Labor & Employment Law Daily P. F. Chang’s servers in 30 states forge ahead as a collective in suit over nontipped work
Monday, July 13, 2020

P. F. Chang’s servers in 30 states forge ahead as a collective in suit over nontipped work

By Lisa Milam, J.D.

The court certified a collective of servers in 30 states. P.F. Chang’s cited Bristol-Myers Squibb to challenge personal jurisdiction, but the court said a jurisdiction analysis is premature.

A federal court in Pennsylvania has granted conditional certification to an FLSA collective of P.F. Chang’s servers working in restaurants in 30 states, finding the requisite “modest factual showing” in the form of 11 declarations from servers asserting they were required to spend 25-50 percent of their work time performing nontipped side work at the tip-credit rate, and evidencing that the side work is relatively the same at all P.F. Chang’s locations. P.F. Chang’s argued that, if anything, the collective should be limited to servers in Pennsylvania, relying on the Supreme Court’s Bristol-Myers Squibb decision addressing jurisdiction in the class action context. However, the court held that a jurisdictional analysis of opt-ins, not as yet parties to the dispute, was premature (Belt v. P.F. Chang’s, July 8, 2020, Brody, A.).

Nontipped duties. P.F. Chang’s servers were required to perform tipped work as well as nontipped work related to their tip-producing work, including labeling sauces, preparing drink machines, filling sugar caddies, and rolling silverware. They also performed unrelated nontipped duties, such as sanitizing the kitchen, cleaning tables and chairs, dusting and sweeping, and bagging and taking out trash. During each shift, the servers spent approximately 25-50 percent of their time performing work that did not give them the opportunity to interact with customers and earn tips, they alleged. They perform side duties before the restaurant opens, during their shifts, and before the end of their shifts. Servers working the closing shift also had additional, extensive side duties to perform.

Yet P.F. Chang’s took the tip credit against their minimum wage rate—as opposed to the full minimum wage rate—for all hours worked, including the time they spent performing nontipped duties.

Wage claims. The servers alleged that P.F. Chang’s violated FLSA and state minimum-wage laws by paying them at the tip-credit rate for their nontipped duties. They also claimed that the employer’s failure to correctly calculate their regular rate of pay meant that it also improperly computed “time and a half” for the overtime hours they work. They filed a proposed collective action under the FLSA and class claims under the Pennsylvania and Maryland wage laws. But they moved to conditionally certify a class comprised of all servers who worked at P.F. Chang’s in 30 states in the last three years.

“Dual jobs” guidance rejected. In an earlier ruling, the court refused to dismiss the action, denying the restaurant chain’s motion for judgment on the pleadings. In so ruling, the court rejected the Department of Labor’s 2018 “dual jobs” guidance which provides that employers may pay the sub-minimum hourly wage to restaurant workers for all related, untipped work, no matter how much time a tipped employee spends performing the untipped work. In the court’s view, the DOL guidance did not reflect a fair and considered judgment, and need not be given deference.

Here, the court addressed the plaintiffs’ motion for conditional certification of their FLSA claims and to provide notice to potential class members.

Companywide practices. P.F. Chang’s has a top-down corporate structure; training and pay practices are the same throughout the restaurant chain, regardless of location. This uniformity is by design: “P.F. Chang’s wants a guest who goes to a restaurant in Naples to have the same experience as in Pittsburgh,” according to a senior vice president. P.F. Chang’s requires every server to perform side work, but it does not track the side work that servers perform before, during, and after their shift., and pays them the tip-credit wage for all hours worked.

P.F. Chang’s contended that the plaintiffs failed to identify a corporate-wide policy requiring servers to spend at least 20 percent of their time performing non-tipped side work. However, the court noted that the plaintiffs don’t have to prove the existence of a written policy; at the conditional certification stage, all they need do is make a modest showing of “a factual nexus between the manner in which the employer’s alleged policy affected him or her and the manner in which it affected the proposed collective action members.”

Declarations, other evidence suffice. The plaintiffs submitted declarations from 11 servers from seven different states, all asserting that they are required to do side work—taking anywhere from 25 to 50 percent of their work time—and are paid the tip-credit wage for the time they spend performing these duties. They also relied on the deposition of a P.F. Chang’s senior regional vice president, as well as P.F. Change’s “side work sheets” that reflect the many tasks that servers must perform before, during, and after their shifts.

P.F. Chang’s conceded that all servers are expected to perform side work, but argued that the amount of side work varies by server. For example, some restaurants require servers to start work 30 minutes before opening, while others don’t schedule servers until the restaurant opens, it pointed out. Moreover, the amount of purported side work varied from 15 to 90 minutes among some of the declarants. P.F. Chang’s also presented declarations from multiple servers who said they spend under 20 percent of their work time on side duties, and that they know of no company policy requiring a minimum amount of side work and had never been instructed to devote a certain amount of time to side tasks. The employer also cited contrary evidence from two regional company officials.

But this competing evidence goes to the merits of the case, not the wisdom of conditional certification, the court said. The plaintiffs have shown that all servers in the proposed class are required to perform side work, that they are paid the tip credit wage for the hours during which they perform this work, that P.F. Chang’s does not record the amount of time servers spend on side work, and that the side work expectations are relatively uniform across all P.F. Chang’s locations. Thus, the plaintiffs made the requisite preliminary showing that they are similarly situated for purposes of conditional certification.

Claims too individualized? P.F. Chang’s also argued the court should deny conditional certification because determining whether any putative class member was injured would require a highly individualized inquiry. But that issue was to be addressed at the decertification stage after discovery has closed, the court said.

Personal jurisdiction. If the court grants conditional certification, P.F. Chang’s argued, the scope of the collective action should be limited to named plaintiffs and those opt-in plaintiffs who worked in restaurants in Pennsylvania. The court does not have personal jurisdiction over any opt-in servers who did not work in Pennsylvania, the employer contended, citing the Bristol-Myers Squibb Company v. Superior Court of California (BMS) and asserting that this 2017 Supreme Court decision extends to opt-ins in an FLSA collective action brought in federal court. (In that case, the Supreme Court had ruled that California state courts did not have specific jurisdiction over an employer with regard to claims brought by out-of-state plaintiffs because there was not an “adequate link between the State and the nonresidents’ claims.” Bristol Myers left open the question of whether, in an FLSA collective action, each individual opt-in plaintiff must satisfy the minimum contacts inquiry.

“No circuit court of appeals has addressed the question of whether BMS applies to FLSA collective actions, and the district courts nationwide are split,” the district court explained. In P.F. Chang’s view, the High Court decision applies to FLSA collective actions and a court must determine whether it has specific jurisdiction over the claims of each individual opt-in plaintiff. The plaintiffs countered that BMS involved a mass action in state court; in contrast, in the FLSA context, “the only requirement is that a court possesses personal jurisdiction over the claims of each named plaintiff.”

Ultimately, it was too soon to address this question. “Despite P.F. Chang’s desire to eliminate most of the collective action class prior to conditional certification, it is inappropriate to reach the question of personal jurisdiction before individuals have even been given notice of the collective action and the opportunity to opt-in,” it wrote. “The FLSA clearly indicates that the Court cannot decide whether it has jurisdiction over individuals who have not yet opted-in because they are not parties to the collective action.” That means it would be premature to conduct a personal jurisdiction analysis at this stage of the litigation, and so chose not to render an advisory opinion on the applicability of BMS to FLSA collective actions.

Notice by mail and email. P.F. Chang’s sought to limit notice of the action to distribution through first-class mail, and asserted also sending email and text message notice, as the plaintiffs proposed, would be redundant. “Despite P.F. Chang’s concerns about redundancy, it is appropriate in the modern digital age to distribute notice by mail, email, and text, because although people frequently move and change addresses, they typically retain the same email addresses and phone numbers,” the court wrote, rejecting the employer’s objection. “Providing servers with electronic notice is especially important given the high turnover rate of employees in the restaurant industry.”

Reminders aren’t endorsements. Additionally, the plaintiffs intended to send a reminder letter to potential opt-in plaintiffs thirty days before the close of the opt-in period, via mail and email. The court a reminder is reasonable, adding that courts within the Third Circuit “regularly permit reminder letters.” The court rejected the notion that a reminder would come off as a judicial endorsement of the plaintiffs’ suit, noting “the content of the reminder letter is devoid of any indication of judicial endorsement of the lawsuit, and P.F. Chang’s has not explained why the act of sending a reminder letter itself would put a judicial imprimatur on the lawsuit. The reminder letter is a neutral communication that does not recommend class participation and is reasonable to distribute.”

Thus, the court conditionally certify the proposed collective action and approved the plaintiffs’ proposed notice plan.

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