Hussein v. Jun-Yan, LLC

• Decision Date: 13 July 2020
• Docket Number: Case No. 19-cv-21
• Citation: 472 F.Supp.3d 488
• Parties: Abdullah HUSSEIN and Lufti Hussein, on behalf of themselves and all others similarly situated, Plaintiffs, v. JUN-YAN, LLC, Yun Yan, and "John" Yan aka Jun Liang, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

472 F.Supp.3d 488

Abdullah HUSSEIN and Lufti Hussein, on behalf of themselves and all others similarly situated, Plaintiffs,

v.JUN-YAN, LLC, Yun Yan, and "John" Yan aka Jun Liang,¹ Defendants.

Case No. 19-cv-21

United States District Court, E.D. Wisconsin.

Signed July 13, 2020

Yingtao Ho, The Previant Law Firm SC, Milwaukee, WI, for Plaintiff.

Robert N. Meyeroff, Robert N. Meyeroff SC, Milwaukee, WI, for Defendants.

ORDER

LYNN ADELMAN, District Judge

Plaintiffs have brought claims against their former employer for wages owed under the Fair Labor Standards Act ("FLSA") and state law. Plaintiffs have moved for partial summary judgment, seeking judgment as to liability. For the reasons that follow, I grant in part and deny without prejudice in part Plaintiffs’ motion.

I. BACKGROUND

Abdullah and Lufti Hussein worked as delivery drivers for Defendants’ restaurant, JJ Chen's Eatery, in West Allis, WI. ECF 35, ¶ 1. The parties agree that Plaintiffs were paid at least $4 per hour plus tips; whether they were also paid delivery charges is disputed. Id. , ¶¶ 2, 4-6, 10. See also ECF 41, ¶ 1(2).² Defendants believe that Plaintiffs ultimately received between $13 and $15 per hour after tips. See ECF 14-3; ECF 30-3 at 23:5–7; ECF 38, ¶ 3. While making deliveries, Plaintiffs used their own vehicles, incurring expenses such as those for gasoline, oil changes, and new tires. ECF 35, ¶ 9. Defendant Liang set the rules for how the restaurant compensated its employees and was the person who paid Plaintiffs. Id. , ¶¶ 31-32. Abdullah began working at JJ Chen's on January 1, 2016 and Lufti started on April 25, 2018; both left JJ Chen's on or about December 1, 2018. ECF 29, ¶¶ 1, 3; ECF 35, ¶ 18.³

Plaintiffs subsequently filed this action for unpaid wages, alleging violations of the FLSA⁴ and state law. In support of their partial summary judgment motion, Plaintiffs argue that Defendants cannot prove that they (1) provided Plaintiffs notice necessary to claim a tip credit under the FLSA and Wisconsin law; (2) paid Plaintiffs delivery charges required under the FLSA; and (3) paid overtime wages to Plaintiffs, when appropriate. Further, Defendant Liang is personally liable as their employer under the FLSA, liquidated damages under the FLSA are appropriate, and Plaintiffs are entitled to a three-year statute of limitations on their claims.

II. SUMMARY JUDGMENT STANDARD

Summary judgment is required where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In considering a motion for summary judgment, I view the evidence in the light most favorable to the non-moving party and must grant the motion if no reasonable juror could find for that party. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

III. DISCUSSION

A. Notice of "Tip credit" under the FLSA

The FLSA requires that employers pay their employees a minimum wage for each hour of work, however this obligation may be offset as to a tipped employee by the tips the employee receives. See 29 U.S.C. § 206 ; 29 U.S.C. § 203(m)(2)(A). This offset is referred to as a "tip credit." Employers utilizing a tip credit are required to have "informed" affected employees. 29 U.S.C. § 203(m)(2)(A). For statutory purposes, the employees must be informed as follows: (1) the amount of the cash wage that is to be paid to the tipped employee by the employer; (2) the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer (which amount may not exceed the value of the tips actually received by the employee); (3) all tips received by the tipped employee must be retained by the employee (except for a valid tip pooling arrangement); and (4) the tip credit shall not apply to any employee who has not been informed of these requirements in this section. 29 C.F.R. § 531.59(b). "[A]n employer is not eligible to take the tip credit unless it has informed its tipped employees in advance of the employer's use of the tip credit ..." Id. (emphasis added).⁵

The employer bears the burden to establish that it provided sufficient notice of its intent to take the tip credit. Gabryszak , 427 F.Supp.3d at 1005 (citing Perez v. Lorraine Enters., Inc. , 769 F.3d 23, 27, 30 (1st Cir. 2014) ). Here, Defendants never had any posters at the restaurant that explained the minimum wage and/or tip credit. ECF 35, ¶¶ 7-8. Instead, Defendants point to a selection of Plaintiffs’ paystubs as proof that they gave adequate notice, because the calculations listed provide all the necessary information. See ECF 14-3; ECF 42, ¶ 9(6) ("Those check stubs state the number of hours worked, payment received at $4 an hour and the tips which include delivery charges which were paid to the plaintiffs in cash ..."); ECF 38, ¶ 3. Defendant Liang also "explained the tip credit as well as [he] could by telling [Plaintiffs] that they were being paid less than the minimum wage and tips that they were receiving would bring their pay up to the minimum wage." ECF 38, ¶ 2. See also ECF 18-1, ¶ 2 ("Yun Yan explained Plaintiffs were being paid less than the minimum wage and the tips they were receiving would be added to their pay to bring their pay up to minimum wage."). Defendants assert that this explanation and the summary of wages on their monthly paystubs provided Plaintiffs adequate knowledge about the tip credit. See ECF 37 at 3-5.

As Plaintiffs point out, this does not convey what is necessary under § 531.59(b), which requires, in part, that employers inform tipped employees in advance that all tips received by the tipped employee must be retained by the employee and that the tip credit does not apply to any employee who has not been informed of the requirements of § 531.59. Even when viewed most favorably, Defendants’ proffered evidence could not convince a reasonable jury that it met either of these two elements, nor does it address what happens when the $4 wage plus tips do not reach the minimum wage.⁶ See Schaefer v. Walker Bros. Enterprises , 829 F.3d 551, 556–57 (7th Cir. 2016) (what matters most to tipped employees likely includes "if tips plus the cash wage do not at least match the current minimum wage, the employer must make up the difference"). As explained by the District Court in Gabryszak , even though Defendants are non-movants at this stage, they have the burden of proof on the issue of notice; accordingly, once Plaintiffs point out a lack of evidence as to notice, Defendants must show some evidence that would allow a jury to find in its favor. 427 F.Supp.3d at 1006 (citations omitted). See also Diadenko v. Folino , 741 F.3d 751, 757-58 (7th Cir. 2013) ("[S]ummary judgment is the put up or shut up moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of the events.").

Defendants simply have not made this minimum showing. They had no posters or any other tangible, written notice that could plausibly explain the tip credit to their employees in advance of claiming the tip credit. Verbal conversations between employer and employee could be enough to create a material dispute of fact, see , e.g. , Berger v. Perry's Steakhouse of Illinois, LLC , 430 F.Supp.3d 397, 417–18 (N.D. Ill. 2019) (material dispute of fact as to notice requirement where there existed conflicting recollections re: conversations with management about tip credit), however, Defendants do not allege that they conveyed the information specifically required by § 531.59(b) in their explanation to Plaintiffs, nor does the record support even a mere inference of such. See ECF 30-3 at 23:13–24:15 (deposition testimony as to Defendant Liang's knowledge of procedural requirements). Defendants have not shown that a reasonable jury could find that they provided Plaintiffs with all the information necessary to claim the tip credit under the FLSA. Plaintiffs’ motion is granted on this issue.

B. Tip credit declaration under Wisconsin law

A plaintiff-employee may file an action for back wages under Wis. Stat. § 109.03(5). Wis. Stat. § 104.045(1) authorizes the Wisconsin Department of Workforce Development ("DWD") to promulgate rules governing "[t]he counting of tips or similar gratuities toward fulfillment of the employer's obligation under the [minimum wage] chapter." Under DWD regulations, an employer taking a tip credit "must have a tip declaration signed by the tipped employee each pay period ... to show that when adding the tips received to the wages paid by the employer, no less than the minimum rate was received by the employee." Wis. Admin. Code DWD § 272.03(2)(b)(1).⁷ When the employer's time and payroll records do not contain these requirements, no tip credit shall be allowed. Id.

Defendants concede that they obtained no signed tip declarations from Plaintiffs. ECF 35, ¶ 12; ECF 18-1, ¶ 4. Defendants argue that because no Wisconsin court has not yet found liability on this provision, this court should refrain from doing so. ECF 37 at 7. Alternatively, the court should "overrule the application of the DWD rule that there can be no tip credit without the employee signing a tip declaration each week." Id. at 8. Neither rationale warrants ignoring the regulation at issue. Federal courts often rule on state law issues even where there is no precedent directly on point, looking to other relevant state precedents and analogous decisions for guidance. In re I80 Equip., LLC , 938 F.3d 866, 869–70 (7th Cir. 2019) (citations omitted). Here, Wisconsin courts have allowed plaintiffs to pursue back wages (as Plaintiffs do here) for alleged violations of other comparable DWD regulations. See , e.g. , German v. Wisconsin Dep't of Transp., Div. of State Patrol , 2000 WI 62, ¶ 10, 235 Wis.2d 576, 612 N.W.2d 50 ( § 109.03(5) and DWD rule requiring employers to pay employees for on-duty meal periods combined to "create a system to assure...