Fast v. Applebee's Int'l Inc.

• Decision Date: 06 July 2011
• Docket Number: Nos. 10–1725,10–1726.,s. 10–1725
• Citation: 638 F.3d 872
• Parties: Gerald A. FAST; Talisha Cheshire; Brady Gehrling, Appellees/Cross–Appellants,v.APPLEBEE'S INTERNATIONAL, INC., Appellant/Cross–Appellee.National Employment Lawyers Association; Secretary of Labor, United States Department of Labor, Amici on behalf of Appellees/Cross–Appellants,National Council of Chain Restaurants; National Restaurant Association, Amici on behalf of Appellant/Cross–Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

638 F.3d 872

161 Lab.Cas. P 35,893

17 Wage & Hour Cas.2d (BNA) 939

Gerald A. FAST; Talisha Cheshire; Brady Gehrling, Appellees/Cross–Appellants,

v.APPLEBEE'S INTERNATIONAL, INC., Appellant/Cross–Appellee.National Employment Lawyers Association; Secretary of Labor, United States Department of Labor, Amici on behalf of Appellees/Cross–Appellants,National Council of Chain Restaurants; National Restaurant Association, Amici on behalf of Appellant/Cross–Appellee.

Nos. 10–1725

10–1726.

United States Court of Appeals, Eighth Circuit.

Submitted: Jan. 13, 2011.Filed: April 21, 2011.Rehearing and Rehearing En Banc Denied July 6, 2011.*

Daniel B. Boatright, argued, S. Jane Bruer, on the brief, Kansas City, MO, for appellant/cross-appellee.Lisa S. Blatt, Robert A. Schwartz, and Rachel L. Frankel, on the brief, Washington, D.C., for Amicus National Council of Chain Restaurants in support of appellant.Peter G. Kilgore, Washington, D.C., and Francis X. Neuner, Jr., St. Louis, MO, on the brief, for Amicus National Restaurant Association in support of appellant.Matthew A. Clement, argued, Timothy W. VanRonzelen, Kari A. Schulte, Charles A. Gentry and Jason H. Ludwig, on the brief, Jefferson City, MO, for appellees/cross-appellants.Jamie G. Sypulski, Douglas M. Werman, Chicago, IL, Richard J. Burch, Houston, TX, and Rebecca M. Hamburg, San Francisco, CA, on the brief, for Amicus National Employment Lawyers Association in support of appellees.Maria Van Buren, argued, Paul L. Frieden, on the brief, U.S. Department of Labor, Washington, DC, for The Secretary of Labor as Amicus in support of appellees.Before MURPHY, HANSEN, and MELLOY, Circuit Judges.HANSEN, Circuit Judge.

Applebee's International, Inc. (Applebee's) brings this interlocutory appeal from the district court's ¹ denial of summary judgment in this employment wage dispute. Gerald A. Fast, Talisha Cheshire, and Brady Gehrling represent a class of 5,543 individuals (collectively “the employees”) who are current and former servers and bartenders at Applebee's restaurants. They brought suit under the Fair Labor Standards Act (FLSA) based on Applebee's use of the “tip credit” to calculate their wages for purposes of meeting the minimum wage requirements of the FLSA. In denying Applebee's motion for summary judgment, the district court concluded that the Department of Labor (DOL)'s interpretation of the FLSA as contained in the Wage and Hour Division's Field Operations Handbook (Handbook) was reasonable, persuasive, and entitled to deference. Applebee's challenges that conclusion as inconsistent with the relevant statutes and the related regulations. The employees cross-appeal the district court's allocation of the burden of proof. We affirm the district court's order.

I.

The fighting issue in this case is how to properly apply the “tip credit” to employees whom both sides agree are “tipped employees” as that term is defined in the FLSA. The FLSA allows employers to pay a minimum cash wage of $2.13 per hour to employees in a “tipped occupation” as long as the employee's tips make up the difference between the $2.13 hourly cash wage and the current federal minimum wage, presently $7.25 per hour. See 29 U.S.C. § 203(m); 29 U.S.C. § 206(a)(1). The plaintiff servers and bartenders claim that Applebee's requires them to perform nontip-producing duties for significant portions of their shift while compensating them at the lower $2.13 tipped rate. The plaintiff bartenders claim that they were required to perform such duties as wiping down bottles, cleaning blenders, cutting fruit for garnishes, taking inventory, preparing drink mixers, and cleaning up after closing hours. The servers claim that they performed such duties as cleaning bathrooms, sweeping, cleaning and stocking serving areas, rolling silverware, preparing the restaurant to open, and general cleaning before and after the restaurant was open. Applebee's counters that servers and bartenders are in tipped occupations, so that any incidental duties they perform as part of that occupation are subject to the tip credit and can be paid at the $2.13 hourly rate, regardless of the amount of time spent performing these duties, as long as each employee's tips make up the difference between $2.13 per hour and the full minimum wage rate. While the employees dispute its relevancy, both sides agree that the plaintiffs received in employer cash payments and tips a sum at least equal to the required minimum wage per hour for all hours worked.

The DOL regulations recognize that an employee may hold more than one job for the same employer, one which generates tips and one which does not, and that the employee is entitled to the full minimum wage rate while performing the job that does not generate tips. See 29 C.F.R. § 531.56(e). The DOL's 1988 Handbook provides that if a tipped employee spends a substantial amount of time (defined as more than 20 percent) performing related but nontipped work, such as general preparation work or cleaning and maintenance, then the employer may not take the tip credit for the amount of time the employee spends performing those duties. (Appellant's Add. at 32, DOL Handbook § 30d00(e).) The district court deferred to the DOL's interpretation contained in the DOL Handbook to deny summary judgment to Applebee's.

The parties also disputed the proper burden of proof. The employees argued that they needed to establish only that Applebee's paid them $2.13 per hour for a period of time and then the burden shifted to Applebee's to prove that it was allowed to take the tip credit by presenting evidence of the number of hours the employees worked in a tipped occupation. The district court disagreed, concluding that the employees had to do more than show that they were paid $2.13 per hour because the employees did not dispute that they were subject to the tip credit for at least some of their work. The district court concluded that the employees had to “make a prima facie showing which hours were not properly paid” (Dist. Ct. Mar. 4, 2010 Order at 19), and if there were no records of the time spent on specific duties, then the burden would shift to Applebee's to show that the employees' calculations were not reasonable.

Applebee's filed this interlocutory appeal, arguing, as noted above, that the Handbook is contrary to the express language of the statute and regulations. The employees cross-appeal the district court's allocation of the burden of proof to the employees to prove they were not properly compensated. Both issues are included in the district court's certification permitting an interlocutory appeal, and we address them in turn.

II.

A. Engaged in a Tipped Occupation

In this interlocutory appeal, we conduct a de novo review of the district court's summary judgment ruling and its statutory interpretation. See Haug v. Bank of Am., N.A., 317 F.3d 832, 835 (8th Cir.2003). The FLSA requires employers to pay a minimum hourly wage, which is currently $7.25 per hour. See 29 U.S.C. § 206(a)(1). The “wage” paid to a “tipped employee” is defined as the sum of (1) the cash wage paid to the employee, which must be at least the minimum cash wage that was required to be paid to tipped employees on August 20, 1996 ($2.13 per hour), and (2) an additional amount based on the tips received by the employee that is equal to the difference between the amount stated in paragraph (1) and the current rate required by § 206(a)(1). See 29 U.S.C. § 203(m) (defining “wage”). The amount required by paragraph (2) is commonly referred to as the “tip credit” because it allows the employer to avoid a larger cash payment to the employee as long as the employee's tips make up the difference between $2.13 per hour and the current minimum wage.

A “tipped employee” as used in § 203(m) is defined as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” § 203(t). The tip credit does not apply to just any employee who ever received a tip. It applies only to employees engaged in an occupation where the employee “customarily and regularly receives more than $30 a month in tips.” The parties do not dispute that the servers and bartenders involved in this case are engaged in an occupation in which they customarily and regularly receive at least $30 per month in tips and are “tipped employees” under the statute. The dispute revolves around whether the servers and bartenders are “engaged” in those occupations when Applebee's requires them to perform duties that do not directly result in a tip. Applebee's argues that the statute is focused on the occupation, not the specific duties performed, such that it can take the tip credit for the entirety of a server's or bartender's shift, as long as the employee receives sufficient tips during the shift to make up the difference between $2.13 per hour and $7.25 per hour, regardless of how much time the employee spends performing tip-producing duties. The employees argue that Applebee's requires them to perform duties outside of the server and bartender occupations for significant parts of their shifts, such that they are entitled to full minimum wage rates when they are not “engaged” in the duties of those occupations.

As noted previously, an employee is a tipped employee if two things occur: 1) he is engaged in an occupation, and 2) the occupation is one in which he regularly and customarily receives at least $30 in tips per month. § 203(t). “Occupation” is not defined in the FLSA. The DOL has promulgated regulations to implement the tip credit. See 29 C.F.R. §§ 531.50–531.60. Where a statute does not define a term, and “Congress has delegated authority to an agency to implement an ambiguous statute, we are required to accept the agency's statutory interpretation, so long as it is reasonable.” Eisenrich v. Minneapolis Retail Meat Cutters & Food Handlers Pension Plan, 574 F.3d 644, 649 (8th Cir.2009) (citing Chevron U.S.A. Inc. v....