A lawsuit alleging that waiters at Park Avenue Restaurant were required to share tips with tip-ineligible employees was given the green light to move forward as a class action, according to the September 26, 2011 decision from the United States Court of Appeals for the Second Circuit. The restaurant argued that there was an inherent conflict for waiters to bring a "collective action" under the Fair Labor Standards Act in the same lawsuit as a Rule 23 class action alleging New York state labor law claims. The Court of Appeals disagreed, noting that claims under the FLSA and New York Labor Law usually revolve around the same set of facts and therefore may be brought together. The Court explained that "under the FLSA an employer may not avail itself of the tip credit if it requires tipped employees to share their tips with employees who do not 'customarily and regularly receive tips.'" Thus, an employer loses its entitlement to the tip credit where it requires tipped employees to share tips with employees who do not provide customer service or managers. Under Section 196-d of the New York Labor Law, employers are prohibited from requiring tipped employees to share tips with non-service employees or managers. The Court noted that "by its plain terms, Section 196-d bars employers from requiring tipped employees to share tips with employees who do not perform direct customer service – i.e., employees who are not 'busboys or similar employees' and employees who are managers or agents of the employer." Thus, the Court concluded that the FLSA and New York Labor Law bar the same types of tipping practices, and actions that violate the tip pooling provision of 29 U.S.C. § 203(m) may also violate Section 196-d.
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