United States District Court, E.D. Virginia, Norfolk Division
THOMAS E. PEREZ Secretary of Labor, United States Department of Labor, Plaintiff,
YAMA, INC., d/b/a YAMA SUSHI RESTAURANT and JING LIN, Defendants.
REPORT AND RECOMMENDATION
DOUGLAS E. MILLER UNITED STALES MAGISTRATE JUDGE
suit filed by the Department of Labor (Plaintiff or the
"Department") alleging violations of the Fair Labor
Standards Act ("FLSA"), Defendants, Yama, Inc.
d/b/a Yama Sushi Restaurant and Jing Lin (collectively
"Yama"), moved for summary judgment (ECF No. 15).
Yama argues that it cannot be liable for the alleged
violations because the undisputed evidence shows it paid its
employees above the federal minimum wage, did not utilize a
collective "tip pool, " and otherwise complied with
the FLSA. See Defs.' Mem. Supp. Mot. Summ. J.
(ECF No. 16). The matter was referred to the undersigned
United States Magistrate Judge for a report and
recommendation pursuant to 28 U.S.C. § 636(b)(1)(B) and
Rule 72(b) of the Federal Rules of Civil Procedure. After
reviewing the parties' pleadings and factual record to
date, this report concludes that there is a genuine dispute
of material fact about whether Yama's payments to workers
complied with the FLSA. Accordingly, the undersigned
recommends that the district court DENY Defendants'
Motion for Summary Judgment (ECF No. 15).
Sushi restaurant is located in Virginia Beach, Virginia. It
is owned and operated by Jing Lin (uLin") .
On July 29, 2015, the Department initiated an investigation
based upon a complaint that Yama failed to pay minimum wage.
Mazuera Aff. ¶ 6 (ECF No. 21-1). Wage and Hour
Investigator Alvaro Mazuera ("Mazuera") conducted
the investigation, which focused on Yama's time and pay
practices from August 15, 2013 to August 15, 2015.
Id. at ¶ 8. During the investigation, Mazuera
interviewed seven employees, analyzed time and pay records,
and conducted surveillance at the restaurant. Id. at
interviews with employees revealed that wait staff, "on
average, " earned $2.13 per hour. Id. at ¶
He also learned that all tips, whether given to wait staff as
cash or added onto a credit card receipt, were collected by
management and then distributed at the end of each two week
pay period. Id. at ¶ 12. This was confirmed by
Lin and Yama's business manager, Nana Jiang
("Jiang"). Id. at ¶ 13. Jiang told
Mazuera that they did not record how much each employee
collected in tips from customers, and that the amount of tips
ultimately distributed to employees was based on the
employee's experience, performance, and customer
feedback. Id. at ¶¶ 14-15. Lin - the owner
- would also serve customers directly and collect tips.
Id. at ¶ 16. Jiang told Mazuera that any tips
Lin received were included the tips collected from and
distributed to the employees. Id.
result of his investigation, Mazuera concluded that Yama had
violated Section 203(m) of the FLSA. Payroll time sheets from
August 11, 2013 to September 6, 2014 indicated that
Yama's wait staff was paid hourly wages ranging from
$2.50 to $5.00 per hour before receiving tips. Id.
at ¶ 18. During that time period, Mazuera calculated
that, to ensure employees were paid at least the minimum
wage, Yama took a $67, 546.14 tip credit. Id. at
¶ 24. The records also showed that Lin received a total
of $43, 580.87 in income from tips during that time.
Id. at ¶ 20. According to Mazuera, Yama was
using a "tip pool" to comply with the FLSA, and
because Lin - who is the owner - participated in that pool,
Yama was barred from taking the tip credit. See
Pl.'s Mem. Opp. Mot. Summ. J., 7-8 (ECF No. 21). The
investigation concluded that because of the improper tip
pool, Yama is liable to its employees for a total of $111,
132.54,  plus an equal amount in liquidated
damages. Mazuera Aff. ¶¶ 26-27 (ECF No. 21-1).
claims that it did not use a tip credit, but instead paid its
employees a flat hourly wage. Jiang Aff. ¶ 9 (ECF No.
22-3) . According to Yama, it instituted a flat hourly wage
in response to complaints by wait staff that their pay was
inadequate under the traditional scheme of compensation where
they received a low hourly wage ($2.13 per hour) plus tips.
See id. Yama consulted with an attorney and
prepared a new provision of its Employee Handbook that
Waiter and Waitresses will receive an hourly wage equal to or
above minimum wage requirements. These employees will not
receive tips for their services. Any amounts received for
tips belong to the Company. Failure of a waiter or waitress
to turn over tips to the Company shall subject the employee
to immediate disciplinary action, up to and including
discharge. All other employees will also be compensated at an
hourly wage equal to or above minimum wage requirements.
Id. at ¶¶ 10-11. After implementing the
new system, according to Yama, servers were paid between
$9.00 and $10.00 per hour, well in excess of the minimum
wage. Id. at ¶ 13.
accounting for the new payroll policy, Jiang would
"arbitrarily" assign an employee a portion of the
tips collected from all the servers and then supplement that
amount with an hourly wage to reach the agreed upon rate of
compensation. See id. at ¶ 17; Defs.' Mem.
Supp. Mot. Summ. J., 5 (ECF No. 16). So, for example, an
employee who was to earn a flat hourly wage of $10.00 might
be assigned $234 of tip money for 39 hours of work, equaling
an hourly rate of $6.00 per hour. Id. Jiang would
then assign a $4.00 hourly wage to bring the employee's
effective pay rate to the agreed-upon $10.00 per hour.
Id. This assigned hourly wage would fluctuate each
week depending on the amount of tips that were assigned to
the employee. Two Yama employees submitted affidavits in
which they attest to receiving a flat hourly wage between
$9.00 and $10.00 rather than keeping the tips they collected.
See Correa Aff. ¶¶ 1-4 (ECF No. 16-5); Kotary Aff.
¶¶ 1-4 (ECF No. 16-4) .
respect to the tips paid to Yama's owner Lin, Jiang
claimed that those monies were tips "specifically
designated by customers to be paid to Lin." Jiang Aff.
¶ 21 (ECF No. 22-3). Despite allegedly telling Mazuera
that Lin's tips were collected along with the tips given
to other servers, Jiang stated in her affidavit that
Lin's tips were tracked separately. Id. at
communicated the results of his investigation, including
Yama's total alleged liability, to Lin and Jiang at a
final conference held on December 9, 2015. Mazuera Aff.
¶ 27. At the final conference, both Lin and Jiang
reaffirmed that tips apportioned to Lin were taken from all
the tips collected from the wait staff. Id. at
¶ 28. Yama still denied having violated the FLSA,
stating that because it paid employees a flat hourly wage
above the federal minimum wage, it did not avail itself of
the tip credit. Yama also claimed that Lin only received tip
money that came from customers she personally served, and if
it violated the FLSA, it nonetheless acted in good faith and
should not be liable for liquidated damages. The Department
of Labor subsequently filed this suit to recover the money it
claims Yama owes to its employees. Based on the foregoing
declarations and payroll records, Yama now moves for summary
STANDARD OF REVIEW
Rule of Civil Procedure 56 requires the Court to grant a
motion for summary judgment if "the movant shows that
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); Celotex Corp. v. Catrett, 477
U.S. 317, 322-24 (1986). "A material fact is one
'that might affect the outcome of the suit under the
governing law.' A disputed fact presents a genuine issue
'if the evidence is such that a reasonable jury-could
return a verdict for the non-moving party." Spriggs
v. Diamond Auto Glass, 242 F.3d 179, 183 (4th Cir. 2001)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986)).
party seeking summary judgment has the initial burden of
informing the Court of the basis of its motion and
identifying materials in the record it believes demonstrates
the absence of a genuine dispute of material fact.
Fed.R.Civ.P. 56(c); Celotex Corp., 477 U.S. at
322-25. When the moving party has met its burden to show that
the evidence is insufficient to support the nonmoving
party's case, the burden shifts to the nonmoving party to
present specific facts demonstrating that there is a genuine
issue for trial. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 586-87 (1986).
considering a motion for summary judgment, "the court
must draw all reasonable inferences in favor of the nonmoving
party, and it may not make credibility determinations or
weigh the evidence." Reeves v. Sanderson Plumbing
Prods., Inc., 530 U.S. 133, 150 (2000); see
Anderson, 477 U.S. at 255. " [A] t the summary
judgment stage the judge's function is not himself to
weigh the evidence and determine the truth of ...