2:19-cv-00021
E.D. Wis.Jul 13, 2020Background
- Abdullah and Lufti Hussein worked as delivery drivers at JJ Chen’s Eatery and were paid a $4/hour base wage plus tips; they used their own vehicles and incurred gas/maintenance expenses.
- Defendants collected delivery fees ($2–$6) for deliveries; parties dispute whether drivers received those charges or whether they remained with the restaurant.
- Defendants had no tip-credit posters or signed per-pay-period tip declarations; they produced paystubs and claim Defendant Liang gave verbal explanations about tips making up the wage.
- Plaintiffs allege they often worked over 40 hours/week; Defendant Liang admitted some weeks exceeded 40 hours and testified that he sometimes shifted hours between the brothers for pay credit.
- Plaintiffs moved for partial summary judgment on FLSA tip-credit notice, Wisconsin tip declarations, delivery charges/vehicle expense reimbursement, overtime, liquidated damages, Liang’s personal liability, and a three-year statute of limitations; the court granted most claims but denied without prejudice the delivery-charge issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FLSA tip-credit notice (29 C.F.R. § 531.59(b)) | Defendants failed to inform tipped employees of required elements in advance, so no federal tip credit | Paystubs and verbal explanations suffice to inform employees | Court: Defendants did not provide the specific advance notice required; tip credit disallowed under the FLSA |
| Wisconsin tip-declaration requirement (DWD § 272.03) | No signed per-pay-period tip declarations, so no Wisconsin tip credit | Argue lack of Wisconsin precedent; ask court not to apply DWD rule | Court: DWD rule applies; no tip credit under Wisconsin law due to absence of signed declarations |
| Delivery charges / vehicle expense reimbursement | Delivery fees were not paid to drivers; drivers incurred unreimbursed vehicle expenses that may reduce wages below minimum | Defendants say drivers kept cash delivery fees for cash orders; counsel stated service charges deposited to business account; discovery incomplete | Court: Denies summary judgment without prejudice — genuine factual dispute and ambiguous counsel statement require further development |
| Overtime pay and shifting hours | Plaintiffs worked >40 hrs/week and were not paid proper overtime; hour-shifting deprived individuals of overtime | Defendants claim total compensation (tips + delivery charges) met overtime rate | Court: Because tip credit disallowed, defendants must pay overtime at required rate; cannot contract away FLSA overtime; plaintiffs entitled to OT; damages to be determined later |
| Liquidated damages (FLSA) | Plaintiffs seek liquidated damages for unpaid minimum and overtime pay | Defendants assert good-faith, reasonable reliance defense | Court: Defendants failed to prove good-faith reasonable investigation; liquidated damages awarded in full on FLSA minimum-wage and overtime claims |
| Personal liability & statute of limitations | Liang is individually liable; three-year statute applies | Defendants do not contest | Court: Grants both — Liang liable and three-year limitations period applies |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard; evidence viewed in favor of nonmoving party)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment as the party’s opportunity to show evidence supporting its claims)
- Gabryszak v. Aurora Bull Dog Co., 427 F. Supp. 3d 994 (employer bears burden to prove it provided required FLSA tip-credit notice)
- Perez v. Lorraine Enters., Inc., 769 F.3d 23 (employer must show adequate notice to take tip credit)
- Schaefer v. Walker Bros. Enters., 829 F.3d 551 (employer must make up difference when tips plus cash wage do not meet minimum wage)
- Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728 (FLSA rights to minimum wage and overtime are nonwaivable)
- Uphoff v. Elegant Bath, Ltd., 176 F.3d 399 (presumption in favor of liquidated damages; employer bears heavy burden to show good faith)
- Bankston v. Illinois, 60 F.3d 1249 (employer’s substantial burden to show reasonable and good-faith compliance defenses)
- Diadenko v. Folino, 741 F.3d 751 (summary judgment requires party to show evidence that would convince a trier of fact)