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Supreme Court allows suits over tip-pooling

A sharp division among the Supreme Court bench is illuminated in Burt v. Rackner, Inc., decided Oct. 11, which recognized a private cause of action for employees who are fired for refusing to acquiesce in an employer’s requirement to share gratuities.

It said that the plain language of the Minnesota Fair Labor Standards Act, Minn. Stat. § 177.27, subd. 8, expressly provides such a cause of action and affirmed the Court of Appeals.

The 16-page majority opinion, written by Justice Natalie Hudson, was met with a 13-page dissent from Chief Justice Lorie Gildea, joined by Justice G. Barry Anderson, who said that the majority “surprisingly holds that the Legislature abrogated the common-law employment-at-will rule by express wording.”

Consequences

Plaintiff Todd Burt was employed as a bartender at Bunny’s Bar & Grill for nearly seven years. He was told to give more of his tips to the bussers or there would be “consequences.”  He did not and was subsequently fired.  A Hennepin County District Court judge dismissed the complaint but the Court of Appeals reversed.

The Supreme Court affirmed the Court of Appeals based on Minn. Stat. sec. 177.27, subd. 8, which states that an employee may sue for any violation of the Minnesota Fair Labor Standards Act. The act prohibits an employer from requiring an employee to share gratuities.

The court and the parties agreed that the MFLSA is unambiguous when it says “No employer may require an employee to contribute or share a gratuity.” The provision also states that although an employee may voluntarily agree to share gratuities, the agreement “must be made by the employees without employer coercion or participation.”

Threatening to fire an employee for failure to share tips imposes a requirement on the employee and, at the very least, constitutes coercion by the employer, Hudson wrote.

It rejected the defendant’s argument that although the statute prohibits employers from requiring or coercing employees to share gratuities, it allows employers to terminate employees who refuse.

“Under Rackner’s interpretation, an employer would violate the MFLSA only when its unlawful threat actually compels compliance by the employee. But nothing in the statute states that the employee must acquiesce in the gratuity-sharing mandate for a violation to occur. To the contrary, the statute is violated once the employer ‘require[s]’ an employee to share a gratuity, whether the employee does so or not,” the court said.

Under the defendant’s reasoning, the court continued, employers could lawfully circumvent other MFLSA protections by terminating employees who do not follow the employers’ illegal requirements.

Suit allowed for any violation

The court went on to reject the argument that the lawsuit fails because the statute does not expressly provide a cause of action for wrongful discharge arising out of an employee’s refusal to share tips. The defendant argued that when the Legislature creates an exception to the common-law employment-at-will doctrine, it always does so explicitly by prohibiting, or granting a cause of action for, discharge, such as in other provisions of the MFLSA or other statutes forbidding wrongful discharge.

The court recognized that the statute does not use the words “wrongful discharge” in connection with the sharing of tips. But it said that subdivision 3’s prohibition on firing an employee for refusing to share tips and subdivision 8’s broad grant of a private cause of action for any violation of the statute authorizes an employee’s lawsuit.

The court addressed the dissent’s argument that the common law of employment at will controls. It said that the Legislature may regulate and modify the at-will doctrine and that it did so in the MFLSA.

“Burt does not argue for the creation of a new cause of action under this common-law exception; rather, he claims that the MFLSA itself already contains a cause of action for an employee who is terminated for failing to share gratuities. Indeed, Burt admits that he has recourse only if we decide that the MFLSA allows an employee to sue after being terminated for refusing to share tips,” said the court.

It recognized that although the MFLSA does not explicitly prohibit or punish wrongful discharge with regard to tip sharing, it does expressly prohibit or punish wrongful discharge in other contexts.  It also recognized that other statutes have explicitly prohibited discharging employees or specifically provided a cause of action for wrongful discharge.

But it found that the statute still created a private cause of action because it contains no language prohibiting an employee from suing an employer for wrongful discharge resulting from the employee’s refusal to share tips and unambiguously allows an aggrieved employee to sue for any violation of the statute.

In a footnote, it responded to the dissent.

“The dissent also mischaracterizes our holding by stating that (1) we conclude that Minn. Stat. § 177.24, subd. 3, abrogates the common-law employment-at-will rule, and (2) we are essentially ‘using the remedies provision to expand the scope of actionable violations under the MFLSA,’ implying that we reach this decision by relying on the remedies provision in the MFLSA. To the contrary, our position is that Minn. Stat. § 177.27, subd. 8—not Minn. Stat. § 177.24, subd. 3—expressly provides a cause of action that abrogates the common-law rule here. And our conclusion stands on a firm foundation: the broad and all-inclusive language of Minn. Stat. § 177.27, subd. 8—not simply the remedies available under Minn. Stat. § 177.27, subd. 7.

The court also refuted the defendant’s argument that other MFLSA provisions that explicitly prohibit discharge clearly indicate that the Legislature only meant to prohibit discharge when plainly stated in specific provisions.

It also said that while the employer may be compelled to pay restitution in the amount of the gratuities diverted as an administrative remedy, that provision does not foreclose an employee lawsuit.

Concluding, the court refuted the dissent’s assertion that it is usurping the policymaking role of the Legislature by rewriting the statute.

“Burt has a cause of action under the MFLSA solely because Minn. Stat. § 177.27, subd. 8, expressly provides one. If the Legislature wants to change the law and make a different policy determination, it can do so. Our responsibility is to interpret and follow the statute’s plain language, and that is what we have done here.”

Boot-strapping analysis

The dissent said that express wording or necessary implication is necessary for a statute to abrogate the common law. The Legislature knows how to do that, Gildea wrote, and has specifically addressed wrongful discharge in other sections of the MFLSA.

“The majority essentially uses the remedies provision to expand the scope of actionable violations under the MFLSA. The majority’s boot-strapping analysis fails,” the chief justice continued.

Furthermore, “looking at whether there is specific language that expresses the Legislature’s intention to retain the common law rather than an intention to abrogate the common law—represents a drastic shift in our ‘express-wording’ analysis,” Gildea wrote.

The dissent warned that the majority’s rationale will result in the “judicial creation of a cause of action for wrongful discharge for the violation of any MFLSA provision that imposes a requirement on an employer—and indeed, virtually any statutory provision that imposes a requirement on an employer—without the requisite showing of express wording or necessary implication to abrogate Minnesota’s employment-at-will rule.”

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