Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 1 of 10 PageID #: against - 14 CV 226 (CLP)

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1 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 1 of 10 PageID #: 262 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK X MAYRA PIEDRAHITA and ISABEL ALVAREZ, on behalf of themselves and all others similarly situated, Plaintiffs, ORDER - against - 14 CV 226 (CLP) 3801 BROADWAY RESTAURANT CORP. d/b/a LAS MARGARITAS, RUTH JARA, and MILTON JARA, Defendants X POLLAK, United States Magistrate Judge: On January 13, 2014, plaintiffs Mayra Piedrahita and Isabel Alvarez, on behalf of themselves and all others similarly situated (collectively, plaintiffs ), commenced this action against defendants 3801 Broadway Restaurant Corp. d/b/a Las Margaritas, Ruth Jara, and Milton Jara (collectively, defendants ), seeking unpaid overtime wages, minimum wages, and spreadof-hours pay, pursuant to the Fair Labor Standards Act ( FLSA ), 29 U.S.C. 201 et seq., and New York Labor Law ( NYLL ) 650, as well as damages stemming from defendants alleged failure to comply with the notice and record keeping requirements under the FLSA and the NYLL, and defendants alleged unlawful uniform and wage deductions under the NYLL. In preparation for the trial scheduled to begin on January 25, 2016, the Court held a final pretrial conference on January 19, 2016 to address the Proposed Joint Pretrial Order ( JPTO ) and the parties proposed voir dire questions, and to resolve any outstanding issues before trial. During the conference the Court issued several rulings, which were outlined in this Court s

2 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 2 of 10 PageID #: 263 January 20, 2016 Order. As discussed in that Order, the Court noted that the parties discussed at length the issue of whether defendants could introduce evidence or make arguments as to the gratuities or tips received by plaintiffs or any other current or former employees of defendants. The Court had previously ruled on this issue on January 5, 2016, granting plaintiffs motion in limine in its entirety, after receiving no response or objection to the motion from the defendants. At the conference, defendants counsel stated that he did not object to plaintiffs request to preclude defendants from introducing at trial the amount of the gratuities or tips received by plaintiffs. However, defendants maintained that they should be allowed to present evidence that the plaintiffs did, in fact, receive tips from the defendants, and thus, plaintiffs were properly paid at the tipped employee minimum wage rate, rather than the regular employee minimum wage rate under the FLSA. In other words, the defendants asserted that the jury should be allowed to consider the fact that the plaintiffs received gratuities or tips during the course of their employment with the defendants in determining whether defendants had violated the wage and hour laws and in determining the amount of damages, if any, owed to plaintiffs under the FLSA. Plaintiffs objected to defendants position, asserting that the Court had already ruled on this issue in its January 5, 2016 Order. Further, plaintiffs argued that since defendants had failed to comply with the prerequisites necessary to demonstrate that the plaintiffs were tipped employees as defined under the FLSA, defendants could not take advantage of the tip credit under the FLSA, nor could defendants make the argument to the jury that because plaintiffs had received tips, they were sufficiently compensated. In light of this discussion, the Court directed the parties to brief this issue by January 21, On January 21, 2016, defendants submitted a letter motion seeking reconsideration and/or 2

3 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 3 of 10 PageID #: 264 clarification of this Court s January 5, (Defs. Ltr. 1 at 1). Without citing any legal authority, which this Court had directed defendants to provide, defendants request that the Court allow defendants to demonstrate at trial that since the plaintiffs received tips, they were properly paid minimum wages at the tipped minimum wage rate, pursuant to New York Labor Law 652(4). (Id.) In support of defendants argument that they provided proper notice of their intention to pay at the tipped minimum wage rate, defendants intend to introduce evidence that [n]otices of the applicable minimum wages were posted at the restaurant, sheets with this information were handed out to each server upon hiring, other server[s] employed by the defendants were provided the same notice and terms as the plaintiffs, and plaintiffs were well aware of the rate of pay when they applied for and accepted employment. (Id. at 1-2). Defendants also claim that plaintiffs have conceded that they kept all gratuities for their services and were paid same in cash by the employer. (Id.) Finally, defendants assert that during all pay periods of plaintiffs employment, the total of their tips and wages were equal to or exceeded the minimum wage in effect. (Id.) On January 21, 2016, plaintiffs submitted a response to defendants request, asserting that it is uncontroverted that (1) defendants failed to provide appropriate notice of the tip credit provisions of the FLSA and NYLL; and (2) failed to pay plaintiffs at the tipped minimum wage. (Pls. 1/21/16 Ltr. 2 at 1). Thus, plaintiffs maintain that any evidence as to plaintiffs tip income should be precluded because introducing evidence of a tipped minimum wage would confuse the jury and is inapplicable in this case. (Id.) 1 Citations to Defs. Ltr. refer to defendants letter, dated January 21, Citations to Pls. 1/21/16 Ltr. refer to plaintiffs letter, dated January 21,

4 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 4 of 10 PageID #: 265 DISCUSSION A. Tip Credit under the NYLL Under the NYLL, an employee bringing an action for unpaid minimum wages has the burden of proving that he performed work for which he was not properly compensated. Fermin v. Las Delicias Peruanas Rest., Inc., 93 F. Supp. 3d 19, (E.D.N.Y. 2015) (quoting Pineda v. Masonry Const., Inc., 831 F. Supp. 2d 666, 674 (S.D.N.Y. 2011); Flores v. J & B Club House Tavern, Inc., No. 10 CV 4332, 2012 WL , at *1 (S.D.N.Y. Oct. 16, 2012) (discussing that NYLL plaintiffs have the burden to prove that they performed the work for which they claim the defendant failed to compensate them). Although the minimum wage rate is set forth in NYLL 652(1), the NYLL allows employers to pay tipped workers in the food service industry a lower minimum wage by taking a tip credit, provided that the wage and the employee s tips, taken together, are at least equivalent to the minimum wage. See N.Y. Comp. Codes R. & Regs. Tit. 12, ; Inclan v. New York Hosp. Grp., Inc., 95 F. Supp. 3d 490, 497 (S.D.N.Y. 2015). In order for a defendant employer to take advantage of the tip credit under the NYLL, the defendant has the burden of proving compliance with all of the following notice and recordkeeping requirements. See 12 N.Y.C.R.R (d). First, an employer must provide the employee, prior to the start of employment, written notice of the employee s regular hourly pay rate, overtime hourly pay rate, the amount of tip credit, if any, to be taken from the basic 4

5 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 5 of 10 PageID #: 266 minimum hourly rate, and the regular payment. 12 N.Y.C.R.R (a); Fermin v. Las Delicias Peruanas Rest., Inc., 93 F. Supp. 3d at Second, this written notice must state that extra pay is required if tips are insufficient to bring the employee up to the basic minimum hourly rate. Id. Third, the notice must be provided in English and in any other language spoken by the new employee as his/her primary language. 12 N.Y.C.R.R (a)(1)-(2). Fourth, if there is any change in the employee s hourly rates of pay, then the employer must provide a new notice. Id. at 2.2(b). Fifth, the employer must keep [a]n acknowledgment of receipt signed by the employee... on file for six years. Id. at 2.2(c). In addition, the employer may not retain any portion of an employee s tips. See Hai Ming Lu v. Jing Fong Rest., Inc., 503 F. Supp. 2d 706, 711 (S.D.N.Y. 2007) (holding that violations of NYLL 196-d render an employer ineligible to receive a tip credit under New York law). After reviewing the parties Joint Pretrial Order ( JPTO ), and the parties January 21, 2016 submissions, the Court finds that the defendants have failed to proffer sufficient evidence that they have satisfied the notice and record-keeping requirements of the tip credit provision of the NYLL. While defendants maintain that they will introduce testimony that plaintiffs received sheets with [NYLL] information.. upon [their] hiring, defendants have not listed these records as exhibits in the JPTO or indicated any intent to produce these records. Similarly, to date, defendants have not provided any evidence that plaintiffs signed an acknowledgment of receipt of a written notice describing the NYLL, which is required under the tip credit provision of the NYLL. 12 N.Y.C.R.R (c). Moreover, in the JPTO, defendants stipulated that [p]laintiffs did not receive an annual notice in accordance with NYLL 191 containing the rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, 5

6 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 6 of 10 PageID #: 267 commission, or other; allowances, if any, claimed as part of the minimum wage, including tip; or the regular pay day designated by the employer. (JPTO, 3 at 5 18). This alone constitutes a concession by defendants that they did not comply with the NYLL requirement that the employer provide the annual notice, and thus, defendants are not eligible to claim the tip credit under the NYLL. See Inclan v. New York Hosp. Grp., Inc., 95 F. Supp. 3d at 501 (holding that the employer could not claim the tip credit under NYLL because the employer did not provide the employee with a wage notice containing allowances, including tip allowances, at the time of the employee s hiring, and then annually on or before the first of February ). Given that defendants have not provided any evidence that they intend to produce records of the NYLL sheets given to plaintiffs upon their hiring or plaintiffs signed acknowledgment that they received such written notices, and defendants have conceded that they did not provide plaintiffs with the required annual wage notices, defendants cannot meet the notice and recordkeeping requirements that would allow them to rely on the tip credit provision of the NYLL. See 12 N.Y.C.R.R (a), (c). Although defendants contend that [n]otices of the applicable minimum wages were posted at the restaurant, these posters, which defendant Jara testified were taken from the Labor Department website, do not provide sufficient notice under the NYLL s tip credit provision. Salinas v. Starjem Rest. Corp., No. 13 CV 2992, 2015 WL , at *16 (S.D.N.Y. Aug. 12, 2015) (quoting Copantitla v. Fiskardo Estiatorio, Inc.,788 F. Supp. 2d 253, 289 (S.D.N.Y. 2011)) (holding that [a]lthough [a] generic government poster could inform employees that minimum wage obligations exist, [it] could not possibly inform employees that 21, Citation to JPTO refers to the parties Proposed Joint Pre-Trial Order, dated December 6

7 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 7 of 10 PageID #: 268 their employers intend to take the tip credit with respect to their salary ). More importantly, generic notices taken from the internet obviously do not indicate the employee s regular hourly pay rate, overtime hourly pay rate, the amount of tip credit, if any, to be taken from the basic minimum hourly rate, and the regular payment. 12 N.Y.C.R.R (a). Accordingly, the Court finds that based on their own concessions in the JPTO, defendants are not eligible for the tip credit under the NYLL as a matter of law, and thus, they will be precluded from arguing that the plaintiffs were tipped employees for purposes of refuting plaintiffs claims that they were not paid the proper minimum wage under the NYLL. Defendants will also be precluded from introducing any evidence as to the amount of tips plaintiffs received. The jury will be instructed that, in determining whether plaintiffs were properly paid minimum wages and overtime under the NYLL, they may not consider any tips that plaintiffs may have received. B. Tip Credit under the FLSA Similar to the NYLL, an employee bringing an action for unpaid minimum wages under the FLSA has the burden of proving that he performed work for which he was not properly compensated. Fermin v. Las Delicias Peruanas Rest., Inc., 93 F. Supp. 3d at 41 (quoting Pineda v. Masonry Const., Inc., 831 F.Supp.2d at 674). However, if the employee ordinarily receives customer tips in the course of their employment, the employer may take a tip credit so long as the employer complies with certain prerequisites. 29 U.S.C. 203(m). Section 203(m) provides that: 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 7

8 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 8 of 10 PageID #: 269 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. To be eligible for the tip credit set forth in Section 203(m), the employer bears the burden of showing that it has satisfied two conditions: (1) informing the employee of the tip credit provision of the FLSA; and (2) permitting the employee to retain all of the tips the employee receives to qualify for the tip credit. See Copantitla v. Fiskardo Estiatorio, Inc., 788 F. Supp. 2d at 287 (collecting cases). This notice provision is strictly construed and normally requires that an employer take affirmative steps to inform affected employees of the employer s intent to claim the tip credit. Inclan v. New York Hosp. Grp., Inc., 95 F. Supp. 3d 490, (S.D.N.Y. 2015) (quoting Perez v. Lorraine Enters., Inc., 769 F.3d 23, 27 (1st Cir. 2014)). For example, courts have interpreted the notice requirement to require the employer to show that [it] satisfied the FLSA s notice requirement by, for example, providing employees with a copy of 203(m) and informing them that their tips will be used as a credit against the minimum wage as permitted by law. He v. Home on 8th Corp., No. 09 CV 5630, 2014 WL , at *5 (S.D.N.Y. Aug. 13, 2014) (internal quotation marks omitted); see also Inclan v. New York Hosp. Grp., Inc., 95 F. Supp. 3d at 497 (quoting Reich v. Chez Robert, Inc., 28 F. 3d 401, 404 (3d Cir. 1994) (holding that [i]f the employer cannot show that it has informed employees that tips are being credited against their wages, then no tip credit can be taken and the employer is liable for the full minimum-wage.... ). Although the tip credit requirements under the FLSA are similar to those under the NYLL, they are not identical. Thus, courts have found that evidence of oral notice of the tip 8

9 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 9 of 10 PageID #: 270 credit provision to employees, which would not satisfy the NYLL, may satisfy the notice requirement of the FLSA, and have allowed such evidence to be presented to a jury. Therefore, the adequacy of any oral notice defendants provided to their employees under the FLSA is a question of fact more properly reserved for the jury. Defendants may introduce evidence to show that they complied with the notice requirements, and thus, are eligible to take the tip credit under the FLSA. However, the Court notes that because the jury is being asked to essentially consider whether defendants properly paid minimum wages and overtime under both statutes for the same time period, there is a concern that instructing the jury in this regard could result in confusion and perhaps an inconsistent verdict. Specifically, the jury is going to have to determine whether the defendants gave sufficient notice under the FLSA. If the jury finds that the notice was sufficient for purposes of taking a tip credit under the FLSA, then they would be asked to determine whether defendants failed to pay the proper amount of minimum wages using the lower tipped employee rate. They would also then be instructed to ignore whether the proper amount was paid under the FLSA and determine whether the defendants had paid proper minimum wages under the NYLL, being reminded that they could not consider any tips that plaintiffs may have received in determining whether plaintiffs were paid at the higher minimum wage rate applicable to nontipped employees. Counsel should be prepared to address this issue following jury selection. 9

10 Case 1:14-cv CLP Document 50 Filed 01/24/16 Page 10 of 10 PageID #: 271 CONCLUSION In light of the foregoing, defendants motion for reconsideration is hereby granted in part and denied in part. Since defendants are not eligible for the tip credit under the NYLL as a matter of law, defendants are precluded from introducing any evidence as to plaintiffs tip income with respect to plaintiffs NYLL claims. However, defendants may introduce evidence in an effort to convince the jury that they are eligible to take the tip credit under the FLSA. The Clerk is directed to send copies of this Order to the parties either electronically through the Electronic Case Filing (ECF) system or by mail. SO ORDERED. Dated: Brooklyn, New York January 22, 2016 /S/ Cheryl L. Pollak United States Magistrate Judge Eastern District of New York 10