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REICH v. CHEZ ROBERT

April 8, 1993

Robert B. Reich, Secretary of Labor, Plaintiff,
v.
CHEZ ROBERT, INC., and ROBERT SLIWOWSKI, Individually and as Owner and President, Defendants.



The opinion of the court was delivered by: THOMPSON

 THOMPSON, District Judge.

 The Secretary of Labor (hereinafter "Secretary") filed a Complaint on June 4, 1987, alleging that Defendants had willfully violated the minimum wage, overtime and record keeping provisions of the Fair Labor Standards Act of 1938 (hereinafter "Act"). The Secretary seeks an injunction under Section 17 of the Act to restrain the withholding of unpaid minimum wage and overtime compensation. See 29 U.S.C.A. § 217 (West 1987). The Secretary also seeks liquidated damages under Section 16(c) of the Act equal in amount to the back wages due for the minimum wage and overtime violations. See 29 U.S.C.A. § 216(c) (West 1978).

 Defendant Chez Robert, Inc. (hereinafter "Chez Robert") is a restaurant located in and organized under the laws of the State of New Jersey, having its principal place of business at 329 Haddon Avenue, Westmont, New Jersey. Defendant Robert Sliwowski has at all times material to this action been the chef, owner and chief operator of Chez Robert, exercising the regular management of the restaurant, including the hiring and firing of restaurant personnel.

 During the trial of this matter, which occurred between March 23, 1992 and May 13, 1992, the parties presented extensive evidence to the Court of disputed employment facts and disparate numbers, calculations as to hours worked and wages paid. The Court's task was to determine the wide impact of this evidence and to make specific findings as to the identity of the employees, what jobs they held, what hours they worked and what earnings they accrued. This Memorandum and Order sets forth the Court's findings of fact and conclusions of law pursuant to Fed R. Civ. P. 52(a).

 I. The Trial

 The former restaurant employees of Defendant Chez Robert were the major witnesses. Through their testimony it was established that Defendants largely failed to keep records as required by law. This was particularly true from 1984 to 1987. Further, their testimony established that Defendants failed to pay employees the proper overtime wage and failed to comply with other mandated components of the Fair Labor Standards Act. Although the testimony of the Secretary's witnesses clearly established a number of Act violations, the trial also revealed that no single remedy exists for determining the precise damages owed to each employee. No employee worked the same set hours per week, nor the same number of hours per day. Some were employed for a short period of time such as two weeks, some for a longer period of time such as two years. Some employees worked when the restaurant was busy, some worked when business was slow. Each employee's testimony differed based on his or her gender, experience, job title, and time of year that he or she was employed.

  Twenty-six of Defendants' former employees testified as witnesses for the Secretary. The testimony of another two witnesses was admitted into the record pursuant to Fed. R. Evid. 801(d)(2)(D). *fn1" Twenty-five testified about their employment as waiters or waitresses at Chez Robert between the years of 1984 and 1987. These witnesses confirmed the undisputed fact that waiters and waitresses at Chez Robert were paid a wage rate of $ 2.01 per hour during the first forty hours of the work week. Witnesses further testified that many employees (particularly the male employees) worked in excess of forty hours per week, but that time cards would be removed once an employee reached forty hours and that no further records were kept for that week. Employees were compensated for their overtime work by an amount, usually between $ 10 - $ 30, upon reporting their overtime hours to Defendant Sliwowski or his mother at the end of each overtime shift. Many employees testified that they did not receive any payment for their first day of work.

 Testimony also revealed that while at work, employees were required to do various "side work." This included such tasks as setting the tables in the dining rooms, cleaning and polishing restaurant facilities, preparing food, and arranging flowers.

 Finally, employees testified that men were required to wear a tuxedo and white tuxedo shirt, and that women were required to wear a black skirt and white shirt or apron. These uniforms had to be purchased and maintained by the employee, at his or her own expense. The Secretary claims that the expenses incurred by employees for uniforms and maintenance fees reduced many employees' wages below the lawful minimum rate for each workweek.

 Defendants Chez Robert, Inc. and Robert Sliwowski now assert four major claims in their defense. First, Defendants rely on the tip credit provisions of Section 3(m) of the Act and claim that the required amount to be paid to tipped employees is 60% the applicable minimum wage, or $ 2.01 per hour. See 29 U.S.C.A. 203(m) (1978). *fn2" Second, Defendants claim that records of employees' work hours were kept in the form of payroll reports, time cards, and tip sheets. Third, Defendants assert that uniforms were not a condition of employment and that almost all of the waiters and waitresses employed by Defendants already owned formal wear from previous employment. Fourth, Defendants claim that meals provided to employees for which they were not charged entitle Defendant to a meal credit pursuant to Section 3(m) of the Act.

 II. General Findings of Fact

 A. Burden of Proof

 Under Section 16(b) of the Act, an employee bringing suit for unpaid minimum wages and unpaid overtime compensation bears the burden of proving by a preponderance of the evidence that he or she performed work for which he or she was not properly compensated. Anderson v. Mt. Clemens Pottery, 328 U.S. 680, 687, 90 L. Ed. 1515 , 66 S. Ct. 1187 , reh'g denied, 329 U.S. 822, 91 L. Ed. 699 , 67 S. Ct. 25 (1946); McLaughlin v. DialAmerica Mktg., Inc., 716 F. Supp. 812, 823 (D.N.J. 1989), aff'd sub nom. Pole v. DialAmerica, 935 F.2d 1281 (3d Cir. 1991), cert. denied, 116 L. Ed. 2d 608, 112 S. Ct. 583 (1991). when the employer has complied with the Act and has maintained proper and adequate records, the burden of the employee is discharged by securing production of those records. McLaughlin v. DialAmerica, 716 F. Supp. at 823. However, where an employer has failed to keep adequate records as required by Section 211 of the Act, the employee meets the required burden if he or she can prove that work was performed for which he or she did not receive proper compensation, and if the employee produces sufficient evidence to show the "amount and extent of that work as a matter of just and reasonable inference." Anderson, 328 U.S. at 687. If a higher standard of proof were required, an employee would be unfairly penalized, and it would "place a premium on an employer's failure to keep proper records in conformity with his or her statutory duty." See id.

 The burden then shifts to the employer to negate the reasonableness of the inference to be drawn from the employee's evidence. McLaughlin v. DialAmerica, 716 F. Supp. at 823. If the employer is unable to meet this burden, the court may determine and award damages to the employees. Id. The district court may award damages even though the result can only be reached by approximation. Hodgson v. American Concrete Co., 471 F.2d 1183, 1186 (6th Cir. 1973), cert. denied, 412 U.S. 949, 37 L. Ed. 2d 1001 , 93 S. Ct. 3007 (1973). Thus, the determination of what damages will be awarded is based upon the credibility of the evidence presented before the trial judge, including the weight to be accorded to the compliance officer's computations. Id. at 1186; See also McLaughlin v. DialAmerica, 716 F. Supp. at 824.

 B. Uniform Expenses

 Section 6(a) of the Act required employers to pay employees a minimum wage of $ 3.35 per hour during the applicable period of time. 29 U.S.C.A. § 206 (a) (1978). *fn3" The cost of uniforms and their laundering, where the nature of the business requires the employee to wear a uniform, is a benefit to the employer and must be deducted when computing wages. Marshall v. Krystal Co., 467 F. Supp. 9, 13 (E.D. Tenn. 1978); 29 C.F.R. § 531.3(d) (1991).

 At trial, almost all of the employees testified that they were told by either the person who hired them (usually Defendant Sliwowski) or another employee that they were required to wear tuxedos. As a result, almost all newly hired employees would purchase at least one outfit of formal attire including a tuxedo or skirt, tuxedo shirts, bow tie, and cummerbund. According to the testimony of the waiters, the full cost of the required outfit would range between $ 125.00 to over $ 300.00. Of the three female employees claiming uniform costs, two testified to spending $ 65.00 and $ 70.00, the third testified to having purchased a tuxedo outfit at a cost of $ 215.00. Replacement shirts and tuxedos were also purchased at a comparable or lesser cost.

 Numerous waiters also testified that the cleanliness and condition of their tuxedos were criteria upon which they were assigned the more lucrative work areas of the restaurant. Waiters and waitresses were required to pay for the cost of dry-cleaning jackets, trousers and shirts. Some waiters testified that they spent as much as $ 25.00 to $ 30.00 per week maintaining and cleaning their clothes. Female employees testified to spending between $ 3.00 to $ 15.00 per week for clothing maintenance.

 Defendant Sliwowski, while asserting that uniforms were not required, testified that the wearing of certain clothing was "acceptable" to him and "preferred" by the employees. Although Defendant conceded at trial that he required employees to wear bow ties, he also maintained that most employees acquired their tuxedos and other formal wear from previous employment at other restaurants.

 The Secretary correctly seeks compensation to raise the weekly wages of employees to the minimum rate required by the Act. However, in determining the reasonable cost of the uniform Defendant Sliwowski required his employees to wear, the Court will not recognize costs that are extravagant or unnecessary. That is, expenditures for items either exceeding the uniform required or unreasonable in cost will not be reimbursed. Further, the Court will not award damages for uniform or maintenance costs that are inconsistent with other, more credible evidence. For every testifying employee, the Court has made difficult individual determinations, based on facts in the record, as to reasonable costs and the credibility of the evidence. Having examined the complete record and noted the wide variation in uniform expenses, the Court has decided to establish limits on the costs of expenses incurred by employees. In determining the amount owed to testifying employees, damages for uniform costs will not be awarded in excess of $ 150.00 for tuxedos, $ 27.50 for shirts, $ 19.00 for tie-cummerbund sets, and $ 18.00 per week for maintenance. Further, claims for extra or replacement items will be limited to one tuxedo, three shirts, and one tie-cummerbund set for every six months of employment.

 Based on all of the evidence in the record, the Court has also determined the reasonable costs of uniform purchases and maintenance for non-testifying employees. The Court accepts the Secretary's division of employees by gender because a different type of uniform was required for men than for women. The standard damages to be awarded to non-testifying employees, except where an alternative amount can be substantially proven by evidence in the record, shall be $ 194.00 for waiters and $ 70.00 for waitresses for the cost of uniforms, and $ 15.00 for waiters and $ 9.00 for waitresses for the cost of maintenance. Specific damages for minimum wage violations for testifying and nontestifying employees are set forth in the Specific Findings of Fact and in Appendix A of this Memorandum.

 C. Overtime

 Section 7(a)(1) of the Act requires employers to pay employees who have worked in excess of forty hours per week overtime compensation equivalent to one and one-half times the employees' regular hourly rate of pay. 29 U.S.C. § 207(a)(1). *fn4" The Secretary seeks damages in the amount of one-half the minimum wage for each overtime hour an employee worked. This amount represents the balance due to the employee assuming that the minimum hourly wage has been paid to the employee for overtime hours as well as regular hours. The Secretary has calculated back wages in the amount of $ 1.67 1/2 per each overtime hour, or one-half the minimum wage rate of $ 3.35 per hour.

 Testimony at trial indicates that waiters would work four to seven restaurant shifts per week, with each shift lasting approximately eight to twelve hours. Twenty of the employees employed before 1989 testified that they worked in excess of forty hours per week. Thirteen of these employees testified that they worked in excess of sixty hours per week.

 Four of the former employees testifying were women. Of the four women employees who testified at trial, two testified that they had worked overtime in the amount of five and ten hours per week. Women were not permitted to wait tables at night. Waitresses mainly worked during lunch and occasionally bussed tables during dinner. The Secretary has sought no overtime damages on behalf of Defendant's non-testifying female employees.

 Based on the testimony at trial, there is substantial evidence from which the Court infers that male employees were required to work an average of sixty hours per week or two overtime shifts per week. Accordingly, non-testifying waiters have been awarded an overtime amount based on an average work week including two overtime shifts, or twenty overtime hours. With regard to non-testifying female employees, the testimony and other evidence is substantially lacking and does not permit an inference of overtime work. Specific overtime damages for non-testifying employees are set forth in Appendix A of this Memorandum.

 The evidence has established that Defendants' employees were not paid for overtime as required by the Act and that the sum of the non-payment for overtime totals $ 22,788.73 for testifying employees, and $ 52,653.64 for non-testifying employees.

 D. Records

 Section 11(c) of the Act requires that "every employer . . . shall make, keep, and preserve such records of the persons employed by him and of the wages, hours, and other conditions and practices of employment maintained by him, . . . ." 29 U.S.C.A. § 211(c) (West 1978). *fn5" An employer's failure to keep records in accordance with Section 11(c) is unlawful under the Act. 29 U.S.C.A. § 215(a)(5) (West 1978). 29 C.F.R. Part 516 requires, inter alia, that employers preserve, for three years, records of (1) the total daily and weekly hours employees work; (2) employees' regular hourly rates of pay for each week that overtime is worked; (3) the total daily or weekly straight time earnings; and (4) the total weekly premium pay for overtime hours. See 29 C.F.R. §§ 516.2, 516.5 (1991).

 The testimony of numerous witnesses revealed that Defendant Sliwowski had an established practice of recording the first forty hours an employee worked by having the employee punch a time card at the beginning and end of a work shift. However, these time cards were then taken away from the employees, and no further records of an employee's hours were kept.

 Defendants have presented no convincing evidence that employees were properly compensated for these overtime hours and in fact have no records sufficiently detailed to indicate that such an attempt was made before 1987. Defendants' failure to maintain records is demonstrated by their inability to offer any evidence at trial that clearly and accurately shows the number of hours each employee worked and the rate of pay that was applicable. However, the Court notes that since 1987, Defendants have attempted to keep some records and remunerate some of their employees' expenses. Nevertheless, based on the evidence at trial, the Court finds that Defendants knowingly and willfully failed to keep records in accordance with the requirements of Section 11(c) of the Act.

 E. Tip Credit

 Section 3(m) of the Act permits an employer to claim a tip credit. See 29 U.S.C.A. § 203(m) (West 1978). *fn6" This means that in computing the minimum wage to be paid to an employee, an employer can reduce the employee's hourly wage by an amount "not . . . in excess of 40 per centum of the applicable minimum wage." *fn7" 29 U.S.C. § 203(m) (1982). Congress has made clear that Such a tip credit "shall not apply with respect to any tipped employee unless (1) such employee has been informed" that the employer is taking the credit, and (2) the employee actually retains all the tips he or she has received (unless pooled with other tipped employees). See 29 U.S.C.A. 203(m) (West 1978).

 The notice provision requires the Court to find "at the very least notice to employees of the employer's intention to treat tips as satisfying part of the employer's minimum wage obligations." Martin v. Tango's Restaurant, Inc., 969 F.2d 1319, 1322 (1st Cir. 1992). In Martin v. Tango's Restaurant, Inc., the district court made a finding, based on inference, that the notice requirement had been met even though the employees testified at trial that they were never told that the employer was taking a tip credit, nor that it would reduce the minimum wage the employer was obligated to pay to them. Id. The First Circuit reversed the district court's decision as being "clearly erroneous." Id. at 1323. In light of Tango, the Court finds that Section 3(m) requires three conditions to be met before an employer can lawfully reduce the amount paid to an employee by a tip credit: (1) The employer must inform each employee that a minimum wage is required by law. (2) The employer must inform each employee of the dollar amount of the minimum wage. And (3), The employee must actually keep the tips he or she receives.

 In Tango, as in the case at bar, the compliance officer had allowed the employer to claim a tip credit. However, on appeal the Secretary argued that this allowance was tentative because it was made prior to the employees' trial testimony. Although the First Circuit did not explicitly agree with the Secretary's claim that the original allowance of the tip credit was tentative, it refused to grant the tip credit deduction from back wages since the notice requirement had not been properly satisfied. Id.

 In the case at bar, the applicable minimum wage for the period during which the Secretary seeks damages is $ 3.35 per hour. *fn8" See 29 U.S.C.A. § 206(a)(1) (West 1978). Defendants have assumed a tip credit of 40% of the minimum wage ($ 1.34), the maximum amount under law, for each hour an employee worked, and have paid their employees at a rate of $ 2.01 per hour. Defendants' tip credit deduction was not challenged by the federal investigating officers who informed Defendant Sliwowski about other violations of the Act prior to the commencement of this action. However, the Secretary contends that Defendants are not entitled to any tip credit since the notice requirement of Section 3(m) was never properly satisfied.

 The Court agrees with the Secretary. Although Chez Robert's employees received and kept practically all of their tips, the testimony indicates that the notice requirement was not properly satisfied. Employees testified that when hired, they were informed that they would be paid $ 2.01 per hour. However, at no time was it explained to employees that the minimum wage was in fact $ 3.35 per hour, and that the actual hourly wage to be paid was the result of a deduction allowed by law when tips supplement the reduced wage rate. A tip credit deduction is therefore inappropriate in this case. Therefore, the computation of back wages owed to employees must include a rate of $ 1.34 for every hour worked. *fn9" "If the penalty for omitting notice appears harsh, it is also true ...


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