Restaurants’ Motion to Dismiss Denied in S.D.N.Y. Wage and Hour Case

In Yang v. Shanghai Cafe, Inc., 2011 U.S. Dist. LEXIS 30842 (S.D.N.Y. March 24, 2011) the Southern District of New York denied two restaurants and a owner’s motion to dismiss in a case alleging violations of the Fair Labor Standards Act (FLSA) and the New York Labor Law and regulations. More specifically, plaintiffs, who consisted of cooks, a dim sum maker, and a server, alleged that they were not paid minimum wage, not paid overtime, and that their employer illegally retained portions of the servers’ tips. The only issue involved in the motion to dismiss was whether the defendants were properly named as employers. The court held that all defendants were properly joined after utilizing the “economic reality test” under New York law and federal law. Regarding the owner, the Court noted that he had the power to hire and fire, control the terms of plaintiffs’ employment, and determine the rate and method of their employment. Wage and hour attorneys in New York and other states should be on the lookout for violations within the restaurant industry, especially violations involving the pooling of tips, such as where an employee is impermissibly forced to hand over a portion of his or her tips to management.

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