As discussed repeatedly in these pages and elsewhere, employers have faced innumerable lawsuits regarding their alleged failure to distribute amounts purported to be gratuities to service staff in their entirety. However, even distributing tip money dollar-for-dollar to service providers is not a panacea against wage claims, as highlighted in a new opinion issuing from the Eastern District of New York’s Brooklyn courthouse. Ellis v. Common Wealth Worldwide Chaueffuered Transp. of NY, LLC, 2012 U.S. Dist. LEXIS 40288 (E.D.N.Y. Mar. 23, 2012).
In Ellis, Judge Dora Irizarry ruled that a “suggested” gratuity paid to a chauffeur did not have to be included in the employee’s regular rate for the purposes of computing overtime under the FLSA or New York Labor Law. The Judge further ruled that the employer’s policy of automatically deducting 30 minutes from the employee’s pay for lunch, and requiring the employee to report any instances of being unable to take such a lunch break, was lawful.
In regard to the gratuity issue, plaintiff alleged that, because the company suggested each customer add a gratuity of 20%, any monies added were not a gratuity under DOL regulations, but rather analogous to a commission which must be incorporated into the regular rate of pay for purposes of computing overtime. The court analyzed the regulations and concluded that, because customers were free to vary from the suggested amount and the employer offered un-rebutted evidence that customers in fact did so, these payments were properly treated as voluntary gratuities, excludable from the regular rate calculation.
In regard to the auto-deduct, the court noted that plaintiff failed to proffer any evidence that he had to work through lunch or that he had notified any managerial employee that he had worked through lunch. Absence of this evidence, in connection with the employee’s signed acknowledgement of a policy requiring him to notify the employer if he did not receive a meal period, was fatal to his claim.
Ellis is a victory for employers, but also a cautionary tale regarding the many ways in which standard wage and hour practices, even those benevolent to employees, can give rise to wage and hour claims.