Israel Rosell v. VMSB, LLC
23-12658
11th Cir.Apr 15, 2024Background
- Israel Rosell and Roberto Gonzalez worked as a bartender and server for Gianni’s, a luxury Miami Beach restaurant owned by VMSB, LLC.
- Customers at Gianni’s were automatically charged a 20-22% service fee on all bills, with 90% of this fee distributed to front-of-house employees and 10% retained by the restaurant.
- Employees’ hourly rates were below the federal and state minimum wage, but with service charge distributions included, pay exceeded the minimum wage.
- Rosell and Gonzalez sued VMSB under the Fair Labor Standards Act (FLSA) and Florida Minimum Wage Act, claiming the service charge was improperly treated as a tip, not a service charge, and thus should not count towards minimum wage obligations.
- The district court granted summary judgment to VMSB on the minimum wage claims, and the overtime claim was settled and later dropped; the case is now on appeal after procedural deficiencies were cured.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the automatic service charge is a tip or a service charge under FLSA | It is a tip because it is reported as such for tax purposes and sometimes waived | It is a mandatory service charge as per prior 11th Cir. precedent | It is a service charge, not a tip; can offset wage obligations |
| Relevance of how service charges are reported on tax returns | Tax treatment determines its status for FLSA purposes | Tax returns are irrelevant to FLSA calculation | Tax reporting is irrelevant; customer discretion is determinative |
| Effect of occasional waivers of the service charge | Optional waivers make the charge non-mandatory, so it is a tip | Occasional waivers by management are irrelevant to its mandatory status | Charge is still mandatory; waivers do not change the classification |
| Applicability of 11th Cir. precedent (Compere) | Precedent is distinguishable due to factual differences and tax record specifics | Compere is directly controlling; facts are materially identical | Compere is binding; precedent controls outcome |
Key Cases Cited
- Compere v. Nusret Miami, LLC, 28 F.4th 1180 (11th Cir. 2022) (held that a mandatory service charge applied to all bills is not a tip and can be counted towards minimum wage obligations)
- Rudolph v. United States, 92 F.4th 1038 (11th Cir. 2024) (addresses what constitutes dicta versus binding precedent in prior decisions)