Kansas and Missouri Federal Courts Raise the Stakes on Employers' Tip Pooling Practices

ABSTRACT: Kansas and Missouri federal courts certify FLSA class actions, challenging the tip sharing arrangements of casinos in Kansas, Missouri, and other locations.

In separate cases, the U.S. District Courts for the Districts of Kansas and the Western District of Missouri recently certified classes under the Fair Labor Standards Act (“FLSA”) to pursue claims against Boyd Gaming and Pinnacle Entertainment, Inc. regarding tip-pooling arrangements and notice issues at local casinos, and other casino locations.

In James v. Boyd Gaming Corp. the District of Kansas certified classes relating to the tip pooling policies of Boyd Gaming at the Kansas Star Casino. And in Lockett v. Pinnacle Entm’t the Western District of Missouri certified similar classes related to tip pooling policies at Ameristar Council Bluffs, Ameristar Casino, Cactus Pete’s, Boomtown New Orleans, L’Auberge Baton Rouge, Boomtown Bossier City, L’Auberge Lake Charles, River City, Ameristar Vicksburg, and The Meadows casinos. In both cases the Court certified classes challenging both the tip splitting policies and the employers’ notice to employees.

The FLSA requires that employees receive a minimum wage of $7.25 an hour. Section 203(m) of the FLSA allows employers to pay tipped employees below the Federal minimum wage so long as the employees retain all tips, subject to permitted tip pooling arrangements, and the employer provides proper notice of the provisions of §203(m). 

If you walk into one of these casinos, you would likely find yourself, unwittingly, at the epicenter of the issue in both cases. Table games, such as blackjack and roulette, have dealers who play the games with customers and pit-bosses who supervise the casino floor. Table dealers receive pooled tips, where the casino collects the tips and equally redistributes them to all dealer, and wages below the Federal Minimum Wage. The pay for pit-bosses exceeds the minimum wage, but the supervisory positions do not get tips. Many casinos, including those above, have employees who work in dual roles covering both the pit-boss position and table dealer position on different day. All employees accrued Paid Time Off (PTO) based on their seniority and hours worked. When a tipped employee took PTO they received tips from the pool as if they had actually worked that shift.

Plaintiffs sought class certification of FLSA violation claims relating to the tip pooling practices applied to dual-role dealers. Plaintiffs allege that the casinos violated two FLSA provisions: first, a requirement to redistribute tips to employees “who customarily and regularly receive tips,” and second, a provision precluding the employers from keeping any portion of the tips collected. More specifically, Plaintiffs allege that when a dual-role employee took PTO, that pay necessarily occurred at the dealer’s rate, including tip shares, regardless of whether the employee earned the PTO working as a dealer or supervisor.

The FLSA allows an employee to bring wage/hour claims on behalf of himself and others, in a so-called “collective action”. Unlike class action suits, FLSA collective actions require claimants to opt-in rather than opt-out to participate in pursuing claims against the employer. Federal courts generally utilize a two-step approach to determining whether claims can be pursued on a class-wide basis. Under the two-stage approach, the court must first determine if the plaintiff has sufficiently alleged that all potential claimants are victims of a single policy. At the initial stage, the court can look to the allegations of the Complaint, supporting affidavits or declarations, but the court does not weigh evidence, resolve factual disputes, or rule on the merits until the second stage. If the court determines that a single policy has affected multiple “similarly situated” employees, it may issue a conditional class certification, which then enables plaintiffs to send out notice to all potential class members.

Both the Lockett and James courts conditionally certified the plaintiffs’ tip pooling class, as well as classes regarding the employers’ compliance with the FLSA’s notice requirements regarding tip withholdings. 

So what happens next?

Plaintiffs and defendants in both cases will get together to work out issues related to language and timing for the notice and opportunity to opt-in to the cases. After discovery, the courts will be called upon to make a final determination regarding whether the employees’ have similarly situated claims.  

We will keep our eyes on these cases to anticipate any impacts the decisions may have for all employers in tipping industries.