670 F.Supp.3d 563
M.D. Tenn.2023Background
- Plaintiff Connor Crowell brought an FLSA collective action on behalf of current and former front-of-house (FOH) employees at six Nashville restaurants operated by M Street entities; conditional certification was granted for FOH non‑managerial employees.
- Most opt‑in plaintiffs were paid sub‑minimum straight wages under a tip credit (often $2.13/hr); defendants paused use of the tip credit during much of the pandemic (May 2020–Apr 2021) and resumed thereafter.
- Plaintiffs amended to add CEO/owner Chris Hyndman and management company MSEG, LLC; original restaurant defendants had stipulated they were a single employer.
- Plaintiffs sought partial summary judgment on several discrete issues: Hyndman/MSEG employer status, tip‑credit notice and tip control, overtime calculation, compensability of study time, and entitlement to liquidated damages.
- Defendants challenged those points and moved for partial summary judgment on limited issues (e.g., no tip‑credit during May 2020–Apr 2021, proper tip pools, no unlawful retention of event service charges, no willfulness).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Liquidated damages under FLSA | Defs waived good‑faith defense; plaintiffs entitled to liquidated damages if they prevail | N/A (defendants withdrew the defense) | Granted: defendants withdrew good‑faith defense; plaintiffs entitled to liquidated damages if they prevail |
| Hyndman individual liability as "employer" | Hyndman had ownership, operational control, set pay/policy and ultimate authority | Hyndman delegated day‑to‑day functions and thus is not an FLSA employer | Granted: court finds Hyndman is an employer under the FLSA |
| MSEG liability / single‑employer status | MSEG centrally controlled HR, policies, training, and had interrelated offices with restaurant entities | MSEG lacked ownership of restaurant LLCs and separate finances | Granted: MSEG and restaurant entities constitute a single employer (material factors satisfied) |
| Tip‑credit notice — pre‑pandemic | No adequate §203(m)/29 C.F.R. §531.59(b) notice was given before pandemic; plaintiffs entitled to tip‑credit forfeiture | Managers gave verbal notice and DOL posters were posted | Granted for plaintiffs: defendants cannot claim tip credit pre‑pandemic (posters + vague verbal notice insufficient) |
| Tip‑credit notice — post‑pandemic | Same defect applies after resumption | Defs distributed written Tipped Employee Policy and Compensation Structures plus DOL posters | Denied for plaintiffs: material factual dispute exists; written materials + posters could satisfy notice post‑pandemic |
| Employer control of tips (rounding/using employee cash) | Defendants had a rounding practice that forced servers to use tips to make customer change | Rounding was informal/convenience; cash sales rare; change available; no written policy | Denied for plaintiffs: material factual disputes about existence, scope, frequency, and impact of rounding practice |
| Overtime miscalculation effect on tip credit | Miscalculated overtime could invalidate tip credit | Overtime error creates overtime liability but does not revoke tip credit | Denied for plaintiffs: court holds overtime underpayment does not automatically forfeit tip credit; plaintiffs may recover unpaid overtime separately |
| Compensability of off‑clock study time | Time spent studying for required menu/tests is compensable work; plaintiffs seek ruling as matter of law | Studying at home was voluntary/not required or employer lacked knowledge; disputes over whether employer knew employees studied off‑clock | Denied for plaintiffs: material factual disputes exist re: whether off‑clock studying was required or known by employer |
| Inclusion of non‑tipped employees in tip pools (barbacks, silverware rollers) | Plaintiffs say barbacks and silverware rollers (no customer contact) were included improperly | Defendants say barbacks/bussers perform customer‑facing support and were properly pooled; written structures exclude certain roles post‑2021 | Denied in part: material disputes exist (barbacks may be tipped; factual dispute over silverware rollers); no SJ for defendants |
| Large‑party service charges | Plaintiffs allege unlawful retention of gratuities on events | Defendants show 22% service charge split (18% tip to servers; 4% service to admin) and cite regulation that compulsory service charges are not tips | Granted for defendants: no FLSA claim for retention of the 4% service charge; plaintiffs not pursuing these claims further |
| Willfulness (three‑year statute) | Prior lawsuit (Fenwick) and notice about similar practices make defendants reckless/willful | Defendants argue prior case settled early, limited investigation, not dispositive | Denied for defendants: material factual issues exist whether defendants acted willfully; willfulness remains triable |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (summary judgment standard)
- Dole v. Elliott Travel & Tours, Inc., 942 F.2d 962 (6th Cir. 1991) (corporate officers with operational control may be FLSA employers)
- Donovan v. Agnew, 712 F.2d 1509 (1st Cir. 1983) (operational control and ownership support personal liability)
- Irizarry v. Catsimatidis, 722 F.3d 99 (2d Cir. 2013) (individual employer liability requires control over employment‑related operations)
- Swallows v. Barnes & Noble Book Stores, Inc., 128 F.3d 990 (6th Cir. 1997) (single‑employer/integrated‑enterprise factors)
- Kilgore v. Outback Steakhouse, 160 F.3d 294 (6th Cir. 1998) (who ‘‘customarily and regularly receive tips’’ for tip‑pool eligibility)
- Myers v. Copper Cellar Corp., 192 F.3d 546 (6th Cir. 1999) (employer bears burden to prove entitlement to tip credit)
- Dep’t of Labor v. Cole Enters., 62 F.3d 775 (6th Cir. 1995) (tip‑credit and minimum wage principles)
- Solis v. Laurelbrook Sanitarium & Sch., Inc., 642 F.3d 518 (6th Cir. 2011) (economic‑reality test for employment relationships)
- McLaughlin v. Richland Shoe Co., 486 U.S. 128 (U.S. 1988) (definition of willfulness under the FLSA)