Employees at Vitale's Italian Restaurants kept two timecards, "one reflecting the first forty hours of work, and the other, reflecting overtime hours. The employees were paid via check for the first card and via cash for the second. The pay was at a straight time rate on the second card, although it reflected hours worked in excess of forty hours in a week." As a result, "employees were deprived of overtime pay, and Vitale's did not pay taxes on the cash payments." This was the context for the Sixth Circuit's decision in Torres v. Vitale, which held that the plaintiff-employees could pursue a civil RICO claim regarding the employer's failure to pay social security and other taxes for the work time for which cash was paid.
The Sixth Circuit, in an opinion authored by Judge John K. Bush and joined by Judges Raymond Kethledge and Julia Gibbons, reversed a dismissal order by Western District of Michigan Judge Paul Maloney. The employees had sought recovery of their unpaid overtime by way of suit under the Fair Labor Standards Act (FLSA). The Sixth Circuit ruled that FLSA precludes RICO claims "to the extent that the damages sought are for unpaid minimum or overtime wages." This preclusion, however, does not extend to damages distinct from unpaid wages or overtime:
when a RICO claim ... is based on a dispute between an employer and an employee alleges damages that are distinct from unpaid wages, even if the RICO-predicate act arises from conduct that also violates the FLSA, then the RICO remedies do not fall within the ambit of the FLSA's remedial scheme and are therefore not precluded.
Based on this analysis, the Sixth Circuit affirmed dismissal of RICO claims premised on the employers' "wage theft scheme." Dismissal of a RICO claim alleging a "workers compensation insurance scheme" by the employer "benefitted by falsely reporting payroll to its insurance company, thus lowering its premiums" was also affirmed because the insurance company, not the plaintiffs, was the victim of that scheme. However, a RICO claim arising from "a tax evasion scheme through which [plaintiff] and other similarly-situated Vitale's employees were deprived of the employer's half of social security payments, and were then subjected to tax liabilities" was reinstated and remanded to determine whether the plaintiff had "pleaded cognizable damages separate from lost wages so as to state a viable RICO claim."
This case was well-lawyered for the plaintiff by Robert Alvarez of Wyoming, Michigan.
