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Chavez v. T&B Management, LLC

United States District Court, M.D. North Carolina

May 24, 2017

VANESSA CHAVEZ, AMY BERLAK, BROOKE GRAHAM, and MELISSA VARNER, on behalf of themselves and all others similarly situated, Plaintiffs,


          THOMAS D. SCHROEDER, District Judge.

         This dispute involves a putative collective action by servers and bartenders of Defendants (also collectively, “Hickory Tavern”) who operate various restaurants. Plaintiffs allege that Defendants have violated the tip-credit provisions of the Fair Labor Standards Act (“FLSA” or the “Act”), 29 U.S.C. §§ 201 et seq., by requiring these employees to spend more than twenty percent of their workweek engaged in non-tippable activities. Before the court are Defendants' motion to dismiss the first amended complaint (Doc. 28) and motion to strike a number of consents by Plaintiffs to join the action on the ground they were solicited before Plaintiffs sought certification of the collective action under 29 U.S.C. § 216(b) (Doc. 22). Also, Plaintiffs have moved to conditionally certify the action as a collective. (Doc. 38.) The court heard argument on the pending motions on April 17, 2017, and they are ripe for consideration.

         For the reasons that follow, the court will grant Defendants' motion to dismiss the amended complaint, but Plaintiffs will be permitted thirty days within which to file an amended complaint to raise the dual occupation claim they contend they wish to pursue.

         I. BACKGROUND

         Viewed in the light most favorable to Plaintiffs, the allegations of the amended complaint show the following:

         Defendants operate twenty-three casual dining restaurants under the name “Hickory Tavern” throughout North Carolina, South Carolina, Alabama, and Tennessee. (Id. at 3, ¶ 9.) Plaintiffs are former Hickory Tavern employees who allege that the restaurant chain engaged in a “systemic scheme of wage abuses” against its tipped server employees. (Id. at 2-3, ¶¶ 1-6.) Specifically, Plaintiffs contend that Hickory Tavern required its tipped server employees to spend more than twenty percent of their workweek performing related but non-tip-generating duties and tasks, which they term “sidework, ”[1] for which they were paid below minimum wage, in violation of the FLSA. Plaintiffs bring this action collectively on behalf of themselves and the class of similarly situated persons, defined as “[a]ll hourly tipped employees of Hickory Tavern who work, or worked, as servers [or bartenders[2] at any of Defendants' Hickory Tavern restaurants from August 1, 2013 through the present, and who Defendants did not pay minimum wage when their non-tip generating work exceeded twenty percent (20%) of their workweek.” (Id. at 5, ¶¶ 18, 19.)

         In addition to sidework, the named Plaintiffs and proposed class members operate in “a team oriented system” known as “The Loop.” (Id. at 9, ¶ 39.) The Loop divides an employee's daily routine into five steps, functioning in a continuous cycle: (1) greeting patrons, (2) serving them their first round, (3) providing them with food and drinks, (4) bussing tables, and (5) preparing silverware and performing general sidework. (Id. at 10, ¶ 40.) Once a server completes the fifth step, he or she begins the cycle again with the first step. (Id. at 9-10, ¶¶ 40-47.) The Loop specifically instructs tipped employees to spend more than twenty percent of their time doing work that does not generate tips for themselves. (Id. at 10, ¶ 42.) Defendants also have a policy of not pooling tips among servers, meaning that a server who assists a fellow employee does not generate work for himself. (Id. at 6, ¶ 26.)

         As tipped employees, Plaintiffs were paid an hourly rate of $2.13, below the Federal minimum wage of $7.25 per hour. Defendants supplemented Plaintiffs' hourly rate with a “tip credit, ” as authorized by the FLSA. See 29 U.S.C. § 203(m). Plaintiffs do not allege that they did not earn at least the minimum wage for their total hours worked, but they claim they spent more than twenty percent of their workweek completing sidework. (Doc. 6 at 11, ¶ 50.) According to Plaintiffs, when tipped employees perform sidework for more than twenty percent of their workweek, the FLSA requires that the employer record the sidework and page the employees minimum wage for it. (Id. at 7, ¶ 31.) Plaintiffs contend that Defendants' failure to properly record all time they engaged in sidework and to pay them minimum wage for it violates the FLSA, and Plaintiffs seek the wage difference - $5.12 per hour - for all sidework (not just that over twenty percent) performed by them and the collective members. (Id. at 11-12, ¶¶ 51, 53.)

         In June 2016, Defendants modified their compensation practices, paying servers and bartenders $7.25 per hour to perform “pre-shift and post-shift duties.” (Id. at 12, ¶¶ 55-56.)

         Plaintiffs filed this action against Defendants on August 1, 2016, alleging one count under the FLSA. (Doc. 1 at 7-8, ¶¶ 34-44; Doc. 6 at 13-15, ¶¶ 64-76.) They seek unpaid wages, liquidated damages, attorney's fees, prejudgment interest, and the costs of this action. (Doc. 6 at 15.)

         II. ANALYSIS

         A. Standard of Review

         The purpose of a Rule 12(b)(6) motion is to “test[] the sufficiency of a complaint” and not to “resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). In considering a Rule 12(b)(6) motion, a court “must accept as true all of the factual allegations contained in the complaint, ” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam), and all reasonable inferences must be drawn in the plaintiff's favor, Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). To be facially plausible, a claim must “plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable” and must demonstrate “more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). While “the complaint, including all reasonable inferences therefrom, [is] liberally construed in the plaintiff's favor, ” this “does not mean that the court can ignore a clear failure in the pleadings to allege any facts [that] set forth a claim.” Estate of Williams-Moore v. All. One Receivables Mgmt., Inc., 335 F.Supp.2d 636, 646 (M.D. N.C. 2004) (citing McNair v. Lend Lease Trucks, Inc., 95 F.3d 325, 327 (4th Cir. 1996)). Mere legal conclusions are not accepted as true, and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678

         B. The Statute, Regulation, and Interpretive Guidance

         Plaintiffs allege that the non-tip generating work (sidework and The Loop tasks) they were required to perform violated the FLSA because in the aggregate it habitually and regularly exceeded twenty percent of their workweek. (Doc. 6, ¶¶ 47-51.) Plaintiffs rely principally on the U.S. Department of Labor (“DOL”) regulations, related agency opinion letters, a handbook, and a “fact sheet.” Defendants contend that Plaintiffs' asserted twenty percent rule is not founded on the FLSA but rather is based on statements found only in agency documents that are not entitled to deference. (Doc. 29 at 15-18.)

         As with any question of statutory authority, the court begins with the FLSA's text, which reads in relevant part:

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.

29 U.S.C. § 203(m). The FLSA defines “tipped employee” to mean “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” Id. § 203(t).

         In interpreting the phrase “more than $30 a month in tips, ” the DOL has issued the following regulation:

(e) Dual jobs. 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 ...

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