Alexis Herman, Secretary of Labor, United States Department
of Labor (successor to Robert Reich),
Plaintiff - Appellee,
v.
Palo Group Foster Home, Inc., a Michigan Corporation; No.
Abraham Joshua, Individually, and doing business as 97-
Ramsdell Foster Care; Ramsdell Foster Care, 2102
Defendants - Appellants.
Appeal from the United States District Court
for the Western District of Michigan at Kalamazoo.
No. 96-00280--Richard A. Enslen, Chief District Judge.
Argued: February 5, 1999
Decided and Filed: May 17, 1999(*)
Before: JONES, NELSON, and BOGGS, Circuit Judges.
_________________
COUNSEL
ARGUED: John H. Hess, Grand Rapids, Michigan, for Appellants.
Paula W. Coleman, U.S. DEPARTMENT OF LABOR, OFFICE OF THE
SOLICITOR, Washington, D.C., for Appellee. ON BRIEF: John H.
Hess, Grand Rapids, Michigan, for Appellants. Paula W. Coleman,
U.S. DEPARTMENT OF LABOR, OFFICE OF THE SOLICITOR, Washington,
D.C., for Appellee.
_________________
OPINION
_________________
BOGGS, Circuit Judge. The United States Secretary of Labor
brought an action in district court to enjoin the Palo Group
Foster Home, Inc. ("Palo"), its owner, Abraham Joshua, and
Joshua's other business, Ramsdell Foster Care ("Ramsdell"), from
violating certain provisions of the Fair Labor Standards Act
("FLSA" or "Act"), and to recover unpaid wages owed to
Defendants' employees plus statutory liquidated damages. The
district court granted summary judgment for the Secretary,
awarded actual and statutory liquidated damages to the underpaid
employees, and permanently enjoined Defendants from violating the
FLSA. Herman v. Palo Group Foster Home, Inc., 976 F. Supp. 696
(W.D. Mich. 1997). We adopt the reasoning of Chief Judge Enslen's
thorough opinion and affirm, discussing here only the errors
charged on appeal.
I
Joshua was the president of the now-defunct Palo, and the
owner and administrator of Ramsdell. Both entities provided adult
foster care for the sick, aged, and mentally ill in western
Michigan. At all relevant times, Joshua was the primary
individual in charge of establishing personnel practices for both
businesses.
In 1983, the Department of Labor ("DOL") investigated Palo
and discovered violations of the Act's minimum wage and overtime
requirements that reflected $1,073.02 in unpaid wages to
employees.(1) The DOL also discovered that Palo had not kept the
records required by the FLSA. The DOL compliance officer informed
Joshua of the deficiencies, and Joshua agreed to comply with the
requirements of the Act in the future.
The DOL followed up with an investigation in 1985. The
investigators again found Palo in violation of the FLSA. In
particular, they informed Joshua that in order to claim credit
for meals and lodging provided to his employees, he was required
to keep accurate records of the actual costs of those services.
The DOL agents computed Joshua's credits for the 1983-1985 period
from his other business records, and calculated his wage
underpayments as $7,544.56. The agents specifically informed
Joshua that the calculated credit applied only to the 1983-1985
period under investigation, and that he was required to maintain
records showing the actual cost of food, lodging, and other
facilities furnished to his employees if he wished to claim the
credits in the future. To reinforce their point, the DOL agents
gave Joshua DOL publication 1326, which details the requirements
of the FLSA with respect to residential-care facilities.
The DOL investigated Palo again in 1995 after receiving a
complaint from a former employee. Noting that Joshua was involved
with Ramsdell, the DOL included that business also in its
investigation. The compliance officer found that Defendants
undercompensated their employees by (1) failing to consider hours
worked during sleeping shifts as compensable, (2) paying set
wages for each shift regardless of the actual hours worked, and
(3) taking deductions for providing meals and lodging despite not
having kept records of the actual cost of providing them, as
required by the Act. The DOL determined that Palo employees were
owed $47,509.27 in unpaid wages for the period between April 8,
1993 and June 1, 1996, and that Ramsdell employees were owed
$13,044.39 in unpaid wages for the period between May 1993 and
April 20, 1996. The DOL allowed some deductions for the provision
of meals and lodging, even though Joshua produced no records
supporting the deductions.
II
Defendants charge four errors below. First, they assert that
the district court "erred in determining that [Defendants']
response to the motion for summary judgment was deficient due to
failure to submit adequate information." Second, they argue that
the district court erred in shifting the burden of proof to them
as to the adequacy of their records. Third, they claim that the
district court erred in finding that they violated the minimum-
wage and overtime provisions of the FLSA. Finally, they argue
that the district court erred in finding that Defendants
willfully violated the FLSA and in allowing the Secretary to
collect the enhanced damages associated with willful violation.
Appellants' first assignment of error lacks both substance
and merit. The record reveals that the district court did not
"determine" that Defendant's response to the motion was
"deficient" in any manner that carries legal significance. The
district court commented on the paucity of Defendants' response,
976 F. Supp. at 699, but the only effect on the proceedings below
was the one the district court stated: most of the Secretary's
evidence went unrebutted. In fact, the district court considered
Defendants' evidence even though it did not meet the Fed. R. Civ.
P. 56(e) requirements. Ibid.
Appellant's second assignment of error lacks merit. The FLSA
sets the minimum wage and overtime standards for most employers
in the United States. Generally, an employee must be compensated
at or above the statutory rate for the first forty hours per week
of work, and at one and one-half times the employee's regular
wage for overtime. There are exemptions from these requirements,
and an employer seeking an exemption bears the burden of proving
that it is applicable. Douglas v. Argo-Tech Corp., 113 F.3d 67,
70 (6th Cir. 1997). Exemptions are construed narrowly against an
employer seeking to assert an exemption. Auer v. Robbins, 519
U.S. 452, 462 (1997) (citing Arnold v. Ben Kanowsky, Inc., 361
U.S. 388, 392 (1960)).
A plaintiff generally has the burden of proving that his
employer violated the FLSA. However,
where the employer's records are inaccurate or inadequate
. . . an employee has carried out his burden if he proves
that he has in fact performed work for which he was
improperly compensated and if he produces sufficient
evidence to show the amount and extent of that work as a
matter of just and reasonable inference. The burden then
shifts to the employer to come forward with evidence of the
precise amount of work performed or with evidence to
negative the reasonableness of the inference to be drawn
from the employee's evidence. If the employer fails to
produce such evidence, the court may then award damages to
the employee, even though the result be only approximate.
Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687-88 (1946)
(quoted and reaffirmed in United States Dep't of Labor v. Cole
Enters., Inc., 62 F.3d 775, 779 (6th Cir. 1995)), superseded by
statute on other grounds as stated in Carter v. Panama Canal Co.,
463 F.2d 1289, 1293 (D.C. Cir. 1972).
Employers must keep records for each employee of the "hours
worked each workday and total hours worked each workweek (for
purposes of this section, a 'workday' is any fixed period of 24
consecutive hours and a 'workweek' is any fixed and regularly
recurring period of 7 consecutive workdays)." 29 C.F.R.
§ 516.2(a)(7). "[A]n employer who makes deductions from the wages
of employees for 'board, lodging, or other facilities' (as these
terms are used in sec. 3(m) of the Act) furnished to them by the
employer or by an affiliated person, or who furnishes such
'board, lodging, or other facilities' to employees as an addition
to wages, shall maintain and preserve records substantiating the
cost of furnishing each class of facility." 29 C.F.R.
§ 516.27(a). The district court found that Defendants failed to
maintain records of the number of hours their employees actually
worked each workday and the total number of hours they actually
worked each workweek. The district court also found that
Defendants did not provide documentation substantiating the cost
of providing meals to their employees, nor did they show a legal
or factual basis for finding that their records were sufficient
despite their failure to comply with the regulations. Therefore,
the district court shifted the burden to Defendants according to
Cole.
In particular, Defendants did not keep track of the hours
their employees were on duty but allowed to sleep. "An employee
who is required to be on duty for less than 24 hours is working
even though he is permitted to sleep or engage in other personal
activities when not busy." 29 C.F.R. § 785.21. When employees are
on duty for twenty-four hours or more, "the employer and the
employee may agree to exclude bona fide meal periods and a bona
fide regularly scheduled sleeping period of not more than 8 hours
from hours worked, provided adequate sleeping facilities are
furnished by the employer and the employee can usually enjoy an
uninterrupted night's sleep." 29 C.F.R. § 785.22(a). However,
"[i]f the sleeping period is interrupted by a call to duty, the
interruption must be counted as hours worked. If the period is
interrupted to such an extent that the employee cannot get a
reasonable night's sleep, the entire period must be counted. For
enforcement purposes, . . . if the employee cannot get at least 5
hours' sleep during the scheduled period the entire time is
working time." Ibid.
Defendants' employees worked overnight shifts for which they
were not paid, and during which the unrebutted evidence shows
that they had various responsibilities, including remaining
alert, checking on the residents, and checking the security of
the facility. Sleep was permitted, but the employees were
awakened frequently to assist the residents. Defendants'
employees on twenty-four hour shifts were paid a fixed rate that
included an eight-hour sleep deduction, and were not paid for the
times their sleep was interrupted. Additionally, Defendants'
employees were paid a fixed rate per shift, although they were
often required to stay late and their meal times were often less
than thirty minutes and were constantly interrupted.
The evidence is sufficient to prove that Defendants'
employees were undercompensated, even if the burden remained on
the Secretary. Defendants assert that their schedule sheets, on
which their employees indicated when they had traded shifts with
others, satisfy the recordkeeping requirement. This assertion
misses the point. At times, the Defendants' employees worked
compensable hours that were never recorded nor compensated. At
bottom, Defendants disagree with the Secretary about whether
sleep shifts, interrupted sleep time on twenty-four hour shifts,
and interrupted meal time is compensable. Unfortunately for
Defendants, these issues are settled by the FLSA and numerous
court decisions.
The Secretary presented credible evidence that Defendants'
employees had performed work for which they were improperly
compensated. Defendants did not keep the records required by the
FLSA, so the district court properly shifted the burden to
Defendants to show that they did not violate the Act. Despite the
fact that Defendants presented almost no evidence, and the
evidence they did present was not properly before the court
because it did not satisfy the requirements of Rule 56(e), the
district court considered it in making its decision. In the face
of the Secretary's unrebutted evidence, however, Defendants could
not prevail even if the burden did not shift.
In their argument for the third assignment of error,
Defendants assert essentially equitable arguments. Joshua argues
that he gave the DOL the same information he had given them the
two previous times they investigated. If it was good enough then,
he wonders, why is it not good enough this time? In a related
argument that Defendants placed under their second assignment of
error, Joshua claims that the sixty-two-cents-per-hour meal
allowance established in the 1985 investigation should still
apply "since it did not seem to be a matter of concern to the
DOL." Further, Joshua maintains that letters from the DOL
"establish[ed] that rate."
There is corroborated and uncontested evidence that the DOL
specifically told Joshua that the rate it established in 1985 was
a retrospective rate, and that he would have to keep proper
records establishing the actual cost of providing lodging and
meals if he wished to receive the credit in the future.
Therefore, it is uncontradicted that Joshua knew that it would
not be reasonable to rely on the 1985 figure in the future.
Similarly, the fact that in 1985 the DOL calculated the meal and
lodging costs from records that did not satisfy the statutory
requirement did not make it reasonable for Joshua to believe that
he was prospectively exempt from the recordkeeping requirements.
The DOL explicitly told Joshua that he would have to maintain
proper records if he wished to claim the credits in the future.
Defendants view the 1985 investigation as setting two precedents:
the meal-credit value, and the acceptability of inadequate
records to the DOL. The DOL views the 1985 investigation as an
accommodation of past violations and a warning not to repeat
them. The explicit instructions of the DOL leave no room to doubt
which is the correct view. The 1985 investigation set neither
precedent. Defendants' third assignment of error is without
merit.
Section 6(a) of the Portal-to-Portal Act, 29 U.S.C.
§ 255(a), provides that if an employer "willfully" violates the
FLSA, the statute of limitations is three years. If the violation
is not willful, the limitations period is two years. Violations
are willful if "the employer either knew or showed reckless
disregard for the matter of whether its conduct was prohibited by
the statute." Trans World Airlines, Inc. v. Thurston, 469 U.S.
111, 133 (1985). This court held that a violation of the Act was
willful where undisputed evidence showed that the employer "had
actual notice of the requirements of the FLSA by virtue of
earlier violations, his agreement to pay unpaid overtime wages,
and his assurance of future compliance with the FLSA." Dole v.
Elliott Travel & Tours, Inc., 942 F.2d 962, 967 (6th Cir. 1991)
(citing Brock v. Superior Care, Inc., 840 F.2d 1054, 1062 (2d
Cir. 1988)).
There is undisputed evidence that Joshua had actual notice
of the requirements of the Act. He had been investigated for
violations twice in the past, paid unpaid overtime wages,
received explanations of what was required to comply with the
Act, and assured the DOL that he would comply in the future. The
district court properly found that Defendants' violations were
willful and extended the limitations period to three years.
The FLSA provides for liquidated damages in an amount equal
to the actual damages. 29 U.S.C. § 216(c). The Portal-to-Portal
Act provides a limited affirmative defense to the liquidated-
damages provision. The trial court may, at its discretion, reduce
or eliminate the liquidated damages "if the employer shows to the
satisfaction of the court that the act or omission giving rise to
the action was in good faith and that he had reasonable grounds
for believing that his act or omission was not in violation of
the [FLSA]." 29 U.S.C. § 260. Elliott Travel recognized that the
liquidated damages issue is "closely related" to the willfulness
issue. 942 F.2d at 967. Absent a good-faith disagreement with the
authority of the government to promulgate the statute, a finding
of willfulness is dispositive of the liquidated-damages issue.
The district court properly awarded statutory liquidated damages.
III
For the foregoing reasons, and the reasons given by the
district court, the judgment of the district court is AFFIRMED in
all respects.
Footnotes
*This decision was originally issued as an "unpublished decision"
filed on May 17, 1999. On July 7, 1999, the court designated the
opinion as one recommended for full-text publication.
1The DOL initially found that Joshua owed $2,600.61 in back pay,
then revised its assessment to $1,073.02.
|