Brock v. Seto
| Decision Date | 03 June 1986 |
| Docket Number | No. 85-5826,85-5826 |
| Citation | 790 F.2d 1446 |
| Parties | 27 Wage & Hour Cas. (BN 1129, 104 Lab.Cas. P 34,772 William E. BROCK, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. Some SETO, individually and doing business as Tony of California, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Claire Brady White, U.S. Dept. of Labor, Washington, D.C., for plaintiff-appellant.
Frank Piazza, Edwin Rosenberg, Los Angeles, Cal., for defendant-appellee.
Appeal from the United States District Court for the Central District of California.
Before WRIGHT and NELSON, Circuit Judges, and MARQUEZ, * District Judge.
In this appeal we must decide the sufficiency of evidence regarding uncompensated overtime where the employer failed to keep records required by the Fair Labor Standards Act. We conclude that the district court did not fulfill its duty to approximate an award of back wages based on the employees' testimony. We reverse and remand for a determination of back wages.
The Secretary of Labor filed this action on behalf of sixteen employees of Seto, alleging minimum wage, overtime and record keeping violations under the Fair Labor Standards Act (FLSA), 29 U.S.C. Secs. 201-219. The Secretary sought a permanent injunction to restrain Seto from violating the Act and a restitutionary injunction for unpaid overtime compensation (back wages).
At trial, four employees testified that they had worked over 40 hours a week without overtime pay. A Compliance Officer (CO) from the Wage and Hour Division of the Department of Labor testified about her investigation of Seto's business for compliance with federal wage and hour requirements. However, she was not permitted to testify about her computations of back wages. The court sustained Seto's objection that the CO's computations were based on employees' statements and that testimony based on such hearsay was inadmissible.
After the Secretary's case in chief, Seto moved to dismiss the Secretary's claim for back wages. The court granted the motion, finding that the evidence was "too speculative and unspecific" to support an award. Trial proceeded on the prospective injunction issue. 1 Seto presented seven employee witnesses who testified that they were paid overtime wages. Finally, Seto was called by the Secretary as a rebuttal witness. He testified that overtime hours were not recorded in the payroll earnings statements for one year of the two-year period in question. All other employment records for the relevant period were apparently destroyed.
The district court found "by a preponderance of the evidence ... that there [had] been violations of the applicable [FLSA] statutes." It granted a permanent injunction prohibiting Seto from violating Section 6 (minimum wages), Section 7 (overtime), Section 11(c) (record keeping), and Section 15(a)(1) ().
The Secretary timely appealed the denial of back wages and presents us with two issues:
(1) Did the district court err in refusing to award back wages based on a finding that the evidence of uncompensated overtime was too speculative?
(2) Did it err in refusing to allow the compliance officer's testimony about the computation of back wages?
Findings of fact are reviewed for clear error. United States v. McConney, 728 F.2d 1195, 1200 (9th Cir.) (en banc), cert. denied, --- U.S. ---, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984). The selection and application of the correct legal standard for reviewing a claim for unpaid overtime under the FLSA is a question of law, reviewable de novo. See id. at 1201. Evidentiary rulings are reviewed for abuse of discretion. See United States v. McClintock, 748 F.2d 1278, 1291 (9th Cir.), cert. denied, --- U.S. ---, 106 S.Ct. 75, 88 L.Ed.2d 61 (1985).
An employee seeking to recover unpaid minimum wages or overtime under the FLSA "has the burden of proving that he [W]here the employer's records are inaccurate or inadequate and the employee cannot offer convincing substitutes, ... the solution ... is not to penalize the employee by denying him any recovery on the ground that he is unable to prove the precise extent of uncompensated work. Such a result would place a premium on an employer's failure to keep proper records ...; it would allow the employer to keep the benefits of an employee's labors without paying due compensation as contemplated by the [FLSA].
Here, it is undisputed that overtime hours and wages were not recorded by Seto as required by the FLSA. In such a situation, "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 a just and reasonable inference." Id. (emphasis added).
The burden then shifts to the employer to show the precise number of hours worked or to present evidence sufficient to negate "the reasonableness of the inference to be drawn from the employee's evidence." Id. at 688, 66 S.Ct. at 1192. If the employer fails to make such a showing, the court "may then award damages to the employee, even though the result be only approximate." Id. (emphasis added).
We find that the district court erred as a matter of law in concluding that the Secretary's proof of uncompensated overtime was "too speculative." Mt. Clemens Pottery leaves no doubt that an award of back wages will not be barred for imprecision where it arises from the employer's failure to keep records as required by the FLSA.
The employer cannot be heard to complain that the damages lack the exactness and precision of measurement that would be possible had he kept records in accordance with the [FLSA].... Nor is [an award] to be condemned by the rule that precludes the recovery of uncertain and speculative damages.
Id. at 688, 66 S.Ct. at 1192 (emphasis added).
Seto argues that the Secretary failed to show the amount of overtime as a just and reasonable inference. In the alternative, he argues that his witnesses' testimony negated the reasonableness of the inference to be drawn from the Secretary's evidence.
These arguments are unavailing here. The district court found that Seto failed to pay overtime and minimum wages and failed to maintain records as required by the FLSA. These violations were the basis for the injunctive relief granted below. Seto does not challenge these findings or the injunction.
Once the employee "has proved that he has performed work and has not been paid in accordance with the [FLSA]," the fact of damage is certain. Mt. Clemens Pottery, 328 U.S. at 688, 66 S.Ct. at 1193. The only uncertainty is the amount of damage. "In such a case 'it would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from making any amend for his acts.' " Id. (quoting Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563, 51 S.Ct. 248, 250, 75 L.Ed. 544 (1931) ).
The district court's determination that the damages were too speculative ignored the legal standard established in Mt. Clemens Pottery: "Unless the employer can provide accurate estimates [of hours worked], it is the duty of the trier of facts to draw whatever reasonable inferences The Secretary's claim for back wages is remanded to permit the district court to approximate an award based on reasonable inferences from the employees' testimony. See Houser v. Matson, 447 F.2d 860, 863 (9th Cir.1971) (); Wirtz v. Dix Box Co., 322 F.2d 499, 501 (9th Cir.1963) ().
can be drawn from the employees' evidence ...." Id. 328 U.S. at 693, 66 S.Ct. at 1195. The district court failed to fulfill its duty in ascertaining back wages.
The Secretary contends that the district court erred in...
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