Court Partially Dismisses and Denies Conditional Certification In Tip-Credit Case

by BakerHostetler

Anyone who has dined at a restaurant is aware of the importance of tipping, even if the exact rules, like the percentage and how it should be calculated, may be a bit fuzzy at times. From the standpoint of the restaurant, too, the standards of what may or may not be tipped work for taking advantage of the FLSA’s tip credit may be less than clear. A recent case from the Northern District of Indiana demonstrates not only some of the issues to be considered, but also that it may be difficult for a plaintiff to pursue claims challenging the amount of tipped work on a class-wide basis.

In Roberts v. Apple Sauce, Inc., Cause No. 3:12-CV-830-TLS (N.D. Ind. May 13, 2013), the plaintiff, a former Applebee’s waitress, brought suit against the franchisee for whom she had worked, contending that it had not properly taken advantage of the tip credit exception contained in section 6(a)(1)(C) of the FLSA. The significance of such a claim, by the way, is that if the tip credit does not apply the employer cannot take advantage of tips to make up the difference between $2.13 per hour and the minimum wage (or a difference of $5.13 per hour at present). The crux of the plaintiff’s claim was that she was required, in addition to waiting tables, to perform various non-tipped duties such as dishwashing, food preparation, cleaning the kitchen and bathrooms (hopefully at very different times), and trash removal. She also contended, somewhat incredibly, that she had not been advised that the employer would be taking advantage of the tip credit, a specific requirement of the applicable regulation. As if often the case, she sought to pursue her claims on a collective basis on behalf of the wait staff at 24 Applebee’s restaurants.

The defendant moved to dismiss the claims under Rule 12(b)(6), and the plaintiff, in essence, sought conditional certification of the proposed class as well as to toll the statute of limitations. In a relatively compact but thoughtful opinion, the court granted the motion to dismiss, at least in part, but also denied the plaintiff’s motions. As to the motion to dismiss, the court noted that the Department of Labor guidance specifically recognized that incidental duties such as “general preparation work or maintenance” like cleaning, table-setting, making coffee, and dishwashing, did not destroy the exemption so long as they do not exceed 20% of the tipped employee’s time. The court noted that despite the general allegation that such work was done, the precise allegations were somewhat “sparse.” Citing the pleading standard of Ashcroft v. Iqbal, 556 U.S. 662 (2009), the court dismissed that aspect of the plaintiff’s claims.

The court did find that the complaint stated a claim that the employer had failed to inform her that it would be taking advantage of the tip credit. Of course, the court was obligated under the applicable standard to accept the allegations of the complaint as true, but one could legitimately question in this day and age how a waitress would not realize that she was receiving a sub-minimum wage and that the employer was taking a credit for tips to make up the difference. While the court held that the complaint stated such a claim, however, it also found that it relied upon what the plaintiff was told in orientation, not a uniform policy, and that the case could therefore not be handled as a collective action. It therefore denied conditional certification and it also rejected tolling because there were no extraordinary circumstances that would justify tolling the statute of limitations.

The Roberts case is significant because the court took at least a cursory review of the plaintiff’s claims and denied conditional certification even though it found that she had stated, at least in part, a claim. A contrary holding would have resulted in a class being conditionally certified that likely would have been decertified only after the parties had spent considerable sums advancing or defending their claims.

The bottom line: A court has denied conditional certification of a tip credit case because of the need for individual inquiries.


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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