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Hugler v. Legend of Asia, LLC

United States District Court, W.D. Missouri, Western Division

June 22, 2017

EDWARD C. HUGLER, Acting Secretary of Labor, United States Department of Labor, Plaintiff,
v.
LEGEND OF ASIA, LLC, TONG LIN, and YU MIN XIAO, Defendants.

          ORDER ON PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND PLAINTIFF'S MOTION TO EXCLUDE EXPERT TESTIMONY.

          GREG KAYS, CHIEF JUDGE

         Plaintiff Edward Hugler, Acting Secretary of Labor, United States Department of Labor, filed suit against Legend of Asia, LLC (“Legend of Asia”), its owner, Tong Lin (“Lin”), and her husband, Yu Min Xiao (“Xiao”) for violations of the minimum wage, overtime, and recordkeeping provisions of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. The alleged minimum wage and overtime violations primarily stem from Legend of Asia's arrangement to pay some workers with a combination of a “salary” and meals and lodging. The alleged recordkeeping violations are the result of a flood that destroyed many of Defendants' business records.

         Now before the Court is Plaintiff's Motion for Partial Summary Judgment (Doc 34) and Motion to Exclude Expert Testimony of Defendants' Expert Witness (Doc. 31).[1] For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Plaintiff's Motion for Partial Summary Judgment (Doc. 34), and DENIES AS MOOT Plaintiff's Motion to Exclude Expert Testimony of Defendant's Expert Witness (Doc. 31).

         Undisputed Material Facts [2]

         Legend of Asia is a buffet-style Chinese restaurant that opened in 2011. Xiao is the manager of Legend of Asia. His primary responsibilities are hiring, firing, training, and supervising employees, setting the rate of pay for each employee, and processing payroll.

         Lin is the sole owner of Legend of Asia and works at the restaurant as an assistant manager. Lin is at the restaurant nearly every day and is primarily responsible for scheduling hosts, working as a hostess, monitoring the cleanliness of the dining room, opening and closing the register, and occasionally resolving customer complaints. While she has no set work schedule, she is generally at the restaurant during the busier lunch and dinner times as well as at opening and closing times. Lin denies she has any responsibility for paying employees, however her signature appears on at least four payroll checks issued to servers. When Xiao is not at the restaurant, Lin acts as the substitute manager by supervising the server employees and handling customer complaints.

         Xiao and Lin do not speak, read, or understand the English language proficiently. They often rely on their son to translate English for them. Even so, their contracts with their employees and rental agreements, discussed later, are all written in English.

         Three categories of workers are subject to this motion, “Hispanic kitchen employees, ” “Chinese kitchen employees, ” and “server employees.”[3] As pertinent to this motion, the allegations of FLSA violations for the kitchen employees involve the arrangement to pay kitchen employees with a combination of cash wages and meals, lodging, and transportation. Regarding the server employees, the allegations of FLSA violations concern proper recordkeeping.

         Compensation for kitchen employees is governed by a “Restaurant Salary Contract” which is a template-type form stating a monthly wage amount, that the wage is paid part in cash and part in rent and meals, and that the agreement covers a sixty-hour workweek. See (Doc. 35-17). Each month the kitchen employees are paid the cash portion of their wages and are given a payment receipt, which they sign to acknowledge the cash wages received.

         According to the terms of the Restaurant Salary Contract, kitchen employees are provided housing as part of their wages. Employee housing occurs at two locations: 3707 SE Adams Drive (“Adams Drive”); and 1801 SW 8th Street (“8th Street”). Both Lin and Xiao co-own the Adams Drive property and Legend of Asia rents the building for use as employer-provided housing. Legend of Asia also leases the four apartments at 8th Street from Chang Zhao, the restaurant's kitchen manager, for employer-provided housing. Lin's signature appears on both rental agreements on behalf of Legend of Asia.

         In addition to meals and lodging, Legend of Asia provides transportation to and from the restaurant for the employees who reside at the 8th Street location.[4]

         Legend of Asia pays its server employees monthly through a payroll process. Two servers hired on a probationary basis quit after only a week on the job. These two servers refused to provide their personal information to Xiao, and therefore they could not be added to the payroll records.

         In August 2014, the United States Department of Labor (“DOL”) began investigating Legend of Asia for compliance with the FLSA. The investigation period covered September 3, 2012, to July 31, 2015.

         Prior to the investigation by the DOL, Legend of Asia maintained a record of the start and stop time for employees in a paper notebook. These records, along with time sheets, employee schedules, and payroll records, were stored in the basement of Lin and Xiao's personal residence. On three separate occasions in 2013, 2014, and 2015, Lin and Xiao's basement flooded. These floods destroyed much of the business records for the time periods subject to the DOL investigation.

         During the investigation, the DOL investigator, Yolanda Blancarte (“Blancarte”), requested pay and time records from Legend of Asia including the hours worked and the additions and deductions to wages for overtime, housing, and meals for the kitchen employees and hours worked for the server employees. Lin and Xiao provided some records but were unable to provide all the records requested because most of the relevant records were destroyed in the basement floods.

         Sometime in 2015, based on Blancarte's recommendation, Defendants implemented an electronic time clock to capture employee start and stop time for each workday rather than the paper notebooks previously used.

         In response to this litigation, Legend of Asia hired accountant Melanie Bacon, CPA (“Bacon”), to summarize Legend of Asia's business records[5] and calculate the reasonable cost of the meals, lodging, and transportation provided to kitchen employees on a workweek basis.

         On January 14, 2015, Xiao signed a Statute of Limitations Tolling Agreement (“Tolling Agreement”) tolling the statute of limitations for claims subject to this lawsuit beginning on August 31, 2014.

         Summary Judgment Standard

         A moving party is entitled to summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed R. Civ. P. 56(a). A party who moves for summary judgment bears the burden of showing there is no genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). A court must view the facts in light most favorable to the nonmoving party and allow the nonmoving party to benefit from all reasonable inferences to be drawn from the evidence. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 588-89 (1986).

         Discussion

         Plaintiff moves for partial summary judgment on the following issues under the FLSA: (1) Legend of Asia is a covered enterprise; (2) Xiao is an employer; (3) Lin is an employer; (4) Defendants violated the recordkeeping requirements; (5) Defendants should be enjoined from prospectively violating the recordkeeping requirements; (6) Defendants are not entitled to a wage credit to offset back wages owed to kitchen employees; (7) employee Jersson Pineda is not an exempt employee; and (8) Plaintiff's claims are not barred by the statute of limitations. Defendants concede issues (1), (2), and (7), and ...


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