Court Grants Summary Judgment For Employer In Tip Credit Collective Action

by BakerHostetler
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What? I Need a Valid Claim to Represent a Class?!

With scores of collective actions being filed every month and many courts willing to issue conditional certification on even very weak claims, it’s easy to forget that, yes, it’s important for there to be a claim in the first place. That’s one of the lessons in last week’s decision in Calabrese v. TGI Fridays Inc., Civil Action No. 16-CV-0868 (E.D. Pa., Nov. 2, 2017). The Calabrese case started out like countless other wage-and-hour cases in the restaurant industry. In February 2016, the plaintiff, a restaurant server, brought suit against the TGI Friday’s chain for unpaid wages. The crux of his claim was that he was not advised that the restaurant would be taking advantage of the tip credit provisions section of the FLSA (29 U.S.C. § 203(m)) and the comparable versions of state law. Those long-standing provisions permit a restaurant to pay the employee only half of the applicable minimum wage and to take a credit for the tips an employee receives to make up the difference between the minimum wage and any overtime. The applicable regulations include the commonsense requirement that the employee be advised that the tip credit provisions would apply. 29 C.F.R. § 531.59.

The plaintiff contended that he did not recall hearing the term “tip credit” during his orientation, and thus the employer should not have been able to take advantage of the tip credit provisions when computing his pay. He not only brought suit in his own right, but also sought conditional certification across the entire TGI Friday’s chain.

The problem, however, was that, as you might expect, Friday’s did have procedures to tell employees that the tip credit would apply. Its policy was to alert new hires about the issue both verbally and by showing them forms explaining how the tip credit would work. Significantly, the tip credit was also explained in the handbooks given to all employees and which they acknowledged receiving.

Faced with this evidence, the court found that the employee’s claim that he did not recall hearing about the tip credit did not create a question of fact. It also rejected arguments that the plaintiff had to participate in an improper tip pool, concluding that while the employer encouraged tip sharing and the employee may have felt awkward not sharing his tips with certain other workers, that awkwardness was not attributable to the employer. The court thus granted summary judgment for the employer and denied the plaintiff’s motion for conditional certification.

The decision in Calabrese is important in several respects. First, it is typical of many of the kinds of wage-and-hour claims currently being brought, where the underlying basis is thin at best and the employee banks on obtaining conditional certification to coerce a settlement from the employer. Second, that tactic might very well have worked in some courts, but in this instance the court was prepared to examine difficulties with the merits before leaping to a certification decision. This court also neatly resolved the issue by holding that the employee’s own testimony that he did not recall hearing about the credit created no fact question when the employer had reasonable policies in place to ensure that he would have.

The bottom line: Some courts will consider the weaknesses of the plaintiff’s own claim before deciding whether to grant conditional certification.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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