Walsh v. Fusion Japanese Steakhouse, Inc.

• Decision Date: 12 July 2021
• Docket Number: 2:19-CV-00496-CCW
• Citation: 548 F.Supp.3d 513
• Parties: Martin J. WALSH, Plaintiff, v. FUSION JAPANESE STEAKHOUSE, INC., Fusion Japanese Steakhouse, Inc., Z&S International Cuisine, Inc., Yuan Zheng Xiao, Christine Xiao, Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

548 F.Supp.3d 513

Martin J. WALSH, Plaintiff,

v.FUSION JAPANESE STEAKHOUSE, INC., Fusion Japanese Steakhouse, Inc., Z&S International Cuisine, Inc., Yuan Zheng Xiao, Christine Xiao, Defendants.

2:19-CV-00496-CCW

United States District Court, W.D. Pennsylvania.

Signed July 12, 2021

Brian P. Krier, Pro Hac Vice, Ethan Dennis, U.S. Department of Labor Office of Solicitor, Philadelphia, PA, for Plaintiff.

Jian Hang, Pro Hac Vice, Hang & Associates, PLLC, Flushing, NY, for Defendants Fusion Japanese Steakhouse, Inc., Z&S International Cuisine, Inc., Yuan Zheng Xiao, Christine Xiao.

MEMORANDUM OPINION GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT

CHRISTY CRISWELL WIEGAND, United States District Judge

On April 30, 2019, then-Secretary of the United States Department of Labor R. Alexander Acosta filed this action under the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq. (FLSA). In essence, the Complaint alleges that Defendants, who own and run multiple Japanese Steakhouse restaurants, willfully failed to pay their kitchen employees an overtime premium, and failed make and keep appropriate records, in violation of the FLSA. Defendants are Fusion Japanese Steakhouse, Inc., a Pennsylvania corporation, ("Fusion Washington"); Fusion Japanese Steakhouse Inc., a West Virginia corporation, ("Fusion Vienna"); Z&S International Cuisine, Inc. d/b/a Fusion Steakhouse of Wheeling ("Fusion Triadelphia") (collectively "the Restaurant Defendants"); and two individuals, Yuan Zheng Xiao and Christine Xiao (the "Individual Defendants"). Before the Court are Plaintiff's Motion for Partial Summary Judgment, ECF No. 59, and Defendants’ Motion for Partial Summary Judgment, ECF No. 61. The cross motions have been fully briefed and are ripe for review.

I. Factual Background

The Restaurant Defendants, located in Triadelphia and Vienna, West Virginia, and Washington, Pennsylvania, respectively, are each restaurants that use the "Fusion Japanese Steak House" name. ECF No. 72 at ¶¶ 1–4, 7. Defendant Yuan Zheng Xiao is president and co-owner of each of the Restaurant Defendants, ECF No. 72 at ¶ 7. He supervises the managers and oversees the general operations and performance of the Restaurant Defendants. Id. at ¶ 11. Defendant Christine Xiao is the manager and a shareholder of Fusion Vienna, ECF No. 72 at ¶ 22; ECF No. 59-3 at ¶ 12. She is married to Defendant Yuan Zheng Xiao. ECF No. 59-6 at 27:6–12.

A. Pay Practices and Record Keeping

In this case, Plaintiff, the Secretary of the United States Department of Labor, seeks to redress violations of the FLSA that Defendants allegedly committed with respect to pay practices and recordkeeping affecting Defendants’ kitchen staff between October 18, 2014 through the present. ECF No. 60 at 3. During the relevant time period, the Restaurant Defendants employed two general categories of workers: front of the house employees (i.e. servers, bussers, bartenders, and hosts) and kitchen employees (i.e. hibachi chefs, sushi chefs, dishwashers, kitchen helpers, and cooks. ECF No. 72 at ¶¶ 34, 38; ECF No. 59-7 at 2. The front of the house employees are all English-speaking and are usually American citizens. ECF No. 72 at ¶ 35. Defendants paid front of the house employees by the hour and required them to clock in and out for their shifts. ECF No. 72 at ¶¶ 36–37. Unlike the front of the house workers, Defendants calculated payment to kitchen employees using a day unit or day rate. ECF No. 72 at ¶ 50. For example, until at least 2017, a kitchen employee paid $120 per day would get paid $360 for three days of work, $600 for five days of work, and $720 for six days of work. ECF No. 72 at ¶ 55. Similarly, until at least 2017, a kitchen employee paid $120 per day would only get paid half of their day rate (i.e. $60) if they worked only half of a day. Id. Defendants claim that "[t]he total payment for each period was intended to cover all hours kitchen employees worked in a workday, including lunch and dinner shifts, and any overtime hours worked." ECF No. 72 at ¶ 52.

It is undisputed that before 2017, Defendants did not require kitchen employees to clock in and out for their shifts or for meals or breaks. ECF No. 72 at ¶¶ 47, 68. Until at least December 2017, Defendants did not keep records of kitchen employees’ daily start and stop times. ECF No. 72 at ¶ 69. Until at least 2017, Defendants paid each of their kitchen employees according to the number of days the employee worked, regardless of the number of hours in each day. ECF No. 72 at ¶¶ 53, 56. Defendants paid their kitchen employees twice per month in an amount calculated by multiplying the employee's day rate by the number of days the employee worked. ECF No. 72 at ¶ 54. Finally, until at least 2017, Defendants did not keep records of the addresses, of dates of employment for Hispanic workers and Defendants did not keep records of the last names of Mexican or Hispanic workers because Defendants believed their names were too long and difficult to remember. ECF No. 72 at ¶¶ 72–73.

During the relevant time period for this case, beginning on October 18, 2014, Yuan Zheng Xiao gave the Restaurants’ managers his permission and opinion on how much to pay kitchen employees, and required the managers to maintain records of cash payments to kitchen employees. ECF No. 72 at ¶¶ 15–17. With Yuan Zheng Xiao's approval, the managers of the Restaurant Defendants distributed cash payments to kitchen employees in envelopes; but, Defendants did not maintain records of these cash payments. ECF No. 72 at ¶ 77–78. For kitchen employees who were paid by both cash and check, Defendants’ records reflect only the cash portions of payments. ECF No. 72 at ¶ 81. The parties refer to Defendants’ written records of the cash payments to kitchen employees as "the ‘Cash Logs.’ " See e.g. , ECF No. 72 at ¶ 82. The Cash Logs reflect twice-monthly payments. ECF No. 72 at ¶ 83. They contain a column for identifying employee names, but most employees are listed by first or nickname only. Id. at ¶ 84. The Cash Logs contain a column for "salary" amounts, but many of these salary fields are either blank or incomplete. Id. The Cash Logs contain a field for employees’ signatures, but some signatures are missing and many pages have signatures with no salary amounts listed. Id. In contrast to the lack of recordkeeping for the kitchen employees, Defendant kept records that complied with the FLSA for front of the house employees, including paying them by the hour, and consistently requiring them to clock in and out for shifts and breaks. ECF No. 72 at ¶¶ 35–37.

B. Prior DOL Investigations

Between 2010 and 2012, the Wage and Hour Division of the United States Department of Labor investigated each of the three Restaurant Defendants for potential violations of the FLSA. ECF No. 72 at ¶¶ 20, 91, 99, 112. Yuan Zheng Xiao was the Wage and Hour Division's primary contact for the Restaurant Defendants for each of those three investigations. ECF No. 72 at ¶ 20. As president, Yuan Zheng Xiao hires and sets the pay rates for the general managers of each of the Restaurant Defendants. ECF No. 72 at ¶¶ 9–10. He supervises the managers and oversees the general operations and performance of all the restaurants. Id. at ¶ 11.

1. The 2010 Fusion Triadelphia Investigation

In August 2010, the Wage and Hour Division investigated Fusion Triadelphia for violations of the FLSA from August 2009 through September 2010. Id. at ¶ 91. It is undisputed that the 2010 Triadelphia investigation revealed that Defendants did not pay their kitchen employees the required overtime when they worked more than forty hours in a week; instead, Defendants paid their non-exempt hourly employees their straight-time rates for all hours worked, including overtime. Id. at ¶ 92. Defendant Yuan Zheng Xiao agreed to pay back wages in connection with the 2010 Triadelphia investigation. Id. at ¶ 98. He also signed and returned a letter from the Wage and Hour Division that asked him to confirm his understanding that the investigation revealed violations of the overtime and recordkeeping requirements of the FLSA and to confirm that Defendants would comply with the FLSA moving forward. ECF No. 72 at ¶ 97; ECF No. 59-8 at 5–7.

2. The 2011 Fusion Washington Investigation

In September 2011, the Wage and Hour Division investigated Fusion Washington for violations of the FLSA during the period of January 2011 through December 2011. ECF No. 72 at ¶ 112. The investigation revealed that Defendants did not pay certain employees the required overtime premium when they worked more than forty hours in a week, that Defendants paid non-exempt employees’ salaries, and did not keep records of the hours worked each day for non-exempt employees such as dishwashers. ECF No. 72 at ¶ 114. The investigation revealed that Defendants owed thousands of dollars in back wages to its employees. Id. at ¶ 115. At the end of the 2011 Fusion Washington investigation, Fusion Washington and Yuan Zheng Xiao agreed to comply with all of the provisions of the FLSA. Id. at ¶ 117. Specifically, they "agreed to keep accurate records of all employees’ hours worked, pay the additional half-time premium for hours worked over forty in a week to all non-exempt employees, and to pay in full back wages" owed. ECF No. 72 at ¶ 117. Yuan Zheng Xiao signed and returned a letter from the Wage and Hour Division that explained the results of the 2011 Fusion Washington investigation, asked him to sign and return the letter to confirm his understanding, and which enclosed a copy of the FLSA's "Handy Reference Guide to the FLSA." ECF No. 72 at ¶ 120; ECF No. 59-0 at 43.

3. The 2012 Fusion Vienna Investigation

In February 2012, the Wage and Hour Division investigated Fusion Vienna for violations of the FLSA during the period of March 2010 through March 2012. Id. at ¶ 99. Plaintiff states that the investigation revealed that Defendants did not pay...