TIMOTHY D. DEGIUSTI, District Judge.
Presently before the Court is Plaintiff's Motion for Summary Judgment [Doc. No. 75] filed pursuant to Fed. R. Civ. P. 56 and LCvR56.1. Plaintiff R. Alexander Acosta, Secretary of Labor, seeks a judgment as a matter of law on all claims and an order granting injunctive and monetary relief against Defendants Meers Store & Restaurant, Inc. ("Meers") and Margaret Maranto. Defendants have responded in opposition to the Motion [Doc. No. 112], and Plaintiff has replied [Doc. No. 114]. The Motion is fully briefed and ripe for decision.
This case involves claims by the United States Department of Labor ("DOL") that Defendants violated the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201-19, by failing to pay minimum wages to certain employees, failing to pay overtime compensation, failing to comply with child labor provisions, and failing to maintain required records. Plaintiff seeks injunctive relief prohibiting further FLSA violations, an assessment of unpaid wages and compensation owed to Defendants' employees, liquidated damages, and a three-year period of recovery for willful violations. Specifically, by its Motion, Plaintiff seeks to recover unpaid wages of $167,843.68, and an equal amount as liquidated damages.
Defendants' opposition to the Motion is largely based on a defense to Plaintiff's claims previously asserted in a motion for summary judgment filed by Meers. By its motion, Meers sought to avoid FLSA liability by arguing that Margaret Maranto was solely responsible for adopting and implementing the alleged pay practices that violated FLSA and that she acted without knowledge or authority from Meers in committing the violations. After Defendants filed their response to Plaintiff's Motion, the Court denied Meers' motion because Meers did "not present sufficient facts or legal authority to support its position." See 9/19/17 Order [Doc. No. 115] at 5. In light of this ruling, all contentions in Defendants' response to Plaintiff's Motion that merely refer to Meers' motion for summary judgment or repeat Meers' ultra vires arguments are disregarded.
Defendants also oppose Plaintiffs' Motion by submitting an affidavit of Randall O'Neal, their designated expert witness regarding wage-and-hour matters.
Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A material fact is one that "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if the evidence is such that a reasonable jury could return a verdict for either party. Id. at 255. All facts and reasonable inferences must be viewed in the light most favorable to the nonmovant. Id.
The movant bears the initial burden of demonstrating the absence of a dispute of material fact warranting summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). If the movant carries this burden, the nonmovant must then "set forth specific facts" that would be admissible in evidence and that show a genuine issue for trial. See Anderson, 477 U.S. at 248; Celotex, 477 U.S. at 324; Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998). "To accomplish this, the facts must be identified by reference to affidavits, deposition transcripts, or specific exhibits incorporated therein." Adler, 144 F.3d at 671; see also Fed. R. Civ. P. 56(c)(1)(A). "The court need consider only the cited materials, but may consider other materials in the record." See Fed. R. Civ. P. 56(c)(3). The Court's inquiry is whether the facts and evidence identified by the parties present "a sufficient disagreement to require submission to a jury or whether it is so onesided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52.
Meers is a corporation that operates a restaurant and, during the relevant time period, employed 84 individuals identified in Exhibit A to the Complaint [Doc. No. 1-1] as servers, hostesses, cooks, kitchen staff, and bussers.
Defendants' employees handled goods that had been moved in interstate commerce, including time cards from Tennessee, liquid sweetener from New York, and kitchen equipment from Indiana, California, Mexico, and Italy. Meers had an annual gross sales volume of $500,000 or more for calendar years 2012, 2013, 2014, and 2015.
Beginning in November 2014, DOL investigated Meers' compliance with FLSA's requirements regarding minimum wages, overtime compensation, record keeping, and child labor restrictions. Two investigators from DOL's Wage and Hour Division, Cheryl Masters and Lindsey Arnold, visited Meers' restaurant, made written requests for payroll and time records, communicated with Meers' managers and attorney regarding requested documents, interviewed witnesses, and obtained written statements from 19 employees. Despite requests for records from the previous three years, Defendants produced time cards covering a three-month period from October 15, 2014, to January 19, 2015. These time cards were generated by a time clock used to record time worked by Meers' employees; employees were required to clock-in at the beginning of each shift and clock-out for breaks and at the end of each shift.
The investigation resulted in findings that Defendants had committed minimum wage violations affecting certain employees due to four identified policies or practices (see 29 U.S.C. § 206(a)(1)): 1) requiring employees to clock-out for all breaks regardless of duration and excluding breaks, including ones less than 20 minutes, from the computation of hours worked;
The investigation also resulted in a finding that Defendants had violated FLSA's requirement to pay overtime compensation at one and one-half times an employee's regular rate for hours worked in excess of 40 hours in a workweek. See 29 U.S.C. § 207(a)(1). Meers' payroll was administered by an accounting firm that issued employees' pay checks. Each pay period, Mrs. Maranto reported to the accountant an amount of hours worked for each employee that she computed from the employee's time card and transferred to a handwritten summary sheet, omitting any overtime hours. Mrs. Maranto then made cash payments to any employees who had worked overtime, compensating them at their regular rates for the hours not reported to the accountant and thus not included in their payroll checks. Mrs. Maranto engaged in this practice on a routine basis during the investigation period. She also routinely destroyed the time cards and summary sheets after each pay period, except during the three-month period for which records were provided to DOL.
In addition to destroying payroll records, Defendants failed to keep other records as required by 29 U.S.C. § 211(c) and implementing regulations. See 29 C.F.R. §§ 516.1, 516.2, 516.4, 516.6. Defendants did not consider bussers to be employees (see supra note 5) so there was no record of their employment or payments they received. Defendants did not record tips received by servers. At least two employees were paid in cash only, and Defendants did not retain any pay records for these employees. Due to Mrs. Maranto's underreporting of wage information to Meers' accountants, the payroll records kept by the accountants were inaccurate. Defendants failed to keep a list of all employee names and addresses during 2012 to 2014, and did not display a required FLSA minimum wage poster in the workplace.
During the investigation period, Defendants allowed two minors to work as bussers when they were younger than 14 years old and, therefore, prohibited from working in a nonagricultural occupation. See 29 C.F.R. § 570.2. One of the minors later worked as a busser in violation of federal regulations restricting the work hours of children 14 and 15 years of age. See 29 C.F.R. § 570.35(a) (no more than three hours on school days or eight hours on non-school days, no more than 18 hours per school week, and no working past 7:00 p.m. from Labor Day to June 1 or 9:00 p.m. from June 1 to Labor Day). Another employee who was younger than 18 years of age during the investigation period operated a meat slicer and a dough mixer on a regular basis as a primary part of his job duties, in violation of 29 C.F.R. §§ 570.61 and 570.62.
During her testimony in this case, Mrs. Maranto has admitted these errors occurred. Defendants do not dispute the facts and evidence presented by Plaintiff to establish them.
With their brief, Defendants present evidence intended to show that they relied on the advice of Meers' accountant, Danny Delciello, to ensure FLSA compliance and to pay employees properly. This evidence consists of conclusory statements in affidavits of Mr. and Mrs. Maranto that they followed the advice of Mr. Delciello prior to his death in 2014, and "if [they] were violating the law with regard to minimum wage or overtime, it was the result of [their] reliance on our CPA." See J. Maranto Aff. [Doc. No. 112-1], ¶ 11; M. Maranto Aff. [Doc. No. 112-2], ¶ 10. Both Mr. and Mrs. Maranto deny "intentionally or willfully violating the law," and both say, "We were doing our best to follow the law." Id.
Despite these statements, Defendants provide no facts to show that Mr. Delciello provided advice regarding the minimum wage issues identified by DOL (deducting break periods, rounding fractional hours, and not paying bussers or making seasonal adjustments in wages of tipped employees).
Due to a lack of payroll records and a limited amount of historical information, DOL investigators calculated an amount of unpaid wages due to Meers' employees using estimation methods, as described in the affidavit of Cheryl Masters, to reconstruct back wages owed for each category of worker (part-time kitchen staff, full-time kitchen staff, servers, hostesses, bussers, and kitchen managers). For example, to calculate unpaid wages for improperly deducting work breaks of less than 20 minutes, Ms. Masters used time records and interview statements to estimate a total amount of off-the-clock ("OTC") work time, and determined an average amount of OTC time for different categories of workers during slow seasons and busy seasons. In a similar manner, Ms. Masters estimated overtime compensation owed by determining the average number of hours worked by employees in each category and reconstructing hours worked and overtime wages due to each employee at one and one-half times his or her regular rate of pay. For wages owed to bussers, Ms. Masters used interview statements of bussers and other employees who worked with them to estimate the number of days and hours worked by each busser.
Based on reconstructed back wages for all employees during the investigation period, the total amount owed to Meers' employees for FLSA violations is $166,758.12.
FLSA imposes duties on employers with respect to compensation of employees engaged in commerce or employed by an enterprise engaged in commerce. In relevant part, an "employer" as defined by FLSA "includes any person acting directly or indirectly in the interest of an employer in relation to an employee." See 29 U.S.C. § 203(d). As the corporation that employed the restaurant workers, Meers plainly was their employer. The undisputed facts also establish that Mrs. Maranto acted in the interest of an employer in relation to Meers' employees. See, e.g., Chao v. Hotel Oasis, Inc., 493 F.3d 26, 34 (1st Cir. 2007) ("corporate officer principally in charge of directing employment practices, such as hiring and firing employees, requiring employees to attend meetings unpaid, and setting employees' wages and schedules" and "thus instrumental in `causing' the corporation to violate the FLSA" was personally liable for violations). The Court finds that Defendants were both "employers" of Meers' employees, and thus, both Defendants are liable for the FLSA violations that occurred in the operation of Meers' restaurant.
DOL's investigation period for Defendants' FLSA violations and back wage liability assumes a three-year statute of limitations. "The FLSA generally imposes a two-year statute of limitations unless the defendant's violations are shown to be willful, in which case a three-year period applies." Mumby v, Pure Energy Servs. (USA), Inc., 636 F.3d 1266, 1270 (10th Cir. 2011); accord Perez v. El Tequila, LLC, 847 F.3d 1247, 1255 (10th Cir. 2017); see 29 U.S.C. § 255(a). To establish a willful violation, Plaintiff must prove that Defendants "either knew or showed reckless disregard for the matter of whether [their] conduct violated the statute." McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988); see Mumby, 636 F.3d at 1270. "Reckless disregard can be shown through action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known." Mumby, 636 F.3d at 1270 (internal quotation omitted).
The undisputed facts shown by the record establish willful conduct by Meers and Mrs. Maranto acting on Meers' behalf in relation to employees. Like the employer in El Tequila, where the issue of willfulness was determined as a matter of law, Defendants manipulated and falsified payroll records (by concealing overtime hours), withheld and destroyed records, and recklessly disregarded their duties to keep records and determine whether their practices complied with FLSA. See El Tequila, 847 F.3d at 1255-56. Here, as in El Tequila, Defendants "took affirmative steps to create the appearance that [Meers] complied with the FLSA." Id. at 1256. Even after DOL began its investigation and filed this action, Defendants failed to correct some FLSA violations. Further, Defendants provide no meaningful response in their summary judgment brief regarding the issue of willful conduct.
Plaintiff bears the burden to prove the amounts of unpaid back pay and overtime compensation due to employees during the relevant time period. Where an employer fails to keep adequate or accurate records of employees' work hours, however, Plaintiff can satisfy this burden by proving that employees "performed work for which [they were] improperly compensated" and by "produc[ing] sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference." Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946); see Baker v. Barnard Constr. Co., 146 F.3d 1214, 1220 (10th Cir. 1998); Donovan v. Simmons Petroleum Corp., 725 F.2d 83, 85-86 (10th Cir. 1983).
Anderson, 328 U.S. at 687-88; see Donovan, 725 F.2d at 85-86.
In this case, it is undisputed that Meers' employees performed work for which they were not properly compensated. Based on available records and DOL's investigation, Plaintiff has produced evidence of the approximate amount due for uncompensated work by employees in various positions as a matter of reasonable inference. Defendants have not produced any admissible evidence to rebut the inference. Under these circumstances, Defendants are "not in a position to complain that the award is imprecise." Donovan, 725 F.2d at 86. Thus, the Court finds that Plaintiff's computation of unpaid back wages and overtime compensation should be accepted, and that an award should be made in the amounts shown by Plaintiff's Motion.
FLSA mandates that "[a]ny employer who violates the provisions of [29 U.S.C. § 206 (minimum wages) or § 207 (overtime compensation)] shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and an additional equal amount as liquidated damages." See 29 U.S.C. § 216(b). "The purpose for the award of liquidated damages is the reality that the retention of a workman's pay may well result in damages too obscure and difficult of proof for estimate other than by liquidated damages." Renfro v. City of Emporia, 948 F.2d 1529, 1540 (10th Cir. 1991) (internal quotation omitted); ); see also Jordan v. U.S. Postal Serv., 379 F.3d 1196, 1202 (10th Cir. 2004) ("liquidated damages are not a penalty exacted by the law, but rather compensation to the employee occasioned by the delay in receiving wages due caused by the employer's violation of the FLSA") (internal quotation omitted). A district court may decline to award liquidated damages or reduce the amount awarded only in limited circumstances provided by 29 U.S.C. § 260:
Applying this provision, the Tenth Circuit has explained FLSA law governing an award of liquidated damages as follows:
Dep't of Labor v. City of Sapulpa, 30 F.3d 1285, 1288-89 (10th Cir. 1994). "The employer has the plain and substantial burden of persuading the court by proof that his failure to obey the statute was both in good faith and predicated upon such reasonable grounds . . . . In the absence of such a showing the district court has no discretion to mitigate an employer's statutory liability for liquidated damages." Renfro, 948 F.2d at 1540 (internal quotation omitted).
In this case, Defendants have not provided any substantial proof that their conduct in violation of FLSA was done in good faith or that they had a reasonable basis for believing their employee practices complied with FLSA's requirements. In their summary judgment brief, Defendants argue generally that they "relied on their long time CPA, Mr. Danny Delciello" and they had no reason to doubt his advice regarding FLSA compliance. See Defs.' Resp. Br. at 15-16, 25. Notably, Defendants do not identify any particular advice of Mr. Delciello that they were honestly attempting to follow. Nor do Defendants present any facts to show their conduct was objectively reasonable. On this record, the Court has no discretion to avoid or reduce the liquidated damages mandated by FLSA. Further, assuming Defendants had made a sufficient showing, the Court would retain discretion to award liquidated damages. See Mumby, 636 F.3d at 1272. Under the circumstances shown by the record, the Court finds insufficient reason to deny Defendants' employees an award of liquidated damages as provided by FLSA.
Therefore, the Court finds that Plaintiff is entitled to summary judgment awarding liquidated damages equal to the amount of unpaid minimum wages and overtime compensation.
FLSA authorizes the issuance of an injunction to restrain further violations by an employer who has violated the Act. See 29 U.S.C. § 217. "Where the Secretary has established violations of the Act, the district court should ordinarily grant injunctive relief, even if the employer is in present compliance, unless the district court is soundly convinced that there is no reasonable probability of a recurrence of the violations." Marshall v. Van Matre, 634 F.2d 1115, 1118 (8th Cir. 1980). Injunctions are an important enforcement tool "because the cost of noncompliance is placed on the employer, which lessens the responsibility of the Wage and Hour Division in investigating instances of noncompliance." See Martin v. Funtime, Inc., 963 F.2d 110, 114 (6th Cir. 1992) (citation omitted). "The issuance of a permanent injunction in FLSA cases does not subject an employer against whom its runs to a penalty or a hardship since it requires him to do what the Act requires anyway to comply with the law." Dunlop v. Davis, 524 F.2d 1278, 1281 (5th Cir. 1975) (internal quotation omitted). "In deciding whether to grant injunctive relief, a district court must weigh the finding of violations against factors that indicate a reasonable likelihood that the violations will not recur." Brock v. Big Bear Mkt. No. 3, 825 F.2d 1381, 1383 (9th Cir. 1987); see Reich v. Petroleum Sales, Inc., 30 F.3d 654, 657 (6th Cir. 1994) (factors to be considered include the employer's past conduct, current conduct, and most importantly, "the likelihood that the employer will comply with the Act in the future"); accord Solis v. A-1 Mortg. Corp., 934 F.Supp.2d 778, 815 (W.D. Pa. 2013).
In this case, the existing record provides no assurance that Defendants will comply with FLSA's requirements going forward. Defendants point to no facts that indicate a reasonable likelihood of future compliance. Quite the opposite, the record shows that Defendants did not correct compliance issues while this case was pending. The Court is particularly concerned by the prospect of continued violations of FLSA's child labor provisions and record keeping requirements, which cannot be remedied by awards of back pay and unpaid compensation. In short, the Court has no belief that past conduct by Defendants that led to their FLSA violations will be corrected without an injunction. Therefore, the Court finds that injunctive relief is appropriate and that future conduct by Defendants involving similar FLSA violations should be enjoined.
For these reasons, the Court finds that Plaintiff is entitled to summary judgment in its favor on all FLSA claims asserted in the Complaint and all issues raised by its Motion, including willful conduct, liquidated damages, the amount of back wages and overtime compensation owed to Defendants' employees, and the need for a permanent injunction.
IT IS THEREFORE ORDERED that Plaintiff's Motion for Summary Judgment [Doc. No. 75] is GRANTED. Plaintiff shall submit a proposed judgment and permanent injunction within 7 days from the date of this Order.
IT IS SO ORDERED.
