Berger v. Perry's Steakhouse of Ill., LLC

• Citation: 430 F.Supp.3d 397
• Decision Date: 23 December 2019
• Docket Number: No. 14 C 8543,14 C 8543
• Parties: Jessica BERGER and Timothy Rendak, et al., Plaintiffs, v. PERRY'S STEAKHOUSE OF ILLINOIS, LLC, Howard Cortes, and Jeffrey Pagnotta, Defendants.
• Court: U.S. District Court — Northern District of Illinois

430 F.Supp.3d 397

Jessica BERGER and Timothy Rendak, et al., Plaintiffs,

v.PERRY'S STEAKHOUSE OF ILLINOIS, LLC, Howard Cortes, and Jeffrey Pagnotta, Defendants.

No. 14 C 8543

United States District Court, N.D. Illinois, Eastern Division.

Signed December 23, 2019

Colleen M. McLaughlin, Gregory Scott Dierdorf, The Law Offices of Colleen M. McLaughlin, Wheaton, IL, Elissa Joy Hobfoll, Herschman Levison Hobfoll, Chicago, IL, Quinton Michael Osborne, Osborne Employment Law LLC, Glen Ellyn, IL, for Plaintiffs.

Jeffrey S. Fowler, Jennifer Anne Naber, Laner Muchin, Ltd., Chicago, IL, Lionel M. Schooler, Pro Hac Vice, Jackson Walker L.L.P., Houston, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

Honorable Thomas M. Durkin, United States District Judge

In this partial class and collective action, Plaintiffs, who worked as table servers at Perry's Steakhouse and Grille in Oak Brook, Illinois ("Perry's Oak Brook"), allege that Perry's Steakhouse of Illinois, LLC ("PSI"), which operates Perry's Oak Brook, and managers Howard Cortes and Jeffery Pagnotta (PSI, Cortes and Pagnotta collectively, "Defendants") failed to pay them all tips and other compensation owed, required them to perform non-table-service-related work at less than minimum wage, and failed to give them adequate notice of their intent to take a "tip credit" and use a "tip pool" in violation of the Fair Labor Standards Act and the Illinois Minimum Wage Law. Plaintiffs also seek relief under the Illinois Wage Payment and Collection Act, and under breach of contract and unjust enrichment theories. The parties filed cross motions for partial summary judgment. For the following reasons, both motions are granted in part and denied in part. R. 306; R. 312.

Standard

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Celotex Corp. v. Catrett , 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court considers the entire evidentiary record and must view all of the evidence and draw all reasonable inferences from that evidence in the light most favorable to the nonmovant. Horton v. Pobjecky , 883 F.3d 941, 948 (7th Cir. 2018). To defeat summary judgment, a nonmovant must produce more than a "mere scintilla of evidence" and come forward with "specific facts showing that there is a genuine issue for trial." Johnson v. Advocate Health and Hosps. Corp. , 892 F.3d 887, 894, 896 (7th Cir. 2018). Ultimately, summary judgment is warranted only if a reasonable jury could not return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Background

PSI is a wholly-owned subsidiary of Texas-based Perry's Restaurants Limited ("PRL"). R. 313 ¶ 2; R. 329 ¶ 2. PRL—formerly known as Leasing Enterprises, Ltd.—is the parent company for all Perry's Steakhouse and Grille Restaurants located in Texas, Illinois, Colorado and Alabama. Id. PSI operates Perry's Oak Brook, which opened for business in mid-November 2013 and is the first Perry's restaurant in Illinois. R. 313 ¶¶ 1, 12; R. 329 ¶¶ 1, 12. PSI and PRL share a corporate office in Houston, Texas. R. 313 ¶ 3; R. 329 ¶ 3. PSI's headquarters is staffed solely by PRL employees, and all corporate PSI management is conducted through PRL employees from PRL's Texas headquarters. Id. Perry's Oak Brook is operated by PSI in the same manner as all other Perry's restaurants, and many of its administrative functions are done by or run through PRL. R. 313 ¶¶ 4, 7; R. 329 ¶¶ 4, 7.

Howard Cortes served as Perry's Oak Brook's general manager from its inception until October 2014. Before that, Cortes worked for PRL at various Perry's locations in Texas. R. 313 ¶ 6; R. 329 ¶ 6. While general manager, Cortes was responsible for hiring, training and supervising employees; employee wage and hour classifications; employee compensation; timekeeping; and tip pool policies and procedures. R. 313 ¶¶ 6, 14; R. 329 ¶¶ 6, 14. Cortes did not receive any training on Illinois wage laws prior to Perry's Oak Brook's opening, he does not recall any FLSA training, and he did not know for certain during the relevant time period what the FLSA was. R. 313 ¶¶ 12-13; R. 329 ¶¶ 12-13. In October 2014, Cortes was promoted to PRL Regional Manager, and ultimately returned to Texas to oversee the Perry's locations there. R. 313 ¶ 6; R. 329 ¶ 6. Thereafter, Jeffrey Pagnotta, who had worked as a floor manager at Perry's Oak Brook from the fall of 2013 until October 2014, assumed Cortes's responsibilities as general manager. R. 313 ¶ 8; R. 329 ¶ 8.

Class representatives Jessica Berger and Timothy Rendak are former servers at Perry's Oak Brook and represent a Rule 23 class of 107¹ and opt-in FLSA collective of 29. R. 313 ¶ 9; R. 329 ¶ 9. Each Perry's Oak Brook server is a "tipped employee" as defined by the FLSA and is paid at the Illinois tip credit rate of $4.95 per hour (which is higher than the federal rate of $2.13 per hour). R. 313 ¶ 11; R. 329 ¶ 11.

Perry's Oak Brook uses an electronic Point of Sale ("POS") system to record its servers' hours, credit card transactions, tips, gratuities, and sales (among other things). R. 313 ¶ 16; R. 329 ¶ 16. At the end of each shift, the POS system generates a "checkout report" for each server, which the server reviews before taking it to a manager or bartender for their review. Id.

From opening in November 2013 until mid-October 2014, Perry's Oak Brook's servers were paid nightly in cash for all tips received during a shift, including those paid by credit or debit card. R. 313 ¶ 17; R. 329 ¶ 17. Servers' hourly wages were paid separately by check every two weeks. Id. During that same time period, two deductions were taken from servers' cash tips and reflected on servers' POS checkout reports: (1) a deduction representing 4.5% of the server's total sales, to be pooled and redistributed to hostesses, bussers, bartenders and food runners (the "tip pool"), and indicated on the checkout report as the server's "tip share"; and (2) a credit card offset fee in the amount of 3.25% of servers' credit and debit card tips (or 3.5% in the case of a private event or large party of eight or more), used to recoup the expense involved with the nightly cashing out of those tips, and referred to on the checkout report as the server's "tip refund." R. 313 ¶¶ 18-20, 51; R. 329 ¶¶ 18-20, 51. Defendants continue to operate a tip pool, and to employ the same tip pool deduction, but, for reasons explained below, PSI stopped deducting the credit card offset fee in mid-October 2014, and started paying credit card tips through its weekly payroll system. R. 313 ¶¶ 54-55; R. 329 ¶¶ 54-55.

In addition to claims related to Defendants' tip pool and credit card offset fee deductions and of relevance here, Plaintiffs also bring claims related to the notice (or lack thereof) Defendants gave regarding the tip credit it took and the tip pool it operated, and the untipped "sidework" that Defendants require servers to perform at less than minimum wage. Plaintiffs also seek to recover additional compensation they claim they were owed but did not receive in the form of mandatory service charges for private or larger events. Both Plaintiffs and Defendants seek summary judgment on two of the claims the Court certified under the FLSA and the IMWL: (1) the credit card offset fee claim (Plaintiffs only as to PSI, not the individual defendants,² and Defendants only as to liquidated damages, not liability); and (2) the sidework claim against each Defendant. R. 315. Defendants also seek summary judgment on Plaintiffs' claims concerning: (1) the notice Plaintiffs received pertaining to Defendants' use of a tip credit and tip pool (certified); (2) the allegation that Defendants impermissibly retained some of the tips in the tip pool to pay business and other expenses (not certified); and (3) breach of contract and unjust enrichment (not certified).

Analysis

The FLSA and IMWL require employers to pay their employees a minimum wage for each hour of work.³

29 U.S.C. § 206 ; 820 ILCS 105/4(a)(1). But an employer may offset its minimum wage obligations as to a tipped employee by the tips the employee actually receives. 29 U.S.C. § 203(m) ; 820 ILCS 105/4(a)(1), (c). This offset is known as a "tip credit." While generally an employer may only take a tip credit if each tipped employee retains all of his tips, 29 U.S.C. § 203(m) ; 820 ILCS § 105/4(c), this restriction does not apply if the employer operates a valid "tip pool." Id. In a tip pool, a portion of an employee's tips are redistributed to other employees who perform customer service functions, such as bussers, bartenders and food runners. Id. A tip pool is "valid" if it includes only employees who "customarily and regularly receive tips," and the employer does not "retain any of the employees' tips for any other purpose." 29 C.F.R. § 531.54 ; Williams-Green v. J. Alexander's Restaurants, Inc. , 277 F.R.D. 374, 380-81 (N.D. Ill. 2011) ; Morgan v. SpeakEasy, LLC , 625 F. Supp. 2d 632, 652-53 (N.D. Ill. 2007). If the tip pool is invalid—either because it includes employees who do not "customarily and regularly receive tips," or because the employer retains a portion of the tips for some other purpose—the employer may not take the tip credit, and must instead pay minimum wage. 29 U.S.C. § 203(m) ; Williams-Green , 277 F.R.D. at 379.

The FLSA also requires employers seeking to use a tip credit and/or tip pool to provide certain notice to affected employees. 29 U.S.C. § 203(m)(2)(A). The Department of Labor ("DOL") has promulgated regulations regarding that notice. One such regulation identifies information an employer must disclose to its tipped employees before using a tip credit, id. § 531.59(b), and another governs notice concerning tip pools, id. § 531.54. Yet another regulation addresses the type and amount of untipped work (...