In a landmark case, a federal court ruled that a group of New York City workers from one of Chinatown’s largest restaurants could sue its individual owners and managers for illegally stealing their tips.
Part of the case, a suit against nine of the owners/managers of New Silver Palace, was settled late last month on the first day of trial for $489,000. Three other owners/managers have defaulted on their part of the suit and the court is expected to enter judgments against them at a hearing in August.
The 17 waiters and busboys claimed that their bosses extorted up to 30 percent of their tips between 1997 and 2000, and also failed to pay them overtime. Those who complained against these practices were allegedly fired. Workers charged they were owed over $1 million.
Chang Liang, employed for 15 years first as a Silver Palace busboy and later as a waiter, estimated that he is actually owed $100,000. He has been unemployed since the restaurant closed.
“I believe the tips belong to us. It’s the sweat and blood of the waiters,” said Chang. “The employers have no right to take away our sweat and blood. They already make a profit. Our livelihood depends on income from the tips.”
Chang said the waiters made about $3 an hour in wages, but on a good day received up to $100 a day in tips.
“I wasn’t that excited because so much money has been taken away from us and we won’t be able to recover all the money,” he said.
With assistance from the Asian American Legal Defense and Education Fund (AALDEF) the workers sued under both state labor laws and federal racketeering laws. The written court ruling, issued by Judge Alvin Hellerstein of the United States District Court in Manhattan, marked the first time a federal court ruled that under state law, workers can also sue individual employers for demanding kickbacks from employees.
The 800-seat New Silver Palace closed and went into bankruptcy in December. The lawyer for AALDEF who handled the case said this is a frequent ploy used by restaurants and sweatshops to try to avoid paying old debts to workers.
“Many business owners believe that they can violate the labor laws with impunity by simply letting their companies go into bankruptcy,” said Kenneth Kimerling, legal director of AALDEF and the lead attorney on the case. “Judge Hellerstein’s decision makes it clear that these owners can also be held individually liable.”
AALDEF handled the case with pro bono work from one of Manhattan’s largest law firms, Davis Polk & Wardwell.
The settlement and court ruling were the latest developments in a series of legal conflicts between the restaurant and its employees over the past two decades. Cases have been brought against the banquet hall and its predecessor, the original Silver Palace, before the National Labor Relations Board, the New York Supreme Court and the U.S. District Court for the Southern District of New York. Over the years, workers and labor activists frequently picketed the restaurant. In 1980, workers at the Silver Palace formed Local 318, the first independent restaurant workers union in Chinatown.
In 1993, the restaurant’s owner, Richard Chan, locked workers out for seven months during heated contract renewal talks. Federal and state courts later ruled that the lockout was illegal and ordered Chan to pay the workers $1.5 million in back wages. Chan later filed for Chapter 11 bankruptcy and attempted to bring in Off-Track Betting, which would have made the eatery the largest betting parlor in New York City.
After community leaders staged protests, Off-Track Betting backed out of the deal. The court later removed Chan as a manager and appointed a trusteeship to oversee the restaurant. In 1998, after being converted to Chapter 7 bankruptcy, the restaurant shut down for several months and was sold at auction to a new group of owners, although labor activists contended that the previous owner, Chan, still maintained a stake in the new restaurant. The new owners quickly ran into conflict with the union by refusing to rehire all of the former unionized workers.
In the case that was just settled, Chan was named as one of the nine defendants. He settled for $450,000. Three other owners settled for $39,000 combined.
Calls to Chan’s lawyer and lawyers representing other defendants were not returned.
Each worker will get an average of $29,400, Kimerling said, with the exact amount to be determined according to how long they were employed by the restaurant.
Labor activists who assisted the workers hailed the settlement and ruling.
“It’s a good beginning, but it’s not finished yet,” said Wing Lam, director of the Chinese Staff and Workers Association, which has battled the restaurant since it helped organize the union more than 20 years ago. “There are still three other employers who have to pay.”
Lam said news of the victory had already inspired workers at other restaurants to come forward with similar tales of labor abuses at their eateries.
He said it’s important that workers speak out when their employers violate labor laws. “There’s a stereotype of Asians that we don’t stand up,” said Lam. “But that’s totally wrong. We do.”