One Fair Wage, Inc. v. Darden Restaurants Inc.

District Court, N.D. California·Decided August 17, 2023·No. 3:21-cv-02695·Unknown

Opinion

ONE FAIR WAGE, INC., Case No. 21-cv-02695-EMC

Plaintiff, ORDER GRANTING DEFENDANT’S v. MOTION TO DISMISS

DARDEN RESTAURANTS INC., Docket No. 44 Defendant.

Plaintiff One Fair Wage (“OFW”), an advocacy organization focused on eliminating the subminimum cash wage, has filed suit against Defendant Darden Restaurants, Inc. (“Darden”). OFW alleges that Darden’s cash wage and tipping policies result in increased sexual harassment and disparate wages for workers across racial groups, and that these sex and race-based effects violate the prohibitions on workplace discrimination in Title VII of the Civil Rights act of 1964 (“Title VII”), 42 U.S.C. § 2000e-2. See Docket No. 41 (“FAC”). OFW did not file this action on behalf of any Darden employee. Rather, OFW seeks redress for the harm that Darden’s policies have caused OFW as an organization. Now pending is Darden’s 12(b)(1) Motion to Dismiss for lack of standing. See Docket No. 44 (“Mot.”). A. Procedural Background On September 29, 2020, OFW filed a charge of discrimination with the United States Equal Employment Opportunity Commission (“EEOC”) alleging race and sex based disparate charge at OFW’s request and issued OFW a right to sue notice. See id. ¶ 102. OFW filed the instant suit on April 14, 2021. See Docket No. 1. Darden filed three Motions to Dismiss on July 20, 2021. See Docket Nos. 15, 16, 17. On September 14, 2021, this Court dismissed OFW’s suit, determining OFW’s claims were not within the zone-of-interests of Title VII, but declining to determine whether OFW had Article III standing. See Docket No. 30 (“MTD Order”). OFW appealed and the Ninth Circuit vacated this Court’s order and remanded for further proceedings. See One Fair Wage, Inc. v. Darden Restaurants Inc., No. 21-16691, 2023 WL 2445690 (9th Cir. Mar. 10, 2023). The court held “that federal courts cannot proceed to the merits without first assuring themselves of their Article III jurisdiction.” Id. at *2 (citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101 (1998)). The court noted that whether a claim falls within the zone-of-interests of a statute, or whether a party has “statutory standing,” does not implicate a court’s “constitutional power to adjudicate [a] case,” and instead “is properly viewed as a dismissal for failure to state a claim rather than a dismissal for lack of subject matter jurisdiction.” Id. (first quoting Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118, 128 n.4 (2014); and then quoting Vaughn v. Bay Env’t Mgmt., Inc., 567 F.3d 1021, 1024 (9th Cir. 2009)). As such, the court concluded that this Court erred by deciding Darden’s motion to dismiss on statutory grounds before determining whether OFW had Article III standing. Id. at *3. On May 4, 2023, OFW filed its First Amended Complaint. See FAC. The First Amended Complaint contains additional allegations that purport to further establish OFW’s Article III standing. Id. ¶¶ 91–98. B. Factual Background OFW is a New York nonprofit organization with its principal place of business in Oakland, California. See FAC ¶ 7. OFW’s organizational purpose is to “lift millions of tipped and subminimum-wage-earning” restaurant workers out of poverty “by requiring all employers to pay the full minimum wage as a cash wage with fair, nondiscriminatory tips on top.” Id. Darden is a Florida corporation with its principal place of business in Orlando, Florida—it is the largest At issue are two of Darden’s corporate wage related policies (cash wage and tipping described below) which allegedly cause increased sexual harassment and race-based disparate impacts in Darden’s workplaces in violation of Title VII. See id. ¶¶ 15–16, 104–24. 1. Cash-Wage Policy Darden enforces a cash wage for all “‘tipped employees,’” as defined by the Fair Labor Standards Act of 1938, 29 U.S.C. § 203(t) (“FLSA”),1 that is equal to the lowest possible cash wage in the state or municipality in which that employee works. FAC ¶ 17. This policy is incorporated into Darden’s handbook. Id. ¶ 18. As such, in the 43 states where state law permits this type of policy, Darden’s practice is to pay “tipped employees a subminimum wage, which is the lowest legally-permissible cash wage permitted and less than the minimum wage for non- tipped employees.” Id. ¶ 17. In effect, employees subject to the policy are paid less than the minimum wage because tips are used to cover the difference between the tipped and non-tipped wage. In 2021, OFW conducted a survey (“Survey”) of hundreds of current and former Darden employees and found that those who worked as tipped servers for Darden were “paid at or below the lowest legally-permissible cash wage.” Id. ¶ 19. OFW asserts that this empirical data, combined with the instruction in Darden’s handbook, id. ¶ 18, proves the cash wage policy is “a corporate-level instruction to local managers that they must pay tipped employees a cash wage as low as applicable law allows.” Id. ¶ 20. In this case, OFW alleges that Darden’s cash wage policy directly results in increased sexual harassment because the policy “causes sex to play more of a role in the jobs of all employees subject to the policy . . . .” Id. ¶ 33. That is, Darden employees subject to the cash wage policy face the difficult choice of having to tolerate sexual harassment from customers because the employees rely on customers’ tips for a significant portion of their income. See id. ¶ 1 Under the FLSA, an employer is required to pay a tipped employee an amount equal to “the cash wage paid such employee which for purposes of such determination shall be not less than the cash wage required to be paid such an employee on August 20, 1996; and []an additional amount on account of the tips received by such employee which amount is equal to the difference between the 65. OFW also argues that employees subject to a subminimum wage are “pressured by management to flirt with customers and dress suggestively to try to earn enough tips to survive.” Id. at ¶ 63. Citing their Survey results, OFW highlights complaints made by some of Darden’s cash wage employees of sexual harassment from customers and other Darden employees. Id. ¶ 34. To further support its claim, OFW cites a Darden cash wage employee’s EEOC complaint that alleges she was subject to sexual harassment from customers and coworkers. See id. ¶ 60. OFW argues that because Darden’s cash wage employees suffer more frequent and severe sexual harassment from customers in comparison to Darden’s other employees (i.e., minimum wage employees), the cash wage employees suffer more financial retaliation from managers and customers because they complain of and rebuff more sexual harassment. See id. ¶ 67. As such, OFW argues that Darden’s cash wage policy “perpetuates a cycle of systemic sexual harassment.” Id. ¶ 68.2 2. Tipping Policy OFW contends that Darden encourages and “tacitly requires” its customers to tip its tipped employees “without mediating that process in any way.” Id. ¶ 28. OFW cites (1) pooling tips and (2) adding a standard service charge to all bills and letting customers tip on top of the charge as examples of appropriately mediating customer tipping. Id. ¶ 86. OFW argues the effect of Darden’s unmediated tipping policy is that “Darden’s customers directly determine a large portion of the wages paid to Darden’s tipped employees.” Id. OFW asserts that Darden actively facilitates this tipping policy by including a “tip line” and recommended tip percentages on the bill, as well as hanging signage that encourages customers to tip. Id. I

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One Fair Wage, Inc. v. Darden Restaurants Inc., (N.D. Cal. 2023).

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