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Bergstrom v. Coco Pazzo of Illinois, LLC

United States District Court, N.D. Illinois, Eastern Division

March 27, 2017

JACQUELINE BERGSTROM and MATTHEW CRIMMINS, individually and on behalf of all others similarly situated, Plaintiffs,
v.
COCO PAZZO OF ILLINOIS, LLC, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Andrea R. Wood United States District Judge

         Plaintiffs Jacqueline Bergstrom and Matthew Crimmins allege that their former employer, Defendant Coco Pazzo of Illinois, LLC, and its president, Defendant Jack Weiss, failed to pay them the minimum and overtime wages required by the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201. That statute permits an employer to pay less than the otherwise mandated minimum wages by crediting tips received against those required amounts if the employer has notified employees of the practice and the employees either kept their tips or shared them in a valid tip pool. 29 U.S.C. § 203(m). In the cross-motions for summary judgment now before the Court, the parties dispute whether Coco Pazzo properly claimed the tip credit. Plaintiffs contend that Coco Pazzo failed to provide the necessary notification that it would use the credit. Defendants, in turn, assert that the FLSA's restrictions on the tip credit are directed only to mandatory pools and that Coco Pazzo's system was voluntary, thus rendering the requirements inapplicable. They also contend that their notice of the credit was proper and that no tip pool participants were managers whose inclusion would invalidate the pool. For the reasons detailed below, both motions for summary judgment (Dkt. Nos. 60, 62) are denied.

         BACKGROUND

         Plaintiff Jacqueline Bergstrom worked as an hourly-paid server at Coco Pazzo restaurant in Chicago from August 2012 to May 2014. (Defs.' R. 56.1 Resp. ¶¶ 6, 13, Dkt. No. 100.) Plaintiff Matthew Crimmins also worked at the restaurant as a server in two stints, the first from October 2008 to September 2012 and the second from January 2013 to June 2014. (Id. ¶¶ 7, 13.) Both were paid $4.95 per hour plus tips. (Id. ¶ 19.)

         The FLSA permits allows an employer to pay less than standard minimum and overtime wages to employees who regularly receive tips; the employer receives credit towards its payment obligations to the extent of the amount the employee receives in tips. 29 U.S.C. § 203(m). But the employer may claim the credit only if it notifies the employee of the practice and if the employee either keeps all of her tips or shares them with “employees who customarily and regularly receive tips.” Id.

         In their lawsuit, which they have brought as a proposed collective action on behalf of all similarly-situated employees, Plaintiffs allege that Coco Pazzo invoked FLSA's tip credit provisions and paid them less in base wages and overtime compensation than the statute otherwise required. (Compl. ¶¶ 28, 32, Dkt. No. 1.) They further allege that Coco Pazzo employees pooled tips, but that managers not properly included in the statute's definition of “employees who customarily and regularly receive tips” also shared in the pool, thereby invalidating it for purposes of the restaurant's claim for credit towards the required minimum and overtime wages. (Id. ¶¶ 19-20.) Plaintiffs' complaint seeks recovery of wages not paid as a result of the claimed credit.

         The parties filed concurrent motions for summary judgment. Although Plaintiffs' complaint focuses on the assertion that the tip pool was invalidated by the participation of managers who were not customarily tipped employees, their summary judgment motion argues instead that Defendants had not given the FLSA-mandated notice that they intended to claim the tip credit. Defendants moved to strike the Plaintiffs' motion, arguing that it improperly raised a new claim not included in Plaintiffs' complaint. (Dkt. No. 66.) The Court ruled that the tip credit was properly considered an affirmative defense to a claim of underpayment rather than an element Plaintiffs were required to raise in their complaint; Defendants' motion to strike was therefore denied. (Dkt. No. 74.)

         Defendants next sought discovery pursuant to Federal Rule of Civil Procedure 56(d): they asserted that in order to respond to Plaintiffs' summary judgment motion, they needed discovery from Plaintiffs and the similarly-situated employees who opted in to the action to learn what they had known about the restaurant's intent to take the tip credit. (Dkt. No. 79.) Because the issue raised by Plaintiffs' motion was whether Coco Pazzo had given any notice of its claim to the tip credit and because Defendants' notice efforts were matters within their own knowledge, the Court denied the motion. (Dkt. No. 84.) Now, in their own summary judgment motion, Defendants assert that none of the tip pool participants had managerial authority that would disqualify them from participation in a valid tip pool.[1]

         DISCUSSION

         Summary judgment is appropriate if the admissible evidence considered as a whole shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law, even after all reasonable inferences are drawn in the nonmovant's favor. Dynegy Mktg. & Trade v. Multiut Corp., 648 F.3d 506, 517 (7th Cir. 2011). When cross-motions for summary judgment are filed, inferences are drawn in favor of the party against whom the motion under consideration is made. Siliven v. Indiana Dep't of Child Servs., 635 F.3d 921, 925 (7th Cir. 2011).

         I. Plaintiffs' Motion

         Plaintiffs contend that Defendants have identified no evidence that they gave notice of the restaurant's intention to claim the tip credit and that this failure invalidates the credit, thereby entitling them to judgment for the amounts their pay fell short of FLSA's minimums. In support of their response, Defendants filed an affidavit from Defendant Weiss, Coco Pazzo's president, stating that he personally informed employees about their pay and the tip pool either during the initial interviews or at run-throughs before the employees began active duty. As he explained:

I inform servers, bartenders, bussers and food runners that this is a ‘pool house.' I explain how the tip pool works and I say that servers contribute all of their tips into a tip pool, which is then re-distributed to other servers, bartenders, bussers and food runners who ...

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