Cases & Deals

WHM LLC obtains summary judgment on Florida wage-hour class action

Clients WHM LLC (LXR Luxury Resorts)

On December 9, 2013, Jones Day prevailed on summary judgment on behalf of WHM LLC (LXR Luxury Resorts), a nationwide owner and operator of hotels, dismissing a putative wage class action for unpaid wages under the Florida Minimum Wage Law in its entirety. In reviewing the threshold issue before class certification, the Court analyzed whether the hotel's compensation structure for servers in restaurants and bars, which included both an hourly rate and a portion of a service charge, failed to satisfy the Florida minimum wage law. The decision represents a key victory against the Plaintiffs' bar attempt to expand wage-hour class actions in Florida under state law. Plaintiffs argued that payments from the service charge could not be used to satisfy minimum wage obligations because the hotel's service charge was not a bona fide "service charge" but a disguised tip. In claiming the service charge was not really a service charge, Plaintiffs argued that it was not "compulsory" because the Defendant made exceptions and removed the service charge at times. Plaintiffs also argued the service charge was not really a service charge because employers must properly account for service charges as "gross receipts." The Court sided with Defendant and rejected both arguments. First, the Court held that "[w]here the employer collects and records the charge in its books and records, it qualifies as gross receipts." The Court found that the undisputed material facts showed that the Defendant collected the service charges and deposited them into its accounts before distributing a portion of them to the Plaintiffs, and "the 18 percent service charge qualified as gross receipts under the Fair Labor Standards Act and generally accepted accounting principles." Second, the Court found that, even if the service charge is excused at times, this did not change the mandatory nature of the charge. The Court noted that the hallmark of a compulsory service charge is that it is a fixed percentage levied by the establishment on its customers, and here, the point of sale system automatically added an 18 percent service charge to orders. Despite a dispute among witnesses as to the nature of exceptions, the Court also found significant that the sampling of register receipts overwhelmingly demonstrated that the service charge was mandatory. Having agreed with Defendant's position as to both factors, the Court found that the service charge was in fact not a gratuity but a commission, and therefore properly satisfied the minimum wage obligations. The Court then denied the pending motion for class certification as moot.

Blevins et al. v. WHM, LLC, Case No. 50 2012 CA 006462 (15th Jud. Cir. of Fl.)

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