United States District Court, E.D. Pennsylvania
R. ALEXANDER ACOSTA, Secretary of Labor, United States Department of Labor
OSAKA JAPAN RESTAURANT, INC., J.H.S.K., INC., KWANG BUM KIM and JAMES KIM
MEMORANDUM RE: MOTION FOR SUMMARY JUDGMENT
R. Alexander Acosta, Secretary of Labor, United States
Department of Labor moves for partial summary judgment in
this action asserting violations of the Fair Labor Standards
Act (FLSA), 29 U.S.C. § 201, et seq. against
Defendants Osaka Japan Restaurant, Inc. and J.H.S.K, Inc.,
sushi restaurants in Philadelphia, Pennsylvania and Lansdale,
Pennsylvania, respectively; Kwang Bum Kim, the owner of both
restaurants; and his son, James Kim, manager of the Lansdale
Complaint asserted numerous ways in which Defendants violated
1) Violation of the Minimum Wage Requirement for Tipped
2) Failure to Pay Overtime; and
3) Failure to Keep Records.
further asserts that Defendants' violations of the FLSA
were willful, and seek back wages, liquidated damages, and an
injunction against Defendants, as well as to hold both Kwang
Bum and James Kim individually liable. (Pl.'s Mot. for
Summ. J. ECF 29.)
reasons that follow, Plaintiff's motion for partial
summary judgment is GRANTED IN PART AND DENIED IN
Osaka Japan Restaurant (“Osaka Chestnut Hill”) is
a fusion/sushi restaurant located at 8605 Germantown Avenue
in Philadelphia, which has been in operation for
approximately thirteen years. (Pl.'s SOF ¶¶
1-4; Defs.' SOF ¶¶ 1-4). Osaka Chestnut Hill
serves dinner seven days a week and lunch Monday-Saturday; on
days when both lunch and dinner are served, the restaurant
closes between 2:30 and 5:00 PM. (Pl.'s SOF ¶ 4;
Defs.' SOF ¶ 4).
J.H.S.K Inc. (“Osaka Lansdale”) is a fusion/sushi
restaurant located at 1598 Sumneytown Pike in Lansdale,
Pennsylvania, which has been in operation for approximately
eight years. (Pl.'s SOF ¶¶ 5-8; Defs.' SOF
¶¶ 5-8). Osaka Lansdale serves dinner seven days a
week and lunch Monday-Friday; on days when both lunch and
dinner are served, the restaurant closes between 2:30 and
5:00 PM. (Pl.'s SOF ¶ 8; Defs.' SOF ¶ 8).
Kwang Bum Kim is the president, sole corporate officer, and
owner of Defendants Osaka Japan Restaurant and J.H.S.K Inc.
(Pl.'s SOF ¶ 9; Defs.' SOF ¶ 9). Kwang Bum
Kim previously owned and operated an Osaka restaurant in
Wayne, Pennsylvania (“Osaka Wayne”), which he
opened approximately 18 years ago and closed approximately 15
years ago. (Pl.'s SOF ¶ 11; Defs.' SOF ¶
11). He testified at his deposition, through a translator,
that he “do[es] not understand English.” (KBK
Dep. 137:1, Ex. A to Pl.'s Mot. for Summ. J., ECF 29-5).
James Kim, the son of Kwang Bum Kim, was the manager of Osaka
Lansdale, a position he held, with an interruption to sell
life insurance in approximately 2012, from 2010 to 2016.
(Pl.'s SOF ¶ 13-14; Defs.' SOF ¶ 13-14). In
2001 or 2002 to 2003, he worked as a server at Osaka Wayne.
(James Kim (JK) Dep. 216:19-24), Ex. B to Mot. for Summ. J.,
parties dispute the scope of James's responsibilities and
autonomy as manager of Osaka Lansdale. Whereas Plaintiff
asserts that James was responsible for “interviewing
employees, firing employees, hiring employees, and
recommending prospective employees” to his father and
enforcing workplace rules, such as not sitting down during
service, Defendants point to deposition testimony from both
Kwang and James that Kwang, not James, hired employees and
that James only “relay[ed] the messages to fire
employees, ” could not set pay rates, and merely passed
on his father's rules. (Pl.'s SOF ¶ 15;
Defs.' SOF ¶ 15). James testified that Kwang James
testified that he “was instructed to put together
payroll once a week” at Osaka Lansdale, which involved
“doing the balance books or the tip sheets.” (JK
Dep. 24:10-11). Kwang testified that his son had “no
power.” (JK Dep. 138:14).
to whom James referred to throughout his deposition as
“Mr. Kim, ” fired James as manager of Osaka
Lansdale in October 2016. (JK Dep. 11:1-9).
Types of employees at Osaka
employed servers, hosts, bussers, bartenders, dishwashers,
kitchen chefs, sushi chefs, and, at Osaka Lansdale, hibachi
chefs. (Pl.'s SOF ¶ 33, 39; Defs.'
SOF ¶ 33, 39). Most types of employees were paid an
hourly wage, and the kitchen chefs, sushi chefs, and hibachi
chefs were paid a daily rate set by Kwang. (Pl.'s SOF
¶ 33, 38-39; Defs.' SOF ¶ 33, 38-39).
Bartenders and some servers were paid $2.83 per hour, and
bussers were paid $5.00 per hour.(Pl.'s SOF ¶ 34-35;
Defs.' SOF ¶ 34-35). Daily-rate employees were paid
$80-160 per day. (Pl.'s SOF ¶ 40; Defs.' SOF
Osaka employees clock in and out on a point-of-sale computer
system known as Micros, which records hours worked, shifts
worked, and pay amounts, tracking each shift down to the
minute. (Pl.'s SOF ¶ 44-46, 49; Defs.' SOF
¶ 44-46, 49). Micros calculates pay for hourly employees
by multiplying hours worked by the pay rates stored in the
system. (Pl.'s SOF ¶ 55; Defs.' SOF ¶ 55).
Minimum wage and tipping policies
“Tip credit” against minimum wage
“claimed a tip credit against [its] minimum wage
obligations to hourly employees.” (Pl.'s SOF ¶
78; Defs.' Resp. to Requests for Admissions ¶ 14,
Ex. C to Pl.'s Mot. for Summ. J. ECF 29-7). Plaintiff
presents numerous affidavits from former Osaka employees
attesting that they were not informed of the following:
“that they were claiming a tip credit as part of their
wages”; “that tipped employees had to be paid at
least $2.13 per hour, in addition to any tips
received”; “that Defendants could not claim more
than $5.12 per hour as a tip credit as part of their
wages”; “that the tip credit Defendants claimed
could not exceed the tips tipped employees actually
received”; “that Defendants could not take their
tips unless they were part of a valid tip pool”;
“that Defendant [sic] cannot claim a tip credit unless
they inform tipped employees about the tip credit.”
(Pl.'s SOF ¶¶ 81-86). Defendants dispute these
assertions by citing to a portion of James' testimony in
which he testified that he told new employees being hired at
$2.83 per hour that they would be receiving tips. (Defs.'
SOF ¶¶ 81-86). At his deposition, James testified
that he “still [did]n't know” what the term
“tip credit” meant. (JK Dep. 150:21).
Osaka Chestnut Hill and Osaka Lansdale, servers and
bartenders were required to contribute their tips to a tip
pool, which was then distributed among various categories of
employees. (KBK Dep. 91:25-93:2; JK Dep. 166:22-168:24).
Prior to a federal investigation, the tip pools at the two
locations included kitchen chefs, who did typically receive
tips directly from customers and did not regularly interact
with customers. (Pl.'s SOF ¶ 97; Defs.' SOF
¶ 97). Once the tips were pooled, the tip money received
each shift would be distributed according to a points-based
system according to which employees were assigned a
particular point value based on their position, length of
employment, and performance; servers, for example, received
50-100 points in the tip pool, and bartenders received 90-100
points in the tip pool. (Pl.'s SOF ¶ 101-02;
Defs.' SOF ¶ 101-02). An employee would calculate
tips by aggregating cash and credit card tips, and then
distributing the tips based on the number of points each
employee was allotted. (Pl.'s SOF ¶ 105; Defs.'
SOF ¶ 105).
Kwang testified that he did not develop the points system, he
testified that servers, bartenders, and hosts could not keep
their own tips and were “required” to share them.
(KBK Dep. 91:25-92:20). James testified that although no
employee had ever been fired for failing to participate in a
tip pool, he “[could]n't envision” a server
staying on if he refused to participate in the tip pool.
Kim, a former hibachi chef, wrote in his declaration that
James and Kwang held a meeting with staff and “told the
staff that we were required to pool our
tips.” (Heng Kim Decl. ¶ 21, Ex. N. to
Pl.'s Mot. for Summ. J., ECF 29-18). Former server Helen
Prentice wrote in her declaration that she and a co-worker
approached James to ask whether the tip pool would be
changed, and James made clear that it would not. (Prentice
Decl. ¶ 33, Ex. L. to Pl.'s Mot. for Summ. J., ECF
Credit card deduction
undisputed that although credit card processing fees were 4%,
Defendants deducted 15% from employees' credit card tips
until this policy was changed in February 2016. (Pl.'s
SOF ¶ 113-14; Defs.' SOF ¶ 113-14). Kwang
testified that the extra eleven percentage points “was
considered to cover [employees'] meals.”
(Defs.' SOF ¶ 113-14). Defendants did not reimburse
their employees for the credit card tip deductions, and
deposited the deductions into corporate bank accounts.
(Pl.'s SOF ¶ 118; Defs.' SOF ¶ 118).
tipped employees were paid by multiplying their hourly rate
by the number of hours worked (as logged in Micros); if
Micros showed an hourly employee working more than 40 hours,
Defendants did not pay overtime, but instead simply
multiplied the number of hours worked by the employee's
regular hourly rate. (Pl.'s SOF ¶ 55-56; Defs.'
SOF ¶ 55-56). Plaintiffs provide Micros printouts for
several hourly employees whose Micros printouts show more
than 40 hours per week clocked in for the week of October
19-25, 2015, and who were not paid overtime, but Defendants
assert that employees frequently forgot to clock out between
the lunch and dinner shifts; thus, Micros would show
employees as working when the restaurant was closed.
(Pl.'s SOF ¶ 57-59; Defs.' SOF ¶ 57-59).
Defendants would record the pay for the hourly tipped
employees as recorded in the Micros printouts into a
spreadsheet. (Pl.'s SOF ¶ 60; Defs.' SOF ¶
employees were paid by multiplying the number of days worked
by the according to the number of days they had worked.
(Pl.'s SOF ¶ 63; Defs.' SOF ¶ 63).
Defendants did not pay daily-rate employees overtime, even if
Micros had logged them as working more than 40 hours in a
single week, and, as with the hourly employees, Defendants
argue that daily-rate employees often did not clock out.
(Pl.'s SOF ¶ 128-32; Defs.' SOF ¶ 128-32).
does not keep or maintain full records of employees'
phone numbers and home addresses, or, in some cases, their
full names. (Pl.'s SOF ¶ 148-49; Defs.' SOF
¶ 148-49). Kwang testified that he would make Excel
spreadsheets showing monthly pay and then discard these after
one to two months. (KBK Dep. 78:19-20). James testified that
he would discard hard-copy Micros records a few weeks after
employees were paid, and time records would be erased from
the Micros server if the system crashed. (JK Dep.
115:12-116:15). James also testified that the pieces of paper
on which employees calculated nightly tips after those tips
were recorded. (Id. 176:1-16). Kwang testified that
although Osaka has provided some information regarding tips
to Osaka's account to prepare tax returns since 2017,
Osaka discards its handwritten records of tips received after
one to two months because it “d[id]n't need
them.” (KBK Dep. 95:11-96:14).
Understanding of FLSA obligations
testified that prior to an investigation by the Department of
Labor, he believed that the minimum wage for servers was
$2.83 per hour, and only learned that the general minimum
wage was $7.25 per hour in the course of this litigation.
(KBK Dep. 80:8-82:2). He also testified that he only learned
what overtime was after the investigation began, and
previously did not know that he had to pay time-and-a-half
for time worked over 40 hours in a workweek. (Id.
testimony regarding his understanding of overtime
requirements was unclear. While he stated at first that he
had not “truly underst[ood]” what overtime meant
until the Department of Labor investigator had explained it
to him (JK Dep. 96:20-23), he later asserted that he had
known that overtime meant time-and-half pay for time worked
over forty hours before the investigation. (Id.
97:11-98:12). He did not recall raising any issue of
potential overtime violations to his father prior to the
investigation. (Id. 127:20-24).
did not seek a legal opinion regarding, or consult with state
or federal agencies regarding, whether Osaka's tipping,
overtime, and recordkeeping practices complied with the FLSA.
(Id. 133:3-135:21; JK Dep. 214:15-216:3).
point, Osaka was the subject of a federal investigation by
the Department of Labor, but the precise chronology is
unclear from the record before this Court. This lawsuit
R. Alexander Acosta, Secretary of Labor, United States
Department of Labor filed this action pursuant to the Fair
Labor Standards Act on March 8, 2017. (Compl., ECF 1.)
Defendants filed their Answer on May 12, 2017. (Answer, ECF
the conclusion of discovery, Plaintiff moved for partial
summary judgment on February 28, 2018, reserving the issue of
damages for trial. (Pl.'s Mot. for Summ. J. ECF 29.)
of filing a response in opposition, Defendants filed a
“motion for settlement conference” on March 28,
2018. (Mot. for Settlement Conf., ECF 32.) Plaintiff filed a
memorandum in opposition to the motion for settlement
conference on March 30, 2018. (Mot. for Settlement Conf., ECF
33.) Plaintiff filed a motion to amend the exhibit listing
employees of Osaka on May 1, 2018. (Mot., ECF 35.)
filed a memorandum in opposition to the motion for partial
summary judgment on May 4, 2018. (Defs.' Opp. to Summ.
J., ECF 36.) Plaintiff filed his reply on May 29, 2019.
(Pl.'s Reply in Support of Summ. J, ECF 38.)
Court held a recorded telephone conference regarding the
motion for partial summary judgment on July 10, 2018.
judgment is appropriate if the movant can show “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). A dispute is “genuine” if
“the evidence is such that a reasonable jury could
return a verdict for the non-moving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A factual dispute is “material” if it
“might affect the outcome of the suit under the
governing law.” Id.
seeking summary judgment bears the initial responsibility for
informing the district court of the basis for its motion and
identifying those portions of the record that it believes
demonstrate the absence of a genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
Where the non-moving party bears the burden of proof on a
particular issue at trial, the moving party's initial
burden can be met simply by “pointing out to the
district court that there is an absence of evidence to
support the non-moving party's case.” Id.
at 325. Summary judgment is appropriate if the non-moving
party fails to rebut the motion by making a factual showing
“that a genuine issue of material fact exists and that
a reasonable factfinder could rule in its favor.”
Id. Under Rule 56, the Court must view the evidence
presented on the motion in the light most favorable to the
opposing party. Anderson, 477 U.S. at 255.
Fair Labor Standards Act (FLSA) was enacted “with the
goal of ‘protect[ing] all covered workers from
substandard wages and oppressive working hours.'”
Christopher v. SmithKline Beecham Corp., 567 U.S.
142, 147 (2012). The FLSA “establishes federal
minimum-wage, maximum-hour, and overtime guarantees that
cannot be modified by contract.” Genesis Healthcare
Corp. v. Symczyk, 569 U.S. 66, 69 (2013).
undisputed that Osaka Chestnut Hill and Osaka Lansdale were
covered entities under the FLSA. (Pl.'s Mem. in Support
of Mot. for Summ. J (“Pl.'s Br.”) at 6-8, ECF
29-2; Defs.' Mem. in Opposition to Mot. for Summ. J.
(“Defs.' Br.”) at 3, ECF 36-1).
Minimum Wage Violations for Hourly Tipped Employees
6 of the FLSA requires that all covered employees be paid
$7.25 per hour. 29 U.S.C. § 206 (a). Section 3(m)