Romero v. Top-Tier Colo. LLC, 16-1057

• Decision Date: 07 March 2017
• Docket Number: No. 16-1057,16-1057
• Parties: Aarica ROMERO, Plaintiff–Appellant, v. TOP–TIER COLORADO LLC; Richard J. Warwick, Defendants–Appellees. Secretary of Labor, Amicus Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

849 F.3d 1281

Aarica ROMERO, Plaintiff–Appellant,

v. TOP–TIER COLORADO LLC; Richard J. Warwick, Defendants–Appellees.Secretary of Labor, Amicus Curiae.

No. 16-1057

United States Court of Appeals, Tenth Circuit.

FILED March 7, 2017

Jamie G. Sypulski, Law Office of Jamie Golden Sypulski, Chicago, Illinois (Clifford P. Bendau, II, The Bendau Law Firm, Phoenix, Arizona, Douglas M. Werman, and Sarah J. Arendt, Werman, Salas P.C., with her on the briefs), for Plaintiff–Appellant.

Gregory E. Givens, Gregory E. Givens Law Offices, Colorado Springs, Colorado, for Defendants–Appellees.

M. Patricia Smith, Solicitor of Labor, Jennifer S. Brand, Associate Solicitor, Paul L. Frieden, Counsel for Appellate Litigation, and Sarah Kay Marcus, Senior Attorney, U.S. Department of Labor, Washington, D.C., filed a brief for Amicus Curiae.

Before TYMKOVICH, Chief Judge, BACHARACH and MORITZ, Circuit Judges.

MORITZ, Circuit Judge.

In dismissing Aarica Romero's minimum-wage claim under Fed. R. Civ. P. 12(b)(6), the district court relied on a single, undisputed fact: Romero has never alleged that she earned less than the federal minimum wage of $7.25 an hour—at least after taking into account both (1) the cash wage that her employer paid her and (2) all of the tips that she received each week.

But an employer doesn't comply with its federal minimum-wage obligations just because its employees receive at least $7.25 an hour in tips. Instead, an employer complies with its minimum-wage obligations if it "pay[s]" its employees at least $7.25 an hour in "wages." 29 U.S.C. § 206(a)(1)(C). And while an employer can treat tips as wages under certain circumstances, see id. § 203(m), Romero asserts that her employer impermissibly did so here.

The district court declined to address this argument. But without first resolving whether Romero's employer was entitled to treat her tips as wages under § 203(m), the district court couldn't have determined whether that employer "pa[id]" Romero "wages" of at least $7.25 an hour under § 206(a)(1)(C). Accordingly, we reverse and remand to the district court to make this threshold determination in the first instance.

BACKGROUND

Romero worked as a server for defendant Top–Tier Colorado LLC (Top–Tier) at one of its restaurants.¹ Rather than directly paying Romero the federal minimum wage of $7.25 an hour, see § 206(a)(1)(C), the defendants instead took advantage of what's known colloquially as the "tip credit": they paid Romero a "cash wage" of $4.98 an hour² and then used some of the tips that Romero received to cover the gap between that cash wage and the federal minimum wage, see Fast v. Applebee's Int'l, Inc. , 638 F.3d 872, 876 (8th Cir. 2011) (explaining that tip credit "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") (citing § 203(m)).

But the tip credit only applies to "tipped employee[s]." § 203(m). And during some of the hours she worked, Romero performed what she describes as "non-tipped" tasks, e.g.,

brewing tea, brewing coffee, rolling silverware, cleaning soft drink dispensers, wiping down tables, setting tables, busing tables, cutting and stocking fruit, stocking ice, taking out trash, scrubbing walls, sweeping floors, restocking to-go supplies, cleaning booths, cleaning ramekins, sweeping, mopping, restocking all stations, washing dishes, and breaking down and cleaning the expo line.

App. 9.

Reasoning that she wasn't a "tipped employee" under § 203(m) for at least some of the hours she spent performing these tasks, Romero asserts that the defendants should have paid her a cash wage of at least $7.25 an hour—rather than a cash wage of $4.98 an hour—for those hours. And because they failed to do so, Romero alleges, they violated § 206(a)(1)(C).

More specifically, Romero divides the non-tipped tasks she performed into two categories: "related" tasks and "unrelated" ones. App. 9. She alleges that the defendants weren't entitled to take the tip credit for any of the hours she spent performing unrelated non-tipped tasks—a rule that she derives primarily from 29 C.F.R. § 531.56(e). And she alleges that the defendants weren't entitled to take the tip credit for those hours "in excess of [20 percent] of her regular workweek" that she spent performing related non-tipped tasks—a rule that she derives primarily from § 30d00(e) of applicable version of the Department of Labor's Field Operations Handbook. App. 10.

The defendants moved to dismiss Romero's complaint under Rule 12(b)(6). In relevant part, they argued that Romero's complaint doesn't state a claim under § 206(a) because it doesn't "allege that she failed to receive the minimum wage when including [all] the tips she received as a server." App. 18. Relying on United States v. Klinghoffer Bros. Realty Corp. , 285 F.2d 487 (2d Cir. 1960), the district court agreed.

In Klinghoffer , the Second Circuit held that an employer complies with § 206(a)"so long as the total weekly wage paid by an employer meets the minimum weekly requirements of the statute, such minimum weekly requirement being equal to the number of hours actually worked that week multiplied by the minimum hourly statutory requirement." 285 F.2d at 490. Thus, the district court reasoned, "whether [an employee] is able to state [a] minimum wage violation depends on [the employee's] total pay earned for the workweek divided by the total number of hours worked in that same week." App. 77. And as the district court noted, Romero's complaint doesn't allege that, after (1) adding up her cash wages and all the tips she received in any given week and (2) dividing that amount by the number of hours she worked, she didn't "earn[ ]" at least "the minimum wage every week she worked at the restaurant." Id. at 79. Accordingly, the district court dismissed Romero's complaint for failure to state a claim. Romero appeals.

DISCUSSION

The Fair Labor Standards Act (FLSA) of 1938 requires employers to "pay [their] employees ... wages [of] ... not less than ... $7.25 an hour." § 206(a)(1)(C). But when it comes to "tipped employee[s]," an employer can take advantage of the FLSA's tip-credit provision: it can pay those employees a cash wage of as little as $2.13 an hour, and then use a portion of the employees' tips to make up the difference between that hourly cash wage and the federal minimum wage. Id. § 203(m); Fast , 638 F.3d at 876.

Yet § 203(m)'s tip-credit provision is not without its limits. As Romero points out, the Department of Labor (DOL) has "recognize[d] 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." Fast , 638 F.3d at 875 (citing 29 C.F.R. § 531.56(e) ). Moreover, § 30d00(e) of the applicable version of the DOL's Field Operations Handbook (FOH) "provides that if a tipped employee spends a substantial amount of time (defined as more than 20 percent) performing related but nontipped work, ... then the employer may not take the tip credit for the amount of time the employee spends performing those duties."³ Id.

Romero alleges that the defendants employed her in two occupations: one that generated tips and one that didn't. She also alleges that she spent more than 20 percent of her workweek performing "related but nontipped work." Id. Thus, citing 29 C.F.R. § 531.56(e) and § 30d00(e) of the applicable version of the FOH, she concludes that the defendants weren't entitled to take the tip credit for (1) those hours she spent "performing the job that [didn't] generate tips" and (2) those hours she spent "performing related but nontipped work." Id. Instead, she insists, she was "entitled ... to the overall minimum wage" for those hours. App. 11.

But the district court explicitly declined to address either of these arguments. Instead, the court adopted the defendants' alternate theory: that Romero's claim fails as a matter of law because she doesn't allege "she was ... paid less than the federal minimum wage of $7.25 an hour when including [all] her tips and counting all her hours worked in any one workweek." Id. at 76.

Citing Klinghoffer , the district court concluded that "whether [a plaintiff] is able to state an FLSA minimum wage violation depends on her total pay earned for the workweek divided by the total number of hours worked in that same week." Id. at 77. See Klinghoffer , 285 F.2d at 490 (explaining that employer satisfies § 206(a) as long as "total wage paid to [employee] during any given week," when "divided by the total time [employee] worked that week," yields a "resulting average hourly wage" that meets or exceeds federal minimum). And because Romero doesn't dispute that she "earn[ed] more than the minimum wage every week she worked at the restaurant," the district court dismissed her claim. App. 79.

On appeal, Romero argues that the court's reliance on Klinghoffer is misplaced. Reviewing the district court's decision to dismiss de novo, see Moore v. Guthrie , 438 F.3d 1036, 1039 (10th Cir. 2006), we agree.

The district court's Klinghoffer analysis conflates two distinct concepts: (1) the tips that Romero "earn[ed]," see App. 79, and (2) the "wages" that the defendants "pa[id]," see § 206(a). True, the former is relevant to the minimum-wage inquiry to the extent that § 203(m) allows an employer to "us[e]" some of an employee's tips as wages. Trejo v. Ryman Hosp. Props., Inc. , 795 F.3d 442, 447 (4th Cir. 2015). But only the latter is actually dispositive of such a claim. See § 206(a)(1)(C) (requiring "[e]very employer [to] pay [its] employees ... wages [of] ... not less than ... $7.25 an hour" (emphases added)).

And this distinction between tips earned and wages paid simply wasn't at issue in Klinghoffer ; there, the plaintiff never disputed that every cent the employees earned for the work they...