By Lisa Milam-Perez, J.D. Servers for a local pancake house chain were unable to revive their minimum wage claims alleging the employer improperly deducted the tip credit from their hourly rate. The time they spent performing additional duties on top of waiting tables amounted to less than 20 percent of their shifts, or the tasks were sufficiently related to their tipped work to satisfy the strictures of the FLSA as embodied in the DOL’s tip-credit regulations and its field operations handbook (and which applied to their claims under state law). Consequently, the servers’ "dual jobs" allegations lacked merit, the Seventh Circuit held. As for their FLSA claims, the appeals court found they received sufficient information about the tip credit to satisfy the statutory notice requirement (Schaefer v. Walker Bros. Enterprises, Inc., July 15, 2016, Easterbrook, F.). Tip-credit claims. In a class and collective action comprised of some 500 waitstaff who toiled at one or more of the restaurant chain’s six locations, the servers contended they performed a number of non-tipped duties in addition to their primary role of taking customers’ food orders and bringing them their meal. These included brewing coffee and tea; washing and cutting strawberries, mushrooms, and lemons; preparing applesauce, jams, salsas, and blueberry compote; replenishing bread bins and dispensers of milk, syrup, etc.; wiping toasters and tables; wiping down burners and woodwork; and dusting picture frames. The servers argued these added duties amounted to "dual jobs" (in addition to their tipped work), which meant the employer was barred from taking the tip credit against the minimum hourly wage and that, by not paying them the full minimum wage, it violated the Illinois Minimum Wage Law. As for their FLSA claims (there were only 11 opt-ins, and one named plaintiff, bringing this particular cause of action), the servers argued the employer failed to provide them the requisite notice before the tip credit could be applied, and so violated the federal statute by not paying them the full minimum wage. Dual jobs? The DOL regulations distinguish between a "dual job" (non-tipped duties which amount to an entirely separate job from a server’s tipped occupation, and which requires compensation at the full minimum wage rate) and "related duties," which are part and parcel to a server’s tipped duties (and which can be compensated at the tip-credit rate). Most of the added duties noted above fell under the "related duties" category, the appeals court found. Indeed, they fell directly within the examples offered in the DOL regulation or its field operations handbook as the kinds of tasks that might be expected of a server compensated at the tip-credit rate. Arguably, some of the delineated duties (wiping down woodwork and dusting picture frames, most notably) could fall on the "dual job" side of the equation. But the time they spent on these particular tasks was negligible. Also, the DOL regulation lists "cleaning and setting tables … and occasionally washing dishes or glasses" as examples of tasks potentially related to tipped work. Consequently, "cleanup tasks cannot be categorically excluded" from "related duties," the appeals court noted. Citing other cases, the servers pointed out that some of these functions were carried out by non-tipped workers at other restaurants. That mattered little to the court. "That some of our plaintiffs’ tasks may be performed by untipped staff at other restaurants does not make them unrelated as a matter of law," it explained. At any rate, the evidence reflected that all of the servers’ non-tipped duties combined (in the court below, the servers had simply aggregated all these tasks) took anywhere from 10 to 45 minutes out of their 8-hour shifts—or far less than 20 percent of their work time. As such, pursuant to the field operations handbook, it was irrelevant if some of the added functions were not "related" to their tipped work. "The possibility that a few minutes a day were devoted to keeping the restaurant tidy does not require the restaurants to pay the normal minimum wage rather than the tip-credit rate for those minutes." What constitutes sufficient notice? The servers’ federal claims turned on whether they were given proper notice of the employers’ intent to take the tip credit and information about the tip credit (at least prior to May 2011, at which point the employer started to use a brochure that was indisputably compliant with the DOL regulatory revisions implemented that month.) Section 203(m) of the Act requires proper notice be given as a condition of paying the tip-credit wage. Tipped workers "are entitled to knowledge about the tip-credit program but not to a comprehensive explanation," the Seventh Circuit explained. It found that, to satisfy the statutory notice requirement, three key pieces of information must be provided: (1) that in anticipation of tips, the employer will pay less than the minimum wage; (2) how much the cash wage will fall short of the current minimum wage; and (3) if tips plus the cash wage do not at least match the current minimum wage, the employer must make up the difference. "We think that a person told these things has been adequately ‘informed’ for the purpose of the statute, during the time before the Department of Labor elaborated by regulation." The appeals court rejected the servers’ contention that the employer also must tell tipped employees that they are entitled to keep all tips received, unless tips are pooled among the staff (and details about what a tip pool is); and that the tip credit cannot be taken in the absence of these notices. As for the servers’ additional plea, that employers should just be required to provide each worker with a copy of the statute? This was "not a sensible way to ‘inform’ non-lawyers about how the tip-credit program works," the appeals court countered. "The statute is hard to parse, even for someone with a legal education, given its opaque structure and its use of the minimum wage from 1996. An employer ought to boil it down and tell workers directly what matters to them." Notice was proper here. In this case, the restaurant provided sufficient notice of what mattered. It provided the servers a document that explained tipping and which noted, "The Company can apply a credit to the minimum wage to include those tips as wages. The tip credit in Illinois is 40% of minimum wage." It also distributed a handbook providing an example, with math. Granted, the example was based on the incorrect minimum wage, so it was wrong about how much the restaurant would claim in tip credit. Also, neither the text nor the example explained that if the server didn’t receive enough in hourly tips to equal or exceed the credit that the employer was taking, the restaurant would have to make up the difference. That neither the handout nor the handbook contained that vital detail was cured by the fact that it put up a minimum-wage poster (as required by law) setting forth the information. The servers insisted the poster didn’t suffice because the information was not "employee-specific," that is, it did not identify for any particular employee whether a tip credit had been deducted from his or her wages. The court was unconvinced, noting that employees received this information in the handout, the handbook, and their individual pay stubs. Collectively, the various documents provided the servers with the three relevant details about the tip credit required by federal law, the court said. Therefore, the lower court properly granted summary judgment to the employer on the servers’ FLSA tip-credit claims contending lack of notice.
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