Opinion · Court of Appeals for the Fifth Circuit
Bruce Barcellona, Cross-Appellants v. Tiffany English Pub, Inc., D/B/A Tgi Friday's, Cross-Appellee
597 F.2d 464
- Type
- Opinion
- Court
- Court of Appeals for the Fifth Circuit
- Jurisdiction
- Federal
- Date
- 1979-06-20
- Topic
- general
affirming in part a decision of the district court which adopted the findings of special master appointed to compute damages in a case arising under the FLSA | employees were entitled to receive from then-employer the full minimum wage where they were not allowed to keep all of the tips they received | “the employer has the ultimate burden to prove compliance with the tip credit notice requirement[.]” | “We do not believe an employer may rely on ignorance alone as reasonable grounds for believing that its actions were not in violation of the Act.” | restaurant failed to meet its burden of demonstrating a valid tip pooling agreement | burden of proving amount of tips received is on employer
Citator
- Cited by
- 70 opinions
BARCELLONA v. TIFFANY ENGLISH PUB,597 F.2d 464(5th Cir. 1979)
BRUCE BARCELLONA ET AL., PLAINTIFFS-APPELLEES, CROSS-APPELLANTS, v. TIFFANY
ENGLISH PUB, INC., D/B/A TGI FRIDAY'S, DEFENDANT-APPELLANT, CROSS-APPELLEE.
No. 77-1892.
United States Court of Appeals, Fifth Circuit.
June 20, 1979.
Page 465
Thomas W. Tardy, III, Kenneth A. Rutherford, Jackson, Miss., for plaintiffs-appellees, cross-appellants.
Before TUTTLE, TJOFLAT and HILL, Circuit Judges.
[2] A crucial issue in the trial of this case related to the ownership of tips. The restaurant contended that it had a valid agreement with the waiters thatalltips belonged to the restaurant, to be surrendered to it to count towards satisfying its obligation to pay the waiters a minimum wage. In practice, however, the system in no way resembled that described by the restaurant. Although the restaurant introduced "acknowledgments" apparently signed by some of the waiters which attempted to create the impression that thePage 467waiters were employed by TGI Friday's on the condition and with the understanding that all of their tips belonged to the employer, there was substantial evidence that the waters had never heard of such a policy or of any agreement that they were to relinquish ownership of their tips.1The testimony of the restaurant's witnesses and the testimony presented by the waiters reveals such vast conflicts that only one version could have been accepted. The trial court, having the opportunity to observe the demeanor of the witnesses and exhaustively review the records of the restaurant, decided that "the evidence. . . . has not shown or convinced the Court by a preponderance that the employer and these employees had any agreement or understanding as to such disposition of these tips. . . ." Although there was evidence going both ways, the restaurant did not meet the formidable burden of upsetting the district court's findings. F.R.Civ.P.52(a).Chaney v. City of Galveston,368 F.2d 774(5th Cir. 1966).2
[3] If there was not agreement as to ownership, then the tips were the property of the recipient.Williams v. Jacksonville TerminalCo.,315 U.S. 386,397,62 S.Ct. 659,86 L.Ed. 914(1940). Prior to May 1, 1974, the Fair Labor Standards Act stated with respect to tips:
In determining the wage of a tipped employee, the amount paid such employee by his employer shall be deemed to be increased on account of tips by an amount determined by the employer, but not by an amount in excess of 50 per centum of the applicable minimum wage . . . .
[4]29 U.S.C. § 203(m). Thus, if no agreement existed transferring ownership of tips, the tips were by law the property of the waiters who received them, and those tips could be credited towards no more than fifty percent of the minimum wage. Therefore, the district court correctly interpreted this statute to require that the waiters be compensated at the rate of fifty percent of the then minimum wage for all hours worked as tipped employees prior to May 1, 1974.3
[5] On May 1, 1974, the Act was amended to place the burden of proving the amount of tips received on the employer for purposes of allowing the fifty percent tip credit. To implement this policy, the following sentence was added to § 203(m):
[The fifty percent tip credit] shall not apply with respect to the tipped employee unless (1) such employee has been informed of this subsection, and (2) all tips received by such employee have been returned by the employee . . . .
[6] Since the parties agreed by stipulation that the restaurant did not inform the waiters of any tip credit after this change in the law, and since it is undisputed that far less than all tips received were returned by thePage 468employees, the district court properly found that the employees were entitled to the full minimum wage for every hour worked after May 1, 1974.See Richard v. Marriott Corp.549 F.2d 303(4th Cir. 1977)4
[7] The district court's ruling on the issue of liquidated damages is more troublesome. The waiters contend that based on the facts as found by the district court in its decision on the question of liability, they are entitled to liquidated damages as a matter of law. We agree.
[8] Section 16(b) of the FLSA,29 U.S.C. § 216(b), provides that "any employer who violated the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages . . . and in an additional equal amount as liquidated damages." The language of the statute is mandatory, and until 1947 district courts had absolutely no discretion; if the employer violated the Act, he paid back wages and an equal amount in liquidated damages. In 1947, Congress passed the Portal-to-Portal Act, Section 11 of which does permit the district court, "in its sound discretion," to award a lesser amount of liquidated damages or none at all, "ifthe employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act of 1938, as amended." Section 11,29 U.S.C. § 260(emphasis added).
[9] The district court found on the liability issue that "the evidence in this case. . . shows by a preponderance of the evidence that there has been a flagrant violation by the employer of the requirements of the Fair Labor Standards Act," but the rather surprisingly changed its tone one year later in its final order adopting the special master's recommendation to deny liquidated damages. In its subsequent opinion, the court made no specific finding of good faith or reasonable belief in the legality of the acts of the restaurant but merely stated:
This Court is convinced from the facts and circumstances and the background of the owners that there was nothing defiant intended by the defendant, but it simply did not know and did not understand exactly what it was to do with respect to these records on these waiters.
[10] We understand the language of section 11 of the Portal-to-Portal Act to impose upon the employer who would escape the payment of liquidated damages a plain and substantial burden of persuading the court by proof that his failure to obey the statute was both in good faith and predicated upon such reasonable grounds that it would be unfair to impose upon him more than a compensatory verdict.See Rothman v. PublickerIndustries,201 F.2d 618,620(3d Cir. 1953). On the present record, the restaurant never seemed to attempt to meet the burden. The only indication we can glean from the record concerning Friday's good faith and the reasonableness of its belief in the legalities of its actions is the restaurant's contention that the owners were merely a couple of farmers, acting for the first time as employers, with blind faith in their franchisor. Perhaps this argument was the basis for the district court's decision to deny liquidated damages due to nondefiant ignorance. This is curious because the court's conclusory justification for its denial of liquidated damages is so totally inconsistent with its earlier finding of a willful and flagrant violation of the FLSA.
[11] In addition to our concern over the inconsistency between the finding of a flagrant violation and yet a later denial of liquidated damages based on nondefiant ignorance, we also doubt the validity of ignorance as a defense to liability for liquidated damages under Section 11. We do not believe an employer may rely on ignorance alone asreasonablegrounds for believing that its actions were not in violation of thePage 469Act.See Hooper v. Acme Car Truck Rentals, Inc.,47 CCH Lab.Cas ¶ 31,404 (N.D.Ga. 1963),aff'd on other grounds,331 F.2d 442(5th Cir. 1964). Further, we feel that good faith requires some duty to investigate potential liability under the FLSA.See Leister v. Multi-Systems, Inc.,37 CCH Lab.Cas. ¶ 65,425 (S.D.N.Y. 1951). Even inexperienced businessmen cannot claim good faith when they blindly operate a business without making any investigation as to their responsibilities under the labor laws. Apathetic ignorance is never the basis of a reasonable belief.
[12] Finally, we must reverse the district court's award of prejudgment interest. This court has held inForemost Dairies,Inc. v. Ivey,204 F.2d 186(5th Cir. 1953), that interest as such is not recoverable under this statute.
[13] For these reasons, we reverse that part of the district court's decision which denied liquidated damages and awarded prejudgment interest, but we affirm the decision in all other respects. On remand, the district court should amend its judgment accordingly. The court should also consider supplementing the award of counsel fees to correspond with any adjustment in the final judgment on remand and to pay for the prosecution of the appeal.
[14] AFFIRMED in part, REVERSED and REMANDED in part.
[17] We are dealing with the law establishing minimumwages.The provisions with which we have wrestled have nothing to do with assuring minimumearningsfor the waiters.29 U.S.C.A. § 203(m) provides that a restaurant owner or operator must pay to each waiter 50 percent of the applicable minimum wage irrespective of how much earnings may be actually realized in tips. Thus, if after furnishing the capital, operating expenses, and know-how, and after assuming the business risks involved in establishing a restaurant, someone succeeds to the extend that the restaurant's waiters earn far in excess of minimum wages, that entrepreneur must still pay a penalty for providing this employment equal to 50 percent of what the minimum wage would be if the waiters were not receiving any tips. As I view it, this expresses the conclusion by our Congress that an entrepreneurs ought to be discouraged from providing job opportunities. The waiters in the case investigated here were young people for whom it is said that job opportunities are not great in our present economy. There must be some wisdom in discouraging the creation of good paying jobs for those people under these circumstances, or surely the Congress would not have enacted such legislation. I must confess to my own limitation which prevents me from fully understanding the wisdom inherent in this policy.
[18] Nevertheless, it is the law. Therefore, I concur.
- The records of the restaurant were inaccurate, incomplete, and of very little value in attempting to determine the actual practice employed by the restaurant. The testimony of the witnesses paints a picture of a disorganized and confused management. Several waiters testified that they were specifically told they workedOnlyfor their tips. Although most waiters understood that it was the policy to require them to turn over some of their tips generally equal to the number of hours worked multiplied times the minimum wage, which they, in turn, would get back in the form of a paycheck withholding income and Social Security taxes, even this practice was not rigidly followed. Further, the waiters were not required to report any hours worked on double shifts, substitute shifts, or as shift leaders as an inducement to perform these roles. ↩
- Since we affirm the district court's finding that no agreement existed regarding ownership of tips, we do not reach the question of the validity of such agreements in face of the 1966 amendments to § 3(m) of the Act.29 U.S.C. § 203(m) 1966.compareS.Rep. No. 93-690, 93rd Cong., 2d Sess. at 43andMelton v. Roundtable Restaurant, Inc.,20 Wage and Hour Cases 532, 67 CCH Lab.Cas. ¶ 32.630 (N.D.Ga. 1971),withS.Rep. No. 1487. 89th Cong., 2d Sess. at 12and Hodgson v. Bern's SteakHouse, Inc.,20 Wage and Hour Cases 262 (M.D.Fla. 1971). ↩
- The court allowed the waiters damages for full minimum wage for those hours worked in a nontipped capacity, such as laying tables, cleaning up, and other duties preparing the restaurant for business, for which they had received no compensation.SeeHodgson v. Frisch's Dixie, Inc.,469 F.2d 82(6th Cir. 1972). ↩
- We have considered the restaurant's various challenges to the Special Master's computations and find them to be without merit. ↩