M.D. PA: 29 U.S.C. § 203(M) Requires That Servers Employed at Red Robin Restaurants Must Have Direct Customer Interaction in Order to Participate in a Tip Pool

In an opinion issued yesterday from the Middle District of Pennsylvania, Judge James M. Munley denied Red Robin restaurant’s motion to dismiss a Fair Labor Standards Act (“FLSA”) claim brought by our firm as a collective action on behalf of all other Red Robin restaurant Servers employed within the last 3 years. See Ford, et al. v. Lehigh Valley Rest. Group, 2014 U.S. Dist. LEXIS 92801 (M.D. Pa. July 9, 2014). In this case, the defendant is Lehigh Valley Restaurant Group, Inc., a corporate entity that operates approximately 19 Red Robin Restaurants throughout Eastern Pennsylvania. Specifically, Lehigh Valley Restaurant Group, Inc. operates Red Robin restaurants in Allentown, Center Valley, Easton, Carlisle, Collegeville, Dickson City, Lancaster, Harrisburg, Lancaster, Quakertown, and Reading, among other cities.

In our case, the plaintiffs (2 servers who previously worked at Red Robin restaurants in the Wilkes-Barre, PA area) allege that Red Robin violated 29 U.S.C. § 203(m) by distributing the Servers’ tips to Expediters (aka “Expos”) who have virtually no customer interaction. Thus, plaintiffs argue that Red Robin violated the FLSA’s minimum wage and overtime pay mandate law by distributing the Servers’ tips to Expos.  Plaintiffs argue that Expos may not properly participate in the tip pool because Expos rarely, if ever, interact with customers.  Because of Red Robin’s distribution of the tip pool proceeds to Expos, Plaintiffs argue that Red Robin may not utilize a tip credit wherein it only pays Servers $2.83 for every hour worked, instead of the mandatory $7.25 minimum wage.

Defendant moved to dismiss our FLSA claim alleging that section 203(m) does not require customer interaction and instead only requires that tips be distributed to anyone that customarily and regularly receives tips regardless of job duties; thus, according to Red Robin’s logic, anyone could receive tips. The Court denied Red Robin’s motion to dismiss and relying upon the plain meaning of 203(m) and several circuit courts held that “[b]ased on this case law, section 203(m)’s plain meaning and the directive that exemptions to the FLSA are narrowly construed, we conclude that to take part in a tip pool a restaurant employee must have direct customer interaction.”

Section 203(m) allows the “pooling of tips among employees who customarily and regularly receive tips.”29 U.S.C.  § 203(m). Red Robin argued that Expos customarily and regularly receive tips due to their regular inclusion in the tip pool. The Court, however, rejected this argument: “section 203(m)’s plain meaning beckons the image of customer service employees who receive tips directly from customers in a recurring fashion and as a matter of occupational custom.” Indeed, the Court noted that the requirement that direct customer interaction is needed for an employee to participate in a tip pool is supported by cases from the Second, Fifth, and Sixth Circuits.

In addition to their federal FLSA claim asserted as a collective action, Plaintiffs assert Rule 23 class action claims brought under the Pennsylvania Minimum Wage Act (“PMWA”) and the Pennsylvania Wage Payment and Collection Law (“PWPCL”) against Lehigh Valley Restaurant Group, Inc.  Plaintiffs agreed to the dismissal of their PMWA and PWPCL claims in federal court so that they could instead be litigated in state court. Plaintiffs’ PWPCL claim alleges that Red Robin improperly required Servers to purchase uniforms through deductions from their paychecks. The PMWA, similar to the FLSA claim, alleges that Red Robin’s distribution of Servers’ tips to Expos violate the PMWA’s minimum wage and overtime pay mandates. To date, 3 other individuals have joined the federal lawsuit.

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