The opinion of the court was delivered by: Geraldine Soat Brown United States Magistrate Judge
Magistrate Judge Geraldine Soat Brown
MEMORANDUM OPINION AND ORDER
The five named plaintiffs Glenn Driver, Demiko McCaster, Rosamar Mallari, Joyce Britton and Michael Hicks (collectively, "Plaintiffs") were formerly employed by defendant AppleIllinois, LLC ("AppleIllinois"), as servers and bartenders at an Applebee's restaurant in Ford City, Illinois. (Third Am. Compl. ¶¶ 2-6). They bring claims against AppleIllinois under the Illinois Minimum Wage Law ("IMWL"), 820 Ill. Comp. Stat. 105/1, et seq., the Illinois Wage Payment and Collection Act ("IWPCA"), 820 Ill. Comp. Stat. 115/1, et seq., and the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq. (Id. ¶ 1.)*fn1 Plaintiffs (except Glenn Driver) now move for class certification of their IMWL and IWPCA claims. (Pls.' Mot. for Class Cert.) [Dkt 121.] AppleIllinois opposes the motion. That motion is granted in part and denied in part as set out below.*fn2
This lawsuit was originally filed as a putative class action in the Circuit Court of Cook County, Illinois and was removed by AppleIllinois to the federal court. [Dkt 1.] The parties consented to magistrate judge jurisdiction. [Dkt 53.]*fn3 The current Third Amended Complaint alleges five counts. In the present motion, Plaintiffs seek class certification under Fed. R. Civ. P. 23 for Counts I, II and III (the counts brought under the IMWL and IWPCA). Counts IV and V allege FLSA claims on behalf of the named Plaintiffs only, not as a FLSA collective action. Thus, there is no problem here of a potential tension between a FLSA "opt-in" class and a Rule 23 "opt-out" class.*fn4
AppleIllinois, LLC, is an Illinois limited liability company that currently owns and operates 34 Applebee's restaurants throughout Illinois pursuant to franchise agreements with Applebee's International, Inc. (Answer ¶ 7; Defs.' Mem., Ex. 96, Decl. of Scott Cortner ¶ 6.)*fn5 Plaintiffs' proposed classes would include employees working at all of AppleIllinois' restaurants. (Pls.' Mot. for Class Cert. ¶ 2.)
Plaintiffs were tipped employees who worked at a single AppleIllinois location -- the Ford City, Illinois restaurant -- for less than a year. (Answer, ¶¶ 3-6.) The Ford City location opened for business in June 2006. (Cortner Decl. ¶ 12.) Demiko McCaster was employed as a bartender from May 2006 to January 2007. (Pls.' Mem., Ex. 3, Decl. of Demiko McCaster ¶ 1.) Rosamar Mallari was employed as a server from mid-May 2006 through August 2006. (Pls.' Mem., Ex. 4, Decl. of Rosamar Mallari ¶ 1.) Joyce Britton was employed as a server from June 2006 through January 2007. (Pls.' Mem., Ex. 5, Decl. of Joyce Britton ¶ 1.) Michael Hicks was employed as a server from June 2006 through January 2007. (Pls.' Mem., Ex. 6, Decl. of Michael Hicks ¶ 1.)
Plaintiffs submitted a presumably typical franchise agreement AppleIllinois entered into with Applebee's International, Inc. (Pls.' Suppl. Exs., Ex. 53, Applebee's Neighborhood Grill & Bar Franchise Agreement ("Franchise Agreement").)*fn6 As relevant to the present motion, the Franchise Agreement requires AppleIllinois to operate the restaurants in conformity with Applebee's International's comprehensive restaurant system, adhering to its standards and policies. (Franchise Agreement Sect. 2.) As a franchisee, AppleIllinois is responsible for the restaurants' compliance with Applebee's International's operating standards, methods, techniques and material, and for training restaurant employees in accordance with those standards, methods and techniques. (Franchise Agreement Sect. 6.) The Franchise Agreement also requires AppleIllinois to use a point of sales ("POS") electronic recordkeeping system provided by Applebee's International, and to complete and submit reports to Applebee's International on a weekly, monthly and annual basis containing specific financial and sales data. (Franchise Agreement Sect. 10.) As a result, the records of AppleIllinois' various restaurants are meant to be kept in a uniform manner. Plaintiffs submitted sample computer printouts of "payroll details reports" from the POS system. (Pls.' Suppl. Exs., Exs. 50, 51.)
To operate its restaurants, AppleIllinois employs various hourly employees, who are divided into "directly tipped positions" (servers, bartenders, and car side servers), "in-directly tipped positions" (hosts/hostesses); and "non-tipped positions" (line cooks/Expo [expediting], General Utility (GU) workers, prep cooks and service/kitchen professionals). (Pls.' Suppl. Exs., Ex. 52, Apple Sauce, Inc./AppleIlllinois, LLC Corporate Policy ("AppleIllinois Wage Policy") at 11.)*fn7
AppleIllinois pays the "directly tipped" and "in-directly tipped" positions at the "tip credit" rate, that is, an amount less than the prevailing minimum wage, taking an allowance (or tip credit). (Id. at 11; see also, e.g., Defs.' Mem., Ex. 80, Decl. of Steven Schiller ¶ 4; Pls' Mem., Ex. 42, Decl. of Juan Oropeza ¶ 4.) Non-tipped employees are to be paid minimum wage or above. (Pls.' Suppl. Exs., Ex. 52 at 11.)
The Motion for Class Certification
Plaintiffs propose two IMWL classes and one IWPCA class. The first proposed IMWL class is defined as:
All persons employed by Defendant AppleIllinois, LLC, from October 6, 2003, to the conclusion of this action, who worked as tipped employees earning a sub-minimum, tip-credit wage rate, and who performed non-tipped duties, like dishwashing, for which they did not receive minimum wage. (Pls.' Mem. at 8.) The second proposed IMWL class, which is a subset of the first, is defined as:
All persons employed by Defendant AppleIllinois, LLC, from October 6, 2003, to the conclusion of this action, who worked as tipped employees earning a sub-minimum, tip-credit wage rate, who performed non-tipped duties, like dishwashing, for which they did not receive minimum wage and who worked more than forty (40) hours in any individual workweek, but did not receive overtime pay at the rate of one and one-half times their regular rate of pay for all time in excess of forty (40) hours.
(Id. at 9.) Plaintiffs' proposed IWPCA class is defined as:
All persons employed by Defendant AppleIllinois, LLC, as hourly employees from October 6, 2001, to the conclusion of this action who were not paid for all time worked in individual workweeks. (Id.) Under those definitions, the IMWL classes would be made up of tipped employees, like servers and bartenders, while the IWPCA class would be made up of hourly workers including so-called "back of the house" workers such as cooks, as well as tipped employees like servers and bartenders.
In support of their motion, Plaintiffs submitted the declarations of 42 former AppleIllinois employees. These declarants, primarily servers, but also a few bartenders, hosts/hostesses, carside servers and kitchen managers, were employed at 26 different AppleIllinois locations for varying lengths of time. (See Pls.' Mem., Exs. 2-43.) Opposing certification, AppleIllinois submitted the declarations of 95 current employees working at approximately 26 different AppleIllinois restaurants. (Defs.' Mem., Exs. 1-95.)
Some background on the "tip credit wage rate" is necessary in order to understand Plaintiffs' claims. The IMWL requires employers to pay workers (with some exceptions) a minimum hourly rate. 820 Ill. Comp. Stat. §105/4(a)(1). However, for employees "engaged in an occupation in which gratuities have customarily . . . been recognized as part of the remuneration," the employer may calculate as part of the hourly wage rate an allowance for gratuities not to exceed 40% of the applicable minimum wage rate. 820 Ill. Comp. Stat. § 105/4(a)(1)(c). That allowance is the "tip credit."
The FLSA also allows a tip credit, subject to certain conditions:
The additional amount on account of tips may not exceed the value of the tips actually received by an employee. The [tip credit] shall not apply with respect to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection, and all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.
The FLSA is relevant to Plaintiffs' IMWL claims because the IMWL parallels the FLSA and, as the parties agree, the same analysis generally applies to both statutes. (See Defs.' Mem. at 2; Pls.' Mem. at 4 n. 7 (citing, inter alia, Condo v. Sysco Corp., 1 F.3d 599, 601 n. 3 (7th Cir. 1993).) See also Ladegaard v. Hard Rock Concrete Cutters, Inc., No. 00 CV 5755, 2004 WL 1882449 at *4 (N.D. Ill. Aug. 18, 2004) (citing Haynes v. Tru-Green Corp., 507 N.E.2d 945, 951 (Ill. App. 4th Dist. 1987)); O'Brien v. Encotech Constr., No. 00 CV 1133, 2004 WL 609798 at *7 (N.D. Ill. Mar. 23, 2004). The Illinois Administrative Code also provides that FLSA regulations are to be used as guidance in interpreting the IMWL. Ill. Admin. Code tit. 56, pt. 210.120 (2009).
The FLSA is a remedial act and exemptions from its coverage are to be narrowly construed against employers. Klein v. Rush-Presbyterian-St. Luke's Med. Ctr., 990 F.2d 279, 282 (7th Cir. 1993) (citing Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960)). The employer bears the burden of proving its entitlement to exemptions. Demos v. City of Indianapolis, 302 F.3d 698, 701 (7th Cir. 2002). Likewise, the employer bears the burden of proving its entitlement to the tip credit.
Section 3(m) of FLSA makes clear the intent of Congress to place on the employer the burden of proving the amount of tips received by 'tipped employees', and the amount of tip credit, if any, which the employer may claim. Since Sec 3 (m) is not an exemption from the MW [minimum wage], but merely allows the employer to claim up to 40 percent of the MW as tip credit, the employer is responsible for ascertaining that the MW provisions are complied with in compensating 'tipped employees.'
U.S. Dept. of Labor, Field Operations Handbook § 30d00(b) (Rev. 563) (Dec. 9, 1988) (emphasis in original). Accord Bernal v. Vankar Enterprises, Inc., 579 F. Supp. 2d 804, 808 (W.D. Tex. 2008) ("Defendants, as the employers, bear the burden of proving that they are entitled to taking tip credits") (citing among others Barcellona v. Tiffany English Pub, Inc., 597 F.2d 464, 467 (5th Cir. 1979)); Chung v. New Silver Palace Rest., Inc., 246 F. Supp. 2d 220, 229 (S.D.N.Y. 2002) ("The two prerequisites that the employer must fulfill to be eligible for the tip credit are strictly construed, and must be satisfied even if the employee received tips at least equivalent to the minimum wage.") The IMWL was also enacted to protect employees. Lewis v. Giordano's Enterprises, Inc., No. 1-08-2944, ___ N.E.2d ___, 2009 WL 5125252 *12 (Ill. App. Dec. 23, 2009). Under the IMWL, the employer has the burden of providing evidence supporting the tip credit allowance:
The Director shall require each employer desiring an allowance for gratuities to provide substantial evidence that the amount claimed, which may not exceed 40% of the applicable minimum wage rate, was received by the employee in the period for which the claim of exemption is made, and no part thereof was returned to the employer. 820 Ill. Comp. Stat. 105/4 (c).
To claim a tip credit, AppleIllinois is obligated to notify its tipped employees of the tip credit provisions of the FLSA. 29 U.S.C. § 203(m). As further discussed below, the parties dispute the extent to which AppleIllinois provides the notice and whether the notice it provides is legally adequate.
Although both directly and in-directly tipped positions are paid at the tip credit rate, AppleIllinois maintains different tip practices for each position. Servers receive tips directly from customers but give a portion of those tips to hosts and bartenders through AppleIllinois' tip sharing policy. (See, e.g., Oropeza Decl. ¶ 5; Defs.' Mem., Ex. 1 Decl. of Brian Ackerman ¶¶ 5, 21, 22.)
Bartenders receive tips directly from customers, but they also receive money by sharing tips with other bartenders and through tip pooling with servers. (See, e.g., Ackerman Decl. ¶¶ 5, 49-51; McCaster Decl. ¶¶ 2, 8.) Hosts and hostesses receive money through tip pooling with servers, but generally do not receive tips directly from customers. (See, e.g., Pls.' Mem., Ex. 38, Decl. of Lorayne Williams ¶ 2; Defs.' Mem., Ex. 64, Decl. of Brent Perrotti ¶ 12.)
Pursuant to AppleIllinois' tip sharing policy, servers contribute, or "tip out," the equivalent of 2.5% of their sales each shift to a pool, which is then shared with hosts/hostesses and bartenders. (Cortner Decl. ¶ 15.)*fn8 It is unclear whether a server's contribution is calculated according to the server's gross sales or net sales. Plaintiffs state that servers contribute 2.5% of "gross" sales each shift. (Pls.' Mem. at 3; see also Oropeza Decl. ¶ 5.) The declarations of former servers submitted by Plaintiffs, however, state simply that servers contributed a percentage of the "sales [the server] rang up in a given shift." (See, e.g., Pls.' Mem., Ex. 2, Decl. of Glenn Driver ¶ 2; Mallari Decl. ¶ 2.) AppleIllinois says that servers contribute a percentage of their "net" sales. (Answer ¶ 24; see also, e.g., Ackerman Decl. ¶ 22; Ducat Decl. ¶ 26.)
There is evidence suggesting that AppleIllinois managers do not provide or retain a reconciliation of the tip pool funds, and that, on occasion, they used money from the tip pool to make up for shortages in the cash register and to cover the bill of "walk off" customers. (Driver Decl. ¶ 13; McCaster Decl. ¶ 8; Pls.' Mem., Ex. 18, Decl. of Robert Cantu ¶ 6, Ex. 40, Decl. of Valerie Zoppa ¶ 6, Ex. 41, Decl. of Jennifer Swords ¶ 11; Defs.' Mem., Ex. 41, Decl. of Adam Kurdziel ¶ 62, Ex. 64, Perrotti Decl. ¶ 13.)
The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor.
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997) (quoting Mace v. Van Ru Credit Corp. 109 F.3d 338, 334 (7th Cir. 1997)).
To have a class certified, Plaintiffs must satisfy the four prerequisites of Fed. R. Civ. P. 23(a):
(1) the class is so numerous that joinder of all members is impracticable [numerosity]; (2) there are questions of law or fact common to the class [commonality]; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class [typicality]; and (4) the representative parties will fairly and adequately protect the interests of the class [adequacy].
Plaintiffs must also satisfy at least one of the subsections of Rule 23(b). See Arreola v. Godinez, 546 F.3d 788, 794 (7th Cir. 2008). Plaintiffs here seek certification under Rule 23(b)(3), which requires them to demonstrate that the questions of law or fact common to class members predominate over any questions affecting only individual members [predominance], and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy [superiority]. Rule 23(b)(3) includes a list of factors for courts to consider in analyzing the predominance and superiority criteria: (a) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (b) the extent and nature of litigation already commenced by the class members; (c) the desirability of concentrating the litigation of the claims in the particular forum; and (d) the difficulties likely to be encountered in the management of a class action. The Rule 23(b)(3) manageability requirement "encompasses the whole range of practical problems that may render the class action format inappropriate for a particular suit." Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 164 (1974).
In deciding whether to allow a case to proceed as a class action, a court should make whatever factual and legal inquires are necessary under Rule 23. Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th Cir. 2001). However, the decision on class certification turns on whether the requirements of Rule 23 are met, not on the merits of the claims. Eisen, 417 U.S. 177; Thomas v. City of Peoria, 580 F.3d 633, 635 (7th Cir. 2009). Thus, the "focus [is] not [on] the substantive strength or weakness of the plaintiffs' claims, but rather whether the path that will need to be taken to decide the merits renders the case unsuitable for class treatment." George v. Kraft Foods Global, Inc. 251 F.R.D. 338, 343 (N.D. Ill. 2008) (citations omitted).
As the party seeking class certification, Plaintiffs bear the burden of demonstrating that certification is proper. See Oshana v. Coca-Cola Co., 472 F.3d 506, 513 (7th Cir. 2006) (citing Trotter v. Klincar, 748 F.2d 1177, 1184 (7th Cir. 1984)). They must also provide a workable class definition by showing that the members of the class are identifiable. Id. Failure to establish any one of the requirements precludes class certification. Retired Chicago Police Assn. v. City of Chicago, 7 F.3d 584, 596 (7th Cir 1993).
I. The Numerosity and Adequacy Requirements
The numerosity requirement means that proposed class must be so numerous that joinder of all members is impractical. Rule 23(a)(1). Plaintiffs are not required to specify the exact number of persons in the class; a properly-supported estimate is sufficient. See Marcial v. Coronet Ins. Co., 880 F.2d 954, 957 (7th Cir. 1989). A court may make common sense assumptions to determine class size. See Hispanics United of DuPage Co. v. Village of Addison, Ill., 160 F.R.D. 681, 688 (N. D. Ill. 1995) (quotations and citations omitted).
AppleIllinois does not dispute that the requisite numerosity is established for any of the proposed classes. Plaintiffs' review of AppleIllinois' records shows that from October 2003 through mid-2007, AppleIllinois employed in excess of 10,000 people as tipped employees and 18,000 as hourly workers. (Pls.' Mem. at 10, Ex. 44, Decl. of Adriana P. Rodriguez ¶¶ 3, 4.) Accordingly, each of the proposed classes is so numerous that joinder is impracticable.
The named plaintiffs must fairly and adequately protect the interests of the class. Rule 23(a)(4). "[A]dequacy of representation is composed of two parts: the adequacy of the named plaintiff's counsel, and the adequacy of representation provided in protecting the different, separate, and distinct interest of the class members." Retired Chicago Police, 7 F.3d at 598 (internal quotations and citations omitted).
AppleIllinois does not challenge Plaintiffs' showing of adequacy of representation. Plaintiffs' counsel is competent and experienced in FLSA and Illinois wage law class action suits and have acted as representative counsel in numerous actions in federal and state court. (Pls.' Mem., Ex. 48, Decl. of Douglas Werman ¶¶ 4, 5; Ex. 49, Decl. of Jamie Sypulski ¶ 5.) The named plaintiffs here have a sufficient interest in the outcome of the case to ensure their vigorous advocacy, and there are no indications that their claims conflict with those of other members of the proposed classes. Accordingly, this element is also satisfied.
Because AppleIllinois contests that the other requirements of class certification are met, those requirements are discussed in ...