Steele v. Leasing Enter., Ltd., No. 15-20139 (5th Cir. 2016)Annotate this Case
Plaintiffs, a class of servers employed by Perry's, filed suit alleging that Perry's violated the Fair Labor Standards Act (FLSA), 29 U.S.C. 203(m), by charging its servers a 3.25% offset fee. When customers paid and tipped with a credit card, Perry’s retained 3.25% of the tip to offset credit card issuer fees and other costs it incurred in collecting and distributing the tips. Because Perry’s offset always exceeded the direct costs required to convert credit card tips to cash, as contemplated in section 203(m) and interpreted by the Sixth Circuit, the court held that Perry’s’ 3.25% offset violated section 203(m) of the FLSA, and therefore Perry’s must be divested of its statutory tip credit for the relevant time period. The court affirmed the district court’s holding of liability, its certification of a second class, and its denial of liquidated damages and a three-year extension of the statute of limitations. However, the court remanded for the district court to award plaintiffs attorney’s fees that it deems reasonable under section 216(b).