Wai Tom v. Hospitality Ventures LLC


PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 18-2509 WAI MAN TOM, Plaintiff - Appellant, and BRANDON KELLY, on behalf of himself and all others similarly situated, Plaintiff, v. HOSPITALITY VENTURES LLC, d/b/a Umstead Hotel and Spa; SAS INSTITUTE, INC.; NC CULINARY VENTURES LLC, d/b/a Ãn Asian Cuisine, Defendants – Appellees, and ANN B. GOODNIGHT, Defendant. Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. Louise W. Flanagan, District Judge. (5:17-cv-00098-FL) Argued: September 8, 2020 Decided: November 24, 2020 Before AGEE and QUATTLEBAUM, Circuit Judges, and Thomas S. KLEEH, United States District Judge for the Northern District of West Virginia, sitting by designation. Affirmed in part, vacated in part and remanded by published opinion. Judge Quattlebaum wrote the opinion, in which Judge Agee and Judge Kleeh joined. ARGUED: Gilda Adriana Hernandez, LAW OFFICES OF GILDA A. HERNANDEZ, PLLC, Cary, North Carolina, for Appellant. John R. Hunt, STOKES WAGNER, ALC, Atlanta, Georgia, for Appellees. ON BRIEF: Charlotte Smith, LAW OFFICES OF GILDA A. HERNANDEZ, PLLC, Cary, North Carolina, for Appellant. Arch Y. Stokes, Jordan A. Fishman, STOKES WAGNER, ALC, Atlanta, Georgia, for Appellees. 2 QUATTLEBAUM, Circuit Judge: In this appeal, we are required to apply statutory provisions of the Fair Labor Standards Act (“FLSA”) and accompanying regulations to workers in the restaurant industry. Ãn Asian Cuisine (“Ãn”), an upscale sushi restaurant in Cary, North Carolina, paid its servers an hourly rate plus tips and automatic gratuities, which generally consisted of twenty percent of the bill for parties of six or more. When combined, the hourly wage, tips and automatic gratuities almost always exceeded the FLSA’s minimum-wage and overtime requirements. The Appellants (the “Employees”) claim, however, that the tips and automatic gratuities cannot be considered in determining whether Ãn met its FLSA obligations because they were paid through an unlawful tip pool. Tip pools must only include employees who customarily and regularly receive tips. Ãn, according to the Employees, included in its tip pool employees who did not meet that criteria. Therefore, the Employees claim Ãn violated the FLSA, entitling them to damages, attorneys’ fees and costs. 1 The district court disagreed and entered summary judgment in favor of Ãn. It determined that the automatic gratuities were not tips but instead commissions, which, according to the court, entitled Ãn to invoke a statutory exemption to the FLSA’s requirements—29 U.S.C. § 207(i) (“the 7(i) exemption”). The district court held that the 1 The Employees allege that Appellees Hospitality Ventures LLC, d/b/a Umstead Hotel and Spa, SAS Institute, Inc. and NC Culinary Ventures, LLC, d/b/a Ãn Asian Cuisine are their joint employers. Appellees, referred to simply as Ãn here, dispute the Employees’ allegations. 3 automatic gratuities satisfied the requirements of the 7(i) exemption for most weeks at issue here and, for those that it did not, the tip pool was valid as a matter of law. We agree with the district court that the automatic gratuities were not tips. But, for the reasons set ...

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