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Budget Bill Limits Circumstances Under Which Employers Can Use Tip Pools; Clarifies Damages Due If Employers Improperly Retain Employees Tips
After contentious negotiations and threatened government shutdowns, on March 23, the President signed the 2018 Budget Bill into law. Of significance here, the bill resolved several longstanding regulatory issues.
The spending bill, includes an amendment to the Fair Labor Standards Act (FLSA), which now prohibits employers—including managers and supervisors—from participating in tip-pooling arrangements, even where the employer does not seek to take the so-called tip credit and pays the employees the regular minimum wage rather than the tip-credit minimum wage, sometimes referred to as the “server’s wage” in the restaurant industry. In other words, under the new law employers, managers and supervisors can never share in a tip pool and employees can never be required to pay any portion of their tips to employers, managers or supervisors.
The amendment also clarifies two (2) issues which have divided courts regarding the disgorgement of illegally retained tips. While many courts have long-held that an employer who illegally requires employees to share tip with non-tipped employees (managers, supervisors, back-of-house and/or kitchen staff, etc.) must return all such tips to the employees, not all courts uniformly held as such. The amendment clarifies that damages resulting from illegal tip pooling include a return of all tips to the employees. The amendment also clarifies that employees’ damages include liquidated damages on all damages, including the disgorged tips, an issue which had previously divided courts and for which the Department of Labor had not provided guidance previously.
In light of the fervent anti-employee stance that the Department of Labor has taken under the current administration, this certainly must be celebrated as a victory for workers. Indeed, the law replaces a proposed regulation which garnered much opposition for its pro-wage theft stance and which was recently discovered to have been pushed through the regulatory process based on intentionally incomplete information provided by Secretary of Labor.
Click amendment to the Fair Labor Standards Act to read the full text of the new law.
Anyone who has ever moved for or opposed a motion for conditional certification (i.e. a “Stage 1” motion) of a collective action is likely familiar with the common defense tactic whereby a defendant asserts that the named plaintiff and members of the putative class are not similarly situated. Typically a defendant argues that individualized issues pertaining to the claims of the named plaintiff(s) (and members within the putative class) render the case ill-suited for class/collective treatment. As discussed below, three recent decisions discuss three separate issues related to this analysis. In the first, a court held that a pro se plaintiff could not adequately serve the interests of the putative class and denied conditional certification. However, in the second and third cases discussed below, the courts rejected the defendants’ contentions that: (1) an undocumented (“illegal”) immigrant was ill-suited to serve as a representative plaintiff; and (2) issues regarding whether specific putative class members signed binding arbitration agreements relating to the issues raised by the named-plaintiff were not properly raised at stage 1.
Pro Se Plaintiff Inadequate Representative for Collective Action
Koch v. CHS Inc.
In the first case, the pro se plaintiff (apparently fairly savvy) moved for conditional certification. Denying the motion, the court held that a pro se plaintiff cannot pursue their claims in a collective action for lack of adequacy of representation. Specifically, the court explained:
The issue of whether a pro se plaintiff can sue on behalf of other members in a collective action is one of adequacy of representation. Determining adequate representation is typically based on a two-part inquiry: “First, the named representatives must appear able to prosecute the action vigorously through qualified counsel, and second, the representatives must not have antagonistic or conflicting interests with the unnamed members of the class.” Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir.1978). Courts have generally concluded that a pro se plaintiff cannot pursue claims on behalf of others in a representative capacity. See Simon v. Hartford Life, Inc., 546 F.3d 661, 664 (9th Cir.2008); see also Johns v. County of San Diego, 114 F.3d 874, 876 (9th Cir.1997) (“While a non-attorney may appear pro se on his ow n behalf, he has no authority to appear as an attorney for others than himself.”); C.E. Pope Equity Trust v. United States, 818 F.2d 696, 697 (9th Cir.1987) (holding that a pro se litigant may not appear as an attorney for others). Here, because Koch is a pro se litigant, he cannot pursue claims on behalf of other CHS employees in a representative capacity.
The rule holds true for pro se plaintiffs seeking to bring collective action suits under the F LSA. Morgovsky v. AdBrite, Inc. ., No. C10–05143–SBA, 2012 WL 1595105 *4 (N.D.Cal. May 4, 2012) (denying pro se plaintiff’s motion to bring a collective action under the FLSA and dismissing collective action claims); Spivey v. Sprint/United Mgt. Co., No. 04–2285–JWL, 2004 WL 3048840 (D.Kan. Dec.30, 2004) (holding that a claim under 29 U.S.C. § 216(b) cannot be brought by a pro se plaintiff).
Accordingly, the Court agrees with CHS that Koch, because he proceeds in the litigation pro se, cannot represent the class members on whose behalf he purports to bring suit. Therefore, proceeding with the litigation as a collective action is not permitted pursuant to 29 U.S.C. § 216(b). The motion will be denied.
Click Koch v. CHS Inc. to read the entire Memorandum Decision and Order.
Named-Plaintiff’s Immigration Status Has No Bearing on Similarly Situated Analysis
Torres v. Cache Cache, Ltd.
In the second case of interest, arising from alleged tip pool violations at defendant’s restaurant, the defendant opposed conditional certification, in part, based on the fact that the named-plaintiff was allegedly an undocumented immigrant. The court rejected this notion, citing well-established authority that an FLSA plaintiff’s immigration status is irrelevant to a claim inasmuch thereunder, inasmuch as same seeks payment for work already performed. Discussing this issue the court reasoned:
Finally, in an apparent attempt to distinguish Plaintiff from other proposed collective action members, Defendants note his status as an illegal immigrant and involvement in other similar FLSA lawsuits. Neither of these issues, however, is likely to provide Defendants with a valid defense that is unique to Plaintiff. First, there are a number of cases finding that evidence of immigration status has no relevance in an FLSA action. See e.g. Reyes v. Snowcap Creamery, Inc., 2012 WL 4888476 at *2 (D.Colo. Oct.15, 2012) (recognizing that “weight of authority clearly holds that a plaintiff’s immigration status is irrelevant in an FLSA action” and citing supporting authority). It is also questionable whether Defendants will be able to introduce evidence of other lawsuits involving Plaintiff. See Van Deelen v. Johnson, 2008 WL 4683022 at *2 (D.Kan. Oct.22, 2008) (evidence of plaintiff’s prior lawsuits cannot be admitted for purpose of proving that plaintiff is litigious but may be admissible for other purposes).
Click Torres v. Cache Cache, Ltd. to read the entire Order.
Whether Putative Class Members’ Claims Are Subject to Arbitration is an Issue Reserved for Stage 2
Hernandez v. Immortal Rise, Inc.
In the final decision, the court had before it the Report and Recommendation of the magistrate judge recommending conditional certification. As it had in its opposition to the underlying motion, the defendant argued that members of the putative class who had previously signed agreements to arbitrate their FLSA claims, were not similarly situated to the plaintiff and the remainder of the putative class. As such, the defendant argued such putative class members should be excluded from receiving notice of their right to join the case by opting in. Rejecting this contention, the court held that the issue of whether (and who) may have signed arbitration agreements, is an issue reserved for Stage 2 (decertification) analysis, and is not properly addressed at the conditional certification stage:
Next, defendants argue that the proposed class should be limited to cashiers and those who had not signed arbitration agreements, excluding grocery packers and delivery workers, whom defendants never employed, and employees subject to arbitration agreements. However, these are issues of fact that should be determined during discovery rather than at this preliminary stage. See D’Antuono v. C & G of Groton, Inc., No. 11–cv–33, 2011 U.S. Dist. LEXIS 135402, at *12–13 (D.Conn. Nov. 23, 2011) (holding that the enforceability of arbitration agreements should not be determined during conditional class certification); Lujan v. Cabana Mgmt., No. 10–cv–755, 2011 U.S. Dist. LEXIS 9542, at *23–24, 2011 WL 317984 (E.D.N.Y. Feb. 1, 2011) (quoting Realite v. Ark Rests. Corp., 7 F.Supp.2d 303, 307 (S.D.N.Y.1998)) (holding that defendants’ contention that its restaurants constituted separate entities raised a contested issue of fact, and was therefore not a basis for denying conditional class certification). Thus, Judge Bloom correctly found that the proposed class should not be limited as defendants propose.
Click Hernandez v. Immortal Rise, Inc. to read the entire Order.
E.D.Mo.: Where Common Tip Pool Violations Alleged, Employees of Franchise Stores as Well as Those at Company-Owned Stores Similarly Situated at Stage 1
White v. 14051 Manchester, Inc.
This case was before the court on the plaintiffs’ motion for conditional certification. As discussed here, the plaintiffs sought to facilitate class notice to employees who worked at the franchise locations of the franchisee who employed them, as well as those who worked for “Hotshots” franchisor or company-owned locations. In support of their motion, plaintiffs argued that all tipped employees at all Hotshots locations, regardless of the owner, were required to participate in illegal tip pools whereby they were required to tip out back-of-the-house employees not eligible to participate in a valid tip pool. Rejecting the defendants’ argument that the court should limit the putative class to those tipped employees employed by the franchisee who employed plaintiffs the court explained, that it would be inappropriate to resolve the merits issue regarding which entities employed each putative class member at Stage 1.
Discussing this issue the court opined:
The Supreme Court has noted that whether a relationship is covered by the FLSA turns on the economic realities of the working relationship rather than technical definitions relating to employment. Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961). The FLSA defines “employee” broadly to include “any individual employed by an employer.” 29 U.S.C. § 203(e)(1)(2006). In turn, “employ” is defined as “to suffer or permit to work” 29 U.S.C. § 203(g), and an “employer” is any person “acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). “Thus, based on the language of the statute, an employee is any individual who is permitted to work by one acting directly or indirectly in the interest of an employer.” Helmert v. Butterball, LLC, No. 4:08CV00342, 2010 U.S. Dist. LEXIS 28964, at *6 (E.D.Ark. Mar. 5, 2010); see also Nicholson v. UTi Worldwide, Inc., No. 3:09–cv–722, 2011 U.S. Dist. LEXIS 41886, at *3 (S.D.Ill. Apr. 18, 2011)(conditionally certifying class of “forklift operators employed” by defendant that included workers hired through temporary staffing agencies).
The Court finds that, for purposes of this Motion, Defendants “permitted or suffered to work” all Hotshots employees, even those at the franchise locations. Given the FLSA’s broad definition of the “employee” and its remedial purpose, Defendants’ franchise arrangement demonstrates sufficient “control” for conditional class certification. Moreover, the employment relationship for franchise employees is disputed by the Plaintiffs, and the Court cannot make credibility determinations at this juncture. See Arnold v. DirecTv, Inc., No. 4:10–CV–352–JAR, 2012 U.S. Dist. LEXIS 140777, at *8 (E.D.Mo. Sept. 28, 2012)(“The Court will not make any credibility determinations or findings of fact with respect to contradictory evidence presented by the parties at this initial stage.”).
The Court also finds that the proper class definition is all Hotshots employees who shared in any tip pool. Employees who participated in the tip pool were allegedly victims of the same policy or plan and denied compensation as a result of the tip-pooling arrangement. While the Court acknowledges that distinctions exist among the Hotshot’s teams and locations, Plaintiffs’ affidavits provide enough evidence at this stage to demonstrate employees were similarly situated and subject to a common practice. McCauley, 2010 U.S. Dist. LEXIS 91375, at *12–13 (citing Busler v. Enersys Energy Products, Inc., No. 09–00159, 2009 U.S. Dist. LEXIS 84500, at *9–10, 2009 WL 2998970 at *3 (W.D.Mo. Sep. 16, 2009)); see also Fast v. Applebee’s Intern., Inc., 243 F.R.D. 360, 363–64 (W.D.Mo.2007) (citations omitted) (“To be similarly situated, however, class members need not be identically situated. The ‘similarly situated’ threshold requires only a modest factual showing.”); Schleipfer v. Mitek Corp., No. 1:06CV109, 2007 U.S. Dist. LEXIS 64042, at *9 (E.D.Mo. Aug. 29, 2007)(class members need not be identically situated). “[A]rguments concerning the individualized inquiries required and the merits of Plaintiffs’ claims are inappropriate at this stage of the proceeding and can be raised before the Court at the second, or decertification, stage.” Dominquez v. Minn. Beef Indus., No. 06–1002, 2007 U.S. Dist. LEXIS 61298, at *10 (D.Minn. Aug. 21, 2007)(internal quotation omitted).
Click White v. 14051 Manchester, Inc. to read the entire Memorandum and Order.
Giuffre v. Marys Lake Lodge, LLC
This case was before the court on the defendant’s motion for summary judgment. At issue was whether its tip pool- which included its “expeditors”- complied with the FLSA. Holding that the defendant-restaurant was entitled to include the expeditor in the tip pool, the court reasoned that: (1) the expeditor was properly deemed a “front-of-the-house” employee with requisite duties to be deemed a “tipped employee;” (2) the expeditor was not an “employer” under the FLSA; and (3) the defendant had properly put plaintiff on notice of its intention to take the tip credit. Thus, the court granted the defendant’s motion.
Briefly discussing the chief issue of interest, the court explained:
MLL utilized the expeditor position on busy nights to assist in its restaurant. Defendants contend that the expeditor is a “front of the house” position that falls within the definition of a “tipped employee” for purposes of the FLSA, thus barring plaintiff’s claim that the tip credit is invalidated by the sharing requirement. See Roussell v. Brinker Int’l, Inc., 441 F. App’x 222, 231 (5th Cir.2011) (“Customarily, front-of-the-house staff like servers and bartenders receive tips. Back-of-the-house staff like cooks and dishwashers do not, and thus cannot participate in a mandatory tip pool.”). In arguing about whether the expeditor could share in tips, the parties focus on the position’s level of interaction with customers. See id. (“Direct customer interaction is relevant because it is one of the factors distinguishing these two categories of workers.”); see Townsend v.. BG–Meridian, Inc., 2005 WL 2978899, at *6 (W.D.Okla. Nov. 7, 2005) (“The cases that have considered whether a given occupation falls within the definition of a tipped employee have focused on the level of customer interaction involved in that occupation.”).
Plaintiff admits that, during the time he worked at MLL, the expeditor position was usually filled by Mikilynn Wollett. See Docket No. 64 at 3, ¶ 8; Docket No. 92 at 3, ¶ 8. Ms. Wollett descibes the expeditor as a “front of the house” position with the following responsibilities: “checking the plates as they come out from the kitchen cooks to make sure they match the tickets; placing the food on the serving trays; taking the serving trays to the tables and delivering the food to customers; checking in with customers about their meals and exchanging food if the customer has [a] complaint; refilling beverages; chatting with customers; and assisting the wait staff in any other way necessary.” Docket No. 64 –1 at 2, ¶¶ 1–2. According to Ms. Wollett, the “position is very similar to that of a waiter, and the attire is nearly identical, but the expeditor/food runner does not take the customers’ orders.” Id. at 1, ¶ 2.
Curiously, the court appears to have resolved factual issues with regard to the alleged duties of the expeditor and simply rejected plaintiff’s proffered evidence in that regard. As such, the court seemed to imply that with a stronger factual record- supported by testimony other than that of the named-plaintiff alone- it may have reached a different result, at least at the summary judgment stage. Thus, it’s not clear how much precedential value this case will have, if any.
Click Giuffre v. Marys Lake Lodge, LLC to read the entire Order.