Perez v. Over-Easy, Inc. et al
Filing
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MEMORANDUM Opinion and Order: For the foregoing reasons, the Court grants the defendants' motion for summary judgment [dkt. no. 43] and directs the Clerk to enter judgment in favor of defendants and against plaintiff. Signed by the Honorable Matthew F. Kennelly on 10/9/2019. Mailed notice. (mma, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
GUSTAVO PEREZ,
Plaintiff,
vs.
OVER-EASY, INC., d/b/a LA ESCAROLA,
JOSEPH MONDELLI, and ARMANDO
VASQUEZ,
Defendants.
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Case No. 18 C 1369
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Gustavo Perez has sued his former employer, Over-Easy, Inc., d/b/a La Escarola
(La Scarola), 1 its president Joseph Mondelli, and its manager Armando Vasquez, for
violations of the Fair Labor Standards Act (FLSA). Perez worked for La Scarola as a
restaurant server. He alleges that the defendants violated the tip-credit and retaliation
provisions of the FLSA. The defendants have moved for summary judgment. For the
reasons stated below, the Court grants the defendants' motion.
Background
The following facts are undisputed except where otherwise noted. Over-Easy is
an Illinois corporation that operates a fine-dining Italian restaurant in Chicago called La
Scarola. Mondelli serves as the corporation's president, and Vasquez manages the
restaurant. From approximately 2012 until 2017, Perez worked as a server there.
1
The Court refers to the business by the name used by the defendants.
As at many restaurants, servers at La Scarola earn wages and tips. During the
relevant timeframe, the restaurant operated a tip pool through which it required servers
to pay a percentage of their tips to the bartender and busboys each night. Before
starting his job, Perez knew that La Scarola required him to contribute to the tip pool.
Perez Dep., Ex. 4 to Defs.' Statement of Undisputed Material Facts (SUMF), dkt. no. 454 at 52:5–14. He testified that he paid 10 percent of his tips to the bartender and 20
percent to the busboys. Id. at 21:3–8. 2 Unlike tips paid in cash, credit card tips would
take a few days to process. Perez testified that on nights when he did not earn enough
in cash tips to cover the amount owed to the bartender and busboys, he had to pay
them with his own, out-of-pocket cash. Id. at 103:5–18.
At the end of each night, the servers calculated and recorded their tips, including
their total earned tips, their cash tips, and the tips they paid to the bartender and
busboys. A few days after servers earned credit card tips, La Scarola gave them a
check payment for those tips. After each weekly pay period, it paid them their hourly
wage by issuing a separate check.
La Scarola deducted tax withholdings from its servers' paychecks. Perez
testified that La Scarola taxed the total amount of tips he earned, rather than taxing only
the tips he retained after paying the bartender and busboys. E.g., id. at 16:16–22. As a
result, he claims, La Scarola deducted more taxes than he owed. E.g., id. But despite
this alleged over-taxation, Perez testified that he still earned minimum wage. Id. at
16:23–25.
2
Although La Scarola required him to pay only 7 percent to the bartender, Perez
testified that, like many servers, he paid a greater percentage to encourage the
bartender to provide better service to his tables. Id. at 51:11-52:4.
2
The parties dispute whether Perez complained to Vasquez or any other
supervisor about the allegedly excessive tax withholdings. Perez testified that he
initially did not "do anything" about the alleged over-taxation because he did not want to
lose his job. Id. at 58:9–13. But at some point, Perez said, he asked Vasquez for his
money and "why they were taking" his money. Id. at 58:14–17. He told Vasquez that
he did not want to be taxed "on the tips [he] wasn't making." Id. at 110:13–16. Vasquez
has stated in an affidavit that Perez never complained to him "about not being paid
properly or having too much in taxes withheld from his pay." Vasquez Decl., Ex. 1 to
Defs.' SUMF, dkt. no. 45-1 at ¶ 15.
In 2017, Vasquez fired Perez. The defendants say that Perez was fired for
insubordination because he refused to follow Vasquez's direction to assist another
server in cleaning a table and became argumentative. Perez contends that this is a
pretext and that the real reason for his termination was retaliation for his complaints
about his pay.
Perez sued the defendants for violations of the FLSA, the Illinois Minimum Wage
Law, and the Illinois Wage Payment and Collection Act. The defendants moved to
dismiss Perez's claims, and the Court granted the motion to dismiss for all but the FLSA
claims. The remaining claims are count 1, alleging violations of the FLSA's tip-credit
provision, 29 U.S.C. § 203(m), and count 2, alleging a violation of the FLSA's retaliation
provisions, id. § 215(a)(3). The defendants have moved for summary judgment.
Discussion
"Summary judgment is proper where there are no genuine issues of material fact
and the movant is entitled to judgment as a matter of law." Richardson v. Chi. Transit
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Auth., 926 F.3d 881, 886 (7th Cir. 2019) (internal quotation marks omitted). In
considering a motion for summary judgment, the Court construes all facts and draws all
reasonable inferences "in favor of the party against whom the motion under
consideration was filed." Id. The party opposing summary judgment "must present
specific facts showing that there is a genuine issue for trial; inferences that rely upon
speculation or conjecture are insufficient.” Aguilar v. Gaston-Camara, 861 F.3d 626,
630–31 (7th Cir. 2017) (internal quotation marks omitted). "A genuine issue of material
fact arises only if sufficient evidence favoring the nonmoving party exists to permit a jury
to return a verdict for that party." Hanners v. Trent, 674 F.3d 683, 691 (7th Cir. 2012).
A.
Tip credit
The FLSA "is designed to protect workers from the twin evils of excessive work
hours and substandard wages." Howard v. City of Springfield, 274 F.3d 1141, 1148 (7th
Cir. 2001). Toward that end, it requires employers to pay their employees a minimum
wage for each hour of work performed. 29 U.S.C § 206. Subject to certain
requirements, an employer may pay a reduced hourly wage to a "tipped employee"—
one who "customarily and regularly receives more than $30 a month in tips"—by
crediting the employee's tips, up to a certain amount, toward his minimum wage. Id. §§
203(m) & (t). An employer may take this tip credit only if it has informed the tipped
employee of the relevant subsection of the FLSA. Id. § 203(m)(2). Additionally, "all tips
received by such employee" must "have been retained by the employee," although the
statute does not prohibit the pooling of tips among tipped employees. Id.
The Department of Labor has promulgated regulations regarding tip credits. One
regulation identifies the specific information that an employer must disclose to "its tipped
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employees in advance of the employer's use of the tip credit." 29 C.F.R. § 531.59.
Specifically, an employer must inform each tipped employee of the "amount of cash
wage" the employee will receive, the difference between this amount and the minimum
wage (i.e., the tip credit claimed by the employer), that the employee must retain all tips
he earns "except for a valid tip pooling arrangement," and that "the tip credit shall not
apply to any employee who has not been informed of these requirements." Id. Another
regulation governs tip pooling, a practice where employees split tips, "as where waiters
give a portion of their tips to the busboys." Id. § 531.54. The regulation states that "an
employer must notify its employees of any required tip pool contribution amount, may
only take a tip credit for the amount of tips each employee ultimately receives, and may
not retain any of the employees' tips for any other purpose." Id.
Lopez contends that the defendants violated the tip-credit provision by failing to
give the requisite notice and by taxing all tips that servers earned, including those paid
into the tip pool. The Court addresses each issue separately.
1.
Notice
Perez argues that the defendants violated the FLSA by claiming a tip credit
without providing him proper notice. He contends that, in advance of an employee's first
day of work, an employer must explain its tip pool practices. Specifically, he argues that
the defendants owed him advance notice of their expectation that he would contribute
his own cash to the tip pool to cover for credit card tips that had not yet been processed.
Perez also contends that he should have received advance notice that the defendants
would tax him on all tips he earned, including those paid to the bartender and busboys.
The defendants argue that an employer must provide advance notice to an employee of
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only a tip pool's existence—not how it is operated.
The FLSA and the pertinent Department of Labor regulations do not require
employers to provide advance notice to tipped employees of their tip pool or taxation
practices. 29 U.S.C. § 203; 29 C.F.R. §§ 531.54, 531.59. As indicated above, an
employer is required to provide advance notice of specific items of information
enumerated in the regulation and listed earlier in this opinion. 29 C.F.R. § 531.59. That
information does not include tip pool or taxation practices. See id. The advance
notification requirement serves "to inform affected employees of the employer's intent to
claim the tip credit," Perez v. Lorraine Enterprises, Inc., 769 F.3d 23, 27 (1st Cir. 2014)
(emphasis added), rather than to explain the employer's particular tip pool and taxation
practices.
Nor does the regulation governing tip pooling require the type of notice that
Perez contends he should have been given. The regulation states that "an employer
must notify its employees of any required tip pool contribution amount." 29 C.F.R. §
531.54. It does not require an employer to provide that notification in advance of the
employee's first day or to explain how he will be taxed or how he will contribute to the tip
pool. See id.
Viewing the facts in the light most favorable to Perez, no reasonable jury could
find that the defendants claimed a tip credit without providing him with the requisite
notice. Perez provides no evidence suggesting that the defendants failed to provide
advance notification of the information required by 29 C.F.R. § 531.59, including their
intent to claim a tip credit and the existence of a tip pool among their tipped employees.
During his deposition, Perez confirmed that he knew there would be "tip deductions"
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when he started working for the defendants. Perez Dep., Ex. 4 to Defs.' SUMF, dkt. no.
45-4 at 52:5–14. Nor does Perez dispute that the defendants informed him of the
required tip pool contribution amount, as required by 29 C.F.R. § 531.54. Perez's
arguments—that he lacked advance notice of the defendants' tip pool and taxation
practices—miss the mark, because the statute and regulations do not require advance
notice of those practices. Accordingly, the defendants are entitled to summary
judgment on the question of the adequacy of notice under the FLSA's tip-credit
provision.
2.
Taxation
Perez also contends that the defendants claimed an unauthorized tip credit
because they withheld more than he owed in taxes. Specifically, he asserts that the
defendants improperly withheld taxes from the total tips he earned rather than from the
tips he retained after paying the busboys and the bartender.
This tax-withholding practice does not constitute a violation of the FLSA,
however, unless it results in an employer claiming a tip credit for more than the tips the
employee ultimately received. 29 U.S.C. § 203(m)(2). In other words, the alleged
taxation practice would be a violation of the FLSA only if the defendants claimed an
excessive tip credit, thereby reducing Perez's income below the minimum wage. Cf.
Nakahata v. New York-Presbyterian Healthcare Sys., Inc., 723 F.3d 192, 201 (2d Cir.
2013) ("[T]he FLSA is unavailing where wages do not fall below the statutory minimum
and hours do not rise above the overtime threshold."); Labriola v. Clinton Entm't Mgmt.,
LLC, No. 15 C 4123, 2016 WL 1106862, at *4 (N.D. Ill. Mar. 22, 2016) ("Because the
FLSA only addresses minimum and overtime compensation, . . . the statute does not
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provide a cause of action for plaintiffs seeking the return of additional tip money from
their employer or others."); Morgan v. SpeakEasy, LLC, 625 F. Supp. 2d 632, 656 (N.D.
Ill. 2007) (denying summary judgment where there were questions of fact regarding
whether an employer paid its tipped employee less than the minimum wage and
deducted more than he owed in taxes). 3
Perez asserts, citing Martin v. Tango's Restaurant, Inc., 969 F.2d 1319, 1323 (1st
Cir. 1992), that even an employee who earned minimum wage may seek unpaid tips as
a remedy under the FLSA. Martin involved an action brought by the Secretary of Labor
against a corporation and its owners for FLSA violations. Id. at 1321. The court did not
indicate that a private plaintiff has a cause of action for FLSA violations unrelated to
minimum wage or overtime compensation. See generally id.; see also Labriola, 2016
WL 1106862, at *4 (the FLSA's tip-credit provision "does not require an employer to
return tip money to an employee where the employer does not claim to have used those
tips to satisfy the employees' minimum wage").
Perez provides no evidence suggesting that the defendants' alleged taxation
practice reduced his income below the minimum wage. At all relevant times the
minimum wage was $7.25 per hour. 29 U.S.C. § 206. During his deposition, he
testified that, despite the alleged over-taxation of his tips, he nonetheless earned
minimum wage. Perez Dep., Ex. 4 to Defs.' SUMF, dkt. no. 45-4 at 16:23–25. That
testimony appears to be confirmed by a summary of over a dozen paychecks issued to
Mr. Perez between August 24, 2016 and November 23, 2016, which shows that, on
3
Because Perez's claims in this case involve solely the FLSA, the Court need not
address the defendants' argument that employees have no private cause of action
under other statutes for employers' excessive tax deductions.
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average, he earned more than approximately $48 per hour. Ex. B to Pl.'s SUMF, dkt.
no. 46-1. Even accounting for the payments of 30% of his tips to the bartender and
busboys, as well as the allegedly excessive tax withholdings, the evidence suggests
that Perez would have earned more than $7.25 per hour during that timeframe.
Because he has not shown that the allegedly excessive taxes reduced his earnings
below the minimum wage, Perez has not provided evidence in support of a finding that
the defendants' taxation practice violated the FLSA's tip credit provision.
In sum, the Court concludes that the defendants are entitled to summary
judgment for Perez's claim regarding violations of the tip-credit provision.
B.
Retaliation
The FLSA prohibits employers from "discharg[ing] or in any other manner
discriminat[ing] against any employee because such employee has filed any complaint
or instituted or caused to be instituted any proceeding under or related to" the statute.
29 U.S.C. § 215(a)(3). To establish a prima facie case of retaliation under the FLSA
using direct evidence, a plaintiff must show "(1) that he engaged in protected
expression; (2) that he suffered an adverse employment action; and (3) that a causal
link existed between the protected expression and the adverse action." Kasten v. SaintGobain Performance Plastics Corp., 703 F.3d 966, 972 (7th Cir. 2012).
With respect to the first element, "[t]o fall within the scope of the antiretaliation
provision, a complaint must be sufficiently clear and detailed for a reasonable employer
to understand it, in light of both content and context, as an assertion of rights protected
by the statute and a call for their protection." Kasten v. Saint-Gobain Performance
Plastics Corp., 563 U.S. 1, 14 (2011). An employee may make a protected complaint
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orally or in writing. Id. at 17.
An employee's generalized complaints about his wages or hours constitute an
assertion of his FLSA-protected rights only if he frames his complaints in terms of
potential illegality. Sloan v. Am. Brain Tumor Ass'n, 901 F.3d 891, 895 (7th Cir. 2018)
(observing that, in cases finding employees' generalized complaints to constitute
protected expression, the complaints were "readily recognizable as an objection that a
particular employment practice regarding wages or hours was illegal"). Compare Garcia
v. Draw Enters. III, LLC, No. 17 C 4477, 2018 WL 6045206, at *8 (N.D. Ill. Nov. 19,
2018) (a reasonable jury could find that employee's complaint constituted protected
expression where she complained to her employer on multiple occasions that her
employer was violating the law by not providing overtime pay) with Silver v. Townstone
Fin., Inc., No. 14 C 1938, 2016 WL 4179095, at *5 (N.D. Ill. Aug. 8, 2016) (no
reasonable jury could find that employee's complaints constituted protected expression
where he "could not recall the particulars of these communications beyond the general
gist that he was working extra time" and deserved to be paid for it, and did not
communicate that he had a statutory right to receive overtime pay).
Even viewing the evidence in the light most favorable to Perez, no reasonable
jury could conclude that he made any complaints or statements suggesting that the
restaurant's practices ran afoul of the law in any way. Perez testified that "[a]t first" he
did not "do anything" to address the allegedly excessive deductions because he did not
want to lose his job. Perez Dep., Ex. 4 to Defs.' SUMF, dkt. no. 45-4 at 58:9–17.
Eventually he asked Vasquez for his money, he testified, and asked "why they were
taking" his money. Id. Perez testified that he told Vasquez that he did not want to be
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taxed "on the tips [he] wasn't making." Id. at 110:13–16. Crucially, Perez has offered
no testimony or other evidence that he told Vasquez that the restaurant's taxation
practice was illegal, that he planned to sue, or that his rights had been violated. He has
provided no evidence indicating that he framed his complaint in terms of illegality. In
short, Perez has offered no evidence from which a reasonable jury could find that he
made a complaint that would lead a reasonable employer to understand that he was
invoking his rights under the FLSA. The defendants are entitled to summary judgment
on the retaliation claim on this basis, and as a result the Court need not address their
remaining arguments.
Conclusion
For the foregoing reasons, the Court grants the defendants' motion for summary
judgment [dkt. no. 43] and directs the Clerk to enter judgment in favor of defendants and
against plaintiff.
________________________________
MATTHEW F. KENNELLY
United States District Judge
Date: October 9, 2019
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