Morgan v. Speakeasy, LLC, 05 C 5795.

Citation625 F.Supp.2d 632
Decision Date20 September 2007
Docket NumberNo. 05 C 5795.,05 C 5795.
CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
PartiesAndrew MORGAN on behalf of himself and all other Plaintiffs similarly situated known and unknown, Plaintiff, v. SPEAKEASY, LLC, the Room of Chicago d/b/a South, and Jody Andre, individually, Defendants.
625 F.Supp.2d 632
Andrew MORGAN on behalf of himself and all other Plaintiffs similarly situated known and unknown, Plaintiff,
SPEAKEASY, LLC, the Room of Chicago d/b/a South, and Jody Andre, individually, Defendants.
No. 05 C 5795.
United States District Court, N.D. Illinois, Eastern Division.
September 20, 2007.

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Douglas M. Werman, Maureen Ann Bantz, Werman Law Office, P.C., Christopher

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John Williams, Workers' Law Office, P.C., Chicago, IL, for Plaintiff.

Paul J. Andre, Perkins Coie L.L.P., Menlo Park, CA, Todd M. Church, Perkins Coie L.L.P., Chicago, IL, for Defendants.


NAN R. NOLAN, United States Magistrate Judge.

Plaintiff Andrew Morgan filed suit on behalf of himself and a class of individuals similarly situated alleging that Defendants SpeakEasy, LLC, The Room of Chicago d/b/a South ("South"), and Jody Andre violated the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., and the Illinois Minimum Wage Law ("IMWL"), 820 ILCS 105/1 et seq., by failing to pay their wait staff minimum wages. Morgan also charges Defendants with unjust enrichment based on their practice of forcing employees to share tips with managers. On January 31, 2006, the district court approved the parties' Agreed Form of Notice to Similarly-Situated Persons Pursuant to 29 U.S.C. § 216(b). Morgan sent the notice to some 46 current and former employees of SpeakEasy and South, but none of them chose to opt-in to the case. Thus, Morgan is pursuing this lawsuit solely on his own behalf.

The parties consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636(c), and have now filed cross-motions for summary judgment on all of Morgan's claims. For the reasons set forth here, the motions are granted in part and denied in part.


SpeakEasy is an Illinois limited liability company owned by Defendant Andre and three other individuals not involved in this lawsuit. On June 3, 2003, SpeakEasy began operating as a restaurant called SpeakEasy Supper Club, located at 1401 West Devon in Chicago, Illinois.1 (Def. Facts ¶ 1; Pl. Facts ¶ 2.)2 South is an Illinois corporation licensed to do business as a restaurant in the city of Chicago. The restaurant, located at 5900 North Broadway in Chicago, first opened in April 2001 under the name The Room of Chicago. In August 2004, the restaurant began doing business as South, but subsequently closed its doors on January 1, 2006. (Id. ¶ 2.)

Andre was the sole owner and shareholder of South, and she managed and operated both South and SpeakEasy. (Id. ¶¶ 2, 3.) According to Andre, she conducted these management duties as an employee of Don't Speak, Inc., which hired her out as a consultant to the restaurants. (Id. ¶ 3; Andre Dep., at 97.) By approximately April 2005, however, Andre stopped receiving compensation from Don't Speak because SpeakEasy and South were doing poorly and she "chose not to take [a consulting fee]." (Andre Dep., at 100-02.) The parties agree that Andre was the "ultimate authority" at both SpeakEasy and South, responsible for the day to day operations of both restaurants, including hiring and firing employees; directing and supervising employee work; signing the corporations' checking and payroll accounts; and participating in decisions regarding employee compensation and capital expenditures. (Pl.Facts ¶ 8.)

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A. Morgan's Employment

Sometime prior to June 14, 2005, Morgan applied for a job as a waiter at Speak-Easy. Andre hired him to work as a server at South instead, beginning June 14, 2005 until he gave notice of his resignation on September 19, 2005, effective October 2, 2005. Morgan claims that he was also employed as a server for SpeakEasy and Andre at that time, but Defendants deny this assertion. (Def. Facts ¶ 4; Pl. Resp. ¶ 4; Pl. Facts ¶¶ 5, 9, 10.)3 The parties also disagree as to the extent to which SpeakEasy and South were interrelated. Morgan claims that the restaurants shared employees on a weekly basis, including managers, servers, line cooks, and dishwashers. He also contends that the restaurants shared supplies, such as napkins, wine glasses, and bar napkins. (Pl. Facts ¶¶ 12, 13.) Defendants deny these assertions, but do not cite any supporting evidence. Andre testified, moreover, that several employees worked at both restaurants, and she acknowledged that it was possible that she had sent a busboy or dishwasher from one restaurant to the other to help cover no-shows. (Def. Resp. ¶¶ 12, 13; Andre Dep., at 59-60, 77.)4

In any event, the parties agree that upon hiring new employees such as Morgan, Andre explained to them the restaurant's operations and procedures. She discussed how many shifts they wanted to work; what their first day would be like; what to wear; when training would occur and by whom; and what they would learn in their first few days. Andre also distributed a handout explaining the restaurant's opening and closing procedures, which was identical for both SpeakEasy and South. (Pl. Facts ¶ 11; Def. Resp. ¶ 11.) Andre insists that she also explained to the employees the restaurant's "well-known" policy that food ordered at the restaurant would be credited against the servers' compensation. (Def. Facts ¶ 13.) Morgan testified, however, that Andre never discussed a meal policy with him, and Andre herself could not recall any meetings during which she discussed the restaurant's rules regarding employee meals. (Morgan Dep., at 130-31; Andre Dep., at 118.)

B. Defendants' Payment Records

Defendants used several different records to keep track of the hours worked by each employee and the gratuities paid to them. At the close of business each night, the senior server completed a "Nightly Closing Form" identifying the name of each server present that evening and the tips each received. (Def. Facts ¶ 6; Def. Add'l Facts ¶ 42.)5 In addition, Andre maintained Excel "Daily Sales Sheets" for South identifying each staff member working each night, the hours each worked, and the tips each received. (Id. ¶ 7.) Defendants claim that Andre also instructed servers to fill out time cards reflecting the number of hours they worked each week. (Id. ¶ 8.) Morgan denies this but admits that he kept time cards for his first few weeks of employment. (Pl. Resp. ¶ 8.)

Though Morgan admittedly stopped filling out time cards a few weeks after he started work, he apparently started keeping track of his time on his own beginning in late July or early August. Entries prior

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to that time were based on Morgan's memory, and he acknowledges that they are not entirely accurate. (Def. Facts ¶ 11; Pl. Resp. ¶ 11.)

C. Morgan's Compensation Plan

The primary dispute in this case is whether Morgan was paid the applicable minimum wage for all hours he worked as a server. Defendants claim that Morgan received the following forms of compensation during his employment at South: (1) regular wages; (2) tips; and (3) meal compensation.

1. Wages

Defendants claim that Morgan received "wages" each week as required by law. It is clear, however, that he did not always receive cash payments. In certain weeks, Defendants instead withheld amounts they characterize as wages "for payroll taxes." (Def. Facts ¶ 23.) Specifically, Defendants claim that South withheld Morgan's wages to cover taxes as follows:

 $100 for the pay period of June 13-26
                 $140 for the pay period of June 27-July
                 $110 for the pay period of July 11-24
                 $312 for the pay period of September 5-18

(Id. ¶¶ 23-29.) In support of this assertion, Defendants cite a 2005 W-2 Wage and Tax Statement indicating that South withheld a total of $662 in federal income tax, social security tax, medicare tax, and state income tax from Morgan's 2005 wages. (Ex. 15 to Def. Facts.)

Morgan disputes that South withheld any amounts for payroll taxes, noting that Andre did not testify to such an arrangement at her deposition. Morgan also argues that, if Defendants did withhold such amounts, they deducted more than he actually owed in taxes based on his income. (Pl. Add'l Resp. ¶¶ 56-58.)6 Notably, Defendants have not provided any underlying documentation demonstrating the manner in which South calculated and/or applied the above payments towards Morgan's tax withholdings. Morgan, moreover, has submitted a Wage and Income Transcript from the Internal Revenue Service ("IRS") indicating that South did not pay any payroll taxes on Morgan's behalf in 2005 at all.7 (Ex. A to Pl. Motion to Supplement; Pl. Supp. to Add'l Facts ¶ 13.)8

Defendants find this omission irrelevant, noting that Morgan's W-2 form from South did not include his social security number because he repeatedly declined to provide it to them. (Andre Aff., Ex. 3 to Def. Facts, ¶ 9.) In Defendants' view, "any request for wage and tax statements from the IRS using Plaintiff's social security number [thus] would not include payments made by South." (Def. Opp. to Supp. to Add'l Facts ¶ 7; Def. Resp. to Supp. to Add'l Facts ¶ 13.)9 Defendants also claim that after South ceased operations in January 2006, the restaurant entered into a payment plan with the IRS regarding outstanding payroll taxes due, including tax payments for 2005. Defendants speculate that "[t]his payment plan likely superseded any wage and tax statements issued by the

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IRS for South." (Id. ¶ 8; Def. Resp. to Supp. to Add'l Facts ¶ 13.)

In other weeks, Morgan received cash payments, though the parties dispute that they constituted "wages." They also dispute when the wages were paid, and what hours of work they covered, as discussed later in this opinion.

2. Tips

SpeakEasy and South both used a tip pool for their servers, and each server was supposed to receive a pro rata share of the total tips based on the number of hours worked. (Def. Facts ¶ 15; Pl. Facts ¶ 19.) Morgan was employed as a regular, or junior, server, but...

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