Sicklesmith v. Hershey Entm't & Resorts Co.

Decision Date25 February 2020
Docket Number19-cv-1675
Citation440 F.Supp.3d 391
Parties Randy SICKLESMITH, on behalf of Himself and similarly situated Employees, Plaintiffs v. HERSHEY ENTERTAINMENT & RESORTS COMPANY, Defendants.
CourtU.S. District Court — Middle District of Pennsylvania

Mark J. Gottesfeld, Peter Winebrake, R. Andrew Santillo, Winebrake & Santillo, LLC, Dresher, PA, for Plaintiffs.

Harlan William Glasser, Richard L. Hackman, Saxton & Stump, LLC, Lancaster, PA, for Defendants.

MEMORANDUM AND ORDER

John E. Jones III, United States District Judge

Presently pending before this Court is Defendant's Motion to Dismiss. (Doc. 8). For the reasons that follow, we will deny the motion.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

We take the following from the Plaintiff's Complaint and assume it to be true, as we must.

The instant case alleges a variety of wage-and-hour-related claims against Hershey Entertainment & Resorts Company resulting from Plaintiff Sicklesmith's employment as a server. Plaintiff Sicklesmith brings his claims on behalf of himself and a group of similarly-situated Hershey employees.

Plaintiff Sicklesmith was employed by Defendant at the "Houlihan's" restaurant in Hershey, Pennsylvania ("the Restaurant") from approximately January 2017 until September 2019. (Doc. 1 at ¶¶ 7, 9). During his employment, Plaintiff Sicklesmith was paid the Pennsylvania hourly tipped minimum wage of $2.83, plus tips from customers of the Restaurant. (Id. at ¶ 10). This tipped minimum wage falls below the Pennsylvania minimum wage of $7.25, but such a practice is permitted by Department of Labor ("DOL") regulations, providing that certain requirements are met. 29 C.F.R. § 531.56(e). At issue here is whether Defendant complied with relevant regulations when it compelled Plaintiff Sicklesmith and the putative class to perform alleged non-tip-generating work while paying them the tipped minimum wage, as opposed to the higher minimum wage.

Plaintiff alleges that he and similarly-situated tipped servers employed by Defendant were required to perform impermissible "non-tip-producing work" during their shifts, including "rolling silverware; [sic ] setting up drink stations, cleaning the soda machine, filling sauce containers, setting-up the salad cooler, preparing food, slicing fruit, sorting silverware and ramekins, and cleaning the Restaurant." (Id. at ¶ 12). While performing such tasks, Plaintiff Sicklesmith claims, he and other servers were not earning tips, nor did Defendant pay them the higher minimum wage required by regulation. (Id. at ¶ 10). Plaintiff further alleges that he and the putative class of servers spent "at least 30% of their working hours" performing these non-tip-generating tasks in contravention of federal regulations limiting the amount of such work. (Id. at ¶ 14). Specifically, Plaintiff alleges that Defendant's tipped employees were required to perform these tasks in the hour prior to the Restaurant's opening and for 30 minutes at the end of the day, when "Restaurant mangers relieve[d] servers of their customer service duties to focus exclusively on performing non-tip producing work." (Id. ).

Plaintiff Sicklesmith now brings the instant case alleging violations of the FLSA (Count I) and the PMWA (Count II).1 He filed his Complaint on September 27, 2019. (Doc. 1). On December 2, 2019, Defendant filed a Motion to Dismiss, (Doc. 8), and an accompanying brief in support. (Doc. 9). Plaintiff Sicklesmith filed a brief in opposition on January 8, 2020. (Doc. 20). Defendant replied on January 29, 2020. (Doc. 23). The Motion is therefore ripe for disposition. For the reasons that follow, we shall deny the Motion.

II. STATUTORY AND REGULATORY BACKGROUND

At its core, this case asks us to resolve a question of Auer deference to an agency's interpretation of a federal regulation. We begin, however, with a brief overview of the relevant statutory and regulatory schemes.

The DOL interprets the FLSA and its accompanying regulations. See 32 Fed. Reg. 222 (Jan. 10, 1967) (Notice of Proposed Rulemaking); 32 Fed. Reg. 13575 (Sept. 28, 1967) (Promulgation of Final Rule). This includes 29 U.S.C. § 203(m), which governs the payment of tipped employees and the use of the "tip credit." Under both federal and Pennsylvania laws, employers must ensure that their tipped employees are paid the Pennsylvania minimum wage of $7.25 per hour.

29 U.S.C. § 203(m). To calculate this minimum hourly wage, however, employers are permitted to add the tips earned by tipped employees to their hourly tipped wage. Such an addition is referred to as a "tip credit," and represents the difference between the Pennsylvania minimum wage of $7.25 per hour and the Pennsylvania hourly tipped minimum wage of $2.83 per hour. Id. In Pennsylvania, the "tip credit" employers are permitted to use to calculate wages for tipped employees is $4.42 per hour ($7.25-$2.83). However, if a tipped employee does not receive sufficient tips to earn the threshold minimum hourly wage during her shift, the employer is required to pay the difference. Id.

Generally, an employer may require tipped employees to perform some non-tip-generating tasks during their shifts while still taking advantage of the "tip credit" to pay their tipped employees a lower wage. 29 C.F.R. § 531.56. However, federal regulations place restrictions on the amount and types of non-tip-producing work a tipped employee may be required to perform before she must be paid the full minimum wage. Id.

In a classic case of regulatory miasma, we now have before us two drastically different DOL readings of the relevant federal regulation. The regulation itself states, in relevant part:

In some situations an employee is employed in a dual job, as for example, where a maintenance man in a hotel also serves as a waiter. In such a situation the employee, if he customarily and regularly receives at least $30 a month in tips for his work as a waiter, is a tipped employee only with respect to his employment as a waiter. He is employed in two occupations, and no tip credit can be taken for his hours of employment in his occupation of maintenance man. Such a situation is distinguishable from that of a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses. It is likewise distinguishable from the counterman who also prepares his own short orders or who, as part of a group of countermen, takes a turn as a short order cook for the group. Such related duties in an occupation that is a tipped occupation need not by themselves be directed toward producing tips. 29 C.F.R. § 531.56(e).

This regulation therefore creates a distinction between jobs that directly generate tips, which may be compensated at the lower hourly tipped wage, and those tasks which do not directly engender tips, which require payment at the state's minimum wage.

In 1988, the DOL further elaborated upon this "dual jobs" concept, stating that "where the facts indicate that...tipped employees spend a substantial amount of time (in excess of 20 percent) performing general preparation work or maintenance, no tip credit may be taken for the time spent in such duties." U.S. Dept. of Labor, Wage & Hour Division, Field Operations Handbook at § 30d00(e) (Dec. 9, 1988). This language came to be known as the "80/20 Rule," and required employers to pay the full minimum wage to tipped employees for any amount of time spent on non-tip generating activities in excess of twenty percent of their shifts. Id. Generally, the courts provided deference to this DOL interpretation, which remained in effect until 2018. See, e.g. , Fast v. Applebee's Int'l, Inc. , 638 F.3d 872, 879 (8th Cir. 2011) ; Barnhart v. Chesapeake Bay Seafood House Assocs., L.L.C. , No. CV JFM-16-01277, 2017 WL 1196580, at *6 (D. Md. Mar. 31, 2017) (finding that "the majority of courts...have deferred to" the 80/20 Rule).

In 2018, the DOL issued an Opinion Letter which purported to change the 80/20 Rule because "the current [rule]...resulted in some confusion and inconsistent application." U.S. Dep't of Labor, Wage & Hour Div., Opinion Letter FLSA 2018-27 (Nov. 8, 2018), 2018 WL 5921455. The DOL's new interpretation stated that "no limitation shall be placed on the amount of [non-tip-generating] duties that may be performed, whether or not they involve direct customer service, as long as they are performed contemporaneously with the duties involving direct service to customers or for a reasonable time immediately before or after performing such direct services. Id. ("the 2018 Interpretation") (emphasis added). The DOL's new interpretation, then, intends to focus not on the percentage of a tipped employee's time that is spent on non-tip-generating tasks, but instead seeks to inquire when those tasks are performed in relation to tip-generating tasks. The Opinion Letter further stated that it constituted an "official statement of [DOL] policy and an official ruling." Id.

Consistent with that Opinion Letter, the DOL revised its Field Operations Handbook on February 15, 2019, including identical language as the Letter. U.S. Dep't of Labor, Field Operations Handbook, § 30d00(f)(1)-(4) (rev. Feb. 15, 2019). On the same day, the DOL issued a Field Assistance Bulletin that also purported to override the 80/20 Rule. See U.S. Dep't of Labor, Wage & Hour Div., Field Assistance Bulletin No. 2019-2 (Feb. 15, 2019).

III. STANDARD OF REVIEW

In considering a motion to dismiss pursuant to Rule 12(b)(6), courts "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. Cty. of Allegheny , 515 F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche Holdings, Ltd. , 292 F.3d 361, 374 n.7 (3d Cir. 2002) ). In resolving a motion to dismiss pursuant to Rule 12(b)(6), a court generally should consider only the allegations in the...

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    • U.S. District Court — Southern District of Ohio
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    ...Supreme Court requires compelling justification for such a dramatic shift in agency interpretation." Sicklesmith v. Hershey Entm't & Resorts Co. , 440 F. Supp. 3d 391, 403 (M.D. Pa. 2020). An agency interpretation that "conflicts with the agency's earlier interpretation is ‘entitled to cons......
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    ...the "80/20 Rule," and it was generally afforded deference by the courts while it remained in effect. Sicklesmith v. Hershey Entm't & Resorts Co., 440 F. Supp. 3d 391, 397 (M.D. Penn. 2020) (quoting Fast v. Applebee's Int'l, Inc., 638 F.3d 872, 879 (8th Cir. 2011); Barnhart v. Chesapeake Bay......
  • Williams v. Bob Evans Rests., LLC, 2:18-cv-01353
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    ...or does not reflect a fair and considered judgment by the DOL. Reynolds, 2020 WL 2404904, at *5; Sicklesmith v. Hershey Entm't & Resorts Co., 440 F. Supp. 3d 391, 402 (M.D. Pa. 2020); Belt, 401 F. Supp. 3d at 531-32. The Court concurs with the reasoning of those cases. In Belt, the court he......

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