Jessica M. Karmasek Aug. 16, 2013, 5:50pm

ST. PAUL, Minn. (Legal Newsline) -- The Minnesota Supreme Court this week ruled in favor of more than 700 servers, bartenders and security guards in a lawsuit brought against their employers, alleging violations of the state's Fair Labor Standards Act.

The employees sued Uptown Drink LLC, Drink Inc., Downtown Entertainment Ventures LLC d/b/a Spin Night Club, the parent corporation Fun Group Inc., and the parent corporation's president Michael Whitelaw.

The employees filed the class action, alleging they were required to pay for register shortages, and the bills of customers who walked out without paying or failed to sign credit-card receipts, from their gratuities.

Some of the witnesses at trial indicated that employees who failed to make these payments could face employment termination.

The employers did not dispute that the employees were required to pay for shortages "on occasion," but argued that the payments were not deductions because the employees on "their own volition [made] a decision that rather than taking a write-up for improperly failing to handle cash," they would cover the shortages to the employers.

A jury found in favor of the employers, and a state appeals court affirmed.

The state's high court, in an 11-page decision Wednesday, reversed and remanded the case.

"We must first determine whether gratuities satisfy the definition of 'wages' under section 181.79," Chief Justice Lorie Gildea wrote for the court. "The district court found that the deductions at issue came from the employees' gratuities, not from their hourly pay. The court of appeals suggested that 'wages' under section 181.79 do not include gratuities."

The Supreme Court sided with the employees, concluding that the term "wages" includes gratuities.

As such, the appeals court erred when it ruled that the employees were not entitled to judgment as a matter of law, or JMOL, because the deductions were taken from their gratuities rather than their hourly pay, the high court explained.

The court also ruled that the district court erred when it determined the employees had to show that the deductions at issue caused their wages to fall below the minimum wage.

"Because section 181.79 does not require employees to prove that deductions caused their wages to fall below the minimum wage, we hold that the court of appeals erred when it concluded that the employees were not entitled to JMOL on that basis," Gildea wrote.

The court said there is "no dispute" that the employees were required to pay the employers back for register shortages, walkouts and unsigned credit-card receipts.

"Even when the evidence is viewed in the light most favorable to the employers, there was no legally sufficient basis for a reasonable jury to find that the employers did not make unlawful deductions from the employees' wages in violation of section 181.79," the chief justice wrote.

Justice David Lillehaug, not having been a member of the court at the time of submission, did not take part in the case.

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