Pizzella v. Diner

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PATRICK PIZZELLA, Plaintiff, v. EMPIRE DINER, et al., Defendants.

Civil Action No. 18-4663

United States District Court, E.D. Pennsylvania

August 18, 2022

MEMORANDUM

EDUARDO C. ROBRENO, J.

I. INTRODUCTION

Patrick Pizzella, former acting Secretary of Labor (“Plaintiff”), brings this action under the Fair Labor Standards Act (the “FLSA”) against Empire Diner, Ihsan Gunaydin, and Engin Gunaydin (collectively “Defendants”), for violations of the FLSA's minimum wage, overtime, and recordkeeping requirements.

Empire Diner (“Empire”) is a 24-hour restaurant in Lansdowne, Pennsylvania. At all times relevant to this action, Ihsan Gunaydin (“Ihsan”) was the owner of Empire Diner, and Engin Gunaydin (“Engin”) worked as a manager at the diner. The diner employs, inter alia servers, kitchen workers, bussers, and cashiers.

On August 10, 2017, a Wage and Hour (“WH”) investigation began at Empire. The WH investigation continued until May 3, 2018, when WH Investigator Gyasi Martin convened a final conference with Ihsan, Engin, and Certified Public Accountant Ali Gunaydin.

On October 30, 2018, Plaintiff filed a complaint alleging that Defendants violated the FLSA and seeking injunctive relief and a judgment against Defendants consisting of back wages and liquidated damages. After discovery, the parties filed cross motions for summary judgment. The Court denied Defendants' motion in full. Plaintiff's motion was granted as to the liability of Defendants Ihsan and Empire for minimum wage, overtime, and recordkeeping violations. The Court declined to enter summary judgment in favor of Plaintiff as to the following issues: (1) whether Engin is an employer under the FLSA; (2) whether Defendants acted willfully, which, in turn, would affect (3) the amount of back wages owed; (4) the imposition of liquidated damages; and (5) whether Plaintiff was entitled to injunctive relief.

The Court held a bench trial on the five issues that remained in the case after summary judgment. This memorandum constitutes the Court's findings of fact and conclusions of law. For the reasons set forth below, the Court concludes that Engin Gunaydin was an employer under the FLSA, that Defendants' violations of the FLSA were willful, that Defendants are liable for $675,626.67 in back wages and an equal amount in liquidated damages, and that injunctive relief is warranted.

II. FINDINGS OF FACT

A. Engin's Employment with Empire

Engin is Ihsan's oldest son. See Tr. of Trial on 03/29/2022 (“Day 3 Tr.”) 26:16-17, ECF No. 91.^[1] While Engin held no formal ownership interest in Empire, he and Ihsan were jointly responsible for operating the diner and setting general work policies. See Day 3 Tr. 54:15-21. When Ihsan traveled to Turkey, which generally occurred multiple times per year, Engin was left in charge of Empire. See id. at 59:3-5. And while Ihsan generally ordered food and supplies for the restaurant, Engin took over that responsibility when Ihsan was unavailable.

As Empire's manager, Engin was primarily responsible for interviewing and hiring front-of-the-house employees such as servers and bussers. Tr. of Trial on 02/22/22 (“Day 1 Tr.”) 41:10-16, ECF No. 78; Day 1 Tr. 97:2-4 (server testifying that “[Engin] talked to me for . . . a few minutes about the job, and then he hired me.”); Frazer Decl. ¶ 3, Pl.'s Trial Ex. 40; Williams Decl. ¶ 3, Pl.'s Trial Ex. 48; Sheeran Decl. ¶ 3, Pl.'s Trial Ex. 46, Tepper Decl. ¶ 3, Pl.'s Trial Ex. 42. Ihsan testified in his deposition that he only hired servers “when [Engin's] not there.” Ihsan Dep. 34:21-22, ECF No. 40-8. Engin 1 Empire's Certified Public Accountant, Ali Gunaydin, is also Ihsan's son. See Day 3 Tr. 99:7-8. was also tasked with training new employees when necessary. See Day 3 Tr. 52:2-10; Engin Dep. at 15:12-20, ECF No. 40-9.

Engin worked together with Ihsan to set work schedules for Empire's employees. See Day 3 Tr. 52:14-17; Tr. of Trial on 04/07/22 (“Day 4 Tr.”) 18:18-25, ECF No. 92. When servers needed to change their schedule, they would ask Engin for approval. See Day 1 Tr. 42:21-22. And when Empire needed employees to work overtime, Engin called them in to work. See Day 1 Tr. 116:8-11, 191:11-14. Engin and Ihsan shared the responsibility of assigning employees to their workstations for each shift. See Day 3 Tr. 52:22-53:4, 53:9-11.

Engin disciplined employees at Empire. See Day 1 Tr. 43:57, 55:6-10. Such discipline included removing employees from the schedule, yelling at them, firing them, reducing their scheduled hours, and assigning them to undesirable workstations. See Id. at 55:11-18.

When Engin hired new servers, he told them they would be paid $2.83 per hour plus tips. See Day 1 Tr. 169:19-20; Engin Dep. at 16:5-10. Engin and Ihsan worked together on payroll duties such as collecting timecards and sending records of employee time sheets and tips to Empire's payroll company. Day 3 Tr. 55:22-24, 56:19-24, 57:7-17. Engin and Ihsan both distributed paychecks to Empire's employees. Id. at 57:7-9. One server testified that, at least on occasion, she received her paychecks in the form of a personal check signed by Engin. Day 1 Tr. 116:21-117:12.

B. Defendants' Pay Policies

Defendants paid an hourly wage to servers, bussers, kitchen employees, and cashiers. See Tr. of Trial on 03/02/2022 (“Day 2 Tr.”) 21:1-5, ECF No. 81. Defendants paid servers a wage of $2.83 per hour, see Pl.'s Trial Ex. 2, and allowed them to keep a portion of the tips earned for each shift. Day 1 Tr. 41:2542:5.^[2]

At all times relevant to this action, the federal minimum wage was $7.25 per hour. See 29 U.S.C. § 206(a). Defendants never informed servers that they were entitled to the minimum wage under federal law. See Day 1 Tr. 101:10-21, 115:9-18, 143:15-20, 156:7-9, 168:18-23; Day 2 Tr. 12:22-13:3.

1. Tip Practices

Defendants paid servers a wage of $2.83 per hour. See Pl.'s Trial Ex. 2. Defendants also allowed servers to keep a portion of the tips they received from customers. See Day 1 Tr. 41:25 42:5. However, Defendants also required servers to turn over anywhere from ten to fifteen percent of the tips they earned after each shift to either Engin or the employee working at the cash register. See Day 1 Tr. 44:10-19, 98:22-99:14, 112:19113:5, 139:7-9, 153:15-20, 183:16-22; Day 2 Tr. 10:20-11:5, 32:10-13, 38:18-23; Day 3 Tr. 61:2-7. If servers failed to turn over the requisite percentage of their tips after their shift, Engin-or a cashier under Engin's direction-would require them to give a greater percentage on their next shift. See Day 1 Tr. 52:11-19, 154:11-16. Defendants used the tips that servers turned over to them to pay the bussers' hourly wage. See Day 2 Tr. 46:3-10; Day 3 Tr. 64:21-25.

The tips Defendants collected from servers were placed in a box under the cash register. See Day 3 Tr. 80:22-24. The cashier would then record the amount each server turned over on a piece of paper, which the cashier left in a drawer at the register after every shift. See Engin Dep. 44:7-13; Day 1 Tr. 50:2351:17. Though these amounts were written down after every shift, Defendants did not preserve these records. See Day 3 Tr. 12:1619; Engin Dep. 44:14-20.

Before the start of the WH investigation, Defendants did not require servers to keep any record of all the tips they received, nor did Defendants keep any such record themselves. See Day 1 Tr. 48:15-22, 139:10-13, 153:24-154:3, 167:22-168:4, 184:10-13; Day 2 Tr. 11:6-10. Despite Defendants' failure to keep records of the tips received by servers, their payroll records always reported that each server received a total $7.63 per hour. See Day 2 Tr. 88:10-89:15; Day 3 Tr. 86:25-87:3. This number was not based on any concrete record of actual tips received, but was a “guesstimate” employed by Ihsan. Ihsan Dep. 76:21-77:2; see also Day 3 Tr. 88:9-13. Ihsan reported this estimated number in order to give the appearance that the servers all made over minimum wage. See Day 3 Tr. 86:20-87:3. Ihsan never consulted Empire's accountant about this practice. See id. at 87:9-12.

2. Overtime Practices

During the period relevant to the instant action, many of Empire's employees-including servers, bussers, and kitchen staff-worked over forty hours in certain weeks. See Day 1 Tr. 103:8-11, 116:14-16, 139:19-22, 157:12-14, 191:15-17; Day 2 Tr. 30:5-9, 35:2-4; see also Williams Decl. ¶¶ 25-26, Pl.'s Trial Ex. 48 (employee's statement that “all cooks worked in excess of fifty hours per workweek”). Defendants did not pay their employees time-and-a-half pay for overtime hours worked. See Mem. Op. at 15, ECF No. 47 (finding that Defendants failed to comply with the overtime pay requirements of the FLSA).

When hourly employees worked over forty hours per week, Defendants paid them in cash for the portion of their hours that exceeded forty. See Day 1 Tr. 103:23-104:10, 116:17-25; Pl.'s Trial Ex. 24; Sheeran Decl. ¶ 11, Pl.'s Trial Ex. 46; Pl.'s Trial Ex. 48 ¶ 29. These cash payments represented the number of overtime hours worked times the employees' standard hourly rate of pay. See Day 1 Tr. 104:7-10, 116:17-24; Pl.'s Trial Ex. 24, Pl.'s Trial Ex. 46 ¶ 10; Pl.'s Trial Ex. 48 ¶ 31. Defendants kept no records of these cash payments. See Day 2 Tr. 96:14-18.

C. The WH Investigation

On August 10, 2017, WH Investigator Martin began his investigation into Defendants' pay practices.^[3] See Day 2 Tr. 18:6-9. Thereafter, Engin told a group of Empire employees about the investigation. See Day 1 Tr. 43:13-18; Day 2 Tr. 10:8-19, 38:24-39:8.

After the investigation began, Engin directed a number of Empire employees to tell Martin that bussers only worked on weekends. See Day 1 Tr. 43:19-44:5, 167:14-21; Day 2 Tr. 38:24 39:8. However, testimony at trial established that bussers worked...