Regulations

Chauffeur Tip Wage Rules Emerge As Big Challenge For Limo Industry

Posted on June 6, 2012
NLA Day On Hill: Steve Edelmann of Royale Limousine Manufacturers, NLA board director Scott Solombrino of Dav El Chauffeured Transportation Network, Commonwealth Worldwide executive Tami Saccaccio, John Greene of ETS International, and NLA board director Michael Campbell of Grace Limousine were among 60-plus limousine industry figures who visited Capitol Hill on May 16 to lobby and raise awareness among key Congresspeople about important industry issues and concerns. The group is pictured in front of the offices of Sen. John Kerry, D-Mass.


NLA Day On Hill: Steve Edelmann of Royale Limousine Manufacturers, NLA board director Scott Solombrino of Dav El Chauffeured Transportation Network, Commonwealth Worldwide executive Tami Saccaccio, John Greene of ETS International, and NLA board director Michael Campbell of Grace Limousine were among 60-plus limousine industry figures who visited Capitol Hill on May 16 to lobby and raise awareness among key Congresspeople about important industry issues and concerns. The group is pictured in front of the offices of Sen. John Kerry, D-Mass.

NLA Day On Hill: Steve Edelmann of Royale Limousine Manufacturers, NLA board director Scott Solombrino of Dav El Chauffeured Transportation Network, Commonwealth Worldwide executive Tami Saccaccio, John Greene of ETS International, and NLA board director Michael Campbell of Grace Limousine were among 60-plus limousine industry figures who visited Capitol Hill on May 16 to lobby and raise awareness among key Congresspeople about important industry issues and concerns. The group is pictured in front of the offices of Sen. John Kerry, D-Mass.
NLA Day On Hill: Steve Edelmann of Royale Limousine Manufacturers, NLA board director Scott Solombrino of Dav El Chauffeured Transportation Network, Commonwealth Worldwide executive Tami Saccaccio, John Greene of ETS International, and NLA board director Michael Campbell of Grace Limousine were among 60-plus limousine industry figures who visited Capitol Hill on May 16 to lobby and raise awareness among key Congresspeople about important industry issues and concerns. The group is pictured in front of the offices of Sen. John Kerry, D-Mass.

WASHINGTON, D.C. — Limousine industry leaders outlined their opposition to chauffeur tips being considered taxable wages when they met with Department of Labor officials and visited Congressional offices last month during the group’s annual lobbying event.

Dubbed “Day on the Hill,” the May 15-16 event included leaders and board directors of the National Limousine Association, leaders and members of major state associations nationwide, NLA lobbyists, and influential operators with nationwide affiliate networks who all gathered to interact with representatives from key federal agencies as well as Congressional representatives and their staffs.

In a summation this week of the event, NLA President Diane Forgy considered this year’s event “mission critical” as it focused on presenting industry concerns about the chauffeur wage tip issue. How federal officials ultimately interpret and apply labor laws — as well as how courts rule on individual cases and Congress possibly legislates on it — will determine whether operators nationwide are subject to paying overtime on chauffeur gratuities. The NLA says chauffeur gratuities are voluntary contributions from clients and therefore are not considered formal wages. Several operators already have been hit with costly lawsuits and/or Department of Labor audits on the controversial premise that tips are wages.

“I was extremely pleased with the attendance as we were very successful getting operators to participate that were from states with key representation on Senate and Congressional committees that directly affect our industry,” Forgy told LCT. “Overwhelmingly I heard that our members successfully relayed our concerns on DOL’s position on overtime being applied to chauffeur tips. Several offices made calls on our behalf to DOL on this issue.”

While Day on the Hill participants made inroads in communicating on this issue, much works still needs to be done. At stake is how the limousine industry does business and how chauffeur gratuities will be handled: Will operators still be able to handle pass-through gratuities from clients to chauffeurs or will they have to wash their hands of gratuities entirely, leaving it as a completely private transaction between client and chauffeur?

“They clearly understand the impact this decision will have on our industry and ability to stay in business and offer the best compensation system to our employees,” Forgy said. “However we are still very concerned that the DOL will move forward with its position on imposing overtime on gratuities regardless of our efforts. We will continue to seek support from our key “champions” on Capitol Hill and are strategizing with our attorneys and lobbyists on other efforts to successfully make our case with the DOL.”

In a related matter, participants received a legal briefing from Katherine Glynn and Catherin Reuben of Robinson & Cole, legal counsels to Boston-based Commonwealth Worldwide Chauffeured Transportation, on their winning cases that resulted in rulings favorable to the limousine industry on the overtime and tips issue. Commonwealth owner and CEO Dawson Rutter, also an NLA board director active on this issue, prevailed in a recent case.

“This was probably one of the most important sessions we have ever conducted,” Forgy said. “They eloquently summarized how these cases were initiated and the arguments they made to defend their position on tips being discretionary and not subject to overtime. I am confident those in attendance gained much insight on how they can avoid problems with this issue in the future.”

Industry leaders hope the Commonwealth legal victory in U.S. District Court will set a longstanding precedent for rulings and interpretations favorable to the chauffeured transportation industry.

Glynn served as defense counsel on behalf of Commonwealth in Andrew Ellis v. Commonwealth Worldwide Chauffeured Transportation of NY, LLC (United States District Court, Eastern District of New York). The court granted the defendants' motion for summary judgment in its entirety and dismissed all claims brought against Commonwealth. The plaintiff, a former chauffeur for Commonwealth, claimed that Commonwealth violated wage and hour laws.

The court issued three important rulings from the case for the limousine industry:

  • The court held that tips are not considered compensation under the Fair Labor Standards Act, because they are discretionary and not part of compensation considered in calculating overtime pay. The court found that Commonwealth's practice of recommending tip amounts to clients still allowed tips to be discretionary amounts that did not have to be part of the overtime calculation. It also held that a tip could be paid by a third party who had no direct contact with the server/chauffeur and still be considered a tip under the Fair Labor Standards Act.
  • The court maintained if an employer has a policy requiring employees to notify their employer when they work through a break and employees fail to report this, the employer is not liable for not paying employees for working through that break.
  • The court held that the New York Spread of Hours Law only applies to employees earning the minimum wage. The law requires New York employees to receive one additional hour's pay at the basic minimum hourly wage rate in addition to their minimum wage for any day in which they worked more than 10 hours. The plaintiff argued that the law applies to low wage workers, not just those earning minimum wage.

“Commonwealth proved it was unaware that the plaintiff was not paid for any meal breaks he did not take and demonstrated it had a policy requiring the plaintiff to inform Commonwealth if he was unable to take a meal break,” Glynn said in press release. "We proved that the plaintiff signed a copy of the policy. Because the plaintiff's chauffeuring job involved a lot of independent traveling, and he could not be monitored easily by supervisors, it was up to the plaintiff to follow the policy. The plaintiff admitted he never informed his employer that he was unable to take a meal break.”

Case reference is Andrew Ellis v. Commonwealth Worldwide Chauffeured Transportation of NY, LLC, et al., 2012 U.S. Dist. LEXIS 40288, *; 162 Lab. Cas. (CCH) P36, 006 (March 23, 2012 E.D.N.Y.)

NLA President Forgy said the association strongly advises all of its members to consult with their own legal counsel when facing labor compliance issues.

Related LCT article: Boston Operation Prevails In Pivotal Wage/Hour Lawsuit

Sources: Martin Romjue, LCT editor; Robinson & Cole law firm

Related Topics: Commonwealth Worldwide Chauffeured Transportation, Dawson Rutter, Day On the Hill, Diane Forgy, employee wages, lobbying, National Limousine Association, wage lawsuits

Comments ( 1 )
  • James

     | about 6 years ago

    I think we are wasting a lot of money trying to create a true definition for gratuity or tipping in the transportation industry. Hint: There is a loophole in the law pertaining this. The language is incomplete with one word that can change everything. Let's just say, "forget about using the word gratuity and tipping." A standand gratuity gesture is 20% added to the bill for the drive, well all carriers need to do is increase fares or rates by 20%, not use the word gratuitity period and state on the driver's pay stub that the 20% is a commission for each waybill or charter transportation service order. There is a big difference between commission and gratuity! Think about it real hard.

More Stories
(LCT image)
Article

How To Keep Up With Labor Laws

SEPT. LCT: Complying with labor laws meant to protect employees gets tough since drivers can’t pull over and take a 30-minute break.