Schultze v. 2K Clevelander LLC

ROBERT SCHULTZE, Plaintiff, v. 2K CLEVELANDER LLC, Defendant.

CASE NO.: 17-CV-22684-MORENO/LOUIS

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

August 28, 2018

REPORT AND RECOMMENDATION ON MOTION FOR SUMMARY JUDGMENT

This matter is before the Court on Defendant's Motion for Summary Judgment (ECF No. 46). This motion was referred to the undersigned United States Magistrate Judge for a Report and Recommendation by the Honorable Federico A. Moreno, United States District Judge, on March 19, 2018 (ECF No. 65). Upon consideration of the briefing, the pertinent parts of the record, and being otherwise fully advised in the premises, the undersigned recommends DENYING Defendant's Motion for Summary Judgment.

I. BACKGROUND

Plaintiff Robert Schultze ("Plaintiff") was employed as a barback at Defendant 2K Clevelander LLC ("Defendant" or "the Clevelander") between July 2014 and September 2014 (ECF No. 47, Defendant's Facts ¶ 2). As a barback, Plaintiff's duties included stocking the bars and cleaning the bar area (Id. at ¶ 3).

Plaintiff was paid no hourly wage but was compensated strictly from commissions (Id. at ¶ 6). According to Defendant, Plaintiff's commissions were based upon "a percentage of grosssales or a percentage of service commissions generated by the bar, whichever was greater" (Id. at ¶ 7). The commissions were further calculated based on hours worked, specific duties involved, and the specific bars where the employee was assigned for his or her shift (Id. at ¶ 8).

During the time period Plaintiff was employed at the Clevelander, every bill presented to Clevelander customers had an 18% "service charge" added automatically to all food and beverage orders (ECF No. 46-1, Decl. of Kittine Moreno, at 2; ECF No. 48-1 at 58). This service charge was a key part of how Plaintiff's and other bartenders' pay was calculated, and was considered by Defendant as a "commission." The Parties dispute whether this charge to the customer was mandatory or discretionary. Defendant contends that the charge was not discretionary; it was applied to every bill for every customer, and as such, was consistently calculated for purpose of determining Plaintiff's "commission." Plaintiff maintains that the service charge was discretionary: Defendant removed the service charge for particular customers, or to take into account employee errors, and as a result the service charge was essentially a "gratuity" or "tip," not a compulsory commission. ECF No. 48. Plaintiff also maintains that tips in addition to the service charge, also known as "overtips," were improperly included as commissions.

Plaintiff worked overtime hours from time to time. He was not paid an overtime rate for such hours. See 29 U.S.C. § 207(a)(1). The Parties dispute whether Defendant was required to pay Plaintiff overtime, or whether Defendant's commission system was exempt from overtime requirements. Plaintiff was paid a total of $5,151.33 from July 2014 through September 2014 (ECF No. 47 at ¶ 15). According to Defendant's calculation, over those two months, Plaintiff worked for a total of 309.55 hours of work and was thus paid at a rate of $16.64 per hour ($5,151.33/309.55). Id. In 2014, the minimum wage in Florida was $7.93 per hour; as such, theminimum overtime rate in Florida was $11.89 in 2014. Using Defendant's basis for calculation, Plaintiff's hourly rate exceeded 1.5 times the minimum wage. However, Plaintiff contends that his pay was calculated based on a demonstrably wrong number of hours and improperly crediting tips as commissions.

On July 18, 2017, Plaintiff filed his Complaint (ECF No. 1), alleging a single count for violation of the overtime provision under the Fair Labor Standards Act ("FLSA"). Specifically, Plaintiff alleges that Defendant was not entitled to the FLSA's exemption for a "bona fide commission scheme" and thus failed to pay Plaintiff time-and-a-half for all hours worked over 40 hours per week.

II. LEGAL STANDARD

Under Rule 56(a) of the Federal Rules of Civil Procedure, "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The movant bears "the stringent burden of establishing the absence of a genuine issue of material fact." Suave v. Lamberti, 597 F. Supp. 2d 1312, 1315 (S.D. Fla. 2008) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)).

The movant "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp., 477 U.S. at 323. To discharge this burden, the movant must identify an absence of evidence to support the nonmoving party's case. Id. at 325. After the movant has met its burden under Rule 56(c), the burden of production shifts, and the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586(1986). The non-moving party must come forward with "specific facts showing a genuine issue for trial." Matsushita, 475 U.S. at 587.

"A fact [or issue] is material for the purposes of summary judgment only if it might affect the outcome of the suit under the governing law." Kerr v. McDonald's Corp., 427 F.3d 947, 951 (11th Cir. 2005) (internal quotations omitted). Furthermore, "[a]n issue [of material fact] is not 'genuine' if it is unsupported by the evidence or is created by evidence that is 'merely colorable' or 'not significantly probative.'" Flamingo S. Beach I Condo. Ass'n, Inc. v. Selective Ins. Co. of Southeast, 492 F. App'x 16, 26 (11th Cir. 2013) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986)). "A mere scintilla of evidence in support of the nonmoving party's position is insufficient to defeat a motion for summary judgment; there must be evidence from which a jury could reasonably find for the non-moving party." Id. at 26-27 (citing Anderson, 477 U.S. at 252). Accordingly, if the moving party shows "that, on all the essential elements of its case on which it bears the burden of proof at trial no reasonable jury could find for the nonmoving party," then "it is entitled to summary judgment unless the nonmoving party, in response, comes forward with significant, probative evidence demonstrating the existence of a triable issue of fact." Rich v. Sec'y, Fla. Dept. of Corr., 716 F.3d 525, 530 (11th Cir. 2013) (citation omitted).

III. ANALYSIS

This case turns on whether Plaintiff should have been paid time-and-a-half for overtime hours worked, or whether Defendant correctly classified him as exempt.

Defendant argues that it is entitled to summary judgment on Plaintiff's FLSA overtime claim because Plaintiff received commissions as part of his compensation and is thereforeexempt from the FLSA's overtime requirements. Plaintiff responds that Defendant was not entitled to the FLSA's exemption for a "bona fide commission scheme."

A. Overtime Commission Exemption Under 29 U.S.C. § 207(i) (Count I)

The central dispute in Defendant's motion is whether Plaintiff was subject to the FLSA's overtime exemption for commissions. Defendant insists that it satisfies the criteria for commissioned-employee exemption and that it was not required to comply with FLSA's overtime wage provision.

The FLSA requires an employer to pay an employee for hours worked over 40 in a week (overtime) at a rate not less than "one and one-half times the regular rate at which he is employed." 29 U.S.C. § 207(a)(1); 29 C.F.R § 778.101. The FLSA also provides an exemption to the overtime requirement under Section 207(i) for commissioned employees of retail or service establishments:

No employer shall be deemed to have violated subsection (a) of this section by employing any employee of a retail or service establishment for a workweek in excess of the applicable workweek specified therein, if (1) the regular rate of pay of such employee is in excess of one and one-half times the minimum hourly rate applicable to him under section 207 of this title, and (2) more than half his compensation for a representative period (not less than one month) represents commissions on goods or services. In determining the proportion of compensation representing commissions, all earnings resulting from the application of a bona fide commission rate shall be deemed commissions on goods or services without regard to whether the computed commissions exceed the draw or guarantee.

29 U.S.C. § 207(i) (the "7(i) exemption"). As such, the 7(i) exemption applies if: (1) the employer is a retail or service establishment; (2) the regular rate of pay of the employee is in excess of one and one-half times the minimum hourly rate applicable to him under 29 U.S.C. § 206; and (3) more than half of the employee's compensation for a representative period (not less than one month) represents commissions on goods or services. Id. The employer bears theburden of proving the 7(i) exemption by "clear and affirmative evidence." Klinedinst v. Swift Investments, Inc., 260 F.3d 1251, 1254 (11th Cir. 2001).

Additionally, the employee's commission must stem from the application of a "bona fide commission rate." Id. While there is no exact definition for what constitutes a "bona fide" rate, guiding regulations and case law provide that the commission rate must be a "consistently applied methodology," but should not give employees a fixed compensation amount irrespective of their efforts or sales. See Flores v. 2K Clevelander, LLC, No. 1:16-CV-24083-UU, 2017 WL 5054565, at *5 (S.D. Fla. May 4, 2017); see also Klinedinst, 260 F.3d at 1256; 29 C.F.R. § 779.416. Courts in other circuits have provided factors for determining a "bona fide" rate, including: "(1) whether the commission is a percentage or proportion of the ultimate price passed onto the customer;...