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News | Nov 29, 2020

A Few Comments on the Fourth Circuit’s Recent FLSA Opinion in Tom v. Hospitality Ventures LLC

I’ve noticed that many wage and hour lawyers have been talking and writing about the Fourth Circuit Court of Appeals‘ recent precedential opinion in Tom v. Hospitality Ventures LLC, 18-2509 (4th Cir. Nov. 24, 2020).  A copy of the opinion is available HERE.

In case you are too busy to read the opinion, the following is a quick summary of the legal rules expressed by the Court:  (1)  the “automatic gratuities” (e.g., customer required to leave 20%) at issue were not “tips” because the customer was not authorized to deviate from the required gratuity amount; (2) the automatic gratuities could possibly qualify as “commissions” under the Section 7(i) “retail sales” exemption; (3) even if the automatic gratuities are deemed commissions, they still must be counted as total compensation in determining whether the employer satisfies Section 7(i)’s requirement that “more than half [of the employee’s] compensation for a representative period (not less than one month) represents commissions;” (4) an employer violates the tip credit rules by distributing tip pool proceeds to restaurant employees whose customer contact is de minimis (adopting the viewpoint expressed by the Fifth and Sixth Circuits); and (5) an FLSA retalition claim requires and “adverse employment action.”  -PW

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