Minnesota Supreme Court Allows Private Cause of Action for Employees Terminated for Refusing to Share Tips & October 2017 Updates in Labor and Employment Labor

Minnesota Supreme Court Allows Private Cause of Action for Employees Terminated for Refusing to Share Tips

On October 11, 2017, the Minnesota Supreme Court held in Burt v. Rackner, 2017 WL 4532933 (Minn. 2017), the Minnesota Fair Labor Standards Act (MFLSA) grants an employee a private cause of action for wrongful discharge when terminated for refusing to share gratuities.

Rackner employed Burt as a bartender from January 2007 to July 2014. On July 21, 2014, the co-owners of Rackner terminated Burt “because [he] was not properly sharing his tips with the other staff.” Prior to his termination, Rackner warned Burt that he needed to share his tips with the bussers, and refusal to comply would result in consequences. In December 2014, Burt sued Rackner claiming Rackner violated the MFLSA, which prohibits an employer from requiring its employees to engage in tip sharing. 

The District Court ruled for Rackner, finding that the MFLSA did not explicitly recognize a cause of action for wrongful discharge. The Court of Appeals reversed the District Court’s ruling, holding the MFLSA provides a private cause of action for any violation of the MFLSA. As a result, the court of appeals remanded the case back to the district court for further proceedings. The Supreme Court granted review to address the issue of “whether the MFLSA provides a private cause of action for an employee who is terminated for failing to share gratuities.”

Rackner argued that although the MFLSA prohibits employers from requiring employees to share or pool gratuities that the employee receives, nothing under the MFLSA prohibits an employer from terminating an employee for failing to share tips. A divided Supreme Court (5-2) disagreed with Rackner, stating Rackner’s interpretation of the statute was “unreasonable.” The majority held “the language of the MFLSA expressly provides a cause of action for an employee who is terminated for failing to share tips.”

Although Minnesota is an at-will employment state, meaning employers may discharge and employees may leave for any reason or no reason at all, the Court held the legislature has the ability to limit and modify the at-will doctrine through creating statuary exceptions. The legislature did not specify a wrongful discharge cause of action for tip sharing under the MFLSA. However, the Court ruled the MFLSA provision allowing an “aggrieved employee to sue for any violation of the statute” created a private right of action when an employee is terminated for refusal to share tips. Further the majority reasoned that, under Rackner’s interpretation, “employers could lawfully circumvent other MFLSA protections by terminating employees who do not follow the employers’ illegal requirements.”

The dissent, written by Chief Justice Lorie Gildea, disagreed with the majority’s interpretation that the broad provision allowing suit for any violation of the statute was intended by the legislature to create a private cause of action for termination for refusal to share tips. Gildea argued that while the legislature provided certain remedies for an employee who was required to share tips, such as the recovery of the diverted tips and injunctive relief, the legislature did not provide a cause of action for employees who were terminated for failing to comply with the tip sharing policy. Further, the dissent claimed that a private cause of action when an employee has been terminated for refusing to share tips impedes on the employer’s ability to terminate an employee “for ‘any reason-even a bad reason’,” under the at-will rule.

While the prohibition of tip sharing is not new in Minnesota, the Court’s holding in Burt v. Rackner allows an employee to recover not only restitution for tips lost, but also “any damages or appropriate relief provided by law, including back pay.” In light of this new private cause of action, employers should review all pay practices for compliance with the MFLSA and the federal Fair Labor Standards Act.

October 2017 Updates in Labor and Employment Law

Labor-Related Nominees Advance to Senate Floor Vote

On October 18, 2017 the Senate Health, Education, Labor and Pensions Committee voted to advance DOL, NLRB, and EEOC nominees for a full Senate floor vote. The Committee voted to advance Patrick Pizzella for deputy labor secretary, Cheryl Stanton to serve as the DOL’s Wage and Hour Division Administrator, and David Zatezalo as assistant secretary of labor for mine safety and health. The committee also voted to advance Peter Robb, the nominee for the NLRB’s general counsel, Janet Dhillon and Daniel Gade for chair and member of the EEOC. A full Senate confirmation vote is expected to occur within the next couple of weeks.

New Form I-9

As of September 18, 2017, employers must use the revised Form I-9 with a revision date of 07/17/17 N exclusively. U.S. Citizenship and Immigration Services released the revisions this summer, along with revised guidance for employers completing the Form I-9.  The main revisions to the Form I-9 concern the list of acceptable employment authorization documents, such as the inclusion of the Consular Report of Birth Abroad (Form FS-240) as an acceptable document under List C. Employers should make sure to they are implementing and utilizing the revised form because increased audits are expected under the Trump Administration.

If you have questions regarding this article or other labor and employment law matters, please contact Martin Kappenman or any other attorney at Seaton, Peters & Revnew, P.A.

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