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Inclan v. New York Hospitality Grp., Inc.

United States District Court, S.D. New York

March 26, 2015

LUIS INCLAN, IVAN KRAUCHANKA, SZILVIA REP, MAME FATOU WADE, and SKANDER SOLTANI, on behalf of themselves, FLSA Collective Plaintiffs and the Class, Plaintiffs, -

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For Plaintiffs: C.K. Lee, Esq., Lee Litigation Group, PLLC, New York, NY.

For Defendants: Marshall B. Bellovin, Esq., Evan E. Richards, Esq., Ballon Stoll Bader & Nadler, P.C., New York, NY.

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Before the Court are cross-motions for summary judgment in a collective action brought under the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201, et seq. (" FLSA" ), also involving supplemental claims under the New York Labor Law (" NYLL" ). Plaintiffs, who are former waiters at a Manhattan restaurant called " Le Bateau Ivre," operated by defendant New York Hospitality Group, Inc. (" NYHG" ), move for partial summary judgment, asking the Court to rule: (1) that defendants are liable under the FLSA and the NYLL for unpaid minimum wages due to defendants' failure to meet the requirements for claiming tip credit allowances under the FLSA and the NYLL; (2) that defendants are liable under the FLSA and the NYLL for unpaid overtime wages; (3) that defendants are liable under the Wage Theft Prevention Act (an amendment to the NYLL) for statutory damages for their failure to provide proper wage notices and wage statements; (4) that defendants are liable under the NYLL for unpaid spread-of-hours payments; (5) that defendants are liable under the FLSA and the NYLL for liquidated damages; (6) that plaintiffs are entitled to the benefit of a three-year limitations period for their FLSA claims; and (7) that defendants Raju S. Mirchandani and NYHG are jointly and severally liable under the FLSA and the NYLL as joint employers of plaintiffs. In their cross-motion for summary judgment, Mirchandani and defendant Rajmar Holdings, Inc. (" RHI" ; collectively, the " Moving Defendants" ) ask the Court to rule that they are not liable as employers under the FLSA and the NYLL and to dismiss them from the case. For the reasons stated herein, plaintiffs' motion is granted in part and denied in part, and the Moving Defendants' motion is granted in part and denied in part.


The following facts are undisputed except

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as noted.[2] At all relevant times, Le Bateau Ivre (or the " Restaurant" ) was a Manhattan restaurant in the style of a French bistro. Am. Compl. ¶ 6; Pls.' 56.1 Stmt. ¶ 30; Deposition of Raju Mirchandani at 9:19-21 (" Mirchandani Dep." ), Bellovin Aff. Ex. C. The five plaintiffs (Luis Inclan, Ivan Krauchanka, Szilvia Rep, Mame Fatou Wade, and Skander Solanti) were employees at the Restaurant, where they worked as waiters and two of them also worked as bartenders. Pls.' 56.1 Stmt. ¶ ¶ 1, 5, 9, 13, 17. Plaintiffs' dates of employment at the Restaurant varied but overlapped; the first plaintiff (Wade) was hired in March 2005, and the last one (Soltani) left the Restaurant in June 2012. Pls.' 56.1 Stmt. ¶ ¶ 13, 17; Defs.' 56.1 Stmt. ¶ ¶ 16, 17.

Throughout their employment at the Restaurant, the plaintiffs were paid at what the parties call a " tip credit minimum wage rate," which was $5.00 per hour at the dates of their termination. Pls.' 56.1 Stmt. ¶ ¶ 3, 7, 11, 15, 19. In other words, each plaintiff was paid the prevailing hourly minimum wage, minus an allowance permitted by law (under some circumstances) for employees who customarily receive tips. See Pls.' 56.1 Stmt. ¶ 3; Pls.' Mem. at 1; Defs.' Opp. Mem. at 2. However, plaintiffs did not receive a notice of the Restaurant's intent to take a tip credit, nor did they receive a wage notice form from the Restaurant. Pls.' 56.1 Stmt. ¶ ¶ 4, 8, 12, 16, 20, 23, 24.

From time to time, plaintiffs worked more than forty hours per week. On at least some of those occasions, the Restaurant did not fully compensate them (even assuming a tip credit were allowed) for their overtime hours, which would have required multiplying the general minimum wage rate by one and one-half and then subtracting the amount of the permissible tip credit. Pls.' 56.1 Stmt. ¶ 27; see Defs.' 56.1 Counterstmt. ¶ 27. Additionally, plaintiffs sometimes worked more than ten hours per day. On those occasions, the Restaurant did not pay them an additional hour's wage for their " spread of hours," as was required by New York law. Pls.' 56.1 Stmt. ¶ 28.

The Restaurant was operated by defendant NYHG, a corporation wholly owned by defendant Mirchandani. Pls.' 56.1 Stmt. ¶ 30; Defs.' 56.1 Stmt. ¶ ¶ 21, 22. Mirchandani was also the sole owner of defendant RHI, a separate entity with no

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relation to the Restaurant and with no employees in common with NYHG. Defs.' 56.1 ¶ 23, 24. Mirchandani's involvement in the Restaurant's affairs was substantial, although the parties vigorously contest the degree of this involvement. As discussed in greater detail in Part II.H below, Mirchandani signed the lease and contracts on the Restaurant's behalf, hired the Restaurant's managers and chef, met with the managers weekly to discuss the Restaurant's business, and set employees' pay rates. Mirchandani Dep. 9:11-18, 10:17-19, 11:2-10, 21:11-1828:7-29:6.

The initial complaint in this action was filed on June 8, 2012, and the Amended Complaint (which is the operative complaint), was filed on November 13, 2012. Docs. 1, 15. The action was certified as an FLSA collective action on April 2, 2013. Doc. 26.[3] Following discovery, plaintiffs and the Moving Defendants filed the instant cross-motions for summary judgment on July 28, 2014. The motions were fully briefed on August 29, 2014.


Plaintiffs do not seek summary judgment on the amount of damages, but only as to issues of liability that will structure further proceedings. Similarly, resolution of the Moving Defendants' motion will decide which defendants remain in the case but will not determine the amount of the remaining defendants' liability.

In Part II.H below, we explain the reasons for our conclusion that Mirchandani will be held jointly and severally liable with NYHG. Throughout this discussion, we refer to the " Restaurant's" liability as shorthand for the joint and several liability of those two defendants.

A. Summary Judgment Standard

A motion for summary judgment is appropriately granted when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). In this context, " [a] fact is 'material' when it might affect the outcome of the suit under governing law," and " [a]n issue of fact is 'genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir. 2007) (other internal quotation marks and citations omitted). " In assessing the record to determine whether there is [such] a genuine issue to be tried, we are required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought." Gorzynski v. JetBlue Airways Corp., 596 F.3d 93, 101 (2d Cir. 2010) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

On a motion for summary judgment, " [t]he moving party bears the initial burden of demonstrating 'the absence of a genuine issue of material fact.'" F.D.I.C. v. Great Am. Ins. Co., 607 F.3d 288, 292 (2d Cir. 2010) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Where that burden is carried, the non-moving party " must come forward with specific evidence demonstrating the existence of a genuine dispute of material fact." Id. (citing Anderson, 477 U.S. at 249). The non-moving party " must do more than simply show that there is some metaphysical doubt as to the material facts . . . and may not rely on conclusory allegations or

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unsubstantiated speculation." Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011) (internal quotation marks and citations omitted).

B. Minimum Wage Claims

Both the FLSA and the NYLL permit an employer to pay a tipped worker a cash wage that is lower than the statutory minimum wage, provided that the cash wage and the employee's tips, taken together, are at least equivalent to the minimum wage. See 29 U.S.C. § § 203(m), 206(a)(1); 12 N.Y.C.R.R. § 146-1.3(b) (effective Jan. 1, 2011); 12 N.Y.C.R.R. § 137-1.5 (repealed effective Jan. 1, 2011); [4] Shahriar v. Smith & Wollensky Restaurant Grp., 659 F.3d 234, 239-40 (2d Cir. 2011). This allowance against the minimum cash wage is known as a " tip credit."

Plaintiffs contend that defendants paid them an hourly wage that was below the generally permissible minimum wage, without fulfilling federal and state law requirements to take a tip credit allowance. It is undisputed that at all times during their employment, each plaintiff was " paid at a tip credit minimum wage rate, that is, minimum wage minus the applicable tip credit allowance." Pls.' 56.1 Stmt. ¶ 3; see id. ¶ ¶ 7, 11, 15, 19. Thus, plaintiffs' wages were impermissibly low unless the Restaurant satisfied the requirements of the FLSA and NYLL to claim a tip credit. We consider the requirements of each of those statutes in turn.


Under the FLSA, an employer may not claim a tip credit as to an employee's wages unless the employer has informed that employee of the provisions of the section of the FLSA permitting the tip credit. 29 U.S.C. § 203(m); see, e.g., Copantitla v. Fiskardo Estiatorio, Inc., 788 F.Supp.2d 253, 287 (S.D.N.Y. 2011); Chung v. New Silver Palace Rest., Inc., 246 F.Supp.2d 220, 228-29 (S.D.N.Y. 2002). " This notice provision is strictly construed and normally requires that an employer take affirmative steps to inform affected employees of the employer's intent to claim the tip credit." Perez v. Lorraine Enters., Inc., 769 F.3d 23, 27 (1st Cir. 2014); see, e.g., Kilgore v. Outback Steakhouse of Fla., Inc., 160 F.3d 294, 298 (6th Cir. 1998); Reich v. Chez Robert, Inc., 28 F.3d 401, 404 (3d Cir. 1994); Hart v. Rick's Cabaret Int'l, Inc., 967 F.Supp.2d 901, 934 (S.D.N.Y. 2013); Lanzetta v. Florio's Enters., Inc., 763 F.Supp.2d 615, 623 (S.D.N.Y. 2011).

The employer " bear[s] the burden of showing that [it] satisfied the FLSA's notice requirement by, for example, providing employees with a copy of § 203(m) and informing them that their tips will be used as a credit against the minimum wage as permitted by law." He v. Home on 8th Corp., No. 09 Civ. 5630, 2014 WL 3974670, at *5 (S.D.N.Y. Aug. 13, 2014) (internal quotation marks omitted); see, e.g., Copantitla, 788 F.Supp.2d at 288. " If the employer cannot show that it has informed employees that tips are being credited against their wages, then no tip credit can be taken and the employer is liable for the full minimum-wage . . . ." Chez Robert, 28 F.3d at 403.

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Here, defendants point to no evidence that the Restaurant complied with the FLSA's tip credit notice requirement. Instead, defendants argue that the Court should " assume proper tip credit notification was provided," Defs.' Mem. at 3, because one of the Restaurant's managers testified that she " d[id]n't recall" whether the employees were given notice that the Restaurant was taking a tip credit. Deposition of Adriana Daci at 29:7-9 (" Daci Dep." ), Bellovin Aff. Ex. D; see, e.g., Defs.' 56.1 Counterstmt. ¶ ¶ 4, 8, 12, 16, 20, 23. To make such an assumption in defendants' favor would be inconsistent with the principle that on a motion for summary judgment, " where the nonmoving party will bear the burden of proof on an issue at trial, the moving party may satisfy its burden by pointing to an absence of evidence to support an essential element of the nonmoving party's case." Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473, 486 (2d Cir. 2014) (brackets and internal quotation marks omitted). Because the employer has the ultimate burden to prove compliance with the tip credit notice requirement, an employer opposing summary judgment on this issue must " do more than point to a dearth of evidence." Lorraine Enters., 769 F.3d at 30. Instead, the employer must " adduce definite competent evidence showing that waiters were informed of the tip credit." Id. As defendants here have not done so, the Restaurant is liable under the FLSA for plaintiffs' unpaid minimum wages without a tip credit allowance.


The regulations implementing the NYLL also impose notice requirements upon an employer that desires to take a tip credit. See 12 N.Y.C.R.R. § 146-2.2 (effective Jan. 1, 2011); 12 N.Y.C.R. § 137-2.2 (repealed effective Jan. 1, 2011). In addition to notice, state records also impose a recordkeeping burden, by requiring that an employer " establish, maintain and preserve for at least six years weekly payroll records" that show the " tip credits, if any, claimed as part of the minimum wage." 12 N.Y.C.R.R. § 146-2.1(a)(9) (effective Jan. 1, 2011); accord 12 N.Y.C.R.R. § 137-2.1(a)(7) (repealed effective Jan. 1, 2011).

Here, defendants " acknowledge and take responsibility for their mistake in not providing the proper notification in not providing the proper notification under the . . . NYLL." Defs.' Opp. Mem. at 3. Although defendants also summarily assert that plaintiffs are not entitled to summary judgment on the NYLL claim, see id., they offer no argument for declining to award on this issue in light of their concession of fault. Accordingly, the ...

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