Shahriar v. Smith & Wollensky Rest. Group

• Decision Date: 26 September 2011
• Docket Number: Docket No. 10–1884–cv.
• Citation: 659 F.3d 234,80 Fed.R.Serv.3d 1070,161 Lab.Cas. P 35953,18 Wage & Hour Cas.2d (BNA) 193
• Parties: Salim SHAHRIAR, Muhammad Islam, and Mary Harvey, on behalf of themselves and all others similarly situated, and Suhel Ahmed, Andrew Mellor, Maria Zayaruzny, Masud Ahad, Anthony Justin DeSouza, Nazaruddin Zaidan, Christopher Lee Robbins, Sebastian G. Joulain, Michael Mueller, Gous Uddin, Ron Elton Megason, Bobbi Kim, Nicholas Lee Mullins, Erasmo Dinninno, Matthew Alexander Wulf, Ishah Faith–Jannsen, Mahbub Malik, Raymond Taylor, Phyliss Lynn Spiece, Lawrence Larocca, Rbiai Ouazene, Pat Thuniljinda, Plaintiffs–Appellees,v.SMITH & WOLLENSKY RESTAURANT GROUP, INCORPORATED, DBA Park Avenue Restaurant, Fourth Walls Restaurant LLC, DBA Park Avenue Restaurant, Defendants–Appellants. *
• Court: U.S. Court of Appeals — Second Circuit

659 F.3d 234

161 Lab.Cas. P 35,953

80 Fed.R.Serv.3d 1070

18 Wage & Hour Cas.2d (BNA) 193

Salim SHAHRIAR, Muhammad Islam, and Mary Harvey, on behalf of themselves and all others similarly situated, and Suhel Ahmed, Andrew Mellor, Maria Zayaruzny, Masud Ahad, Anthony Justin DeSouza, Nazaruddin Zaidan, Christopher Lee Robbins, Sebastian G. Joulain, Michael Mueller, Gous Uddin, Ron Elton Megason, Bobbi Kim, Nicholas Lee Mullins, Erasmo Dinninno, Matthew Alexander Wulf, Ishah Faith–Jannsen, Mahbub Malik, Raymond Taylor, Phyliss Lynn Spiece, Lawrence Larocca, Rbiai Ouazene, Pat Thuniljinda, Plaintiffs–Appellees,

v.SMITH & WOLLENSKY RESTAURANT GROUP, INCORPORATED, DBA Park Avenue Restaurant, Fourth Walls Restaurant LLC, DBA Park Avenue Restaurant, Defendants–Appellants. *

Docket No. 10–1884–cv.

United States Court of Appeals, Second Circuit.

Argued: June 6, 2011.Decided: Sept. 26, 2011.

Gregory B. Reilly III, A. Michael Weber, Littler Mendelson, P.C., New York, NY, for Defendants–Appellants.Daniel Maimon Kirschenbaum, Denise A. Schulman, Charles Joseph, Joseph, Herzfeld, Hester & Kirschenbaum LLP, New York, NY, for Plaintiffs–Appellees.Richard J. Burch, Bruckner Burch PLLC, Houston, TX, for Plaintiffs–Appellees.Dean A. Romhilt (Jennifer S. Brand, Associate Solicitor and Paul L. Frieden, Counsel for Appellate Litigation, on the brief; M. Patricia Smith, Solicitor of Labor, of counsel), Washington, D.C., for the United States Secretary of Labor as Amicus Curiae in Support of Plaintiffs–Appellees.Justin M. Swartz (Rachel Bien and Mariko Hirose, on the brief), Outten & Golden LLP, New York, NY, for Rebecca M. Hamburg, National Employment Lawyers Association, et al., San Francisco, CA, as Amicus Curiae in Support of Plaintiffs–Appellees.Before: NEWMAN, MINER, and LYNCH, Circuit Judges.MINER, Circuit Judge:

Defendants-appellants, Smith & Wollensky Restaurant Group, Inc. (d/b/a Park Avenue Restaurant), and Fourth Walls Restaurant LLC (d/b/a Park Avenue Restaurant) (collectively, “Park Avenue”) appeal from a January 29, 2010, Order of the United States District Court for the Southern District of New York (Cedarbaum, J.) granting a motion for class certification made, pursuant to Federal Rule of Civil Procedure 23, by plaintiffs-appellees, Salim Shahriar, Muhammad Islam, and Mary Harvey (collectively, the “Plaintiffs”). Plaintiffs worked for Park Avenue as waiters at the Park Avenue Restaurant in Manhattan. On behalf of themselves and all others similarly situated, they filed a Complaint on January 4, 2008, and an Amended Complaint on July 28, 2008, alleging that Park Avenue violated the minimum wage and overtime provisions of the Fair Labor Standards Act (“FLSA”), Pub.L. No. 75–718, ch. 676, 52 Stat. 1060 (1938), 29 U.S.C. §§ 201–19 (2006), by requiring waiters to share tips with tip-ineligible employees. Plaintiffs allege that Park Avenue also violated various provisions of the New York Labor Law by requiring servers to share tips with tip-ineligible employees and by failing to pay waiters for an extra hour's work when their workdays lasted more than ten hours. Plaintiffs' federal claims for relief were brought as a collective action pursuant to Section 16(b) of the FLSA, 29 U.S.C. § 216(b), and a putative class action was brought with regard to Plaintiffs' New York State Labor Law claims.

On November 11, 2009, Plaintiffs moved to have their state law claims certified as a class action pursuant to Federal Rule of Civil Procedure 23 (“Rule 23”). The District Court heard oral argument and orally granted Plaintiffs' motion on January 28, 2010. In granting the motion, the court exercised supplemental jurisdiction over the Plaintiffs' New York State Labor Law claims and found that the requirements for class certification under Rule 23(a), (b)(3) had been met.

On February 11, 2010, Park Avenue filed in this Court, pursuant to Federal Rule of Civil Procedure 23(f), a petition for leave to appeal from the District Court's written January 29, 2010, interlocutory Order granting Plaintiffs' motion for class certification of their state law claims. Over plaintiffs' opposition, we granted the petition for leave to appeal on May 14, 2010. For the reasons that follow, we affirm the Order of the District Court certifying the class action.

BACKGROUND

I. Park Avenue's Alleged Practices

Defendant-appellant Smith & Wollensky Restaurant Group, Inc. (“Smith & Wollensky”), is a Delaware corporation with its headquarters in New York City. Smith & Wollensky owned and managed Park Avenue Restaurant in midtown Manhattan. Defendant Fourth Walls Restaurants LLC (d/b/a Park Avenue Restaurant) is a limited liability corporation with its headquarters in New York and owns and manages Park Avenue Restaurant. Each plaintiff was employed by Park Avenue at the Park Avenue Restaurant as a “front waiter/captain” within three years of the filing of the Complaint.

Plaintiffs have alleged that Park Avenue's practices concerning tips violate federal and state law. Park Avenue compensates servers pursuant to state and federal tip credits that permit restaurant employers to pay tipped employees ¹ a lower minimum wage as long as the employees earn a certain amount in tips. See 29 U.S.C. § 203(m) (2006); N.Y. Comp.Codes R. & Regs. tit. 12, § 137–1.5 (2010) (“Tip allowance for food service worker”). ² The FLSA permits employers to take a tip credit up to 50% of the minimum wage except that the credit “may not exceed the value of the tips actually received by the employee.” 29 U.S.C. § 203(m). Under New York Labor Law, as of January 1, 2011, however, employers are entitled to a tip credit of only $2.25. N.Y. Comp.Codes R. & Regs. tit. 12, § 146–1.3 (effective Jan. 1, 2011) (“Tip credits”).

Under the FLSA an employer may not avail itself of the tip credit if it requires tipped employees to share their tips with employees who do not “customarily and regularly receive tips.” 29 U.S.C. § 203(m) (stating that the tip credit “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”). Thus, an employer loses its entitlement to the tip credit where it requires tipped employees to share tips with (1) employees who do not provide direct customer service or (2) managers. E.g., Myers v. Copper Cellar Corp., 192 F.3d 546, 550–51 (6th Cir.1999) (noting its precedent that a host or hostess qualifies as a “ ‘tipped employee[ ]’ ” because his or her work entails “sufficient customer interaction and table attendance duties” but concluding that a “salad maker” was not a tipped employee because a salad maker: had no “direct intercourse with diners, worked entirely outside the view of restaurant patrons, and solely performed duties traditionally classified as food preparation or kitchen support work”); Chung v. New Silver Palace Rest., 246 F.Supp.2d 220, 229 (S.D.N.Y.2002) (finding that it violates the FLSA for an employer to use a tip credit while requiring tipped employees to share tips with managers).

New York law similarly prohibits employers from requiring tipped employees to share tips with non-service employees or managers. N.Y. Labor Law § 196–d (“ § 196–d”) (McKinney 2009) (“Gratuities”) provides:

No employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee.... Nothing in this subdivision shall be construed as affecting ... the sharing of tips by a waiter with a busboy or similar employee.

By its plain terms, § 196–d bars employers from requiring tipped employees to share tips with employees who do not perform direct customer service—i.e., employees who are not “busboy[s] or similar employee[s]” and employees who are managers or “agent[s]” of the employer. See Chan v. Triple 8 Palace, Inc. (“Chan II”), No. 03 Civ. 6048, 2006 WL 851749, at *16, 2006 U.S. Dist. LEXIS 15780, at *57 (S.D.N.Y. Mar. 31, 2006) (noting that plaintiffs may establish a violation of § 196–d by showing that they were required to share tips with individuals who were either “employers, owners, or managers” or simply “not waiters, busboys, or ‘similar employees' ”); see also Ayres v. 127 Restaurant Corp., 12 F.Supp.2d 305, 307 n. 1 (S.D.N.Y.1998) (“While tip-pooling is not per se illegal, N.Y. Labor Law § 196–d prohibits any ‘employer or his agent’ from ‘demand[ing] or accept[ing], directly or indirectly, any part of the gratuities, received by an employee, or retain[ing] any part of a gratuity or of any charge purported to be a gratuity for an employee.’ An employer ‘includes any person acting directly or indirectly in the interest of an employer in relation to an employee.’ 29 U.S.C. § 203(d).” (internal citation omitted; alternations in original)); Tandoor Rest., Inc. v. Comm'r of Labor, No. PR–82–85 (Industrial Bd. of App. Dec. 23, 1987) (finding that defendant restaurant violated § 196–d by requiring service employees to share tips with managers and with clerical and kitchen staff who did not engage in “any meaningful aspect of direct service to customers”).

Thus, 29 U.S.C. § 203(m) and § 196–d bar the same types of tipping practices, and actions that violate the tip pooling provision of 29 U.S.C. § 203(m) may also violate § 196–d. Plaintiffs contend that Park Avenue's tipping practices violate both 29 U.S.C. § 203(m) and § 196–d. According to the Plaintiffs, Park Avenue required servers to share their tips with “expediters,” “dishwashers,” “silver polishers,” and “coffee makers.” Plaintiffs allege that none of these employees had any direct contact with customers....