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News | Jul 11, 2014

OUR SUCCESSFUL LEGAL ARGUMENT IN THE RED ROBIN SERVER CASE; WHY EMPLOYERS MAY NOT REQUIRE SERVERS TO SHARE THEIR TIPS WITH RESTAURANT EMPLOYEES WHO DO NOT WAIT ON CUSTOMERS

Several Philadelphia and New Jersey unpaid wage attorneys have asked us to post the brief we filed in the Red Robin tip lawsuit that appears in out July 10 blog entry.  We are happy to share this work product.  Here is the legal argument section of the brief:

The FLSA requires employers to pay employees a minimum wage of $7.25/hour.  See 29 U.S.C. § 206(a)(1)(C).  However, in determining the minimum wage owed to a “tipped employee,” the FLSA contains a “tip credit” provision that enables an employer to pay the tipped employee as little as $2.13/hour so long as the employee’s additional tip payments bring her total pay above the $7.25/hour threshold.  See id. at § 203(m); 29 C.F.R. § 531.50(a).

Generally speaking, employers can use the FLSA tip credit in paying a tipped employee only if “all tips received by such employee have been retained by the employee.”  29 U.S.C. § 203(m).  However, this rule “shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.”  Id.

In this lawsuit, Plaintiffs worked at Defendant’s restaurants as servers.  See Complaint at ¶¶ 9-11.  Defendant utilized the FLSA tip credit in satisfying its minimum wage obligations to Plaintiffs.  See id. at ¶ 15.  Defendant also required Plaintiffs to contribute some of their tips to a tip pool that was distributed to “Expos.”  See id. at ¶¶ 16-17.  These Expos – who are more commonly known in the restaurant business as “expediters” – “spend almost all of their time working in or near the kitchen area and rarely interact with restaurant customers,” id. at ¶ 18, and “are not the types of employees who customarily and regularly receive tips from customers,” id. at ¶ 19.

In a nutshell, Plaintiffs’ FLSA claim alleges that Defendant violated the rule – described in 29 U.S.C. § 203(m) – that employers who use the FLSA’s tip credit provision to satisfy their minimum wage obligations may not require their tipped employees to share tips with other employees who do not “customarily and regularly receive tips.”  29 U.S.C. § 203(m).  In particular, Plaintiffs allege that the Expos – who “spend almost all of their time working in or near the kitchen area and rarely interact with restaurant customers” – are the types of employees who do not “customarily and regularly receive tips.”

Defendant argues that Plaintiffs have failed to adequately plead that Expos are the types of employees who do not “customarily and regularly receive tips.”  According to Defendant, the fact that Expos “spend almost all of their time working in or near the kitchen area and rarely interact with restaurant customers,” Complaint at ¶ 18, is entirely irrelevant to this issue.  Defendant fails to cite to any court decisions endorsing its position.  See generally Doc. 18.

Meanwhile, Defendant’s argument has been flatly rejected by federal courts throughout the country:

In Roussell v. Brinker Int’l, Inc., 441 Fed. Appx. 222 (5th Cir. 2011), the employees alleged that the restaurant violated FLSA § 203(m) by requiring them to share tips with expediters who did not customarily and regularly receive tips.  See id. at 224-25.  The restaurant – like Defendant in this case – argued that the extent of the expediters’ interaction was irrelevant to whether they were the types of employees who customarily and regularly receive tips.  See id. at 231.  The Fifth Circuit disagreed:  “We conclude that the district court reasonably found direct customer interaction “highly relevant” to tip-eligibility. . . .  Brinker has not advanced a compelling reason why direct customer interaction should not be considered.”  Id.; accord Roussell v. Brinker Int’l, Inc., 2008 U.S. Dist. LEXIS 52568, *29-51 (S.D. Tx. July 9, 2008) (exhaustively analyzing the issue and holding “that the level of customer interaction is highly relevant to the question of whether an employee may participate in a valid tip pool”).

In Myers v. The Copper Cellar Corp., 192 F.3d 546 (6th Cir. 1999), the Sixth Circuit was called upon to determine whether a restaurant violated § 203(m) by allowing salad preparers to participate in a tip pool.  See id. at 548-50.  In affirming the district court’s finding against the restaurant, the Circuit Court expressly considered the extent of the salad preparers’ customer interactions:

Because the salad preparers abstained from any direct intercourse with diners, worked entirely outside the view of restaurant patrons, and solely performed duties traditionally classified as food preparation or kitchen support work, they could not be validly categorized as “tipped employees” under section 203(m).  Accordingly, during the work shifts in which salad mixers were included within the tip pool, the pooling scheme was illegal.

 

Id. at 550-51.

In Kilgore v. Outback Steakhouse of Florida, Inc., 160 F.3d 294 (6th Cir. 1998), the Sixth Circuit considered a tip pool that distributed tips to hosts, buspersons, and bartenders.  Id. at 296-97.  The plaintiffs argued that the inclusions of hosts in the tip pool violated § 203(m) because hosts did not customarily and regularly receive tips.  See id. at 297, 300.  In finding no § 203(m) violation, the Sixth Circuit expressly considered the extent of the hosts’ customer interactions:  “Hosts at Outback are ‘engaged in an occupation in which [they] customarily and regularly receive[] . . . tips’ because they sufficiently interact with customers in an industry (restaurant) where undesignated tips are common.  Although the parties dispute exactly how hosts spend their time working at Outback, hosts do perform important customer service functions: they greet customers, supply them with menus, seat them at tables, and occasionally “enhance the wait.”  Like bus persons, who are explicitly mentioned in 29 C.F.R. § 531.54 as an example of restaurant employees who may receive tips from tip outs by servers, hosts are not the primary customer contact but they do have more than de minimis interaction with the customers.  One can distinguish hosts from restaurant employees like dishwashers, cooks, or off-hour employees like an overnight janitor who do not directly relate with customers at all.”  Id. at 301.

In Shahriar v. Smith & Wolenski Restaurant Group, Inc., 659 F.3d 234 (2d Cir. 2011), the Second Circuit summarized the pertinent law as follows:  “Under the FLSA an employer may not avail itself of the tip credit if it requires tipped employees to share their tips with employees who do not “customarily and regularly receive tips.”  29 U.S.C. § 203(m) (stating that 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”).  Thus, an employer loses its entitlement to the tip credit where it requires tipped employees to share tips with (1) employees who do not provide direct customer service or (2) managers.”  Id. at 240 (emphasis supplied).

Consistent with the above circuit court decisions, district court judges consistently analyze the extent of customer interaction in determining whether restaurant employees’ participation in a tip pool violates § 203(m).  See, e.g., Porter v. West Side Restaurant, LLC, 2014 U.S. Dist. LEXIS 57126, *31 (D. Kan. Apr. 24, 2014) (“The case law suggests that direct customer interaction is a relevant factor in determining whether an employee ‘regularly and customarily receives tips’ and therefore can participate in a mandatory tip pool.”); Chhab v. Darden Restaurants, Inc., 2013 U.S. Dist. LEXIS 135926, *18 (S.D.N.Y. Sept. 20, 2013) (“Courts in this District have concluded that certain back-of-the-house restaurant staff, including cooks and dishwashers, cannot participate in valid tip pools under the FLSA because they do not interact with customers.”); Arango v. Landry’s, Inc., 2013 U.S. Dist. LEXIS 97240, *11-13 (N.D. Ill. July 12, 2013) (expediters’ “level of interactivity with customers” relevant to § 203(m) analysis); Rubio v. Fuji Sushi & Teppani, Inc., 2013 U.S. Dist. LEXIS 8469, *5-9 (M.D. Fla. Jan. 22, 2013) (considering extent of kitchen chef’s customer interaction); Giuffre v. Marys Lake Lodge, LLC, 2012 U.S. Dist. LEXIS 140506, *5-12 (D. Col. Sept. 28, 2012) (considering extent of expediters’ customer interaction); Pedigo v. Austin Rumba, Inc., 722 F. Supp. 2d 714, 727-36 (N.D. Tx. 2010) (considering extent of prep cooks’ and dishwashers’ customer interaction because “the level of customer interaction is highly relevant to the question of whether an employee may participate in a valid tip pool”); Rudy v. Consolidated Restaurant Cos., Inc., 2010 U.S. Dist. LEXIS 92764, *6-11 (N.D. Tx. Aug. 18, 2010) (considering extent of maitre d’s customer interaction); Ash v. Sambodromo, LLC, 676 F. Supp. 2d 1360, 1369-70 (S.D. Fla. 2009) (considering extent of sushi chefs’ customer interaction); Morgan v. Speak Easy, LLC, 625 F. Supp. 2d 632, 653 (N.D. Ill. 2007) (considering extent of “senior servers” customer interaction); Hai Ming Lu v. Jing Fong Restaurant, Inc., 503 F. Supp. 2d 706, 711 (S.D.N.Y. 2007) (considering extent of “pantry workers’” and “dim sum servers’” customer interaction).

As reflected by Roussell, Myers, Kilgore, Sharriar, and the above-cited district court opinions, § 203(m) can be violated when employees who do not sufficiently interact with customers share in a tip pool.  As such, Plaintiffs have adequately stated an FLSA claim by clearly alleging that Defendant violated § 203(m) – and thereby lost the benefit of the FLSA tip-credit provision – by requiring Plaintiffs to share tips with Expos who “spend almost all of their time working in or near the kitchen area and rarely interact with restaurant customers,” Complaint at ¶ 18, and “are not the types of employees who customarily and regularly receive tips from customers,” id. at ¶ 19.  Defendant’s Motion – which is predicated entirely on the incorrect notion that customer interaction is irrelevant to the § 203(m) analysis – should fail.

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