Lewis Brisbois Secures Appellate Victory on Behalf of Celebrity Restaurateur in FLSA Matter of First Impression

Miami, Fla. (March 21, 2022) - Fort Lauderdale, Miami, and Tampa-based Partner Jonathan Beckerman recently secured a significant appellate victory on behalf of celebrity restaurateur Nusret Gökçe (also known as "Salt Bae") in a matter of first impression when the U.S. Court of Appeals for the Eleventh Circuit determined that the client and his company did not violate the Fair Labor Standards Act (FLSA) when mandatory service charges included in all bills were used to cover minimum and overtime wages for restaurant employees.

In the underlying matter, the plaintiffs were a class of almost two dozen front-of-the-house employees at Mr. Gökçe's Miami steakhouse. The employees claimed that the FLSA was violated when they were paid exclusively via mandatory service charges applied to each guest’s bill. They filed a contentious and high-profile collective action lawsuit seeking to recover unpaid wages, arguing that the service charges were actually tips and thus could not be used to compensate them. Mr. Beckerman led a team of Lewis Brisbois attorneys that subsequently secured summary judgment and class decertification on behalf of Mr. Gökçe and the company. The plaintiffs appealed.

As reported in the Law360 Employment Authority article "11th Circ. Says Salt Bae's 'Service Charge' Is Not a Tip," and following oral argument and extensive briefing on the issue, the Eleventh Circuit determined that: (1) an 18% mandatory service charge that was automatically included in all guest bills did not constitute a gratuity under the FLSA because customers had no discretion to pay it; (2) the service charge was properly used to meet the restaurant's minimum wage and overtime obligations under Section 207(i) of the FLSA (the “Retail Sales or Service” exemption), noting that this section frees employers from paying overtime wages if employees receive at least one and one-half times the minimum hourly wage for every hour worked and more than half of the employees' compensation for a representative period constituted commissions on goods or services; and (3) collected service charges need not be reported as sales revenue or taxed accordingly to apply the exemption enumerated in Section 207(i). Accordingly, because the service charge was properly considered part of the workers' regular pay and not a tip, the panel unanimously upheld the lower court's grant of summary judgment.

In discussing the Eleventh Circuit's decision, Mr. Beckerman noted, "[t]his was a case of first impression. Through our efforts, we helped to create precedent that service charges are not tips. We were also successful in having the appellate court identify the tax implications of service charges, which had been an unsettled issue as well. The Eleventh Circuit victory is a watershed moment for restaurateurs and other hospitality venues within the Circuit. Business owners can more confidently utilize service charges to compensate staff and now have guidance regarding the associated tax consequences and how they impact the legal sufficiency of this pay practice.”

Atlanta Partner Joelle C. Sharman worked with Mr. Beckerman at both the trial and appellate levels of this case.

Mr. Beckerman is a member of Lewis Brisbois' Labor & Employment Practice. A go-to resource in complex employment matters, he leverages his legal experience and deep subject matter knowledge to achieve successful results on behalf of management-side clients. Mr. Beckerman's proactive counsel helps employers identify and mitigate workforce risks, particularly for companies in the hospitality, retail, construction, manufacturing, and health/wellness sectors.

You may read the full Law360 article here (subscription may be required).

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