The United States Department of Labor sued Mr. Cao’s LLC, Caozheng Corporation, and Jason Cao in the United States District Court for the District of Kansas, alleging violations of the Fair Labor Standards Act (FLSA) and the Families First Coronavirus Response Act (FFCRA). The Department moved for default judgment against the two corporate defendants and summary judgment against Jason Cao.
Factual Overview
The Department of Labor investigated two restaurants owned and operated by Jason Cao and his wife: Mr. Cao Japanese Steakhouse and Daimaru Steakhouse. The investigation revealed that approximately a decade ago, Daimaru had been investigated for FLSA violations, resulting in back wage payments to 39 employees. Despite this previous investigation and Jason Cao’s agreement to ensure future compliance, subsequent investigations in 2020 uncovered violations at both restaurants spanning from 2018 through 2020.
After entering into a statute of limitations tolling agreement with the Department, both restaurants continued to violate the FLSA. Initially represented by counsel, all defendants’ attorneys withdrew in 2023. While Jason Cao proceeded pro se, the corporate defendants failed to retain new counsel as ordered by the court. During discovery, the Department sought and obtained sanctions against all defendants, resulting in an entry of default against the corporate defendants and evidence preclusion sanctions against Jason Cao.
Legal Analysis
FLSA Coverage: The court determined that both restaurants qualified as enterprises covered by the FLSA, with annual gross sales exceeding $500,000 and employees engaged in commerce. Jason Cao was found to be an employer under the FLSA based on his control over employment matters.
FLSA Violations: The court found multiple FLSA violations, including invalid tip pool arrangements where supervisors and kitchen staff improperly received portions of servers’ tips, failure to pay minimum wage to tipped employees, improper overtime calculations, inadequate recordkeeping, and employment of minors under age 16.
COVID-19 Leave Violations: The court determined that defendants violated the FFCRA by failing to provide paid sick leave to two employees who missed work due to COVID-19 in December 2020. One employee contracted COVID-19, and his spouse was advised to quarantine with him.
Damages and Injunctive Relief: The court found the violations were willful due to the defendants’ prior knowledge of FLSA requirements from earlier investigations. The court awarded liquidated damages, doubling the back wages owed, and granted injunctive relief based on the defendants’ history of non-compliance and failure to engage in the litigation process.
The court granted the Department’s motion for summary judgment and default judgment, permanently enjoining the defendants from violating various FLSA provisions and ordering back pay with liquidated damages.
Schrag on Law 