Alert: Minnesota Fair Labor Standards Act Provides Private Cause of Action for Employees Discharged for Refusing to Share Tips

October 2017

On October 11, 2017, in Burt v. Rackner, Inc. d/b/a Bunny’s Bar & Grill, a divided Minnesota Supreme Court affirmed the Minnesota Court of Appeals’ groundbreaking holding that an employer violates the Minnesota Fair Labor Standards Act (“MFLSA”) when it terminates an employee for refusing to acquiesce in the employer’s requirement to share gratuities and that the MFLSA expressly provides for a private cause of action to litigate such violations.

The case involves a bartender, Burt, who had been employed by Rackner from January 2007 until he was terminated in 2014. After his termination, Burt sued Rackner, claiming Rackner terminated his employment in violation of the MFLSA, Minn. Stat. § 177.24, subd. 3, which prohibits an employer from requiring an employee to contribute or share a gratuity received by the employee. Specifically, the complaint alleged that, during his employment, Burt was warned “that he needed to give more of his tips to the bussers, and that there would be consequences if that did not happen.” Burt refused to follow this directive and was later allegedly terminated by Rackner because “[he] was not properly sharing his tips with other staff.”

The district court dismissed the complaint, concluding that the MFLSA did not contemplate an action for wrongful discharge. The Minnesota Court of Appeals reversed, holding that the MFLSA unambiguously provides that an employee may seek wrongful-discharge damages, including back pay and other appropriate relief as provided by law, for violation of the tip-sharing provision of the MFLSA. Rackner then appealed to the Minnesota Supreme Court.

In its decision, the Minnesota Supreme Court acknowledged that MFLSA does not use the words “wrongful discharge” in connection with the sharing of tips. However, the Court held that, by demanding that Burt share his tips, and threatening Burt with severe consequences, including discharge, if he refused, Rackner imposed an obligation on Burt to share his tips in violation of Minn. Stat. § 177.24, subd. 3. Therefore, the Court held, Minn. Stat. § 177.24 can be reasonably interpreted to prohibit an employer from terminating an employee for refusing to share gratuities. This prohibition, combined with Minn. Stat. § 177.27, subd. 8, which provides a broad, private cause of action for any violation of the statute, expressly authorizes an employee to sue for wrongful discharge arising out of a refusal to share tips.

The Supreme Court concluded its opinion by stating that if the Legislature wants to change the law and make a different policy determination, it can do so. In the meantime, however, Minnesota courts will be required to recognize the cause of action of wrongful discharge for refusing to share gratuities by employees.

If your business involves tips for employees, please contact us to further discuss the implications of this ruling on your business and its tipping practices and policies.

If you have any questions about this decision or the Minnesota Fair Labor Standards Act, please contact Jenny Helling at jenny.helling@fmjlaw.com or call 952-995-9500.

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