Tip credit issues are inherently difficult. Section 3(m) of the Fair Labor Standards Act permits an employer to count tips toward a portion of a tipped employee’s wages to meet the minimum wage (and in some instances overtime) requirements of the Act. The Department of Labor, however, has gone back and forth over the requirements for tipped work and what the test is for the amount of side work permitted to take advantage of the tip credit. Even worse, courts have disagreed, both before and after the recent changes in the DOL guidance, over how the test is to be administered. The questions relate both to how side work is measured (i.e., is there a 20 percent limit?) and which activities actually produce tips and which ones do not.
But under either test, the question is fundamentally one that is not well-suited to class or collective action treatment. By its very nature, working in a restaurant entails ebbs and flows of customers, peaking around meal times and slowing during off times. There is disagreement over what might constitute “side work” (how about replacing a dirty piece of silverware for a customer?), and frequently side work is done in conjunction with tipped duties. Some customers want more service than others; some shifts are different from others. So it’s hard to say that even one day is similar to another, let alone that a class exists of “similarly situated” tipped servers.
A recent case from Florida illustrates this point on a larger scale. In Rafferty v. Denny’s, Inc., Case No. 1:19-CV-24706-DLG (S.D. Fla. Aug. 3, 2020), the plaintiffs sought to bring a nationwide collective action covering all of the company-owned Denny’s restaurants across the United States.
In seeking conditional certification, the plaintiffs introduced declarations from six servers in a variety of locations, such as Hawaii, Vermont, California and Virginia.
The court first found that the size of the submission was insufficient. The proposed class had 8,400 employees, and the court concluded that having six opt-ins was not enough to justify certifying a class, even conditionally. Even with subsequent opt-ins, the servers came from only seven of the 170 company-owned restaurants.
Second, the court found that the declarations did not demonstrate that the proposed class members were similarly situated. The plaintiffs were unable to identify any company-wide illegal policy other than the conclusory allegation that they performed more than the permissible amount of side work. Each restaurant was under the policies established by the local manager.
Because the servers at each restaurant were subject to different policies, supervision and working conditions, the court denied conditional certification.
The Rafferty case demonstrates what can happen if a court takes a commonsense approach to conditional certification rather than formulaic incantations of the low standard. Had the case been conditionally certified, the restaurant chain would have been under severe pressure to settle, yet it’s hard to see how such an unwieldy, localized case could have been tried on a class basis. If more courts took such an approach, the number of conditionally certified cases, and their sizes, would both drop precipitously.
The bottom line: Even a cursory look at a proposed class may result in the denial of conditional certification, but not every court is willing to take even that step.