Melissa Compere, et al. v. Nusret Miami, LLC, et al.

[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 20-12422
____________________
MELISSA COMPERE,
VALDO SULAJ,
ALVARO BETANCOURTE,
ALBA CASTILLA,
SLAGJANA KOVACHEVSKA,
ALDALYNNE ALDANA,
DANIEL PACHECO,
SANTOS RIVERA,
WILLIAM CAMERON,
ADAM JAGODA,
ALEJANDRA LAVALLE,
ANTONIO SCIANCALEPORE,
MERVE BUDOK,
ARBER LUKOVIC,
VIOLETA MARKOVIC,
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2 Opinion of the Court 20-12422
TAMAS CZOMBOS,
PABLO CANO,
LUIS LUCIANO,
GORDON MACK,
RONALDO ESCALONA,
ODALYS BURGOS,
MUNEVVER KOC,
MEHMET BAYKARA,
Plaintiffs-Appellants,
DIEGO VARGAS,
Plaintiff,
versus
NUSRET MIAMI, LLC,
d.b.a. Nusr-et Steakhouse, a Florida limited
liability company,
NUSRET GOKCE,
an individual,
Defendants-Appellees.
____________________
Appeal from the United States District Court
for the Southern District of Florida
D.C. Docket No. 1:19-cv-20277-AHS
____________________
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20-12422 Opinion of the Court 3
Before BRANCH , G RANT, and B RASHER , Circuit Judges.
B RANCH, Circuit Judge:
Restaurants regularly add mandatory service charges or
gratuities to customers’ bills. This appeal is about whether such
charges are “tips” under federal employment law, an issue of first
impression in the Eleventh Circuit. If the mandatory service
charges are tips, federal law would generally prohibit restaurants
from using the fees to pay minimum and overtime wages to
employees. But if the charges are not tips, establishments may
apply them toward employee wages.
Nusret Miami, LLC is an upscale steakhouse in Miami,
Florida. It is owned by Nusret Gokce, a chef and internet celebrity
also known by the nickname “Salt Bae.”1 Since opening in
November 2017, the restaurant added a mandatory 18% “service
charge” to customers’ bills. It collected these payments and
redistributed them to certain employees on a pro rata basis to cover
Nusret’s minimum and overtime wage obligations. To do so, the
restaurant used a provision in the Fair Labor Standards Act
(“FLSA”) exempting certain retail and service establishment
employers from paying overtime wages if, as relevant here, “the
1 For clarity’s sake, we will refer to Nusret Gokce and Nusret Miami—the two
defendants—collectively as “Nusret.”
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4 Opinion of the Court 20-12422
regular rate of pay” of employees exceeds one and one-half times
the applicable minimum hourly rate.
See 29 U.S.C. § 207(i).
In this collective action under the FLSA, the plaintiffs—a
group of tipped employees at Nusret (“Employees”)—challenge
Nusret’s compensation scheme. The Employees allege that from
November 1, 2017, through January 18, 2019, the restaurant paid
them less than the required federal minimum and overtime wages
and forced them to participate in an illegal tip pool with non-tipped
employees. The heart of their argument is that, although their
portion of the service charges exceeded the statutory wage
requirements (
e.g., some employees made over $100,000 per year),
Nusret still violated the FLSA because the 18% “service charge”
was not a service charge, but, in fact, a tip. And because tips are
not part of the Employees’ “regular rate of pay,” the restaurant
could not use them to offset its wage obligations under the FLSA.
See, e.g.,
Walling v. Youngerman-Reynolds Hardwood Co., 325
U.S. 419, 424 (1945) (explaining that “[t]he regular rate by its very
nature must reflect all payments which the [Employer and
Employees] have agreed shall be received regularly during the
work week”); 29 U.S.C. § 207(e). The district court rejected the
Employees’ argument and granted summary judgment to Nusret.
The Employees timely appealed.
The primary issue before us is whether Nusret’s mandatory
18% “service charge” is a tip under the FLSA and associated
regulations. The Employees say that the charge is a tip; Nusret says
it is a bona fide service charge. The classification of this charge is
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20-12422 Opinion of the Court 5
dispositive of this appeal. To wit: If the charge
is a tip, the FLSA
barred Nusret from using that money to satisfy its minimum and
overtime wage obligations to the Employees. But if the charge is
not a tip, Nusret could use it to meet its wage obligations under the
FLSA, and the district court properly granted summary judgment.
After careful review and with the benefit of oral argument,
we agree with the district court that the service charge was not a
tip and could lawfully be used to offset Nusret’s wage obligations
under the FLSA.2 Accordingly, we affirm.
I. Background
A. Factual Background
Nusret’s menu informs customers of the service charge:
“For your convenience an 18% service charge will be added to your
final bill and will be distributed to the entire team.”3 Separate from
2 The Employees also appeal the denial of their motions to extend the pretrial
and trial deadlines and the deadline for responding to Nusret’s motion for
summary judgment, as well as a motion for deferred consideration of
summary judgment—all for the purpose of conducting the in-person
deposition of Nish Patel of Paperchase Accounting, Nusret’s outside
accountant, which was delayed because of the COVID-19 pandemic. The
Employees hoped Patel’s testimony would reveal that Nusret did not report
the service charges in its tax returns. As explained further below, we need not
reach these issues given our holding that Nusret’s service charge was not a tip
no matter how it was treated for tax accounting purposes.
3 At first, Nusret referred to the charge as an “automatic gratuity” and not a
“service charge.” At some point between November 2017 and April 2018, the
restaurant began calling it a “service charge.” Yet in every relevant legal
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6 Opinion of the Court 20-12422
the service charge, customers can add a voluntary, discretionary
gratuity by writing in the desired amount on a blank line on the
final receipt or by leaving cash tips. The service charge, however,
is non-negotiable. Although restaurant managers have the
discretion to remove it from the bill when a customer complains
about the service or food, the record contains no evidence that the
customer has the discretion to negotiate or remove the charge.
The service charge payments never went directly to
restaurant employees. Instead, Nusret would process the bill and
the service charge (and credit card tips) through a point-of-sale
system (“POS System”). Nusret would then distribute the
collected service charges—minus 2.65% for credit card processing
fees—to employees using a point system to give each employee a
pro-rata share of the total.4 Nusret would also distribute the
additional gratuities to tip-eligible employees.
Nusret’s pay structure for the Employees changed slightly
over the relevant period: From November 2017 through April
respect, the service charge remained the same throughout the period at issue
in this appeal. And the Employees advance no argument turning on this
change in nomenclature.
4 The Employees dispute Nusret’s claim that the service charges were
distributed to service employees only (
i.e., non-managerial, tipped
employees), pointing to the lead plaintiff’s deposition testimony that the
money was distributed to some employees who performed non-tipped work.
This dispute is immaterial, because, as explained below, the service charges
were not tips, so it is irrelevant whether Nusret paid some of that money to
non-tipped employees.
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20-12422 Opinion of the Court 7
2018, the restaurant paid the Employees an hourly rate and
overtime wage and a pro rata share of the collected service charges.
Starting on April 30, 2018, however, the restaurant eliminated the
hourly rate for the Employees and instead satisfied its wage
obligations exclusively through the service charges.
Nusret explained to its employees that the new pay structure
was lawful under 29 U.S.C. § 207(i), which exempts certain
employers from paying overtime wages if: (1) “the regular rate of
pay of such employee is in excess of one and one-half times the
minimum hourly rate”; and (2) if “more than half [the employee’s]
compensation for a representative period (not less than one month)
represents commissions on goods or services.” 29 U.S.C. 207(i).
In 2017, Florida’s minimum wage was $8.10 per hour; in
2018, it was $8.25 per hour; and in 2019, it was $8.46 per hour.
From November 1, 2017 through January 1, 2019—the period at
issue in this lawsuit—Nusret paid the Employees amounts ranging
from $23.68 to $51.58 per hour.
B. Procedural History
On January 18, 2019, Melissa Compere, a former Nusret
server, initiated a collective action complaint5 on behalf of herself
and similarly situated service employees against Nusret Miami and
5 Like class actions, a collective action under the FLSA permits the aggregation
of claims by multiple plaintiffs against a defendant, but unlike the prerequisites
for class certification in Fed. R. Civ. P. 23, the FLSA requires only that the
employees be “similarly situated.”
See 29 U.S.C. § 216(b).
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8 Opinion of the Court 20-12422
Gokce for “unpaid minimum wage compensation, unpaid
overtime wage compensation, liquidated damages, return of tips
wrongfully taken, and other relief under the Fair Labor Standards
Act of 1938.”
See 29 U.S.C. § 216(b) (providing for a collective
action of “similarly situated” employees against employers who
violate the provisions of the FLSA). The district court granted her
motion for conditional certification and certified a collective action
of former and current Nusret service employees who worked at
the restaurant from November 2017 to January 1, 2019.
The Employees alleged that, “[t]hroughout the majority of
[lead plaintiff Compere’s] employment as a tipped employee at
Nusret Steakhouse,” she “and others similarly situated . . . were
only paid a share of the tips collected,” and therefore were paid no
wages at all, in violation of the FLSA’s minimum and overtime
wage requirements. They also alleged that “non-tipped
employees” and “management” improperly participated in the tip
pool, which also violates the FLSA.
See 29 U.S.C. § 203(t) (defining
“tipped employee” as any employee “engaged in an occupation in
which he customarily and regularly receives more than $30 a
month in tips”);
id. § 203(m)(2)(B) (providing that employers “may
not . . . allow[] managers or supervisors to keep any portion of
employees’ tips”).
Nusret filed an answer stating that the Employees “have
been fully compensated for all hours worked in accordance with
the applicable provisions of the FLSA.”
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20-12422 Opinion of the Court 9
(i)
Discovery
During discovery, Employees sought to depose Nish Patel,
the corporate representative of Nusret’s accounting firm,
Paperchase, on the restaurant’s treatment of the service charge for
financial and tax purposes. Patel’s deposition was set for March 20,
2020, in Miami, Florida. But on March 17, 2020, the Employees
moved to extend the deadline to file pretrial motions, claiming
that, “[t]oday, Defendant’s counsel advised that Mr. Patel would
not be able to come to Miami, Florida, for his scheduled deposition
on March 20, 2020, because he has self-quarantined” at home in
New York City and that Compere herself was also quarantined due
to the COVID-19 pandemic. Although the filing never explicitly
demanded an in-person deposition of Patel, the Employees insisted
that they could not take Patel’s deposition—which they described
as “critically important”—without him traveling to Miami. The
district court granted the motion and extended the pretrial motions
deadline to April 20, 2020. And then on April 16, 2020, the parties
jointly moved to further extend the deadline another sixty days, in
part because the Employees had yet to depose Patel due to COVID-
related restrictions.
While the joint motion to extend the relevant deadlines was
pending, Nusret moved for summary judgment on April 20, 2020.
Shortly before the May 4 deadline for responding, the Employees
filed for a 30-day extension. And then on Monday, May 4, the
Employees responded to Nusret’s motion for summary judgment
along with a motion to defer consideration of summary judgment
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10 Opinion of the Court 20-12422
because they had been unable to depose Patel due to the pandemic,
see Fed. R. Civ. P. 56(d) and (e). The district court denied the
Employees’ motions for an extension and for deferred
consideration of summary judgment.
(ii)
Summary Judgment
In its motion for summary judgment, Nusret contended that
the 18% fee was a bona fide service charge and that the undisputed
record evidence showed that the Employees were compensated
well above the statutory wage rates. Nusret argued that the critical
feature of a tip, unlike a service charge, is that the decision to pay a
tip (and how much to pay) is entirely within the customer’s
discretion. Service charges, in contrast, are mandatory. Because
Nusret did not allow customers to refuse to pay the service charge,
it was not a tip.
The Employees responded that, for the 18% fee to be a bona
fide service charge (and not a tip), Nusret was required to report
the payments in its gross receipts on its tax returns. According to
the Employees, there is a genuine issue of fact as to whether Nusret
reported the service charges in this way, and summary judgment
was therefore inappropriate. The Employees also suggested that
the charge was not mandatory because managers had discretion to
remove it from the bills of dissatisfied customers.
Soon after, the district court granted Nusret’s motion for
summary judgment, concluding that the restaurant satisfied the 29
U.S.C. § 207(i) exemption because: (1) it was a retail or service
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20-12422 Opinion of the Court 11
establishment; (2) it was undisputed that at all relevant times
Compere’s “regular rate of pay” was more than one and one-half
times the minimum wage; and (3) more than half of the
Employees’ compensation for the relevant time consisted of
commissions on goods or services. The district court called the
Employees’ argument that the service charge was actually a tip
“erroneous as a matter of law and untenable as a matter of fact.”
Citing the definition of a tip set forth in 29 C.F.R. § 531.52,6 the
district court noted that Nusret’s service charge was not paid
directly to the Employees, nor did customers have a right to direct
who would receive the service charge. The district court also
noted that at least one court had observed that “the essential
element of a tip is its voluntary nature,” and that Nusret’s
customers had no choice but to pay the service charge.
Accordingly, the court held that because the service charge was not
6 This regulation defines a “tip” as:
[A] sum presented by a customer as a gift or gratuity in
recognition of some service performed for the customer. It is
to be distinguished from payment of a charge, if any, made for
the service. Whether a tip is to be given, and its amount, are
matters determined solely by the customer. . . . Only tips
actually received by an employee as money belonging to the
employee may be counted in determining whether the person
is a “tipped employee” within the meaning of the [FLSA] and
in applying the provisions of section 3(m)(2)(A) which govern
wage credits for tips.
29 C.F.R. § 531.52.
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12 Opinion of the Court 20-12422
a tip, it was properly considered part of the Employees’ “regular
rate of pay” so Nusret could lawfully use it to pay employee
wages.7 Summary judgment was therefore appropriate, the court
said, because Nusret’s compensation scheme complied with the
FLSA. This appeal followed.
* * *
On appeal, the Employees challenge the district court’s
grant of summary judgment to Nusret. They also appeal the denial
of the joint motion to extend the pretrial and trial deadlines; the
Employees’ motion for extension of time to respond to Nusret’s
motion for summary judgment; and the Employees’ motion for
deferred consideration of the motion for summary judgment—all
of which, they argue, should have been granted to give them time
to conduct the deposition of Paperchase representative Nish Patel.
II. Discussion
A. The Service Charge
This Court reviews the grant or denial of summary
judgment
de novo, “applying the same legal standards used by the
district court.”
Yarbrough v. Decatur Hous. Auth., 941 F.3d 1022,
1026 (11th Cir. 2019). “At the summary judgment stage, facts must
be viewed in the light most favorable to the nonmoving party only
if there is a genuine dispute as to those facts.”
Scott v. Harris, 550
7 The district court also found that “the undisputed evidence supports [that]
the service charge became part of the Steakhouse’s gross receipts.”
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20-12422 Opinion of the Court 13
U.S. 372, 380 (2007) (quotation omitted). Summary judgment is
appropriate “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a);
Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986).
The parties do not dispute that if the service charge is
properly considered part of the Employees’ “regular rate of pay,”
Nusret satisfied its overtime and minimum wage obligations under
the FLSA because the Employees were paid well above 1.5 times
Florida’s minimum wage per hour.8 But if the service charge
counts as a tip, Nusret was not eligible to use those payments to
satisfy its wage obligations under 29 U.S.C. § 207(i)’s overtime
exemption9 because tips cannot count toward the hourly “regular
8 The restaurant attached the following table to its motion for summary
judgment purporting to show the lead plaintiff’s pay for a representative
period, and the Employees do not dispute its accuracy.
Check Date Work Days Hours Gross Pay Hourly
Rate
06/01/2018 05/14/2018 05/27/2018 79.30 $ 2,890.61 $ 36.45
06/15/2018 05/28/2018 06/10/2018 68.63 $ 2,373.02 $ 34.58
06/29/2018 06/11/2018 06/24/2018 76.22 $ 2,520.69 $ 33.07
07/13/2018 06/25/2018 07/08/2018 52.58 $ 1,798.91 $ 34.21
9 29 U.S.C. § 207(i) provides, in full:
No employer shall be deemed to have violated subsection (a)
by employing any employee of a retail or service
establishment for a workweek in excess of the applicable
workweek specified therein, if (1) the regular rate of pay of
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14 Opinion of the Court 20-12422
rate of pay.”10
See Walling, 325 U.S. at 424 (“[T]he regular rate
refers to the hourly rate actually paid the employee for the normal,
non-overtime workweek for which he is employed.”);
see also 29
U.S.C. § 207(e) (defining “regular rate” in part, as including “all
remuneration for employment paid to, or on behalf of, the
employee” (emphasis added)).11
such employee is in excess of one and one-half times the
minimum hourly rate applicable to him under section 206 of
this title, and (2) more than half his compensation for a
representative period (not less than one month) represents
commissions on goods or services. In determining the
proportion of compensation representing commissions, all
earnings resulting from the application of a bona fide
commission rate shall be deemed commissions on goods or
services without regard to whether the computed
commissions exceed the draw or guarantee.
Section 207(a) (referenced above in § 207(i)) provides for a forty-hour
workweek and one and one-half times compensation for time worked
over forty hours.
Id. § 207(a)(1).
10 The “regular rate” of pay is calculated by dividing the total compensation
an employee receives by the total number of hours worked. 29 C.F.R. §
778.118. And to be clear, this case is not about whether tips are part of the
regular rate of pay (they are not, and neither party claims otherwise), but
rather whether Nusret’s mandatory service charge is a tip.
11 As quoted above, the regular rate of pay includes “remuneration for
employment paid to . . . the employee” but it does not include, for example,
“sums paid as gifts” or, in general, “[s]ums paid in recognition of services
performed.” And DOL regulations explain that, outside of circumstances not
applicable here (
i.e., where an employer claims a “tip credit” under 29 U.S.C.
§ 203(m)), tips “need not be included in the regular rate” because they “are not
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20-12422 Opinion of the Court 15
For the reasons explained below, we hold Nusret’s service
charge was not a tip under the FLSA or other DOL regulations and
was therefore part of the Employees’ “regular rate of pay.”
Accordingly, the unrebutted record evidence shows that the
restaurant satisfied its wage obligations under the FLSA.
The FLSA defines neither “tip” nor “service charge.” But as
noted in Department of Labor (“DOL”) regulations, the critical
feature of a “tip” is that “[w]hether a tip is to be given, and its
amount, are matters
determined solely by the customer.”
See 29
C.F.R. § 531.52(a) (emphasis added). Distinct from “a payment of
a charge, if any made for the service,” a tip is presented by a
customer “as a gift or gratuity in recognition of some service
performed for the customer.”
Id.
By this measure, Nusret’s service charge is not a tip.
Critically, whether and how much to pay are not “determined
solely by the customer.” Indeed, those decisions are not
determined by the customer at all. As the lead plaintiff, Compere,
conceded in her deposition, “[Employees] were told that the
service charge was supposed to be mandatory as if it was an item
that a person ordered it, it had to be on the check.”
Moreover, our conclusion that Nusret’s charge was not a tip
is bolstered by another DOL regulation providing “examples of
amounts not received as tips” and speaking directly to the type of
payments made by the employer to the employee as remuneration for
employment within the meaning of the Act.” 29 C.F.R. § 531.60.
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16 Opinion of the Court 20-12422
charge at issue.
See 29 C.F.R. § 531.55. Section 531.55 (a) explains
that:
A compulsory charge for service, such as 15 percent
of the amount of the bill, imposed on a customer by
an employer’s establishment, is not a tip . . . .
Id. § 531.55(a). We simply cannot distinguish between Nusret’s
service charge and this example. The only difference between the
two—that Nusret’s service charge is 18% of the final bill and the
example is only 15%—is obviously immaterial. Nusret’s charge
was therefore a service charge and not a tip.12
12 Our reading of the FLSA and DOL regulations is in line with the Fourth
Circuit’s decision in
Wai Man Tom v. Hospitality Ventures LLC, 980 F.3d 1027
(4th Cir. 2020), where our sister circuit held that a restaurant’s automatic
gratuity of 20% for parties of six or more was not a “tip” and could be used to
offset the restaurant’s minimum and overtime wage obligations.
Id. at 1038.
The court considered and rejected the employees’ argument that the charges
were tips because the manager would sometimes remove them from the bill.
Relying only on the definition of “tip” in 29 C.F.R. § 531.52—and not
mentioning the other regulations discussed here or “gross receipts”—the court
emphasized that “the material issue is not whether customers always paid a
twenty-percent automatic gratuity. The material issue is
who determined
whether and how much to pay.”
Id.
Our holding is also supported by an opinion letter from the DOL Wage and
Hour Division on a similar question. That letter opined that a chauffeur
service’s “imposed gratuity” of 15%, which the company transferred directly
to the chauffeur, was not a “tip” even though “[t]his imposed gratuity would
not be included in the company’s gross receipts.”
See DOL Opinion Letter,
2005 WL 3308602 (Sept. 2, 2005). Agency interpretations in opinion letters are
“‘entitled to respect’ . . . to the extent that those interpretations have the
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20-12422 Opinion of the Court 17
The Employees disagree. Their argument rests mainly on
the theory that a service charge is a tip unless an employer
“include[s] the service charges in their gross receipts for tax
purposes.” Because, according to the Employees, Nusret has failed
to show that it included the service charges in its federal tax returns,
there is a genuine issue of material fact as to whether the service
charge is a tip, thereby precluding summary judgment.
Contrary to the Employees’ contention, Nusret’s tax forms
are irrelevant. To be sure, 29 C.F.R. § 531.55(b) provides another
example of an “amount[] not received as [] tip[],” and reads: “[a]s
stated above, service charges
and other similar sums which become
part of the employer’s gross receipts are not tips for the purposes
of the Act,”
id. (emphasis added). But this section merely provides
“examples” of non-tips. It does not purport to define—for purposes
of the FLSA—“tips.” By contrast, § 531.52(a) does.
See 29 C.F.R.
§ 531.52(a) (“A tip is . . . .”). And, as discussed above, that definition
of “tip” does not encompass Nusret’s service charge.
Moreover, the “service charges and other similar sums”
example in subsection (b) cannot be fairly read to require that an
employer include a service charge in its gross receipts for tax
purposes to avoid treating it as a tip. First, (b) references the
example of a service charge in subsection (a) through the “as stated
above” language and thereby reiterates that service charges are not
‘power to persuade.’”
Christensen v. Harris Cnty., 529 U.S. 576, 587 (2000)
(quoting
Skidmore v. Swift & Co., 323 U.S. 134, 140 (1994)).
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18 Opinion of the Court 20-12422
tips for purposes of the FLSA.
See id. § 531.55(b). Second, nothing
in the text of subsection (b) affirmatively requires that the service
charges be included in the employer’s gross receipts to not be
considered a tip; it simply gives examples of non-tips. 13 Third, the
13 The Employees point to several district court decisions holding that the
relevant sums must be recorded in the employer’s gross receipts to be
considered a service charge countable toward the employer’s wage
obligations.
See, e.g.,
Hart v. Rick’s Cabaret Int’l, Inc., 967 F. Supp. 2d 901,
927–30 (S.D.N.Y. 2013);
Henderson v. 1400 Northside Drive, Inc., 110 F. Supp.
3d 1318, 1322 (N.D. Ga. 2015);
Shaw v. Set Enters., Inc., 241 F. Supp. 3d 1318,
1328–29 (S.D. Fla. 2017). Of course, we are not bound by the decision of any
district court. But, in any event, these cases are distinguishable because they
involved clubs where customers paid fees, in cash, as well as tips, directly to
dancers. In contrast, the service charges paid by Nusret’s customers never
went directly to employees, but went directly to Nusret through its POS
system.
The Employees also cite one circuit court decision,
McFeeley v. Jackson Street
Ent., LLC, 825 F.3d 235 (4th Cir. 2016), in which the Fourth Circuit held that
a performance fee paid by club patrons directly to dancers, which the dancers
kept for themselves, was not a service charge for FLSA purposes.
Id. at 245–
46. The court stated that one prerequisite to use the “service charge” as an
offset to an employer’s overtime and minimum wage obligations is that “the
service charge ‘must have been included in the establishment’s gross
receipts.’”
Id. (quoting
Hart, 967 F. Supp. 2d at 929).
McFeeley is not
persuasive as it relates to this case because it is factually distinct—it’s another
case in which charges and tips were both paid in cash directly to the dancers.
Moreover, we are far more persuaded by the later Fourth Circuit decision in
Wai Man Tom, discussed above in footnote 12, which considered a scenario
much closer to our case and held that a mandatory 20% gratuity was not a tip.
See Wai Man Tom, 980 F.3d at 1038.
And even assuming that service charge payments must be included in an
employer’s gross receipts to constitute a bona fide service charge, the record
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20-12422 Opinion of the Court 19
Employees have cited no binding authority for reading an “include
in gross receipts
for tax purposes ” requirement into the FLSA or its
accompanying regulations. Such a requirement is absent even
from 29 C.F.R. § 531.52(b), which mentions gross receipts.
Pointing to no binding authority, the Employees ask this Court to
ignore the plain text of the regulations and read an additional
recordkeeping requirement into the FLSA’s already extensive and
burdensome requirements. We decline to do so.14
The Employees also argue that Nusret’s service charge was
not, in fact, mandatory because managers had discretion to remove
the charges on the bills of dissatisfied customers (much like a
manager might “comp” an entrée). But what the Employees miss
is that the relevant question is whether the decision to pay the
given sum is “determined solely by the
customer.”
See 29 C.F.R.
§ 531.52(a) (emphasis added). Here, it is not. The customers had
evidence on this issue demonstrates that Nusret satisfied this requirement.
Black’s Law Dictionary defines “Gross Receipts” as “[t]he total amount of
money or other consideration received by a business taxpayer for goods sold
or services performed in a taxable year, before deductions.”
Gross Receipts,
Black’s Law Dictionary (11th ed. 2019). Here, the undisputed record evidence
shows that Nusret received the service charges and recorded them in its POS
system before redistributing them to employees. Thus, the charges “bec[a]me
part of [Nusret’s] gross receipts.”
See 29 C.F.R. § 531.52(b).
14 To be clear, we give no opinion on whether Nusret complied with federal
tax law in its treatment of the service charge on its tax returns. Our holding is
simply that Nusret’s tax returns are irrelevant to determining whether the
service charge is a tip.
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20 Opinion of the Court 20-12422
no ability to determine on their own whether they would pay the
service charge. It is irrelevant that
managers would sometimes
remove the service charge for dissatisfied customers.
Accordingly, we agree with the district court that Nusret’s
mandatory 18% service charge was a bona fide service charge and
not a tip because it was a “compulsory charge for service,” and the
decision to pay it—and the amount to pay—were not “determined
solely by the customer.”
See 29 C.F.R. §§ 531.52, 531.55.
B. Discovery and Rule 56(d) Motions
As discussed above, the Employees unsuccessfully sought
extensions of the pretrial and trial deadlines and the deadline for
responding to the motion for summary judgment, as well as
deferred consideration of summary judgment to conduct the in-
person deposition of Nish Patel of Paperchase, Nusret’s outside
accountant, which was delayed because of the pandemic. The
Employees expected Patel “to confirm that the service charges
were not included in [Nusret’s] gross receipts,” which they asserted
would have defeated Nusret’s § 207(i) exemption.
Because we hold that, as a matter of law, Nusret’s
mandatory 18% service charge was not a “tip” no matter how it
was treated on Nusret’s tax returns, Patel’s purported testimony
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20-12422 Opinion of the Court 21
would have made no difference.15 We therefore do not reach the
Employees’ argument about the denial of these motions.
* * *
Accordingly, we affirm the district court’s award of
summary judgment to Nusret.
AFFIRMED.
15 In its discovery requests, the Employees also sought the restaurant’s
monthly and annual financial statements, tax returns, and cash flow
statements, along with other financial documents. The Employees do not
dispute that Paperchase produced these documents, nor do they dispute their
authenticity. And in any event, Nusret affirmatively “concede[d]” that it “did
not report the service charges on its corporate tax returns nor pay sales tax on
them” in its reply in support of summary judgment.
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