Nelson v. Firebirds of Overland Park, LLC

Josh Nelson, on behalf of himself and all others similarly situated, Plaintiffs, v. Firebirds of Overland Park, LLC; and Firebirds International, LLC, Defendants.

Case No. 17-2237-JWL

UNITED STATES DISTRICT COURT DISTRICT OF KANSAS

June 18, 2018

MEMORANDUM & ORDER

Plaintiff is a former server at defendants' restaurant location in Overland Park, Kansas. He filed this wage and hour lawsuit, individually and on behalf of others similarly situated, against defendants alleging violations of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., and various state wage payment laws. Plaintiff alleges that defendants, while taking advantage of the FLSA's "tip credit" provision, required him and putative class members to spend more than 20 percent of their time performing non-tip-producing "side work" activities. This matter is presently before the court on plaintiff's motion for conditional class certification under § 216(b) of the FLSA (doc. 39) and defendants' motion for partial summary judgment (doc. 42).¹ As setforth in more detail below, plaintiff's motion is granted in part and denied in part and defendants' motion is denied.

Background

From December 2013 through November 2015, plaintiff Josh Nelson worked as a server for defendants at one of defendants' restaurants in Overland Park, Kansas. During that time, defendants paid plaintiff $2.15 per hour and relied on the "tip credit" provision of the FLSA to make up the difference between the paid wage and the federal minimum wage. See 29 U.S.C. § 203(m). Plaintiff asserts that he routinely spent more than 20 percent of his time performing "non-tip-producing activities" and that defendants violated the tip-credit provision (and the minimum wage provision) by failing to pay plaintiff the federal minimum wage for that time. Plaintiff further alleges that defendants' uniform compensation policy requires that all servers are paid exclusively under the tip-credit provision and that servers are never paid the minimum wage regardless of whether they spend more than 20 percent of their time performing non-tip-producing activities. Plaintiff alleges that defendants failed to track the amount of time spent by servers performing non-tip-producing activities and that, as a result of these policies and procedures, defendants routinely failed to pay their servers the federal minimum wage in violation of the FLSA.

The Tip Credit Provision of the FLSA

The Fair Labor Standards Act (FLSA) of 1938 requires employers to pay a minimum hourly wage, which is currently $7.25 per hour. 29 U.S.C. § 206(a)(1)(C). For a "tippedemployee," defined by the statute as an employee engaged in an occupation in which he or she customarily and regularly receives more than $30 per month in tips, 29 U.S.C. § 203(t), the employer must pay a wage of at least $2.13 per hour plus an additional amount based on tips received by the employee that is equal to the difference between the $2.13 cash wage and the current $7.25 minimum wage. 29 U.S.C. § 203(m). In other words, the tip-credit provision of the FLSA permits an employer to pay tipped employees a cash wage of as little as $2.13 an hour, and then use a portion of the employees' tips to make up the difference between that hourly cash wage and the federal minimum wage. Romero v. Top-Tier Colorado LLC, 849 F.3d 1281, 1283 (10th Cir. 2017) (citing 29 U.S.C. § 203(m); Fast v. Applebee's Int'l, Inc., 638 F.3d 872, 876 (8th Cir. 2011)).

As the Tenth Circuit has recognized, § 203(m)'s tip-credit provision is "not without its limits." Id. at 1284. The Department of Labor (DOL) has promulgated regulations to implement the tip credit and those regulations "recognize that an employee may hold more than one job for the same employer, one which generates tips and one which does not, and that the employee is entitled to the full minimum wage rate while performing the job that does not generate tips." Id. (quoting Fast, 638 F.3d at 875 (citing 29 C.F.R. § 531.56(e))). Specifically, the "dual jobs" regulation provides:

Dual jobs. 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 hisown 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.

29 C.F.R. § 531.56(e).

The DOL has further interpreted its dual jobs regulation through § 30d00(e) of its Field Operations Handbook (FOH), which provides "that if a tipped employee spends a substantial amount of time (defined as more than 20 percent) performing related but nontipped work, . . . then the employer may not take the tip credit for the amount of time the employee spends performing those duties." Romero, 849 F.3d at 1284 (quoting Fast, 638 F.3d at 875). Specifically, § 30d00(e) of the FOH provides as follows:

(e) Reg 531.56(e) permits the taking of the tip credit for time spent in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips (i.e. maintenance and preparatory or closing activities). For example, a waiter/waitress, who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses may continue to be engaged in a tipped occupation even though these duties are not tip producing, provided such duties are incidental to the regular duties of the server (waiter/waitress) and are generally assigned to the servers. However, where the facts indicate that specific employees are routinely assigned to maintenance, or that tipped employees spend a substantial amount of time (in excess of 20 percent) performing general preparation work or maintenance, no tip credit may be taken for the time spent in such duties.

Field Operations Handbook § 30d00(e).²

In support of his motion for conditional certification, plaintiff alleges that defendants had a uniform policy that required servers to spend more than 20 percent of their time engaged in non-tip-producing activities and that defendants unlawfully failed to pay the full minimum wage for that time. Plaintiff, for example, alleges that defendants uniformly required servers to perform non-tip-producing tasks such as brewing coffee and tea; wiping down server station counters, beverage machines, light fixtures, tables and chairs; stocking tea, coffee, ice, glasses, and napkins; sweeping floors and "bisseling" carpets; refilling condiments; and polishing silverware. Plaintiff alleges that the completion of these tasks routinely exceeded 20 percent of the hours worked in a work week and, thus, that servers should have been paid the full minimum wage for that time. In other words, plaintiff asserts that defendants violated the FLSA by using § 203(m)'s tip credit for hours that, according to plaintiff, were not tip-credit eligible under 29 C.F.R. § 531.56(e) and § 30d00(e) of the applicable FOH. Plaintiff asserts that defendants' uniform, nationwide policies requiring servers to spend more than 20 percent of their time engaged in non-tip-producing activities and refusing to pay servers the full minimum wage for that time justifies conditional certification of a nationwide class of all current and former servers employed by defendants from May 12, 2014 to the present.

Defendants oppose the motion on various grounds. As a threshold matter, defendants contend that the DOL's interpretation of the dual jobs regulation, as set forth in § 30d00(e) of the FOH, is not entitled to deference and should be disregarded by the court. This issue is also the basis for defendants' motion for partial summary judgment. According to defendants, they are entitled to summary judgment on plaintiff's "tip credit" claims because those claims are based entirely on the FOH, which is not entitled to deference under Auer v. Robbins, 519 U.S. 452 (1997). In response, plaintiff urges that the FOH is entitled to Auer deference and that the FOH's interpretation of the dual jobs regulation governs plaintiff's claims in this case. "Auer ordinarilycalls for deference to an agency's interpretation of its own ambiguous regulation." Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155 (2012). "[T]his general rule does not apply in all cases." Id. As a threshold matter, Auer deference is warranted only if the language of the regulation in question is ambiguous, "lest a substantively new rule be promulgated under the guise of interpretation." EEOC v. Abercrombie & Fitch Stores, Inc., 731 F.3d 1106, 1137 (10th Cir. 2013), rev'd on other grounds, 135 S. Ct. 2028 (2015). Moreover, deference is not appropriate when the agency's interpretation "is plainly erroneous or inconsistent with the regulation." Christopher, 567 U.S. at 155.

The two Circuit Courts of Appeal that have addressed squarely whether § 30d00(e) of the FOH is entitled to Auer deference are split on the issue. Defendants urge the court to follow the Ninth Circuit's opinion in Marsh v. J. Alexander's LLC, 869 F.3d 1108 (9th Cir. 2017), while plaintiff urges the court to follow the Eighth Circuit's opinion in Fast v. Applebee's International, Inc., 638 F.3d 872 (8th Cir. 2011). In a 2-1 panel decision, the Ninth Circuit in Marsh held that § 30d00(e) of the FOH was not entitled to Auer deference such that the plaintiffs in that case...