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Belt v. P.F. Chang's China Bistro, Inc.

United States District Court, E.D. Pennsylvania

August 15, 2019

STEVEN BELT, et al., Plaintiffs.
v.
P.F. CHANG'S CHINA BISTRO, INC., Defendant.

          MEMORANDUM

          ANITA B. BRODY, J.

         Plaintiffs Steven Belt, Laura Council, and James Harris bring a putative class and collective action against P.F. Chang's China Bistro, Inc. (“P.F. Chang's”), alleging wage and overtime violations of the Pennsylvania Minimum Wage Act[1] (“PMWA”), 43 Pa. Stat. Ann. §§ 333.104(a), 333.104(c) and the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 206, 207(a).[2] P.F. Chang's moves for judgment on the pleadings.[3] I will deny P.F. Chang's motion.

         I. Background

         A. Factual Background[4]

         P.F. Chang's operates hundreds of restaurants throughout the United States. Compl. ¶ 8. At the time of the filing of the Complaint, Plaintiffs were employed as Servers at various P.F. Chang's restaurants.[5] Compl. ¶ 30.

         Plaintiffs were required to perform three different categories of work: tipped work, untipped work related to their occupation as Servers, and work unrelated to their occupation as Servers.[6] Plaintiffs' tipped work included “serving food and drinks to patrons, ” “wait[ing] on tables and describing] daily specials, ” “regularly check[ing] on patrons throughout their meal, ” and collecting payment from customers. Compl. ¶ 30. P.F. Chang's also required Plaintiffs to perform work that did not give them the ability to earn tips because it “did not involve interacting with, nor serving food and beverages to customers.” Compl. ¶ 31. This untipped work included both tasks related to Plaintiffs' employment as Servers, and tasks unrelated to Plaintiffs' employment as Servers.[7] The untipped work included:

• Preparatory tasks, such as labeling sauces, preparing drink machines, filling sugar caddies, polishing dishes, and rolling silverware;
• Sanitation and maintenance tasks, such as sanitizing the kitchen and dining area and bagging and taking out trash; and
• Cleaning tasks, such as cleaning tables and chairs, dusting, sweeping, and polishing.

Compl. ¶¶ 32-34. Plaintiffs' schedules varied, but they routinely worked between twenty and fifty hours each week, in six- to ten-hour shifts. Compl. ¶ 44. During each shift, Plaintiffs spent approximately thirty to fifty percent of their time performing work that did not give them the opportunity to earn tips. Compl. ¶ 45.

         Plaintiffs were paid at the tip-credit minimum wage rate-as opposed to the full minimum wage rate-for the entirety of the hours worked for P.F. Chang's.[8] Compl. ¶¶ 38-40. They were paid at the tip-credit rate for both their tipped and untipped work. Compl. ¶ 47.

         B. Statutory and Regulatory Framework

         The Fair Labor Standards Act (“FLSA”), a Department of Labor (“DOL”) regulation known as the “Dual Jobs regulation, ” and a DOL policy document called the Field Operations Handbook (“FOH”) set forth the framework for determining when an employer is excused from paying an employee the full minimum wage. I will discuss each of these instruments in turn.

         1. The Fair Labor Standards Act

         The original FLSA, enacted in 1938, requires employers to pay a minimum hourly wage. 29 U.S.C. § 206(a)(1)(C). In 1966, the FLSA was amended to also allow an employer, under certain circumstances, to utilize the tips of a “tipped employee” to meet its minimum wage obligations. See Fair Labor Standards Act, Pub. L. 89-601, 80 Stat. 830 (1966). Section 203(m) of the FLSA provides:

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-
i. 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 [$2.13]; and
ii. an additional amount on account of the tips received by such employee which amount is equal to the difference between the wage specified in clause (i) and the wage in effect under section 206(a)(1) of this title [$7.25].
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.

29 U.S.C. § 203(m)(2)(A).[9]

         Therefore, the FLSA does not preclude an employer from paying a tipped employee a cash wage of $2.13 per hour provided that the employee's tips make up the difference between the $2.13 cash wage and the current federal minimum wage. Id. Section 203(t) of the FLSA defines a “tipped employee” as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” 29 U.S.C. § 203(t). The difference between the cash wage and the federal minimum wage is known as the “tip credit.” See 29 C.F.R. § 531.56(d).

         2. The Dual Jobs Regulation

         Beginning in 1967, the DOL promulgated several regulations to address the 1966 FLSA Amendments. This included a regulation addressing the tip-credit provision in Section 203(m), and importantly, it sought to interpret the definition of “tipped employee” set forth in Section 203(t). See 32 Fed. Reg. 222 (Jan. 10, 1967) (Notice of Proposed Rulemaking); 32 Fed. Reg. 13575 (Sept. 28, 1967) (Promulgation of Final Rule).

         The 1967 regulation concerning the tip-credit provision recognizes that an employee may be engaged in two occupations for the same employer but may only qualify as a “tipped employee” in one of those occupations. See 29 C.F.R. § 531.56(e) (“Dual Jobs regulation”). In this situation, an employer may only take the tip credit for the hours an employee spends in the occupation for which he qualifies as a “tipped employee.” Id. The Dual Jobs regulation states:

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.

Id.

         3. The DOL's Prior Interpretations of the Dual Jobs Regulation

         Beginning in 1980, the DOL issued several statements and documents endeavoring to clarify the Dual Jobs regulation. First, the DOL released opinion letters in 1980 and 1985 addressing restaurant servers who spent part of their time performing untipped related duties. The language of the 1980 letter reiterated that when servers only “occasionally” or “part of [the] time” perform untipped related duties, a tip credit may be taken for time spent on those duties. U.S. Dep't of Labor, Wage & Hour Div., Opinion Letter WH-502 (Mar. 28, 1980), 1980 WL 141336. The 1980 letter also stated that the DOL “might have a different opinion if the facts indicated that specific employees were routinely assigned, for example, maintenance-type work such as floor vacuuming.” Id. In the 1985 opinion letter, the DOL stated that when a waiter spent 30 to 40 percent of his or her time performing “preparatory activities” before the restaurant opened-such as setting tables, cleaning and filling salt shakers, and checking supplies of napkins and straws-no tip credit could be taken for this time, because it consumed a “substantial” portion of the waiter's workday. U.S. Dep't of Labor, Wage & Hour Div., Opinion Letter FLSA-854 (Dec. 20, 1985), 1985 WL 1259240.

         Next, in 1988, the DOL added a section to the Field Operations Handbook (“Handbook”) addressing the Dual Jobs regulation. This section read:

(1) When an individual is employed in a tipped occupation and a non-tipped occupation, for example, as a server and janitor (dual jobs), the tip credit is available only for the hours spent in the tipped occupation, provided such employee customarily and regularly receives more than $30.00 a month in tips. See 29 CFR 531.56(e).
(2) 29 CFR 531.56(e) permits the employer to take a tip credit for time spent in duties related to the tipped occupation of an employee, even though such duties are not by themselves directed toward producing tips, provided such related duties are incidental to the regular duties of the tipped employees and are generally assigned to the tipped employee. For example, duties related to the tipped occupation may include a server who does preparatory or closing activities, rolls silverware and fills salt and pepper shakers while the restaurant is open, cleans and sets tables, makes coffee, and occasionally washes dishes or glasses.
(3) However, where the facts indicate that tipped employees spend a substantial amount of time (i.e., in excess of 20 percent of the hours worked in the tipped occupation in the workweek) performing such related duties, no tip credit may be taken for the time spent in those duties. All related duties count toward the 20 percent tolerance.
(4) Likewise, an employer may not take a tip credit for the time that a tipped employee spends on work that is not related to the tipped occupation. For example, maintenance work (e.g., cleaning bathrooms and washing windows) are not related to the tipped occupation of a server; such jobs are non-tipped occupations. In this case, the employee is effectively employed in dual jobs.

         U.S. Dep't of Labor, Field Operations Handbook, § 30d00(f)(1)-(4) (rev. Dec. 15, 2016). The Handbook provided that a tip credit may never be taken for time spent performing work unrelated to the tipped occupation. Additionally, the Handbook provided that a tip credit could only be taken for time an employee spends performing “related, ” but untipped, duties if the employee spent twenty percent or less of their time performing related duties. Under this principle-known as the “80/20 Rule”-a server who spent two hours or less filling salt shakers during a ten hour shift, and who spent the remainder of his or her shift waiting on customers, could be paid $2.13 an hour for all of the hours he or she worked. But a server who spent more than two hours filling salt shakers and performing other untipped related work would be engaged in dual jobs, and must be paid the full minimum wage for all hours spent performing untipped related work.

         In recent years-including as recently as July, 2016-the DOL has adopted the 80/20 Rule in amicus briefs to the Eighth, Ninth, and Tenth Circuit Courts of Appeals. See Brief for the Secretary of Labor as Amicus Curiae in Support of Plaintiffs-Appellants, Marsh v. J. Alexander's LLC, 905 F.3d 610 (9th Cir. 2018) (Nos. 15-15791, 15-15794, 15-16561, 15-16659, 16-15003, 16-15004, 16-15005, 16-15118, 16-16033), 2016 WL 3900819; Brief for the Secretary of Labor as Amicus Curiae in Support of Plaintiff-Appellant, Romero v. Top-Tier Colo., LLC, 849 F.3d 1281 (10th Cir. 2017) (No. 16-1057), 2016 WL 3922687; Brief for the Secretary of Labor as Amicus Curiae in Support of Plaintiffs-Appellees, Fast v. Applebee 's Int'l, Inc., 638 F.3d 872 (8th Cir. 2011) (Nos. 10-1725/26), 2010 WL 3761133.

         4. The DOL's Current Interpretation of the Dual Jobs Regulation

         On November 8, 2018, the DOL's Wage and Hour Division (“WHD”) issued an Opinion Letter (“November 2018 Letter”) purporting to supersede the 80/20 Rule.[10] U.S. Dep't of Labor, Wage & Hour Div., Opinion Letter FLSA2018-27 (Nov. 8, 2018), 2018 WL 5921455. Stating that “the current FOH sections addressing the tip credit have resulted in some confusion and inconsistent application, ” the Letter purports to “clarify our Field Operations Handbook (FOH) section 30d00(e), ” which in turn interprets “the definition of a ‘tipped employee' in section 3(t) of the [FLSA].” Id. at *1. According to the Letter, the 80/20 Rule “has created some confusion.” Id. at *2. To support this, the Letter cites to two 2007 district court cases which, under WHD's reading, arrived at different interpretations of the 80/20 rule. Id. at *2-*3.

         To resolve this alleged confusion, the Letter states that WHD “do[es] not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.” Id. at *3.

         Consistent with this Opinion Letter, the WHD revised the Handbook on February 15, 2019 (“Current Handbook”). The Current Handbook reads, in relevant part:

(1) When an individual is employed in a tipped occupation and a non-tipped occupation-for example, as a server and janitor (i.e., dual jobs)-the tip credit is available only for the hours the employee spends working in the tipped occupation, provided the employee customarily and regularly receives more than $30.00 a month in tips. See 29 CFR 531.56(e).
(2) 29 C.F.R. 531.56(e) permits the employer to take a tip credit for any time the employee spends in duties related to the tipped occupation, even though such duties are not themselves directed toward producing tips.
(3) WHD staff will consult the Occupational Information Network (O*NET), an online source of occupational information, and 29 CFR 531.56(e) to determine whether duties are related or unrelated to the tip-producing occupation. Duties will be considered related to the tipped occupation when listed as “core” or “supplemental” under the “Tasks” section of the “Details” tab for the appropriate tip-producing occupation in O*NET.
a. An employer may take a tip credit for any amount of time that an employee spends on related, non-tipped duties performed contemporaneously with the tipped duties-or for a reasonable time immediately before or after performing the tipped duties-regardless whether those duties involve direct customer service. See WHD Opinion Letter WH-502 (March 28, 1980), which concludes that a server's time spent performing related duties (e.g., vacuuming) after restaurant closing is subject to a tip credit. For example, the core tasks currently listed in O*NET for waiters and waitresses (see the O*NET Summary Report for waiters and waitresses) include: cleaning tables or counters after patrons have finished dining; preparing tables for meals, which encompasses setting up items such as linens, silverware, and glassware; and stocking service areas with supplies such as coffee, food, tableware, and linens. In addition, O*NET lists garnishing and decorating dishes in preparation for serving as a supplemental task for waiters and waitresses. An employer may take a tip credit for any amount of time a waiter or waitress who is a tipped employee spends performing these related duties.
. . .
(5) An employer may not take a tip credit for the time an employee spends performing any tasks not contained in 29 CFR 531.56(e), or in the O*NET task list for the employee's tipped occupation, or-for a new occupation without an O*NET description-in the O*NET task list for a similar occupation. Some of the time spent by a tipped employee performing tasks that are not related to a tipped occupation, however, may be ...

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