Howard v. Second Chance Jai Alai LLC et al

Filing 93

ORDER denying 84 Motion for Reconsideration. Signed by Magistrate Judge Philip R. Lammens on 7/18/2016. (JWM)

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.

ORDER
This case, which is currently scheduled for a bench trial on August 8, 2016, is before the
court for consideration of Defendant’s Motion for Partial Reconsideration on Defendant’s Motion
for Summary Judgment (Doc. 84), to which Plaintiff has responded in opposition (Doc. 86). For
the reasons explained below, Defendant’s motion is due to be denied.
I.

BACKGROUND

Plaintiffs, Christopher Howard and Jeffrey Greenstone, are former employees of
Defendant, Second Chance Jai-Alai, LLC (“Second Chance”), and were employed as poker dealers
at Defendant’s Ocala Poker and Jai-Alai establishment. As set forth in their Second Amended
Complaint (Doc. 29), Plaintiffs bring claims for alleged violations of the minimum wage
provisions of the Fair Labor Standards Act, 29 U.S.C. §201 et seq. (“FLSA”).
Plaintiffs’ claims arise from Second Chance’s claiming of a tip credit on its poker dealers,
which permitted it to pay them 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 Plaintiffs. Plaintiffs also allege that, by requiring its poker
dealers to share their tip pool with non-tipped employees, Second Chance 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 Second Chance, Plaintiffs seek unpaid minimum wages owed to
them for the period in which they were paid pursuant to the tip credit, in addition to liquidated
damages, and attorneys’ fees and costs.
By Order entered June 16, 2016 (Doc. 81), the Court denied cross-motions for summary
judgment filed on behalf of both Defendant and Plaintiffs. Defendant, Second Chance, has now
moved for partial reconsideration of the Court’s denial of summary judgment on the issue of
whether Plaintiffs were properly notified about the tip credit under 29 U.S.C. § 203(m), arguing
that a recent Supreme Court decision should substantially change this Court’s evaluation of the
issue.
II.

STANDARD

Under Federal Rule of Civil Procedure 54(b), a court’s order or decision is “subject to
revision at any time before the entry of judgment.” Indeed, district courts have broad discretion
to reevaluate issues already heard before them. See Sussman v. Salem, Saxon & Lielsen, P.A.,
153 F.R.D. 689, 694 (M.D. Fla. 1994)(“The district courts are necessarily afforded substantial
discretion in ruling on motions for reconsideration.”).

There are three recognized grounds

justifying reconsideration of an order: (1) an intervening change of controlling law; (2) the
availability of new evidence; and (3) the need to correct clear or manifest injustice. See Lamar
Adver. Of Miobile, Inc. v. City of Lakeland, 189 F.R.D. 480, 489 (M.D. Fla. 1999).

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III.

DISCUSSION

Defendant argues that reconsideration of the Court’s summary judgment order is
appropriate because it was decided without the benefit of a recent Supreme Court decision relevant
to agency interpretation of statutes, citing Encino Motorcars, LLC, v. Navarro, No. 15-415, 2016
WL 3369424 (June 20, 2016). Defendant notes that the Supreme Court decided Navarro just four
days after this Court issued its order denying summary judgment, and contends that Navarro will
substantially change this Court’s evaluation of the notice issue.
A. The Prior Summary Judgment Decision
The basis for this Court’s decision denying summary judgment on the issue of whether
Defendant properly notified Plaintiffs about the tip credit under 29 U.S.C. § 203(m) is discussed
in detail in the prior Order. (Doc. 81). To summarize, Defendant argued, and continues to
maintain, that it is entitled to summary judgment on the issue of notice because it is undisputed
that an official Department of Labor minimum wage poster was prominently displayed at its
establishment. Defendant relies on Pellon v. Bus. Representation Int’l, Inc, 528 F. Supp. 2d 1306,
1310-11 (S.D. Fla. 2007), for the proposition that a prominently displayed poster containing
language approved by the Department of Labor would sufficiently inform an employee of the
FLSA tip credit. Consistent with this Court’s prior reasoning, however, the Pellon decision has
only limited relevance to the instant case due to several factors, including distinguishable facts and
an intervening amendment to the FLSA regulations.
In Pellon, the court considered on summary judgment whether defendant had properly
informed plaintiffs, who were employed as skycaps at Miami International Airport, that it intended
to take a tip credit against their wages under the FLSA. 528 F. Supp. 2d at 1309. The court
addressed what constituted proper notice of the tip credit provision under 29 U.S.C. § 203(m). Id.

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at 1310. The court stated, “[b]ecause 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.” Id. Notably, the facts of the Pellon case did not involve a tip pooling arrangement as
existed in the instant case, and the court’s holding considered that plaintiffs had also received an
oral notification. Id. at 1311.
Effective May 5, 2011, the Department of Labor (“DOL”) amended rule 29 C.F.R. §
531.59(b), detailing an employer’s obligation to inform tipped employees of the tip credit
provisions of § 203(m). The requirement “to inform” was enacted in 1974, when Congress
amended the FLSA to include, inter alia, that a tip credit shall not apply “unless such employee
has been informed by the employer of the provisions of this subsection.” 29 U.S.C. § 203(m).
The DOL’s stated purpose in promulgating the revisions was to update FLSA regulations that had
“become out of date because of subsequent legislation or court decisions,” and to “conform the
regulations to the FLSA Amendments.” See Updating Regulations Issued Under the Fair Labor
Standards Act, 73 Fed. Reg. at 43654 (July 28, 2008).
The amended final rule, codified as 29 C.F.R. § 531.59(b) provides five distinct disclosure
requirements, and reads in part:
Pursuant to section 3(m), an employer is not eligible to take the tip credit unless it
has informed its tipped employees in advance of the employer’s use of the tip
credit of the provisions of section 3(m) of the Act, i.e.: [1] The amount of the cash
wage that is to be paid to the tipped employee by the employer; [2] the additional
amount by which the wages of the tipped employee are increased on account of
the tip credit claimed by the employer, [3] which amount may not exceed the value
of the tips actually received by the employee; [4] 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; [5]
and that the tip credit shall not apply to any employee who has not been informed
of these requirements in this section.

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Id.
In the instant case, Defendant argues that summary judgment is warranted due to the fact that
it displayed an official DOL poster at its establishment which stated 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.
(Doc. 70-3, p. 4).
Importantly, the poster did not contain any mention of the final disclosure requirement
under 29 U.S.C. § 531.59(b): 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.” As this Court previously noted, in light of the amended regulation, it
is questionable whether the poster the Defendant displayed, 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. When considering such a poster after the final amended rule
had taken effect, one court concluded that the poster itself was insufficient:
“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.”
Driver v. AppleIllinois, LLC, 917 F. Supp. 2d 793, 802-03 (N.D. Ill. 2013).
Defendant’s reliance on Pellon is misplaced. Not only is Pellon factually distinguishable
from this case, but it predates the 2011 clarification of the notice requirement. Indeed, the DOL
poster (i.e., the poster that Defendant claims is in itself sufficient notice) lacks any mention of tip
pooling requirements and states, “[c]ertain other conditions must also be met.” (Doc. 70-3, p. 4).

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In light of the amended rule, common sense dictates that the “certain other conditions” which must
be met could include the fourth disclosure requirement under 29 C.F.R. § 531.59(b), which
requires notice 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.”
Defendant also cites two other district court cases from this Circuit to demonstrate that
courts have continued to rely on Pellon to evaluate notice even after the effective date of 29 C.F.R.
§ 531.59. The cases cited by Defendant, however, are distinguishable and do not analyze—or
even discuss—the amended rule. See Ide v. Neighborhood Rest. Partners, LLC, F. Supp.3d 1285
(N.D. Ga. 2014) (finding that notice was sufficient where the employer provided associate
handbooks “to their employees that articulate the tip credit requirements of 29 U.S.C § 203(m)”
and maintained a “Wage and Hour Poster”); Garcia v. Koning Rests. Int’l, 2013 WL 8150984
(S.D. Fla. 2013) (discussing a factual dispute between the parties as to whether the Department of
Labor’s poster was prominently displayed, but noting that regardless the “poster alone would not
have sufficed to inform [employees that do not understand English] of the ‘tip credit’”).
As this Court previously noted, beyond the poster, the evidence in the record regarding
what notice was given to Plaintiffs is vague and inconclusive, including Plaintiffs’ depositions.
Neither party is entitled to summary judgment because the evidence creates an issue of fact
regarding whether Defendant complied with the notice requirements of section 203(m).
B. Defendant’s Motion for Reconsideration
Defendant now contends that the Supreme Court’s recent decision in Encino Motorcars,
LLC, v. Navarro, No. 15-415, 2016 WL 3369424 (June 20, 2016), should substantially change this
Court’s evaluation of the notice issues. In Navarro, five automobile “service advisors” brought

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suit against their former employer claiming that their employer failed to pay overtime as required
by the FLSA. Id. at *3. The district court dismissed the action on the basis that “service
advisors” were exempt as a “salesman, partsman, and mechanic” under 29 U.S.C. § 213(b)(10)(A).
Id. The Court of Appeals for the Ninth Circuit reversed in relevant part, construing the statute by
deferring under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984), to the interpretation set forth by the DOL in its 2011 regulation. Id. at *6. The Court of
Appeals granted deference to the DOL’s regulation under the rule that agencies are free to change
their existing policies as long as they provide a reasoned explanation for the change. Id.

See

also National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U.S. 967,
981–982 (2005); Chevron, 467 U.S., at 863–864.
In evaluating the issue, the Supreme Court noted that the DOL had taken contrary positions
on the application of the exemption to service advisors and, when promulgating the new regulation,
failed to provide reasons for the new policy. 2016 WL 3369424 at *9. Accordingly, the Court
declined to apply deference to DOL regulation, and vacated and remanded the case. Id. at *9.
In light of the Navarro decision, Defendant argues that this Court should not defer to the
DOL’s amended regulation. Defendant contends that the DOL’s analysis regarding notice of the
tip credit in 76 Fed. Reg. 18842-44 is “as defective as the analysis” considered by the Supreme
Court in Navarro, and “is therefore arbitrary and capricious.” (Doc. 84).
Defendant’s argument is unavailing for several reasons.

First, notwithstanding

Defendants’ characterization that the DOL’s poster (Publication 1088) and its regulations are
inconsistent, the DOL’s promulgation of amended rule 29 C.F.R. § 531.59(b) did not represent a
new policy or changed position. To the contrary, courts have observed that expressly requiring
the disclosure of five specific provisions, as in the final amended rule, does not require employers

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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 acknowledged. See Nat’l Rest. Ass’n, 870 F.
Supp. at 56; Dorsey v. TGT Consulting, LLC, 888 F. Supp. 2d 670, 681 (D. Md. 2012). The
amended rule is best described as a clarification. Such a clarification is distinguishable from a
change of position as was addressed in Navarro, where the DOL changed its position altogether
on the issue of whether service advisors were exempt employees. 2016 WL 3369424 at *1.
Further, the DOL’s amendment to 29 C.F.R. § 531.59(b) is hardly arbitrary and capricious.
As outlined in the Court’s prior Order, the DOL provided ample explanation for the amendment.
For example, one reason for the amendment was to clarify what level of notice is sufficient. As
observed by the DOL in the introductory summary of the final rule, courts had been inconsistent
in determining what level of notice is sufficient to adequately inform the employee of the
provisions of § 203(m). See Updating Regulations Issued Under the Fair Labor Standards Act,
76 Fed. Reg. 18832-01, 18843-44. The DOL’s stated purpose in promulgating the revisions was
to update FLSA regulations that had “become out of date because of subsequent legislation or
court decisions,” and to “conform the regulations to the FLSA Amendments.” See Updating
Regulations Issued Under the Fair Labor Standards Act, 73 Fed. Reg. at 43654 (July 28, 2008).
The DOL decided, after careful reexamination of the terms of the statute, its legislative history,
and a review of the public comments, to revise the rule as to “the level of interpretation that
employers must provide when informing tipped employees about the tip credit pursuant to section
[20]3(m).” Updating Regulations Issued Under the Fair Labor Standards Act, 76 Fed. Reg. at
18844.

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In updating the regulations, the DOL provided reasoned explanations for the amendment,
and displayed an awareness that clarification of the rule was necessary. The Court disagrees with
Defendant’s contention that the amended regulation is not entitled to deference.
Further, as Plaintiff argues, it is worth noting that the Ninth Circuit concluded the DOL’s
regulations interpreting 203(m) and extending tip pooling restrictions to employers who do not
take a tip credit were a reasonable interpretation of the Fair Labor Standards Act and warranted
Chevron deference. See Or. Rest. & Lodging Ass’n, Corp. v. Perez, Nos. 13–35765, 14–15243,
2016 WL 706678 (9th Cir. Feb. 23, 2016) (considering the 2011 rule, observing numerous
comments that section 203(m) was “confusing” or “misleading,” and stating it “was certainly
reasonable to conclude that clarification by the DOL was needed. The DOL’s clarification – the
2011 rule – was a reasonable response to these comments and relevant case law.”).
In short, the Supreme Court’s decision in Navarro does not warrant reconsideration of the
prior Order denying summary judgment on the issue of whether sufficient notice was given to
Plaintiffs about the tip credit under 29 U.S.C. § 203(m). Nonetheless, although Plaintiff has
moved for sanctions and contends Defendant’s motion for reconsideration was filed in bad faith,
the Court is disinclined to grant sanctions on that basis.

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IV.

CONCLUSION

Upon due consideration, and for the reasons stated above, Defendant’s Motion for Partial
Reconsideration (Doc. 84) is DENIED.

Plaintiff’s motion for sanctions on the basis that

Defendant’s motion for reconsideration was filed in bad faith (Doc. 86) is DENIED.
DONE and ORDERED in Ocala, Florida on July 18, 2016.

Copies furnished to:
Counsel of Record
Unrepresented Parties

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