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Grosscup v. KPW Management, Inc.

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

June 7, 2017

LINDSAY GROSSCUP, on behalf of herself and all other persons similarly situated, Plaintiffs,
v.
KPW MANAGEMENT, INC. and HERE'S WINGS, LLC Defendants.

          MEMORANDUM OPINION AND ORDER

          John J. Tharp, Jr. United States District Judge

         In this case under the Fair Labor Standards Act, the named plaintiffs Lindsay Grosscup and the prospective opt-in plaintiffs (collectively, the “plaintiffs”)-servers and bartenders at the defendants' franchised Buffalo Wild Wings (“BWW”) restaurants in Illinois and Maryland- allege that they were unlawfully paid below-minimum, tip-credited hourly wages while (1) they performed excessive amounts of non-tipped work related to their jobs; and (2) they were required to perform duties unrelated to their jobs. They also allege that they were denied the statutory right to retain all of their tips when they were forced to pay for customer walkouts and cash shortages from their tips. The plaintiffs now move for conditional certification of a collective action and for authorization to issue step-one notice to prospective opt-in members. See 29 U.S.C. § 216(b). The defendants oppose the motion on the ground that the plaintiffs have not made the preliminary showing of the existence of a common unlawful policy or practice as to any of the FLSA violations they allege.

         BACKGROUND

         A. Collective Actions

         Section 16(b) of the FLSA, 29 U.S.C. § 216(b) authorizes employees to act together to seek redress for violations of the minimum wage and maximum hour provisions of 29 U.S.C. §§ 206 and 207. Ervin v. OS Rest. Servs., Inc., 632 F.3d 971, 974 (7th Cir. 2011); see Schaefer v. Walker Bros. Enterprises, 829 F.3d 551, 553 (7th Cir. 2016) (“Suits under the Fair Labor Standards Act cannot proceed as class actions. Instead they are opt-in representative actions.”); Alvarez v. City of Chicago, 605 F.3d 445, 448 (7th Cir. 2010). “The conditional approval process is a mechanism used by district courts to establish whether potential plaintiffs in the FLSA collective action should be sent a notice of their eligibility to participate and given the opportunity to opt in to the collective action.” Ervin, 829 F.3d at 551. Here, the plaintiffs seek to give notice to all servers and bartenders who worked at any of the defendants' BWW restaurants in Illinois or Maryland in the three years preceding the complaint of their ability to opt into the collective action. See Pls. Mot. ¶ 1-2, ECF No. 21; 29 U.S.C. § 216(b) (opt-in requirement).

         “Neither Congress nor the Seventh Circuit has specified the procedure courts should use to decide FLSA certification and notice issues, but collective FLSA actions in this district generally proceed under a two-step process.” Salmans v. Byron Udell & Assocs., Inc., No. 12 C 3452, 2013 WL 707992, at *2 (N.D. Ill. Feb. 26, 2013); Ballou v. iTalk, LLC, No. 11 C 8465, 2013 WL 3944193, at *3 (N.D. Ill. July 31, 2013). First, the plaintiffs have the burden of showing that there are other similarly situated employees who are potential claimants. Salmans, 2013 WL 707992, at *2. The plaintiffs must make a modest factual showing sufficient to demonstrate that they and potential plaintiffs together were victims of a common policy or plan that violated the law. Id.; Bergman v. Kindred Healthcare, Inc., 949 F.Supp.2d 852, 855 (N.D. Ill. 2013) (“At this stage of the proceedings, plaintiffs must make a modest factual showing of common, unlawful conduct and provide some indication of harm to employees.”). Courts use a “lenient interpretation” of the term “similarly situated” in deciding whether plaintiffs meet this burden. Salmans, 2013 WL 707992, at *2 (quoting Jirak v. Abbott Labs., Inc., 566 F.Supp.2d 845, 848 (N.D. Ill. 2008). “There is a low standard of proof.” Bergman, 949 F.Supp.2d 852, 855 (N.D. Ill. 2013). If the plaintiffs are able to show that other potential plaintiffs are similarly situated, courts may conditionally certify the case as a collective action and allow the plaintiffs to send notice of the case to similarly situated employees who may then opt in as plaintiffs. Salmans, 2013 WL 707992, at *2; Ballou, 2013 WL 3944193, at *3.

         The second step, occurring after the opt-in and discovery process has been completed, is more stringent. Once it is known which employees will be part of the collective, the Court must reevaluate the conditional certification to determine whether there is sufficient similarity between the named and opt-in plaintiffs to allow the matter to proceed to trial on a collective basis. Salmans, 2013 WL 707992, at *2; Nehmelman v. Penn Nat. Gaming, Inc., 822 F.Supp.2d 745, 751 (N.D. Ill. 2011). “If the court finds insufficient similarities during the second step, it may revoke conditional certification or divide the class into subclasses.” Sylvester, 2013 WL 5433593, at *3.

         B. The FLSA Standards for Tipped Work

         Under the FLSA, an employer may pay a tipped employee less than minimum wage- the employer takes a so-called “tip credit”-but if the tips, in combination with the below-minimum-wage hourly rate, do not add up to the minimum wage, the employer has to make up the difference. 29 U.S.C. § 203(m); Soto v. Wings 'R Us Romeoville, Inc., No. 15-CV-10127, 2016 WL 4701444, at *2 (N.D. Ill. Sept. 8, 2016). There are two ways in which an employer can violate the tip-credit provisions of the FLSA. First, if the employer fails to pay the minimum wage for any time spent on duties that are not “related” to an employee's occupation, there is a violation. It is also unlawful for the employer to pay the tip-credited wage to an employee who spends excessive time on non-tipped work, even if that work is “related” to the occupation. The Department of Labor has interpreted this to mean 20% or more of the employee's working hours. This Court will refer to the first kind of violation as a “dual jobs” violation and the second as an “excessive side work” (the industry term for the duties attendant to serving food and drink) violation.

         The FLSA statute itself does not prescribe these two separate kinds of violations but the attendant regulation (29 C.F.R. § 531.56(e)), Chapter 30 of the Labor Department's Field Operations Handbook (the “FOH, ” see https://www.dol.gov/whd/FOH/FOHCh30.pdf), and countless court decisions have recognized both. The relevant regulation is the “dual jobs” provision in 29 C.F.R. § 531.56(e):

In some situations an employee is employed in a dual job, as for example, where a maintenance man in a hotel also serves as a waiter. In such a situation the employee, if he customarily and regularly receives at least $30 a month in tips for his work as a waiter, is a tipped employee only with respect to his employment as a waiter. He is employed in two occupations, and no tip credit can be taken for his hours of employment in his occupation of maintenance man. Such a situation is distinguishable from that of a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses. It is likewise distinguishable from the counterman who also prepares his own short orders or who, as part of a group of countermen, takes a turn as a short order cook for the group. Such related duties in an occupation that is a tipped occupation need not by themselves be directed toward producing tips.

         In other words, “the tip credit may not be taken for hours of employment worked in the occupation not subject to tips.” Fast v. Applebee's Int'l, Inc., 638 F.3d 872, 877 (8th Cir. 2011). An occupation that requires the performance of duties related to the primary tip-generating duties, however, is not solely by virtue of that fact a “dual job” and the regulation itself provides no requirement that time performing such related duties be paid at the minimum wage rate.

         The Labor Department's FOH[1] interprets the dual-jobs regulation and is accepted by courts, including the Seventh Circuit, as authoritative. See Schaefer v. Walker Bros. Enterprises, Inc., 829 F.3d 551, 554, 555 (7th Cir. 2016); Driver v. Apple Illinois, LLC, 739 F.3d 1073, 1075 (7th Cir. 2014). “Where the rule to be interpreted ‘is a creature of the Secretary's own regulations, [however, its] interpretation of it is, under [Supreme Court] jurisprudence, controlling unless plainly erroneous or inconsistent with the regulation.'” Fast v. Applebee's Int'l, Inc., 638 F.3d 872, 878 (8th Cir. 2011) (quoting Auer v. Robbins, 519 U.S. 452, 461 (1997) (internal marks omitted).

         The FOH adds a temporal standard on top of the dual job regulation's relatedness inquiry. It provides that the tip credit may be taken for time spent on “related duties” that are “incidental” to the regular duties of a tipped employee and generally assigned to the tipped employee-i.e., “side work.” FOH § 30d00(f)(2). An example is “a server who does preparatory or closing activities, rolls silverware and fills salt and pepper shakers while the restaurant is open, cleans and sets tables, makes coffee, and occasionally washes dishes or glasses.” Id. If, however, the related duties take a “substantial” amount of time-in excess of 20% of hours worked per week-“no tip credit may be taken for the time spent in those duties.” Id. § 30d00(f)(3).[2] Thus even incidental work related to a worker's occupation must be paid at the non-tip-credited wage if it takes an excessive amount of time relative to the core functions of the occupation. Put differently, in the words of the Seventh Circuit, “[T]he Department of Labor, interpreting section 203(m), has distinguished between non-tipped work that is, and is not, ‘related' to tipped work, and has decided that as long as the tipped employee spends no more than 20 percent of his workday doing non-tipped work related to his tipped work (such as a waiter's setting or clearing a table that he waits on), the employer doesn't have to pay the full minimum wage” for time spent on that related work. Driver, 739 F.3d at 1075 (citing 29 C.F.R. § 531.56(e)) and FOH § 30d00(e) (2012).

         Further, whenever any non-tipped duties are unrelated to the tipped worker's occupation, the tip credit may not be taken at all, regardless of how much time they take. Id. § 30d00(f)(4) (“[A]n employer may not take a tip credit for the time that a tipped employee spends on work that is not related to the tipped occupation.”). As an example, a server who does “maintenance work” such as “cleaning bathrooms and washing windows” is engaged in a dual job because those duties “are not related to the tipped occupation of a server.” Id. The restaurant cannot take a tip credit-it must pay the full minimum wage-for the time a server spends on maintenance work. In Driver, the Seventh Circuit outlined this type of claim: “[O]f course if the tipped employees also perform non-tipped duties . . . they are entitled to the full minimum wage for the time they spend at that work” with the “important qualification” that the work is “unrelated to their tipped duties.” See 739 F.3d at 1075. As examples unrelated duties for a restaurant server the Court listed, in dicta: “washing dishes, preparing food, mopping the floor, or cleaning bathrooms”-in other words, generally, culinary and janitorial duties. On the other hand, in Schaefer Brothers, the Seventh Circuit, concluded that the following tasks of the servers were related to “taking customers' orders and bringing food”: washing and cutting strawberries, mushrooms, and lemons; mixing up applesauce and jams; preparing jellies, salsas and compote for use; restocking bread bins and replenishing dispensers of milk, whipped cream, syrup, and hot chocolate; restocking straws; filling ice buckets; brewing tea and coffee; and wiping down toasters and tables. 829 F.3d at 555. The Court concluded that “cleanup tasks cannot be categorically excluded” from a server's occupation. In the Court's view, the most “problematic”-that is, the most unrelated-tasks were “wiping down burners and woodwork and dusting picture frames, ” Id. at 555, but those things took only a negligible amount of time, much less than 20%.[3] Because the untipped tasks were, overwhelmingly, related, there was no “dual jobs” violation.

         Finally, as relevant here, under the FLSA, tipped workers must be permitted to retain all tips for themselves (except to the extent they lawfully pool their tips), and employers may not take the tip credit unless they have informed their employees about the tip-credit provisions of the statute. 29 U.S.C. § 203(m). Id.

         C. The Plaintiffs' Allegations

         In this case, the plaintiffs allege in their complaint that the defendants violated the FLSA's tip-credit provisions as to servers and bartenders in three ways: (1) “by requiring Plaintiffs and similarly-situated servers and bartenders to perform non-tipped work that is unrelated to their tipped occupation while paying them less than minimum wage, such as: cleaning bathrooms, sweeping, vacuuming, mopping, and deck scrubbing floors, cleaning and bleaching drains, emptying and cleaning trash cans, slicing lemons, limes, and oranges, and regularly washing dishes”; (2) “by requiring Plaintiffs and similarly-situated servers and bartenders to perform non-tipped work that, even if related to their occupation, exceeded twenty (20) percent of their time worked in one or more individual workweeks without paying them full minimum wage;” ...


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