” provision used for FLSA collective actions, under which a putative class member is not bound unless he or she affirmatively opts in to the suit. Gardenvariety class actions, however, are governed by Rule 23, which states that “the court will exclude from the class any member who requests exclusion.” Fed.R.Civ.P. 23(c)(2)(B)(v). This is the “opt-out” provision, under which members of a certified class must affirmatively opt out of the class or be bound by the class action litigation. This divergence between the respective opt-in and opt-out procedures of a FLSA collective action and a garden-variety class action results in a class action under state labor laws being preempted by the FLSA’s collective action scheme.
The Ninth Circuit has based its preemption analysis on the Supreme Court’s three categories: (1) express preemption-“where Congress explicitly defines the extent to which its enactments preempt state law”; (2) field preemption-“where state law attempts to regulate conduct in a field that Congress intended the federal law exclusively to occupy”; and (3) conflict preemption-“where it is impossible to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Williamson v. Gen. Dynamics Corp., 208 F.3d 1144, 1149 (9th Cir.2000) (citing Indus. Truck Ass’n, Inc. v. Henry, 125 F.3d 1305, 1309 (9th Cir.1997) (citing English v. Gen. Elec. Co., 496 U.S. 72, 78-80 (1990))). “Consideration of the issues arising under the Supremacy Clause ‘start[s] with the assumption that the historical police powers of the states [are] not to be superseded by … Federal Act unless that [is] the clear and manifest purpose of Congress.’ “ Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947)). “Preemption issues must be decided on a case-by-case basis.” Williamson, 208 F.3d at 1155.
A court of this District has ruled that the FLSA precludes state-law labor class actions. In Williams v. Trendwest Resorts, Inc., the court found that “the class action mechanisms of the FLSA and Rule 23 are incompatible. It would be inappropriate to permit Plaintiff’s attempt to circumvent the restrictive opt-in requirement of the FLSA….” No. 2:05-CV-0605-RCJ-LRL, 2007 WL 2429149 at *4 (D.Nev. Aug. 20, 2007) (Jones, J.). In Trendwest Resorts, the defendant’s employees were attempting to recover overtime wages under the FLSA as well as under California state labor law. The court pointed out that notice was sent to 1578 employees of Trendwest Resorts in California and Nevada, but only 194 individuals had opted into the putative class. Id. Had Rule 23 been implemented, the other 1100 California employees who failed to affirmatively opt in would have been brought into the case. Id . In the present case, there is only one complaining party and an unknown number of potential class members. “[T]he policy behind requiring FLSA plaintiffs to opt in to the class would largely be thwarted if a plaintiff were permitted to back door the shoehorning in of unnamed parties through the vehicle of calling upon similar state statutes that lack such an opt-in requirement.” Leuthold v.. Destination Am., Inc., 224 F.R.D. 462, 470 (N.D.Cal.2004) (citation and internal quotation marks omitted).
Plaintiff argues that no preemption issue exists since none of the three types of preemption apply. Express and field preemption are not in dispute since neither side alleges that the federal law expressly preempts state law or that labor disputes are strictly a federal issue. Conflict preemption, Plaintiff argues, also does not apply because the “Nevada overtime and minimum wage claims do not ‘stand as an obstacle’ to Congress’ purpose in enacting the FLSA.” (Resp. Mot. Dismiss 9:11-12, ECF No. 14). In support of this argument, Plaintiff points to the “savings clause” of the FLSA which allows states to enact wage and hour laws more favorable to workers than the minimum requirements of the FLSA and quotes Williamson, which states that, “the FLSA’s ‘savings clause’ is evidence that Congress did not intend to preempt the entire field.” 208 F.3d at 1151 (citing 29 U.S.C. § 218(a)). This argument is unpersuasive for two reasons. First, the savings clause of the FLSA that Plaintiff mentions deals expressly with minimum wages and child labor laws. The language leaves little room for broader inference and probably no room for broader application. Second, the quote from Williamson Plaintiff mentions explicitly refers to field preemption, a type of preemption Plaintiff explicitly disclaims. The savings clause simply means that plaintiffs may bring FLSA collective actions based on violations of state wage and hour laws that are stricter than federal requirements. But the fact that Congress permits suit based on a state’s wage and hour requirements that are stricter than those in the FLSA does nothing to ameliorate the conflict between the FLSA opt-in provision and the Rule 23 opt-out provision.
Because of the tension between the opt-in procedure of an FLSA collective action and the opt-out procedure of a garden-variety Rule 23 class action, a conflict exists. See, e.g., Rose v. Wildflower Bread Co., No. CV09-1348-PHX-JAT, 2010 WL 1781011, at *3 (D.Ariz. May 4, 2010). The Ninth Circuit has stated even more broadly in dicta that “[c]laims that are directly covered by the FLSA (such as overtime and retaliation disputes) must be brought under the FLSA.” Williamson, 208 F.3d at 1154. This could be read as preempting even Plaintiff’s individual claim, but that question is not before the Court.”
There continues to be a rift between various circuits (and even within circuits) as to whether so-called hybrid FLSA Collective Actions may co-exist with State Law Class claims. Stay tuned to see whether the Supreme Court will ultimately weigh in.
To read the entire decision, click here.
Overtime Law Blog 