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Workers Slam TGI Friday's Bid To Shake Minimum Wage Suit

Law360— Igor Kossov

A putative class suing T.G.I. Friday's owner Carlson Restaurants Inc. for allegedly making tipped employees perform unpaid side work blasted the company for "picking off" plaintiffs with individual settlement offers, in the hopes of killing the suit, the plaintiffs' attorneys wrote in a letter to New York federal judge Analisa Torres on Thursday.

The company sent a letter to Judge Torres in December, in advance of its motion to dismiss the case, saying that many of the named plaintiffs in the case have accepted settlement offers in principle. Carlson Restaurants wrote that the court lacks subject matter jurisdiction because the plaintiffs' claims will be mooted. The plaintiffs' attorneys replied on Thursday that a motion to dismiss would be futile.

"To allow defendants’ pick-off efforts to succeed would undermine the important rights plaintiffs seek to protect and allow defendants to duck millions of dollars of liability to thousands of minimum-wage restaurant workers," the plaintiffs' attorneys wrote. "On the other hand, an order granting plaintiffs’ conditional certification motion would end defendants’ desperate avoidance strategies and force them to defend thousands of low-wage workers’ claims on their merits."

In Thursday's letter, the plaintiffs' counsel said that the defendants offered 19 workers more than $417,000 in both regular settlements and Rule 68 offers. A Rule 68 offer allows a defendant to offer opponents a deal, to allow judgment on specified terms, 14 days before a trial date.

The plaintiffs' counsel said that there are currently five opt-in plaintiffs who didn't get settlement offers, and nine of the plaintiffs who accepted settlements in principle haven't gotten draft settlement agreements yet, making their claims still live. The letter also disputed that the individual settlement offers give plaintiffs more than they could have recovered in a class action.

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The dispute began in April when Friday's employee Jamel Flood and three other named plaintiffs sued to challenge the tipping policy. Flood, Ira Heaston, Isaac Heaston and Josephine Diaz seek to represent a nationwide class of tipped employees that includes servers, bartenders and hosts who have worked at Friday's since April 17, 2011.

The plaintiffs contend they are entitled to the full minimum wage — as opposed to the lesser minimum wage for tipped workers — when doing side work.

The tip credit at issue refers to a portion of FLSA that the plaintiffs say permits certain tipped employees to receive part of the minimum wage in direct wages from the employer and part through tips received by the employee.

Among their claims, the workers contended that an employee must be paid the full minimum wage absent the tip credit for the time they spend performing nontipped duties if those tasks take up more than 20 percent of the employees' time.

But Friday's argued that the plaintiffs did not specifically identify how much time in excess of 20 percent or during what time periods they spent doing side work.

"Defendants respectfully request the court dismiss [the count] to the extent it relies upon the 20 percent rule as a basis for invalidating the tip credit available to employers of tipped employees," Friday's had said.

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The restaurant chain said the 20 percent rule came about as part of a guidance issued in 1988 by the U.S. Department of Labor in its handbook given to its internal investigators. Since then, the agency has vacillated on the enforceability of the rule, and the DOL's shifting stances have led to conflict in the way the rule has been interpreted by various federal and appellate courts, Friday's motion said.

The DOL's handbook also provides "no explanation, no analysis, no justification and no indication of special expertise" by the agency to support a rule which “strays far beyond the statute and the regulations,” Friday's said.

On the same day Friday's motion was filed, the plaintiffs filed for preliminary class certification, saying that granting the motion will allow potential opt-in plaintiffs to be notified and given an opportunity join the action.

More named plaintiffs came forward to join the case throughout the course of the year.

The plaintiffs are represented by Justin M. Swartz and Sally J. Abrahamson of Outten & Golden LLP and by Joseph A. Fitapelli, Brian S. Schaffer and Frank J. Mazzaferro of Fitapelli & Schaffer LLP.

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The case is Jamel Flood et al. v. Carlson Restaurants Inc. et al., case number 1:14-cv-02740, in the U.S. District Court for the Southern District of New York.