Justia.com Opinion Summary: The issue before the Supreme Court in this case was whether a resort violated the requirement to pay its employees the minimum wage when it paid wait staff a portion of the standard "service charge" that it added to its banquet customers' bills and treated that portion as a "tip" that satisfied the minimum wage law by qualifying the resort for a tip credit. Allison Hayden-Tidd appealed the superior court's grant of summary judgment to The Cliff House & Motels, Inc. and the denial of her cross-motion for summary judgment. On appeal, Hayden-Tidd contended that the court erred when it rejected her argument that the wage laws required Cliff House to treat its entire banquet staff service charge as a "tip" to be paid to the banquet servers for purposes of the tip credit statute. The Supreme Court agreed that Cliff House's compensation arrangement with its banquet servers did not violate the tip credit statute, and therefore was not a violation of the minimum wage law.
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MAINE SUPREME JUDICIAL COURT
Decision:
2012 ME 111
Docket:
Yor-11-550
Argued:
May 9, 2012
Decided:
September 11, 2012
Panel:
Reporter of Decisions
SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and
JABAR, JJ.
ALLISON HAYDEN-TIDD
v.
THE CLIFF HOUSE & MOTELS, INC., et al.
SAUFLEY, C.J.
[¶1] This appeal involves the interpretation of Maine’s minimum wage
laws. We must determine whether a resort violated the requirement to pay its
employees the minimum wage when it paid its wait staff a portion of the standard
“service charge” that it added to its banquet customers’ bills and treated that
portion as a “tip” that satisfied the minimum wage law by qualifying the resort for
a tip credit. See 26 M.R.S. § 664(2) (2010).1
[¶2] Specifically, Allison Hayden-Tidd appeals from the Superior Court’s
(York County, Brodrick, J.) entry of summary judgment in favor of The Cliff
House & Motels, Inc., and its owner, Kathryn M. Weare (collectively, Cliff House)
and its denial of Hayden-Tidd’s cross-motion for summary judgment.
1
Title 26 M.R.S. § 664 (2010) has been amended since the events at issue. See P.L. 2011, ch. 118,
§§ 3, 4 (effective Sept. 28, 2011) (codified at 26 M.R.S. § 664 (2011)).
2
Hayden-Tidd contends that the court erred when it rejected her argument that the
wage laws required Cliff House to treat its entire banquet service charge as a “tip”
to be paid to the banquet servers for purposes of the tip credit statute. See id.
We agree with the court that Cliff House’s compensation arrangement with its
banquet servers did not violate the tip credit statute and, therefore, did not result in
a violation of the requirement to pay its employees a minimum wage.2 We affirm
the judgment.
I. BACKGROUND
[¶3]
Because of reports that Maine restaurants were occasionally
withholding tips from their wait staffs, particularly when a customer paid by using
a credit card, Maine wage laws now require that the entirety of a tip paid by a food
service customer must be given to the waiter or waitress who waits on that
customer. 26 M.R.S. § 664(2); L.D. 1543, Summary (123rd Legis. 2007); Comm.
Amend. A to L.D. 1543, No. H-370, Summary (123rd Legis. 2007).
[¶4] The question presented by this appeal is whether a “service charge”
paid directly to a resort as part of the fees charged for a banquet, as distinguished
from ordinary, separate seating service, is a “tip” that must be paid entirely to the
2
Hayden-Tidd’s right of action flows ultimately from her claim of unpaid minimum wages, rather
than a stand-alone claim that the tip credit statute has been violated. See 26 M.R.S. § 670 (2011) (stating
that “[a]ny employer shall be liable to the employee or employees for the amount of unpaid minimum
wages” and additionally for liquidated damages, the cost of suit, and reasonable attorney fees); 26 M.R.S.
§ 671 (2011).
3
wait staff at those banquets. For consistency with the statute, we refer to the
waiters and waitresses at the banquets as “servers” to distinguish them from other
Cliff House employees who work at banquets but do not provide direct wait
service to banquet attendees.
[¶5] Hayden-Tidd is a banquet server who worked for Cliff House. On
behalf of herself and all banquet servers employed by Cliff House, she filed a
class-action complaint against Cliff House alleging that it violated Maine’s wage
laws when it took a tip credit for the portion of its standard nineteen percent
service charge that it allocated to its servers. See 26 M.R.S. §§ 621-A, 626-A, 664,
670 (2010). After a period of discovery and before any class certification, Cliff
House moved for summary judgment. Hayden-Tidd opposed the motion and filed
a cross-motion for summary judgment. The court held a hearing on the competing
motions. The court granted Cliff House’s motion for summary judgment and
denied Hayden-Tidd’s cross-motion, holding that, absent a statutory prohibition
against the practice, Cliff House could apply a standard service charge to a banquet
bill and allocate only a portion of that service charge to the servers as tips without
violating Maine’s tip credit statute, 26 M.R.S. § 664(2), because as a matter of law,
“[a]bsent a statutory command, banquet servers are not entitled to 100% of the
banquet service charge.”
4
[¶6] The material facts presented on summary judgment are not in dispute.3
Cliff House operates a resort and spa located in Ogunquit. As part of its business,
Cliff House offers banquet services to its customers.
Cliff House employed
Hayden-Tidd as a banquet server beginning sometime in June 2009.
[¶7] Although not fully developed in the record, banquet services include
group events that the resort caters, such as wedding receptions and business
meetings. Payment is made in advance of, or separate from, the banquet events.
As made clear from the billing forms submitted in conjunction with the motion for
summary judgment, individuals attending a banquet do not pay Cliff House
directly for the food or beverages served during the event.
[¶8] Cliff House adds a nineteen percent service charge to the food and
beverage bill of its banquet customers. Each banquet bill includes a line item that
is denoted as a nineteen percent “service charge.”
Each bill also includes a
separate line item designated for a “gratuity,” although banquet customers rarely
add a gratuity. The service charge is mandatory, and a banquet customer does not
have discretion in paying the charge.
Banquet customers do not receive an
explanation of the service charge or how it is distributed.
3
Although there are ancillary factual disputes, none of the facts material to the application of the law
at issue here are disputed by the parties.
5
[¶9] Service charges are customary in the banquet setting; Cliff House set
its service charge at 19% based on its analysis of its competitors, which it found
normally levied a service charge between 17% and 22%. Cliff House uses the term
“service charge” because it is the customary term for mandatory charges for
banquets.
However, Cliff House also uses the term “service charge” for an
automatic gratuity it levies on food and beverages when individual customers
purchase an all-inclusive package from the resort that includes meals. In the
individual service, non-banquet setting, the service charge is added to the cost of
each meal, and the entire amount of the service charge is treated as a “tip” and is
paid to the individual server who waits on the customer.
[¶10] In the banquet setting, Cliff House pools together the service charges
it collects from different banquets that occur within the same week.
Of the
nineteen percentage points paid, thirteen of those points, approximately two-thirds,
are allocated to banquet servers based on the number of hours each server worked
during that week. The remaining six percentage points are allocated to non-server
banquet staff including, but not limited to, the dining room manager, group room
coordinator, director of group sales, and kitchen employees. Cliff House does not
keep any portion of the banquet service charge.
[¶11] In addition to their share of the banquet service charge for a particular
week, banquet servers are also paid an hourly wage, which would ordinarily be
6
required to be a minimum of $7.50 per hour,4 but for the addition of tips.
Cliff House paid the servers fifty percent of the minimum wage, or $3.75 per hour,
because the servers receive a portion of the service charge pool, which Cliff House
considers to be tips. Pursuant to this compensation arrangement, Hayden-Tidd
earned, on average, $35.09 per hour from June 2009 through October 2009 and
$23.92 per hour from April 2010 through June 2010, after receiving her share of
the service charge pool. There is no dispute that her average hourly wages far
exceeded the minimum wage during those months.
II. DISCUSSION
A.
Standard of Review
[¶12]
Summary judgment provides a procedural mechanism to test the
application of law to facts that are not in dispute. See Cach, LLC v. Kulas, 2011
ME 70, ¶ 8, 21 A.3d 1015. The matter before us is appropriately presented on the
competing summary judgment motions because the parties do not dispute the
operative facts, and the question presented requires the interpretation of a statute
and its application to the facts at hand. We review the interpretation of a statute
de novo to determine whether the successful moving party is entitled to judgment
as a matter of law. Thayer Corp. v. Me. Sch. Admin. Dist. 61, 2012 ME 37, ¶ 4,
4
Pursuant to 26 M.R.S. § 664(2), employers “may consider tips as part of the wages of a service
employee, but such a tip credit may not exceed 50% of the minimum hourly wage.” During the time
period relevant to this case, the minimum wage was increased from $7.25 per hour to $7.50 per hour. See
id. § 664(1).
7
38 A.3d 1263. In the matter before us we must determine whether the court
correctly interpreted 26 M.R.S. § 664(2).
B.
Minimum Wage and the Tip Credit
1.
Construction of the Statute
[¶13] Hayden-Tidd argues, in essence, that because the tip credit statute
mandates that a tip that is automatically included in a customer’s bill or charged to
a credit card must be given to the service employee, the entire amount of the
service charge paid by banquet customers to Cliff House should have been given to
the banquet servers. See 26 M.R.S. § 664(2).5 In other words, according to
Hayden-Tidd, the service charge included in all banquet bills is a tip that cannot be
distributed to any employees other than banquet servers. She contends that when
Cliff House allocated a portion of the service charge to employees other than the
servers, it violated the tip credit statute. Because of this violation, she argues, Cliff
House was not entitled to the “tip credit” against the minimum wage and was
obligated to pay the banquet servers the full minimum wage pursuant to 26 M.R.S.
§ 664(1) (setting the minimum wage at $7.50 per hour starting on October 1,
2009). Accordingly, Hayden-Tidd contends that she and the other banquet servers
5
In her complaint, Hayden-Tidd additionally alleged that Cliff House violated the tip credit statute,
26 M.R.S. § 664(2), because the resort did not comply with its obligation to inform the affected
employees before taking the tip credit. However, in her brief on appeal, Hayden-Tidd asserted that the
only question in this case is whether the nineteen percent service charge constituted a tip that was
automatically included in the customer’s bill. Thus, our decision addresses only that narrow issue.
8
are entitled to an additional $3.75 for every hour that they worked during the
period complained of, notwithstanding their actual receipt of, on average, $23.92 to
$35.09 per hour during that time.
[¶14] At the time of Hayden-Tidd’s employment with Cliff House, Maine’s
tip credit statute, 26 M.R.S. § 664(2), provided that an employer of servers must
assure that the servers receive the minimum wage. The law allowed tips to be
credited toward that minimum wage, but tips could only account for half of the
required minimum wage. Id. The result, when tips were sufficient, was that the
employer paid one-half of the required minimum wage and the server’s tips
covered the remaining half and, hopefully, more. If the tips did not bring the
server’s compensation up to the minimum wage, the employer was required to
make up the difference.6 Id. To ensure that the server actually received the entire
tip left by a customer, the law prohibited an employer from retaining any portion of
the tip, even when the tip was paid by credit card directly to the employer:
The tips received by a service employee become the property of the
employee and may not be shared with the employer. Service
employees may volunteer to pool their tips to be split among other
6
Pursuant to 26 M.R.S. § 664(2):
An employer may consider tips as part of the wages of a service employee, but such a tip
credit may not exceed 50% of the minimum hourly wage established in this section. An
employer who elects to use the tip credit must inform the affected employee in advance and
must be able to show that the employee receives at least the minimum hourly wage when
direct wages and the tip credit are combined. Upon a satisfactory showing by the employee
or the employee’s representative that the actual tips received were less than the tip credit, the
employer shall increase the direct wages by the difference.
9
service employees or may volunteer to share a part of their tips with
other employees who do not generally receive tips directly from
customers. Tips that are automatically included in the customer’s bill
or that are charged to a credit card must be given to the service
employee. A tip that is charged to a credit card must be paid by the
employer to the employee by the next regular payday and may not be
held while the employer is awaiting reimbursement from a credit card
company.
Id. (emphasis added).
[¶15] It is this provision that Hayden-Tidd relies on, urging us to conclude
that the service charge must be a tip because it is “automatically included in the
customer’s bill.” Id. The statute at the time, however, did not define the terms
“tip” or “service charge.” See 26 M.R.S. §§ 661-672 (2010).
[¶16] Nothing in the language of the statute expressly precluded Cliff House
from treating only a portion of its service charge as a “tip.” The statute did,
however, require that “[t]ips that are automatically included in the customer’s bill
or that are charged to a credit card” be given to the service employee. 26 M.R.S.
§ 664(2).
The service charge could thus be understood to be a tip that is
automatically included in a banquet customer’s bill and is, therefore, required to be
given to the banquet servers in full. Alternatively, it could be considered an
aggregate charge, only a portion of which would be treated as a tip. The language
of the statute does not provide a clear answer.
10
[¶17] When, as here, the language of the statute is ambiguous, we seek to
determine the meaning that will best give effect to the intent of the Legislature.
See Anastos v. Town of Brunswick, 2011 ME 41, ¶ 9, 15 A.3d 1279; Liberty Ins.
Underwriters, Inc. v. Estate of Faulkner, 2008 ME 149, ¶ 15, 957 A.2d 94. “We
also construe the whole statutory scheme of which the section at issue forms a part
so that a harmonious result, presumably the intent of the Legislature, may be
achieved.” Liberty Ins. Underwriters, Inc., 2008 ME 149, ¶ 15, 957 A.2d 94
(quotation marks omitted). “If the plain meaning of the text does not resolve an
interpretative issue raised, then we consider the statute’s history, underlying policy,
and other extrinsic factors to ascertain legislative intent.” Burke v. Port Resort
Realty Corp., 1999 ME 138, ¶ 8, 737 A.2d 1055.
2.
Recent Changes to the Minimum Wage Laws
[¶18] The Legislature’s recent amendment to the tip credit statute, enacted
after the time at issue here but before the court entered its judgment, now explicitly
provides for compensation arrangements similar to the one utilized by Cliff House.
See P.L. 2011, ch. 118, § 4 (effective Sept. 28, 2011).
[¶19] The tip credit statute now provides,
An employer in a banquet or private club setting that adds a service
charge shall notify the customer that the service charge does not
represent a tip for service employees. The employer in a banquet or
private club setting may use some or all of any service charge to meet
11
its obligation to compensate all employees at the rate required by this
section.
26 M.R.S. § 664(2-B) (2011) (emphasis added).
[¶20] The definitions section of the minimum wage laws was also amended
prior to the court’s decision. See P.L. 2011, ch. 118, § 2 (effective Sept. 28, 2011)
(codified at 26 M.R.S. § 663 (2011)). The statute now includes a definition of
“tip,” stating:
“Tip” means a sum presented by a customer in recognition of services
performed by one or more service employees, including a charge
automatically included in the customer’s bill. “Tip” does not include
a service charge added to a customer’s bill in a banquet or private
club setting by agreement between the customer and employer.
26 M.R.S. § 663(15) (emphasis added).
[¶21] There is, however, nothing in the recent legislative amendments to the
minimum wage laws that clearly indicates that the Legislature intended the
changes to apply retroactively; thus, we do not give retroactive effect to the recent
changes for the time period complained of here. See MacImage of Me., LLC v.
Androscoggin Cnty., 2012 ME 44, ¶¶ 21-23, 40 A.3d 975; cf. Bakala v. Town of
Stonington, 647 A.2d 85, 87 (Me. 1994) (stating that it may be appropriate to apply
later legislative “clarifications” that make no substantive changes in the law).
Therefore, we look to the statute as it existed in 2009 and 2010 when Cliff House
employed Hayden-Tidd as a banquet server.
12
3.
The Applicable Statute
[¶22] The minimum wage statute is meant to protect employees from being
paid too little. In re Wage Payment Litigation, 2000 ME 162, ¶ 18, 759 A.2d 217.
The undisputed facts in this case show that Hayden-Tidd earned substantially more
than the minimum hourly wage as a banquet server while employed by Cliff
House. Thus, Hayden-Tidd cannot argue that Cliff House violated the minimum
wage statute as to the overall amount of the hourly wages paid to banquet servers
once they received their portion of the service charge pool; rather she contends that
Cliff House should have paid the banquet servers the full minimum wage in the
first instance because the resort’s treatment of the service charge violated the tip
credit statute’s provisions.
[¶23] The statutory language at issue, which states that “[t]ips that are
automatically included in the customer’s bill or that are charged to a credit card
must be given to the service employee,” 26 M.R.S. § 664(2), was added to the tip
credit statute, without debate, in 2007.
See P.L. 2007, ch. 367, § 2
(effective Sept. 20, 2007). The language was proposed as part of L.D. 1543, which
aimed to “clarif[y] that tips belong to the employee providing direct service and
that the entire tip . . . from any credit card payment must go to the employee.”
L.D. 1543, Summary (123rd Legis. 2007). The proposed bill was assigned to the
Legislature’s Joint Standing Committee on Labor, see L.D. 1543 (123rd Legis.
13
2007), where it received a public hearing.
Proponents of the bill and a
representative from the Maine Department of Labor submitted written testimony at
the hearing.
[¶24] A representative from the Maine Women’s Lobby testified that the
proposed legislation “clarifies that tips belong to employees and not employers,”
and that “[p]atrons tip specific employees and certainly don’t intend that money to
be spent by their employers.” Another supporter of the legislation, the President of
the Maine State Employees Association, SEIU Local 1989, testified: “The idea that
employers skim from these tips is reprehensible, and must be stopped.”
William A. Peabody, then Director of the Bureau of Labor Standards, testified to
the committee: “The bureau has occasionally had to deal with cases where service
employees had tips held by their employer.” Ultimately, L.D. 1543 was slightly
amended, but the language at issue here was not changed. See Comm. Amend. A
to L.D. 1543, No. H-370 (123rd Legis. 2007).
[¶25] Although the legislative history of the tip credit statute’s language
concerning “[t]ips that are automatically included in the customer’s bill” is not
voluminous, it does suggest that the Legislature’s purpose in enacting that portion
of the statute was to ensure that employers did not retain tips that were left by
individual customers for servers, whether the tips were included automatically in a
customer’s bill or as part of a credit card transaction.
14
[¶26] Nothing in the legislative history, however, addressed or precluded
the practice employed in the context of banquet service by Cliff House. When
Cliff House collected a standard service charge and allocated that charge among
various employees who worked in the banquet area, it engaged in a practice that
was distinct from the practice of calculating a total gratuity on a bill given to
customers at the time of service.7 The service charge is not, by operation of that
statute, synonymous with “tip.”
The statute’s discussion of “[t]ips that are
automatically included in a customer’s bill” cannot be read to mean that any charge
that is automatically included in the customer’s bill must be a treated as a “tip.”
The fact that the service charge is automatically included in a banquet customer’s
bill simply does not alone make it a “tip.”
[¶27] The court did not err in concluding that the statute did not mandate
that the entire service charge be treated as a “tip.” The statute did not define “tip”;
the service charge was not called a “tip” in the contract with the customer; and the
service charge was not individually paid to the banquet servers by the persons
served. Nothing in the statute prevented Cliff House from allocating the thirteen
percentage points of the service charge to the servers as tips and applying the tip
credit on that amount in its arrangement with its servers.
7
Indeed, nothing in the statute as it existed at the time of these events would have required that Cliff
House give any portion of the service charge to the servers. Of course, Cliff House might have had
difficulty hiring servers and would have had to pay the full minimum wage to the servers for all hours
worked.
15
[¶28] Cliff House allocated approximately two-thirds of its service charge
to tips for its banquet servers. It did not violate the law in so doing. Pursuant to
this arrangement, Hayden-Tidd earned three to four times the minimum wage and
therefore does not have a remedy to collect unpaid minimum wages pursuant to
26 M.R.S. § 670.
[¶29] Because Cliff House did not violate the minimum wage laws, the
court properly entered judgment for Cliff House on Hayden-Tidd’s claims for
damages pursuant to 26 M.R.S. § 621-A and 26 M.R.S. § 626-A.
The entry is:
Judgment affirmed.
On the briefs:
Timothy Belcher, Esq., Maine State Employees Association, SEIU Local
1989, Augusta, Harold Lichten, Esq., and Hillary Schwab, Esq., Lichten &
Liss-Riordan, P.C., Boston, Massachusetts, for appellant Allison HaydenTidd
Robert W. Kline, Esq., Kline Law Offices, Portland, for appellees The Cliff
House & Motels, Inc., and Kathryn M. Weare
At oral argument:
Hillary Schwab, Esq., for appellant Allison Hayden-Tidd
Robert W. Kline, Esq., for appellees The Cliff House & Motels, Inc., and
Kathryn M. Weare
York County Superior Court docket number CV-2010-213
FOR CLERK REFERENCE ONLY
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