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Maldonado v. BTB Events & Celebrations, Inc.

United States District Court, S.D. New York

November 22, 2013

ARTURO MALDONADO, et al., Plaintiffs,
v.
BTB EVENTS & CELEBRATIONS, INC., et al., Defendants

For Arturo Maldonado, on behalf of themselves and others similarly situated, Oscar Salgado, on behalf of themselves and others similarly situated, Agustin Santana, on behalf of themselves and others similarly situated, Luis Gabriel Guerrero, on behalf of themselves and others similarly situated, Jose Alberto Vargas, on behalf of themselves and others similarly situated, Armando Vivanco-Navarrete, on behalf of themselves and others similarly situated, Jesse Cortes, on behalf of themselves and others similarly situated, Christopher Brown, on behalf of themselves and others similarly situated, Christian Tuta, on behalf of themselves and others similarly situated, Plaintiffs: Giustino Cilenti, Peter Hans Cooper, Cilenti & Cooper, P.L.L.C., New York, NY.

For BTB Events & Celebrations, Inc., Between the Bread II, Ltd., Cookie Panache by Between the Bread, Ltd., Ricky I. Eisen, Defendants: Arthur J. Robb, LEAD ATTORNEY, Clifton Budd & DeMaria, LLP, New York, NY.

OPINION

Page 383

OPINION & ORDER

Paul A. Engelmayer, United States District Judge.

This case involves claims, under federal and state law, that a catering company underpaid its food-delivery workers. Defendants BTB Events & Celebrations, Inc., Between the Bread II, Ltd., and Cookie Panache by Between the Bread, Ltd. are companies that together form a New York catering and event planning business that operates under the name " Between the Bread." [1] Plaintiffs are current or former employees whose work involved making food and related deliveries in connection with Between the Bread's catering and banquet lines of business.

Although there are a number of aspects to plaintiffs' claims, this lawsuit centers on a mandatory charge that Between the Bread imposed in connection with delivery orders placed over the phone. For those orders, Between the Bread added a mandatory surcharge to customer invoices amounting to 11% of the total food and drink bill (the " 11% surcharge" ). However, it did not treat the 11% surcharge as a tip or gratuity owed to delivery personnel. Between the Bread instead retained a portion of the 11% surcharge, and used it to pay various administrative costs and business expenses. Between the Bread distributed the remainder to delivery personnel, and credited that amount against the statutory minimum-wage obligations.

Plaintiffs sue under the Fair Labor Standards Act (" FLSA" ), 29 U.S.C. § § 201 et seq., the New York Labor Law (" NYLL" ), § § 190 et seq . & § § 650 et seq., and regulations promulgated under the NYLL by the New York State Department of Labor (" NYSDOL" ), see N.Y. Comp. Codes R. & Regs. tit. 12, § § 137-1.1 et seq . Plaintiffs claim, inter alia, that under the FLSA and NYLL, the 11% surcharge was a tip or gratuity,[2] and that Between the Bread was not entitled to

Page 384

withhold a portion of the charge from them. Plaintiffs bring several causes of action under the FLSA and NYLL, including (1) failure to pay the minimum wage, overtime compensation, and " spread of hours" premium; (2) unlawful deductions from plaintiffs' wages; (3) unlawful retention and misappropriation of plaintiffs' gratuities; (4) unlawful retention of service charges purported to be gratuities from tipped employees; (5) unlawful withholding and/or failing to pay wages and tips to employees; and (6) failure to reimburse employees for uniform and equipment purchase and maintenance. Defendants defend these practices on the ground, inter alia, that the 11% surcharge added to delivery invoices was not a gratuity under federal or state law, and that the proceeds from this charge may be used to satisfy their statutory minimum-wage obligations.

Discovery is complete. The parties cross-move for partial summary judgment, solely on the issue of whether the 11% surcharge constituted a gratuity under the FLSA or the NYLL. For the reasons that follow, (1) as to the FLSA, defendants' motion for partial summary judgment is granted, and plaintiffs' motion is denied; and (2) as to the NYLL, for the period through and including December 31, 2010, defendants' motion for partial summary judgment is granted, and plaintiff's motion is denied, whereas for the period from January 1, 2011, through September 26, 2012, the final date covered by this case,[3] plaintiffs' motion for partial summary judgment is granted and defendants' motion is denied.

I. Background[4]

A. The Parties and the Relevant Employment Practices

Between the Bread is a catering and events company primarily engaged in delivering

Page 385

food and drink to pre-planned private and corporate events. It also provides daily a la carte catering menus for delivery upon request, either by phone or online. Joint 56.1 Statement ¶ ¶ 16, 17. The company also provides other event-planning services, including securing venues for parties and banquets, decorating event space, providing servers and other event staff, and coordinating rentals of tables, chairs, tents, and the like. Id. ¶ 16. Between the Bread maintains its corporate office at 244 West 54th Street, New York, NY. Id. ¶ 14. It maintains a custombuilt kitchen at 145 West 55th Street, New York, NY, where it prepares the food for its catering delivery services. Id. ¶ 15. At all relevant times, Ricky I. Eisen was Between the Bread's owner and chief executive officer. Id. ¶ 20.

Plaintiffs are nine delivery workers for Between the Bread. Each worked for Between the Bread during some or all of the period between August 3, 2006 and September 26, 2012. Id. ¶ ¶ 2-10.

At all relevant times, Between the Bread paid its delivery personnel the " tip credit" minimum wage. It thus paid these workers a base salary below the minimum wage required by federal and state law. Specifically, it paid plaintiffs $4.60/hour in 2006; $4.85/hour between January 2007 and July 23, 2009; $4.90/hour between July 24, 2009 and December 2010; and $5.65/hour between January 2011 and September 26, 2012. Joint 56.1 Statement ¶ 24. In addition, Between the Bread attributed to these workers' compensation a " tip credit," as the FLSA and NYLL permit under specified circumstances, in an amount which, if added to the workers' base salary, achieved the minimum wage. Id. ¶ 23.

At all relevant times, Between the Bread imposed a mandatory 11% surcharge, payable by the customer, on traditional delivery orders placed over the phone.[5] The 11% surcharge was calculated based on the customer's total food and drink bill. Joint 56.1 Statement ¶ ¶ 25-27. The 11% surcharge was reflected on an invoice provided to the customer upon delivery of an order. Id. ¶ 30.

Before 2007, Between the Bread's invoices used the term " service charge" to describe the 11% surcharge. Supplemental Joint 56.1 Statement ¶ 5. However, beginning in late 2007, the invoices instead used the term " processing surcharge" to denote the 11% surcharge. Between the Bread used that term for the balance of the period at issue in this case (i.e., through September 26, 2013). Id.

The invoices presented the 11% surcharge as follows. The surcharge appeared immediately below the line item for food and beverage costs, and immediately above the line item for sales tax. Thus, the invoices indicated that the 11% surcharge was subject to sales tax; consistent with this, sales taxes were calculated based on the sum of food and beverage costs and the 11% surcharge. Joint 56.1 Statement ¶ 30. Immediately below these three items was a subtotal, representing the combined total of food and beverage costs, the 11% surcharge, and sales taxes. Below the subtotal was a line-item for a " gratuity" with a blank space to the right of it, which the customer was at liberty to fill in.

Thus, through late 2007, the invoice presented as follows:

Page 386

FOOD AND BEVERAGE....

$xxx

SERVICE CHARGE....

$xxx

SALES TAX....

$xxx

SUBTOTAL....

$xxx

GRATUITY....

[BLANK]

TOTAL DUE....

$xxx

Id. From late 2007 forward, the invoices presented as follows:

FOOD AND BEVERAGE....

$xxx

PROCESSING SURCHARGE....

$xxx

SALES TAX....

$xxx

SUBTOTAL....

$xxx

GRATUITY....

[BLANK]

TOTAL DUE....

$xxx

At no point did Between the Bread give customers a written explanation (on the invoices or otherwise) of the 11% surcharge. Id. ¶ 31. Between the Bread instructed delivery personnel not to discuss fees with customers. It instructed them, in the event a customer inquired about the purpose served by the 11% surcharge, to contact management with such questions. Id. ¶ ¶ 33-35. Where customers requested such an explanation, Between the Bread's practice was to provide a statement, written or oral, that the 11% surcharge was " a surcharge for shipping, packaging, fuel, market fluctuations not covered by price increases, various processing and dispatching fees, and additional overhead, and is not a tip." Supplemental Joint 56.1 Statement ¶ 2.

At all relevant times, Between the Bread included proceeds from the 11% surcharge in its gross receipts. Joint 56.1 Statement ¶ 40. It distributed 45% of those proceeds to delivery personnel. It retained the remaining 55%, which it used to pay various business expenses. Id. ¶ 41.

During the relevant time period, approximately 75% of Between the Bread customers wrote in gratuities on their invoices for traditional delivery orders. Id. ¶ 38. The average gratuity amounted to approximately 11% of the total food and drink bill. Supplemental Joint 56.1 Statement ¶ 1 & Ex. 1. Delivery personnel ...


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