Director of Bureau of Labor Standards v. Cormier

• Decision Date: 24 June 1987
• Parties: 28 Wage & Hour Cas. (BNA) 480, 110 Lab.Cas. P 55,994 DIRECTOR OF the BUREAU OF LABOR STANDARDS v. Kenneth CORMIER, et al.
• Court: Maine Supreme Court

Page 1297

527 A.2d 1297

28 Wage & Hour Cas. (BNA) 480, 110 Lab.Cas. P 55,994 DIRECTOR OF the BUREAU OF LABOR STANDARDS v. Kenneth CORMIER, et al.

Supreme Judicial Court of Maine.

Argued March 4, 1987.

Decided June 24, 1987.

James E. Tierney, Atty. Gen., Leanne Robbin (orally), Asst. Atty. Gen., Augusta, for plaintiff.

Peter H. Jacobs (orally), Peter Culley, Gregory D. Woodworth, Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, for defendants.

Before McKUSICK, C.J., NICHOLS, ROBERTS, WATHEN, GLASSMAN and SCOLNIK, JJ.

ROBERTS, Justice.

Kenneth Cormier and various corporate and partnership entities comprising what is popularly known as "Funtown USA" appeal from a judgment entered by the Superior Court, Kennebec County, requiring those entities to pay overtime wages, damages and fines to certain employees and to the State for the years 1982 and 1983. Numerous employees had worked an aggregate of more than forty hours in one week for two or more of the entities at Funtown but were compensated by each entity separately, at regular wage rates. The Superior Court determined that the defendant entities were in fact a single employer for purposes of enforcing Maine's wage and hour law, 26 M.R.S.A. § 664 (Supp.1986). ¹ The Superior Court reasoned that because the defendants were in fact one "employer," the employees were entitled

to overtime wages if their hours totalled in excess of forty in one week even if those hours were divided between two entities and the employees never worked over forty hours in one week for any one entity. The defendants contend on appeal 1) that the court erred in applying a "joint employer" test to determine a violation of section 664 and 2) that under section 664 an employer must pay an employee overtime wages only if the employer "requires," in the sense of compulsion, the employee to work those overtime hours. On his appeal, the Director of the Bureau of Labor Standards challenges the portion of the court's order declining to find one of the named defendants, Lucre, Inc., a "joint employer" in conjunction with the other defendants for purposes of enforcing section 664. For the reasons hereinafter set forth we vacate the judgment with respect to Lucre, Inc. and affirm the judgment as to the remaining defendants.

I.

The underlying facts in this case are not in dispute. "Funtown USA" is an amusement park located in Saco. There is no corporate entity known as Funtown USA. Rather, Funtown USA is a collection of corporate and partnership entities that run various aspects of the amusement park. This case concerns those entities owned, controlled or in some way directed by members of the Cormier family. In 1982 and 1983 employees working for the Cormier-related corporations and partnerships worked in excess of forty hours for two or more of those entities. They did not, however, receive overtime compensation unless they worked in excess of forty hours for just one entity. Thus, an employee who in one week would work 27 3/4 hours for Red Baron and 23 3/4 hours for Dalcor received wages for 51 1/2 hours of work at a regular rate of pay instead of 40 hours of regular pay and 11 1/2 hours of overtime (1 1/2 times the regular rate). The director, after discovering these apparent violations following an audit, filed suit against the various Cormier-related entities. The director sought to enjoin the entities from continuing this practice as well as seeking fines, damages and the payment of overtime due numerous employees for the years 1982 and 1983. The corporate and partnership relationships among and between the Cormier-related enterprises are set forth in a diagram in an appendix to this opinion.

At trial, the director introduced documents and elicited testimony that established the factual basis of its claim with respect to overtime hours worked at two or more of the defendant-entities and the intertwined relationships among those entities. The defense case centered on establishing that the various entities were all duly constituted for legitimate business and family reasons and that they were not sham or shell corporations. The defense also elicited testimony from the Cormiers tending to establish that no employee was ever compelled or forced to work overtime.

The director brought out at trial that Kenneth Cormier and corporations he was involved with had been subject to prior investigations by the Bureau of Labor Standards and had paid back-overtime to employees in a factually similar situation in 1980. In that case the two corporations, Dalcor and Ken-Ted, ² were effectively controlled by Kenneth and Violet Cormier. It was Kenneth Cormier's understanding at that time that assessments were levied on the two corporations because of that joint ownership. Thus, it is still Kenneth Cormier's position that employees who work for both Baseball, Inc. and Dalcor, Inc. in a single week are to be paid overtime if their combined employment time for both entities exceeds forty hours. Consistent with this view, the appellants concede that the violations involving Baseball and Dalcor are not at issue on appeal. The defendants contend, however, that actual legal control over an entity is necessary to establish joint employer status. Hence, because Astrosphere, Inc. is effectively owned by William Cormier, and Red Baron Amusement, Inc. is effectively owned by Kevin Cormier, employees who, for example, work 20 hours for Red Baron and 30 hours for Following a bench trial the court ordered the defendants to pay the employees $972.35 in back overtime and $972.35 in liquidated damages. The court also ordered civil penalties to be paid to the State in accord with 26 M.R.S.A. § 671 (1974) in the amount of $4725 (63 violations of section 664 assessed at $75 per violation).

Dalcor in a single week are not paid overtime wages.

II.

The defendants first contend that the court failed to apply the correct legal standard in determining the status of the Cormier-related enterprises. They argue that the court erred when it undertook a balancing process to decide whether the defendants were joint employers for purposes related to enforcing section 664. The defendants do not contest the factual findings utilized by the court in its balancing. Rather, the defendants contend that Maine law does not contemplate or permit any such balancing, that the "joint employer" concept is foreign to Maine law, and is not set forth or described in any state statute. The defendants argue that once it is established that the entities are legally distinct and not shams, the inquiry should end.

The court considered the following factors as tending to establish joint employer status: 1) Kenneth Cormier and the corporation he and his wife control, Dalcor, exercise overall direction and control of the Funtown USA operation which includes all the other business entities at issue; 2) hiring and payment of employees is coordinated in one central office which, when necessary, also advertises jobs, provides initial screening of job applicants, and conducts orientation for applicants after they are hired; 3) all entities operate within the same defined piece of real estate, for the same general purpose--amusements--under the single overall name Funtown USA; and 4) most entities have some interlocking financial relationships that result, or have resulted, in some providing other guarantees to aid financing and that resulted, in the 1982-1983 period at issue, in the entities controlled by the sons receiving indirect subsidies for the land use and other overhead costs from Dalcor.

The court also considered several factors tending to support the view that the Funtown USA defendants were not joint employers for purposes of enforcing section 664; 1) hiring generally is done by those individuals who control the entity for which the work is to be performed; and, in addition, employees punch time cards for and are separately paid by each entity for which they work; 2) the separate entities are, in fact, separately owned and controlled and are not sham operations all controlled, in reality, by Kenneth Cormier and Dalcor; and 3) the separate entities of the Cormier family operate within the park along with other entities owned and controlled completely outside the Cormier family. After balancing these factors, the court concluded that the Cormier-related enterprises acted as one employer for the purposes of enforcing section 664.

The term "employer" is not defined in the relevant state statutory provisions. See 26 M.R.S.A. §§ 661-672 (1974 and Pamph.1986). Recognizing this, the court analyzed the economic realities of the interlocking Funtown USA entities, and determined that although they were legitimate, separate, legal entities, they were so interrelated as to be, in effect, one employer under section 664.

The court, in fashioning its joint employer analysis, referred to the federal Fair Labor Standards Act (FLSA), 29 U.S.C.A. §§ 201-19 (1978 & Supp.1987), in particular section 203(d) which defines the term "employer" ³ and section 207 which sets forth in detail the federal maximum hour and overtime wage law. ⁴ Cases interpreting Moreover, to interpret section 664 in this manner is consistent with the overall remedial nature of the minimum wage and overtime laws. Section 661 states that:

these sections of the FLSA uniformly recognize that the economic reality and the totality of the factual circumstances in a particular case must guide a court's determination of the employers' status rather than formalistic labels or common law notions of employment relationships. See, e.g., Donovan v. Agnew, 712 F.2d 1509, 1510 (1st Cir.1983) (interpreting term "employer" in context of minimum wage and overtime hours enforcement action); Donovan v. Sabine Irrigation Co., Inc., 695 F.2d 190, 194 (5th Cir.), cert. denied, 463 U.S. 1207, 103 S.Ct. 3537, 77 L.Ed.2d 1387 (1983) (interpreting term "employer" in context of minimum wage enforcement...