[PUBLISH] In the United States Court of Appeals For the Eleventh Circuit

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No. 20-12422 ____________________ MELISSA COMPERE, VALDO SULAJ, ALVARO BETANCOURTE, ALBA CASTILLA, SLAGJANA KOVACHEVSKA, ALDALYNNE ALDANA, DANIEL PACHECO, SANTOS RIVERA, WILLIAM CAMERON, ADAM JAGODA, ALEJANDRA LAVALLE, ANTONIO SCIANCALEPORE, MERVE BUDOK, ARBER LUKOVIC, VIOLETA MARKOVIC, USCA11 Case: 20-12422 Date Filed: 03/18/2022 Page: 2 of 21

2 Opinion of the Court 20-12422 TAMAS CZOMBOS, PABLO CANO, LUIS LUCIANO, GORDON MACK, RONALDO ESCALONA, ODALYS BURGOS, MUNEVVER KOC, MEHMET BAYKARA, Plaintiffs-Appellants, DIEGO VARGAS, Plaintiff, versus NUSRET MIAMI, LLC, d.b.a. Nusr-et Steakhouse, a Florida limited liability company, NUSRET GOKCE, an individual, Defendants-Appellees.

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Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:19-cv-20277-AHS ____________________ USCA11 Case: 20-12422 Date Filed: 03/18/2022 Page: 3 of 21

20-12422 Opinion of the Court 3

Before BRANCH, GRANT, and BRASHER, Circuit Judges. BRANCH, Circuit Judge: Restaurants regularly add mandatory service charges or gratuities to customers’ bills. This appeal is about whether such charges are “tips” under federal employment law, an issue of first impression in the Eleventh Circuit. If the mandatory service charges are tips, federal law would generally prohibit restaurants from using the fees to pay minimum and overtime wages to employees. But if the charges are not tips, establishments may apply them toward employee wages. Nusret Miami, LLC is an upscale steakhouse in Miami, Florida. It is owned by Nusret Gokce, a chef and internet celebrity also known by the nickname “Salt Bae.”1 Since opening in November 2017, the restaurant added a mandatory 18% “service charge” to customers’ bills. It collected these payments and redistributed them to certain employees on a pro rata basis to cover Nusret’s minimum and overtime wage obligations. To do so, the restaurant used a provision in the Fair Labor Standards Act (“FLSA”) exempting certain retail and service establishment employers from paying overtime wages if, as relevant here, “the

1 For clarity’s sake, we will refer to Nusret Gokce and Nusret Miami—the two defendants—collectively as “Nusret.” USCA11 Case: 20-12422 Date Filed: 03/18/2022 Page: 4 of 21

4 Opinion of the Court 20-12422 regular rate of pay” of employees exceeds one and one-half times the applicable minimum hourly rate. See 29 U.S.C. § 207(i). In this collective action under the FLSA, the plaintiffs—a group of tipped employees at Nusret (“Employees”)—challenge Nusret’s compensation scheme. The Employees allege that from November 1, 2017, through January 18, 2019, the restaurant paid them less than the required federal minimum and overtime wages and forced them to participate in an illegal tip pool with non-tipped employees. The heart of their argument is that, although their portion of the service charges exceeded the statutory wage requirements (e.g., some employees made over $100,000 per year), Nusret still violated the FLSA because the 18% “service charge” was not a service charge, but, in fact, a tip. And because tips are not part of the Employees’ “regular rate of pay,” the restaurant could not use them to offset its wage obligations under the FLSA. See, e.g., Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 424 (1945)