The owners of diners in Yonkers and Hawthorne say they were forced to file for bankruptcy because of an $837,000 federal fine that was assessed last year for paying workers less than they had earned.
American Classic Broadway Diner in Yonkers and American Classic Executive Diner in Hawthorne filed for Chapter 11 reorganization, May 2 in federal bankruptcy court, White Plains.
“It is the debtor’s intention to immediately seek mediation and reach a settlement with the DOL,” vice president Gulam R. Khan says in an affidavit, “that will enable the debtor to successfully emerge from Chapter 11.”
Both diners list a U.S. Department of Labor judgment for $837,356, that they characterize as disputed, as their greatest unsecured debt. The diners filed bankruptcy petitions under their corporate names, Chrisevan Corp. for the Yonkers restaurant and American Diner Group Inc. for the Hawthorne location.
The restaurants are operated by four brothers who share the same first name, Gulam, or spelled Gulan in some documents. Their middle names are Haider, Rabbani, Usmani and Zilani. The owner of record for both businesses, according to court records, is Rabbani Khan’s wife, Suhela Khan.
The family has operated the diners for 12 years, with 30 employees in Yonkers and 23 in Hawthorne.
The labor department accused the Khans of requiring workers to routinely work six days a week for 10 hours or more, according to a complaint filed in 2016, and of not paying the minimum wage or overtime to 29 workers.
Some busboys, for example, worked 55 to 66 hours a week for $25 a day. Even with tips of $200 to $300 a week, the agency charged, busboys often earned less than the $7.25 hourly minimum.
The labor department also accused the Khans of creating false payroll records, paying people in cash and off the books, and directing workers to lie to investigators. The Khans did not formally respond to the accusations.
U.S. District Judge Cathy Seibel ordered the Khans and the diners in September to pay the labor department an average award per employee of $28,874, half for back wages and half as damages.
Suhela Kahn, as president, received no salary, her husband Rabbani said in the affidavit. He was paid $500 a week as vice president of operations of the Yonkers diner. Usmani Khan was paid $500 a week by each diner to manage the restaurants.
Chrisevan had sales of $908,423 in 2016, according to a federal tax return filed in the bankruptcy case, gross profit of $663,520, and ordinary business income after deductions of $11,372.
American Diner Group had sales of nearly $1.2 million in 2015, according to its tax return, gross profit of $724,779 and a business loss after deductions of $16,267.