Perez v. Yama, Inc. et al

Filing 33

MEMORANDUM ORDER: This court, having examined the Objections to the Magistrate Judge's R&R, and having made de novo findings with respect thereto, OVERRULES the Defendants' Objections and hereby ADOPTS and APPROVES in full the findings of f act and recommendations set forth in the R&R of the United StatesMagistrate Judge filed on December 6, 2016. ECF No. 28. Accordingly, the court DENIES the Defendants' Motion for Summary Judgment filed on October 13, 2016. ECF No. 15. re denying 15 Motion for Summary Judgment; adopting Report and Recommendations re 28 Report and Recommendations. Copy of Memorandum Order provided to counsel for all parties. Signed by Chief District Judge Rebecca Beach Smith on 12/28/2016. (bgra)

FILED
UNITED

0eC2 820l6

STATES DISTRICT COURT

EASTERN DISTRICT OF VIRGINIA

CLERK, U.S. DISTRICT COUKl

Norfolk Division

THOMAS

E.

NORFOI K. VA

PEREZ

SECBETARY OF LABOR,
UNITED STATES DEPARTMENT OF LABOR,

Plaintiff,

ACTION NO:

V.

YAMA,

2:16cv432

INC.,

d/b/a

YAMA SUSHI RESTAURANT,

and

JING LIN,
Defendants.
MEMORANDUM ORDER

This

matter

is

before

for Summary Judgment
No.

15.

On

the

accompanying
ECF

No.

Opposition
No.
ECF

20,
No.

Response
No.

22.

On

to

and a
21.

in

same

day,

in

November

Defendants'
Memorandum in
On

November

Support

court

("Motion"),

Memorandum

16.

the

of

the

the

for

2016,

Motion

also

{"Defendants'

Support

their

Defendants'

Defendants

2016,

Motion

14,

the

filed on October 13,

Support
1,

on

2016.

EOF

filed

an

Memorandum").

Plaintiff

Summary

Motion

filed

Judgment,

an

ECF

{"Plaintiff's Memorandum"),
the

for

Defendants

Summary

filed

Judgment.

a

ECF

On
United

November
States

16,

2016,

Magistrate

this

Judge

the provisions of 29 U.S.C.
Civil

Procedure

submit
fact

to

and

Motion
filed
ECF

the

72(b),

to

Summary

a

Report

No.

28.

Defendants'

The

December 21, 2016,

law

for

the
27.

("R&R")

Judge

the

The

Defendants' Objections. ECF No.
I.

findings

of

December

recommended

of

the

Judge

6,

2016.

denying

Id.

the

at

2.

On

Objections

to

the

Recommendation.

filed

to

Magistrate

on

filed

Plaintiff

and

disposition

Defendants
and

to

hearings,

Judgment.

Report

to

pursuant

judge proposed
for

Motion

and Federal Rule of

Summary

the

the

Miller,

necessary

ECF No.

Magistrate

2016,
Judge's

of

Recommendation

Motion

December 16,
Magistrate

and

E.

636(b) (1) (B)

conduct

Judgment.

referred

Douglas

undersigned district

recommendations

for

§

court

a

ECF

No.

Response

31.

On

to

the

32,

LEGAL STANDARDS

A. Motion for Summary Judgment
Summary

judgment under

Federal

Rule of Civil

Procedure

56

is appropriate when the court, viewing the record as a whole and
in the light most favorable to the nonmoving party,

finds

that

there is no genuine issue of material fact and that the moving
party is

entitled to

Liberty

Lobby,

summary

judgment

judgment

Inc.,

stage

477

the

U.S.

as

a

242,

judge's

matter of law.
248-50

function

(1986).

is

not

Anderson v.
"[A]t

himself

the

to

weigh the evidence and determine the truth of the matter but to

determine

whether

there

is

a

genuine

issue

for

trial."

Id.

at 249.

A court should grant summary judgment if the nonmoving

party,

after

adequate

time

for

discovery,

has

establish the existence of an essential element

case,

on

trial.

which

Celotex

essence,

the

that
Corp.

To
party

rely

instead

show a
see

defeat
go

Hosp.,

Catrett,
must

motion

beyond

477

on

of that party's

burden
317,

of

proof

at

(1986).

323

"evidence

issue

for

In

on

which

trial.

160,

judgment,

alleged

in

or

{4th

Inc.

Cir,

477
v.

nonmoving

pleadings,

other

See Celotex,

& Serv.,

163

the

the

U.S.

Anderson,

or
477

'is
U.S.

not
at

sufficiently

249-50).

specific evidentiary support,
162

F.3d

existence

795,

of

802

a

(4th

scintilla

do not

Cir.

of

plaintiff's position." Anderson,

statements,

suffice.

1998),

evidence
477 U.S.

nor

in

at 252.

Rather,

for

(quoting
without

Baloq,

"[t]he

support

324;

^merely

Causey v.
does

to

Valley

(''A motion

probative.'")

Conclusory

at

Pleasant

1993)

and

evidence

summary judgment may not be defeated by evidence that is

colorable'

the

for the nonmoving party.

depositions,

Supplies

F.2d

summary

facts

affidavits,

981

the
U.S.

present

for

the

M & M Med.

Inc.,

bear

to

at 252.

a

genuine

also

will

could reasonably find"

477 U.S.

must

v.

nonmovant

[trier of fact]
Anderson,

party

failed

mere

of

the

"there

must be evidence on which the jury could reasonably find for the
plaintiff." Id.

B. Review of Magistrate Judge's R&R
Pursuant

Procedure,

entirety,
of

the

Fed.

the

Cir.

to

which

Civ.

P.

2007).

§

the

the

Federal

reviewed

the

Rules

of

record

Civil

in

its

novo determination of those portions

the

Plaintiff

72(b).

The

of

having

United

whole or in part,
recommit

72(b)

court,

particularized."

(4th

Rule

shall make a ^

R&R

R.

to

has

Objections

States

Midqette,

"specific

and

478

F.3d

621

or

with

reject,

or

616,

the recommendation of the Magistrate Judge,
him

accept,

be

in

to

may

must

objected.

modify,

matter

court

v.

specifically

instructions.

28

U.S.C.

636(b)(1).
II.

ANALYSIS

A. First Objection

The

Defendants

object

determination that there
as
The

is a

to

the

state

that

Judge's

genuine dispute of material

to whether the restaurant utilized a
Defendants

Magistrate

there

is

tip credit.

Obj.

"undisputed evidence

fact
at 1.

.

.

.

that the employers did not keep any of the tips and Yama did not
seek a

credit."

The

"tipped

Id.

Fair Labor

employees"^

^ A "tipped

Standards Act

to

satisfy

employee"

is

("FLSA")

the

"any

allows

federal

employee

employers

minimum

engaged

of

wage

in

an

occupation in which he customarily and regularly receives more
than $30 a month in tips." 29 U.S.C. § 203 (t). "A tip is a sum

requirement by paying a base hourly rate of at least $2.13 and
accounting
receives.

for

29 U.S.C.

portion

of

29 C.F.R.

notify

the

the

§

203 (m) .

minimum

through

wage.

that

wage

29

their

U.S.C.

which

some

or

all

is

known

tips

§

are

this

retention

participation
include
and

as

being

203(m).

All

a

in

employees'

requirement.
a

employees

the

employer

tip
who

pool

contribution amount,

Id.;

is

notify

29

and

the

only take a

employee ultimately receives,

counted

tips

credit."

the employer must

such

toward

tips

are

the

must

be

"tip pool,"

collected

for

provides an exception

C.F.R.

mandatory,

customarily

must

employee

"tip

Participation in a

redistribution among a group of employees,
to

the

The use of tips to account for a

"retained by the employee." Id.
in

tips

§ 531.51. To utilize the tip credit,

employees

minimum

difference

§

the

531.54.
pool

regularly

employees

Where

must

receive

of

any

only
tips,

required

tip credit for the amount each

and may not retain any of the tips

for any other purpose. See 29 C.F.R. § 531.54.
The

Defendants

employees,

and

credit.

Obj. at

servers

were

retain

tips.

that
1.

paid

argue

the
The

a

servers

restaurant

Defendants

flat

Jiang Aff.

that

55

hourly

19-20.

did

have

rate

were

not

utilize

produced

and

were

According

to

not

tipped

the

evidence
not

the

tip
that

allowed

to

Defendants,

presented by a customer as a gift or gratuity in recognition of
some service performed for him." 29 C.F.R. § 531.52 (2013).

this

practice

Handbook,
because

was

id.
the

memorialized

at 5 25,

at

some

point

and accordingly,

restaurant

paid

its

in

its

Employee

§ 203 (m) does not apply

servers

an

hourly

salary

in

excess of the federal minimum wage and did not rely on tips to
do so. Obj. at 4.

While

the

Defendants

assert

that

"the

undisputed evidence

was that the employees did not keep any of the tips and Yama did
not

seek a

contrary.

credit,"
To

Defendants'

id.

utilize

Memorandum,

at

1,

the
the

its

payroll

Defendants'
restaurant's

records

are

example

to

the

from

the

Wage Transcription and

Computation Sheets calculate server Christina Correa's earnings
as the sum of "tips" and her "cash wage." See ECF No.
The amount paid as

hourly

wage

received.

a

the

"cash wage"

Defendants

See id.;

Computation Sheet provides a
and

is below the

is the difference between the

promised

Correa Aff.

16-2 at 8.

5 5.

her

and

the

tips

she

The Wage Transcription and

"rate of pay" that varies by week

federal minimum wage.

See ECF No.

16-2 at

8.

The "rate of pay" is multiplied by the number of hours worked to
calculate

the

amount

indicates

that

the

wage

and

record,
the
the

used

tips

as

Defendants
to

make

a

"cash

paid

up

the

credit;

tipped employees
the

Magistrate

wage."

servers

See

less

difference.

there is evidence from which a

servers were
tip

paid

id.

than
Based

This

minimum
on

this

jury could conclude that

and that
Judge

the

restaurant

correctly

noted

used
that

"Yama's

records

redistributed,
raise

the

show
and

that

then

effective

the

employees'

supplemented

tips

with

hourly compensation

were

an

of

collected,

hourly

wage

each employee

to

above

minimum wage." R&R at 14,
The

Defendants

further

argue

that

under

the

Employee

Handbook all funds paid by customers "for payment of the bill or

by tip" belonged to the
fungible,

no

actual

restaurant,

tip money was

According to the Defendants,
not

use

tip

credit.

Transcription

and

Computation

the

Anderson,

jury
477

credit was

could

U.S.

at

paid to

Id.

But

the

Sheets

reasonably
252,

servers.

Obj.

at

5.

this means that the restaurant did

the

which

and that because money is

is

find

because

presence

plainly
for

it

of

the

Wage

"evidence

the

on

[P]laintiff,"

indicates

that

the

tip

used.

In support of their argument,

the Defendants cite Guerra v.

Guadalajara, IV.^ According to the Defendants, in Guerra a group
of employees sued their employer for taking a percentage of the
servers'

tips,

seeking

"the

amount

withheld

but the court "dismissed this claim." Obj.

egregiously misrepresent
court

considered

pleadings

on

defendant's

the

the

the

employer's

servers'

retention

record.

of

"claim

tips."

In

for

The Defendants

for

judgment

conversion

Guerra

employer,"

opinion cited,

at

2 2016 WL 3766444 (W.D. Va. July 7, 2016).
7

the

at 3.

the

motion

by

based

*1.

The

the

on

the

on

the

court

concluded
Id.

at

that

"the

defendant's

motion

.

.

.

will

be

denied."

*4.

The Defendants'

first objection is OVERRULED.
B. Second Objection

The

Defendants

do

not

object

to

the

Magistrate

Judge's

determination that there is a genuine issue of material fact as

to whether Lin participated in the tip pool,

and instead argue

that the Department of Labor is only allowed to recover "unpaid
minimum wages," and cannot recover "unpaid tips in excess of the
minimum wage," Obj.
if

the

servers

at 6. The Defendants further argue that even

could

recover

Department of Labor cannot.

The
to

Defendants'

receive

federal

tips

minimum

hour,

but

if
wage

their
is

pre-tip

based

restaurants

Transcription

Defendants

did

in

question,

and

precisely

on

compensation
a

exceeds

misunderstanding

of

may use

the

requirement.
Computation
that.

See

tip

29

credit

U.S.C.

Sheets
ECF

No.

to

§

203(m).

indicate
16-2.

that

However,

tips

been

such

the

partially

as relevant here,

by

the

The federal minimum wage is $7.25

employer may only use the tip credit if,
received

the

argument that the servers are not entitled

satisfy the minimum wage
Wage

tips

Id.

statute or the relevant facts.

per

the

employee

have

retained

by

The
the
an

"all
the

employee" or the employees are compensated via a valid tip pool.
29

U.S.C.

§

203{m).

The

Defendants
8

have

not

complied with

the

former

provision.

"randomly

assign

Therefore,

the

See Jiang

a

portion

restaurant

servers

were

paid

Robert,

Inc.,

28

Aff.

via

a

of

has

15

(the

tips

403

tip

restaurant

to

each

with

complied

valid

F.3d 401,

f

the

pool.

(3d Cir.

See

1994)

would

server[]").
law

only

Reich

v.

(stating

if

Chez

that

if

employer fails to notify employees that "tips are being credited
against

their

wages,

then

no

tip

credit

can

be

employer is liable for the full minimum-wage").
Yama's

tip

evidence
tip

pool

is

showing

pool.

that

Jiang Aff.

in

dispute.

Lin

did

SI5 15,

The

not

Defendants

The

and

the

The validity of
have

produced

in

the

servers'

Plaintiff

has

produced

participate

21-23.

taken

evidence showing that tips Lin earned while acting as

a

server

were combined with tips earned by others and later redistributed
to

Lin's

benefit.

Mazuera

Aff.

S

16.

The

R&R correctly

found

that the Defendants were not entitled to summary judgment on the
issue.

R&R at

17.

The Defendants further argue that even if the servers could

bring such an action,

the Department of Labor cannot. Obj.

They

court

would

have

statute,

and

that

federal

of

the
this

the

claim,

regulation,

case,

the

Department
government
the
or

believe
of

that

Labor

Congress

has

enacted

cannot enforce.

Defendants
treatise.

do

See

not
id.

without any legal support of any kind -

has

See
cite

They

at 6.

passed

a

regulations,

id.
any

simply

In

support
statute,

assert

-

that the "Department of

Labor has no statutory right to recover" tips that Lin may have
taken
law.

of

from

the

servers.

Id.

at

6-7.

This

defies

logic

and

the

The Department of Labor may "bring an action in any court

competent

jurisdiction

minimum wages
liquidated

or

to

overtime

damages."

29

recover

compensation

U.S.C.

§

requirements,

should

have

servers.

about

been

but

that

excluded,

See Mazuera Aff.

whether

the

and

216(c).

evidence that the Defendants used a
wage

the

the

16.

Defendants

an

of

equal

The

unpaid

amount

record

as

contains

tip pool to satisfy minimum
tip

pool

and allotted
5

amount

to

Accordingly,

have

complied

included

Lin

tips

Lin,

who

earned by

there

is a

dispute

with

the

federal

minimum wage law.

At issue is the $43, 580.87 that Lin claims to

have

tips

earned

servers,

from

and the

but

which may

Defendants have not

in

reality

shown that

belong
the

to

the

Department

of Labor lacks the authority to recover the amount in question.

The Defendants'

second objection is OVERRULED.
C. Third Objection

The

Defendants

next

object

to

the

Magistrate

Judge's

determination that they are not entitled to summary judgment on
the basis that they acted in good faith. Obj. at 7.
In an action to recover unpaid minimum wages or liquidated
damages

award

under

the

liquidated

FLSA,

the

damages

satisfaction of the

court

court

where

has

discretion

"the

employer

that the act
10

to

decline

shows

to

to

the

or omission giving rise

to

such

action

grounds
violation

This

of

good

faith

that

his

the

language

employer.

in

believing

for

was

Fair

places

Labor

a

See Mayhew v.

(quoting Richard v.

and

that

act

or

Standards

"plain

and

Wells,

had

omission

Act."

29

substantial

125 F.3d 216,

Marriott Corp.,

he

reasonable
was

not

U.S.C.

burden"

220

§

549 F.2d 303,

306

260.

on

{4th Cir.

a

the

1997)

(4th Cir.

1977).

The Defendants argue that they had a
believe

that

compliance
record
in a

paying

with

the

suggests

servers
FLSA.

that

more

Obj.

than

at

7.

Lin may have

"reasonable basis" to

$7.25
But

the

per

hour

ensured

evidence

in

the

established and participated

tip pool that allowed her to pocket tips earned by others.

The Defendants further argue that because they consulted with a

lawyer when drafting the Employee Handbook,
of

fact

on which

a

fact

finder

can

find

that

subjective belief that

its practice was

law."

the

good

Obj.

faith.

done so.

at

8.

See

But

e.g.,

Defendants

Mayhew,

125

Yama did not have

a

in compliance with the

must

F.3d

"there is no dispute

at

establish

220.

objective

They

have

not

They merely stated that an attorney "was consulted" as

they prepared the Employee Handbook,

not that the attorney wrote

the Handbook or provided advice on this issue.

See Jiang Aff.

f

10. While the Defendants may ultimately prevail on this point at
trial,

they

have

not

shown

that

judgment.
11

they

are

entitled

to

summary

The Defendants' third objection is OVERRULED.
III.

This

court,

having

Magistrate Judge's
respect thereto,
ADOPTS

and

Judgment

set

Judge

Accordingly,

the

Objections

and having made ^

novo

in

full

forth

filed

in

on

the
the

findings

R&R

December

of

6,

the

2016.

the court DENIES the Defendants'

filed

DIRECTED to

examined

to

the

findings

with

OVERRULES the Defendants' Objections and hereby

APPROVES

recommendations

Magistrate

R&R,

CONCLUSION

on

October

forward a

13,

2016.

ECF

No.

of

United

ECF

IS

15.

The

States

No.

28.

Clerk

is

copy of this Memorandum Order to counsel

SO ORDERED.

Isl

Rebecca Beach Smith

Chief Judge
REBECCA BEACH
CHIEF JUDGE
December

and

Motion for Summary

for all parties.
IT

fact

2016

12

SMITH