Valle et al v. Gordon Chen's Kitchen LLC et al
OPINION AND ORDER: Accordingly, the parties are directed to submit for the Court's consideration a proposed calculation of damages based on the findings in this Opinion and Order. If the parties cannot agree on the damages calculation, they may submit competing proposals. The Court will thereafter enter judgment. For the foregoing reasons, plaintiffs are entitled to judgment against defendants for violating the FLSA and NYLL. Plaintiffs shall supply to defendants within 14 days of the d ate of the date of this Opinion and Order their proposal for calculation of damages. The parties' final proposal (or proposals) shall be filed within 7 days thereafter, and as further set forth in this order. (Signed by Magistrate Judge Gabriel W. Gorenstein on 6/5/2017) (ap)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ALEJANDRO VALLE et al.,
OPINION AND ORDER
15 Civ. 2005 (GWG)
GORDON CHEN’S KITCHEN LLC et al.,
GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE
Plaintiffs Alejandro Valle and Edgar Cid1 brought this action against Gordon Chen’s
Kitchen, LLC, Mac-War Restaurant Corporation, and Allan Wartski (collectively, “defendants”)
to recover unpaid wages and other damages arising out of defendants’ alleged violations of the
Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”), and the New York Labor Law,
N.Y. Labor Law § 1 et seq. (“NYLL”). The Court held a bench trial on November 3, 2016, and
has considered the parties’ submissions.2 This Opinion and Order contains the findings of fact
and conclusions of law required by Federal Rule of Civil Procedure 52(a)(1).
In brief, plaintiffs contend that they worked for defendants’ restaurant as delivery
Edgar Cid was also known as Balverde Lopez or “Daniel” Lopez. (Garzon: Tr. 62, 77).
See Defendants’ Proposed Findings of Fact and Conclusions of Law, filed Aug. 22,
2016 (Docket # 41) (“Defs. Pre-trial Mem.”); Plaintiffs’ Proposed Findings of Fact and
Conclusions of Law, filed Aug. 22, 2016 (Docket # 42) (“Pls. Pre-trial Mem.”); Joint Pretrial
Order, filed Aug. 26, 2016 (Docket # 44); Post-Trial Memorandum of Defendants Gordon
Chen’s Kitchen LLC (d/b/a/ Hakata Grill), Mac-War Rest. Corp. (d/b/a/ Hakata Grill), and Allan
Wartski, filed Jan. 27, 2017 (Docket # 49) (“Defs. Mem.”); Plaintiffs’ Post-Trial Memorandum
of Law, filed Jan. 27, 2017 (Docket # 50); Opposition to Plaintiffs’ Post-Trial Memorandum of
Law, filed Feb. 17, 2017 (Docket # 53) (“Defs. Reply”).
workers and were not properly paid under federal and state labor laws. They contend that
defendants improperly used a “tip credit” to calculate plaintiffs’ hourly wage instead of paying
them at minimum wage; that the hourly overtime rate paid by defendants was too low; that
plaintiffs worked more hours than were reflected on defendants’ records; that defendants failed
to provide plaintiffs with the notices required by the NYLL; and that defendants failed to pay
them “spread of hours” pay as required by the NYLL. Pls. Pre-trial Mem. at 7-12, 15.
The Court has subject matter jurisdiction over plaintiffs’ federal claims under 28 U.S.C.
§ 1331 and supplemental jurisdiction over their state law claims under 28 U.S.C. § 1367(a).
A. Undisputed Facts
Gordon Chen’s Kitchen LLC operates and controls a Japanese restaurant called “Hakata
Grill” at 232 East 53rd Street in New York, New York. (Cid: Tr. 8; Garzon: Tr. 60).3 Mac-War
Restaurant Corporation previously did business as Hakata Grill at 230 West 48th Street in New
York, but ceased operations on December 14, 2008. (Cid: Tr. 29; Garzon: Tr. 60-61). Allan
Wartski is the managing member of Gordon Chen’s Kitchen LLC, was the president of Mac-War
Restaurant Corporation, and has been doing business through these entities as “Hakata” for over
30 years. (Wartski: Tr. 111-112). Hakata hired Cid in September 2008, and Valle in October
2010, to make deliveries of food orders. (Cid: Tr. 8; Valle: Tr. 37-38). Cid worked under the
name “Balverde ‘Daniel’ Lopez.” (Cid: Tr. 33; Garzon: Tr. 77). Both plaintiffs stopped
working at Hakata in 2014. (Cid: Tr. 8; Valle: Tr. 37).
“Tr.” refers to the transcript of the trial which has been filed as Docket # 51.
B. Trial Testimony
1. Edgar Cid
Cid testified that before October 2011 he worked Monday to Saturday, 10:30 a.m. to 4:00
p.m. and 6:00 p.m. to 10:30 p.m. (Cid: Tr. 9-10). He said that he began working only five days
a week after October 2011, when the restaurant began closing on Saturdays. (Cid: Tr. 11-13).4
Cid testified that, when he started working at Hakata, he did not have to record when he came to
work and when he left. (Cid: Tr. 14). That changed in 2012, at which point he had to punch
numbers into a computer system to enter and to leave. (Cid: Tr. 14-15). Cid said that this was
“just for a month.” (Cid: Tr. 14).
Cid testified that he was told he was paid $4.65 per hour when he first started at Hakata.
(Cid: Tr. 15-16). He was not paid any supplementary pay if he worked more than 40 hours in a
week. (Cid: Tr. 16). His pay increased to $5 per hour beginning in October 2010, then to $5.65
“approximately from 2012 to 2014.” (Id.). He received tips, but was never told how those tips
would affect his compensation from the restaurant. (Cid: Tr. 17).
Cid testified that he was paid by check each week, which came with a slip of paper that
Cid “never paid very much attention to.” (Cid: Tr. 29-30). The slip of paper could have
included his number of hours worked, his hourly rate, and notations of tips and what was
withheld from wages. (Cid: Tr. 31). He said that the check covered 40 hours of work, but he
was regularly paid in cash for an extra 10 hours of work per week not listed on these slips of
paper. (Cid: Tr. 33-34). He testified that the extra time was paid “in a different check written,
Cid’s testimony about when this change occurred was inconsistent. He first testified
that this change occurred in October 2010. (Cid: Tr. 9). He then testified that the restaurant
closed on Saturdays “[i]n March of 2009 . . . [t]hrough October of 2010.” (Cid: Tr. 10). Later,
he testified that the change occurred in October 2011. (Cid: Tr. 13-14).
payable to a different person, and then that person would cash the check and pay [him] cash, but
at the regular hours.” (Cid: Tr. 33). He said that he was paid either in cash or by check at the
regular hourly rate for all 50 hours. (Cid: Tr. 33-34).
Cid testified that he made approximately 22 deliveries per day. (Cid: Tr. 20). When he
was not making deliveries, he performed other activities, such as purchasing and organizing food
items, cleaning, and preparing soy sauce and ginger dressing. (Cid: Tr. 17-18). He spent a
half-hour preparing soy sauce every day, washed utensils for half an hour per day, cleaned the
floor for half an hour per day, prepared ginger sauce two times a week for a half-hour, and
stocked soda for 15 minutes once per week. (Cid: Tr. 18-19).
2. Alejandro Valle
Valle testified that his starting schedule was from 10:30 a.m. to 2:00 p.m., then 4:00 p.m.
to 10:30 p.m., five days per week. (Valle: Tr. 38-39). His schedule changed in 2012, when he
started working from 9:30 a.m. to 2:00 p.m. and from 4:00 p.m. to 10:30 p.m. (Valle: Tr. 39).
At first, he did not have to record the time he came to work in the morning and left in the
evening. (Valle: Tr. 38-39). “[F]or two months” in 2012, however, he had to put his arrival and
departure times into a computer system. (Valle: Tr. 40).
Valle was told he would be paid $4.65 per hour when he first started, which was paid by
check. (Valle: Tr. 40-41). He received checks for 40 hours of work, both delivery and nondelivery. (Valle: Tr. 50-51). He also received additional money that was “changed” for him by
a coworker. (Id.). He did not remember if anything was attached to the check. (Valle: Tr. 52).
His pay increased to $5 per hour in January 2011, then to $5.65 per hour in October 2012.
(Valle: Tr. 41-42). He also received tips, but was never told how receiving those tips would
affect his wages. (Valle: Tr. 42).
Valle made between 18 and 25 deliveries each day. (Valle: Tr. 46-47). When he was not
making deliveries, he prepared salad every day for 30-40 minutes, cleaned the floor for about 45
minutes, prepared delivery bags for about 20 minutes, put deliveries from suppliers away about
twice a week for about 20 minutes, and twice a week washed dishes for 30 minutes or more.
(Valle: Tr. 44-45). Additionally, in 2014, Valle bought soda twice a week for a half-hour, made
ginger dressing twice a week for a half-hour, and made soy sauce every day for 20-25 minutes.
(Valle: Tr. 46).
3. Pedro Garzon
Garzon testified that he is a manager at Gordon Chen’s Kitchen, and had worked there
and at Mac-War Restaurant for 22 years, becoming the manager in 2004. (Garzon: Tr. 60-61).
His most “important” job is to keep the records and hours for the restaurant’s employees,
including recording the time they come in and the time they leave work. (Garzon: Tr. 61-62).
He remembered Valle and Cid (whom he knew as Daniel Lopez) from when they worked there,
and he gave them their work assignments beginning in January 2010. (Garzon: Tr. 62-64). He
was on the premises at all times when plaintiffs were there, and neither one was there for more
than 10 hours a day. (Garzon: Tr. 64-65, 67). Also, plaintiffs would normally leave in the
middle of the day, then return. (Garzon: Tr. 93-94).
Garzon described the method by which Hakata kept track of work hours from 2008 to
2014. Originally there was only a time clock that required a “punch in” and “punch out” using a
card. (Garzon: Tr. 92). Garzon was responsible for maintaining the system, which indicated the
date and time, with places on the punch cards for four time entries per day, five days per week.
(Garzon: Tr. 92-94). Garzon would take these cards and record the hours listed, rounding up to
the nearest 15-minute increment, to calculate the number of hours each employee worked.
(Garzon: Tr. 94-98). The total hours for each employee was then transferred to the payroll
department. (Garzon: Tr. 98-99). The restaurant switched from this system to a computerized
POS system he set up in 2013. (Garzon: Tr. 62, 66). He testified that every time there was
overtime he would memorialize it and put it into the payment system. (Garzon: Tr. 84-86). This
overtime would be paid at “time and a half.” (Garzon: Tr. 81). The time cards were kept for
about four years but were lost during a move. (Garzon: Tr. 99).
Garzon testified that the delivery workers were always paid their weekly wages by check.
(Garzon: Tr. 67, 73). The checks were attached to a “stub” that would show the number of hours
worked and the tips each employee had been paid. (Garzon: Tr. 76). Garzon would also
distribute tips to the delivery workers daily, in cash, after pooling the tips from every delivery
worker. (Garzon: Tr. 67-68). The delivery workers would keep cash tips customers gave them
— apparently without being recorded in their wage statements. (See Garzon: Tr. 69). Most of
the tips were on credit cards, however. (Id.). Garzon would run a report each day that would tell
him credit card tips from the previous day, then divide that total by the number of delivery
workers who worked and pay each one their share in cash. (Garzon: Tr. 67-68, 71-72). Garzon
would receive a check from Wartski each week, made out to “cash,” which he would redeem and
use to distribute tips on a daily basis. (See id.).
The tips paid in this manner were reflected on the pay stubs. (Garzon: Tr. 73). Garzon
admitted that he does not know what a “tip credit” is, and that he did not provide the delivery
workers with a written notice about what it means to take a tip credit. (Garzon: Tr. 89).
Garzon testified that, in addition to delivering food, delivery workers would also make
soy sauce, make salad, make fruit salad, prepare delivery bags with utensils, napkins, and
chopsticks, wash utensils, wash the floor, help put away delivery containers, buy soda, take out
garbage, and make ginger sauce. (Garzon: Tr. 101-05). He estimated that Cid and Valle spent
an average of one hour and 15 minutes per day doing these tasks. (Garzon: Tr. 106).
4. Allan Wartski
Wartski testified that he consulted with “professionals” concerning his payroll
obligations, attempting to learn when pay rates changed, and that he was familiar with “tip rate”
and “non-tip rate.” (Wartski: Tr. 112). He claimed, concerning “the integrity of recordkeeping,”
that he gave instructions “[t]o do everything according to how we are supposed to,” meaning that
all employees had to “punch in” and “punch out” each day. (Wartski: Tr. 112).
Wartski said that he has never told Garzon to lie or “put in improper records,” and
instructed him to “keep a time clock, record it on the sheet, and get it over to the payroll
company,” all of which was done to his satisfaction. (Wartski: Tr. 113). He very rarely
reviewed the paychecks Garzon issued to the delivery workers. (Wartski: Tr. 113-14). On
cross-examination, Wartski testified that he could fire Garzon, or make any other change he
wanted to the business dealings of Hakata. (Wartski: Tr. 115-16).
C. Pay Statements and Payroll Registers
Plaintiffs entered into evidence defendants’ trial exhibits A through H (Tr. 53-54), which
were copies of weekly pay statements issued to “Lopez” (a.k.a Cid) from 2009 to 2011, weekly
pay statements issued to Valle from 2010 to 2011, and weekly payroll registers maintained by
defendants referencing payments to Valle and Lopez from 2012 to 2014, Exs. A-H. The pay
statements generally show the number of hours plaintiffs worked, their hourly rates, the tips they
reportedly received, the number of any overtime hours worked, and an hourly overtime rate one
and one-half times their base rate. See Exs. A-E. The payroll registers contain the same
information. See Exs. F-H.
These records indicate that plaintiffs were paid at a rate of $4.60 per hour from 2009 to
May 2010, $4.65 per hour from May 2010 to January 2011, $5 per hour from January 2011 to
December 2011, and $5.65 per hour for the remainder of their employment.5 See, e.g., Balverde
Lopez Pay Stub, dated Jan. 2, 2009, Ex. A ($4.60 per hour); Balverde Lopez Pay Stub, dated
May 28, 2010, Ex. B (same); Balverde Lopez Pay Stub, dated June 4, 2010, Ex. B ($4.65 per
hour); Alejandro Valle Pay Stub, dated Dec. 31, 2010, Ex. D (same); Alejandro Valle Pay Stub,
dated Jan. 6, 2011, Ex. E ($5 per hour); Alejandro Valle Pay Stub, dated Dec. 30, 2011, Ex. E
(same); Payroll Registers, Exs. F-H ($5.65 per hour). Where overtime was paid, the hourly rates
were $6.98 in 2010, $7.50 in 2011, either $8.48 or $9.28 in 2012, $9.28 in 2013, and $9.65 in
2014. See generally Exs. B-H.
D. Findings on Disputed Issues of Fact
We accept the testimony of Garzon as credible. Although plaintiffs attempted at trial to
impeach Garzon by implying Wartski influenced his testimony (see Garzon: Tr. 90-91), Garzon
credibly testified that Wartski never told him to lie, alter records, or otherwise deceive the court
(Garzon: Tr. 91-92). Wartski similarly credibly testified that he never told Garzon to lie or to
create improper records. (Wartski: Tr. 113-15). Regarding defendants’ method of recordkeeping before they began to use a computerized system, Garzon testified clearly and
consistently, and when examined by the Court about the system’s operation, he answered
questions without hesitation or equivocation. (See Garzon: Tr. 92-101). Additionally, the
payroll records before 2013 do not reflect a uniform number of hours worked, but instead varied
Some payroll records also include time noted for Valle and “Lopez” as “cooks” paid at
$11 per hour, see, e.g., Payroll Register, dated Feb. 14, 2014, Ex. H, which Garzon testified was
for when plaintiffs helped with catering events (see Garzon: Tr. 81, 87).
and sometimes included overtime, supporting Garzon’s testimony that they were entered
manually each week from the time cards. Compare Balverde Lopez Pay Stub, dated Jan. 1,
2010, Ex. B (31 hours worked), with Belvedere Lopez Pay Stub, dated Apr. 9, 2010, Ex. B (40
hours), Belvedere Lopez Pay Stub, dated Jan. 21, 2011, Ex. C (44 hours), and Payroll Register,
dated Apr. 13, 2012, Ex. F (42.5 hours). We also credit Garzon’s testimony that from 2010
through 2012 the restaurant closed at 9:30 p.m. or earlier, and that the delivery shifts ran from
10:00 a.m. to 2:00 or 3:00 p.m., then from 5:00 p.m. to 9:00 or 10:00 p.m. (Garzon: Tr. 108-10).
As a result, we conclude that the payroll records (exhibits A through H) are accurate as to the
number of hours that plaintiffs worked. These records reflect the total number of hours plaintiffs
worked each week, including their overtime hours, and their rate of pay.
We thus reject the testimony of Cid and Valle regarding the hours they worked to the
extent it was inconsistent with Garzon’s testimony and the pay records. Neither plaintiff
explained why their pay stubs varied in hours, or why they received overtime for some days but
not for others, despite claiming that there was no requirement to record the hours they came and
We recognize that Cid testified that his overtime pay was paid “in a different check
written, payable to a different person, and then that person would cash the check and pay us in
cash, but at the regular hours.” (Cid: Tr. 33). But this was more or less congruent with the
system that Garzon used to pay delivery workers their tips — that is, that Wartski would make a
check out for the total amount of tips from credit card receipts and that this check would then be
cashed. (Garzon: Tr. 67-72). It is also consistent with the pay records, which indicate separate
sums attributable to tips.
As for the number of non-tipped hours worked, Cid said that he spent a half-hour every
day preparing soy sauce, a half-hour every day washing utensils, and a half hour every day
cleaning the kitchen floor. (Cid: Tr. 17-19). He also spent a half-hour preparing ginger sauce
twice a week, and 15 minutes stocking soda once per week. (Id.). Valle said that he spent 30-40
minutes preparing salad and fruit salad every day, 45 minutes cleaning the floor every day, and
20 minutes preparing delivery bags every day. (Valle: Tr. 44-45). Additionally, he testified he
spent 20 minutes once or twice a week putting away deliveries from suppliers, and in 2014 he
bought soda twice a week for half an hour; made ginger dressing twice a week for a half-hour;
and made soy sauce every day for 20-25 minutes. (Valle: Tr. 45-46). While we accept that
plaintiffs performed these tasks, we believe that their testimony in general was not as clear and
consistent as that of Garzon. Garzon acknowledged that plaintiffs performed all of these nondelivery tasks. (Garzon: Tr. 103-05). But he estimated that plaintiffs spent about an hour and 15
minutes per day completing them. (Garzon: Tr. 106). Based on this testimony and the
description of the tasks involved, the Court estimates that plaintiffs spent one and one-half hours
per eight-hour shift performing non-delivery work.
A. Minimum Wage Claims
The FLSA provides that every employer not otherwise exempt from its coverage must
pay any employee engaged in commerce a minimum hourly wage. See 29 U.S.C. § 206(a)(1).6
The FLSA applies to enterprises “whose annual gross volume of sales made or business
done is not less than $500,000.” 29 U.S.C. § 203(s)(1)(A)(ii). The failure to prove this element
does not implicate subject matter jurisdiction. See, e.g., Rocha v. Bakhter Afghan Halal Kababs,
Inc., 44 F. Supp. 3d 337, 344 (E.D.N.Y. 2014) (collecting cases); Padilla v. Manlapaz, 643 F.
Supp. 2d 298, 300-01 (E.D.N.Y. 2009) (discussing Arbaugh v. Y & H Corp., 546 U.S. 500
(2006) which found that coverage under the statute in the Title VII context is not a jurisdictional
issue). Although defendants did not concede at trial that their revenue is greater than $500,000 a
year (Tr. 22), they make no argument in their pre- or post-trial memoranda of law that the FLSA
While plaintiffs worked for Hakata, the applicable federal minimum wage was between $5.85
per hour and $7.25 per hour. See 29 U.S.C. § 206(a)(1) (listing federal minimum wage rates).
The New York State minimum wage rate as of July 12, 2013, was $7.15 per hour. NYLL § 652.
It increased to $8 on December 31, 2013, and to $8.75 on December 31, 2014. Id. The rates at
which plaintiffs were paid while working at Hakata were consistently less than both the federal
and state minimum wages. See generally Exs. A-H (showing plaintiffs’ hourly rate as $4.60,
$4.65, $5, and $5.65).
Under certain conditions, an employer is entitled to pay an employee an hourly wage less
than the standard minimum wage if the employee receives tips from customers for his or her
services. See 29 U.S.C. §§ 203(m), (t). However, under the FLSA,
an employer may not claim a tip credit as to an employee’s wages unless the
employer has informed that employee of the provisions of the section of the
FLSA permitting the tip credit. 29 U.S.C. § 203(m); see, e.g., Copantitla v.
Fiskardo Estiatorio, Inc., 788 F. Supp. 2d 253, 287 (S.D.N.Y. 2011); Chung v.
New Silver Palace Rest., Inc., 246 F. Supp. 2d 220, 228-29 (S.D.N.Y. 2002).
“This notice provision is strictly construed and normally requires that an
employer take affirmative steps to inform affected employees of the employer’s
intent to claim the tip credit.” Perez v. Lorraine Enters., Inc., 769 F.3d 23, 27 (1st
Cir. 2014); see, e.g., Kilgore v. Outback Steakhouse of Fla., Inc., 160 F.3d 294,
298 (6th Cir. 1998); Reich v. Chez Robert, Inc., 28 F.3d 401, 404 (3d Cir. 1994);
Hart v. Rick’s Cabaret Int’l, Inc., 967 F. Supp. 2d 901, 934 (S.D.N.Y. 2013);
Lanzetta v. Florio’s Enters., Inc., 763 F. Supp. 2d 615, 623 (S.D.N.Y. 2011).
Inclan v. N.Y. Hosp. Grp., Inc., 95 F. Supp. 3d 490, 497 (S.D.N.Y. 2015). An employer
does not apply to them. Additionally, Cid and Valle’s testimony makes it more likely than not
that defendants’ gross revenue was greater than $500,000. Cid testified that he made about 22
deliveries per day, with an average value of around $25 per delivery. (Cid: Tr. 20, 23). Valle
testified that he made about 22 deliveries per day, with an average value of around $30 per
delivery. (Valle: Tr. 47, 49). Conservatively estimating 22 deliveries per day, five days per
week, at $25 per delivery, plaintiffs alone would have delivered around $143,000 worth of
merchandise each per year. With about four deliverymen at the restaurant (e.g. Cid: Tr. 21),
defendants easily made over $500,000 in gross revenue per year.
“bear[s] the burden of showing that they have satisfied [the FLSA’s notice] requirement by, for
example, providing employees with a copy of § 203(m) and informing them that their tips will
be used as a credit against the minimum wage as permitted by law.” Chan v. Sung Yue Tung
Corp., 2007 WL 313483, at *18 (S.D.N.Y. Feb. 1, 2007); accord He v. Home on 8th Corp., 2014
WL 3974670, at *5 (S.D.N.Y. Aug. 13, 2014); Copantitla, 788 F. Supp. 2d at 288. An employer
who fails to provide the required notice is liable under the FLSA for unpaid minimum wages.
See, e.g., Reich, 28 F.3d at 403 (“If the employer cannot show that it has informed employees
that tips are being credited against their wages, then no tip credit can be taken and the employer
is liable for the full minimum-wage . . . .”); Inclan, 95 F. Supp. 3d at 498 (as defendants did not
meet burden of proving they provided notice of tip credit, they were liable under the FLSA for
unpaid minimum wages without a tip credit allowance).
New York law also requires that an employer provide an employee notice before it may
deduct a “tip credit” from the employee’s base wage. N.Y. Comp Codes R & Regs. tit. 12,
§ 146-2.2 (effective Jan. 1, 2011); id. § 137-2.2 (repealed effective Jan. 1, 2011); accord Inclan,
95 F. Supp. 3d at 498. The burden is on the defendants to show that they have complied with the
tip notice requirement. See N.Y. Comp Codes R & Regs. tit. 12, § 146-2.2(d) (“The employer
has the burden of proving compliance with the notification provisions of [the NYLL].”); Villar
v. Prana Hosp., Inc., 2017 WL 1333582, at *3 n.4 (S.D.N.Y. Apr. 11, 2017).
Here, defendants have offered no argument that they complied with the FLSA or the
NYLL’s requirement that notice be given before the tip credit is taken. Notably Garzon testified
that he does not know what a “tip credit” is. (Garzon: Tr. 89). Both plaintiffs testified that they
were never told how receiving tips would affect their wages. (Garzon: Tr. 17; Valle: Tr. 42).
Rather, the only argument defendants have offered on the tip credit issue is that the claim
is not properly pled in the complaint and thus was not properly raised at trial. See Defs. Reply at
1-3. While the complaint is not a model of clarity, plaintiffs clearly alleged that they were not
paid minimum wage, Complaint, filed Mar. 17, 2015 (Docket # 1) (“Compl.”) ¶¶ 81, 103-109,
114-118; pled that “[a]t no time did Defendants inform Plaintiffs that they had reduced their
hourly wage by a tip allowance,” id. ¶ 88; and sought “damages for the amount of unpaid
minimum and overtime wages, and damages for any improper deductions or credits taken
against wages under the FLSA and NYLL as applicable,” id. at 22-23. We believe these
allegations were sufficient to alert defendants that plaintiffs were raising as an issue in the case
that defendants’ failure to pay minimum wage could not be justified on the basis that defendants
properly provided notice to plaintiffs of their intention to take a tip credit.
More importantly, even though it was clear long before trial that the notice of tip credit
issue was to be part of this case, defendants made no objection to the inclusion of this issue. The
joint pretrial order listed as an issue to be tried the defendants’ failure to pay minimum wage, see
Joint Pretrial Order, filed Aug. 26, 2016 (Docket # 44), at 2-3 — a failure that defendants could
justify only by meeting their burden of proof that they had fulfilled all the prerequisites of
claiming a tip credit, including the notice requirement. The plaintiffs’ proposed findings of fact
and conclusions of law, filed months before trial, described the tip credit notice claims in detail
and at length both under the FLSA and NYLL. See Pls. Pre-trial Mem. at 10-12. Defendants
never objected to plaintiffs’ express plan to raise this issue at trial. At trial itself, plaintiffs’
counsel elicited from plaintiffs testimony on whether they had been told about a tip credit being
taken and also questioned Garzon about the same issue — all without any objection from
defendants as to relevance. (Tr. 17, 42, 89). Following the conclusion of the bench trial, the
Court specifically noted, and defense counsel acknowledged, that whether notice had been given
regarding the tip credit was an issue in the case. (Tr. 116-17). Indeed, defendants indicated at
that time that they would argue that the pay stubs constituted the notice and would brief that
issue. (Tr. 117).7 Thus, putting aside the question of whether the issue was raised in the
complaint, defendants impliedly consented to the issue being raised at trial. Under Federal Rule
of Civil Procedure 15(b)(2), “[w]hen an issue not raised by the pleadings is tried by the parties’
express or implied consent, it must be treated in all respects as if raised in the pleadings.” Courts
have found implied consent in situations where, notwithstanding a claim’s absence from the
governing pleading, the opposing party made no objection to the claim’s inclusion in pretrial
materials. See, e.g., Putz v. Golden, 2012 WL 2565017, at *22 n.6 (W.D. Wash. July 2, 2012);
Wildwood Indus. v. Genuine Mach. Design, 587 F. Supp. 2d 1035, 1053 (N.D. Ind. 2008).
In sum, for the reasons stated above, plaintiffs are entitled under the FLSA and the
NYLL to the difference between the minimum wage and the wage they were actually paid for
the period of their employment to which the statute of limitations applies. See, e.g., Changxing
Li v. Kai Xiang Dong, 2017 WL 892611, at *5 (S.D.N.Y. Mar. 7, 2017) (“Defendants here were
not entitled to take credit under the FLSA or NYLL since defendants did not advise plaintiffs of
their right to an undiminished wage if their tips fell short of the tip credit taken, or of their right
to be paid the minimum wage; nor did defendants provide plaintiffs with written notice of the tip
credit at all, let alone in . . . their native language. Consequently, plaintiffs are entitled to unpaid
minimum wages at the full minimum wage rate.”) (internal citation omitted). The issue of the
In fact, defendants never did so. They argued merely that the sum of “the tips earned
by Plaintiffs, when added to their hourly wage, indicated a wage rate equal to or exceeding” the
minimum wage. See Defs. Mem. at 14-15. No attempt was made to show that the notice
requirement was met.
statute of limitation is discussed in section III.E below.8
B. Overtime Wage Claims
1. Improper Wages
Both the FLSA and NYLL require that a covered employee be paid no less than one and
one-half times their regular rate of pay for hours worked in excess of 40 per week. 29 U.S.C.
§ 207(a); N.Y. Comp. Codes R & Regs. tit. 12, § 142-2.2 (using the same definition of overtime
as the FLSA); accord Domenech v. Parts Auth., Inc., 653 F. App’x 26, 27 (2d Cir. 2016)
(summary order); Nakahata v. New York-Presbyterian Healthcare Sys., Inc., 723 F.3d 192, 200
(2d Cir. 2013). As noted above, we accept that defendants’ time records are accurate, and that
plaintiffs were paid for the overtime hours they worked.
However, the rate at which plaintiffs were paid overtime was one and one-half times the
“tip credit” rate, which, as we have just explained, defendants were not entitled to use. As was
true for the base hourly wage, defendants were not entitled to take a “tip credit” off plaintiffs’
overtime hourly wage because they failed to provide plaintiffs with notice they were doing so.
See, e.g., Inclan, 95 F. Supp. 3d at 500 (defendants not entitled to tip credit allowance on
overtime wage for failure to provide plaintiffs proper notice). Defendants are thus liable for the
difference between the full overtime rate (i.e. one and one-half times the minimum wage for the
relevant years) and the amount plaintiffs actually received for their overtime hours worked.9
Because defendants are not eligible for a “tip credit” against the minimum wage in
light of their failure to provide plaintiffs with proper notice, we need not decide whether
defendants were entitled to take a “tip credit” based on the time per shift plaintiffs performed
Even if defendants had notified plaintiffs that they were taking a “tip credit,” they still
would be liable to plaintiffs for unpaid overtime wages because they deducted a tip credit from
their wage before calculating the time-and-a-half-rate instead of after. See, e.g., Inclan, 95 F.
2. Spread of Hours Pay
In addition to unpaid overtime wages, plaintiffs argue that they were entitled to “spread
of hours” pay. New York law requires, separate from any unpaid minimum wage or overtime
award, that “an employee whose workday is longer than ten hours must receive one hour’s pay at
the basic minimum hourly wage rate.” Galeana v. Lemongrass on Broadway Corp., 120 F.
Supp. 3d 306, 319 (S.D.N.Y. 2014) (internal quotation marks omitted) (quoting N.Y. Comp.
Codes R & Regs. tit. 12, § 142-2.4; and Ke v. Saigon Grill, Inc., 595 F. Supp. 2d 240, 260
(S.D.N.Y. 2008)). This time is measured as “the interval between the beginning and end of an
employee’s workday.” N.Y. Comp. Codes R & Regs. tit. 12, § 142-2.18; accord Martinez v.
Hilton Hotels Corp., 930 F. Supp. 2d 508, 531 (S.D.N.Y. 2013). Thus, breaks, lunch periods,
“split shifts,”10 and other non-working time on premises count as part of the “workday” for this
provision’s requirements. N.Y. Comp. Codes R & Regs. tit. 12, §§ 142-2.4, 142-2.18.
Here, while Garzon did not remember the exact shifts that plaintiffs worked, he testified
that the shifts were normally from 10:00 a.m. to 2:00 or 3:00 p.m., then from 5:00 p.m. to 9:00
or 10:00 p.m. (Garzon: Tr. 108-10). He also said that most of the delivery workers would have
a break of two hours or more (Garzon: Tr. 110), and that plaintiffs would normally “clock out”
during that break (Garzon: Tr. 93-94). Thus, even when not working overtime, plaintiffs would
Supp. at 499 (finding that overtime payment at $5 for base pay and $7.50 for overtime was
improper; restaurant should have multiplied minimum wage by one and one-half, then subtracted
the tip credit); see also N.Y. Comp. Codes R & Regs. tit. 12, § 146-1.4 (“It is a violation of the
overtime requirement for an employer to subtract the tip credit first and then multiply the
reduced rate by one and one half.”).
“A split shift is a schedule of daily hours in which the working hours required or
permitted are not consecutive,” and where the “split” is greater than one hour. N.Y. Comp.
Codes R & Regs. tit. 12, § 142-2.17 (emphasis omitted).
begin work around 10:00 a.m. and finish around 9:00 p.m. — a “split shift” of 11 hours.
Accordingly, plaintiffs are entitled to one extra hour of pay per day at the regular
minimum wage rate as unpaid “spread of hours” pay for each day on which they worked.
C. NYLL Notices Claims
1. Section 195(1) Notices
NYLL section 195(1) requires that, both at the time of hiring and annually through
December 28, 2014, an employer “provide his or her employees, in writing in English and in the
language identified by each employee as [their] primary language,” notice of
the rate or rates of pay and basis thereof, whether paid by the hour, shift, day,
week, salary, piece, commission, or other; allowances, if any, claimed as part of
the minimum wage, including tip, meal, or lodging allowances; the regular pay
day designated by the employer in accordance with section one hundred
ninety-one of this article; the name of the employer; any “doing business as”
names used by the employer; the physical address of the employer's main office
or principal place of business, and a mailing address if different; the telephone
number of the employer; plus such other information as the commissioner deems
material and necessary.
NYLL § 195(1)(a); accord Franco v. Jubilee First Ave. Corp., 2016 WL 4487788, at *13
(S.D.N.Y. Aug. 25, 2016). The notice must also state an employee’s regularly hourly rate and
overtime rate of pay. NYLL § 195(1)(a). Statutory damages apply to those employers who fail
to comply with this provision. See id. § 198(1-b).
However, this provision did not take effect until April 9, 2011. See, e.g., Franco, 2016
WL 4487788, at *13 (“Employees who began working before . . . April 9, 2011, however, are
not entitled to bring a claim for an employer’s failure to provide notice as required under NYLL
§ 195(1)(a).”). Here, Cid began working for Hakata in September 2008. (Cid: Tr. 8). Valle
began working there in October 2010. (Valle: Tr. 37). Because they began their employment
before April 9, 2011, they cannot raise claims under section 195(1). See, e.g., Franco, 2016 WL
4487788, at *13 (collecting cases).
2. Section 195(3) Pay Stubs
NYLL section 195(3) requires that employers
furnish each employee with a statement with every payment of wages, listing the
following: the dates of work covered by that payment of wages; name of
employee; name of employer; address and phone number of employer; rate or
rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary,
piece, commission, or other; gross wages; deductions; allowances, if any, claimed
as part of the minimum wage; and net wages.
NYLL § 195(3). The statements must also include, where applicable, the employee’s “regular
hourly rate or rates of pay; the overtime rate or rates of pay; the number of regular hours worked,
and the number of overtime hours worked.” Id. The penalty for violating this statute is $250 per
work day, not to exceed $5,000. NYLL § 198(1-d).
Garzon testified that the plaintiffs received the pay statements that were admitted into
evidence. (Garzon: Tr. 76-80). The plaintiffs themselves never denied receiving such
statements; indeed, Cid testified that they received some kind of paper with their paychecks.
(Cid: Tr. 30-32).11 Thus, we find that the stubs in evidence were given to plaintiffs. In their preor post-trial submissions, plaintiffs do not argue that these statements fail to include the elements
required by statute. Accordingly, plaintiffs cannot prevail under NYLL § 195(3).
D. Other Claims in Complaint
Plaintiffs’ complaint raises other grounds for damages, including claims of allegedly
unlawful deductions from plaintiffs’ wages for meals and equipment. See Compl. ¶¶ 134-142.
Plaintiffs failed to marshal evidence on these claims in their pre-trial submissions, however, and
Valle testified that he did not remember if anything was attached to the checks he
received. (See Valle: Tr. 51-52).
thus they cannot recover for them.
E. Statute of Limitations
As discussed above, the claims on which plaintiffs have prevailed are (1) their claims
under the FLSA and the NYLL that the defendants improperly paid them at a tip credit rate
instead of at the appropriate minimum wage or overtime wage; and (2) their claim under the
NYLL for “spread of hours” pay.
Any claim under the FLSA for unpaid minimum wages, unpaid overtime, or liquidated
damages must be brought within two years after the cause of action accrued, or three years if the
violation was willful. 29 U.S.C. § 255(a). An action accrues for purposes of the FLSA “on the
next regular payday following the work period when services are rendered” and required
compensation is not paid. Nakahata, 723 F.3d at 198 (citing 29 C.F.R. § 790.21(b)). A violation
is “willful” if the employer “either knew or showed reckless disregard for the matter of whether
its conduct was prohibited by the statute.” McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133
(1988); accord Kuebel v. Black & Decker, Inc., 643 F.3d 352, 366 (2d Cir. 2011). However,
“[i]f an employer acts unreasonably, but not recklessly, in determining its legal obligation,” it
has not acted willfully. McLaughlin, 486 U.S. at 135 n.13; see also Parada v. Banco Industrial
de Venez., C.A., 753 F.3d 62, 71 (2d Cir. 2014) (“If an employer acts unreasonably, but not
recklessly, in determining its legal obligation, its action should not be considered willful.”)
(citation, alteration, and internal quotation marks omitted); Young v. Cooper Cameron Corp.,
586 F.3d 201, 207 (2d Cir. 2009) (a showing of “[m]ere negligence is insufficient” to establish
willfulness); Salinas, 123 F. Supp. 3d at 477 (citing Parada, 753 F.3d at 71; and Young, 586 F.
3d at 207).
A claim under the NYLL must be brought within six years. NYLL § 198(3); accord
Galeana, 120 F. Supp. 3d at 314.
Plaintiffs filed their complaint on March 17, 2015. They may thus bring any claims
under the NYLL that accrued on or after March 17, 2009, and defendants are liable for the
violations of NYLL that occurred on or after that date. As plaintiffs were paid weekly, they may
only bring claims under the FLSA that accrued on or after March 17, 2013, or on or after March
17, 2012, if the violation was willful. Given that the defendants are liable for the same damages
under either the NYLL or the FLSA, it is not necessary to reach the issue of whether the FLSA
violation was willful.
F. Liquidated Damages
Plaintiffs’ pre-trial memorandum requested liquidated damages for violations of the
FLSA and NYLL, under 29 U.S.C. § 216(b) and NYLL § 198(1-a), respectively. Pls. Pre-trial
Mem. at 13-14.
An employer who violates the minimum wage and overtime provisions of the FLSA is
presumptively liable to the affected employees, in addition to back-pay, for 100% of the unpaid
wages as liquidated damages. 29 U.S.C. § 216(b) (“Any employer who violates the
provisions . . . of this title [relating to minimum wages and overtime compensation] shall be
liable to the employee or employees affected in the amount of their unpaid minimum wages, or
their unpaid overtime compensation . . . and in an additional equal amount as liquidated
damages.”). However, the employer may escape liability for such liquidated damages if the
employer demonstrates that his violation of the FLSA was committed “in good faith and that he
had reasonable grounds for believing that his act or omission was not a violation” of the FLSA.
Id. § 260; see also Brock v. Wilamowsky, 833 F.2d 11, 19 (2d Cir. 1987) (“Under [FLSA] § 260,
the employer bears the burden of establishing the defense of good faith.”). Here, defendants did
not present reasonable grounds for their belief that they were not in violation of the FLSA.
Defendants argue that their actions were “indicative of at least attempting to comply with all
Federal and New York state wage laws and notice requirements,” Defs. Pre-trial Mem. at 4, but
did not provide evidence at trial to support a finding that they could have reasonably believed
that there was no requirement in the law that they give notice of the tip credit. Although Wartski
confirmed that he “consulted with professionals concerning [his] obligations concerning payroll”
(Wartski: Tr. 112), he did not discuss what advice he specifically received regarding the FLSA
obligations, nor why it would have been objectively reasonable for him to believe that he did not
have to provide his employees with notice regarding the tip credit. Because defendants could
not have reasonably believed that failing to provide the notice explicitly demanded by the FLSA,
see 29 U.S.C. § 203(m), would not be a violation of the FLSA, they are liable for liquidated
NYLL also provides for liquidated damages “unless the employer proves a good faith
basis for believing that its underpayment of wages was in compliance with the law.” NYLL
§ 198(1-a). As was true for the FLSA, the defendants have not shown why they had a basis for
their belief that they were not required to comply with NYLL’s explicit notice requirement or
with their obligation to make “spread of hours” payments.
As for the amount of liquidated damages, we note that plaintiffs may recover under the
NYLL for claims accruing on or after March 17, 2009. However, before November 24, 2009, a
plaintiff was only entitled to liquidated damages if he or she could prove “that the employer’s
failure to pay the wage required by [article 6 of the NYLL] was willful.” Inclan, 95 F. Supp. 3d
at 504 (alteration in original) (internal quotation marks omitted) (quoting NYLL § 198(1-a)
(version effective prior to Nov. 23, 2009)). The meaning of “willfulness” under the NYLL does
not appreciably differ from “willfulness” under the FLSA’s statute of limitations. Kuebel, 643
F.3d at 366; accord Inclan, 95 F. Supp. 3d at 504-05. We do not find that plaintiffs have shown
that defendants acted wilfully, however. Wartski credibly affirmed at trial that he had
“consulted with professionals concerning [his] obligations concerning payroll.” (Wartski: Tr.
112). It thus appears defendants’ failure stemmed from their ignorance of this provision, not
from an intentional disregard of its requirement. Indeed, given defendants’ attempts to comply
with other NYLL provisions, it would have been quite a simple matter to provide the required
notice, and no benefit to defendants to intentionally not provide it. Courts have found conduct
similar to defendants’ as reflecting negligence rather than recklessness. See, e.g., Mould v. NJG
Food Serv. Inc., 37 F. Supp. 3d 762, 773 (D. Md. 2014) (“In availing themselves of the tip credit
allowed by the FLSA but failing to determine whether any legal conditions needed to be satisfied
prior to taking such a tip credit, Defendants’ conduct was unreasonable but falls short of the
recklessness required for the Court to find that their violation . . . was willful.”).
Because defendants did not willfully violate the NYLL, plaintiffs are not entitled to
liquidated damages before November 24, 2009.
They are entitled to liquidated damages on their NYLL claims that accrued from
November 24, 2009, to March 17, 2015, however. Those damages are 25% of the unpaid wages
for claims that accrued from November 24, 2009, until April 8, 2011, and 100% of the unpaid
wages from April 9, 2011, to March 17, 2015. Inclan, 95 F. Supp. 3d at 505 (citing NYLL
§ 198(1-a) as amended before and after Apr. 9, 2011); accord Chowdhury v. Hamza Express
Food Corp., 666 F. App’x 59, 60 (2d Cir. 2016) (summary order) (NYLL was amended “in 2010
to increase the amount of liquidated damages from twenty-five percent to one-hundred percent
of the total wages due”).
Plaintiffs request “both FLSA and NYLL liquidated damages for overlapping periods of
time” — i.e. from March 17, 2012, or March 17, 2013, to March 17, 2015, depending on
whether the FLSA violation was willful. See Pls. Pre-trial Mem. at 14. We reject this request as
it would lead to duplicative damages. See Chowdhury, 666 F. App’x at 61 (“[W]hatever reasons
existed to award liquidated damages under the relevant provisions of both the FLSA and the
NYLL before 2010, we read the subsequent amendments to the NYLL provision, which brought
it into substantial conformity with the FLSA provision, as having eliminated those reasons.”);
Cabrera v. 1560 Chirp Corp., 2017 WL 1289349, at *8 (S.D.N.Y. Mar. 6, 2017) (“Subsequent to
the Second Circuit’s decision in Chowdhury, courts have declined to award cumulative
liquidated damages for unpaid wages on or after April 9, 2011, the effective date of the second
amendment to the NYLL . . . .”) (collecting cases); Diaz v. AJE Mgmt. Corp., 2017 WL 746439,
at *4 (S.D.N.Y. Jan. 10, 2017) (noting that Chowdhury is non-precedential, but following its
guidance in not awarding double liquidated damages); Santana v. Brown, 2015 WL 4865311, at
*5 (S.D.N.Y. Aug. 12, 2015) (“The changes in the NYLL’s liquidated damages provision have
rendered any distinction between the [FLSA and NYLL liquidated damages] largely illusory.”).
G. Amount of Judgment
Although plaintiffs proposed damages findings in their pre-trial submissions, Damages
Chart (attached as Ex. A to Pls. Pre-trial Mem.), the chart assumes that plaintiffs consistently
worked 50 hours per week during their employment period, a contention not supported by the
evidence at trial. Plaintiffs have not revised these calculations post-trial, and defendants have
submitted no damages calculation.
Accordingly, the parties are directed to submit for the Court’s consideration a proposed
calculation of damages based on the findings in this Opinion and Order. If the parties cannot
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