Benavidez et al v. Greenwich Hotel Limited Partnership et al
Filing
112
ORDER granting in part and denying in part 101 Motion for Summary Judgment. For the reasons explained in the attached Ruling and Order, Defendants' motion for summary judgment is GRANTED IN PART AND DENIED IN PART. Defendants' motion is g ranted with respect to the federal claims, but denied with respect to the Connecticut law claims, which are hereby dismissed without prejudice to refiling in state court. The Clerk of the Court is respectfully directed to enter judgment for Defendants as to Count One only and to close this case.Signed by Judge Victor A. Bolden on 3/15/2019. (Baran, Hugh)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
EDGAR BENAVIDEZ, ALI KAZI,
MARVIN CASTANEDA, IVAN PERALTACABRERA, LUIS VICTORIA, PATRICK
DESROSIERS, ROCIO RIBEIRO,
DOUGLAS MOLINA, WILLIAM
ACAPANA, RODOLPHO OYARIDE,
FERNANDO FAJARDO, JAIME DIAZ,
ALBERTO GONZALES, KLEVER
ORDONEZ, AMIR SOTO, MARCELO
VILLACIS, ANGEL CAMPOVERDE,
JAMES LOPEZ, IVAN P. ABRIL, MARIA
JARILLO, FREDI SOTO, and NILO
HUYHUA, on behalf of themselves and
others similarly situated,
Plaintiffs,
No. 3:16-cv-191 (VAB)
v.
GREENWICH HOTEL LIMITED
PARTNERSHIP d/b/a Hyatt Regency
Greenwich, HYATT EQUITIES, L.L.C., and
HYATT CORPORATION,
Defendants.
RULING AND ORDER ON MOTION FOR SUMMARY JUDGMENT
On March 7, 2018, Greenwich Hotel Limited Partnership, Hyatt Equities, L.L.C., and the
Hyatt Corporation (collectively, “Defendants”) moved for summary judgment against Edgar
Benavidez, Ali Kazi, Marvin Castaneda, Ivan Peralta-Cabrera, Luis Victoria, Patrick Desrosiers,
Rocio Ribeiro, Douglas Molina, William Acapana, Rodolpho Oyaride, Fernando Fajardo, Jaime
Diaz, Alberto Gonzales, Klever Ordonez, Amir Soto, Marcelo Villacis, Angel Campoverde,
James Lopez, Ivan P. Abril, Maria Jarillo, Fredi Soto, and Nilo Huyhua (“Plaintiffs”). See
Motion for Summary Judgment, dated Mar. 7, 2018 (“Mot. Summ. J.”), ECF No. 101;
Defendants’ Memorandum of Law in Support of Mot. Summ. J., dated Mar. 7, 2018 (“Defs.’
Mem.”), ECF No. 101-1; Defendants’ Local Rule 56(a)(1) Statement of Undisputed Material
Facts in Support of Mot. Summ. J., dated Mar. 7, 2018 (“Defs.’ SMF”), ECF No. 101-2.
On April 25, 2018, Plaintiffs opposed Defendants’ motion. See Plaintiffs’ Memorandum
in Opposition to Mot. Summ. J., dated Apr. 25, 2018 (“Pls.’ Opp.”), ECF No. 106-1; Plaintiffs’
Local Rule 56(a)(2) Statement of Facts in Opposition to Mot. Summ. J., dated Apr. 25, 2018
(“Pls.’ SMF”), ECF No. 106.
For the following reasons, Defendants’ motion for summary judgment is GRANTED IN
PART AND DENIED IN PART.
Defendants’ motion is granted with respect to the federal claims, but denied with respect
to the Connecticut law claims, which are dismissed without prejudice to refiling in state court.
I.
FACTUAL AND PROCEDURAL BACKGROUND
A.
Factual Allegations1
Plaintiffs have all been employed as banquet servers at the Hyatt Regency Greenwich
hotel, located at 1800 East Putnam Avenue in Old Greenwich, Connecticut. First Amended
Complaint, dated Sept. 19, 2016 (“Am. Compl.”), ECF No. 37-3, ¶ 1. Edgar Benavidez, Ali
Kazi, Marvin Castaneda, Ivan Peralta-Cabrera, Luis Victoria, Patrick Desrosiers, William
Acapana, Rodolfo Oyaride, Fernando Fajardo, Jaime Diaz, Alberto Gonzales, Amir Soto,
Marcelo Villacis, Angel Campoverde, James Lopez, Maria Jarillo, and Fredi Soto have all been
employed by Defendants as banquet servers for at least ten years. See Am. Compl. ¶¶ 46–51, 54–
58, 60–63, 65–66. Rocio Ribeiro, Douglas Molina, Klever Ordonez, and Nilo Huyhua have all
been employed as banquet servers for at least six years. Id. ¶¶ 52, 53, 59, 67.
1
The following facts are undisputed unless indicated otherwise.
2
Plaintiffs allege that Ivan P. Abril has been employed as a banquet server at the hotel for
approximately eighteen years. Id. ¶ 64. Defendants admit that he was previously employed as a
banquet server, but deny that he has been employed for eighteen years. Answer to First Amended
Complaint, dated Dec. 16, 2016 (“Am. Ans.”), ECF NO. 62, at 14. They do not provide an
alternative estimate of the length of his employment. Id.
Plaintiffs all reside in either Fairfield County, Connecticut or Westchester County, New
York. Am. Compl. ¶¶ 6–27.
Greenwich Hotel Limited Partnership is a limited partnership organized under the laws of
Connecticut, and is the owner of the Hyatt Regency Greenwich hotel. Answer to First Amended
Complaint, dated Dec. 16, 2016 (“Am. Ans.”), ECF NO. 62, at 8. Hyatt Equities, L.L.C. (“Hyatt
Equities”) is a limited liability corporation incorporated in Delaware, and is the general partner
of Greenwich Hotel Limited Partnership. Id. at 9. The Hyatt Corporation (“Hyatt Corp.”) is a
limited liability corporation incorporated in Delaware, and is the agent of Greenwich Hotel
Limited Partnership. Id. at 9.
Plaintiffs allege that, at all relevant times, they were employees of Defendants, and were
jointly employed by Defendants. Am. Compl. ¶¶ 28, 40. Defendants deny that they were joint
employers, and admit only that “Plaintiffs were employees of Hyatt Corporation d/b/a Hyatt
Regency Greenwich.” Am. Ans. at 7.
1. Allegations as to Job Duties
As banquet servers, Plaintiffs have served at special events held at the Hyatt Regency
Greenwich, such as conferences, weddings, and other life celebrations. Their regular duties
include: “the collecting and setting up of equipment needed for the event; setting up tables;
taking orders from customers; carrying trays to tables; serving food to customers; all other
3
general service that customers need and require; cleaning tables after events; breaking down the
room after events; and all other work needed to physically set up events and clean up after
them.” Am. Compl. ¶ 76.
Three other categories of employees also have job functions related to these events:
housemen, bartenders, and banquet captains. Am. Compl. ¶¶ 71–85.
A houseman’s regular duties include “the setting up of banquet rooms; the resetting of
them to their original state after the event has concluded; and during the event, assisting banquet
servers and transporting tables and equipment.” Am. Compl. ¶ 77.
A bartender’s regular duties include “the setting up of the bar for the event; making
drinks during the event, and the breaking down of the bar after the event.” Id. ¶ 78.
The parties dispute the scope of the regular duties of a banquet captain.
Plaintiffs generally allege that banquet captains “have had, and continue to have, the
power to control the banquet servers, bartenders and housemen employed within the banquet
department at the Hotel, including Plaintiffs.” Id. ¶ 71. Plaintiffs have identified four specific
individuals as banquet captains in their Amended Complaint: Dan Ridell, George Mickaiel,
Dennis Carrington, and Francis Tobias. Id. ¶ 70.
Specifically, they allege that the banquet captains are “the supervisors of the banquet
events and supervise the banquet servers, bartenders and housemen2 while these employees
perform their work; i.e., the Captains are the bosses of these employees during the set-up of the
banquets, the actual banquets, and breakdown of them.” Id. ¶ 72. At pre-shift meetings, Plaintiffs
2
The Amended Complaint uses the term “houseman,” a singular noun, as a plural noun in multiple paragraphs. See,
e.g., Am. Compl. ¶ 77 (“The regular duties that houseman are required to perform . . . .”) (emphasis added). The
Court assumes these are typographical errors and has corrected them throughout, rather than indicating the
alterations with brackets.
4
allege that “the Captains advise the banquet servers and housemen of all pertinent information
concerning the upcoming events including the menu.” Id. ¶ 73.
Plaintiffs allege that “at pre-shift meetings, as well as during the events, the Captains
assign particular tables to each banquet server, and assign various duties to banquet servers
including the service of hors d’oeuvres, the cleanup of the reception area, the final work needed
to set up the room, the refilling of water glasses, the supplying of bread and butter to tables, and
the maintenance of candles on the tables.” Id. ¶ 74. Plaintiffs also allege that “at pre-shift
meetings, as well as during the events, the Captains assign the housemen duties with respect to
the setting up and refreshing of the conference and food and beverage rooms.” Id. ¶ 75.
Plaintiffs allege that “[t]he Captains do not perform any banquet server, houseman or
bartender duties; rather, they only perform supervisor duties by which they supervise those types
of employees.” Id. ¶ 79. Plaintiffs also allege that “[p]rior to and after the events, the Captains
occasionally have superficial, de minimus contacts with the customers; however, once the event
begins the Captains do not provide any service to the customers, and have typically secluded
themselves within the banquet office during the term of the banquets while the banquet servers
serve the customers as needed, and the housemen and bartenders perform their regular duties.”
Id. ¶ 80. Plaintiffs further allege that “Captains have had the power to discipline employees,
including banquet servers, bartenders and housemen, and have in fact done so by, among other
things, ‘writing them up’, sending employees home when they are late, ordering employees to
work through lunch, and punishing them by assigning them difficult tasks and to difficult
events.” Id. ¶ 81.
Plaintiffs allege, on information and belief, that “all of the Captains participate in the
evaluation of employees, including Plaintiffs, by collecting the pertinent information that is
5
needed to assess the performance of the employees, and Ridell collects and synthesizes all the
reported information with respect to the evaluation that is eventually presented to the employee.”
Id. ¶ 82. Plaintiffs further allege that “Captains have controlled the schedules of housemen,
bartenders and banquets servers, including Plaintiffs, by among other things, setting their
schedules; changing their schedules including sending employees home early from events;
calling them at any time, even as late as only hours before an event is to occur, to advise then
that they are not needed; and requiring housemen to work as banquet servers,” id. ¶ 83, and that
“[a]t least one of the Captains has had the power to approve or deny vacation requests or requests
for days off for personal reasons,” id. ¶ 84.
Defendants deny nearly all of these allegations as to the banquet captains’ duties. See
Am. Ans. at 16–19. They admit only that “[a]t pre-shift meetings, the Captains advise the
banquet servers and housemen of all pertinent information concerning the upcoming events
including the menu.” Id. at 16 (quoting Am. Compl. ¶ 73).
2. The Agreement with Plaintiffs’ Union
The parties do not dispute that, since September 1, 2014, the terms and conditions of
Plaintiffs’ employment have generally been defined according to the collective bargaining
agreement between Plaintiffs’ union, UNITE HERE Local 217 and the Hyatt Corporation, as an
agent of the Greenwich Hotel Limited Partnership, doing business as the Hyatt Regency
Greenwich. Defs.’ SMF ¶ 6; Pl.’s SMF ¶ 6. That agreement recognizes that UNITE HERE Local
217 is the “sole and exclusive bargaining representative with respect to wages, hours and other
conditions of employment for all full-time and regular part-time employees” employed by the
6
Hyatt Regency Greenwich in the job classifications specified in Appendix A of the agreement.3
See Labor Agrmt. between Hyatt Corp., as an agent of Greenwich Hotel Ltd. P’ship d/b/a Hyatt
Regency Greenwich, and UNITE HERE, Local 217, effective Sept. 1, 2014–Aug. 31, 2020
(“CBA”), annexed as Ex. B to Declaration of Marvin Castaneda, annexed to Pls.’ Opp., ECF No.
106-4, at § 1.1.
Appendix A specifies the contract hourly rates for three “commissioned classifications”:
banquet servers/bartenders, banquet captains, and IRD [in-room dining] servers. CBA at App’x
A. Under the contract, the base hourly pay rates for banquet servers/bartenders increase
biannually as follows:
Banquet Server/
Bartender
Banquet Captain
9/1/14
4.90
9/1/15
5.01
3/1/16
5.12
9/1/16
5.23
3/1/17
5.35
9/1/17
5.47
3/1/18
5.60
9/1/18
5.72
3/1/19
5.85
9/1/19
5.97
3/1/20
6.10
7.40
7.51
7.62
7.73
7.85
7.97
8.10
8.22
8.35
8.47
8.60
CBA at App’x A.
Under the CBA, events requiring banquet services shall normally be subject to a service
charge of twenty-three percent of food, beverage, and room rental costs. CBA § 30.6. Those
service charges are then placed into what the agreement describes as a service charge pool. Id. In
addition, the CBA requires that fifty percent of fees charged for any carving and pasta stations,
corkage fees, and extra staffing fees shall be allocated to the service charge pool. Id. Finally, the
3
Even where a collective bargaining agreement exists, private-sector employees nevertheless may bring actions to
challenge violations of their individual, nonwaivable rights to minimum wage and overtime pay under the FLSA.
See Barrentine v. Ark.-Best Freight Sys., 450 U.S. 728, 739–41 (1981) (“[T]he FLSA was designed to give specific
minimum protections to individual workers and to ensure that each employee covered by the Act would receive ‘[a]
fair day’s pay for a fair day’s work’ and would be protected from “the evil of ‘overwork’ as well as ‘underpay.’ The
statutory enforcement scheme grants individual employees broad access to the courts. Section 16(b) of the Act, 29
U.S.C. § 216(b), which contains the principal enforcement provisions, permits an aggrieved employee to bring his
statutory wage and hour claim ‘in any Federal or State court of competent jurisdiction.’ This Court’s decisions
interpreting the FLSA have frequently emphasized the nonwaivable nature of an individual employee’s right to a
minimum wage and to overtime pay under the Act . . . . [C]ongressionally granted FLSA rights take precedence over
conflicting provisions in a collectively bargained compensation arrangement.”).
7
CBA dictates that all of the tips received by banquet servers, captains, and bartenders are placed
into the service charge pool. Id.
The CBA further provides that the service charge pool is then allocated among the
workers as follows: 69% to banquet servers and banquet captains, 3% to convention services
housemen and convention services supervisors, and 28% to the Hyatt Regency Greenwich as an
administrative fee. Id.
According to the CBA, banquet captains’ duties “are to facilitate the event and work with
the kitchen and stewarding to ensure the function is prepared properly.” Id. In addition, absent
unusual circumstances, banquet captains are not to be scheduled for work more than two hours
before an event’s starting time. Id.
3. Plaintiffs’ Allegations as to Defendants’ Pay Practices
Plaintiffs allege that the above-described service charge pool arrangement, as well as the
pool used prior to the CBA’s effective date, results in two allegedly illegal pay practices.
First, Plaintiffs argue that Defendants “unlawfully required Plaintiffs to pool their tips
with banquet captains who have, and continue to, manage and supervise Plaintiffs.” Am. Compl.
¶ 70. Second, they allege that Defendants used that same pool to take a tip credit against the
hourly minimum wage rate. Am. Compl. ¶ 87.
As a result, they contend that Defendants failed to pay Plaintiffs a minimum wage for all
hours worked, in violation of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., and
specifically §§ 203(m), 206, and 215(a)(2). Plaintiffs therefore seek “their unpaid minimum
wages including the amount of the tip credits that were taken by Defendants, damages for
unreasonably delayed payment of wages, liquidated damages, reasonable attorneys’ fees[,] and
costs and disbursements of the action[,] pursuant to 29 U.S.C. § 216(b).” Id. ¶ 93.
8
Plaintiffs further claim that Defendants unlawfully diverted “portions of Plaintiffs’
wages, the tips/gratuities they were entitled to,” in violation of Connecticut General Statute § 3171e, and seek to recover “the tips/gratuities that [Defendants] diverted from Plaintiffs, damages
for unreasonably delayed payment of those tips/gratuities, liquidated damages, reasonable
attorneys’ fees[,] and costs and disbursements of the action” under Connecticut General Statute
§ 31-72. Id. ¶¶ 95–96 (citing CONN. GEN. STAT. §§ 31-71e, 31-72).
Defendants dispute Plaintiffs’ characterizations. They argue, rather, that the pay structure
is not a “tip pool” at all, because the charges at issue are not tips, but mandatory service charges.
Defs.’ Mem. at 3 (“Under the FLSA, there is a clear distinction between tips, on the one hand,
and commissions or service charges, on the other. A tip is voluntarily paid by a guest, while a
service charge is imposed upon the guest by the hotel or restaurant.”); see also Declaration of
Tony Centrone, dated Feb. 27, 2018 (“Centrone Decl.”), annexed as Ex. 1 to Defs.’ SMF, ¶¶ 2–3
(“Hyatt imposes a service charge on its customers for banquet events at the Hyatt Regency
Greenwich. The service charge is normally 23% of the food and beverage and room rental
charges, though there are some variations. For example, some customers have negotiated a
different service charge percentage, such as 21% or 22% . . . . The service charge is not optional
for customers; rather, the service charge is a mandatory term of the banquet contract, agreed to in
advance by Hyatt and its customers.”) (citing Sample Contract, dated Feb. 17, 2016, annexed as
Ex. A, ECF No. 101-4).
Defendants point to applicable federal and state guidance indicating that service charges
may be used to satisfy minimum wage obligations. Defs.’ Mem. at 4 (“The service charge is not
optional for customers; rather, it is mandatory. The service charge is then included in the hotel’s
gross receipts. The distribution from service charges therefore are not tips, so they may be
9
counted toward minimum wage.”) (citing 29 C.F.R. § 531.55(b) and CONN. DEP’T OF LABOR,
Gratuities in the Restaurant Industry, https://www.ctdol.state.ct.us/wgwkstnd/wagehour/restaurant.htm).
Defendants therefore argue that they have paid Plaintiffs “through a combination of
hourly wages (currently $5.35 per hour) and distributions from the mandatory service charges
from banquet events at which they are employed as banquet servers.” Defs.’ SMF ¶ 4. This
results, they contend, in a “regular rate of pay for each Plaintiff in every workweek in excess of
$7.25 per hour through December 9, 2017.” Id. ¶ 5. They therefore contend that they are not only
in full compliance with their obligations to pay minimum wage, but almost always exceed it. Id.
¶ 4. Thus, Defendants argue that “[b]ecause the undisputed evidence shows that Plaintiffs were
paid at least minimum wage and that the banquet service charges they seek are not wages that are
due to them,” they are entitled to summary judgment on Plaintiffs’ FLSA claims. Defs.’ Mem. at
1–2. They further contend that Plaintiffs have no claim under Connecticut law “because they
cannot show that Hyatt failed to pay them the wages that it agreed to pay them under the
applicable agreement or point to any source giving rise to their entitlement to the portion of the
service charges that were retained by Hyatt or paid to banquet captains.” Id. at 2.
B.
Procedural History
On February 5, 2016, Edgar Benavidez, Ali Kazi, Marvin Castaneda, Ivan PeraltaCabrera, Luis Victoria, Patrick Desrosiers, Rocio Ribeiro, and Douglas Molina (collectively, the
“originally-named Plaintiffs”) sued Defendants for failure to pay a minimum wage in violation
of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., and for diversion of portions
of their tips and gratuities in violation of Connecticut Wage Payment Law § 31-71e. See
Complaint, dated Feb. 5, 2016 (“Compl.”), ECF No. 1, ¶¶ 58–68.
10
On March 14, 2016, Defendants answered, asserting three affirmative defenses: (1) that
they acted in good faith and had reasonable grounds for believing that they were in good faith
compliance with the FLSA and Connecticut Wage Payment Law; (2) that Plaintiffs’ claims and
those of potential collective members were barred by applicable statutes; and (3) that Plaintiffs’
claims and those of potential collective members were barred, in whole or in part, by statutory
exclusions, exceptions, setoffs, or credits under the FLSA. Answer, dated Mar. 14, 2016, ECF
No. 21, at 16. Defendants also reserved the right to assert alternative affirmative defenses. Id.
On May 5, 2016, the Court entered a scheduling order providing that discovery be
completed by December 2, 2016. Scheduling Order, dated May 5, 2016, ECF No. 33.
On September 19, 2016, the originally-named Plaintiffs moved to amend the Complaint
to join fourteen additional party Plaintiffs William Acapana, Rodolfo Oyaride, Fernando Fajardo,
Jaime Diaz, Alberto Gonzales, Klever Ordonez, Amir Soto, Marcelo Villacis, Angel
Campoverde, James Lopez, Ivan P. Abril, Maria Jarillo, Fredi Soto, and Nilo Huyhua. See
Motion to Amend, dated Sept. 19, 2016, ECF No. 37; Notices, dated Sept. 19, 2016, ECF Nos.
38–51; Am. Compl. at 1.
On November 23, 2016, the Court amended the discovery schedule, extending discovery
deadlines by several months. Amended Scheduling Order, dated Nov. 23, 2016, ECF No. 57.
On December 2, 2016, the Court granted the unopposed motion to amend. Order, dated
Dec. 2, 2016, ECF No. 61.
On December 16, 2016, Defendants filed an amended answer, adding two additional
affirmative defenses: (1) that Plaintiffs and potential class and collective members were exempt
from the overtime requirements of the FLSA and Connecticut law as employees of a retail or
11
service establishment who are paid on a commission basis; and (2) that Plaintiffs failed to state a
claim for relief against Defendants. Am. Ans.
In January 2017, Plaintiffs moved to compel Defendants to: (1) produce documents
revealing all revenue realized by the Hyatt Regency Greenwich for every banquet/event held in
the first quarter of 2014, 2015, and 2016; and (2) produce all documents showing how
Defendants calculated the service charge and the portion distributed to service personnel at each
event. Motion to Compel, dated Feb. 3, 2017, ECF No. 70.
On March 20, 2017, the Court granted in part and denied in part Plaintiffs’ motion.
Ruling on Motion to Compel, dated Mar. 20, 2017, ECF No. 77. The Court ordered Defendants
to “produce documents demonstrating the calculation of the weekly service charge amount for
the three weeks for which they have provided Banquet Service Charge distribution charts within
thirty days of the date of this Order.” Id. at 8. To further ensure that the documents produced
were representative, Defendants were also ordered to “produce documents relating to the same
week in 2013, 2014, and 2015.” Id.
On March 28, 2017, Plaintiffs moved to clarify the Court’s March 20, 2017 discovery
ruling. Motion for Clarification, filed March 28, 2017, ECF No. 78.
On April 14, 2017, the Court granted the motion, ordering that Defendants “must produce
documents relating to the same week” in 2013, 2014, and 2015. Ruling on Pls.’ Motion to
Clarify the Court’s Discovery Order, dated Apr. 14, 2017, ECF No. 79, at 1. The Court further
clarified that the documents required to be produced were “all documents that (a) reveal the
revenue realized by the Hotel for each and every banquet or event held within the banquet
department during these weeks, and, (b) show how the 23% service charge, and 16.56% amount
distributed to service personnel, was calculated as against the revenue realized during these
12
weeks, including but not limited to all customer contracts, final customer invoices, EO Reports,
Banquet Service Charge Distribution charts, and ledgers, spreadsheets, and other accounting
records reflecting or summarizing such revenue, service charges, and tip/gratuity distribution
figures.” Id. at 2. Specifically, the Court held that “Defendants must produce weekly Banquet
Service Charge Distribution charts for the three representative weeks along with the documents
that the Hotel used to determine the service charge,” and that these charts “must contain the
service charge amount for each and every day for these weeks.” Id.
On June 29, 2017, the Court again extended the discovery deadline to August 31, 2017.
Scheduling Order, dated June 29, 2017, ECF No. 87.
On September 22, 2017, Plaintiffs moved for a discovery conference, arguing that
Defendants had not produced a single ledger or accounting document itemizing the amount of
revenue realized at each and every banquet held during the subject weeks. Motion for Discovery
Conference, dated Sept. 22, 2017, ECF No. 88.
On October 10, 2017, the Court ordered Defendants to produce “Event Actualization
System” records for the weeks responsive to the Court’s April Order by November 10, 2017.
Order, dated Oct. 10, 2017, ECF No. 95. The Court also granted Plaintiffs’ motion to extend time
to respond to Defendants’ requests for admission and outstanding discovery requests by an
additional thirty days. Id.
On March 7, 2018, Defendants moved for summary judgment against Plaintiffs. Mot.
Summ. J.
On April 25, 2018, Plaintiffs opposed the motion. See Pls.’ Opp.; Pls.’ SMF.
On May 17, 2018, Defendants replied to Plaintiffs’ opposition. Reply, dated May 17,
2018, ECF No. 109.
13
On December 12, 2018, the Court heard oral argument on the motion for summary
judgment and reserved decision. Minute Entry, dated Dec. 12, 2018, ECF No. 111.
II.
STANDARD OF REVIEW
A court will grant a motion for summary judgment if the record shows no genuine issue
as to any material fact, and the movant is entitled to judgment as a matter of law. FED. R. CIV. P.
56(a). The moving party bears the initial burden of establishing the absence of a genuine dispute
of material fact. Celotex Corp. v. Cartrett, 477 U.S. 317, 323 (1986). The non-moving party may
defeat the motion by producing sufficient specific facts to establish that there is a genuine issue
of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). “[T]he mere
existence of some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment; the requirement is that there be no genuine
issue of material fact.” Id. at 247–48.
“[T]he substantive law will identify which facts are material.” Id. at 248. “Only disputes
over facts that might affect the outcome of the suit under the governing law will properly
preclude the entry of summary judgment.” Id.; see Graham v. Henderson, 89 F.3d 75, 79 (2d Cir.
1996) (“[M]ateriality runs to whether the dispute matters, i.e., whether it concerns facts that can
affect the outcome under the applicable substantive law.”) (citing Anderson, 477 U.S. at 248).
“The inquiry performed is the threshold inquiry of determining whether there is the need
for a trial—whether, in other words, there are any genuine factual issues that properly can be
resolved only by a finder of fact because they may reasonably be resolved in favor of either
party.” Id. at 250. When a motion for summary judgment is supported by documentary evidence
and sworn affidavits and “demonstrates the absence of a genuine issue of material fact,” the
nonmoving party must do more than vaguely assert the existence of some unspecified disputed
14
material facts or “rely on conclusory allegations or unsubstantiated speculation.” Robinson v.
Concentra Health Servs., Inc., 781 F.3d 42, 44 (2d Cir. 2015) (citation omitted). The party
opposing the motion for summary judgment “must come forward with specific evidence
demonstrating the existence of a genuine dispute of material fact.” Id. “If the evidence is merely
colorable, or is not significantly probative, summary judgment may be granted.” Anderson, 477
U.S. at 250 (citing Dombrowski v. Eastland, 387 U.S. 82, 87 (1967); First Nat’l Bank of Ariz. v.
Cities Serv. Co., 391 U.S. 253, 290 (1968)).
A court must view any inferences drawn from the facts in the light most favorable to the
party opposing the summary judgment motion. Dufort v. City of N.Y., 874 F.3d 338, 343 (2d Cir.
2017). A court will not draw an inference of a genuine dispute of material fact from conclusory
allegations or denials, Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011), and will grant
summary judgment only “if, under the governing law, there can be but one reasonable conclusion
as to the verdict,” Anderson, 477 U.S. at 250.
III.
DISCUSSION
A. Plaintiffs’ FLSA Claims
Defendants argue that Plaintiffs’ FLSA claims fail as a matter of law because when base
hourly wages and distributions from the service charge pool are combined, all Plaintiffs earned
an effective wage above the federal hourly minimum wage of $7.25 for all hours worked. See
Defs.’ Mem. at 3 (“Plaintiffs were paid an hourly wage per the collective bargaining agreement
of at least $5.35 per hour, and each of them in each of the relevant weeks received service
charges that, when combined with their hourly-based pay, exceeded the minimum wage of $7.25
per hour.”).
15
Plaintiffs contend that summary judgment must be denied because there are material
issues of fact in dispute: specifically, whether the service charge pool was, in fact, a tip pool and,
if so, whether its inclusion of the banquet captains was improper under the FLSA’s tip credit and
tip pooling provisions.
Because Plaintiffs have only pleaded a claim for unpaid minimum wages, and because
Plaintiffs have failed to show any genuine dispute as to whether they earned more than the
federal minimum wage for all hours worked through base hourly wages and service charges
alone, the Court agrees with Defendants.
1. Tips vs. Service Charges Under the FLSA
The FLSA does not explicitly define “tips” or “service charges.” Department of Labor
regulations have, accordingly, filled in this statutory gap.
A tip is defined as “a sum presented by a customer as a gift or gratuity in recognition of
some service performed for him.” 29 C.F.R. § 531.52.4 “It is to be distinguished from payment of
a charge, if any, made for the service.” Id. “Whether a tip is to be given, and its amount, are
matters determined solely by the customer, who has the right to determine who shall be the
recipient of the gratuity.”5 Id.
4
In the March 2018 tip credit amendments, Congress abrogated this regulation in part. See Pub. L. 115-141, 132
Stat. 348, div. S, tit. XII, § 1201(c) (2018) (“Effect on Regulations. The portions of the final rule promulgated by the
Department of Labor entitled ‘Updating Regulations Issued Under the Fair Labor Standards Act’ (76 Fed. Reg.
18832 (April 5, 2011)) that revised sections 531.52, 531.54, and 531.59 of title 29, Code of Federal Regulations (76
Fed. Reg. 18854–18856) and that are not addressed by section 3(m) of the Fair Labor Standards Act of 1938 (29
U.S.C. 203(m)) (as such section was in effect on April 5, 2011), shall have no further force or effect until any future
action taken by the Administrator of the Wage and Hour Division of the Department of Labor.”). That abrogation
did not, however, affect the definition of “tip” set forth in the first sentence of this regulation, which has been
unchanged since first adopted. See 29 C.F.R. § 531.52 (effective to May 4, 2011); see also 76 Fed. Reg. 18832
(April 5, 2011) (revising § 531.52 from the “second sentence to the end of the paragraph”).
5
While this sentence was slightly revised by the 2011 final rule, this change in language does not appear to have had
any substantive effect. Compare 29 C.F.R. § 531.52 (effective to May 4, 2011) (“Whether a tip is to be given, and
its amount, are matters determined solely by the customer, and generally he has the right to determine who shall be
the recipient of his gratuity.”), with 29 29 C.F.R. § 531.52 (effective May 5, 2011) (Whether a tip is to be given, and
16
A “compulsory charge for service, such as 15 percent of the amount of the bill, imposed
on a customer by an employer’s establishment, is not a tip and, even if distributed by the
employer to its employees, cannot be counted as a tip received in applying the provisions
of section 3(m) and 3(t).” 29 C.F.R. § 531.55(a). “Similarly, where negotiations between a hotel
and a customer for banquet facilities include amounts for distribution to employees of the hotel,
the amounts so distributed are not counted as tips received.” Id. “[S]ervice charges and other
similar sums which become part of the employer’s gross receipts are not tips for purposes of the
Act.” 29 C.F.R. § 531.55(b); see Labriola v. Clinton Entm’t Mgmt., LLC, No. 15 C 4123, 2017
WL 1150989, at *11 (N.D. Ill. Mar. 28, 2017) (“Courts generally agree that service charges must
be included in an employer’s gross receipts.”) (collecting cases); see also Barenboim v.
Starbucks Corp., 698 F.3d 104, 112 (2d Cir. 2012) (explaining that while service charges are
considered gratuity under New York law and may not be retained by employers, “Tips under the
FLSA, by contrast, do not include such obligatory service charges.”) (citing 29 C.F.R. §
531.55(a)). “Where such sums are distributed by the employer to its employees, however, they
may be used in their entirety to satisfy the monetary requirements of the Act.” 29 C.F.R. §
531.55(b); see Lusk v. Serve U Brands, Inc., 2018 WL 826857, at *2 (W.D.N.Y. Feb. 12, 2018)
(“Service charges that are distributed by an employer to its employees “may be used in their
entirety to satisfy the monetary requirements of the [FLSA].”) (quoting 29 C.F.R. § 531.55(b));
Hart v. Rick’s Cabaret Int’l, Inc., 967 F. Supp. 2d 901, 929 (S.D.N.Y. 2013) (“[T]hese
regulations require that service charges be distributed by the employer in order to count toward
wages.”) (citing 29 C.F.R. § 531.55(b)) (emphasis in original).
its amount, are matters determined solely by the customer, who has the right to determine who shall be the recipient
of the gratuity.”).
17
Thus, where a service charge is mandatory, and is included in the employer’s gross
receipts, it is properly deemed a service charge, and not a tip, for purposes of the FLSA. Where,
however, a customer retains discretion over its payment, it is a tip. See Soliman v. SOBE Miami,
LLC, 312 F. Supp. 3d 1344, 1351 (S.D. Fla. May 14, 2018) (“If payment of a service charge is
within the customer’s discretion . . . it is a ‘gratuity’ or ‘tip.’”) (citations omitted). Finally, where
a service charge has been used and the proceeds of the service charge are distributed to
employees, the proceeds distributed to employees are counted as wages towards satisfying the
employer’s minimum wage obligations. See, e.g., Labriola, 2017 WL 1150989, at *11 (“Service
charges that are distributed from employers to employees are counted against an employer’s
minimum wage obligations, while tips are not; employers must still pay tipped employee a
wage.”) (citing 29 C.F.R. §§ 531.50, 531.55); McFeeley v. Jackson St. Entm’t, LLC, 825 F.3d
235, 246 (4th Cir. 2016) (where service charges included in establishment’s gross receipts and
distributed by employer to employees, they may be counted “as an offset to an employer’s
minimum wage liability.”).
2. Tip Credits and Tip Pools under the FLSA6
Under the FLSA, an employer of a “tipped employee”—i.e., an employee engaged in an
occupation in which he or she customarily and regularly receives more than $30 a month in tips,
29 U.S.C. § 203(t)—may utilize a unique payment structure to compensate employees.7
6
As detailed below, Congress amended the FLSA’s tip credit provisions effective March 23, 2018. The bulk of the
period covered by Plaintiffs’ Amended Complaint was subject to the version of the statute in effect from December
16, 2014 to March 22, 2018. Where the substantive provisions referred to remain the same, the Court generally cites
the statute as currently enacted unless the amendment has resulted in a renumbering or restyling of the provision, in
which case the Court will cite both versions. Where the provisions have substantively changed, the Court will
specify which version of the statute is being cited.
7
See Benjamin Meyer, Mrs. Orville Isn’t Trying to Steal Tips: An FLSA Story, 84 U. CHI. L. REV. 1971, 1973–77
(2017)(summarizing how this structure came to be codified in the FLSA).
18
Employers may pay a tipped employee using a combination of: (1) a base hourly wage (also
known as a “cash wage” or a “direct wage”), which may be as low as $2.13;8 and (2) an
additional amount on account of the tips received by the employee (commonly known as a “tip
credit”9) that is equal to the difference between the base hourly wage and the statutory minimum
wage. 29 U.S.C. § 203(m)(2) (effective Mar. 23, 2018); 29 U.S.C. § 203(m) (effective Dec. 16,
2014 to Mar. 22, 2018). The combination of the base hourly wage and the amount earned on
account of tips must equal at least the statutory federal minimum wage, which has remained
$7.25 per hour since July 25, 2009. 29 U.S.C. 206(a)(1)(C); see also Trejo v. Ryman Hospitality
Props., 795 F.3d 442, 447 (4th Cir. 2015) (“An employer can thus pay tipped employees (1) a
cash wage of $2.13 plus (2) an additional amount in tips that brings the total wage to the federal
minimum wage.”) (citation omitted).
“[I]f the employee does not in fact receive sufficient tips to earn at least $7.25 per hour,
the employer must make up the difference.” Azeez v. Ramaiah, No. 14-cv-5623 (PAE), 2015 WL
1637871, at *4 n.5 (S.D.N.Y. Apr. 9, 2015) (citing 29 U.S.C. § 203(m)(2) (effective Dec. 16,
2014 to Mar. 22, 2018)); see also Marlow v. New Food Guy, Inc., 861 F.3d 1157, 1160 (10th Cir.
2017) (“This provision gives employers of ‘tipped employees’—like hotels and restaurants—the
option of paying a reduced hourly wage of $2.13 so long as their workers receive enough tips to
8
Specifically, the statute provides that the base hourly wage “shall be not less than the cash wage required to be paid
such an employee on August 20, 1996.” 29 U.S.C. 203(m)(2)(A)(i) (effective Mar. 23, 2018); 29 U.S.C. 203(m)(1)
(effective Dec. 16, 2014 to Mar. 22, 2018). That amount in 1996, and today, remains $2.13. See Chung v. New Silver
Palace Rest., 246 F. Supp. 2d 220, 228 (S.D.N.Y. 2002) (“As of August 20, 1996, the minimum wage was $4.25 an
hour, and the tip credit could be as much as one-half, or $2.13 an hour. When, effective on and after September 1,
1997, the minimum wage rose to $5.15 an hour, the minimum cash wage for tipped employees of $2.13 was
retained, and the maximum tip credit rose to $3.02 an hour.”) (citations omitted).
9
Oreg. Rest. & Lodging Ass’n v. Perez, 816 F.3d 1080, 1082 (9th Cir. 2016) (“This practice is known as taking a
‘tip credit.’”); see also Malivuk v. Ameripark, LLC, 694 F. App’x 705, 706–07 (11th Cir. 2017) (“An employer who
utilizes an employee’s hourly tips to reach the minimum hourly wage due the employee is said to take a ‘tip
credit.’”)
19
bring them to the $7.25 minimum. If there are not enough tips, the employer must pay the
difference; if there are more than enough, the excess tips go to employees.”).
To take the tip credit toward its minimum wage obligation, the employer must (1)
provide a tipped employee with notice of the provisions of 29 U.S.C. § 203(m), and (2) allow
that employee to retain all tips they receive. See 29 U.S.C. § 203(m)(2)(A) (effective Dec. 14,
2014 to Mar. 22, 2018) (“The preceding 2 sentences shall not apply with respect to any tipped
employee unless such employee has been informed by the employer of the provisions of this
subsection, and all tips received by such employee have been retained by the employee . . . .”);
29 U.S.C. § 203(m) (effective Dec. 14, 2014 to Mar. 22, 2018) (same).
These two requirements are strictly construed; that is, an employer may not take a tip
credit toward its minimum wage obligation unless it complies strictly with both statutory
requirements. 29 U.S.C. § 203(m)(2)(A) (effective Mar. 23, 2018); 29 U.S.C. § 203(m) (effective
Dec. 14, 2014 to Mar. 22, 2018); see Chung v. New Silver Palace Rest., 246 F. Supp. 2d 220,
230 (S.D.N.Y. 2002) (“Congress, in crafting the tip credit provision of section 3(m) of the FLSA
did not create a middle ground allowing an employer both to take the tip credit and share
employees’ tips. Congress gave employers of tipped employees a simple choice: either allow
employees to keep all the tips that they receive, or forgo the tip credit and pay them the full
hourly minimum wage.”).
The one caveat to the second requirement (allowing employees to retain all tips they
receive) occurs when employers elect to use “tip pools.” A tip pool allows an employer to divide
tips for a given shift among all tipped employees, thereby ensuring that all tipped employees earn
enough in tip credit to satisfy the minimum wage and mitigating any potential for unfairness that
20
may result from, for example, one tipped employee’s bad luck in serving a lower-tipping
customer.10
The FLSA makes clear that when tip pools that are limited to employees who
“customarily and regularly receive tips” are utilized, the employer is not required to allow an
individual employee to keep all tips he or she individually received. 29 U.S.C. § 203(m)(2)(A)
(effective Mar. 23, 2018) (“The preceding 2 sentences shall not apply with respect to any tipped
employee unless such employee has been informed by the employer of the provisions of this
subsection, and all tips received by such employee have been retained by the employee, except
that this subsection shall not be construed to prohibit the pooling of tips among employees who
customarily and regularly receive tips.”); 29 U.S.C. § 203(m) (effective Dec. 16, 2014 to Mar.
22, 2018) (same). In other words, the employer may require a tipped employee to share his or her
individual tips—but only with other tipped employees in a valid tip pool.
Thus, if an employer’s tip pool includes non-tipped employees, the employer loses its
entitlement to take a tip credit. See Shahriar v. Smith & Wollensky Rest. Grp., Inc., 659 F.3d 234,
240 (2d Cir. 2011) (“[A]n employer loses its entitlement to the tip credit where it requires tipped
employees to share tips with (1) employees who do not provide direct customer service or (2)
managers.”) (citations omitted).
3. Minimum Wage
Until March 23, 2018, there was “no federal cause of action for unlawful retention of
tips.” Azeez, 2015 WL 1637871, at *6. The FLSA only provided “a ‘right of action’ against
‘[a]ny employer who violates the provisions of section 206,’ which establishes minimum wage
obligations, ‘or section 207,’ which governs maximum hours and overtime compensation.” Id.
10
See, e.g., Meyer, supra note 7, at 1972 (explaining that servers often share tips with one another “to create a team
culture in the restaurant, or to minimize the risks associated with the variance in party sizes and patron generosity.”).
21
(quoting 29 U.S.C. § 216(b)); see Malivuk, 694 F. App’x at 708 (“Plaintiff’s tip-withholding
claim implicates neither § 206 (minimum wage) nor § 207 (overtime), and thus Plaintiff cannot
assert a private cause of action under § 216(b).”) (citations omitted); Widjaja v. Kang Yue USA
Corp., No. 09-cv-2089 (RRM)(CLP), 2011 WL 4460642, at *3 n.6 (E.D.N.Y. 2011) (“Plaintiffs
concede, however, that Ng does not have a federal claim because he was paid at least minimum
wage and federal law only proscribes the retention of tips if the employee is paid less than
minimum wage.”); Cumbie v. Woody Woo, Inc., 596 F.3d 577, 582–83 (9th Cir. 2010) (“Cumbie
received a wage that was far greater than the federally prescribed minimum, plus a substantial
portion of her tips . . . . nothing in the text of the FLSA purports to restrict employee tip-pooling
arrangements when no tip credit is taken . . . .”); see also Nakahata v. N.Y.–Presbyterian
Healthcare Sys., 723 F.3d 192, 201 (2d Cir. 2013) (“[T] he FLSA is unavailing where wages do
not fall below the statutory minimum and hours do not rise above the overtime threshold.”)
(citation omitted).
Instead, these tip credit and tip pooling provisions simply established how employers of
tipped employees could meet their minimum wage obligations. If an employer’s tip withholding
practices resulted in minimum wage or overtime violations, the employee could sue to enforce
the tip credit and tip pooling provisions to ensure they received the statutorily-required minimum
wage and overtime. See Trejo, 795 F.3d at 448 (“Given that context, § 203(m) does not state
freestanding requirements pertaining to all tipped employees, but rather creates rights and
obligations for employers attempting to use tips as a credit against the minimum wage . . . . We
thus find that the statutory requirements that an employer inform an employee of § 203(m) and
permit the employee to retain all his tips unless the employee is in a tip pool with other regularly
tipped employees does not apply to employees, like the Plaintiffs, who are seeking only the
22
recovery of the tips unrelated to a minimum wage or overtime claim.”) (citations and internal
quotation marks omitted).
If, however, that employer paid hourly wages that, before tips, were higher than the
federal minimum wage, there was no federal law cause of action under the FLSA. See Trinidad
v. Pret a Manger (USA) Ltd., 962 F. Supp. 2d 545, 561–62 (S.D.N.Y. 2013) (“By its terms,
Section 203(m) imposes conditions on tip-pooling arrangements as a means of vindicating the
FLSA’s minimum wage requirement. It is not plausibly read to impose a nationwide freestanding
code of conduct regarding the handling of tip money where the statute’s minimum-wage
command is otherwise met.”).
4. 2018 Tip Credit Amendments
As part of an omnibus spending bill, Congress adopted several amendments to the FLSA
tip credit provisions. See Pub. L. 115-141, 132 Stat. 348, div. S, tit. XII, § 1201 (2018). The
FLSA now provides that “[a]n employer may not keep tips received by its employees for any
purposes, including allowing managers or supervisors to keep any portion of employees’ tips,
regardless of whether or not the employer takes a tip credit.” 29 U.S.C. § 203(m)(2)(B) (effective
Mar. 23, 2018).
Congress also has created what appears to be a new, separate cause of action for the
recovery of unpaid, or improperly withheld, tips—regardless of whether the employer takes a tip
credit. See 29 U.S.C. § 216(b) (effective Mar. 23, 2018) (“Any employer who violates section
203(m)(2)(B) of this title shall be liable to the employee or employees affected in the amount of
the sum of any tip credit taken by the employer and all such tips unlawfully kept by the
employer, and in an additional equal amount as liquidated damages. An action to recover the
liability prescribed in the preceding sentences may be maintained against any employer
23
(including a public agency) in any Federal or State court of competent jurisdiction by any one or
more employees for and in behalf of himself or themselves and other employees similarly
situated.”).
5. Plaintiffs’ Claims
At oral argument, Plaintiffs insisted that their claims were viable under the prior version
of the statute. The Court therefore confines its analysis to Plaintiffs’ claims for minimum wages
under the statute as enacted until March 22, 2018.
Plaintiffs argue that any base hourly wage payment made to tipped workers that is, on its
face, below minimum wage is a cash wage being paid in reliance on the tip credit. See Pls.’ SMF
at 5 ¶ 1 (“Plaintiffs’ hourly rate of pay is less than the minimum wage, and the remainder of the
required minimum wage is achieved through an employer tip credit.”). In other words: if it looks
like a tip credit, it must be a tip credit.
Plaintiffs have admitted, however, that they have been subject to the terms of the CBA
since September 1, 2014. Defs.’ SMF ¶ 6; Pls.’ SMF ¶ 6. The CBA establishes a service charge
pool and sets forth a general procedure by which the hotel agrees to contract for the payment of
mandatory service charges by banquet customers. See supra § I.A.2. It also states that any
voluntary tips given by banquet customers, above and beyond its service charges, will be
reserved in their entirety for distribution to banquet servers and captains. Id.
24
Plaintiffs also have admitted that the “service charge is normally 23% of the food,
beverage, and room rental charges.”11 Pls.’ SMF ¶ 2. Nor do they dispute that these mandatory
service charges are included in the hotel’s gross receipts. Defs.’ SMF ¶ 2; Pls.’ SMF ¶ 2.12
As a result, there is no factual dispute as to whether the “pool” contains service charges.
As discussed above, service charges, may be used in their entirety to ensure compliance with the
FLSA’s minimum wage obligations. See Wai Man Tom v. Hospitality Ventures LLC, No. 5:17cv-98-FL, 2018 WL 6620886, at *8 (E.D.N.C. Dec. 18, 2018) (service charges “may be used in
their entirety to satisfy the monetary requirements of the FLSA); Lusk, 2018 WL 826857, at *2
(“Service charges that are distributed by an employer to its employees “may be used in their
entirety to satisfy the monetary requirements of the [FLSA].”) (quoting 29 C.F.R. § 531.55(b));
McFeeley, 825 F.3d at 246 (where service charges included in establishment’s gross receipts and
distributed by employer to employees, they may be counted “as an offset to an employer’s
minimum wage liability.”). If, as Defendants argue, those service charges, combined with the
base hourly wages, bring Plaintiffs’ effective hourly wages above the federal minimum wage,
11
Three sample catering contracts in the record demonstrate how this language, incorporated into the hotel’s
banquet contracts, is a mandatory contract term. Compare Catering Contract, dated Mar. 21, 2014, annexed as C to
Centrone Decl., ECF No. 101-6 (“A 23% Service Charge and applicable taxes shall be added to all food and
beverage.”), with Catering Contract, dated Mar. 23, 2015, annexed as Ex. B to Centrone Decl., ECF No. 101-5 (“A
23% Service Charge and applicable taxes shall be added to all food, beverage and meeting room rental.”), and
Catering Contract, dated Feb. 17, 2016, annexed as Ex. A to Centrone Decl., ECF No. 101-4 (“A Twenty-three
percent (23%) service charge and applicable taxes shall be added to all food and beverage and room rental.”).
12
While Plaintiffs state they “object to the remainder” of ¶ 2 of Defendants’ Statement of Material Facts, they only
describe their objection as being to whether different contracts may provide for different service charge amounts
than the standard 23%. Pls.’ SMF ¶ 2. They have not objected to the claim that the service charges are included in
the hotel’s gross receipts, nor have they provided any evidence creating a genuine issue of material fact to dispute
this point. Plaintiffs try to qualify their responses on the basis of a failure of Defendants to provide necessary
information in discovery, but, as discussed below, this argument fails.
25
then Defendants have met their federal minimum wage obligations and Plaintiffs do not have a
viable minimum wage claim under the FLSA.13
At this stage, Plaintiffs must show that there is a genuine dispute of material fact, but
have failed to show that their hourly wages and wages earned through mandatory service charges
do not satisfy Defendants’ minimum wage obligations. Indeed, Plaintiffs have been unable to
identify a single employee or pay period in which Defendants were unable to meet their
minimum wage obligations through base hourly wages and service charges.14
At oral argument, Plaintiffs claimed, that they were unable to do so because Defendants
failed to produce critical information that should have been provided in discovery. To the extent
that Plaintiffs are suggesting that, under Rule 56(d) of the Federal Rules of Civil Procedure, this
motion should not be decided now, the Court disagrees. See FED. R. CIV. P. 56(d) (“If a
nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts
essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2)
allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other
appropriate order.”).
13
This is unlike the situation in a very similar case involving Hyatt banquet servers, where the plaintiff received a
base hourly rate of $11.24 to $11.57 throughout her employment, plus service charges. See Livi v. Hyatt Hotels
Corp., No. 15-cv-5371, 2017 WL 5128173, at *3 (E.D.N.Y. Nov. 6, 2017) (“Hyatt paid Livi for her work as a
Banquet Server through a combination of hourly wages and distributions from the service charges that Hyatt
collected on Banquet Events. From September 29, 2012, to the date of her separation, Livi’s hourly rate ranged from
$11.24 to $11.57 per hour. Throughout the course of Livi’s employment, service charge distributions constituted
more than 50% of Livi’s total compensation.”) (citations omitted), aff’d, 751 F. App’x 208 (2018).
Had Defendants paid a base hourly wage here that was at least $7.25, this would be a very straightforward case.
See, e.g., Trejo, 795 F.3d at 446 (“Here, the Plaintiffs concede that they are paid a full minimum wage absent tips . .
Here, the Plaintiffs concede that they are paid a full minimum wage absent tips.); Woody Woo, 596 F.3d at 582–83
(“Cumbie received a wage that was far greater than the federally prescribed minimum, plus a substantial portion of
her tips. Naturally, she would prefer to receive all of her tips, but the FLSA does not create such an entitlement
where no tip credit is taken . . . .”).
14
Notably, during the course of discovery, Defendants identified two employees who, on one occasion each, failed
to receive a minimum wage for all hours worked, and quickly paid them the difference between what they were paid
and what they were owed at the Connecticut minimum wage rate, plus an equal amount in liquidated damages. See
Centrone Decl. ¶ 8. At oral argument, Defendants confirmed that those individuals indeed had been paid.
26
“[A] party resisting summary judgment on the ground that it needs discovery in order to
defeat the motion must submit an affidavit showing (1) what facts are sought [to resist the
motion] and how they are to be obtained, (2) how those facts are reasonably expected to create a
genuine issue of material fact, (3) what effort affiant has made to obtain them, and (4) why the
affiant was unsuccessful in those efforts.” Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292,
303 (2d Cir. 2003) (citation and internal quotation marks omitted).
Plaintiffs do not directly invoke Rule 56(d) in their memorandum opposing summary
judgment, see Pls.’ Opp., but use its language at several points in their Statement of Material
Facts and in a declaration from one of their attorneys. See, e.g., Pls.’ SMF ¶ 2 (“Defendants
refused to produce contracts during the relevant period . . . . as such, Plaintiffs cannot present
facts essential to justify its opposition.”); Declaration of John J. Malley, Esq., dated Apr. 25,
2018 (“Malley Decl.”), annexed to Pls.’ SMF, ECF No. 106-12, ¶ 2 (“Plaintiff cannot present
facts essential to justify its opposition.”). This declaration appears to satisfy Rule 56(d)’s
procedural requirement that the nonmovant file an affidavit or declaration. See FTC v. Moses,
913 F.3d 297, 306 (2d Cir. 2019) (finding nonmovant waived arguments as to insufficiency of
discovery under Rule 56(d) by failing to file “an affidavit explaining why such discovery is
necessary.”).
Plaintiffs first argue that Defendants refused to produce all banquet service contracts for
the period beginning three years before the filing of the Complaint through the present. As a
result, they cannot present facts as to whether the contracts actually provided for slight variations
from the standard 23% service charge. Plaintiffs fail to explain, however, how they reasonably
expect such facts would create a genuine dispute of material fact, given that Defendants have
already admitted that there are occasionally slight variations in the negotiated service charge.
27
These minor, negotiated-for variations to mandatory service charges would not transform the
service charges into tips. See 29 C.F.R. § 531.55(a) (“Similarly, where negotiations between a
hotel and a customer for banquet facilities include amounts for distribution to employees of the
hotel, the amounts so distributed are not counted as tips received.”).
Plaintiffs further argue that Defendants “refused to produce critical documents that are
needed to determine if Defendants’ calculations of the purported service charges only are
accurate, most importantly, the Banquet Service Charge Distribution charts that this Court
identified as essential to understanding the accuracy of Defendants’ service charge calculations.”
Malley Decl. ¶ 6. Plaintiffs state that the “accuracy of the service charges cannot be measured,
unless the banquet revenue figures are identified.” Id. On March 20, 2017, however, the Court
ordered Defendants to produce documents relating to a representative week across three years,
2013, 2014, and 2015:
Defendants must produce documents demonstrating the calculation
of the weekly service charge amount for the three weeks for which
they have provided Banquet Service Charge distribution charts
within thirty days of the date of this Order. To further ensure that
the documents produced are representative, Defendants must
produce documents relating to the same week in 2013, 2014, and
2015. If further questions arise after Defendants produce these three
weeks’ worth of documents, Plaintiffs can renew their motion to
compel.
Ruling on Plaintiff’s Motion to Compel, dated Mar. 20, 2017, ECF No. 77, at 8. Consistent with
Federal Rule of Civil Procedure 26(b)(1), the Court sought to “‘assess the circumstances of the
case and limit discovery accordingly to ensure that the scope and duration of discovery is
reasonably proportional to the value of the requested information, the needs of the case, and the
parties’ resources.’” Id. at 6 (quoting Chen-Oster v. Goldman, Sachs & Co., 293 F.R.D. 557, 562
(S.D.N.Y. 2013). The Court explicitly noted the burden of compliance with Plaintiffs’ request, as
28
well as the fact that the documents sought did not appear “directly relevant to the determination
of whether the service charge was a tip.” Id. at 6–7. Nevertheless, the Court made clear that “[i]f
further questions arise after Defendants produce these three weeks’ worth of documents,
Plaintiffs can renew their motion to compel.” Id. at 8.
On April 14, 2017, in response to a motion by Plaintiffs seeking clarification as to the
precise scope of the March 20, 2017 ruling, the Court ordered Defendants to produce
all documents that (a) reveal the revenue realized by the Hotel for
each and every banquet or event held within the banquet department
during these weeks, and, (b) show how the 23% service charge, and
16.56% amount distributed to service personnel, was calculated as
against the revenue realized during these weeks, including but not
limited to all customer contracts, final customer invoices, EO
Reports, Banquet Service Charge Distribution charts, and ledgers,
spreadsheets, and other accounting records reflecting or
summarizing such revenue, service charges, and tip/gratuity
distribution figures. Specifically, Defendants must produce weekly
Banquet Service Charge Distribution charts for the three
representative weeks along with the documents that the Hotel used
to determine the service charge. Each chart must contain the service
charge amount for each and every day for these weeks. Defendants
must also produce any and all documents showing how this charge
was calculated, including but not limited to the documents Plaintiffs
sought in their motion to compel. They must also produce any and
all documents that reflect revenue realized at any banquet/event that
occurred during the subject periods for which service charge
amounts are not reflected on the Banquet Service Charge
Distribution charts.
Ruling on Plaintiffs’ Motion to Clarify the Court’s Discovery Order, dated Apr. 14, 2017, ECF
No. 79.
In other words, these rulings were designed to yield the very revenue documents
Plaintiffs now claim they need, but limited to a representative sample proportional to the needs
of the case. The rulings also explicitly invited Plaintiffs to renew its motion to compel as needed,
after reviewing the Defendants’ production.
29
On September 22, 2017, Plaintiffs moved for a discovery conference to address
outstanding issues related to this document production. Motion for Discovery Conference, dated
Sept. 22, 2017, ECF No. 88. After that conference, the Court ordered Defendants to “provide
Event Actualization System records for the weeks responsive to the Court’s April Order” by
November 10, 2017. Ruling and Order on Discovery, dated Oct. 10, 2017, ECF No. 95.
No further motions related to discovery were filed, nor were any deficiencies in discovery
brought to the Court’s attention in the five months between that ruling and order and the filing of
Defendants’ summary judgment motion.
In short, Plaintiffs had an opportunity to receive the “critical documents” they now claim
to need. While the Court limited discovery to a representative sample, if, after reviewing that
sample, Plaintiffs arguably needed more, they had ample time to return to the Court and seek it.
As the Second Circuit has noted: “A party who both fails to use the time available and takes no
steps to seek more time until after a summary judgment motion has been filed need not be
allowed more time for discovery absent a strong showing of need.” Burlington Coat Factory
Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 927–28 (2d Cir. 1985). That is the case here.
As a result, to the extent Plaintiffs claim that this Court should not rule on Defendants’ motion or
delay ruling in order to permit Plaintiffs additional discovery under Rule 56(d), the Court
declines to defer consideration of this motion and re-open discovery.
In any event, Plaintiffs’ argument, that the service charges can and should be treated as
tips, is wrong as a matter of law, given that there is no genuine dispute that service charges were
a mandatory term of the banquet contracts. It does not seem “reasonably likely” that a review of
those four years of contracts would reveal that the service charges—which were required to be
imposed by the CBA— were actually voluntary tips completely at the customers’ discretion.
30
Plaintiffs therefore have not offered an adequate explanation for why obtaining documentation of
revenue for all banquets held at the Hyatt Regency Greenwich for the years 2013–2018 will
create a material issue of fact.
To the extent that discovery about whether tips given to Plaintiffs, in addition to revenue
from mandatory service charges, were necessary to ensure that the Plaintiffs received a minimum
wage, then the discovery already provided as well as Plaintiffs’ own information would have
been more than sufficient to make that claim. Plaintiffs should have copies of their own paystubs
and W-2 records, and many payroll records were evidently produced in discovery. See Ex. A to
Declaration of Marvin Castaneda, dated Apr. 25, 2018, annexed to Pls.’ SMF, ECF No. 106-3.
Significantly, the CBA provides that Defendants shall maintain comprehensive records and
“shall make available to any Banquet employee, upon request, a breakdown of their individual
itemized distribution of gratuities, fees, and hours worked for the past week.” CBA § 30.1.
Moreover, a number of “Banquet Service Charge Distribution” records have been produced
through discovery. These records all appear to reflect how service charges were distributed to
Plaintiffs. These could have been compared to other existing records—paystubs, W-2’s, and
individual itemized records for the Plaintiffs—and submitted in response to Defendants’
summary judgment motion or provided to the Court before its filing, in support of an argument
for additional discovery.
In the end, Plaintiffs have not produced any evidence to suggest that the service charges
were actually tips—or that tips, rather than service charges, were necessary in order for Plaintiffs
to make a minimum wage under the FLSA. One Plaintiff, Marvin Castaneda, submitted a
declaration in opposition to summary judgment, asserting that “because the pool referred to in
the CBA as the ‘service charge pool’ contains voluntary tips made by customers, we continue to
31
refer to it as what it is, a ‘tip pool.’” Declaration of Marvin Castaneda, dated Apr. 25, 2018,
annexed to Pls.’ SMF, ECF No. 106-2, ¶ 8.
This is an unsupported legal conclusion. Plaintiffs have provided no support for the
notion that service charges placed in a distribution fund alongside tips are converted into tips,
particularly when the CBA itself provides that such funds are not to be allocated in the same
manner. Moreover, whether employees or employers colloquially choose to call a service charge
a tip is of no legal significance. See Mechmet v. Four Seasons Hotels, Ltd., 825 F.2d 1173, 1177
(7th Cir. 1987) (“We attach no weight to the fact that the collective bargaining agreement
between the Ritz-Carlton and its waiters describes the waiters’ income from the service charge as
a “gratuity” rather than as a “commission.”).
Absent any evidence to the contrary,15 the Court concludes there is no genuine dispute of
material fact as to whether Defendants were able to meet their minimum wage obligations
through a combination of base hourly wages and mandatory service charges.
Accordingly, because Plaintiffs have failed to support their allegations that they were
paid less than minimum wage before voluntary tips were accounted for, the Court finds no
minimum wage claim here and thus, no FLSA claim as a matter of law. See Trejo, 795 F.3d at
448 (“[I]t is clear that [FLSA’s] language – whatever its import – could give rise to a cause of
action only if the employer is using tips to satisfy its minimum wage requirements. The FLSA is
the ‘minimum wage/maximum hour law.’”) (citation omitted).
Defendants therefore are entitled to summary judgment on Plaintiffs’ FLSA claims.
15
For example, in one recent case, a district court denied summary judgment because the plaintiff presented an
affidavit and payroll records that “suggest that the monthly membership charges and/or service charges that
Escalante relies upon for its position that it did not violate the FLSA or Florida law were really discretionary
customer tips which Escalante used to supplement the Plaintiff’s compensation.” Virgin v. Escalante–Black
Diamond Golf Club, LLC, No. 5:13-cv-359-Oc-10PRL, 2014 WL 12591472, at *3 (M.D. Fla. Aug. 4, 2014), Here,
by contrast, Plaintiffs have not shown a genuine issue of material fact as to whether the service charges are
mandatory, included in the hotel’s gross receipts, and distributed by the employer to Plaintiffs.
32
B. Plaintiffs’ Connecticut Law Claims
Having determined that Defendants are entitled to summary judgment and dismissal of all
federal claims over which the Court had original jurisdiction, the Court may decline to exercise
supplemental jurisdiction over Plaintiffs’ remaining state-law claims. 28 U.S.C. § 1367(c)(3);
Kolari v. N.Y.-Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir. 2006) (“[A] district court ‘may
decline to exercise supplemental jurisdiction’ if it ‘has dismissed all claims over which it has
original jurisdiction.’”) (quoting 28 U.S.C. § 1367(c)(3)).
“Once a district court’s discretion is triggered under § 1367(c)(3), it balances the
traditional ‘values of judicial economy, convenience, fairness, and comity’ in deciding whether
to exercise jurisdiction.” Kolari, 455 F.3d at 122 (quoting Carnegie-Mellon Univ. v. Cohill, 484
U.S. 343, 350 (1988) and citing Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d
442, 446–47 (2d Cir. 1998). “In weighing these factors, the district court is aided by the Supreme
Court’s additional guidance in Cohill that ‘in the usual case in which all federal-law claims are
eliminated before trial, the balance of factors . . . will point toward declining to exercise
jurisdiction over the remaining state-law claims.’” Id. (quoting Cohill, 484 U.S. at 350 n.7). As
the Second Circuit recently emphasized, however, “[w]hen § 1367(c)(3) applies, the district
court must still meaningfully balance the supplemental jurisdiction factors” of judicial economy,
convenience, fairness, and comity before declining to exercise supplemental jurisdiction. Catzin
v. Thank You & Good Luck Corp., 899 F.3d 77, 86 (2d Cir. 2018).
Here, Defendants’ arguments for summary judgment on Plaintiffs’ state law claims rest
heavily on interpretations of Connecticut laws concerning the payment of wages, specifically
33
CONN. GEN. STAT. §§ 31-71e and 31-72.16 But neither Defendants nor Plaintiffs have fully
addressed the impact of Connecticut’s minimum wage laws, which contain tip credit provisions
that delegate significant authority over tipped wages to the Connecticut Department of Labor, on
Plaintiffs’ claims. See CONN. GEN. STAT. § 31-60(b); Amaral Bros. v. Dep’t of Labor, 325 Conn.
72, 84 (2017) (“ Following several additional amendments, the statute currently provides in
relevant part: ‘The [commissioner] shall adopt such regulations . . . [that] shall recognize, as part
of the minimum fair wage, gratuities in an amount ... equal to [a] per cent of the minimum fair
wage per hour for persons, other than bartenders, who are employed in the hotel and restaurant
industry, including a hotel restaurant, who customarily and regularly receive gratuities . . . .”)
(quoting CONN. GEN. STAT. § 31-60(b)(1)).
The precise interaction between these different state statutes and the payment of tip
credits or service charges to banquet servers who operate under a collective bargaining
agreement does not appear to have been addressed by any Connecticut state court. Connecticut
state courts therefore should have the first opportunity to do so. See Kolari, 455 F.3d at 124
(“We have repeatedly held that a district court particularly abuses its discretion when it retains
jurisdiction over state-law claims raising unsettled questions of law following dismissal of all
original-jurisdiction claims.”) (collecting cases); Seabrook v. Jacobson, 153 F.3d 70, 72 (2d Cir.
1998) (“Where a pendent state claim turns on novel or unresolved questions of state law . . .
principles of federalism and comity may dictate that these questions be left for decision by the
16
The parties refer to these statutes as “Connecticut’s wage payment law,” or “Connecticut Wage Payment Laws.”
The statute in question falls under Chapter 558 of the Connecticut General Statutes. Chapter 558 does not itself
provide a short title for the law, but a separate state statute requiring employers to furnish records refers to these
sections, CONN. GEN. STAT. § 31-58 et seq., as the “Connecticut Minimum Wage Act.” CONN. GEN. STAT. § 31-13a.
Research on the caselaw suggests that some courts have adopted “Connecticut Wage Payment Law” to describe
§ 31-71e specifically. See Search Results for “Connecticut Wage Payment Law” in Jurisdictions: Connecticut & 2nd
Circuit, WESTLAWNEXT, https://next.westlaw.com (Mar. 10, 2018) (13 cases).
34
state courts. This is particularly true if the federal claim on which the state claim hangs has been
dismissed.”).
The Court therefore declines to exercise supplemental jurisdiction over the remaining
state law claims and dismisses Count Two for want of jurisdiction, without prejudice to refiling
in state court.
IV.
CONCLUSION
For the foregoing reasons, Defendants’ motion for summary judgment is GRANTED IN
PART AND DENIED IN PART. Defendants’ motion is granted with respect to the federal
claims, but denied with respect to the Connecticut law claims, which are hereby dismissed
without prejudice to refiling in state court.
The Clerk of the Court is respectfully directed to enter judgment for Defendants as to
Count One only and to close this case.
SO ORDERED at Bridgeport, Connecticut, this 15th day of March, 2018.
/s/ Victor A. Bolden
VICTOR A. BOLDEN
UNITED STATES DISTRICT JUDGE
35
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?