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Perez v. Over-Easy, Inc.

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

October 9, 2019




         Gustavo Perez has sued his former employer, Over-Easy, Inc., d/b/a La Escarola (La Scarola), [1] its president Joseph Mondelli, and its manager Armando Vasquez, for violations of the Fair Labor Standards Act (FLSA). Perez worked for La Scarola as a restaurant server. He alleges that the defendants violated the tip-credit and retaliation provisions of the FLSA. The defendants have moved for summary judgment. For the reasons stated below, the Court grants the defendants' motion.


         The following facts are undisputed except where otherwise noted. Over-Easy is an Illinois corporation that operates a fine-dining Italian restaurant in Chicago called La Scarola. Mondelli serves as the corporation's president, and Vasquez manages the restaurant. From approximately 2012 until 2017, Perez worked as a server there.

         As at many restaurants, servers at La Scarola earn wages and tips. During the relevant timeframe, the restaurant operated a tip pool through which it required servers to pay a percentage of their tips to the bartender and busboys each night. Before starting his job, Perez knew that La Scarola required him to contribute to the tip pool. Perez Dep., Ex. 4 to Defs.' Statement of Undisputed Material Facts (SUMF), dkt. no. 45-4 at 52:5-14. He testified that he paid 10 percent of his tips to the bartender and 20 percent to the busboys. Id. at 21:3-8.[2] Unlike tips paid in cash, credit card tips would take a few days to process. Perez testified that on nights when he did not earn enough in cash tips to cover the amount owed to the bartender and busboys, he had to pay them with his own, out-of-pocket cash. Id. at 103:5-18.

         At the end of each night, the servers calculated and recorded their tips, including their total earned tips, their cash tips, and the tips they paid to the bartender and busboys. A few days after servers earned credit card tips, La Scarola gave them a check payment for those tips. After each weekly pay period, it paid them their hourly wage by issuing a separate check.

         La Scarola deducted tax withholdings from its servers' paychecks. Perez testified that La Scarola taxed the total amount of tips he earned, rather than taxing only the tips he retained after paying the bartender and busboys. E.g., id. at 16:16-22. As a result, he claims, La Scarola deducted more taxes than he owed. E.g., id. But despite this alleged over-taxation, Perez testified that he still earned minimum wage. Id. at 16:23-25.

         The parties dispute whether Perez complained to Vasquez or any other supervisor about the allegedly excessive tax withholdings. Perez testified that he initially did not "do anything" about the alleged over-taxation because he did not want to lose his job. Id. at 58:9-13. But at some point, Perez said, he asked Vasquez for his money and "why they were taking" his money. Id. at 58:14-17. He told Vasquez that he did not want to be taxed "on the tips [he] wasn't making." Id. at 110:13-16. Vasquez has stated in an affidavit that Perez never complained to him "about not being paid properly or having too much in taxes withheld from his pay." Vasquez Decl., Ex. 1 to Defs.' SUMF, dkt. no. 45-1 at ¶ 15.

         In 2017, Vasquez fired Perez. The defendants say that Perez was fired for insubordination because he refused to follow Vasquez's direction to assist another server in cleaning a table and became argumentative. Perez contends that this is a pretext and that the real reason for his termination was retaliation for his complaints about his pay.

         Perez sued the defendants for violations of the FLSA, the Illinois Minimum Wage Law, and the Illinois Wage Payment and Collection Act. The defendants moved to dismiss Perez's claims, and the Court granted the motion to dismiss for all but the FLSA claims. The remaining claims are count 1, alleging violations of the FLSA's tip-credit provision, 29 U.S.C. § 203(m), and count 2, alleging a violation of the FLSA's retaliation provisions, id. § 215(a)(3). The defendants have moved for summary judgment.


         "Summary judgment is proper where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law." Richardson v. Chi. Transit Auth., 926 F.3d 881, 886 (7th Cir. 2019) (internal quotation marks omitted). In considering a motion for summary judgment, the Court construes all facts and draws all reasonable inferences "in favor of the party against whom the motion under consideration was filed." Id. The party opposing summary judgment "must present specific facts showing that there is a genuine issue for trial; inferences that rely upon speculation or conjecture are insufficient.” Aguilar v. Gaston-Camara, 861 F.3d 626, 630-31 (7th Cir. 2017) (internal quotation marks omitted). "A genuine issue of material fact arises only if sufficient evidence favoring the nonmoving party exists to permit a jury to return a verdict for that party." Hanners v. Trent, 674 F.3d 683, 691 (7th Cir. 2012).

         A. Tip credit

         The FLSA "is designed to protect workers from the twin evils of excessive work hours and substandard wages." Howard v. City of Springfield, 274 F.3d 1141, 1148 (7th Cir. 2001). Toward that end, it requires employers to pay their employees a minimum wage for each hour of work performed. 29 U.S.C § 206. Subject to certain requirements, an employer may pay a reduced hourly wage to a "tipped employee"- one who "customarily and regularly receives more than $30 a month in tips"-by crediting the employee's tips, up to a certain amount, toward his minimum wage. Id. §§ 203(m) & (t). An employer may take this tip credit only if it has informed the tipped employee of the relevant subsection of the FLSA. Id. ยง 203(m)(2). Additionally, "all tips ...

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