Reynolds v. Chesapeake

CHRISTINA MARY REYNOLDS,on behalf of herself and all others similarly situated v. CHESAPEAKE & DELAWARE BREWING HOLDINGS, LLC, et al.

CIVIL ACTION No. 19-2184

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

May 12, 2020

MEMORANDUM

Juan R. Sánchez, C.J.

Plaintiff Christina Mary Reynolds, a former server at Iron Hill Brewery and Restaurant, alleges her former employers failed to pay her (and other servers) the minimum wage because they improperly calculated her pay using a tip credit for time she spent performing untipped side work. Reynolds brings this putative collective and class action against her former employers, alleging violations of the Fair Labor Standards Act (FLSA) and the Pennsylvania Minimum Wage Act (PMWA). Defendants move for summary judgment on both claims. Reynolds moves for partial summary judgment on her PMWA claim and on the narrow issue of whether Defendants acted willfully under the FLSA. Because there are disputes of material fact regarding how much time Reynolds spent performing untipped side work and whether Defendants knew or recklessly disregarded their obligations under the FLSA, the Court will deny both motions.

BACKGROUND¹

Defendants Chesapeake & Delaware Brewing Holdings, LLC and Iron Hill Brewery, LLC own 16 restaurants doing business as Iron Hill Brewery & Restaurant. At each restaurant, Defendants employ servers to wait on customers, take orders, deliver food, and ensure customersenjoy their dining experience. Defendants consider servers to be front-of-house employees who receive tips directly from customers.

Servers clock in and out of their shifts using Defendants' Aloha time clock system. In the Aloha system, there is a job code for servers. Employees who clock in under the server job code are paid an hourly rate of $2.83 per hour in Pennsylvania, less than the minimum wage of $7.25 per hour. Defendants then use a tip credit to make up the difference between the $2.83 hourly wage and the $7.25 minimum wage.² The tips servers receive directly from customers are thus applied to their wages to ensure they are paid at least minimum wage.

In addition to serving customers, servers at Iron Hill are required to perform "side work." Servers are expected to perform side work during their shifts and are trained on how to complete side work tasks, including, but not limited to, cleaning, filling condiments and dressings, rolling silverware, bussing tables, refilling napkins and other products, preparing dressings and sauces, and running dishes. These tasks are disbursed amongst the working servers on each shift. The type of side work servers perform varies based on a particular shift. Defendants use "side work books" to list the tasks servers must collectively complete at each location, designated by day, shift, and section of the restaurant.

Although all servers are required to perform side work, Defendants do not track servers' individual side work responsibilities. As a result, there is no record of what side work tasks were assigned to which servers, or how long a server spent performing the assigned tasks. Even thoughside work is not on its own directed toward generating customer tips, Defendants consider all server duties, including side work, to be tipped work.

Reynolds was employed as a server at the Iron Hill restaurant in North Wales, Pennsylvania from January 17 until March 30, 2019. Reynolds spent 10 days training as a server and was paid $7.25 per hour during this period. On February 8, 2019, Reynolds began working as a server and was paid $2.83 per hour plus tips.

Reynolds testified that throughout her tenure at Iron Hill, she was required to complete excessive amounts of side work.³ According to Reynolds, when working the opening shift, she was required to clock in before the restaurant opened and complete side work before she was assigned a table. During these shifts, Reynolds completed side work from the time she clocked in until approximately 15 minutes after the restaurant opened while she waited to receive her first table assignment. Without a table assignment, Reynolds had no ability to earn a tip during this time. There were also times in the middle of her shifts when she did not have any table assignments. During these "lulls," Reynolds was required to complete side work tasks.

At a certain point in her closing shifts, Reynolds would get "cut" and would no longer receive new tables. Defs.' App. A26-A27. Once Reynolds was cut, she would finish serving her assigned tables and perform side work. Reynolds contends she was often cut approximately two or three hours before she clocked out for her shift. When working a closing shift, Reynolds was required to complete side work after the restaurant was closed and she was no longer assigned a table. As a result, she had no ability to earn a tip during this time. Regardless of the amount of timeReynolds spent performing side work during her shifts, she was paid $2.83 per hour for every hour she worked while clocked in as a server.⁴

On May 20, 2019, Reynolds filed a putative collective and class action Complaint, alleging Defendants violated the FLSA by paying her less than minimum wage for hours she spent performing untipped side work. She asserts an identical claim under the PMWA. Defendants move for summary judgment on both of Reynolds's claims. Reynolds moves for partial summary judgment on her PMWA claim and the narrow issue of whether Defendants acted willfully under the FLSA. The Court heard oral argument on the motions on April 2, 2020.

DISCUSSION

Pursuant to Federal Rule of Civil Procedure 56, a court shall grant summary judgment if "there is no genuine issue as to any material fact and the [moving party] is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In evaluating a motion for summary judgment, a court must "view all facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor." Forrest v. Parry, 930 F.3d 93, 105 (3d Cir. 2019). If, viewing the facts in this light, a reasonable jury could find for the nonmovant, then summary judgment must be denied. See Giles v. Kearney, 571 F.3d 318, 322 (3d Cir. 2009) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "A factual dispute is material if it might affect the outcome of the suit under governing law." Lupyan v. Corinthian Colls. Inc., 761 F.3d 314, 317 (3d Cir. 2014). A court mustthus look to the elements of the underlying claim to determine whether factual disputes are material. See Forrest, 930 F.3d at 105.

Where, as here, cross-motions for summary judgment are filed, "the court must rule on each party's motion on an individual and separate basis, determining, for each side, whether a judgment may be entered in accordance with the Rule 56 standard." Auto-Owners Ins. Co. v. Stevens & Ricci Inc., 835 F.3d 388, 402 (3d Cir. 2016) (alteration omitted) (quoting 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2720 (3d ed. 1998)).

Although the parties offer competing legal interpretations, the Court concludes that under both the FLSA and the PMWA, an employer may not pay a tipped employee using a tip credit for time spent performing related untipped duties if the employee spends more than 20% of her time performing those duties. Whether Reynolds can succeed on her claims thus depends on the amount of time she spent performing untipped side work during each workweek. This fact is disputed. Because there is evidence in the record from which a reasonable jury could find Reynolds spent more than 20% of her time performing untipped side work, the Court will deny Defendants' motion for summary judgment. Because a reasonable jury could also find the opposite on this fact and because there is also a genuine factual dispute on the issue of Defendant's willfulness, the Court will also deny Reynolds's motion for partial summary judgment.

I. Defendants' Motion for Summary Judgment

The FLSA allows employees to bring a private cause of action against their employers for unpaid minimum wages. See 29 U.S.C. §§ 216(b), 206(a). To bring an FLSA claim, an employee must show that she performed work for which she was not properly compensated. See Rosano v. Twp. of Teaneck, 754 F.3d 177, 188 (3d Cir. 2014). The FLSA requires employers to payemployees a minimum hourly wage for hours worked in a workweek, currently $7.25 per hour, unless an exception applies. See 29 U.S.C. § 206(a)(1).

One exception is the wage paid to tipped employees, known as the tip credit. Pursuant to 29 U.S.C. § 203(m), employers may pay their tipped employees less in wages ($2.13 per hour) and take a credit for tips actually received by the employees to make up the difference between the lesser hourly wage and the minimum wage. See § 203(m)(2)(A). To take this tip credit, the employees must be "tipped employees" within the meaning of the statute. Section 203(t) defines a tipped employee as one who is "engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips."

In this case, the parties do not dispute that Reynolds was engaged in a tipped occupation during the hours in which she served customers and received tips based on her service. The issue is whether Reynolds was also "engaged" in that tipped occupation during the time Defendants required her to perform side work that did not directly result in a tip. Based on the best and most reasonable interpretation of the applicable Department of Labor regulation, the Court concludes Reynolds was not engaged in a tipped occupation when performing untipped side work during any workweek in which she spent more than 20% of her time performing such untipped side work. Therefore, to the extent that Reynolds spent more than 20% of her time performing untipped side work in a workweek, Defendants were not entitled to take a tip credit for any of the hours Reynolds spent performing side work.

Because...