Zivkovic v. Laura Christy LLC

Background

Pavle Zivkovic brought this wage-and-hour action on behalf of himself and others similarly situated against Laura Christy, LLC doing business as Valbella, Laura Christy Midtown, LLC, David Ghatanfard, and Genco Luca. The opinion states that, on April 11, 2022, a jury found the defendants liable on all of the plaintiffs’ claims under the New York Labor Law.

One set of claims concerned the defendants’ use of the “tip credit” minimum wage. Under that system, an employer may count certain tips toward its minimum-wage obligation, but the plaintiffs alleged that the defendants were not entitled to take the credit because they had not provided adequate written notice. The opinion refers to these as the “Minimum Wage Claims.”

The disputed defenses

The dispute concerned two affirmative defenses in New York Labor Law § 198. An affirmative defense is a legal argument that can defeat or limit liability even if the opposing party proves the basic elements of a claim. The defenses allow an employer to argue, in specified circumstances, that it made complete and timely payment of wages or reasonably believed that it did not have to provide required notices or statements.

The defendants asked Judge Woods to instruct the jury that these defenses applied to the plaintiffs’ Minimum Wage Claims. The plaintiffs argued that the text of Section 198 made the defenses available only for violations of specified parts of New York Labor Law § 195, which concerns wage and hiring notices and wage statements.

Court’s analysis

Judge Woods concluded that the statutory language was clear. Section 198(1-b) refers to an employee who was not provided notice under Section 195(1)(a), and Section 198(1-d) refers to an employee who was not provided statements under Section 195(3). The court read those references as limiting the defenses to the specified Section 195 violations. Because the plaintiffs’ Minimum Wage Claims were not brought under either of those Section 195 provisions, the defenses did not apply to them.

The court declined to follow Ahmed v. Morgan’s Hotel Grp. Mgmt., LLC, an Appellate Division decision that had upheld applying one of the defenses to a minimum-wage claim. Judge Woods found Ahmed unpersuasive because it quoted only part of the statute and did not explain why the statute’s reference to Section 195 should be disregarded.

The court also rejected reasoning from two other federal district court decisions, Hicks and Marin, which had treated the tip-credit notice regulations as implementing Section 195. Judge Woods emphasized that the Hospitality Industry Wage Order identified Article 19’s Minimum Wage Act—not Section 195—as the statutory basis for the regulations. He also relied on the regulations’ text and history, including that the regulations took effect before Section 198’s affirmative defenses became available.

The defendants argued that any notice violations were technical and that the plaintiffs had not alleged they received too little in tips to reach the minimum wage. The court acknowledged those policy arguments but concluded that it could not change the statutory limits on the defenses. Because the required notices were not provided, the defendants were not allowed to take the tip credit for the plaintiffs’ Minimum Wage Claims.

Disposition

The court concluded, consistent with its March 31, 2022 oral decision, that the affirmative defenses could not be raised in response to the plaintiffs’ Minimum Wage Claims. The court had denied the defendants’ request to instruct the jury that the defenses applied to those claims. This opinion published the court’s reasoning for that decision.