Eleventh Circuit Affirms Skycap Company Victory in FLSA Collective Action
Sealing a significant victory to a Florida skycap company in an FLSA collective action, the Eleventh Circuit Court of Appeals recently affirmed the federal district court’s summary judgment decision in Pellon v. Bus. Representation Int'l, Inc., 528 F. Supp. 2d 1306 (S.D. Fla. 2007). My colleagues Mike Casey and Mark Beutler ably represented the employer at both the district court and the appellate levels.
In Pellon, the district court rejected claims by skycaps at Miami International Airport that their employer violated the Fair Labor Standards Act’s requirements for using the tip credit by (a) providing them insufficient tip credit notice, (b) deploying them to perform non-tipped work while receiving a tipped wage, and (c) imposing a $2 per bag service charge which the skycaps claimed reduced their tips.
The case was advanced by 53 skycaps. The skycaps worked for Business Representation International (BRI), assisting American Airlines passengers at Miami International Airport with their baggage. The skycaps alleged that the employer was violating federal and state minimum wage law and contract law by improperly claiming a tip credit and charging passengers $2 per bag for curbside check in. In August 2007, both sides moved for summary judgment.
The skycaps’ primary challenge was to the tip credit. The tip credit is the reduction in wage that an employer can pay a tipped employee. When the suit was filed, the federal minimum wage was $5.15 per hour. But, under federal minimum wage law, an employer can pay as little as $2.13 if an employee received sufficient tips to make up the difference. A tip credit is the difference between the minimum wage and the amount paid by the employer to a tipped employee.
The court ruled for the employer on all federal claims, and declined to exercise jurisdiction over the state-law based claims.
The court concluded that the skycaps received adequate notice of the tip credit because they were informed that they would be paid $2.13 plus tips, and an FLSA poster containing the DOL-approved language regarding the tip credit, was prominently displayed.
The court held that “every task [the skycaps] complain of are part of the normal duties of a skycap.” The court specifically stated that tasks that "properly fall within the skycap occupation" include transporting luggage to security screeners, assisting disabled passengers, charging passengers for overweight and extra baggage, and collecting baggage fees.
The court rejected the skycaps’ argument that the two dollar ($2) baggage service fee charged by the airline reduced their tips and thereby violated the requirement that all tips be retained by the tipped employee. The court concluded that the baggage fee was not a tip because it was neither given at the customer's discretion nor kept by the skycap. So long as genuine bona fide tips were sufficient to meet the income requirements for use of the tip credit, the employer was entitled to credit those tips against the minimum wage obligation.
The court declined to reach the skycaps state law minimum wage and contract claims, noting that its dismissal of the federal claims permitted it to decline jurisdiction.
BRI’s victory was significant. Had the court invalidated the tip credit, all 53 of the skycap plaintiffs, plus an additional 7 skycaps in a similar case, would have been entitled to recover the tip credit (between $3 and $4 dollars) for every hour logged back to April 2004, plus liquidated damages and attorney fees. In addition, there were supplemental state law claims that would have added to the liability exposure. The Florida minimum wage is higher than the federal minimum wage. In addition, the skycaps claimed that they should have received an $11.76 wage under the county living wage ordinance. Finally, the skycaps claimed that they were owed 50 cents per bag based on an oral contract. Resolving these claims favorably would have required additional costly litigation. An additional risk attendant to an adverse ruling was that the skycaps who had not yet sued BRI would have likely filed another class action lawsuit. Liability exposure was substantial even beyond the cost of a trial. The district court's decision resolving the legal issues in favor of the employer, and the affirmance by the Eleventh Circuit, prevented this.
The Pellon decision is notable as there are several similar cases pending in other federal courts involving thousands of skycaps around the country and millions of dollars in potential liability. While this case was on appeal, nine American Airlines skycaps stationed at Boston’s Logan airport were awarded $325,000 plus fees and costs in litigation regarding skycap tips. Within weeks, nationwide class actions lawsuits were filed against major air carriers and airline industry service providers. The Eleventh Circuit’s affirmance of the district court’s decision will likely affect those cases.
The decision has already had an impact on federal regulations. On July 28, 2008, The U.S. Department of Labor issued proposed regulations that would modify existing regulations to conform to case law. In the commentary explaining the proposed regulations affecting the tip credit notice, the district court’s decision in Pellon is cited as one of the cases to which the regulations conform.
