Howard v. Second Chance Jai Alai LLC et al
Filing
108
MEMORANDUM DECISION AND OPINION. Signed by Magistrate Judge Philip R. Lammens on 12/9/2016. (CAB)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
OCALA DIVISION
CHRISTOPHER HOWARD and
JEFFREY GREENSTONE, on behalf of
themselves and all others similarly
situated
Plaintiffs,
v.
Case No: 5:15-cv-200-Oc-PRL
SECOND CHANCE JAI ALAI LLC
Defendant.
MEMORANDUM DECISION AND ORDER
Plaintiffs, Christopher Howard and Jeffrey Greenstone, seek wages from their former
employer, Defendant Second Chance Jai Alai, LLC, under the minimum wage provisions of the
Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”).1 Beginning on August 8, 2016, I
held a two day bench trial in this case.
For the reasons explained below, I find that the
preponderance of the evidence establishes that Defendant did not violate the minimum wage
provisions of the FLSA and that judgment should be entered in favor of Defendant under Federal
Rule of Civil Procedure 52. In accordance with Rule 52, the following constitutes the Court’s
findings of fact and conclusions of law.
1
23, 24).
The parties previously consented to jurisdiction by magistrate on July 29, 2016. (Docs. 21, 22,
I.
BACKGROUND AND FACTUAL RECORD
Plaintiffs were previously employed as poker dealers in Defendant’s poker room. As set
forth in their Second Amended Complaint (Doc. 29), they allege that Defendant violated the
minimum wage provisions of the FLSA.2
The dispute arises from Defendant’s claiming of a tip credit on its poker dealers, which
permitted Defendant to pay the dealers—including Plaintiffs—less than the statutorily required
minimum wage. Plaintiffs allege that Defendant’s failure to comply with the FLSA tip credit
requirements results in Defendant’s inability to claim a tip credit for the dealers. They also allege
that by requiring its poker dealers to share their tips with non-tipped employees and managerial
employees, Defendant was not permitted to claim the tip credit and was therefore obligated to pay
its dealers the full minimum wage. In a single count against Defendant, Plaintiffs seek unpaid
minimum wages owed to them for the period in which they were paid pursuant to the tip credit,
along with liquidated damages and attorney’s fees and costs.
The following facts were established at trial by a preponderance of the testimony and
documentary evidence offered and admitted into evidence.3 Defendant operates a multi-faceted
gaming operation in North Central Florida. The operation involves inter-track wagering, a JaiAlai court, a bar and deli, and a poker room—all of which are separated into different departments.
(Tr. 169, 200; Tr. II. 7, 50). At dispute here is the poker room department and how the poker
2
This Court has subject matter jurisdiction over this case pursuant to federal question jurisdiction
(28 U.S.C. § 1331).
3
Plaintiffs presented their own testimony, along with the testimony of Brian Matthews and Jason
Bendure. Defendants presented the testimony of Vicki Pernek, Matthews, Phil Faso, and Marsha Keslo.
Official transcripts of the trial testimony, which are contained in two volumes, have been filed with the
Court. (Docs. 103, 104). The Court will refer to the transcripts contained in volume one (Doc. 103) as
“Tr.” followed by the appropriate page or pages and will refer to the transcripts contained in volume two
(Doc. 104) as “Tr. II.” followed by the appropriate page or pages. The Court will refer to Plaintiffs’ and
Defendant’s exhibits as “PX” and “DX” followed by the appropriate exhibit number.
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room’s employees are compensated, tipped, and required to share those tips through a mandatory
tip pool.
A. Overview of Defendant’s poker room
An overview of Defendant’s poker operation is useful to understanding this case. When
a prospective customer first enters the poker room, he or she will first be greeted by an employee
at a podium near the room’s entrance. (Tr. 183; DX. 12). The employee working the podium,
like a restaurant host or hostess, will direct the customer to a seat at a poker table. (Tr. 181–82;
Tr. II. 28–29).
Prior to being seated, however, the customer will walk over to a teller window to exchange
his or her cash for gambling chips. (Tr. 183–84; Tr. II. 29–30).
Indeed, customers are only
allowed to play with gambling chips in the poker room. (Tr. 113, 148; Tr. II. 30–31). To this
end, employees working as tellers are located in a separate area behind two teller windows and
exchange cash for chips. (Tr. 91; DX. 13, 14).
At this time, the customer may (if he or she wishes) tip the teller by placing chips in a tip
box that is located outside of the teller windows. After the customer receives chips from the teller,
the podium employee will then seat the customer at a poker table and the customer may tip the
podium employee with chips. The customer is now ready to play poker.
In the poker room, though, customers do not play against the house. (Tr. II. 7–8). That
is, customers do not gamble against Defendant; customers play against—and only against—other
customers. (Tr. II. 8). So, at each gambling table in the poker room sit a dealer, who is
Defendant’s employee and deals cards to facilitate the poker games, but the dealer does not play
as a player in the card games.
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A dealer will deal customers around thirty hands per hour, or perhaps up to twice this
amount. (Tr. 52, 106, 174). When a customer wins a hand, the customer (usually) tips the dealer
with chips. (Tr. 52, 106–07, 128). To accommodate such tips, each dealer has a tip box into
which customers may place chips. (Tr. 53).
To be sure, each customer will not win every hand. And in the event that a customer needs
additional chips, the customer can remain seated as the dealer can exchange chips for cash right at
the poker table. Each dealer (though they do not gamble in the games) is equipped with a “bank”
of chips and cash in case a customer needs more chips during play.
Nonetheless, sometimes a dealer’s bank runs low. Then, employees who work as “chiprunners” uses a cart to deliver more chips to the dealer, and the chip-runners may also deliver chips
directly to customers. (Tr. 86). The chip-runner’s cart has, of course, its own bank of chips and
also has a tip box in case a customer wishes to tip the chip-runner. (Tr. 84).
After a customer is finished playing, if he or she still has chips, the customer returns to the
teller. (Tr. 184). The customer then exchanges his or her chips for cash with the teller. At this
time the customer is free, once again, to tip the teller by placing a tip in the teller tip box. (Tr.
184–85). If all goes well the customer walks out with more cash than he or she walked into the
poker room with.
But before a customer leaves, he or she may notice a door-way into a room adjacent to the
teller windows. (Tr. II. 36–37; PX. 8; DX. 25). This room is filled with cash and chips and is
the biggest “bank” of chips and cash in the poker room—this room is known as “the vault.” (Tr.
65, 89, 178). In other words, when a dealer, teller, or chip-runner’s bank gets low, that exhausted
bank is replenished with chips and cash from the vault. Obviously, customers do not have access
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to the vault: the vault serves the sensitive and important function of the master bank for all the
other banks. (Tr. 65). Of course, only the most trusted employees enter the vault.
In sum, although customers experience many aspects of the poker room operation, there
are undoubtedly other aspects that customers do not encounter. The next sections will examine
some of these aspects that are not within public view.
B. The poker room’s managerial and employee structure
An understanding of Defendant’s employee structure, including which employees are
managerial, is also important here. Notably, none of the employees mentioned in this opinion
have any ownership interest in Defendant. (Tr. 77, 79, 199, 206).
1. Non-management
The poker room’s non-management employees are broken down into two different
occupations. Defendant, quite naturally, designates poker room dealers as “dealers.” Perhaps
less intuitively, Defendant calls the other poker room employees—the employees who work as
tellers, chip-runners, at the podium, and in the vault—“cage employees.”4 Simply put, dealers
deal cards and cage employees perform all the other poker room duties that serve that end but do
not directly involve card dealing. I will address the dealers first.
i.
Dealers
Dealers sit at the poker tables and deal cards to the customers. As noted above, dealers do
not act as players in the poker games; dealers merely facilitate the poker games by dealing the
4
The cage apparently refers to the room that includes the teller work area and the vault. (Tr. 177–
78); PX. 8; DX. 25).
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cards. Both Plaintiffs, Christopher Howard and Jeffrey Greenstone, dealt cards as dealers at the
poker room.5
Beyond dealing cards, dealers do not perform any other duties. Employees who are
dealers sometimes, however, do work in other capacities. For instance, Plaintiff Howard dealt
cards and when not dealing cards worked in a salaried position.6 (Tr. 134–36). And there is
evidence that other dealers worked as cage employees on a very limited basis. (Tr. II. 58–62).
But beyond these limited exceptions, poker dealers only deal cards.
ii.
Cage employees
In contrast to the limited duties dealers perform, cage employees perform numerous, varied
duties. (Tr. II. 27–31, 37–38). Jason Bendure, a current cage employee, provided testimony as
to his typical work day in which he usually works the evening shift. (Tr. 64). He stated that once
he arrives to work, he works as a teller during his seven to nine hour shift; and he also works,
contemporaneously with his teller duties, in the vault, but only when needed.7 (Tr. 72–76).
As to the vault duties that Bendure performs while customers are present at the poker room,
those duties are relatively limited.
For example, Bendure only enters the vault during this time
when necessary to collect cash or chips to refill a teller, chip-runner, or dealer bank (or to balance
5
Howard and Greenstone started around 2007 or 2008 and both stopped working for Defendant in
2015. (Tr. 39, 96, 128).
6
When an employee works in both salaried and non-salaried positions, like Howard did, that
employee is known as a “dual-rate.” (Tr. 80–81; Tr. II. 5, 20–21). When a dual-rate employee works in
a salaried capacity, that employee does not receive tips or participate in the tip pool during those hours.
(Tr. 207–08; Tr. II. 10, 19–21)). For a discussion of the tip pool see infra sub-section I.C.
7
As an important aside, not all cage employees are allowed to enter the vault—a very sensitive
area of Defendant’s poker room operation. (Tr. 182–83). Undeniably, employees like Bendure are
among Defendant’s most trusted and reliable cage employees, as only these cage employees are eligible to
enter the vault. (Tr. 196–97). Out of the seven current cage employees, only four are eligible to enter the
vault; and there must be a cage employee who is eligible to enter the vault at all times when the poker room
is open to customers. (Tr. 196–97).
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the vault to ensure that no amounts are missing). See (Tr. 187–88). Bendure never closes the
vault door when he is physically in the vault; instead, he actively listens for any customers who
may need his services as a teller, and he is sometimes the only teller in the poker room. (Tr. 75,
91–93, 176); see also (Tr. 165) (Plaintiff Howard admits that Bendure was sometimes the sole
teller when Howard worked for Defendant).
As to Bendure’s teller duties, he exchanges cash for chips and vice versa. To ensure that
accounting and security goals are met, Bendure is given a separate “bank” of chips and cash in
which to serve his teller duties—no other cage employee is allowed to use Bendure’s bank. (Tr.
74, 87, 89, 178–79). In other words, even when another teller is present there is a separate teller
bank that Bendure, and only Bendure, uses.
But the vault and teller duties are not the only duties that Bendure performs. He also
works at the podium and as a chip-runner whenever the other cage employees need a break. (Tr.
76, 179, 188–89). Naturally, cage employees are entitled to breaks each shift and it is the cage
employees, like Bendure, who are eligible to enter the vault that are designated to step in when
these breaks occur. For example, it is not uncommon for a cage employee like Bendure to spend
around twenty minutes at the podium (thus giving the cage employee is who is currently working
the podium a break) and then work as a chip-runner (thus giving a chip-runner a break), before
returning to work as a teller. (Tr. 189).
Moreover, Bendure testified that sometimes he is the only cage employee in the poker
room. (Tr. 65). In essence, Bendure wears numerous hats: he exchanges cash for chips (and vice
versa) as a teller and he works the vault, along with also working at the podium and as a chiprunner.
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Importantly, during the seven years that Bendure has worked as a cage employee, the
amount of time in which he has spent in the vault has varied. (Tr. 65–66, 70). When Plaintiffs
worked for Defendant, Bendure would spend about half his time in the vault, and about half his
time elsewhere working in the other positions. (Tr. 66). But the allocation has changed overtime
with a trend that Bendure spends less and less time in the vault. (Tr. 65, 75; 187–88). In any
event, even when Bendure is in the vault he leaves the vault door open and keeps a look out for
customers who may need his assistance as a teller. (Tr. 92–93).
To be sure, Bendure is a trusted employee tasked with handling the sensitive area that is
the vault; that is, Bendure balances the vault to ensure that other employees do not, through mistake
or malfeasance, abscond with Defendant’s cash or chips. Vault duties extend beyond the time in
which customers gamble at the poker room. Bendure testified that after the customers have left
the poker room for the evening, he spends about thirty to forty-five minutes balancing and
accounting for the chips and cash in the vault. (Tr. 72, 76). And on a related note, each day,
before customers ever arrive at the poker room, the cash and chips in the vault must be balanced
to ensure, once again, that no amount of either cash or chips is missing—this duty takes around
one hour to complete. (Tr. 185–89).
To briefly summarize the duties that the cage employees perform, they ensure (1) that
customers, through the tellers, have chips to start gambling with; (2) that customers find their way
to the gambling tables, though the podium position; (3) then, once a customer needs more chips,
the cage employees, this time in the capacity of the chip-runner, ensure that the customers need
not get up from their seats at the table—the chip-runners deliver more chips right to the gambling
tables; (4) and, importantly, the cage employees who are eligible to enter the vault ensure that
everyone—customers, dealers, teller, and chip-runners—have a sufficient amount of chips.
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Notably, while Bendure is one of Defendant’s most trusted and reliable cage employees
(only employees like Bendure are eligible to enter the vault), Bendure is not an employee with
much power over other employees. He does not hire or fire other employees, set schedules, set
wages, or otherwise control the work of other employees. (Tr. 77–78); see also (Tr. 164) (Plaintiff
Howard admits that Bendure does not hire, fire, or set wages)). At most, Bendure (an experienced
cage employee) trains new cage employees and attempts to resolve minor disputes between dealers
and other cage employees—but Bendure has no authority to discipline other employees. (Tr. 78,
132, 164). And though Bendure sometimes is called (and refers to himself as) a supervisor, he
has never been given that title formally. (Tr. 77, 89).
As another example of a trusted (yet former) cage employee, Kathleen Danielson worked
in the vault while also working as a teller, chip-runner, and at the podium. (Tr. 222). The
evidence shows that although Danielson did not hire, fire, set schedules, set wages, discipline, or
control other employees, she did perform isolated acts beyond the scope of her normal cage
employee duties. (Tr. 192–93). For instance, Danielson once drafted a cage-employee schedule
that her supervisor ultimately adopted. (Tr. 69). Danielson also signed an agreement in which
Bendure was responsible for paying Defendant a sum or sums of money and she signed certain tax
documents. (Tr. 68–69). But in any event, the evidence shows that Danielson, like Bendure, did
not hire or fire, set schedules, set wages, discipline, or otherwise control other employees. (Tr.
79, 192–93, 221–23).
In summary, while neither party offered any evidence during trial on any other specific
cage employees (there are currently seven) besides Bendure and Danielson, Defendant presented
ample testimony that all cage employees—including those who work in the vault (about four of
the current seven cage employees)—work as tellers, chip-runners, and at the podium. (Tr. 170–
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71, 174, 186–89, 196–97, 206; Tr. II. 27). Indeed, cage employees, generally, are not assigned
specific duties but instead usually rotate through all of the duties each week (or even each shift)
(Tr. 171–72, 182). Further, it is also clear that no cage employees (including Bendure, Danielson,
and any other cage employee who works in the vault) hired, fired, set schedules, set wages,
disciplined, or controlled other employees. (Tr. 190–91, 221–22; Tr. II. 12, 62).
2. Management
At the top of the poker room’s management is Defendant’s president Brian Matthews, he
is in charge of the poker room, along with Defendant’s other departments. Matthews makes all
decisions on hiring and firing, job duties, and discipline—unless he is absent and the disciplinary
issue is minor. (Tr. 208–09).
Below Matthews is Vicki Pernek, the cage department manager, i.e., she manages the cage
employees. (Tr. 169, 200; Tr. II. 44). She sets cage employees schedules but does not discipline
or hire and fire employees—she only makes recommendations to Matthews on who to hire or fire.
(Tr. 225). Currently, there are about seven cage employees under Pernek. As noted supra, those
cage employees perform the jobs (or duties) of teller, chip-runner, podium, and vault work. And
no one, not even the cage employees who are eligible to enter the vault, act as an assistant to
Pernek. (Tr. 71, 173, 205).
Also below Matthews is Phil Faso, who manages the dealers. (Tr. 199–200; Tr. II. 7–8).
Plaintiffs, Howard and Greenstone, were among the poker room dealers who Faso managed.
Over time, Faso has also dealt cards in the poker room and had his own tip box. (Tr. 129–30; Tr.
II. 64–65). But Faso has never, as shown by the weight of the evidence, received any amount
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from the tip pool.8 (Tr. 175). Below Faso are poker room floor managers. The floor managers,
who are salaried employees, supervise the dealers under the direction of Faso. (Tr. 207, 208–09;
Tr. II. 9–10).
Finally, the last managerial employee in the poker room is Marsha Kelso, the office
manager. Kelso is in charge of record keeping and other administrative duties. (Tr. II. 49).
Kelso does not have much interaction, if any, with the dealers or cage employees. (Tr. II. 64).
Importantly, from 2010 to the present day, the evidence shows that none of the managerial
employees have received any amount, at all, from the tip pool. 9 (Tr. 170–73, 191, 205, 209–10;
Tr. II. 13–14, 17–18, 21–22, 39–40, 50–51). Further, Matthews, Pernek, Faso, Kelso, and all the
unnamed floor managers are the only managerial employees in the poker room; none of the cage
employees are managers. (Tr. 189–91).
C. The non-managerial employee compensation structure
The poker room’s non-managerial employee (the dealers and the cage employees) receive
two forms of compensation. First, each is paid an hourly wage that is below the federal minimum
wage. (Tr. 40; Tr. II. 51). Second, these employee receive tips from customers.
The tip structure is at the heart of one of the issues in this case—the tip pool. To briefly
introduce the pool, though both dealers and cage employees are tipped by customers, Defendant
8
For a discussion of the tip pool, see infra sub-section I.C. Undeniably, if Faso dealt cards at any
time during the past six years, then he would have been, at least presumably, required to contribute ten
percent of his tips to the tip pool. Plaintiff Howard provided contradictory testimony as to whether Faso
was tipped when acting as a manager (Tr. 129–30, 152–53); given the inconsistency, I do not credit the
testimony that Faso was tipped while performing his managerial duties.
9
Plaintiffs allege in their complaint (Doc. 29, ¶ 10) that employees working in surveillance also
received amounts from the tip pool, but the evidence shows that this is not true. (Tr. 118–19, 201).
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requires the dealers to share ten percent of their tips with the cage employees. This compelled
sharing in known as the tip pool.10
1. Dealer tips
Dealers enjoy ample opportunity to receive tips from customers. They may deal up to
thirty hands (or more) an hour, each game will presumably have a winner who will presumably tip
the dealer after the win. The amount of tips that a dealer can earn in a day is fairly large.
Plaintiffs themselves received on average between two-hundred-fifty to four-hundred dollars per
day in tips. (Tr. 110, 149–50).
Notably, each dealer has a separate tip box that is specifically assigned to her or him. (Tr.
146–47). So, Defendant is able to, and indeed does, track the tips that each dealer receives. This
also enables the dealers themselves to account for their individual tips. To this end, dealers go
through an elaborate procedure to account for their tips after each of their shifts. (Tr. 53–59, 105,
141–43; Tr. II. 45–48).
This procedure starts at the poker tables, where each dealer has an assigned, locked, and
numbered tip box on their poker table. (Tr. 54, 103). Once a dealer’s shift is over, the dealer
takes her or his tip box, and with another poker room employee, enters a secure room known as
the “tip-out room”—the tip-out room is under video surveillance. (Tr. 54).
Under such surveillance, the dealer and the other employee will count the chips that the
dealer received in tips. (Tr. 55, 107). Once they have agreed upon the amount of tips the dealer
received that shift, the dealer and the other employee both sign a “tip slip.” (Tr. 107; Tr. II. 45–
10
The dealers, including Plaintiffs, had to share only eight percent of their tips when the poker
room was started, but that amount was raised to ten percent in 2010. (Tr. 41).
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47). The tip slip records the amount of tips the dealer received and each dealer is given a carbon
copy of the tip slip. (Tr. 55–56, 107–08).
But the tip slip also records the amount of the dealer’s tips that she or he is forced to put
into the tip pool. (Tr. 54–57; Tr. II. 47). So, once a dealer signs the tip slip, they know the tip
amount that they will retain (i.e., ninety percent of their tips) and the tip amount that will be taken
away from them and placed into the tip pool (i.e., ten percent of their tips). There is also evidence
that Plaintiffs’ paychecks reflected their hourly wage, number of hours worked, and their tips.
(Tr. 150–51).
Lastly, the amount in tips dealers receive are about treble the amount cage employees
receive. (Tr. 173–74; Tr. II. 51). In fact, this large disparity between the amount of tips dealers
and cage employees earn is (in part) why Defendant requires all dealers to participate in the tip
pool. (Tr. 214, 226). Defendant also justifies this forced sharing on the basis that the cage
employees, in a way, serve the dealers and enable the dealers to deal cards by ensuring that
customers have a steady flow of chips to gamble with. As Matthews puts it, the dealers and the
cage employees are a team. (Tr. 214).
2. Cage employee tips
Like dealers, cage employees enjoy numerous opportunities to be tipped by customers.
(Tr. II. 51–52). For example, when a cage employee works the podium and seats customers, the
customers may tip the cage employee then. (Tr. 176, 183; Tr. II. 28–29). And when a cage
employee works as a chip-runner and runs chips out to a dealer, customers may place a tip in the
chip-runner’s tip box, which is on the chip-runner’s cart. (Tr. 83, 175, 180–81). Customers may
tip a teller before or after gambling when the customers exchange cash for chips or vice versa.
(Tr. 176, 183; Tr. II. 29).
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Now, as stated supra, but in order to clarify this issue, all cage employees who are eligible
to enter the vault—including Bendure and Danielson—perform (or performed in Danielson’s case)
the duties of chip-runner and teller, along with working the podium. (Tr. II. 37–38, 49). Indeed,
even Plaintiffs themselves admit that Bendure worked as a teller and a chip-runner. (Tr. 98, 118,
163–65). And it is clear that when cage employees work at the podium, or as tellers and chiprunners they receive tips from customers.
But in contrast to the elaborate data tracking methods Defendant deploys for the dealers’
tips, Defendant does not apparently track the amount of individual tips each cage employee earns.
For instance, though there are two teller windows, the tellers share a single tip box; Defendant
does not track which tips are intended for which teller. (Tr. II. 63; DX. 13). Likewise, though
the record in unclear as to how many chip-runner carts there are, it is clear that there is no evidence
that tips placed in the tip box of a chip-runner cart are tracked in the way that the dealers’ tips are
tracked. (Tr. 84; Tr. II. 63). More to the point, when a cage employee working the podium
receives a tips, it appears that the employee simply places that tip in the tip box of a chip-runner
cart. (Tr. 83–84). And there appears to be a communal tip box for the cage employees in the
poker room.
(Tr. 175).
So, as Bendure testified, the cage employees share—amongst
themselves—the tips that they receive directly from customers. (Tr. 68).
The tangible evidence confirms this notion that Defendant does not track the tips each cage
employee individually earns. A spreadsheet compiled by Kelso, the poker room office manager,
shows that cage employees received tips from two sources: (1) a “cage tip box” and (2) a “10%,”
which presumably would be the ten percent of dealers’ tips from the tip pool. (DX. 15). It
appears that Defendant aggregates these two sources into a total and distributes those amounts to
all cage employees on a per-hour basis. (Tr. 68; Tr. II. 48, 51–53). Thus the spreadsheet does
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not show (nor does the testimony show) how much in tips each cage employee—in his or her
individual capacity—directly received from customers.
Yet Defendant’s evidence does show that from 2012 to April 2015 any cage employee who
worked a full twenty-eight day pay period received more than thirty dollars in tips, counting both
of these tips amounts.11 (Tr. 179–80; Tr. II. 48, 52, 55). For instance, Bendure regularly receives
more than thirty dollars in tips per month. (Tr. 88; Tr. II. 48–49, 52–59).
D. Notice of the tip credit and the tip pool
Under the FLSA, when an employer pays its employees less than the federal minimum
wage and then supplements that hourly wage through the tips the employees receive (this practice
is known as taking a “tip credit”), the employer most give its employees notice of that practice.
The evidence shows here that Defendant posted posters in the poker room that provided Plaintiffs
with notice that Defendant took a tip credit in compensating its dealers. But also at issue is what
notice Defendant gave Plaintiffs as to the tip pool. I will address the tip credit notice first.
1. Tip credit
It is undisputed that Defendant in each year at issue posted wage and hour posters in a
location next to where Plaintiffs clocked in and out during their employment with Defendant.12
(Tr. 97, 101, 102–03, 116, 125, 158–59, 194–95, 203–04, 215–221, 228–29; Tr. II. 16–17, 19–21).
11
The only instances where cage employees did not receive more than thirty dollars in tips per
month, from 2012 to April 2015, is where the employee failed to work a full four weeks or where a dealer
worked in the cage on a very limited basis. (Tr. II. 55–56, 58–62).
12
The poster that Defendant presented at trial states the following:
Employers of “tipped employees” must pay a cash wage of at least $2.13 per hour if they
claim a tip credit against their minimum wage obligation. If an employee’s tips combined
with the employer’s cash wage of at least $2.13 per hour do not equal the minimum hourly
wage, the employer must make up the difference. Certain other conditions must also be
met.
(DX. 4).
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The evidence shows that these posters notified Plaintiffs that the hourly wage they received was
below the federal minimum wage and that the difference between their hourly wage and the
minimum wage was supplemented though the tips that the dealers received. (DX. 3, 4).
2. Tip pool
While Plaintiffs do not dispute the notice they received from Defendant as to the tip credit,
the same cannot be said for notification of the tip pool. (Tr. 117–18). In any event, the weight
of the evidence shows that Defendant notified Plaintiffs of the tip pool in three ways: (1) through
a meeting in 2010, (2) through a dealer handbook distributed in 2013, and (3) through the elaborate
dealer tip-out procedure (as discussed supra).
First, Matthews held a meeting in 2010. The meeting was mandatory for all poker room
dealers (including Plaintiffs) and lasted about an hour. (Tr. II. 41). The meeting was attended
by around fifty or so employees, which included not only Faso and Pernek, but also Plaintiffs.
(Tr. 117–18, 131–32, 156–57, 193–94, 212–14; Tr. II. 41). This meeting represents Defendant’s
most elaborate communication with Plaintiffs about the tip pool.
At the meeting, Matthews discussed several controversial changes to the tip pool. (Tr.
213–14, 221; Tr. II. 22–24). First, given a different lawsuit, Defendant was taking all managerial
employees out of the tip pool—i.e., all managerial employees would no longer receive proceeds
from the tip pool.13 (Tr. 202–03). Second, from then on only cage employees would receive
proceeds from the tip pool. (Tr. 213). And third, the then current amount that dealers were
forced to give to the tip pool—eight percent of their tips—was being increased to ten percent. (Tr.
213).
13
Pernek was among these managerial employees who were taken out of the pool. (Tr. 202, 224–
25).
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During the meeting, Matthews elaborated on why the increase from eight to ten percent
was justified. (Tr. 214). He said that while the cage employees do regularly receive tips from
customers (like the dealers do), those tips are far smaller than the tips the dealers receive. (Tr.
226). The cage employees, however, enable the dealers to do their jobs—the cage employees
work as a team with the dealers. (Tr. 214).
Now, at trial both Plaintiffs admit that at the meeting Matthews discussed that the tip pool
amount was being increased from eight to ten percent. (Tr. 117–18, 131–32, 156–57). But
Plaintiffs dispute Matthews’s assertion that he explained who the tip pool amount was going to
(that is, the cage employees), that he explained that the cage employees are tipped employees like
the dealers are, and that he explained that managerial employees were being taken out of the tip
pool. (Tr. 117–18, 126, 132). But despite Plaintiffs’ disputations, the weight of the evidence
shows that Matthews did explain—at the 2010 meeting—that the cage employees would receive
all of the tip pool amounts and that cage employees are, like the dealers, regularly tipped by
customers. Indeed, Pernek and Faso both remember that during the 2010 meeting Matthews
discussed that the cage employees are tipped, that the tip pool amount would be going to only the
cage employees, and that the tip amount was being raised from eight to ten percent. (Tr. 193–94;
Tr. II. 22–24).
Further, as early as 2008 Defendant told Plaintiff Greenstone that chip-runners “and people
that helped [the dealers]” would receive eight percent of his tips. (Tr. 96–97). Greenstone also
has a fundamental understanding of how the cage employees function (Tr. 110–12), knows about
the ten percent mandatory tip pool itself and that he would (when he worked for Defendant) retain
ninety percent of his tips (Tr. 125); and Howard has a fundamental understanding of how the cage
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employees functioned (Tr. 147–49) and knows that dealers receive far larger tips than cage
employees (Tr. 111, 150).
Thus, due to Plaintiffs’ knowledge of the fundamental structure of both the cage employee
department and the tip pool itself, their testimony that Defendant never explained these concepts
to them is not entirely credible. More to this point, Plaintiff Howard testified that the 2010-tippool-amount increase drew the ire of the dealers; at the 2010 meeting dealers challenged Matthews
on why the tip pool amount was increasing from eight to ten percent. (Tr. 156–58). So it seems
more than reasonable to credit the testimony that Matthews attempted to justify the tip pool amount
increase by explaining to the dealers who the tip pool amount would go to and why the increase
was necessary—i.e., it seems more than likely that Matthews explained to the dealers that the cage
employees receive much smaller tips than the dealers, but that the cage employees support the
dealers, and thus is was fair to force the dealers to share ten percent of their tips with the cage
employees.
Second, around early (or perhaps late) 2013, Defendant distributed a dealer handbook to
the Plaintiffs. (Tr. II. 40, 42). Both Plaintiffs signed a document certifying that they indeed
received a copy of the handbook. (Tr. 120–21, 154–55). The handbook states that ten percent
of the dealer’s tips will be distributed to the cage employees: “A tip share of 10% will be deducted
from all dealer tips to be distributed to the Cage personnel, not including full-time supervisors.
This does not mean that Cage personnel work for you[;] they are to be treated with the same respect
as any other co-worker.” (DX. 9).
Finally, both Plaintiffs, who were poker room dealers, went through the rigorous “tip-out”
procedure described above. (Tr. 105–10, 140–43). During this procedure, the dealers (and
another employee) count the tips the dealers earned that shift, allocate ninety percent of the tips
- 18 -
for the dealer to retain, and then allocate the remaining ten percent of the tips to be placed into the
tip pool. (See supra sub-section I.C.1.).
II.
LEGAL STANDARD
Under the FLSA, an employer must pay its employee a minimum wage. See 29 U.S.C.
§ 206(a).
That wage may include the employee’s tips.
29 U.S.C. § 203(m).
That is, an
employer may pay an employee a cash wage below the minimum wage so long as the employer
supplements the difference with the employee’s tips; this is known as an employer taking a “tip
credit.” See id.
In order to use a tip credit toward a tipped employee’s minimum wage, an employer must
satisfy two conditions: (1) the employee must be informed by the employer of the FLSA’s tip
provisions; and (2) the employee must be allowed to retain all tips which he or she receives, except
in instances where pooling of tips is employed among other employees who customarily and
regularly receive tips. 29 U.S.C. § 203(m); see also Kubiak v. S.W. Cowboy, Inc., 3:12-CV-1306J-34JRK, 2016 WL 659305, at *6 (M.D. Fla. Feb. 18, 2016) (citing Rubio v. Fuji Sushi & Teppani,
Inc., No. 6:11-CV-1753-ORL-37, 2013 WL 230216, at *2 (M.D. Fla. Jan. 22, 2013)).
The employer bears the burden of proving that they are eligible for a tip credit and bears
the burden of proving that it provided sufficient notice. Vancamper v. Rental World, Inc., No.
6:10-CV-209-ORL-19, 2011 WL 1230805, at *5–6 (M.D. Fla. Mar. 31, 2011). The requirements
of a tip credit are strictly construed. Rubio, 2013 WL 230216, at *2 (citing Garcia v. La Revise
Assocs. LLC, No. 08–cv–9356, 2011 WL 135009, at *5–6 (S.D.N.Y. Jan.13, 2011)). Lastly, a
FLSA action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages
“shall be forever barred unless commenced within two years after the cause of action accrued,
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except that a cause of action arising out of a willful violation may be commenced within three
years after the cause of action accrued.” 29 U.S.C. § 255.
III.
ANALYSIS
Plaintiffs argue that Defendant violated the FLSA in two different ways. First, they argue
that Defendant provided them insufficient notice under § 203(m). Second they argue that the tip
pool amount was, in part, distributed to ineligible employees. Success on either claim would
render Defendant liable for the difference between the full minimum wage and the wage Defendant
paid Plaintiffs during the relevant time period—regardless of the actual economic harm suffered
by Plaintiffs. See Kubiak, 2016 WL 659305, at *6; Driver v. AppleIllinois, LLC, 917 F. Supp. 2d
793, 800 (N.D. Ill. 2013); Nat’l Rest. Ass’n v. Solis, 870 F. Supp. 2d 42, 45 (D.D.C. 2012).
A. Notice
As noted above, to be eligible to take a tip credit an employer must inform the tipped
employee of certain provisions of 29 U.S.C. § 203(m). See 29 C.F.R. § 531.59(b). Applying
§ 203(m)’s plain language, this duty is to inform, not necessarily to explain. See, e.g., Garcia v.
Koning Restaurants Int’l, L.C., No. 12-CV-23629, 2013 WL 8150984, at *4 (S.D. Fla. May 10,
2013); Kilgore v. Outback Steakhouse of Florida, Inc., 160 F.3d 294, 298 (6th Cir. 1998) (holding
that an employer must “inform its employees of its intent to take a tip credit toward the employer’s
minimum wage obligation,” but the employer is not required to explain the tip credit). The scope
of the required notice is in dispute here, and the notice Defendant gave was fully addressed at trial.
As an initial matter, there is a distinction between a “tip credit” and a “tip pool.” As
explained above, an employer takes a “tip credit” when the employer pays an employee a cash
wage less than the minimum wage required, but supplements the difference with the employee’s
tips. See Kubiak, 2016 WL 659305 at *6. In contrast, a “tip pool” is where certain tip amounts
- 20 -
are taken from one employee, and are then given to another employee—e.g.,“[w]here waiters give
a portion of their tips to the busboys.” 29 C.F.R. § 531.54.
The parties do not dispute here that Defendant adequately notified Plaintiff of the tip credit.
In other words, the Plaintiffs concede and the evidence shows that through the wage and hour
posters posted at Defendant’s business Defendant informed Plaintiffs (1) that they were paid less
than the federal minimum wage and (2) that Defendant supplemented the difference between the
their hourly pay and the minimum wage with their tips (Doc. 106, ¶ 11; DX. 3, 4). See Kubiak,
164 F. Supp. 3d at 1354 & n. 16; Pellon v. Business Representation Int’l, Inc., 528 F. Supp. 2d
1306, 1310–11 (S.D. Fla. 2007), aff’d, 291 Fed. Appx. 310 (11th Cir. 2008) (holding that “an
employer must inform its employees that it intends to treat tips as satisfying part of the employer’s
minimum wage obligations” to satisfy § 203(m)). What is in dispute, then, is whether Defendant
adequately informed Plaintiffs of the tip pool.
To frame the dispute more precisely, while the parties continue to argue about what notice
is necessary, the question here is really whether the notice that was provided was sufficient (along
with the factual dispute over what Defendant actually told Plaintiffs, an issue dealt with infra).
To begin, Defendant argues that its FLSA poster contains all the notice that § 203(m) requires.
That is, that the poster alone was sufficient. On the other hand, Plaintiffs argue that § 531.59(b)’s
amendment has broadened the notice landscape to require notice about the tip pool. That is, that
the poster may be sufficient for the tip credit, but that Plaintiffs also needed additional tip pool
notice. Defendant disagrees and ripostes that to the extent that the amended regulation (§ 531.59)
requires more notice than the statute (§ 203) does, the regulation is not entitled to deference.
Notably, this tip-pool-notice issue has already been raised in this case, and in my previous
order I said the following: “In deciding the cross-motions for summary judgment, however, it is
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not necessary to determine the precise contours of the [§ 531.59(b)] post amendment notice
requirement. There is ample evidence in the record . . . creat[ing] an issue of fact regarding the
extent of notice provided to Plaintiffs.” (Doc. 81, p. 8) (emphasis added). This has proven to be
true: I need not decide the precise contours of the notice requirement.
The evidence at trial reveals that Defendant has satisfied the notice that Plaintiffs say is
required (i.e., necessary) under the statute and the regulation, given a plain reading of the law and
without weighing into whether the regulation exceeds what is required by § 203(m) or whether the
regulation simply explains or supplements it (as I have previously said that it appears to do, see
Doc. 81 p. 7).
In any event, for the sake of completeness I’ll first address the history of the parties’
arguments throughout this case, and then I will turn to the evidence presented at trial.
1. Tip pool notification under § 203(m)
With the distinction between a tip credit and a tip pool in mind (and that only notice of the
tip pool is at issue here), § 203(m), which defines “Wage” under the FLSA, sets forth its notice
requirement—in a most cumbersome way—as follows:
In determining the wage an employer is required to pay a tipped employee, the
amount paid [to] such employee by the employee’s employer shall be an amount
equal to—
(1) the cash wage paid such employee which for purposes of such
determination shall be not less than the cash wage required to be paid such
an employee on August 20, 1996; and
(2) an additional amount on account of the tips received by such employee
which amount is equal to the difference between the wage specified in
paragraph (1) and the wage in effect under section 206(a)(1) of this title.
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The additional amount on account of tips may not exceed the value of the
tips actually received by an employee. 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.
§ 203(m) (emphasis added). While § 203(m)’s final sentence plainly permits tip pools, whether
the section requires employers to notify their employees of a tip pool—and if so, to what extent—
is not plain from § 203(m)’s text. Cf. Dorsey v. TGT Consulting, LLC, 888 F. Supp. 2d 670, 685
n.12 (D. Md. 2012) (noting § 203(m)’s awkward wording).
Indeed, this issue has been heavily
litigated in this case, and both parties have offered competing interpretations of § 203(m). (Docs.
51, 64, 73, 81, 84, 86, 93, 106, 107).
The parties first briefed this issue when they submitted cross-motions for summary
judgment. (Docs. 51, 64). In its motion, Defendant argued that it gave adequate notice of the tip
pool under § 203(m) by prominently posting “an employment poster approved by the Department
of Labor.” (Doc. 51, pp. 13–14). Defendant’s poster stated:
Employers of “tipped employees” must pay a cash wage of at least $2.13 per hour
if they claim a tip credit against their minimum wage obligation. If an employee’s
tips combined with the employer’s cash wage of at least $2.13 per hour do not equal
the minimum hourly wage, the employer must make up the difference. Certain other
conditions must also be met.
(Doc. 70-3, p. 4; DX. 4) Defendant cited Pellon for the proposition that the poster constituted
sufficient notice under § 203(m) (Doc. 51, p. 13). 528 F. Supp. 2d at 1310–11 (“Because it would
defy logic to require the display of inadequate information regarding the minimum wage and
employer tip credit, a prominently displayed poster using language approved by the Department
of Labor to explain 29 U.S.C. § 203(m) is sufficient notice.”).
Plaintiffs opposed Defendant’s motion by arguing that Pellon was not dispositive as it was
- 23 -
decided four years before the Department of Labor amended 29 C.F.R. § 531.59, which is titled
“The tip wage credit.”14 (Doc. 64, pp. 7–12). Section 531.59(b), as amended and by its plain
language appears to require that an employer inform its tipped employees (among other
notifications) “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.” This additional tip-pooling information is, as Plaintiffs argue, required along with
the information contained in the Department of Labor poster (which strictly addresses a tip credit).
In denying the motions for summary judgment, the Court agreed (in part) with Plaintiffs
by stating that “[i]n light of the amended regulation, it is questionable whether the poster the
Defendant had posted, lacking any information about tip pooling, would—without more—
constitute sufficient notice, where Defendant claimed a tip credit and Plaintiffs were part of a tip
pool.”15 (Doc. 81, p. 9) (emphasis added).
Section 531.59 was amended in 2011. The Court’s order on summary judgement examined in
detail § 531.59(b)’s legislative history. (Doc. 81).
15
In agreeing with Plaintiff that Pellon was not dispositive—given § 531.59(b)—the Court cited
favorably to two out-of-circuit cases: AppleIllinois, 917 F. Supp. 2d at 802–03 and Nat’l Rest. Ass’n, 870
F. Supp. at 56. (Doc. 81, pp. 6–9). In AppleIllinois, after § 531.59(b) was amended, that court considered
a poster similar to the poster at issue here and stated that the poster was insufficient under § 203(m).
AppleIllinois, 917 F. Supp. 2d at 802–03. (“The text of [FLSA] posters alone cannot comply with the
requirement to inform employees of the provisions of § 203(m). The federal poster discloses that an
employer may claim a tip credit when “certain other conditions [are] met” without describing those other
conditions. . . . One of such conditions not described is the requirement of § 203(m) that the employee retain
all tips except for tip pooling.”) (emphasis added). Still, AppleIllinois did not specifically address the
contours of tip pool notice; the opinion, instead, focused on the notice of a tip credit in denying a motion
for summary judgment. 917 F. Supp. 2d at 802–05. In Nat’l Rest. Ass’n (which addressed whether
§ 531.59(b), as a final rule, was properly promulgated under the Administrative Procedure Act, as opposed
to explicitly applying the contours of tip-pool notification), that court concluded that § 531.59(b) tracked
§ 203(m)’s statutory language after performing a side-by-side textual comparison and noted that
§ 531.59(b) “does not require employers to do anything other than what they were already obligated to do
under section [20]3(m).” 870 F. Supp. 2d at 56. I relied on Nat’l Rest. Ass’n to support the propositions
that “expressly requiring the disclosure of five specific provisions, as in [§ 531.59(b)], does not require
employers to do any more than what they were already obligated to do under section 203(m), albeit a more
detailed requirement than some courts previously mandated” and that “it could be said that the final
amended rule was intended to clarify the notice requirements.” (Doc. 81, p. 7).
14
- 24 -
Next, the parties briefed § 203(m)’s tip pool notice contours for a second time when
Defendant asked the Court to reconsider its denial of summary judgment. (Doc. 84). Defendant
asserted that § 531.59(b), as a regulation promulgated by the Department of Labor, was not entitled
to Chevron deference given an intervening Supreme Court decision, Encino Motorcars, LLC v.
Navarro, 136 S. Ct. 2117 (2016). (Doc. 84, p. 4). Plaintiffs opposed this motion arguing, in part,
that Encino Motorcars did not constitute a change in controlling law. (Doc. 86, pp. 3–7).
In rejecting Defendant’s request for reconsideration, I briefly summarized my previous
decision denying summary judgment.
In that summary, I noted that Pellon was factually
distinguishable from the instant case (i.e., notification of a tip pool was not at issue in Pellon) and
that Pellon predated § 531.59(b)’s amendment. (Doc. 93, pp. 3–6). I further noted that though
Defendant’s motion for reconsideration cited to two cases for the proposition that courts in this
circuit still continue to rely on Pellon even after § 531.59(b) was amended, neither of those cases
analyzed § 531.59(b) in detail. (Doc. 93, p. 6); Ide v. Neighborhood Rest. Partners, LLC, F. Supp.
3d 1285 (N.D. Ga. 2014); Koning Rests. Int’l, 2013 WL 8150984.
Finally, post-trial, the parties have once again briefed § 203(m)’s notice requirements in
their proposed findings of facts and conclusions of law. (Docs. 106, 107). For Plaintiffs’ part,
they rely heavily on § 531.59(b) for the proposition that § 203(m) requires specific disclosures of
tip pools. (Doc. 106, pp. 14–20). Again, they claim that under § 203(m), as interpreted by
§ 531.59(b), an employer must (among other notifications) explicitly inform their employees (1)
that the employees have a right to retain all of their tips except for those tips taken out for a valid
tip pool, and (2) that only customarily and regularly tipped employees can receive tips from the
- 25 -
pool.16 (Doc. 106, pp. 15–16) (“By not informing its employees of the legal limitations of the tip
pool, Plaintiffs were kept in the dark by Defendant regarding who could legally participate in the
tip pool”).
In Defendant’s post-trial briefing, it presents a structural argument on how to interpret
§ 203(m). (Doc. 107, pp. 25–28). Defendant assumes that § 203(m)’s final sentence imposes
two separate conditions on employers who wish to take a tip credit17 and requires nothing more—
i.e., it does not require notice about retaining tips or tip pooling.
The first condition, according to Defendant, is that employers must inform its employees
“of the provisions of this subsection.” According to Defendant, the phrase “provisions of this
subsection” does not refer to § 203(m) in its entirety—that would be nonsensical as the initial part
of § 203(m) (around four sentences or so) deals with nuanced wage issues involving boarding and
lodging that are not relevant to the average, run-of-the-mill FLSA case. (Doc. 107, p. 26 n.8).
Defendant also argues that the phrase “provisions of this subsection” does not refer to § 203(m)’s
last sentence, because that sentence merely imposes conditions on the use to tip credits but does
not define the tip credit. (Doc. 107, p. 26). By taking Defendant’s argument to its logical
At trial, Plaintiffs focused on Defendant’s purported failure to inform them that only customarily
and regularly tipped employees could receive amounts from the tip pool. (Tr. 126, 132, 226).
17
See Cumbie v. Woody Woo, Inc., 596 F.3d 577, 580–81 (9th Cir. 2010) (concluding that
§ 203(m)’s final sentence imposes two separate “conditions on taking a tip credit”); Kubiak, 164 F. Supp.
3d at 1355 (“If an employer fails to satisfy any of these preconditions, the employer may not claim the tip
credit . . . .”); Steiner-Out v. Lone Palm Golf Club, LLC, No. 8:10-CV-2248-T-24TBM, 2010 WL 4366299,
at *3 (M.D. Fla. Oct. 28, 2010) (“Pursuant to § 203(m), in order for the employer to qualify for the tip
credit, two requirements must be met . . . .”).
16
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conclusion, the two sentences of § 203(m) that do define the wages of tipped employees—that is,
§ 203(m)’s third to last sentence and penultimate sentence—are what constitute the phrase
“provisions of this subsection” and are what an employer must notify an employee of in order to
meet this first tip-credit-condition.18
Defendant argues that the second condition that must be satisfied by an employer to be able
to use a tip credit is that “all tips received by [a tipped] employee have been retained by the
employee.” Yet § 203(m) provides an exception to this condition: though a tipped employee must
retain all of his or her tips, § 203(m) allows an employer to take away an employee’s tips and to
place those amounts into a tip pool, if, and only if, those amounts are distributed only to employees
who customarily and regularly receive tips. See Kubiak, 164 F. Supp. 3d at 1354–55 (noting that
§ 203(m) imposes the condition that “the employee retained all tips he received, except when an
18
Those two sentences of § 203(m) state the following:
In determining the wage an employer is required to pay a tipped employee, the amount
paid such employee by the employee’s employer shall be an amount equal to—
(1) the cash wage paid such employee which for purposes of such determination
shall be not less than the cash wage required to be paid such an employee on
August 20, 1996; and
(2) an additional amount on account of the tips received by such employee which
amount is equal to the difference between the wage specified in paragraph (1) and
the wage in effect under section 206(a)(1) of this title.
The additional amount on account of tips may not exceed the value of the tips actually
received by an employee.
29 U.S.C. § 203(m); see Cumbie, 596 F.3d at 580 (“The first sentence states that an employer must pay a
tipped employee an amount equal to (1) a cash wage of at least $2.13, plus (2) an additional amount in tips
equal to the federal minimum wage minus such cash wage. That is, an employer must pay a tipped employee
a cash wage of at least $2.13, but if the cash wage is less than the federal minimum wage, the employer can
make up the difference with the employee’s tips (also known as a ‘tip credit’). The second sentence clarifies
that the difference may not be greater than the actual tips received. Therefore, if the cash wage plus tips are
not enough to meet the minimum wage, the employer must ‘top up’ the cash wage. Collectively, these two
sentences provide that an employer may take a partial tip credit toward its minimum-wage obligation”).
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employer requires an employee to participate in a tip pool with other employees who customarily
and regularly receive tips”) (page number omitted).
Based on this interpretation of § 203(m), Defendant concludes that the statute does not
require any notification of a tip pool and that its posters were sufficient under the law. (Doc. 107,
pp. 28–30). In other words, Defendant concludes (as it has argued all along) that because
§ 203(m) imposes only two conditions on the use of a tip credit, and because neither condition
requires employers to inform their employees of a tip pool, § 203(m) does not impose any duty on
employers to notify their employees of a tip pool.
To support the proposition that § 203(m) does not require employers to make any
notification of a tip pool, Defendant cites Campbell v. Pincher’s Beach Bar Grill Inc., No.
215CV695FTM99MRM, 2016 WL 3626219, at *4 (M.D. Fla. July 7, 2016), Pellon, 528 F. Supp.
2d at 1310–11, Ide, 32 F. Supp. 3d at 1292–93, Koning Restaurants Int’l, L.C., 2013 WL 8150984
at *4–6, and Garcia v. Palomino, Inc., 738 F. Supp. 2d 1171, 1178 n.37 (D. Kan. 2010). (Doc.
107, pp. 31–34). Although most of these cases are from this Circuit and most were decided after
§ 531.59 was amended, only Koning Restaurants addresses (albeit briefly) § 531.59(b); but, that
case does not elaborate on § 203(m)’s tip pool notice contours. Compare Koning Restaurants,
2013 WL 8150984 at *4 n.3 (noting in a footnote that Nat’l Rest. Ass’n concluded that § 531.59(b),
as amended, requires no more notice than § 203(m) already does, that is, that an employer inform
its employees of § 203(m)’s provisions) with Ide, 32 F. Supp. 3d at 1292–93 (declining to mention
§ 531.59(b)).
Also in its post-trial briefing Defendant cites 29 C.F.R. § 531.54, which is titled “Tip
Pooling.”
Defendant argues that whatever tip pool notification the FLSA requires, that
notification is limited to—and only to—§ 531.54’s explicit requirement that “an employer must
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notify its employees of any required tip pool contribution amount.” (Doc. 107, pp. 33–34). This
regulation appears to clearly define the tip pool notice that an employer must give: notice of the
amount of the tips taken from the employee in question and placed into the pool. But the case
law on what constitutes sufficient notice under § 531.54 is thin at best. See, e.g., Perez v. Sophia’s
Kalamazoo, LLC, No. 1:14-CV-772, 2015 WL 7272234, at *7–8 (W.D. Mich. Nov. 17, 2015)
(denying summary judgment where the parties presented conflicting evidence as to whether a tip
pool was voluntary); Palacios v. Hartman & Tyner, Inc., No. 13-CIV-61541, 2014 WL 7152745,
at *3–4 (S.D. Fla. Dec. 15, 2014) (addressing the validity of a tip pool, quoting § 531.54, but noting
that notice was not at issue).
Post-trial, Defendant also requests that I hold that § 531.59(b) is entitled to no deference
under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). Defendant bases
this request on the notion that to the extent § 531.59(b) requires more notice than § 203(m)
requires, § 531.59(b) is not entitled to Chevron deference. (Doc. 107, ¶¶ 74–79). Yet I, once
again (see Doc. 84), decline Defendant’s request: as set forth infra sub-section III.A.2, I find that
Defendant’s notice was sufficient here and thus need not take up this issue.
In sum, talking all of the parties’ briefing into account, none of the case law before the
Court definitively delineates § 203(m)’s tip-pool-notification requirements; assuming, of course,
that § 203(m) does indeed require notice of a tip pool at all. And certainly none of these cases are
factually similar to this case, because none of these cases involved a direct challenge to an
employer’s notice, or lack thereof, of a tip pool.
At a minimum, it is clear and undisputed that § 203(m) requires a base level of notice to
tipped employees with respect to the tip credit.
This notice was provided here.
Then
§ 531.59(b), by its plain language, states that tip pool notice is also to be given to tipped employees.
- 29 -
This was also provided here, whether or not it is necessary. And, as Defendant points out,
§ 531.54 requires notice as to the amount of tips contributed to the tip pool, which was also done
here. Thus I find in this case, in light of the evidence discussed, that the notification provided by
Defendant was sufficient to claim a tip credit and utilize a tip pool.
2. The tip pool notifications at issue here
So, whatever the specific contours of the tip pool notice requirement are, I need not define
all of those contours here. Even if the Court were to adopt Plaintiffs’ interpretation of the notice
requirements, the evidence presented at trial shows that Defendant provided sufficient notice. Put
differently, the evidence shows that Defendant informed Plaintiffs (1) that a tip pool existed and
that their participation in the tip pool was mandatory; (2) that the tip-pool-contribution amount
was ten percent of their tips (or eight percent before 2010), and that Plaintiffs would retain the rest
of their tips; (3) that the pool amount would be given to, and only to, the cage employees (at least
after the 2010 meeting); and (4) that the cage employees are, like the Plaintiffs and the other
dealers, regularly tipped employees.
Defendant accomplished these notifications through a
meeting in 2010, a handbook distributed in 2013, and through its day-to-day practices.19
The 2010 meeting represents Defendant’s most elaborate communication with its
employees about the tip pool. Defendant, through its president Matthews, held a meeting that was
mandatory for all dealers (including Plaintiffs, who were in attendance). The evidence shows that
at the meeting Matthews discussed several contentious issues surrounding the tip pool: due to a
19
To the extent Plaintiffs argue that they had no subjective understanding of who was receiving
the tip pool amount and whether those recipients were customarily tipped, I note that the § 203(m) notice
standard is whether the employer adequately informs its employees of the tip credit (and, assumedly, of the
tip pool); the standard is not whether the employees understand those concepts. See Kilgore, 160 F.3d at
298) (stating that an employer must “inform its employees of its intent to take a tip credit toward the
employer’s minimum wage obligation”).
- 30 -
lawsuit pending at that time, Defendant was removing managerial employees from the tip pool;
Defendant was increasing the tip-pool amount dealers were forced to contribute by two percent—
from eight to ten percent of their tips; and all tip pool amounts were now going to only cage
employees. Importantly, Matthews further stated at the meeting that the two-percent-tip-poolamount increase was necessary because, although cage employees are also tipped employees like
dealers, the tips that cage employees regularly receive tend to be far smaller than the tips that the
dealers receive; the cage employees and the dealers are a team; and the dealers are dependent upon
the cage employees. I find Matthews’s testimony credible, and consistent with both the testimony
of Faso and Pernek, along with the overall facts. (See supra sub-section I.D.2.).
As to the handbook, Bendure testified that sometime in 2013 Defendant submitted dealer
handbooks that (again) informed the dealers that ten percent of their tips would be distributed to
cage employees.20 While both Plaintiffs struggled to remember if they had actually received the
handbooks, Defendant’s exhibit clearly shows that Plaintiff signed a form stating that they had
been given the handbook, and Plaintiffs do not dispute that they did indeed sign the form.
Lastly, undisputed evidence established that each and every shift that Plaintiffs dealt cards
for Defendant, starting around 2008 and lasting until 2015, Plaintiffs would go through a process
in which the amount of tips flowing from them to the tip pool was accounted for and made known
to Plaintiffs. That is, at the end of a dealer’s shifts, the dealer would be accompanied to a room,
under video-surveillance, in which another employee would (with the dealer) count all of the tips
the dealer earned that day, and then the other employee would allocate ninety percent of the tips
While Plaintiffs argue that the handbook is misleading in as far as it calls the tip pool a “tip
share,” which (according to Plaintiffs) makes the tip pool appear voluntary, I note that the handbook makes
clear that the tip amount “will” be deducted from the dealers’ tips and the handbook makes no mention that
the deduction is optional. (DX. 9).
20
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to the dealer and the remaining ten percent to the tip pool by filling out a tip slip (until 2010, the
tip pool amount was only eight percent). The dealer would then sign the tip slip and would receive
a carbon copy of it. Both Plaintiffs admit that they went through this process after each shift they
dealt cards.
(Tr. 105–10; 140–42).
In other words, Defendant’s tip-out process notified
Plaintiffs each and every shift that they would retain all of their tips except for the tip pool amount
and notified Plaintiffs of what those amounts were.
In sum, as early as 2010, Defendant informed Plaintiffs that their participation in the tip
pool was mandatory; that ten percent of their tips would be taken from them and put into the tip
pool and that Plaintiffs would retain the rest; that the cage employees—and only the cage
employees—would receive the tip-pool amounts; and that the cage employees, like Plaintiffs,
regularly receive tips from customers, but those tips are far smaller than the tips that Plaintiffs
received. So, even if § 203(m) requires what Plaintiffs contends it does, the evidence establishes
that they received sufficient notice from Defendant.
Meanwhile, Plaintiffs failed to present any evidence to the contrary, beyond their own
recollections of the details of the 2010 meeting, but their testimony on their recollections was not
entirely credible. (See supra sub-section I.D.2.) Accordingly, the undersigned finds that, based
on the preponderance of the evidence, Defendant adequately informed Plaintiffs of the tip pool.
B. Pool Validity
In addition to their claim of inadequate notice, Plaintiffs also claim that Defendant’s tip
pool was invalid due to the inclusion of certain employees.
Generally, a tip pool may be
invalidated by the inclusion of either (1) employees who are not customarily and regularly tipped
or (2) employers. Though either circumstance would invalidate the pool here, and in turn
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invalidate Defendant’s use of the tip credit, I find that the evidence shows that the pool includes
only eligible employees and that the pool is therefore valid.
1. Customarily and regularly tipped
The FLSA defines a customarily and regularly tipped employee as “any employee engaged
in an occupation in which he customarily and regularly receives more than $30 a month in tips.”
29 U.S.C. § 203(t). Tips received from a tip pool are counted as “received tips” to establish
whether an employee is customarily and regularly tipped. 29 C.F.R. § 531.54 (“Where employees
practice tip splitting, as where waiters give a portion of their tips to the busboys, both the amounts
retained by the waiters and those given [to] the busboys are considered tips of the individuals who
retain them, in applying the provisions of section 3(m) and 3(t).”); Wacjman v. Investment Corp.
of Palm Beach, No. 07-80912-CIV, 2008 WL 783741, at *2 (S.D. Fla. Mar. 20, 2008).
An employee, however, cannot become eligible for tip sharing simply by taking money
from a tip pool. See 29 C.F.R. § 531.56(c); Chan v. Triple 8 Palace, Inc., No. 03 Civ. 6048
(GEL), 2006 WL 851749, at *14 & n.22 (S.D.N.Y. Mar. 30, 2006). Thus, to show that an
employee is customarily and regularly tipped, there must be evidence that the employee receives
more than thirty dollars in tips per month (through direct tips, or through direct tips and a tip pool).
Additionally, “[c]ourts have focused on the extent of an employee’s customer interaction as a
significant factor in determining whether the employee is a customarily tipped employee.” Rubio,
2013 WL 230216 at *2; Wacjman, 2008 WL 783741 at *3 (“In determining whether an employee
is engaged in an occupation that ‘customarily and regularly’ receives tips for purposes of § 203(t),
the focus is properly drawn to the question of whether the employee performs important customer
service functions, i.e. does the employee have more than de minimis service interaction with
customers.”).
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To begin with, the evidence shows here that Defendant’s employees who work in the
occupation of “cage employee” directly receive tips from customers. There is no dispute that cage
employees are tipped when they work as tellers, chip runners, and when they work at the podium.
And it is clear that cage employees who work in the vault also work as tellers, chip runners, and
at the podium. Thus, cage employees—including the cage employees who are eligible to enter
the vault—do directly receive (at least some) tips from customers when they work at the podium
or as chip-runners and tellers.
Further, Defendant’s officer manager, Kelso, testified that she performed a historical
analysis of the amount of tips that cage employees have received from 2012 through April 2015.
Tr. II. 48, 52, 55. These records show that each cage employee who worked a full twenty-eight
day-work-period, was tipped more than thirty dollars a month. Plaintiffs presented no evidence
to rebut these records.
Plaintiffs do note, however, that the evidence fails to show the precise amount of tips that
each cage employee directly received from customers. (Doc. 106, pp. 23–25). Still, Defendant’s
failure to track exact tip amounts is not dispositive here for two reasons. First, the evidence shows
that all cage employees do receive tips directly from customers (Tr. 83, 98, 118, 163–65 175–76,
180–81, 183; Tr. II. 28–29, 37–38, 49). See Palacios, 2014 WL 7152745 at *6 (noting when the
employee “is, as a matter of undisputed fact, tipped by patrons, the Court need not look further
because the employment position is indisputably one involving the customary and regular receipt
of tips, simply by virtue of the fact that tipping routinely occurs”). Second, the evidence also
shows that the cage employees perform important customer service functions and have far more
than de minimis service interaction with customers. See Manning v. St. Petersburg Kennel Club,
Inc., No. 8:13-CIV-3060, 2015 WL 477364, *3 (M.D. Fla. Feb. 5, 2015) (“[I]n some
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circumstances, an inquiry into the quality and quantity of an employee’s customer interaction is
warranted to determine whether he or she can properly be included in a tip pool.”); Palacios, 2014
WL 7152745 at *6 (“Under circumstances where the challenged position’s tips stem from the tip
pool itself . . . a Court may need to go further in order to ascertain whether the position is one
which customarily and regularly receives tips.”); Wacjman, 2008 WL 783741 at *3 (focusing on
“the question of whether the employee performs important customer service functions”).
Indeed, it is clear here that the cage employees who are eligible to enter the vault also work
at the podium, as chip runners, and as tellers, all of which are duties that undisputedly involve
significant customer interaction. That said, some cage employees do work, at times, exclusively
in the vault and without any customer interaction. These times are limited to two types of
instances.
The first instance occurs when customers are not even present at the casino. During these
periods, for about an hour before customers arrive at the poker room and for about the same amount
of time after the customers leave the poker room, cage employees balance the amount of cash and
chips in the vault. (Tr. 72, 76, 185–89). It is clear that during these times no poker room
employee could even receive a tip from a customer as there are no customers to do so.
The second instance occurs when customers are gambling in the poker room. This
happens when a cage employee who is eligible to enter the vault (e.g., Bendure)
contemporaneously moves between the vault and the teller station throughout his or her shift. So,
taking Bendure as an example, when he enters the vault during these times he exchanges chips for
cash or vice versa (and balances those amounts to ensure that the dealers and other cage employees
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are not absconding with chips and cash) as necessary to serve the dealers and other cage
employees.21
Yet at the most fundamental level, without a cage employee distributing additional chips
and cash from the vault to the dealers, tellers, chip-runners, and players, the gambling operation
would certainly fold—along with all the tipping that flows from the gambling. So, when cage
employees work in the vault, they are tipped employees who are performing tip-related, but nontipped duties. See, e.g., Crate v. Q’s Restaurant Group LLC, No. 8:13-CIV-2549, 2014 WL
10556347, *4 (M.D. Fla. May 2, 2014) (“Pursuant to 29 C.F.R. § 531.56(e), there is a distinction
between an employee in a dual job (such as a maintenance man in a hotel who also servers as a
waiter) and an employee employed in a single job that performs tipped duties and related, nontipped duties (such as a waitress who spends part of her time cleaning and setting tables, toasting
bread, making coffee and occasionally washing dishes or glasses).”).
Put differently, cage
employees who enter the vault to obtain chips or cash for the poker room, and who also receive
tips when they work as a teller, chip-runner, and at the podium, are akin to ‘“a waitress who spends
part of her time cleaning and setting tables, toasting bread, making coffee and occasionally
washing dishes or glasses.’” May v. Steak N Shake Operations, Inc., No. 3:14-CIV-912, 2014
WL 7251637, *2 (M.D. Fla. Dec. 19, 2014) (quoting 29 C.F.R. § 531.56(e)). Thus, though vault
duties may not be directed towards producing tips, they are duties related to a tipped occupation.
And in this case, they aren’t the exclusive duties of a cage employee, e.g., Bendure spends time
directly interacting with customers in his work as a teller or chip runner or at the podium.
21
Still, while he is in the vault, Bendure always leaves the vault door open so he can listen for
customers who may need his assistance as a teller, which would be especially important when he is the only
teller available. (Tr. 75, 91–93).
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In short, the evidence shows that the cage employees receive through the tip pool and
through direct tips from customers more than thirty dollars in tips per month. Additionally, the
evidence also shows that the cage employees, including those who are eligible to enter the vault,
have significant customer interaction when they work as tellers, chip runners, and at the podium.
Accordingly, all of Defendant’s cage employee are engaged in a tipped occupation under § 203(t).
2. Employers
The forced sharing of tips with “employers” is an illegal practice that invalidates a tip pool,
regardless of whether the employers are engaged in services that could be subject to tipping. See
Wacjman, 2008 WL 783741 at *3 & n.1. Section 203 defines an “employer,” as “any person
acting directly or indirectly in the interest of an employer in relations to an employee.” 29 U.S.C
§ 203(d). Typically, employees who have been deemed to be “employers” under the FLSA are
owners or managers. See, e.g., Gionfriddo v. Jason Link, LLC, 769 F. Supp. 2d 880, 893–94 (D.
Md. 2011) (holding that the owner of a tavern was an “employer” under the FLSA and thus
ineligible to participate in a tip pool); see also Ayres v. 127 Restaurant Corp., 12 F. Supp. 2d 305,
308–09 (S.D.N.Y. 1998) (holding that a restaurant employee serving as the manager was precluded
from receiving tips).
Whether an individual is an employee under the FLSA “is not governed by the ‘label’ put
on the relationship by the parties.” Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1311 (11th
Cir. 2013). Instead, in determining who is an “employer,” courts look to whether an individual
hires and fires employees, controls the manner in which employee work is performed, and fixes
employee wages. See Villarreal v. Woodham, 113 F.3d 202, 205 (11th Cir. 1997); Dole v.
Continental Cuisine, Inc., 751 F. Supp. 799, 802–03 (E.D. Ark. Sept. 28, 1990). Yet technical
and isolated factors do not determine whether an individual is an employer; courts, instead, look
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to the circumstances as a whole. Alvarez Perez v. Sanford-Orlando Kennel Club, Inc., 515 F.3d
1150, 1160 (11th Cir. 2008); Vickery v. Cumulus Broad., LLC, No. 616CV248ORL37KRS, 2016
WL 4382703, at *2 (M.D. Fla. Aug. 17, 2016) (“[T]he Eleventh Circuit has condemned the
practice of focusing on a single factor, such as control; rather, the district court must consider the
entire circumstances of the work relationship.”).
The evidence shows here that it is undisputed that none of the cage employees are owners.
Further it shows that (as set forth below) the cage employees (including the cage employees
eligible to enter the vault) do not hire, fire, fix wages, control how other employees work, or set
employee schedules.
For instance, none of the cage employees hired, fired, or fixed wages. The evidence shows
that only Matthews (Defendant’s president) has these powers or responsibilities. What remains
are a few acts performed by the cage employees that fall short—under the entirety of the
circumstances—of transforming the cage employees into employers. For instance, Danielson
once drafted a proposed cage-employee schedule that Pernek, not Danielson, ultimately adopted
and implemented. Cf. Schear v. Food Scope Am., Inc., 297 F.R.D. 114, 135 (S.D.N.Y. 2014)
(denying the defendant’s motion for summary judgment when the employee at issue controlled
other employee’s work schedules, among controlling other conditions of employment). There is
also evidence that Danielson signed tax documents and a single agreement on behalf of Defendant.
But these acts, under the circumstances, do not show that Danielson hired, fired, set wages for, or
controlled other employees.
Evidence also exists that Danielson and Bendure (both of whom are experienced cage
employees) trained new cage employees. Further, Bendure would apparently attempt to resolve
problems between dealers and chip runners, but the unrebutted testimony shows that only
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Matthews was able to discipline employees; Bendure has no such authority. There is also
evidence that Bendure himself, and others, referred to Bendure as a supervisor, but Bendure was
never formally given that title.22
To be sure, the cage employees eligible to enter the vault occupy a position of trust within
Defendant’s business as they handle the sensitive duty of accounting for large sums of Defendant’s
cash and chips, both of which could easily be subject to malfeasance or mistake. Yet cage
employees are not employers under the entirety of the circumstances: they do not hire and fire
other employees, they do not set wages, they do not discipline, they do not schedule other
employees, they do not control Defendant’s day-to-day operations—they simply operate the vault
and work as tellers, chip runners, and at the podium.
IV.
CONCLUSION
Based on the foregoing:
1. Defendant Second Chance Jai-Alai, LCC has proven by a preponderance of the
evidence that it did not violate the FLSA as alleged in Count I of the Complaint (Doc.
29).
2. The Clerk is DIRECTED to ENTER FINAL JUDGMENT in favor of Defendant
Second Chance Jai-Alai, LCC as to all claims by Plaintiffs Christopher Howard and
Jeffrey Greenstone, with costs to be taxed in accordance with applicable law.
22
Plaintiffs appear to contend that Faso participated in the tip pool; but there is no evidence that
Faso ever received any amount from the tip pool. (See supra subsection I.B.) Also, there is evidence that
prior to 2010 Pernek, the cage department manager, received amounts from the tip pool. Yet there is no
evidence that Pernek received any further amounts after the 2010 meeting. This action was filed on April
20, 2015; thus, assuming that Defendant did willfully violate the FLSA, the look-back period only reaches
to three years prior to the date of filing. 29 U.S.C. § 255(a) (“[A] cause of action arising out of a willful
violation may be commenced within three years after the cause of action accrued.”).
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3. The Clerk is further DIRECTED to TERMINATE ALL PENDING MOTIONS and
CLOSE THE FILE.
ORDERED in Ocala, Florida on December 9, 2016.
Copies furnished to:
Counsel of Record
Unrepresented Parties
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