Romero v. Top-Tier Colorado LLC
849 F.3d 1281
10th Cir.2017Background
- Romero worked as a server for Top-Tier Colorado LLC and was paid the reduced tip-credit cash wage (defendants admit $4.98/hr).
- Defendants used employees’ tips to make up the difference to the federal minimum wage under the FLSA tip-credit framework, 29 U.S.C. § 203(m).
- Romero alleges she performed substantial non-tipped work (both unrelated tasks and related but nontipped tasks exceeding 20% of her workweek) and therefore was not tip-credit eligible for those hours.
- She contends defendants should have paid at least $7.25/hr for the non-tip-eligible hours, and that treating her tips as wages for those hours violated § 206(a).
- The district court dismissed her complaint under Rule 12(b)(6), relying on Klinghoffer to hold that total weekly pay (cash + tips) averaged over hours worked, if ≥ minimum wage, defeats a § 206(a) claim.
- The Tenth Circuit reversed and remanded, concluding the district court failed to decide whether defendants were entitled to treat tips as wages under § 203(m) before applying the Klinghoffer rule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an employer complies with § 206(a) when an employee’s weekly tips + cash wages average at least $7.25/hr even if employer took the tip credit improperly for some hours | Romero: Employer cannot treat tips as "wages" for § 206(a) purposes if the tips were not properly creditable under § 203(m); thus she states a claim | Defendants: Substance matters — if employee’s total weekly pay (tips + cash) averages ≥ minimum, there is no § 206(a) violation regardless of tip-credit technicalities | Court: Rejected defendants’ reading; threshold question is whether employer may treat tips as wages under § 203(m). District court must decide that first; remanded |
| Whether Klinghoffer controls dismissal where tip-credit issues are alleged | Romero: Klinghoffer didn’t address § 203(m) tip-credit limits (it predated that provision); it’s inapplicable where employer’s classification of tips as wages is contested | Defendants/District Court: Klinghoffer permits dismissal because complaint does not allege weekly pay averaged below minimum | Court: Klinghoffer’s averaging rule cannot be applied before determining what counts as "wages paid" under § 203(m); district court erred by skipping that inquiry |
| Whether tips earned can substitute entirely for employer-paid wages under the FLSA | Romero: § 203(m) requires an employer cash payment (a minimum cash wage) and limits when tips may be used as wages | Defendants: Purpose of FLSA satisfied if worker receives at least the minimum in total pay, even if mostly tips | Held: Court agrees with Romero; tips do not eliminate employer cash-wage obligations and § 203(m) constrains when tips count as wages |
| Procedural disposition: whether district court erred by dismissing before resolving tip-credit eligibility | Romero: District court should have resolved tip-credit eligibility under § 203(m), DOL regs, and FOH before dismissal | Defendants: Dismissal appropriate because complaint lacks an allegation that weekly averages fell below $7.25 | Held: Reversed and remanded for district court to determine tip-credit eligibility first |
Key Cases Cited
- Fast v. Applebee’s Int’l, Inc., 638 F.3d 872 (8th Cir.) (discusses tip-credit limits and DOL guidance on related vs. unrelated duties)
- United States v. Klinghoffer Bros. Realty Corp., 285 F.2d 487 (2d Cir.) (adopts weekly-averaging rule for minimum-wage compliance)
- Trejo v. Ryman Hosp. Props., Inc., 795 F.3d 442 (4th Cir.) (explains use of employee tips as wages under § 203(m))
- Schaefer v. Walker Bros. Enters., 829 F.3d 551 (7th Cir.) (acknowledges employer must pay some cash wage regardless of tip amounts)
- Doty v. Elias, 733 F.2d 720 (10th Cir.) (rejects argument that employee tips alone satisfy employer minimum-wage duties)