Marlow v. New Food Guy, Inc.

• Citation: 861 F.3d 1157
• Decision Date: 30 June 2017
• Docket Number: No. 16-1134,16-1134
• Parties: Bridgette MARLOW, on behalf of herself and all similarly situated persons, Plaintiff–Appellant, v. The NEW FOOD GUY, INC., a Colorado corporation d/b/a Relish Catering & Events ; Brett Tucker, Defendants–Appellees. United States of America, Amicus Curiae.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

861 F.3d 1157

Bridgette MARLOW, on behalf of herself and all similarly situated persons, Plaintiff–Appellant,

v. The NEW FOOD GUY, INC., a Colorado corporation d/b/a Relish Catering & Events ; Brett Tucker, Defendants–Appellees.United States of America, Amicus Curiae.

No. 16-1134

United States Court of Appeals, Tenth Circuit.

FILED June 30, 2017

Brian D. Gonzales, The Law Offices of Brian D. Gonzales, PLLC, Fort Collins, Colorado, for Plaintiff–Appellant.

Jennifer L. Gokenbach, Gokenbach Law, LLC, Denver, Colorado, for Defendants–Appellees.

John S. Koppel, Attorney, Appellate Staff (Benjamin C. Mizer, Principal Deputy Assistant Attorney General, and Robert C. Troyer, Acting United States Attorney, and Mark B. Stern, with him on the brief), U.S. Department of Justice, Washington, D.C., for Amicus Curiae.

Before HARTZ and EBEL, Circuit Judges.^*

HARTZ, Circuit Judge.

Plaintiff Bridgette Marlow sued her employer The New Food Guy, Inc., d/b/a Relish Catering, under the Fair Labor Standards Act (FLSA). The FLSA requires employers to pay a minimum wage of $7.25 per hour, see 29 U.S.C. § 206(a)(1)(C), plus time and a half for overtime, see 29 U.S.C. § 207(a)(1). Relish paid Ms. Marlow $12 an hour and $18 an hour for overtime. So what is the problem? Ms. Marlow claims that Relish was obligated to turn over to her a share of all tips paid by catering customers. She relies on the tip-credit provision of the FLSA, which is directed to employers who satisfy their minimum-wage obligations in part with tips retained by their employees, and on a regulation promulgated by the Department of Labor (DOL) purportedly interpreting that provision. We are not persuaded. We hold that the tip-credit provision clearly does not apply in this case and that the regulation is beyond the DOL's authority. An employer that pays its employees a set wage greater than the minimum wage does not violate the FLSA when it retains tips paid by customers.

I. BACKGROUND

Ms. Marlow worked for Relish from October 2013 to November 2014. Relish paid workers like Ms. Marlow a base wage of $12 an hour ($18 for overtime).¹ At the end of each catering event, Relish accepted tips from customers paying their final bill. But Relish did not supplement the hourly wage of its workers with any share of the gratuity.

Ms. Marlow sued Relish and Brett Tucker, a manager and part owner, in the United States District Court for the District of Colorado, alleging that Relish had violated the minimum-wage provisions of the FLSA.² The district court granted the defendants' motion for judgment on the pleadings. Ms. Marlow moved for reconsideration, citing a DOL regulation that prohibits employers from retaining employee tips. The court denied the motion, implicitly determining that the regulation was invalid. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

As we shall see, under the clear text of the FLSA, restrictions on employers' use of tips apply only when the employer uses tips received by the employee as a credit against the employee's minimum wage. If an employer pays more than the minimum wage without regard to tips, the FLSA does not restrict the employer's use of tips. The regulation categorically barring employers from retaining tips is invalid because it exceeded DOL's authority.

II. DISCUSSION

Ms. Marlow advances two arguments for reversal: (1) that Relish violated the FLSA's tip-credit restrictions when it retained the tips, and (2) that Relish violated a DOL regulation prohibiting employers from retaining tips. We begin with the statutory argument.

A. Tip–Credit Restrictions

Ms. Marlow's set wage of $12 an hour was well above the $7.25 federal minimum. In spite of this, she claims that Relish violated federal minimum-wage law because Relish retained all tips. She argues that paying a set wage of more than $7.25 per hour but retaining tips can be the economic equivalent of paying a below-minimum wage. For instance, if she received her $12 hourly wage but Relish retained $11 in tips for each hour worked, then the bottom line would be the same as if Relish took none of Ms. Marlow's tips but paid her a $1 wage. Money, of course, is fungible. So from Relish's perspective, these scenarios are economic equivalents.

Supreme Court precedent and the language of the FLSA, however, clearly bar that approach. The Act protects against "substandard wages"—that is, compensation that falls below the " ‘minimum standard of living necessary for health, efficiency and general well-being of workers.’ " Barrentine v. Ark.-Best Freight Sys., Inc. , 450 U.S. 728, 739, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) (quoting 29 U.S.C. § 202(a) ). In general, the FLSA's concern is only with the wage payments that employees receive, not with tracing the sources of the money ultimately used by the employer to pay the wage. In particular, early in the history of the FLSA the Supreme Court held that employers could use the tips paid to their employees toward satisfying their minimum-wage obligations. See Williams v. Jacksonville Terminal Co. , 315 U.S. 386, 62 S.Ct. 659, 86 L.Ed. 914 (1942). The Court said that the FLSA leaves to the parties to contract on who owns the tips paid to employees. See id. at 397, 62 S.Ct. 659 ("Where ... an arrangement is made by which the employee agrees to turn over the tips to the employer, in the absence of statutory interference, no reason is perceived for its invalidity."); id. at 408, 62 S.Ct. 659 (because the FLSA does not address whether tips should be treated as wages, "the employer was left free, in so far as the Act was concerned, to work out the compensation problem in his own way"). Under Williams , Ms. Marlow's "economic" analysis is beside the point. Relish had the right to make it a condition of employment that it would own all tips paid by catering customers. That being the case, Ms. Marlow and other employees would have no right to claim that "their" tips should be subtracted from the $12-an-hour wage to determine if they had received the required minimum wage.

To be sure, the FLSA has been amended since Williams . Ms. Marlow argues that the 1974 amendment to § 3(m) of the Act, Pub. L. No. 89–259, § 139(e), 88 Stat. 55, 64–65 (1974) (codified as amended at 29 U.S.C. § 203(m) ), which added the tip-credit provision, undermined the Williams approach. She is correct that the amendment deals with tips. But the scope of the amendment does not extend to this case. The tip-credit provision states:

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 [$2.13, a special minimum for tipped employees]; and

(2) an additional amount on account of the tips received by such employee which amount is equal to the difference between the wage specified in paragraph (1) [$2.13] and [$7.25, the usual federal minimum].

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) (emphasis added). The statute defines tipped employee as "any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips." Id. § 203(t).

This provision gives employers of "tipped employees"—like hotels and restaurants—the option of paying a reduced hourly wage of $2.13 so long as their workers receive enough tips to bring them to the $7.25 minimum. If there are not enough tips, the employer must pay the difference; if there are more than enough, the excess tips go to employees. This court has held that if an employer counts tips toward the minimum wage, it must pay the $2.13 cash minimum. In Doty v. Elias , 733 F.2d 720, 722 (10th Cir. 1984), the employer did not pay any of the plaintiffs an hourly wage or salary but allowed them to keep all the tips they received. He argued that he had complied with the FLSA because the amount of the tips exceeded the minimum wage. We rejected the argument, stating that § 203(m)"ensure[s] that an employer may not use the tips of a tipped employee to satisfy more than a specified percentage of the Act's minimum hourly wage." Id. at 724 ; see Romero v. Top–Tier Colo. LLC , 849 F.3d 1281 (10th Cir. 2017).

Ms. Marlow complains that Relish never told her it was exercising the tip credit, nor did it let her receive any tips. Fair enough. But her argument that this violated the FLSA rests on a flawed premise: that Relish invoked the § 203(m) tip credit in the first place. Relish always paid Ms. Marlow a wage well above the $7.25 minimum, and that wage was not dependent on the amount of tips left by customers. Section 203(m) imposes no restrictions on an employer who provides a set wage above the $7.25-an-hour minimum.

All that § 203(m) does is permit a limited tip credit and then state what an employer must do if it wishes to take that credit . Ms. Marlow reads the statutory provision as also requiring that all employers always give all tips to employees (perhaps through tip pooling). But it does not say that. What it says is that the employer must so distribute tips if it wishes the first two sentences of the tip-credit provision to apply. The tip credit "shall not apply ... unless" the employer complies with two statutory conditions: (1) notice to employees and (2) payment of all tips to employees. 29 U.S.C. § 203(m). When the employer does not take the tip credit, it must do only what all employers must do—pay the full minimum wage. See Cumbie v. Woody Woo , Inc. , 596...