United States District Court, D. South Carolina, Charleston Division
Ryan Sellers, On Behalf of Herself and All Others Similarly Situated, Plaintiff,
Keller Unlimited LLC, DBA Two Keys Tavern; 57 Limited LLC, DBA Two Keys Public House and Mark Keller, individually, Defendants.
ORDER AND OPINION
Richard Mark Gergel United States District Court Judge
the Court is Defendants' motion to alter the judgment
(Dkt. No. 69) and Plaintiffs' motion for post-judgment
interest and attorneys' fees (Dkt. No. 70). For the
reasons set forth below, Defendants' motion is granted in
part and denied in part and Plaintiffs' motion is denied.
Mark Keller is the sole member of Defendant Keller Unlimited,
LLC, which owns and operates two restaurant-sports bars-Two
Keys Public House in Summerville, South Carolina and Two Keys
Tavern in Ladson, South Carolina-at which Plaintiffs were
employed as bartenders. (Dkt. No. 23-1 at 1.) On June 28,
2019, the Court denied Defendants' motion to decertify
the conditionally certified class, and granted
Plaintiffs' motion for summary judgment, finding that
Defendants clearly violated the Fair Labor Standards Act
("FLSA") by deducting bar shortages from Plaintiff
paychecks, thus lowering Plaintiffs' earnings below the
statutory minimum wage. (Dkt. Nos. 55, 56.) The Court also
found that Defendants willfully violated the FLSA and that
Plaintiffs were entitled to liquidated damages. (Dkt. No.
56.) However, while the Court entered Judgement for
Plaintiffs, the Parties disagreed over how to calculate
damages, as Plaintiffs argued that the unpaid wages included
the amount of the tip credit taken by Defendants, and
Defendants argued that, at most, they were liable for the
amounts deducted for bar shortages. (Dkt. Nos. 64, 65.) The
Court held that Defendants were liable for the amount taken
as a tip credit, holding that Defendants could not take
advantage of the tip credit as they had failed to comply with
§ 203(m) of the FLSA. (Dkt. No. 66.) The Court
calculated Plaintiffs' damages, inclusive of liquidated
damages, as $63, 043.66. (Id. at 7.) These damages
were later amended to $51, 696.29 based on updated
calculations submitted by Plaintiffs. (Dkt. No. 68.)
Additionally, the Court awarded $69, 973.46 in attorneys'
fees and costs. (Dkt. No. 66 at 5 - 7.)
now move for the Court to reconsider its prior Judgment,
pursuant to Rule 59 of the Federal Rules of Civil Procedure.
(Dkt. No. 69.) Defendants largely focus on the Court's
calculation of damages and holding that Defendants forfeited
the tip credit by impermissibly deducting bar shortages from
Plaintiffs' paychecks, arguing that calculating the
damages as equal to the tip credit was clear error. (Dkt. No.
69-1) Defendants also seek to relitigate their liability,
arguing that there is a dispute of material fact regarding
whether the deductions caused Plaintiffs' wages to fall
below minimum wage and whether Defendants' conduct was
willful. (Id. at 9 - 12.) Finally, Defendants ask
the Court to reconsider the award of attorneys' fees and
costs. (Id. at 17.) Plaintiffs oppose the motion,
and Defendants filed a reply. (Dkt. Nos. 70, 71.)
Rule of Civil Procedure 59 allows a party to move to alter or
amend a judgment within twenty-eight days. Fed.R.Civ.P.
59(e). The Court may grant a motion for reconsideration only
in limited circumstances: "(1) to accommodate an
intervening change in controlling law; (2) to account for new
evidence not available at trial; or (3) to correct a clear
error of law or prevent manifest injustice." Pac.
Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396,
403 (4th Cir. 1998). A Rule 59 motion tests whether the
Court's initial Order was "factually supported and
legally justified." Hutchinson v. Staton, 994
F.2d 1076, 1081-82 (4th Cir. 1993). Therefore, the Court may
decline to reconsider a prior holding that "applied the
correct legal standards" and made "factual findings
[ ] supported by substantial evidence." Harwley v.
Comm 'r of Soc. Sec. Admin., 714 Fed.Appx. 311, 312
(Mem) (4th Cir. 2018). As a result, Rule 59(e) provides an
"extraordinary remedy which should be used
sparingly." Pac. Ins. Co., 148 F.3d at 403.
Defendants have identified no intervening change in law, no
new evidence, and no clear error that would require
reconsideration of the Court's determination that
Defendants violated the FLSA by deducting bar shortages from
Plaintiffs' paychecks. The undisputed evidence, as
reiterated by the Defendants in their motion for
reconsideration, demonstrate that Defendants paid Plaintiffs
between $4.13 and $4.75 per hour. (Dkt. Nos. 41-2 at 4; 45-1
¶ 2; 69-1 at 15.) As explained in 29 U.S.C. §
203(m)(2),  this was the "cash wage paid such
employees...." To reach the minimum wage, $7.25 per
hour, the Defendants were permitted to include as part of the
Plaintiffs' wages "an additional amount on account
of the tips received by such employee" equal to the
difference of the cash wage and the minimum wage. 29 U.S.C.
§ 203(m)(2)(ii). This is traditionally called the
"tip credit." Defendants could count this tip
credit towards the minimum wage requirement so long as the
amount was at most $5.12 per hour and did not exceed the
value of tips actually received by Plaintiffs. 29 U.S.C.
§ 203(m)(2)(ii). As the tip credits never exceeded $3.12
here, they were permissible under the statute. (Dkt. No. 65
at 3.) These two components of a tipped employee's wages,
"cash wage" plus a "tip credit" must
where an employer takes an impermissible deduction out of an
employee's cash wage, the employee's wage cannot
equal the statutory minimum wage. Namely, under
§203(m)(2)(A), the "amount paid" to an
employee is the cash wage plus the tip credit. As it is
undisputed that the cash wage here was between $4.13 and
$4.75 per hour, any deduction from that cash wage caused the
Plaintiffs' wage, supplemented by a no-greater than $3.12
per hour tip credit at the time, to fall below $7.25.
Therefore, Defendants did not comply with the requirements of
Section 203(m)(2) and violated the FLSA. Defendants'
position is based in their attempt to credit as paid-wages
other tips not previously included in the tip credit, arguing
that if the Court considered all tips, most Plaintiffs'
wages would exceed the minimum wage. However, as the Department
of Labor's Wage and Hour Division has explained,
When an employer claims an FLSA 3(m) tip credit, the tipped
employee is considered to have been paid only the minimum
wage for all non-overtime hours worked in a tipped
occupation and the employer may not take deductions for
walkouts, cash register shortages, breakage, cost of
uniforms, etc., because any such deduction would reduce
the tipped employee's wages below the minimum wage.
See Wage and Hour Div., U.S. Dep't of Labor,
Fact Sheet # 15 Tipped Employees Under the Fair Labor
Standards Act (FLSA),
(emphasis added) (Dkt. No. 45-3 at 3.) Therefore,
Plaintiffs' cash wage between $4.13 and $4.75 plus the
tip credit equaled the minimum wage, and any deduction
reduced the Plaintiffs' wages below the minimum wage.
Other courts have found that similar deductions from the cash
wages of tipped employees violate the FLSA. See, e.g.,
Mayhue 's Super Liquor Stores, Inc. v. Hodgson, 464
F.2d 1196, 1199 (5th Cir. 1972) ("this agreement tended
to shift part of the employer's business expense to the
employees and was illegal to the extent that it reduced an
employee's wage below the statutory minimum. This amounts
to nothing more than an agreement to waive the minimum wage
requirements of the Fair Labor Standards Act. Such an
agreement is invalid."); Dorsey v. TGT Consulting,
LLC, 888 F.Supp.2d 670, n. 7 (D. Md. 2012)
("Businesses are disqualified from taking a tip credit
where they deduct[ ] losses due to cash register shortages
and unpaid taps from employees' paychecks or nightly
tips.") (internal quotation marks omitted); Bernal
v. Vankar Enterprises, Inc., 579 F.Supp.2d 804, 810
(W.D. Tex. 2008) ("Additionally and alternatively,
summary judgment on the issue is appropriate because the
unrebutted evidence establishes that Defendants deducted
losses due to cash register shortages and unpaid tabs from
Plaintiffs' paycheck[s] or nightly tips.").
Therefore, the Court does not disturb its holding on
the Court will not disturb its ruling on willfulness and a
three-year statute of limitations. To show willfulness,
Plaintiffs must show that Defendants "either knew or
showed reckless disregard for the matter of whether [their]
conduct was prohibited by" the FLSA. Desmond v. PNGI
Charles Town Gaming, L.L.C, 630 F.3d 351, 358 (4th Cir.
2011) (citations omitted). Defendants have identified no
intervening change in law, no new evidence, and no clear
error of law that would require reconsideration of the
Court's holding on the applicable statute of limitations.
Instead, the facts remain that Mr. Keller did not consult
with a lawyer on labor law compliance (Dkt. No. 41-1 at 12,
17, 28); did not consult with a lawyer on his practice of bar
shortage deductions (Id. at 22); did not himself
research labor laws (Id. at 15); and did not take
any steps to verify that the payroll company was ensuring
employees were properly paid (Id. at 18). Most
notably, at the time of the Court's summary judgment
Order, even after having been put on notice of the applicable
law by Plaintiffs' complaint and after receiving a
recommendation to not "charg[e] staff for losses,"
Mr. Keller continued to deduct bar shortages from paychecks
and continued to implement the Terms of Employment at both
restaurants. (Dkt. No. 41-1 at 31 - 32, 35.) Defendants'
argument, that they were not warned of any violation by
non-attorney managers or their payroll company (Dkt. No. 69-1
at 11 - 12), does not affect the Court's determination
that the conduct was willful, and therefore the three-year
statute of limitations applies.
the Court does find that, based on new argument and case law,
the Court's prior calculation of damages was in error and
the inflated damages award constituted a manifest injustice.
As explained above, under 29 U.S.C. § 203(m)(2)(A), for
a "tipped employee," an employer is permitted to
meet the minimum wage by paying the employee: (i) a
"cash wage" not less than $2.13 per hour, plus;
(ii) "an additional amount on account of the tips
received by such employee" equal to the difference of
the cash wage and the minimum wage, so long as the amount is
at most $5.12 per hour and does not exceed the value of tips
actually received by the employee. 29 U.S.C. §
203(m)(2)(i) - (ii). An employer may take ...