Fransioli et al v. 25 W Hubbard Inc. et al

Filing 39

MEMORANDUM Opinion and Order Signed by the Honorable Ronald A. Guzman on 1/10/2018: Defendants' motion to dismiss 23 is denied. [For further details see Statement]. Mailed notice(is, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Jillian S. Fransioli, et al.,
Plaintiffs,
v.
25 W. Hubbard Inc., et al.,
Defendants.

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Case No: 17 C 4763

Judge Ronald A. Guzmán

MEMORANDUM OPINION AND ORDER
For the reasons set forth below, Defendants’ motion to dismiss [23] is denied.
STATEMENT
In their amended complaint, Plaintiffs seek to recover on behalf of themselves and all
similarly-situated individuals unpaid wages, unlawfully-retained tips, interest, and attorney’s
fees and costs under the Fair Labor Standards Act (“FLSA”), the Illinois Minimum Wage Law
(“IMWL”) and the Illinois Wage Payment Collection Act (“IWPCA”). Plaintiffs seek to
represent current and former tipped bartenders and cocktail servers who worked at Defendants’
establishments. (1st Am. Compl., Dkt. # 21, ¶ 1.) According to Plaintiffs, Defendants paid them
an hourly wage below the minimum wage, justifying the underpayment by improperly applying a
“tip credit” to their wages, which did not comply with the relevant tip credit provisions of the
FLSA and the IMWL. (Id. ¶¶ 3-4.) Plaintiffs further allege that Defendants required them to
perform untipped clerical and administrative work at the end of their shifts, for which they were
paid a sub-minimum hourly rate or not at all. (Id. ¶ 6.) Plaintiff Fransioli asserts that when she
confronted Defendant Sanchez about the purported improper payment practices, she was
retaliated against in violation of the IWPCA. (Id. ¶ 7.)
Defendants argue that Plaintiffs’ claims should be dismissed because they fail to allege
sufficient facts in support. To survive a Federal Rule of Civil Procedure (“Rule”) 12(b)(6)
motion to dismiss for failure to state a claim upon which relief can be granted, the complaint
must comply with Rule 8(a) by providing “a short and plain statement of the claim showing that
the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), such that the defendant is given “fair
notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (alteration in
original). The factual allegations in the complaint must be sufficient to raise the possibility of
relief above the “speculative level.” E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773,
776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). In reviewing a motion to dismiss
pursuant to Rule 12(b)(6), the Court accepts as true all of Plaintiffs’ well-pleaded factual
allegations and draws all reasonable inferences in Plaintiffs’ favor. Killingsworth v. HSBC Bank

Nev., N.A., 507 F.3d 614, 618 (7th Cir. 2007).
Applying these principles to the first amended complaint, the Court finds that it
sufficiently alleges facts in support of Plaintiffs’ illegal tip pools, including that:
8. Plaintiffs were directed by managerial staff, including but not limited to
Defendant Roman Sanchez, to remit 15% of their nightly gratuities in cash to
Defendants as the “house tip out.”
9. At the close of business every night, each cocktail server and bartender on
duty would tally up their cash and credit card receipts and tips and calculate his or
her 15% “house tip out,” which was then payable in cash to the manager in duty
before leaving work.
10. On occasions when Plaintiff Fransioli inquired as to the propriety of the
“house tip out”, she was told by Defendant Sanchez that the unlawfully retained
15% was used to pay for security staff and cleaning services contracted by
Defendants and that providing this portion of her tips to Defendants was “for her
own protection” and “to leave well enough alone.”
11. While the FLSA and the IMWL permit an employer with tipped employees to
pay those employees an hourly rate that is below the standard minimum wage, an
employer’s eligibility to do so lawfully is contingent upon the employer’s
compliance with the tip-credit provisions provided by the statutes. See 29 U.S.C.
§ 203(m); 820 ILCS 105/4(3)(c).
12. At all times relevant hereto, Defendants did not comply with the tip-credit
provisions of the FLSA and IMWL because they operated a tip pool that was
rendered illegal by virtue of the participation by management and ownership in
the sharing of employee tips. 29 C.F.R. § 531.59.
(1st Am. Compl. Dkt. # 21, ¶¶ 8-12.)
With respect to the claims regarding unpaid wages for non-tipped and off-the-clock work,
Plaintiffs allege that:
13. Each night after closing, Plaintiffs’ additional job responsibilities included
tallying and tabulating sales receipts in order to both assist Defendants with their
bookkeeping as well as to calculate and then effectuate the mandatory, illegal
“house tip out” to management described above.
14. These job duties generally took place after all customers had left the facility
and the night club was for all practical purposes converted into an office in which
Plaintiffs performed their clerical functions at the behest and for the benefit of
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Defendants.
15. These clerical and accounting job functions performed by Plaintiffs were not
merely incidental to Plaintiffs’ tipped duties; rather, they constituted a distinct
change of work conditions and type of work and were performed for a specific,
routinized, and regular period at the end of each shift.
16. Additionally, Plaintiffs would be compelled to remain at the closed nightclub
while other employees or management worked on clerical matters.
17. Defendants did not regularly and consistently log these hours on the
Plaintiffs’ hourly time sheets.
18. In any instances in which Plaintiffs’ hourly time sheets did accurately and
completely reflect their time engaged performing the after-closing clerical work
described above, Plaintiffs were impermissibly paid the subminimum hourly wage
for such time.
19. Moreover, Named Plaintiffs were recruited by Defendant Sanchez to
perform additional job duties for Defendants “off the clock” as a condition of
their continued employment.
20. These off-the-clock duties required Plaintiff Fransioli to work on preparing
marketing lists in the office once a week for approximately six months, typically
on Thursdays. Plaintiff Fransioli was not paid for any of these hours, but was
assured instead by Defendant Sanchez that her cooperation was crucial to
remaining in the bartending and waitressing scheduling picture.
21. Plaintiff Bustillo was also similarly conscripted for what was known as
“office duty” for a period of approximately three months pursuant to substantially
similar conditions—namely, no pay and the looming threat of an adverse
employment action in the event she did not comply with the terms.
22. Defendants’ failure to pay the regular hourly minimum wage to its
employees for hours worked by Plaintiffs constitutes a violation of the FLSA and
IMWL with respect to each hour worked by Plaintiffs during the relevant period.
(Id. ¶¶ 13-22.)
The Court disagrees with Defendants’ characterization of these allegations as “vague,”
and with their assertion that courts in this district require Plaintiffs to allege “the number of
hours Plaintiffs claimed to work or the amounts they were actually paid for their work in order to
identify even a single workweek when they were paid less then the minimum wage.” (Defs.’
Reply, Dkt. # 34, at 3.) Plaintiffs’ allegations comply with the pleading requirements set forth
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by the Supreme Court, as detailed above.
As to Fransioli’s IWPCA retaliation claim,1 Defendants assert that she fails to allege that
she engaged in activities protected by that statute. Specifically, Defendants assert that
Fransioli’s allegation that she was retaliated against for having raised concerns involving
payment of the minimum wage, the hours of work she performed, and tip-pooling requirements
are not within the scope of the IWPCA, which protects an employee who complains “that he or
she has not been paid in accordance with the provisions of the Act.” 820 ILCS 115/14(c). While
the IWPCA “does not establish a substantive right to overtime pay or any other kind of wage,” a
cause of action may lie “based on wrongfully held compensation pursuant to a contract or
agreement.” Enger v. Chi. Carriage Cab Co., 77 F. Supp. 3d 712, 715-16 (N.D. Ill. 2014).
Defendants contend that Fransioli has not alleged the existence of an agreement or contract.
The Court notes that “[a]n agreement to pay what is already required by law is
insufficient to state a claim under the IWPCA.” Dougherty v. City of Chi., No. 15 C 10975,
2017 WL 5455374, at *4 (N.D. Ill. Nov. 14, 2017). Fransioli argues that the amended complaint
includes reference to a flat-fee agreement in connection with a New Year’s Eve party at which
Fransioli was engaged to provide bartending services. (1st Am. Compl., Dkt. # 21, ¶ 116.)
Given that Fransioli allegedly “demanded . . . generally . . . payment of her full share of tips and
wages” (id.), which includes payment under the purported flat-fee arrangement, and was
retaliated against for having done so, the Court finds Plaintiff has stated a claim under the
IWCPA.
Finally, Defendants assert that Plaintiffs’ unjust enrichment claim is preempted by the
FLSA. “There is a general consensus among courts in this district and elsewhere that the FLSA
preempts unjust enrichment and other common law claims that are grounded in the same facts as
the FLSA claim.” Labriola v. Clinton Entm’t Mgmt., LLC, No. 15 C 4123, 2016 WL 1106862,
at *5 (N.D. Ill. Mar. 22, 2016). The Labriola court, however, concluded that “[p]reemption is
not an issue with respect to Plaintiffs’ allegations that Defendants improperly confiscated
portions of Plaintiffs’ tips” because the “FLSA does not authorize a claim for the return of tip
money unrelated to any claim for unpaid minimum or overtime wages.” Id. While recognizing
that some courts have found that the FLSA provides the sole remedy for a claim arising from a
tip-pooling violation, see e.,g., Morgan v. Speakeasy, LLC, 625 F. Supp. 2d 632, 659-60 (N.D.
Ill. 2007), the Court agrees with the Labriola court that the FLSA does not preempt a claim for
recouping tips that allegedly lawfully belong to the employees and not the employers. See
Malivuk v. Ameripark, LLC, 694 F. App’x 705, 709 (11th Cir. 2017) (while concluding that
Plaintiff did not have a private cause of action under the FLSA for the improper withholding of
tips, stating that “nothing about our present holding undermines . . . a plaintiff’s ability to collect
unpaid tips through an appropriate state law claim.”).
For these reasons, Defendants’ motion to dismiss [23] is denied.

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Fransioli is the only plaintiff named in this claim.
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Date: January 10, 2018

_______________________________
Ronald A. Guzmán
United States District Judge

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