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Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 

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In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 15-1058

ROBERT SCHAEFER, et al.,

Plaintiffs-Appellants,

v.

WALKER BROS. ENTERPRISES, INC., et al.,

Defendants-Appellees.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 10 C 6366 — Charles Ronald Norgle, Judge.

____________________

ARGUED SEPTEMBER 25, 2015 — DECIDED JULY 15, 2016

____________________

Before WOOD, Chief Judge, and BAUER and EASTERBROOK,

Circuit Judges.

EASTERBROOK, Circuit Judge. Through corporations he 

controls, Ray Walker operates six Original® Pancake House 

restaurants in Illinois. Robert Schaefer, who worked as a 

server at three of these restaurants, contends that they violate the Fair Labor Standards Act, 29 U.S.C. §§ 201–19, and 

its state equivalent the Illinois Minimum Wage Law, 820 

ILCS 105/1 to 105/15. Federal and state laws provide that tips 

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count toward the minimum wage and permit employers to 

pay less in the expectation that tips will make up the difference. Both statutes require some cash payment from the employer, however, no matter how much a worker receives in 

tips. In Illinois the employer must pay at least 60% of the 

normal minimum wage. 820 ILCS 105/4(c). This is called the 

tip-credit rate in both state and federal nomenclature. Because the Illinois floor is higher than the federal minimum

set by 29 U.S.C. §203(m)(1), the restaurants paid all servers 

the Illinois rate.

The district court certified this suit as a class action on 

behalf of the approximately 500 servers who worked in the 

restaurants within the period of limitations. The class seeks 

recovery under Illinois law. Suits under the Fair Labor 

Standards Act cannot proceed as class actions. Instead they 

are opt-in representative actions. 29 U.S.C. §216(b) (“No employee shall be a party plaintiff to any such action unless he 

gives his consent in writing to become such a party and such 

consent is filed in the court in which such action is 

brought.”). Twenty-four members of the state-law class 

agreed to be plaintiffs in the federal-law action; of these, 13 

accepted offers of judgment, leaving 11 in addition to 

Schaefer. For convenience, we use Schaefer’s name to designate both the class members and the federal-law plaintiffs.

Schaefer contends that, until May 2011, the restaurants 

failed to give servers the information that §203(m) requires 

as a condition of paying a tip-credit wage. (In May 2011 the 

restaurants started using a brochure designed by the Department of Labor to implement a regulation that took effect 

that month. 29 C.F.R. §531.59(b). Schaefer concedes that this 

notice is adequate.) This claim is based exclusively on federCase: 15-1058 Document: 26 Filed: 07/15/2016 Pages: 12
No. 15-1058 3

al law and is limited to Schaefer plus the 11 who opted in. 

Schaefer’s other claim affects all servers. He contends that 

servers at the restaurants spent some of their time doing 

non-tipped duties such as slicing mushrooms and tidying up 

their service areas, and that the restaurants had to pay the 

full minimum wage for the time that the class members 

spent on the non-tipped work. This contention rests on both 

state and federal law, but Schaefer relies exclusively on federal regulations and precedents, which both sides have assumed are equally applicable under Illinois law. Like the 

district court, we shall do likewise. The district court granted 

summary judgment to the restaurants. 2014 U.S. Dist. LEXIS

177157 (N.D. Ill. Dec. 17, 2014).

We start with the dual-jobs claim, which applies to all of 

the servers. Task lists posted at the restaurants, and affidavits from some of the servers, show that they were assigned 

to a variety of tasks in addition to taking customers’ orders 

and delivering food. They were required to wash and cut 

strawberries, mushrooms, and lemons; prepare applesauce 

and jams by mixing them with other ingredients; prepare

jellies, salsas, and blueberry compote for use; restock bread 

bins and replenish dispensers of milk, whipped cream, syrup, hot chocolate, and straws; fill ice buckets; brew tea and 

coffee; wipe toasters and tables; wipe down burners and 

woodwork; and dust picture frames. Servers would rotate 

among these tasks; some servers apparently never performed some of these tasks. Different servers estimated that 

these duties took between 10 and 45 minutes daily, depending on which tasks were assigned on a given day and the 

server’s experience and aptitude with them.

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The Department of Labor has a regulation, 29 C.F.R. 

§531.56(e), that distinguishes between dual jobs and “related 

duties” that may be performed by a tipped employee without requiring the employer to pay the full cash wage. This 

regulation reads:

In some situations an employee is employed in a dual job, as for 

example, where a maintenance man in a hotel also serves as a 

waiter. In such a situation the employee, if he customarily and 

regularly receives at least $30 a month in tips for his work as a 

waiter, is a tipped employee only with respect to his employment as a waiter. He is employed in two occupations, and no tip 

credit can be taken for his hours of employment in his occupation of maintenance man. Such a situation is distinguishable 

from that of a waitress who spends part of her time cleaning and 

setting tables, toasting bread, making coffee and occasionally 

washing dishes or glasses. It is likewise distinguishable from the 

counterman who also prepares his own short orders or who, as 

part of a group of countermen, takes a turn as a short order cook 

for the group. Such related duties in an occupation that is a 

tipped occupation need not by themselves be directed toward 

producing tips.

The restaurants contend that the duties assigned to its servers all are similar to “cleaning and setting tables, toasting 

bread, making coffee and occasionally washing dishes or 

glasses” and therefore are “related duties” rather than indicators of a dual job. The restaurants also rely on §30d00(e) of 

the Department’s Field Operations Handbook, which says:

Reg 531.56(e) permits the taking of the tip credit for time spent in 

duties related to the tipped occupation, even though such duties 

are not by themselves directed toward producing tips (i.e. 

maintenance and preparatory or closing activities). For example 

a waiter/waitress, who spends some time cleaning and setting 

tables, making coffee, and occasionally washing dishes or glasses 

may continue to be engaged in a tipped occupation even though 

these duties are not tip producing, provided such duties are inCase: 15-1058 Document: 26 Filed: 07/15/2016 Pages: 12
No. 15-1058 5

cidental to the regular duties of the server (waiter/waitress) and 

are generally assigned to the servers. However, where the facts 

indicate that specific employees are routinely assigned to 

maintenance, or that tipped employees spend a substantial 

amount of time (in excess of 20 percent) performing general 

preparation work or maintenance, no tip credit may be taken for 

the time spent in such duties.

Schaefer does not contest the validity of the regulation and 

treats the Handbook as entitled to deference under Auer v. 

Robbins, 519 U.S. 452 (1997). See Fast v. Applebee’s International, Inc., 638 F.3d 872, 877–79 (8th Cir. 2011) (applying Auer to 

§30d00(e)). The estimates in discovery of 10 to 45 minutes a 

day for non-tipped activities all come well under 20% of an 

8-hour shift. (Ten minutes is 2% and 45 minutes is 9.4%.)

Still, Schaefer contends that none of the servers’ duties qualifies as “related” to tipped work.

That position is untenable. The restaurants’ servers engaged in making coffee, cleaning tables, and several other 

activities that the regulation or handbook give as examples 

of duties that may be performed by persons paid at the tipcredit rate. Other duties performed at the restaurants, such 

as ensuring that hot cocoa is ready to serve and that strawberries are spread on the waffles, are of the same general 

kind. In Fast the Eighth Circuit concluded that cutting fruit 

and cleaning blenders are related to a server’s tipped tasks—

though the restaurant lost in Fast because non-tipped duties

took more than 20% of the employees’ time. That some of 

our plaintiffs’ tasks may be performed by untipped staff at 

other restaurants does not make them unrelated as a matter 

of law. To see this think of dish removal (clearing tables), 

which the regulation gives as an example of a related activity. At some restaurants busboys remove dishes after diners 

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have finished, while at others the servers perform this chore. 

So it is not helpful to ask, as Schaefer proposes, whether 

cooks or busboys or janitors do one or another task at other 

restaurants; the right question is whether the tasks are “related” or “incidental” to tipped duties under the regulation 

and handbook.

The most problematic duties at these restaurants are wiping down burners and woodwork and dusting picture 

frames. These do not seem closely related to tipped duties—

though the fact that the regulation gives “cleaning and setting tables ... and occasionally washing dishes or glasses” as 

examples of related duties means that cleanup tasks cannot 

be categorically excluded. We need not decide what to make 

of wiping the woodwork or dusting picture frames, because

in the district court Schaefer aggregated all of the duties. For 

all this record shows, the time servers spend dusting picture 

frames is negligible. The Supreme Court told us in Sandifer v. 

United States Steel Corp., 134 S. Ct. 870, 880 (2014), that the 

Fair Labor Standards Act does not “convert federal judges 

into time-study professionals” and require every minute to 

be accounted for. Sandifer holds that, when the “vast majority” of employees’ time qualifies for a particular treatment 

under the Act, that treatment can be applied to the entire period. Id. at 881. Given the flexibility of words such as “related” and the 20% cap for un-tipped duties, and given how 

much less than 20% of working time these servers spent on 

un-tipped duties at these restaurants, the possibility that a 

few minutes a day were devoted to keeping the restaurant 

tidy does not require the restaurants to pay the normal minimum wage rather than the tip-credit rate for those minutes.

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No. 15-1058 7

Now we turn to the question that is pertinent to the 12

plaintiffs under the Fair Labor Standards Act: whether the 

restaurants told their servers of the rules governing tipcredit wages. Here is the pertinent language of §203(m):

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. 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.

The trailing paragraph says that employers may not reduce 

the cash wages of tipped employees unless each “employee 

has been informed by the employer of the provisions of this 

subsection” and the employees keep all tips they receive 

(unless tips are pooled among employees).

Schaefer reads §203(m) to require the employer to tell 

each tipped worker five things: (1) the cash wage the employee will receive; (2) the difference between this payment 

and the minimum wage (that is, how much tip credit the 

employer is claiming); (3) that the worker is entitled to the 

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full minimum wage through a combination of the cash wage 

plus tips (in other words, that if tips are less than the tip 

credit, the employer must make up the difference); (4) that 

the worker is entitled to keep all tips received (unless tips 

are pooled among the staff); and (5) that the tip credit cannot 

be taken in the absence of the first four notices. Since May 

2011 the restaurants have told their servers all five of these

things, using language provided by the Department of Labor 

and required by a regulation that took effect that month. 29 

C.F.R. §531.59(b). But it is not clear from the statute alone 

(which governs events before May 2011) that all five pieces 

of information are required.

Take No. 5—notice that the employer can’t take a tip 

credit without providing the first four pieces of information. 

If the employer does tell the worker the first four things, then 

it can take the tip credit; the fifth does not add anything to 

the worker’s fund of knowledge (unless the worker is studying to be a lawyer and planning to represent tipped employees at other establishments).

And consider No. 4—notice that the worker is entitled to 

keep all tips received, unless a pooling arrangement is in effect. This appears in the statute after the requirement that 

workers be “informed” of the subsection’s provisions. The 

structure of the statutory language is that workers be informed of the rules and that they keep non-pooled tips. 

That’s a strange way to require workers to be informed that

they keep all tips. Trying to explain “keep unless pooling” 

would breed questions such as “how does pooling work?” 

and “what’s a valid pooling arrangement?” If a given employer does not have a pooling arrangement, as the restaurants in this case did not, it is kinder to the employee to pass 

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No. 15-1058 9

the subject in silence. As the Sixth Circuit has remarked, the 

word “informed” differs from the word “explained”: workers are entitled to knowledge about the tip-credit program 

but not to a comprehensive explanation. Kilgore v. Outback 

Steakhouse of Florida, Inc., 160 F.3d 294, 298 (6th Cir. 1998).

Schaefer tells us that the restaurants could and should 

have complied with §203(m) by providing each worker with 

a copy of the statute. That’s not a sensible way to “inform” 

non-lawyers about how the tip-credit program works. The 

statute is hard to parse, even for someone with a legal education, given its opaque structure and its use of the minimum 

wage from 1996. An employer ought to boil it down and tell 

workers directly what matters to them.

Three things are apt to matter most to employees at establishments such as these defendants: (a) in anticipation of 

tips the employer will pay less than the minimum wage; (b) 

how much the cash wage will fall short of the current minimum wage; and (c) if tips plus the cash wage do not at least 

match the current minimum wage, the employer must make 

up the difference. We think that a person told these things 

has been adequately “informed” for the purpose of the statute, during the time before the Department of Labor elaborated by regulation.

When Schaefer was hired, the restaurant gave him a document that explained uniforms and tipping. Its language included: “Tip Credit. I understand that a portion of the wages 

I receive are from tips. The Company can apply a credit to 

the minimum wage to include those tips as wages. The tip 

credit in Illinois is 40% of minimum wage.” The restaurants’

handbook for employees provided an example:

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Minimum wage $5.15

Tip Credit - $2.06

Hourly rate $3.09

Schaefer received this handbook when he started work in 

November 2005. The handbook ignored the federal rules, 

which depend on the minimum wage as of 1996. Worse: the 

minimum wage in Illinois in 2005 was $6.50 an hour, not 

$5.15, so the example was wrong about how much the restaurant would claim in tip credit. (For a $6.50 hourly minimum wage, the employee gets a cash payment of at least 

$3.90 per hour and the tip credit cannot exceed $2.60 per 

hour.) And neither the text nor the example told Schaefer 

that, if he did not receive enough in hourly tips to equal or 

exceed the credit the employer was taking, then the restaurant had to make up the difference. Illinois does not require 

that piece of information, but federal law does.

The restaurants contend that it is enough that workers 

know that they will receive less than the minimum wage, in 

anticipation of tips. Schaefer admitted that he understood 

that the cash wage had been reduced for this reason. But the 

handout and the handbook collectively did not contain a vital piece of information required by federal law.

These restaurants did furnish that information separately, however. Federal law requires employers to put posters 

about minimum-wage rules in areas that employees frequent 

during the workday. Each restaurant put up at least one 

poster with this information:

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 

employee’s cash wage of at least $2.13 per hour do not equal the 

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No. 15-1058 11

minimum hourly wage, the employer must make up the difference. Certain other conditions also must be met.

Schaefer contends that these posters, despite saying in easyto-understand language that the employer must top up the 

cash wage if tips do not cover the credit, do not meet the restaurants’ statutory obligation because they are not employee-specific. That is, they explain the rules for tip-credit wages (a separate part of the poster states the minimum wage 

that cash plus tips must equal or exceed) but do not tell any 

given employee whether a tip credit has been deducted from 

that employee’s wages. But if the employee has been told 

separately—by the handout, the handbook, and the pay 

stub—that a tip credit is being deducted, then the essential 

information has been supplied. The posters are addressed to 

all of the establishment’s workers, some tipped and some 

not tipped. They have to be general, while the rest of the information comes from what the employer conveyed directly 

to the tipped workers.

Schaefer does not contend that he or any of the 11 opt-in 

plaintiffs failed to put two and two together and understand 

that the cash wage was below the minimum and that the 

employer must pay more if the cash wage plus tips did not 

reach the minimum wage. It certainly would have been preferable for the restaurants to put all of the information in one 

place, as they started to do in May 2011, and provide accurate numerical examples, but §203(m) does not say that all of 

the information must be in a single document. The handout 

plus the handbook plus the poster collectively supplied the 

information required by federal law, and the handbook’s error in stating the Illinois minimum wage is not dispositive 

given that the cash wage promised ($3.09) and paid ($3.60) 

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both exceeded the federal minimum cash wage of $2.13 an 

hour required by §203(m).

Schaefer asserts that the poster is “not enough” but does 

not explain why it is inadequate. If posters don’t count, 

what’s the point of requiring them? In lieu of making an argument, Schaefer points us to Driver v. AppleIllinois, LLC, 917 

F. Supp. 2d 793, 801–03 (N.D. Ill. 2013). Driver thought the 

Department of Labor’s own pre-2011 poster inadequate because it did not contain all five pieces of information specified by the 2011 regulation, and in particular omitted the requirement that employees keep their tips unless the employer uses tip pooling. But regulatory changes are not retroactive, see Bowen v. Georgetown University Hospital, 488 U.S. 204 

(1988), and we have explained why the statute on its own 

does not necessarily call for all of the advice required by the 

regulation. It would be hard to fault an employer for providing exactly the information the Department of Labor then 

required, in the Department’s own words. Schaefer does not 

contend that he was unable to keep all tips he received. The 

handbook and poster together supply the restaurants’ workers with the three pieces of information that we believe constitute the statutory minimum.

AFFIRMED

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