Elkins v. Showcase, Inc.
| Decision Date | 26 July 1985 |
| Docket Number | No. 57079,57079 |
| Citation | 704 P.2d 977,237 Kan. 720 |
| Parties | , 27 Wage & Hour Cas. (BNA) 455, 106 Lab.Cas. P 55,754 Chester R. ELKINS, Claimant/Appellee, v. SHOWCASE, INC., d/b/a Loft Steak House and Showcase Theatre, Respondent/Appellant. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. The Kansas Department of Human Resources has jurisdiction under the Kansas Wage Payment Act (K.S.A. 44-313 et seq.) to determine whether a claimant's wages have been wrongfully withheld by his former employer. In such a case, the provisions of the Fair Labor Standards Act (29 U.S.C. § 201 et seq. [1982] are material only if an issue arises whether the employer was empowered by that act to withhold any portion of the employee's wages.
2. Unless there is a specific provision in a federal law, a state law which is not in conflict with or contrary to the federal law is enforceable.
3. Under the factual circumstances set forth in the opinion, it is held (1) that the employer was not denied procedural due process of law; (2) that the employer was not denied the right to trial by jury in the administrative proceeding; and (3) that the administrative hearing officer's findings of fact were not arbitrary or capricious and were supported by substantial competent evidence.
4. Under the factual circumstances set forth in the opinion, the moneys withheld by the employer under a tip pool arrangement were "wages" within the meaning of K.S.A. 44-313 et seq.
K. Gary Sebelius, of Eidson, Lewis, Porter & Haynes, Topeka, argued the cause, and Catherine A. Walter, Topeka, was with him on briefs, for appellant.
Karl V. Cozad, staff counsel, Kan. Dept. of Human Resources, Topeka, argued the cause and was on brief, for appellee.
This is an appeal in an administrative proceeding brought by an employee, pursuant to the Kansas Wage Payment Act (KWPA), K.S.A. 44-313 et seq., seeking recovery of back wages. The claimant is Chester L. Elkins, a former waiter at the Loft Steak House. The respondent-employer is Showcase, Inc., d/b/a Loft Steak House and Showcase Theatre in Topeka. An administrative hearing officer of the Kansas Department of Human Resources awarded claimant back wages and an equal amount as a statutory penalty pursuant to K.S.A. 44-315(b). Showcase, Inc. appealed to the district court, which affirmed the order of the department. Showcase then appealed to the appellate courts.
The facts in the case were not greatly in dispute and were found by the administrative hearing officer to be essentially as follows:
1. Chester R. Elkins, the claimant, was employed by Showcase Inc., d/b/a Loft Steak House and Showcase Theatre, 417 W. 37th, Topeka, Kansas, the respondent, as a waiter from September 16, 1980, until March 29, 1981, when claimant was fired.
2. Claimant was employed under an employment agreement which provided a cash wage payment of two dollars and one cent ($2.01) per hour with respondent claiming full legal tip credit of one dollar and thirty-four cents ($1.34) per hour. In addition, respondent had in place a tip pooling system whereby respondent would deduct from claimant's daily tips an amount equal to six percent (6%) of the gross dollar volume produced through claimant's employment each day as reflected by guest checks.
3. The tip pool system was in place at the time of claimant's employment and claimant contributed to the pool during his entire employment, yet respondent only maintained records for the period February 16, 1981, to March 29, 1981.
4. Respondent's records in evidence indicate that claimant would report tips received at the end of his shift, and respondent would compute the six percent (6%) gross guest tickets and deduct that amount from reported tips leaving the balance as earned wages of claimant. Further, respondent would make cash payment to claimant for tips on credit sales using the same procedure.
5. Respondent's records report only the last twenty-four (24) days of actual work of claimant, but do not reflect claimant's employment from September 16, 1980, through February 15, 1981. Such employer records do not reflect hours worked by claimant or tips reported, pooled and paid during that period. As respondent is covered by the Fair Labor Standards Act (FLSA), a duty of law exists to maintain required payroll records. Respondent's requirements to keep records includes a method of accurate tip reporting.
6. During the period from February 16, 1981, through March 29, 1981, claimant produced gross sales, reported tips, retained tips and had tip pool deductions as follows:
REPORTED
DATE SALES TIPS 6% SALES TIPS RETAINED
---- ----- -------- -------- -------------
2-16-81 $ 312.19 $ 28.00 $ 18.00 $ 10.00
2-18-81 415.34 34.00 24.00 10.00
2-19-81 591.19 45.00 35.00 10.00
2-21-81 681.90 49.00 39.00 10.00
2-22-81 262.87 25.00 15.00 10.00
2-23-81 513.09 37.00 25.00 12.00
2-24-81 425.15 38.00 28.00 10.00
2-26-81 345.37 27.00 17.00 10.00
2-27-81 778.40 43.00 32.00 11.00
2-28-81 830.32 49.00 39.00 10.00
3-08-81 405.12 34.00 24.00 10.00
3-10-81 413.78 36.00 26.00 10.00
3-11-81 579.16 44.00 34.00 10.00
3-13-81 570.21 43.00 28.00 15.00
3-14-81 887.49 54.00 39.00 15.00
3-16-81 235.81 24.00 14.00 10.00
3-17-81 287.09 27.00 17.00 10.00
3-19-81 577.63 44.00 34.00 10.00
3-21-81 778.53 49.00 39.00 10.00
3-22-81 307.92 28.00 18.00 10.00
3-25-81 488.39 39.00 29.00 10.00
3-27-81 497.34 39.00 24.00 15.00
3-28-81 624.82 52.00 37.00 15.00
3-29-81 595.35 45.00 35.00 10.00
-------- ---------- ------- ------- -------
TOTALS $12,404.45 $933.00 $670.00 $263.00
(24 days)
Daily
Average $ 516.85 $ 38.88 $ 27.92 $ 10.96
These figures indicate that claimant only retained twenty-eight percent (28%) of his reported tips and the six percent (6%) gross sales deduction amounted to seventy-two percent (72%) pooling of reported tips.
7. While the records do not reflect the number of days claimant worked during the period September 16, 1980, through February 15, 1981, the reasonable projection can be made that claimant would have performed in a manner not unlike the average of the twenty-four (24) days worked for which records are available.
8. Respondent's managers testified that claimant had not given a written authorization for deduction of the six percent (6%) of gross sales from his wages. Further, if such deductions were to exist, they could not be considered to accrue to the benefit of the claimant.
9. Respondent's system of deduction for tip pooling does not conform to requirements of the FLSA which places a generally acceptable limit of fifteen percent (15%) of reported tips as the maximum amount an employer may divert into a tip pool. Additionally, payment out of that pool to nontipped employees would invalidate the pool. In the instant case the bartenders, who are paid forty percent (40%) of the pool, are considered nonservice bartenders, as they perform their functions away from the customers much the same as a cook who is clearly nontipped. Respondent additionally takes tip credit for such bartenders as part payment of the required minimum wage of three dollars and thirty-five cents ($3.35) per hour.
10. Clearly respondent, by design, intent and purpose, has caused to be put in place the tip pooling system based on gross sales as a replacement for a tip pool system through which forty percent (40%) of reported tips were pooled. The stated reason is that the employees would not report all tips. Under the standards discussed in Findings of Fact # 9, a question would exist if such previous system would qualify under the FLSA. Accordingly, respondent is found to be a willful violator as provided in K.S.A. 44-315(b).
11. The tip pooling system at issue here is designed to provide tips to other employees who assist in the food service area. However, testimony indicates that not all moneys pooled were in fact paid out to such employee eligible or not. Respondent provides no evidence that any of the moneys pooled by such system are paid out and not retained by the employer.
A question exists that this system may be designed to circumvent provisions of the FLSA and the KWPA.
12. Claimant was employed during the period respondent failed to maintain records and, using the evidence of the period for which records were maintained, it is determinable through estimate to reasonably find claimant was employed at least sixteen days per month for five-to-six hours per day during the five-month period of September 16, 1980, until February 15, 1981, when records were maintained. Further, during such period in which employer records were maintained, claimant's services produced an average daily gross sales of five hundred sixteen dollars and eighty-five cents ($516.85). Claimant reported an average daily tip of thirty-eight dollars and eighty-eight cents ($38.88), having an average daily six percent (6%) deduction of twenty-seven dollars and ninety-two cents ($27.92), while retaining a daily average tip of ten dollars and ninety-six cents ($10.96). In view of such daily averages, a reasonable estimate of amounts deducted is made for that period of no records as follows:
5 months X 16 days X $27.92 (6% deduction) = $2233.60.
13. A total of six percent (6%) deductions in the amount of twenty-nine hundred three dollars and sixty cents ($2903.60) have been made from claimant's reported tips under the respondent's tip pooling system and is...
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