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Court Denies Conditional Certification of Tip Credit Notice Collective Action

The U.S. District Court for the District of Connecticut recently denied first-stage conditional certification of a proposed collective action under Section 216(b) of the Fair Labor Standards Act (FLSA). In a decision that likely sounds the death knell for the plaintiff employee’s allegations, the court determined that the defendant employer, a steakhouse and tavern, provided sufficient tip credit notice under the FLSA.

Under Department of Labor regulations, the required tip credit notice must inform a tipped employee all of the following:

  1. The amount of the cash wage that is to be paid to the tipped employee by the employer

  2. The additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer

  3. Which amount may not exceed the value of the tips actually received by the employee

  4. That all tips received by the tipped employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips

  5. That the tip credit shall not apply to any employee who has not been informed of these requirements in this section

In McDougle v. Dakota of Rocky Hill, LLC, the plaintiff employee alleged that the employer, Dakota, failed to provide the tip credit notice required by FLSA Section 203(m) and therefore was not entitled to take the tip credit. The employee, McDougle, specifically alleged that the employer’s orientation materials, policies distributed to employees, and posters displayed in the restaurant did not satisfy the DOL regulations. McDougle moved for conditional certification of a collective action under FLSA Section 216(b) on behalf of all Dakota servers, but the district court denied the motion. 

Interestingly, rather than conducting a “similarly situated” inquiry, as is typical in FLSA collective action cases, the court proceeded to determine whether the employer had satisfied the tip credit notice requirements. The court painstakingly examined each of the five tip credit provisions at issue, and determined that “[e]ven when adopting a strict reading of the notice requirement as provided in 29 C.F.R. § 531.59(b), Dakota’s orientation process, internal policies, and wage posters collectively notified its servers of the five tip credit provisions of the DOL regulation.” 

Based on that determination, the court explained that “[b]ecause Dakota has satisfied the tip notice requirement, the Plaintiffs’ claims fail on the merits. Therefore, the question whether Dakota servers are similarly situated for purposes of class certification is moot.” Thus, the court never examined whether the requirements for first-stage conditional certification were met.

There are at least two takeaways from the McDougle decision. First, while a plaintiff’s burden under Section 216(b) is lenient, employers from any industry defending FLSA collective actions may want to consider whether any merits-based defenses are available to defeat first-stage conditional certification. Second, employers of tipped employees would do well to revisit their tip credit notice to be sure that policies and practices comply with the relevant technical requirements.

© 2020 BARNES & THORNBURG LLPNational Law Review, Volume IX, Number 284


About this Author

Peter J. Wozniak Barnes Thornburg Chicago  Labor Employment

Pete Wozniak is a vigorous advocate who strives to help his clients navigate issues that can be fraught with challenges as painlessly and efficiently as possible. He is a candid and personable counselor, offering his clients direct advice by leveraging his deep experience performing a broad range of outcome critical functions for complex labor and employment matters.

Pete represents clients across a number of industries, including transportation and logistics, restaurants, retail, manufacturing, and temporary staffing. Handling a number of high profile matters, he identifies the...

Mark Wallin, Attorney, BT, Chicago, Labor Employment
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In order to provide the best counsel, Mark Wallin believes it is his role to understand his clients’ business needs so he can help them determine what resolution will provide the most benefit. His keen ability to understand his clients’ practical concerns allows him to advise on the best path to successfully resolve issues – whether through traditional litigation or negotiated resolution.

In the course of his practice, Mark has focused on providing the highest-level of service to his clients and building long-term relationships. Specifically, he defends employers in a wide range of employment matters including wage and hour class and collective actions, as well as complex, multi-plaintiff and single plaintiff employment discrimination claims brought not only by private plaintiffs but also initiated by the Equal Employment Opportunity Commission (EEOC).

Mark has successfully represented companies of virtually all sizes, litigating matters across multiple areas of the law, from the pleading stage through appeal. He has also represented clients in arbitrations and before administrative bodies.

Mark vigilantly stays abreast of cases, laws, and trends that may impact his clients coming out of the courts, Congress and the state legislature, as well as the U.S. Department of Labor, the EEOC, and state regulatory agencies. He strives to keep a watchful eye on how labor and employment related laws are evolving so as to proactively advise clients.

In addition to his regular legal practice, Mark has undertaken several pro bono cases including trying criminal jury trials in state and federal court, and representing indigent plaintiffs in civil rights matters as part of the federal Trial Bar.

Mark began honing his litigation skill during law school when he interned at the U.S. Attorney’s office for the Northern District of Illinois, where he handled both civil and criminal issues. He also interned for a judge on the U.S. Court of Appeals for the Seventh Circuit, which gave him a unique vantage of seeing the issues from the court’s perspective.