LANSDOWNE, PA – A federal court has ordered a Lansdowne, Pennsylvania, diner, and its owner and a manager to pay more than $1.35 million in back wages and liquidated damages to 107 servers and kitchen workers after a five-day trial confirmed the business operators used an illegal tip pool.

On Aug. 18, 2022, Judge Eduardo C. Robreno in the U.S. District Court for the Eastern District of Pennsylvania found Musluoglu Inc., which operates as Empire Diner; owner Ihsan Gunaydin; and manager Engin Gunaydin liable for $675,626.67 in back wages and an equal amount in damages owed to the affected current and former employees.

The action follows an investigation by the U.S. Department of Labor’s Wage and Hour Division in Philadelphia that determined the employer failed to comply with the tip credit requirements, specifically using servers’ tips to pay bussers’ wages. The division also found the employer violated minimum wage, overtime and recordkeeping provisions of the Fair Labor Standards Act.

The department’s Office of the Solicitor in Philadelphia then filed a lawsuit in the U.S. District Court for the Eastern District of Pennsylvania against the restaurant and the Gunaydins to recover the back wages and liquidated damages owed. In its ruling, the court found the employer willfully violated the FLSA when it failed to comply with the tip credit requirements and misused the servers’ tips to pay wages. Before that ruling, the court had granted, in part, the Office of the Solicitor’s 2021 motion for summary judgment, and found the employer had violated federal wage and recordkeeping provisions. Specifically, the court agreed the restaurant and the Gunaydins were not entitled to claim employee tips as a credit towards their minimum wage obligation. 

“Tipped workers in the food services industry rely on their hard-earned tips to make ends meet. By diverting a portion of these tips, restaurant employers violate federal labor laws and harm workers and their families,” said Principal Deputy Wage and Hour Administrator Jessica Looman. “This significant and successful litigation demonstrates the Department of Labor’s commitment to protect the nation’s essential workers.”

The latest ruling comes after months of litigation and a bench trial, during which the department’s attorneys established that the employer violated federal law when they did the following:

Required servers to turn over 10 to 15 percent of their total tips received on any given shift to pay the bussers’ wages.
Interfered with the investigation by telling employees to lie about the business’ unlawful pay practices.
Paid straight time to certain kitchen employees for all hours worked, including hours over 40 in a work week.
Used an improper practice of paying servers time and one-half of their cash wage of $2.83 per hour for hours over 40 in a work week.

In addition to the back wages and liquidated damages, the employer was assessed a $47,620 civil money penalty due to the willful nature of the violations.

“This legal action recovers the workers’ hard-earned wages and sends a strong message to other restaurant employers that violations come at a high cost,​” said Solicitor of Labor Seema Nanda. “The U.S. Department of Labor is prepared to use every tool available, including litigation, to prevent employers from depriving workers of their wages.”

The Bureau of Labor Statistics projects that 918,000 food and accommodation services workers left their positions in June 2022. BLS also projects about 41,400 openings for food service managers each year, on average, from 2020 to 2030.

“Retaining and recruiting workers becomes much more difficult in today’s changing job market where workers have choices about where and for whom they work,” Looman explained. “Employers who take advantage of workers by violating their legal rights will find it increasingly difficult to recruit and retain the people they need to fill jobs and stay in business.” 

For more information about the FLSA and other laws enforced by the division, contact the agency’s toll-free helpline at 866-4US-WAGE (487-9243). Learn more about the Wage and Hour Division, including a search tool to use if you think you may be owed back wages collected by the division. The division can communicate with workers in more than 200 languages. Download the agency’s new Timesheet App, now available for android devices, to ensure hours and pay are accurate. 

 

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