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Salinas v. Starjem Restaurant Corp.

District Court, S.D. New York
123 F. Supp. 3d 442 (2016)
ELI5:

Rule of Law:

An employer is not entitled to take a tip credit against an employee's wages if the employer fails to provide proper notice of the tip credit provision, requires tipped employees to share tips with ineligible non-service employees or managers, or requires tipped employees to spend more than 20% of their time on non-tipped duties.


Facts:

  • Plaintiffs were current and former employees of the restaurant Fresco by Scotto, holding positions such as busser, runner, barback, stocker, and coffee preparer.
  • The restaurant required tipped employees to participate in a tip pool that distributed tips to other employees, including stockers and a manager, Brent Drill.
  • Stockers and coffee preparers (when assisted by a helper) performed their duties primarily in the kitchen and had only sporadic and minimal direct interaction with customers.
  • Bussers and runners were required to perform substantial non-tipped side work, such as cleaning, polishing, and food preparation, which took up a significant portion of their shifts.
  • Prior to June 2011, the restaurant paid employees on a "shift pay" basis and systematically capped weekly pay at 40 hours, even when employees worked more.
  • After implementing a time clock system in June 2011, a flaw in the system caused it to under-record each employee's shift time by approximately 19 minutes.
  • The restaurant required bussers and runners to wear specific shirts and ties of designated colors and styles, which the employees had to purchase directly from the restaurant.
  • From March 2011 until July 2012, the restaurant provided written tip credit notices only in English, despite knowing the plaintiffs' primary language was Spanish.

Procedural Posture:

  • Current and former employees (Plaintiffs) filed an action against Starjem Restaurant Corp., Marion Scotto, and Anthony Scotto (Defendants) in the U.S. District Court for the Southern District of New York, a federal trial court.
  • The complaint alleged violations of the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL), including improper use of the tip credit and failure to pay minimum and overtime wages.
  • The case proceeded to a bench trial before a district judge to determine the defendants' liability.

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Issue:

Does an employer violate the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL) by taking a tip credit against employees' wages when it fails to provide adequate notice, includes tip-ineligible employees like stockers and managers in the tip pool, and requires tipped employees to spend over 20% of their shift on non-tipped duties?


Opinions:

Majority - Judge Analisa Torres

Yes, an employer violates the FLSA and NYLL by taking a tip credit under these circumstances. The court found that the defendants were not entitled to take a tip credit because they failed to satisfy the strict statutory requirements. First, the defendants failed to provide adequate notice of the tip credit provision; notices were non-existent before March 2011 and were provided only in English until July 2012 to Spanish-speaking employees, rendering them ineffective. Second, the restaurant's tip pool was invalid because it included employees who were not eligible to receive tips, such as stockers who lacked sufficient customer interaction and managers who held 'meaningful authority' under the NYLL. Third, bussers and runners spent more than 20% of their time performing non-tipped side work, which disqualifies the employer from taking a tip credit for those days. The court also found defendants liable for failing to pay for all hours worked, deeming the pre-2011 practice of capping hours a willful violation of the FLSA, and for illegally requiring employees to pay for their required uniforms.



Analysis:

This decision reinforces the principle that the requirements for taking a tip credit under the FLSA and NYLL are strictly construed against the employer. It provides a detailed application of the '20% rule,' clarifying that substantial non-tipped side work can invalidate a tip credit for an entire day under New York law. The ruling also underscores the stringency of tip-pooling rules, particularly the NYLL's 'meaningful authority' test for identifying managers who are ineligible to share in tips. This case serves as a strong precedent for wage and hour litigation in the restaurant industry, demonstrating that systemic failures in record-keeping and payment practices can lead to findings of willfulness, thereby extending the statute of limitations for FLSA claims.

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