Opinion
Index No. 004569/2019
06-08-2023
Tiara Jocko, on behalf of herself and others similarly situated, Plaintiff, v. TJM Syracuse, LLC; Richfield Hospitality New York, LLC; Richfield Hospitality, Inc.; Richfield Syracuse Hotel Partners, LLC; and any other related entities, Defendant.
James E. Murphy, Esq. VIRGINIA & AMBINDER, LLP Adam P. Mastroleo, Esq. BOND, SCHOENECK & KING, PLLC
Unpublished Opinion
James E. Murphy, Esq. VIRGINIA & AMBINDER, LLP
Adam P. Mastroleo, Esq. BOND, SCHOENECK & KING, PLLC
DEBORAH H. KARALUNAS, J.S.C.
This constitutes the Court's decision regarding the motion of defendant TJM Syracuse, LLC for summary judgment to dismiss plaintiff's second amended complaint (the "complaint") and the motion of plaintiff Tiara Jocko for partial summary judgment as to liability.
Defendant TJM Syracuse, LLC ("TJM" or "defendant") is the owner and operator of the Crown Plaza Syracuse, a hotel and restaurant in Syracuse ("the Hotel"). Plaintiff Tiara Jocko ("plaintiff" or "Jocko") was a banquet employee of TJM from May 16, 2016 through March 18, 2020. During the time of her employment, plaintiff claims TJM unlawfully retained employees' gratuities in the form of a 22% Service Charge assessed to TJM's banquet customers.
Plaintiff's employment ended due to the closure the Hotel's banquet facilities during the COVID-19 pandemic.
By order dated February 17, 2022, this Court denied plaintiff's motion to class certify this action. Plaintiff's appeal of that decision filed March 22, 2022 remains pending.
By complaint filed November 24, 2021, plaintiff asserts claims against defendant pursuant to New York Labor Law § 190 et seq. and 12 N.Y.C.R.R. § 146 et seq. The complaint also includes causes of action for breach of contract and unjust enrichment. Defendant TJM answered the complaint on January 28, 2022. Following discovery, both parties now move for summary judgment.
On a motion for summary judgment, the initial burden is on the moving party to demonstrate, by submission of evidentiary material in admissible form, that the movant is entitled to judgment as a matter of law. Zuckerman v City of New York, 49 N.Y.2d 557, 562 (1980). Only if the moving party sustains its initial burden does the burden shift to the opposing party to "show facts sufficient to require a trial of any issue of fact." CPLR 3212 (b); Friends of Animals v Associated Fur Mfrs., 46 N.Y.2d 1065, 1067 (1979). If there is any doubt as to the existence of a triable issue, summary judgment should be denied. See, Rotuba Extruders, Inc. v Ceppos, 46 N.Y.2d 223, 231 (1978).
Defendant argues it is entitled to summary judgment and dismissal of plaintiff's complaint because: (1) it complied with New York State Labor Law § 196-d by effectively notifying customers its Service Charge was not a Gratuity and would be retained by the Hotel; and (2) plaintiff was not an intended beneficiary of any contract between TJM and its customers. In addition, defendant maintains plaintiff's claim for unjust enrichment fails because plaintiff has an adequate remedy at law, and equity does not permit double compensation. In the event this Court denies defendant's motion for summary judgment, defendant moves in the alternative for a declaration that any damages plaintiff might be entitled to must be reduced by the amount she was paid in excess of the statutory tipped minimum wage.
Plaintiff opposes defendant's motion and separately moves for partial summary judgment based on TJM's failure to remit to its banquet workers the 22% Service Charge TJM imposed on its banquet customers, a figure plaintiff argues was actually a Gratuity. Plaintiff also opposes defendant's assertion that it is entitled to an offset for wages paid in excess of the statutory tipped minimum wage.
Discussion
As a preliminary matter, plaintiff voluntarily withdraws her cause of action for unjust enrichment. Pl. MOL in Op., p.1, n 1. As such, that cause of action is DISMISSED. New York State Labor Law § 196-d ("Labor Law § 196-d")
Labor Law § 196-d, entitled "Gratuities," provides in pertinent part:
[n]o employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee.Labor Law § 196-d.
The statute is to be "liberally construed in favor of employees," Samiento v. World Yacht, Inc., 10 N.Y.3d 70, 78 (2008), and is meant to "end the 'unfair and deceptive practice' of an employer retaining money paid by a patron 'under the impression that he is giving it to the employee, not the employer.'" Samiento, 10 N.Y.3d at 79, n. 4 (2008); Martin v. Restaurant Assocs. Events Corp., 35 Misc.3d 215, 223 (Westchester Co. 2012) aff'd 106 A.D.3d 785 (2d Dep't 2013).
In Samiento, the Court of Appeals rejected the notion that a mandatory charge could never be a gratuity. Samiento, 10 N.Y.3d at 78. Instead, the Court stated, "the standard under which a mandatory charge or fee is purported to be a gratuity should be weighed against the expectation of the reasonable customer as this standard is consistent with the purpose of Labor Law § 196-d." Id. at 79.
Three years after Samiento, the Department of Labor adopted the Hospitality Wage Order ("Wage Order") which was effective January 2011 and codified at 12 N.Y.C.R.R. part 146. "The Wage Order and regulations, among other things, clarify what constitutes a gratuity and details notice requirements that employers must follow when informing customers about gratuities." Lyell Party House, Inc. v. New York State Dept. of Labor, Commr.,190 A.D.3d 1046, 1046 (3d Dep't 2021).
The relevant sections are 12 N.Y.C.R.R. §§ 146-2.18 and 146-2.19. 12 N.Y.C.R.R. § 146-2.18, entitled "Charge purported to be a gratuity or tip," provides:
(a) A charge purported to be a gratuity must be distributed in full as gratuities to the service employees or food service workers who provided the service.
(b) There shall be a rebuttable presumption that any charge in addition to charges for food, beverage, lodging, and other specified materials or services, including but not limited to any charge for 'service' or 'food service,' is a charge purported to be a gratuity.
(c) Employers who make charges purported to be gratuities must establish, maintain and preserve for at least six years records of such charges and their dispositions.
(d) Such records must be regularly made available for participants in the tip sharing or tip pooling systems to review.12 N.Y.C.R.R. § 146-2.18.
Likewise, 12 N.Y.C.R.R. § 146-2.19, entitled "Administrative charge not purported to be a gratuity of tip," provides:
(a) A charge for the administration of a banquet, special function, or package deal shall be clearly identified as such and customers shall be notified that the charge is not a gratuity or tip.
(b) The employer has the burden of demonstrating, by clear and convincing evidence, that the notification was sufficient to ensure that a reasonable customer would understand that such charge was not purported to be a gratuity.
(c) Adequate notification shall include a statement in the contract or agreement with the customer, and on any menu and bill listing prices, that the administrative charge is for administration of the banquet, special function, or package deal, is not purported to be a gratuity, and will not be distributed as gratuities to employees who provide service to guests. The statements shall use ordinary language readily understood and shall appear in a font size similar to surrounding text, but no smaller than a 12-point font.12 N.Y.C.R.R. § 146-2.19.
Pertinent to the instant motions are the documents provided to banquet customers who contracted with TJM during the relevant time. In response to interrogatory number 17, defendant stated that "it used one contract for banquet events during the Relevant Time Period.... The contract has been previously produced as Bates Number TJM000006-TJM000012" ("the TJM Banquet Contract"). The TJM Banquet Contract consists of three documents, each of which required a customer signature.
While defendant's response to interrogatory 17 identifies the TJM Banquet Contract as a compilation consisting of three documents bearing Bates Numbers TJM000006-TJM000012, the Medio Affidavit identifies the contract TJM used for banquet events as only one of the three documents, Bates Numbers TJM000006-TJM00009. For purposes of the pending motions, resolution of this discrepancy is not required.
The first document (TJ 000006-TJM000009) is four pages in length and is untitled ("TJM Agreement"). On page two, five lines under the heading "Function Info Agenda/Event Agendas," the following language appears:
All meeting room, food and beverage, and related services are subject to applicable taxes (currently 8% sales tax) and service charge (currently 22 %) in effect on the date(s) of the event.
To ensure the superior service of the Crowne Plaza Syracuse team, a 22% Service Charge will be added to all room set-up, food and beverage, and audio visual costs, 100% of which will be maintained by the Hotel to offset the labor and benefits costs for our associates serving your group. New York State law states that the service charge is subject to sales tax.TJM Agreement, p. 2.
The second document (TJM000010-TJM000011) is two pages in length and is titled "Banquet Event Order" ("BEO"). On page one of the BEO the following language appears: "All prices are subject to 22% service charge and all state and local taxes, currently at 8.00% sales tax." The BEO uses the phrase "Service Charge" rather than "Administrative Fee," and there is no disclaimer that the "Service Charge" is not a gratuity. On page two of the BEO, in a section entitled "Billing," the language "8% Tax. 22% Service Charge. All Charges to PM/DB on File" appears immediately above the customer's signature line. Once again, the phrase "Service Charge" is used instead of "Administrative Fee," and there is no disclaimer that the "Service Charge" is not a gratuity.
The third document (TJM000012) is one page in length and titled "Banquet Check." It breaks down the cost to the customer and includes the following language: "Service Charge %: 22.00." Consistent with both other contract documents, the phrase "Service Charge," rather than "Administrative Fee" is used, and there is no disclaimer that the "Service Charge" is not a gratuity.
Defendant contends the plain language of its TJM Banquet Contract complies with Labor Law § 196-d and the 22% Service Charge is not a gratuity because it explicitly states that "100% of [the Service Charge] will be maintained by the Hotel," the language is not inconsistent or ambiguous, and the Service Charge is both mandatory and taxed. Medio Aff. ¶¶ 6-7. The Court disagrees with TJM's conclusion. Defendant has not established by clear and convincing evidence that its Service Charge was sufficient to ensure that a reasonable customer would understand that such charge was not purported to be a gratuity. 12 N.Y.C.R.R. § 146-2.19; see Samiento, 10 N.Y.3d at 78-79.
First, TJM's reference to the Service Charge, appears buried on page two of the TJM Agreement under a heading entitled "FUNCTION INFORMATION AGENDA/EVENT AGENDA." Second, the TJM Agreement refers to the 22% as a "Service Charge;" it does not use the more illuminating, appropriate or indicative term "Administrative Fee." Use of the term "Service Charge," when combined with TJM's statements that it will be used to "ensure the superior service of the Crowne Plaza Syracuse team" and "to offset the labor and benefit costs for our associates serving your group," may easily be read to imply the funds are going to the TJM's servers. TJM's inclusion of language that "100% of which will be maintained by the Hotel," particularly without an express statement in compliance with 12 N.Y.C.R.R. 146.-2.19(a) that "the charge is not a gratuity or tip," does not clearly and convincingly alter that implication. See, Membrives v. HHC TRS FP Portfolio, 196 A.D.3d 560, 563 (2d Dep't 2021)(granting summary judgment to plaintiffs for defendant's violation of 12 N.Y.C.R.R. § 146-2.18 and §146-2.19 because defendant failed to rebut presumption that fee was not a gratuity and not all contract documents complied with the Wage Order); Atkins v. Metronome Events, Inc., 2019 NY Misc. LEXIS 3902 *19 (New York Co., July 3, 2019)(upholding jury verdict in favor of plaintiff for violation of Labor Law § 196-d upon proof that defendant failed to provide required notification that a service charge was not a gratuity); Pickard v. Bigsbee Enters., Inc., 2017 NY Misc. LEXIS 2052, *19-20 (Albany Co. 2017)(granting summary judgment to plaintiff for post 2011 charges where defendant failed to submit proof of compliance with regulations and did not meet burden to ensure that a reasonable customer would understand the charge was not purported to be a gratuity); see also, Maor v. Glorious Food Inc., 129 A.D.3d 582, 582 (1st Dep't 2015) (denying defendants' motion to dismiss where majority of invoices identified a 24% charge for 'Benefits and Payroll Taxes' or 'Prix Fixe,' with notation that Prix Fixe includes food and labor. A customer might reasonably conclude some portion of charges were meant to be paid to service staff as gratuity); Settecasi v. Gotham Hall, LLC, 2022 NY Misc. LEXIS 1302, *9-10 (New York Co., April 13, 2022) (denying defendants' motion for summary judgment because defendants' invoices lacked statements notifying clients that the administration charge was not a gratuity as required by 12 N.Y.C.R.R. 146 2.19); Button v. Metropolitan Club, Inc., 187 A.D.3d 630, 630 (1st Dep't 2020) (denying summary judgment; defendant's failure to satisfy 12 N.Y.C.R.R. § 140-2.19(c) "precludes it from taking advantage of the regulatory safe harbor provision"); Settecasi v. Ark Restaurants Corp., 2019 NY Misc. LEXIS 13137, * 2 (New York Co., June 27, 2019) (denying dismissal, in part, because "invoices constitute bills listing prices to which 12 N.Y.C.R.R. § 146-2.19 explicitly refers in the conjunctive").
In addition, in light of all other evidence and contrary to defendant's suggestion, it is of no significance that TJM's Agreement states that the 22% Service Charge will be taxed; there simply is no evidence a reasonable customer would understand taxing to mean the Service Charge was not going to the server.
Finally, defendant's argument is further weakened by the fact that the customer receives and must sign two additional documents referencing the Service Charge-the BEO and the Banquet Check-neither of which contains any disclaimer that the Service Charge is not a gratuity.
The BEO contains details of the banquet about which the customer would be most interested, e.g., the menu, the cost, the room layout and the number of guests, references the 22% Service Charge in two places. In neither place does defendant include any disclaimer advising the customer that no portion of the 22 % Service Charge is to be given to the servers, or that it is not a gratuity. One of the entries, located under the heading "Billing" and appears right above the customer's signature line. The Banquet Check, which also must be signed by the customer, likewise includes the 22% Service Charge, and contains no disclaimer.
In short, the TJM Agreement standing alone falls far short of overcoming "the rebuttable presumption," with "clear and convincing evidence," 12 N.Y.C.R.R. § 146-2.18, that "notification was sufficient to ensure that a reasonable customer would understand" that the 22% Service Charge was "not a gratuity or tip." 12 N.Y.C.R.R. § 146-2.19. The BEO and the Banquet Check-which include no disclaimer of any kind-only exacerbate the ruse.
Defendant's reliance on Ahmed v. Morgan's Hotel Group Mgt., LLC, 160 A.D.3d 555 (1st Dep't 2018) lv. denied 32 N.Y.3d 901 (2018) and Amorim v. The Metropolitan Club, Inc., 2018 NY Misc. LEXIS 6259 (New York Co. 2018) is misplaced. In Ahmed, defendant's Banquet Event Order served as the detailed contract and bill for catered events. In concluding the Banquet Event Order "satisfied the statutory requirement that the administrative charge for events not be a charge purported to be a gratuity," the Court relied on the fact that the Banquet Event Order separately identified two charges in addition to food and beverage-a "gratuity [that] would be distributed to the staff[,] and [a separate] administrative charge [that] was not a gratuity but the property of the hotel." Ahmed, 160 A.D3d 555-56. Because the Banquet Event Order-the singular contract document-was clear with respect to the two separate charges, the Court concluded that the absence of explanatory language in other documents, e.g., a proposal, did not render language in the Banquet Event Order ineffective. Id. at 556.
Likewise, Amorim is distinguishable. There, the applicable contract language notified the customer that "22% of the aggregate food and beverage charges of the Event (the "Administrative Surcharge") will be added to your account as a surcharge." Amorim, 2018 NY Misc. LEXIS 6259, *4-5. In addition, the contract expressly provided: [T]he Administrative Surcharge is not a gratuity, will not be distributed to Club employees and is subject to sales tax." Id. Thus, unlike the TJM Banquet Contract, the Amorim contract used a more appropriate phrase, "Administrative Surcharge," and expressly advised that the 22% was "not a gratuity," and would not be distributed to employees. Amorim, 2018 NY Misc. LEXIS 6259 *10.
Based on all of the foregoing, defendant's motion for summary judgment to dismiss plaintiff's first cause of action is DENIED and plaintiff's motion for partial summary judgment as to liability on its first cause of action is GRANTED.
In light of this Court's decision in favor of plaintiff on her statutory claim under Labor Law § 196-d and its implementing regulations under the Wage Order, defendant's motion to dismiss plaintiff's second cause of action for breach of contract is GRANTED.
Plaintiff concedes dismissal would be appropriate. Pl. MOL in Op. p. 1 n 1.
Regarding damages, plaintiff was paid an Elevated Wage, a rate more than the minimum wage. Because of this, defendant contends it is entitled to a damage offset calculated to be "the difference between the wages plaintiff was actually paid and the amount she would have been paid if she were a tipped employee." Def. MOL p. 22-23. Defendant claims an offset will prevent "an unjust windfall on Plaintiff by allowing her to keep her Elevated Wage that was funded by the Service Charge, and also receive a portion of the Service Charge." Id. p. 23.
Defendant defines an Elevated Wage as "a consistent and predictable hourly wage that was significantly higher than the Tipped Wage." Medio Aff. ¶ 13. In contrast, a "Tipped Wage" is a wage lower than regular minimum wage wherein the employer is permitted to assume a "tip credit" of $2.20 per hour to offset the standard minimum wage. Id. at ¶¶ 11-12. During the relevant time period of 2016-2019, the tipped wage was $7.50 per hour, id. at 15, and plaintiff was paid between $11.00 per hour and $14.00 per hour. Medio Aff. ¶¶ 14.
In opposition, plaintiff "argues there is no legal authority for such an offset and, in any event, defendant[ ] could not have paid plaintiff[ ]the 'tipped wage' because they did not satisfy certain regulatory prerequisites." The only court to directly address this issue, did so in dicta. See, Picard v. Bigsbee Enters., Inc., 2017 NY Misc. LEXIS 2052 * 9 (Albany Co. 2017). In Pickard, Judge Platkin stated that it "shares defendants' concern that the measure of damages requested by plaintiffs exceeds their actual damages. It seems inconceivable that defendant would have paid their banquet servers as much as $14 per hour if the servers also were to receive a mandatory 20% gratuity. In this connection, plaintiffs have not cited any legal authority affirmatively demonstrating the unavailability of an offset of the type requested by defendants under the facts and circumstances here." Id. at * 26. This Court tends to agree with Judge Platkin's skepticism, however, in light of the fact the issue of damages will be the subject of an inquest, this Court denies, without prejudice, defendant's request for a declaration of its entitlement to any offset. That issue will be deferred to the time of the inquest, which is September 25, 2023, the previously scheduled trial date.
Counsel for defendant is directed to prepare an order consistent with this decision to be submitted to the court on notice within 15 days. The order shall attach a copy of this decision and incorporate it therein.