R. Alexander Acosta v. Min & Kim, Inc., 919 F.3d 361

Background

Seoul Garden, a restaurant in Ann Arbor run by Kounwoo Hur and Sung Hee Kim since 2008, employed staff who typically worked two shifts six days a week (about 52 hours/week).
Employers paid each employee a negotiated "guaranteed wage" for the expected double-shift week (effectively a day-rate), then derived an hourly rate for 40 hours and an overtime rate for the remaining hours; bonuses/"negative bonuses" adjusted pay to equal the guaranteed wage.
Time and payroll records were incomplete: no hourly records before August 2016 (no time clock until then), patchy payroll entries for 2013–2014, and a two-year gap with virtually no records for 2014–2016.
The Department of Labor investigated and sued for violations of the Fair Labor Standards Act (overtime and recordkeeping) covering September 2013–March 2017; district court awarded $112,212 in back pay to 28 employees, enjoined further violations, but declined to award liquidated damages.
On summary judgment, the district court found defendants violated overtime and recordkeeping provisions but acted in good faith such that liquidated damages were excused; the government cross-appealed the liquidated-damages ruling.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Overtime calculation — whether guaranteed wage complied with FLSA regular-rate/overtime rules	DOL: Guaranteed wage did not vary with actual overtime; total weekly pay must be divided by actual hours to compute regular rate, so employees were underpaid	Hur/Kim: Pay practice functioned as a lawful day-rate/salary system; rates generous and intended to account for overtime	Court: Held for DOL — guaranteed wage that does not vary with overtime cannot include proper overtime; defendants underpaid employees
Recordkeeping — whether defendants met FLSA recordkeeping duties	DOL: Employers failed to record required daily/weekly hours and other mandated items for many periods	Hur/Kim: Claimed fixed-schedule exception and ignorance; implemented time clock and contracts later	Court: Held for DOL — defendants violated recordkeeping rules; fixed-schedule exception inapplicable because actual hours were not recorded when hours deviated
Proof of damages when employer records are incomplete	DOL: Investigator’s reasonable inferences, grounded in employer’s schedules/testimony and other records, suffice to estimate unpaid overtime	Hur/Kim: Calculations speculative; some employees not in original complaint; claimed missing records exist	Court: Held for DOL — Tyson Foods standard satisfied; estimates reasonable; defendants did not rebut
Liquidated damages — whether employers showed good faith and reasonable grounds to avoid double damages	DOL: Liquidated damages appropriate; employers’ recordkeeping and shifting explanations undermine good-faith claim	Hur/Kim: Adopted prior owner’s practices and relied on accountant and DOL materials, demonstrating good faith and reasonable grounds	Court: Held for defendants — district court did not abuse discretion in excusing liquidated damages based on good faith and reasonable grounds

Key Cases Cited

Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016) (employer’s incomplete records can be supplemented by reasonable inference to establish amount/time of uncompensated work)
Graham-Humphreys v. Memphis Brooks Museum of Art, Inc., 209 F.3d 552 (6th Cir. 2000) (ignorance of law is not typically a defense in civil suits)
Elwell v. Univ. Hosps. Home Care Servs., 276 F.3d 832 (6th Cir. 2002) (appeal standard for district court’s discretion on liquidated damages)
Martin v. Ind. & Mich. Power Co., 381 F.3d 574 (6th Cir. 2004) (good-faith/reasonable-ground standard for avoiding liquidated damages under FLSA)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard: complaint need not include detailed factual matter)
Brooklyn Sav. Bank v. O’Neill, 324 U.S. 697 (1945) (prejudgment interest considerations)
McClanahan v. Mathews, 440 F.2d 320 (6th Cir. 1971) (procedural guidance on prejudgment interest)