Case Studies

Epstein Becker Green Wins Dismissal of Servers’ Wage and Tip Claims Against Restaurant

On January 14, 2011, Epstein Becker Green helped one of its restaurant clients, the Brasserie Ruhlmann, obtain summary judgment "in its entirety" in a lawsuit brought by former waiters, bussers, and runners ("Plaintiffs"). Similar to many such wage and hour cases currently being litigated in the hospitality industry, Plaintiffs sought to invalidate the restaurant's tip pool with assertions that captains and the banquet coordinator performed managerial functions and, thus, were not "tip eligible." If Plaintiffs had succeeded, they would have also invalidated the restaurant's "tip credit" system of compensating service employees, potentially resulting in significant minimum wage and overtime liability. Plaintiffs made further claims for tips during their initial training period, alleged "spread of hours" violations, and alleged uniform maintenance violations.

In a sweeping 17-page Memorandum Opinion and Order, Judge Swain of the U.S. District Court, Southern District of New York, found, among other things, that "captains and banquet coordinators had regular interactions with customers in connection with core restaurant functions." Accordingly, the Court held that the restaurant had properly treated the plaintiffs as tip eligible. After careful scrutiny, the restaurant's wage and hour practices were completely vindicated by the Court. Garcia v. La Revise Assocs. LLC, 08 cv 9356 (SDNY 2011).

Epstein Becker Green developed a strategy to elicit admissions from the Plaintiffs in discovery that, together with declarations and selected documents, provided the basis for Judge Swain's decision. This case resulted in a total victory for the restaurant and is the first reported decision to hold that the position of banquet coordinator was tip eligible.

This win was achieved by Epstein Becker Green's Labor and Employment Hospitality and Wage and Hour practice groups and, particularly, attorneys Douglas Weiner and Dean L. Silverberg.

Epstein Becker Green Wins Dismissal of Service Personnel’s Tip Pool Claims Against Restaurant

Epstein Becker Green obtained summary judgment, on behalf of a restaurant client ("Restaurant"), from Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia. See Arencibia v. 2401 Restaurant Corporation d/b/a Marcel's Restaurant, No 1:09-cv-00165-CKK-DAR (D.D.C. Dec. 21, 2011). The plaintiffs, several service personnel, had brought a multifaceted challenge under both the FLSA and District of Columbia law to the method by which the Restaurant operated a tip pool.

In a 31-page decision, Judge Kollar-Kotelly made several significant findings:

  • The maître d' was not a manager and, therefore, properly participated in the tip pool; what controlled was his actual authority, not what the employees may have perceived his authority to be. Accordingly, the Court found that two possible instances where the maître d' allegedly terminated or disciplined an employee were irrelevant.
  • The fact that a director of sales received a commission from part of a service charge, the rest of which went to a tip pool, did not make her a participant in the tip pool. Alternatively, the Court found that she had sufficient interaction with customers in arranging and planning private parties to be included in the tip pool, even though she did not serve food or perform hosting duties.
  • Allegations of improper notice of, and arbitrary modifications to, the operation of the tip pool were rejected by the Court. By doing so, the Court, in what appears to be a matter of first impression, held that the Department of Labor's tip pool regulations do not require any particular percentage method, or preclude adjustments based on good performance or customer-directed tips. Therefore, it was sufficient that the restaurant simply notified the employees that all their non-cash tips went into the tip pool and did not retain any of the tips for any other purpose. Neither federal nor District of Columbia law required disclosure of the formula underlying the dispersal of tips in the pool.
  • A claim that one of the plaintiffs was terminated for making complaints about the operation of the tip pool was rejected by the Court. In so doing, the Court held that a request for a meal break or on premises meal did not raise a compensation issue protected under the FLSA.

The Epstein Becker Green team representing the Restaurant included Frank C. Morris, Jr.; Brian Steinbach; and Kathleen M. Williams of the Washington, D.C., office.

Epstein Becker Green Persuades California Court to Deny Certification of Misclassification, Meal Period, and Rest Period Claims Against Restaurant Client

After more than five years of litigation, a Los Angeles Superior Court has denied a motion for certification of a class action against Epstein Becker Green client Joe's Crab Shack Restaurants on claims that its managers were misclassified as exempt and denied meal and rest periods in violation of California law. The Epstein Becker Green team, which was led by Michael S. Kun, argued on behalf of the defendant that the plaintiffs' claims could not be certified for class treatment because, among other things, individualized inquiries would need to be conducted because managers' experiences differ from restaurant to restaurant, position to position, and day to day.

In denying the plaintiffs' class certification motion, Judge Charles Palmer found that the plaintiffs had not established adequacy of class representatives, typicality, commonality, or superiority. In addition, Judge Palmer noted that handling this case as a class action would require every individual member to prove whether or not he or she spent more than half his or her time on exempt managerial tasks, which would be time-consuming and burdensome for the court. This ruling also emphasized a defendant's due process right to provide individualized defenses to class members' claims.

Epstein Becker Green Wins Dismissal of Leave and Wage Claims Against Senior Living Center

On July 31, 2012, Epstein Becker Green, on behalf of a senior living center, succeeded in obtaining a dismissal of a claim of retaliation under the District of Columbia Family and Medical Leave Act ("DCFMLA") and summary judgment on a claim under the D.C. Wage Payment Collection Law ("DCWPCL") brought in the District of Columbia Superior Court by the plaintiff, a former employee of the center. See Tisdale v. 1330 OPCO LLC, d/b/a Residences at Thomas Circle, No. 2011 CA 009761 B (D.C. Superior Court, July 31, 2012).

In an 18-page decision, Judge Natalia M. Combs Greene made several significant findings:

  1. On a matter of first impression under the DCFMLA, the Court held that an employee who has not yet met the minimum eligibility requirements for DCFMLA leave has no rights under the statute. Accordingly, the plaintiff, who requested DCFMLA leave that would have begun before she met the minimum eligibility requirements, did not engage in protected activity and could not state a claim for retaliation under the DCFMLA. The Court adopted the analysis of this question under the similar provisions of the federal FMLA by the U.S. Court of Appeals for the Sixth and Eleventh Circuits.
  2. The Court also found that the plaintiff could not state a claim for equitable estoppel because, even if the senior living center failed to provide timely notice that she was ineligible pursuant to D.C. regulations, she had conceded that she was ineligible and did not allege that she took any action in reliance on the center's silence.
  3. Finally, on another matter of first impression, the Court held that a handbook provision stating that involuntarily terminated employees were not entitled to be paid for unused accrued paid time off ("PTO") hours, to which the plaintiff was deemed to have agreed, did not violate a provision of the DCWPCL that prohibits modification of its provisions by private agreement. In so doing, the Court held that as an employer is not required to offer paid leave, it is free to set limitations on payment for such leave. Such a limitation does not violate the DCWPCL's provisions governing when wages are due but merely establishes what wages will be due on termination.

The Epstein Becker Green attorneys representing the senior living center included Frank C. Morris, Jr., and Brian Steinbach of the Washington, D.C., office.

Epstein Becker Green Persuades Federal Court in California to Deny Certification of Wage and Hour Claims Against Technology Client

Epstein Becker Green has achieved a major victory in a wage and hour collective/class action in a federal court in California. In this case, the plaintiffs filed a collective and class action alleging violations of the Fair Labor Standards Act ("FLSA") and the California Labor Code against one of our clients, a global technology company. The named plaintiffs are former information technology employees who alleged that their job duties consisted primarily of providing computer support, trouble shooting, testing related to repairs and problem-solving, and technical services. The plaintiffs claimed that they were improperly classified as exempt, worked in excess of 40 hours per week without overtime pay, and were not provided with required meal and rest breaks. Previously, the judge had conditionally certified an FLSA class. Ruling on the parties' respective motions in September 2013, the court denied the plaintiffs' motion to certify a Rule 23 class action under California law, and it granted our client's motion to decertify the conditionally certified FLSA class.

Interestingly, the law firm that represented the plaintiffs in this case represented a similar group of employees in a prior class action brought against a prior owner, and settled that case for approximately $16 million. The Epstein Becker Green team, which was led by Michael S. Kun and included Aaron F. Olsen and Lisa M. Watanabe, crafted and executed a creative strategy that led to a very different result for our client.

Epstein Becker Green Persuades California Court to Deny Class Certification Against Insurance Client

On March 24, 2014, after five years of litigation, Epstein Becker Green succeeded in defeating a motion for class certification in a significant class action lawsuit brought against our client Farmers Group, Inc., an insurance company, in Los Angeles Superior Court. In the case, the plaintiffs alleged that the persons who work for vendors performing property inspections for Farmers Group were wrongly classified as independent contractors, that Farmers Group was their "joint employer," and that they were entitled to overtime pay, minimum wages, reimbursement for business expenses, and a variety of penalties on a class-wide basis. Epstein Becker Green convinced the court that there were individualized issues that prevented class-wide determinations of whether the individuals had been misclassified as independent contractors, whether Farmers Group was their "joint employer," and whether Farmers Group could be held liable on any of the substantive claims. EBG also succeeded in convincing the court that the plaintiffs had not established the critical "superiority" element for class treatment.

The Epstein Becker Green team that represented Farmers Group included Michael S. Kun, Aaron F. Olsen, Lisa M. Watanabe, and Amy B. Messigian.

Epstein Becker Green Obtains Dismissal of Wage and Hour Class Action Brought Against Health Care Client

In March 2014, Epstein Becker Green obtained a significant victory in a wage and hour class action brought against a health care client in California. Although our client was confronted with potential exposure in the millions of dollars, the case was resolved without any payment by our client. Epstein Becker Green obtained this result by first filing motions to dismiss and to strike portions of the Complaint. Those motions were granted in part, essentially cutting the case in half (the court dismissed the class claims, subject to plaintiff's right to attempt to amend the Complaint). When the plaintiff's attorneys chose not to try to amend the Complaint during the time permitted, Epstein Becker Green was able to convince the plaintiffs to dismiss the rest of the case based on documentation showing that the remaining claims were meritless.

The Epstein Becker Green team representing our client included Adam C. Abrahms, Michael S. Kun, and Deanna L. Ballesteros.

Epstein Becker Green Is Victorious in Persuading a Federal Court to Dismiss a Class and Collective Action Alleging Worker Misclassification

On September 16, 2014, Judge Jesse Furman of the U.S. District Court for the Southern District of New York handed down a major victory for Epstein Becker Green and its client Corporate Transportation Group in the case Saleem and Singh v. Corporate Transportation Group, a class and collective action brought two years ago under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL), alleging that defendants, black car companies in New York City, had for years misclassified approximately 1,500 drivers as independent contractors. Plaintiffs sought reclassification as employees and seven-figure amounts of damages in this “bet the company” case.

Epstein Becker Green defeated plaintiffs’ motion for class certification in November 2013 and, in January and February 2014, filed a motion for summary judgment on behalf of defendants and opposed a competing motion for summary judgment brought by plaintiffs. On September 16, 2014, Judge Furman concluded that plaintiffs were properly classified as independent contractors rather than employees for the purposes of both the FLSA and the NYLL.

Member of the Firm Evan J. Spelfogel and Associate Margaret C. Thering led the Epstein Becker Green team, along with Associate Dustin E. Stark.

Epstein Becker Green Persuades California Court of Appeal to Uphold the Right to Contractual Arbitration Against Wage Claims By Independent Contractor

Epstein Becker Green (“EBG”) achieved a significant victory in the California Court of Appeal for its clients Prime Time Shuttle, Inc., and Rideshare Airport Management, LLC, on a motion to compel arbitration. In this case, Khalatian v. Prime Time Shuttle, Inc. et al., 2015 Cal. App. LEXIS 498 (Cal. App. 2d Dist. May 15, 2015), the plaintiff, an owner-operator driver, alleged that the defendants misclassified him as an independent contractor and, thus, failed to pay him all wages due, among other alleged violations of California’s wage and hour laws and Unfair Competition Law.

When EBG took over the case from predecessor counsel, a motion was made to compel arbitration pursuant to the arbitration provision in the parties’ services contract. The trial court denied Prime Time and Rideshare’s motion. The trial court ruled that the plaintiff’s wage and hour claims were based on statute, the California Labor Code, and therefore were not arbitrable, and that the defendants waived arbitration.

In cases where plaintiffs alleged that they were misclassified as independent contractors and denied unpaid wages and other obligations owed to employees, California courts have held that Labor Code claims are based on statutory rights, not a contract between the parties. Courts have held that Labor Code claims are not subject an arbitration agreement because the claims do not “arise out of or relate to” the parties’ services contract. (See Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1206-1208, and Elijahjuan v. Superior Court (2012) 210 Cal.App.4th 15, 23-24.)

However, an exception to California’s rule against arbitration of statutory wage claims exists when the arbitration agreement is governed by the Federal Arbitration Act (“FAA”). The FAA preempts any contrary state rule restricting arbitration. EBG appealed the trial court’s ruling and successfully persuaded the Court of Appeal that the FAA applied to the plaintiff’s claims. Unlike the defendants in Hoover and Elijahjuan, Rideshare presented ample evidence that the parties’ contract affected interstate commerce, resulting in the FAA’s preemption of any contrary California rule preventing arbitration, and that the plaintiff’s claims did, in fact, arise out of or relate to in the parties’ services contract. EBG also successfully persuaded the Appellate Court that the defendants did not waive arbitration. On May 1, 2015, the Court of Appeal reversed the trial court’s ruling in full, and on June 9, 2015, the Court of Appeal granted EBG’s request to publish its Opinion.

This victory is important in upholding the defendants’ right to contractual arbitration. In addition, this published Opinion provides favorable precedent for alleged employers defending against wage and hour claims by independent contractors and provides guidance on drafting arbitration agreements with independent contractors.

The EBG team representing Prime Time and Rideshare included David Jacobs, William O. Stein, and Rhea G. Mariano.