Opinion ID: 614183
Heading Depth: 2
Heading Rank: 1

Heading: Park Avenue's Alleged Practices

Text: Defendant-appellant Smith & Wollensky Restaurant Group, Inc. (Smith & Wollensky), is a Delaware corporation with its headquarters in New York City. Smith & Wollensky owned and managed Park Avenue Restaurant in midtown Manhattan. Defendant Fourth Walls Restaurants LLC (d/b/a Park Avenue Restaurant) is a limited liability corporation with its headquarters in New York and owns and manages Park Avenue Restaurant. Each plaintiff was employed by Park Avenue at the Park Avenue Restaurant as a front waiter/captain within three years of the filing of the Complaint. Plaintiffs have alleged that Park Avenue's practices concerning tips violate federal and state law. Park Avenue compensates servers pursuant to state and federal tip credits that permit restaurant employers to pay tipped employees [1] a lower minimum wage as long as the employees earn a certain amount in tips. See 29 U.S.C. § 203(m) (2006); N.Y. Comp.Codes R. & Regs. tit. 12, § 137-1.5 (2010) (Tip allowance for food service worker). [2] The FLSA permits employers to take a tip credit up to 50% of the minimum wage except that the credit may not exceed the value of the tips actually received by the employee. 29 U.S.C. § 203(m). Under New York Labor Law, as of January 1, 2011, however, employers are entitled to a tip credit of only $2.25. N.Y. Comp.Codes R. & Regs. tit. 12, § 146-1.3 (effective Jan. 1, 2011) (Tip credits). Under the FLSA an employer may not avail itself of the tip credit if it requires tipped employees to share their tips with employees who do not customarily and regularly receive tips. 29 U.S.C. § 203(m) (stating that the tip credit 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). Thus, an employer loses its entitlement to the tip credit where it requires tipped employees to share tips with (1) employees who do not provide direct customer service or (2) managers. E.g., Myers v. Copper Cellar Corp., 192 F.3d 546, 550-51 (6th Cir.1999) (noting its precedent that a host or hostess qualifies as a `tipped employee[]' because his or her work entails sufficient customer interaction and table attendance duties but concluding that a salad maker was not a tipped employee because a salad maker: had no direct intercourse with diners, worked entirely outside the view of restaurant patrons, and solely performed duties traditionally classified as food preparation or kitchen support work); Chung v. New Silver Palace Rest., 246 F.Supp.2d 220, 229 (S.D.N.Y.2002) (finding that it violates the FLSA for an employer to use a tip credit while requiring tipped employees to share tips with managers). New York law similarly prohibits employers from requiring tipped employees to share tips with non-service employees or managers. N.Y. Labor Law § 196-d (§ 196-d) (McKinney 2009) (Gratuities) provides: No employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee.... Nothing in this subdivision shall be construed as affecting ... the sharing of tips by a waiter with a busboy or similar employee. By its plain terms, § 196-d bars employers from requiring tipped employees to share tips with employees who do not perform direct customer servicei.e., employees who are not busboy[s] or similar employee[s] and employees who are managers or agent[s] of the employer. See Chan v. Triple 8 Palace, Inc. (Chan II), No. 03 Civ. 6048, 2006 WL 851749, at , 2006 U.S. Dist. LEXIS 15780, at  (S.D.N.Y. Mar. 31, 2006) (noting that plaintiffs may establish a violation of § 196-d by showing that they were required to share tips with individuals who were either employers, owners, or managers or simply not waiters, busboys, or `similar employees'); see also Ayres v. 127 Restaurant Corp., 12 F.Supp.2d 305, 307 n. 1 (S.D.N.Y.1998) (While tip-pooling is not per se illegal, N.Y. Labor Law § 196-d prohibits any `employer or his agent' from `demand[ing] or accept[ing], directly or indirectly, any part of the gratuities, received by an employee, or retain[ing] any part of a gratuity or of any charge purported to be a gratuity for an employee.' An employer `includes any person acting directly or indirectly in the interest of an employer in relation to an employee.' 29 U.S.C. § 203(d). (internal citation omitted; alternations in original)); Tandoor Rest., Inc. v. Comm'r of Labor, No. PR-82-85 (Industrial Bd. of App. Dec. 23, 1987) (finding that defendant restaurant violated § 196-d by requiring service employees to share tips with managers and with clerical and kitchen staff who did not engage in any meaningful aspect of direct service to customers). Thus, 29 U.S.C. § 203(m) and § 196-d bar the same types of tipping practices, and actions that violate the tip pooling provision of 29 U.S.C. § 203(m) may also violate § 196-d. Plaintiffs contend that Park Avenue's tipping practices violate both 29 U.S.C. § 203(m) and § 196-d. According to the Plaintiffs, Park Avenue required servers to share their tips with expediters, dishwashers, silver polishers, and coffee makers. Plaintiffs allege that none of these employees had any direct contact with customers. These employees worked in the kitchen, which was on a floor of the restaurant to which customers did not have access. According to the Plaintiffs, at the Park Avenue Restaurant, expediters work in the kitchen relaying food orders to the cooks and making sure that food runners take the correct orders out of the kitchen; dishwashers wash dishes and various other service items; coffee makers prepare coffee; and silver polishers polish silverware and glassware. Beginning in or around May 2007, Park Avenue also required servers to share tips with a person who Plaintiffs contend was a manager whose primary duties included supervising employees, interviewing job applicants, disciplining employees, running daily pre-shift meetings for servers, and scheduling employees. Plaintiffs claim that, because of the nature of a restaurant-wide tip sharing policy, the inclusion of a single tip-ineligible employee in that pool is a violation with respect to all waiters because every waiter would have shared tips with that ineligible employee. Plaintiffs contend that their claims brought under the FLSA and § 196-d depend on whether, given their job duties, expediters, dishwashers, silver polishers, coffee makers, and managers lawfully could be included in Park Avenue's tip pool and tip sharing scheme. Because all servers were required to share their tips with the same people, Plaintiffs contend that once factual findings are made in the District Court as to the duties of the positions in question, Park Avenue will either be liable or not liable to all servers under the FLSA and section 196-d of the New York Labor Law. [3] Plaintiffs also contend that Park Avenue violated New York's spread of hours provision. That provision required employers to pay servers an extra hour's pay at the regular minimum wage for each day they work more than ten hours. N.Y. Comp.Codes R. & Regs. tit. 12, § 137-1.7 (2010) (On each day in which the spread of hours exceeds 10, an employee shall receive one hour's pay at the basic minimum hourly wage rate before allowances, in addition to the minimum wages otherwise required in this Part.). [4]