The US Department of Labor has filed a suit in federal court in Wichita against the owners of Mr. Cao’s restaurant in Hutchinson and Daimaru Steakhouse in Salina for alleged violations of the Fair Labor Standards Act related to tips, overtime and sick leave.
The suit is seeking damages of at least $783,000.
Calling the company’s actions “willful” and citing a similar suit it settled with the Salina restaurant in 2016, the federal agency is also seeking liquidated damages and a permanent injunction against the business and its owner and manager, Jason Cao.
It’s unclear if the liquidated damages are part of the amount listed.
Jason Cao declined to comment.
The allegations involve an investigation into employment and pay practices at Mr. Cao’s from July 29, 2018, through July 25, 2020, and at Daimaru in Salina from Sept. 3, 2018, through Aug. 30, 2020, according to the suit filed July 28.
Among the violations listed are that the company withheld tips from employees, illegally pooled tips and distributed some of them to management, and paid some employees less than the minimum wage.
It also alleges the company failed to pay overtime, violated child labor laws with underage employment, and violated the Families First Coronavirus Response Act by refusing to pay sick leave to at least one couple in Salina required to quarantine with COVID-19.
Jason Cao, 43, opened the Daimaru Steakhouse after moving to Salina in 1999, and he opened Mr. Cao’s at 1505 E. 17th Ave. in Hutchinson in July 2014.
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Wage and tip violations
The suit alleged Cao and the businesses repeatedly violated sections of the Fair Labor Standards Act by keeping a portion of the tips received by wait staff and illegally pooling tips to share with employees working in non-tipped roles, including supervisors or managers.
It also claims the company failed to pay its employees a minimum wage of at least $7.25 per hour when it was not eligible to claim a “tip credit” against its minimum wage obligations.
“Defendants also repeatedly violated Sections 207 and 215(a)(2) of the FLSA when they failed to pay their non-exempt employees one-and-one-half times their regular rates for hours worked in excess of 40 in a workweek, ” the suit states. “Defendants paid employees a straight-time rate for overtime hours worked without paying the required overtime premiums.”
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The suit alleges tipped employees who received time-and-a-half were paid a cash wage, rather than their regular rate of pay.
Investigators say the company also did not keep required records of the hours worked, either for salaried or hourly employees, or in the case of some Daimaru employees, maintained inaccurate records.
The Labor Department alleges the company “repeatedly violated Sections 212(c) and 215(a)(4) of the FLSA when they employed minors under 16 years of age,” in violation of child labor laws.
“As a result of their FLSA violations, defendants owe the employees listed in Exhibit A the amounts of unlawfully kept tips, the amounts of tip credit taken, unpaid minimum wages and overtime compensation, and liquidated damages,” the document states.
Exhibit A lists 38 employees in Hutchinson and 52 in Salina.
The suit warns that if the company continued to violate the FLSA after the investigation concluded, it could owe additional withheld tips, back wages, and liquidated damages and that there may be other employees not listed also owed compensation.
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“Defendants repeatedly and willfully violated Sections 206, 207, 211, 215(a)(2) and 215(a)(5) of the FLSA, because Defendants knew or showed reckless disregard for whether the FLSA prohibited their conduct,” the suit states.
They should have known the law requirements “by virtue of an investigation commenced in 2015 of Daimaru, owned at that time by Jason Cao and represented by him in the investigation, finding the same or similar violations as the investigations subject to this Complaint.”
In 2016, the suit notes, Daimaru and Jason Cao agreed to pay any unpaid minimum and overtime wages owed.
“Nevertheless, Daimaru did not change his improper pay and recordkeeping practices, and Jason Cao allowed the same improper practices to occur at Mr. Cao’s,” it states.
The alleged violations of the Coronavirus Response Act stemmed from a husband and wife who worked in Salina and contracted COVID-19 in December 2020.
The husband was hospitalized for about a week due to his illness.
Both employees informed the business that they were not allowed to work from Dec. 16 through Dec. 31 after being advised by a health care provider to self-quarantine. They notified Cao verbally, and he told them to stay home, the suit states. But he then failed to provide paid sick leave, as required by the law.
The suit notes that other unknown employees may also be due compensation for similar, additional violations.