Brennan v. Broadmoor Hotel Inc.
Brennan v. Broadmoor Hotel Inc. Brennan v. Broadmoor Hotel Inc.
June 15, 2023
Brennan worked at the Broadmoor Hotel Inc. (the Broadmoor) as a banquet server from 2013 through 2019. The Broadmoor paid Brennan a base hourly wage of $2.17 plus a portion of the 22% service charge on food and drink consumed at an event. Banquet clients paid the service charge as a single expense, and the Broadmoor told banquet clients that it retained a portion of that service charge for administrative costs and passed the rest on to the service staff. In addition, banquet attendees sometimes left banquet staff separate tips. In 2019, Brennan filed a complaint with the Colorado Department of Labor and Employment, Division of Labor Standards and Statistics (the Division) alleging that he was a “tipped employee” under the Colorado Minimum Wage Order Number 35 (MWO), which implements the Colorado Minimum Wage Act (CWA). Brennan asserted that he was owed the difference between his base hourly rate and the tipped employee hourly rate. Following an investigation, the Division cited the Broadmoor for failing to pay Brennan the tipped employee minimum wage and overtime and ordered the Broadmoor to pay Brennan $7,500 in wages (the statutory maximum) and $9,375 in penalties, along with $1,850 in fines to the Division. The Broadmoor appealed, and a hearing officer reversed the Division’s conclusion that Brennan was a tipped employee but affirmed the Division’s conclusion that Brennan was owed overtime and affirmed the fine. The district court affirmed the hearing officer’s conclusions.
On appeal, Brennan argued that, in deciding whether the service charge is a tip, courts should look only at whether customers intended for the service charge to end up with banquet servers, regardless of whether the payments were voluntary, which assumes that the banquet service charge is in fact a gratuity. Neither the CWA nor the MWO define the term “tip.” The hearing officer therefore used the ordinary meaning of a tip as a customer’s voluntary payment for service in an amount determined by that customer and concluded that the Broadmoor’s banquet service charge was not a tip because it was a mandatory, fixed charge paid by banquet clients for banquet services. The hearing officer’s interpretation of “tip” under these circumstances was reasonable, comports with the word’s ordinary meaning, and is entitled to deference. Accordingly, the hearing officer properly concluded that Brennan is not owed wages for the difference between his base wage and the tipped employee minimum wage.
The Broadmoor argued that Brennan was a sales employee because he was part of a sales team that sold the experience of hosting an event at the Broadmoor. It maintained that he “made sales” by providing exceptional banquet service and attentive beverage service, which increased total sales and, in turn, the size of the service charge and his payout from that charge. The MWO requires employers to pay employees overtime under certain conditions, but certain sales employees who are paid on a commission basis are exempt from overtime pay. The court of appeals concluded that a sales employee unambiguously means someone employed for the purpose of making sales. Here, the record supports the hearing officer’s conclusion that Brennan was employed to provide service to banquet customers rather than to make sales. Accordingly, Brennan was not a sales employee and thus not exempt from overtime pay under the commission sales exemption.
The Broadmoor also argued that it had a good faith legal justification for not paying the claimed wages in believing that (1) the service charge was not a tip and (2) the commission sales exemption applied and therefore CRS § 8-4-113(1)(a) does not permit the imposition of the fine . Here, the Broadmoor had a good faith justification for not paying wages associated with the first issue because the hearing officer, the district court, and the appellate court all concluded that its service charge was not a tip. Second, while the division ultimately concluded that Brennan was not a sales employee and thus not exempt from overtime pay under the commission sales exemption, the Broadmoor advanced plausible arguments in support of its position.
The part of the hearing officer’s order compelling the Broadmoor to pay Brennan for wages owed and associated penalties was affirmed. The imposition of a fine was reversed.