McFarlin v. Word Enters., LLC

Decision Date21 March 2018
Docket NumberCase No. 16-cv-12536
PartiesCHAD MCFARLIN, Plaintiff, v. THE WORD ENTERPRISES, LLC, ET AL., Defendants.
CourtU.S. District Court — Eastern District of Michigan

UNITED STATES DISTRICT COURT JUDGE GERSHWIN A. DRAIN

OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
I. INTRODUCTION

Presently before the Court is Plaintiff's complaint against Defendant, alleging violations of the Federal Labor Standards Act (FLSA) and the Michigan Minimum Wage Law. Pending before the Court is Defendants' Motion for Summary Judgment and Plaintiff's Motion for Partial Summary Judgment. Dkt. Nos. 89, 90. Defendants argue that there is no genuine dispute of fact that they paid their delivery drivers the minimum wage rate or higher. Plaintiffs move for summary judgment on two issues. First, Plaintiff argues that Defendant Kevin Dittrich is an employer of delivery drivers. Second, Plaintiff argues that Defendants may not use tips to reimburse vehicle expenses. For the reasons discussed below, the Court will deny Defendants' Motion for Summary Judgment and grant Plaintiff's Motion for Partial Summary Judgment.

II. FACTUAL BACKGROUND

This case involves a chain of three Hungry Howie's franchises located in Haslett, Perry, and St. Johns, Michigan. Dkt. No. 75, pg. 5 (Pg. ID 1597). Plaintiff was a delivery driver at the Perry location from July 2015 to September 1, 2016. Id. at pg. 4 (Pg. ID 1596). Defendants required delivery drivers at each location to use their personal vehicles to make pizza deliveries. Id. at pg. 6 (Pg. ID 1598). Defendants paid delivery drivers a cash wage of $5.00 per hour when they were making deliveries. Dkt. No. 93-4, pg. 2 (Pg. ID 2170). Defendants paid delivery drivers a run charge of $.75 per delivery, and Perry drivers received $1.75 for deliveries to Lainsburg, Michigan. Dkt. No. 93-2, pg. 3 (Pg. ID 2157). Delivery drivers also received tips. In all store locations, Defendants posted a "Minimum Wage Notice to Tipped Employees." Dkt. No. 93-9, pg. 1 (Pg. ID 2193). This notice stated that Defendants would take a tip credit that was exactly the difference between the drivers' cash wage and the Michigan minimum wage. Id. In other words, Defendants would only take just enough tip credit to get their delivery drivers' salary to the exact minimum wage.

On July 6, 2016, Plaintiff filed a class action complaint against Defendants. Dkt. No. 1. Plaintiff filed his First Amended Complaint on September 19, 2017.Dkt. 75. Plaintiff alleges that throughout his time as a delivery driver at the Perry franchise, Defendants paid him and similarly situated drivers the exact Michigan minimum wage. Id. Plaintiff also alleges that Defendants did not adequately reimburse him and other drivers for vehicle expenses incurred while delivering pizzas for Defendant. Id. at pg. 6 (Pg. ID 1598). Therefore, Defendants actually paid Plaintiff and similarly situated drivers below the federal and Michigan minimum wages. Id. at pg. 15, 18 (Pg. ID 1607, 1610). Defendants deny these allegations. On October 5, 2017, this Court certified Plaintiff's class. Dkt. No. 83.

On December 29, 2017, Plaintiff filed a Motion for Partial Summary Judgment. Dkt. No. 89. Defendants conceded summary judgment in favor of Plaintiff on the issue of Defendant Dittrich's status as an employer of Plaintiff and other delivery drivers. Dkt. No. 93, pg. 11 (Pg. ID 2134). Defendants opposed Plaintiff's Motion on the issue of Defendants' application of the tip credit. Id. Plaintiff replied on February 2, 2018. Dkt. No. 95. Defendants filed a Motion for Summary Judgment on January 1, 2018. Dkt. No. 90. Plaintiff opposed the Motion on January 23, 2018. Dkt. No. 94. Defendants replied on February 6, 2018. Dkt. No. 96.

III. LEGAL STANDARD

Federal Rule of Civil Procedure 56(c) governs summary judgment. The Rule states, "summary judgment shall be granted if 'there is no genuine issue as to anymaterial fact and that the moving party is entitled to a judgment as a matter of law.'" Cehrs v. Ne. Ohio Alzheimer's Research Ctr., 155 F.3d 775, 779 (6th Cir. 1998). "All factual inferences 'must be viewed in the light most favorable to the party opposing the motion.'" Id. (quoting Matsushita Elec. Indus., Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). There is a genuine issue of material fact "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). Ultimately, the court evaluates "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52.

IV. DISCUSSION

Both Plaintiff's and Defendants' Motions contain overlapping issues. The most significant overlapping issue concerns the proper application of the tip credit. Therefore, this Court will discuss Plaintiff's Motion for Partial Summary Judgment first and apply any overlapping analysis to Defendants' Motion for Summary Judgment.

I. Plaintiff's Motion for Partial Summary Judgment
a. Kevin Dittrich's Employer Status

First, Plaintiff moves for summary judgment on Defendant Kevin Dittrich's status as an employer of Plaintiff and similarly situated delivery drivers. Dkt. No.89, pg. 7 (Pg. ID 1851). Defendants have never contested this issue. Dkt. No. 93, pg. 11 (Pg. ID 2134). Both Plaintiff and Defendants concur that Mr. Dittrich is an employer of Plaintiff and other delivery drivers within the meaning of the FLSA. This Court therefore holds that there is no genuine dispute about whether Mr. Dittrich qualifies as an employer under the FLSA. The Court grants summary judgment in favor of Plaintiff on this issue.

b. Application of the Tip Credit

Second, Plaintiff argues that Defendants cannot use tips in excess of the tip credit to reimburse delivery drivers' vehicle expenses. Dkt. No. 89, pg. 8 (Pg. ID 1852). Defendants argue that they can apply a part of the tip credit to vehicle expenses because they paid their drivers a cash wage larger than the minimum cash wage required by the FLSA. Dkt. No. 93, pg. 24 (Pg. ID 2147).

The Sixth Circuit has considered the application of the tip credit. U.S. Dep't of Labor v. Cole Enters., Inc., 62 F.3d 775, 780 (6th Cir. 1995). In Cole, the Department of Labor sued a restaurant for violating minimum wage laws. Id. at 777. The court found that the employers failed to make the employees aware of the existence of the tip credit or the tip credit amount as required by 29 U.S.C. § 203(m) and 29 C.F.R. § 516.28(a)(3). Id. 29 U.S.C. § 203(m) states that the tip credit does not apply unless the employer has informed the employee about the tipcredit." 29 C.F.R. § 516.28(a)(3) states that "[t]he amount per hour which the employer takes as a tip credit shall be reported to the employee in writing each time it is changed from the amount per hour taken in the preceding week." Here, Defendants cannot retroactively claim a higher tip credit taking Cole and the statutory provisions together. Cole stated that an employer must inform the employee of the tip credit amount and not just that the employer is taking a tip credit. 29 C.F.R. § 516.28(a)(3) also states that an employer must inform an employee of the amount of the tip credit if it changes. Therefore, adequately informing an employee of the tip credit requires an employer to give notice of its intent to take a tip credit and the tip credit amount. In this case, Defendants did not give their delivery drivers notice of their intent to take the maximum amount of tip credit. Defendants only gave notice of their intent to take just enough tip credit to get their drivers to the minimum wage. Therefore, Defendants did not give adequate notice of the tip credit and cannot claim the maximum amount.

The Eastern District of Missouri considered a similar issue in 2015. See Perrin v. Papa John's Int'l, Inc., 114 F. Supp. 3d 707, 727-29 (E.D. Mo. 2015). In Perrin, pizza delivery drivers sued their employers for underpayment of wages. Id. at 711. The employers required the delivery drivers to maintain their own vehicles for making deliveries, similar to this case. Id. The employers reimbursed the drivers with a fixed reimbursement rate for vehicle expenses; all drivers received aflat rate per delivery. Id. The employers paid the drivers a cash wage below the minimum wage, and used a tip credit to get the drivers' salary to the minimum wage rate. Id. at 712. The delivery drivers argued they were paid below minimum wage because the vehicle reimbursement was not enough to cover their actual vehicle expenses. Id. Similar to the Defendants in this case, the employers in Perrin asserted that they could pay a higher cash wage and still take the maximum tip credit to reimburse vehicle expenses. Id. at 717.

The Perrin court found that the defendants could not claim a greater tip credit than they originally claimed because they did not notify the plaintiffs in advance of the change. Perrin v. Papa John's Int'l, Inc., 114 F. Supp. 3d 707, 727 (E.D. Mo. 2015). The court found it undisputed that the defendants did not notify plaintiffs they were taking a tip credit greater than the difference between plaintiffs' cash wage and the minimum wage. Id. at 728. Therefore, the defendants could not retroactively claim a higher tip credit. Id. at 729. Defendants could not claim a higher tip credit even if the Department of Labor Guidelines allowed employers to claim a higher tip credit to reimburse vehicle expenses. Id. Again, the court held that this was because the defendants did not tell their employees they were taking a higher tip credit in advance. Id.

Perrin is similar to the present case. Here, Defendants wish to claim a higher tip credit than they stated they would take in their notice to their employees. UnderPerrin, the Defendants are not able to...

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