Victory Against Bulldog Ale House In Overtime Lawsuit
December 4, 2019: We are happy to report that Attorney Kim Hilton obtained summary judgment on a portion of our clients’ claims against the Bulldog Ale House in New Lennox, Illinois. We sued on behalf of servers and alleged that they were not properly paid. The court ruled that Bulldog Ale House failed to establish that it properly informed its employees of the law and therefore that it would lose the tip credit (what allows servers to be paid less than the minimum wage, i.e., $4.95 instead of $8.25). A copy of the ruling is available here.
Here is a portion of the language from the judge’s ruling against Bulldog Ale House:
C. Tip Credit Notification
Plaintiffs find traction with their argument that they are entitled to summary judgment with respect to their claim that Defendant violated minimum wage laws by paying its servers sub-minimum wage without adequately notifying them of its intent to take the tip credit. Under the FLSA an employer may pay tipped employees less than the minimum wage as long as the cash wage plus the tips received equal or exceed the minimum wage. See 29 U.S.C. § 203(m); see also 29 C.F.R. § 531.59. However, under federal law the employer may not take this tip credit “unless such employee has been informed by the employer of the provisions” of Section 203(m). See 29 U.S.C. § 203(m)(2)(A). Under the corresponding federal regulation, the notice requirement with respect to the tip credit means that the employer must, “in advance of” its use of the tip credit, inform the employee of:
[t]he amount of the cash wage that is to be paid to the tipped employee by the employer; the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer, which amount may not exceed the value of the tips actually received by the employee; that all tips received by the tipped employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements.29 C.F.R. § 531.59(b). Under this framework “workers are entitled to knowledge about the tip-credit program but not to a comprehensive explanation.” Shaefer v. Walker Bros. Enters., Inc., 829 F.3d 551, 556 (7th Cir. 2016); see also Kilgore v. Outback Steakhouse of Fla., Inc., 160 F.3d 294, 298 (6th Cir. 1998) (concluding that “an employer must provide notice to the employees, but need not necessarily `explain’ the tip credit”). Nonetheless, “[t]he notice requirement is a firm one.” Reich v. Chez Robert, Inc., 28 F.3d 401, 404 (3rd Cir. 1994). The “statutory minimum” information that the employer must convey is that it will pay less than minimum wage in anticipation of the employee earning tips, how much less than the minimum wage the employer will pay, and that the employer will make up any difference between the minimum wage and the cash wage plus tips that the employee earns. Schaefer, 829 F.3d at 556-58.
Courts have recognized that although it “is not difficult for the employer” to meet the tip-credit notice requirements, the penalty for failing to meet those obligations can be “harsh.” Martin v. Tango’s Restaurant, Inc., 969 F.2d 1319, 1323 (1st Cir. 1992). That is because “an employer who violates the provisions of § 203(m) is liable for the full minimum wage for every hour worked by the employees.”3 Driver v. AppleIllinois, LLC, 917 F.Supp.2d 793, 800 (N.D. Ill. 2013). The employer bears the burden at trial to establish that it provided sufficient notice of its intent to take the tip credit. Perez v. Lorraine Enters., Inc., 769 F.3d 23, 27, 30 (1st Cir. 2014); see also Basina v. Sushi Thai, 14 CV 4090, 2016 WL 6833921, at *4-*5 (N.D. Ill. Nov. 21, 2016).
Here, Defendant has not pointed to evidence sufficient to show that it conveyed the required information to its servers before taking the tip credit. According to Defendant, it met the FLSA’s notice requirements because Souza informed potential servers in their interviews that they would be paid $4.95 per hour plus tips. (R. 114, Def.’s CSF ¶ 3; R. 113, Def.’s Ex. 1, Souza Dep. at 26.) That is enough to show that Defendant notified servers that they would be paid less than minimum wage in anticipation of tip earnings, but there is no evidence showing that Defendant informed its servers how much less $4.95 is than the minimum wage or that it would make up any deficit between a server’s cash wage plus tip earnings and the minimum wage. See Shaefer, 829 F.3d at 556-57.
To shore up its argument Defendant asserts that it hangs posters in the Bull Dog Ale House notifying servers “of minimum wage laws,” and these posters “are changed every year.” (R. 114, Def.’s CSF ¶ 4.) But Defendant has not submitted those posters in support of its summary judgment response or provided any specific description of the posters’ contents. Nor has Defendant pointed to evidence that these posters are distributed by the Department of Labor to fulfill the notice requirement. Souza simply testified that the posters describe “minimum wage, pregnancy, works—just in case you get into an accident or something like that.” (R. 113, Def.’s Ex. 1, Souza Dep. at 77.) Souza said he did not know where the posters came from. (Id. at 78.) Defendant’s assertion that the posters provide information about minimum wage laws is insufficient to show that the posters filled in the missing information required under Section 203(m).
Finally, Defendant relies on Souza’s testimony that during training sessions he informed servers that they would keep all of their tips but would have to participate in a tip pool. (Id. ¶ 5.) Even taking this evidence at face value and in combination with the other undisputed facts, drawing all reasonable inferences in Defendant’s favor, no reasonable jury could conclude that this testimony is sufficient to establish that Defendant informed servers that it would make up the difference between the minimum wage and the actual cash wage plus tips that a server earns. That is statutorily-required information, see Shaefer, 829 F.3d at 556-58, and there is nothing in the record to show that Defendant ever conveyed it.
Summary judgment has been described as the “put up or shut up moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of the events.” Springer v. Durflinger, 518 F.3d 479, 484 (7th Cir. 2008) (citation and quotation marks omitted). Because Defendant has the ultimate burden of persuasion on the notice issue, once Plaintiffs pointed out the absence of evidence showing Defendant complied with the Section 203(m) notice requirements, to avoid summary judgment Defendant is required to produce evidence that would allow a finder of fact to find in its favor with respect to the Section 203(m) issue. See Celotex, 477 U.S. at 322-23; Modrowski v. Pigatto, 712 F.3d 1166, 1168-69 (7th Cir. 2013). Defendant has not pointed to any evidence demonstrating that it provided its servers with all of the statutorily required information before taking the tip credit. Accordingly, Plaintiffs are entitled to summary judgment with respect to the tip credit notice aspect of their FLSA claim.