Reich v. Waldbaum, Inc.

Decision Date30 September 1993
Docket NumberNo. 89 Civ. 3414 (CHT).,89 Civ. 3414 (CHT).
PartiesRobert B. REICH, Secretary of Labor, United States Department of Labor, Plaintiff, v. WALDBAUM, INC., Defendant.
CourtU.S. District Court — Southern District of New York

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U.S. Dept. of Labor by Douglas Weiner and Percy S. Miller, New York City (Judith E. Kramer, Sol. of Labor, Patricia Rodenhausen, Regional Sol., of counsel), for plaintiff.

Catalano & Sparber, New York City (Douglas P. Catalano, Neil G. Sparber, Steven H. Blatt, of counsel), for defendant.

ORDER AND OPINION

TENNEY, District Judge.

The Secretary of Labor ("the Secretary") brings this action against Waldbaum, Inc. ("Waldbaum"), alleging willful violations of the recordkeeping and overtime provisions of the Fair Labor Standards Act of 1938 ("FLSA" or the "Act"), as amended, 29 U.S.C. § 201 et seq. These violations are alleged to have taken place between May 1986 and October 1989 at 20 stores owned by Waldbaum. The Secretary brings suit under 29 U.S.C. §§ 216(c) and 217, seeking back wages for 262 employees and injunctive relief. Beginning on October 18, 1992, a nine day bench trial was held before this court. For the reasons stated below, Waldbaum is found to have violated the Act, although the violations are not found to be willful. Accordingly, an injunction will be issued. The court also awards back wages, in amounts to be determined by recalculations in accordance with this opinion. Liquidated damages are awarded up to the full amount of the wages withheld.

BACKGROUND

Waldbaum operates a chain of grocery stores within New York State and is engaged in commerce within the meaning of § 3(s)(2) of the FLSA. Joint Final Pre-Trial Order, Stipulated Fact ("JFPTO Stip. F.") ¶ 2. The twenty stores that are the loci for the alleged violations are in Bronx, Westchester, Putnam, and Rockland counties. From May 15, 1986 until the time of trial, employees at the stores, with the exception of the store managers or co-managers, were paid in accordance with a collective bargaining agreement (the "Agreement") between Waldbaum and Local 338, Retail, Wholesale and Chain Store Food Employees, and in accordance with Waldbaum's compensation policies. Id. at ¶ 4.

Each week, Waldbaum's store managers or their designees prepared forms called weekly payroll records. The payroll records contain the name of each employee at the subject store for the payroll week and the number of regular, overtime, and Sunday hours1 for which the employee should be compensated. These calculations were based upon time card entries submitted by the employees. The payroll records were then submitted to Waldbaum's main office in Central Islip, New York. Id. at ¶¶ 7-8. The information from the payroll records were keypunched by data processing or payroll office personnel into the defendant's computer, and a paycheck was generated. Id. at ¶ 9. Defendant claims that employees were given an opportunity to notify Waldbaum of any discrepancy between the time cards and the payroll records as reflected in the paychecks.

Plaintiff has conducted eight investigations of Waldbaum since 1962 for violations of the FLSA. Tr. 994, 1163-64. One of those investigations began in 1985 by the Manhattan office of the Labor Department and covered stores in Brooklyn, Queens, and Long Island. Richard Mormile, an investigator for the plaintiff, testified without contradiction that the Secretary's findings of violations of §§ 7 and 11 of the Act in those stores were presented three times to representatives of Waldbaum's "higher management." Tr. 1166. Because Waldbaum did not comply with requests made by the Secretary regarding those investigations, plaintiff brought suit for violations in those stores in the Eastern District of New York, where that action is still pending as Reich v. Waldbaum, Inc., 86 Civ. 0861.

Plaintiff's investigator Patricia Silberman testified that in 1987 she began an investigation of the subject stores in this action upon review of a complaint by employee Philip Naron. Tr. 992-93. Her review of the Secretary's records indicated that the previous investigations had found violations that plaintiff claims had been brought to the attention of Waldbaum management. Tr. 994; see Tr. 1164 (case file reflected that president Ira Waldbaum was informed of results of 1962 investigation). Silberman then went to the stores in question and conducted interviews with employees, which she memorialized in writing. She also mailed questionnaires to other employees and had other investigators conduct similar interviews. Tr. 994-1016. The Secretary compiled additional statements from individuals who appear to be former employees. Tr. 1016-18. From this investigation, the Secretary concluded that violations had occurred and brought suit.

DISCUSSION
I. VIOLATIONS OF THE ACT

Section 7 of the FLSA provides that:

No employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular hourly rate at which he is employed.

29 U.S.C. § 207(1). Compliance with § 7 is safeguarded in part by § 11(c) which requires subject employers to "make, keep, and preserve such records of the persons employed by him and of the wages, hours, and other conditions and practices of employment maintained by him...." 29 U.S.C. § 211(c). The statutory mechanism is completed by 29 U.S.C. §§ 215(a)(2) and (a)(5), which makes unlawful violations of §§ 207(1) and 211(c), respectively.

Among the requirements imposed by the Secretary's implementing regulations are that employees keep and preserve for three years records of (1) the total daily and weekly hours employees work; (2) employees' regular hourly rates of pay for each week that overtime is worked; (3) total daily or weekly earnings; (4) total wages paid; and (5) total weekly premium pay for overtime hours. 29 C.F.R. §§ 516.2 and 516.5; Donovan v. Kaszycki & Sons Contractors, Inc., 599 F.Supp. 860, 867-68 (S.D.N.Y.1984).

The recordkeeping requirements of the Act are fundamental to the Act's effectiveness. "Failure to keep accurate records can obscure a multitude of minimum wage and overtime violations." Wirtz v. Mississippi Publishers Corp., 364 F.2d 603, 607 (5th Cir. 1966). In challenges to the wages paid as reflected in the employer's records,

due regard must be given to the fact that it is the employer who has the duty under § 11(c) of the Act to keep proper records of wages, hours, and other conditions of employment and who is in the position to know and to produce the most probative facts concerning the nature and amount of work performed. Employees seldom keep such records themselves; even if they do the records may be and frequently are untrustworthy.

Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687, 66 S.Ct. 1187, 1192, 90 L.Ed. 1515 (1946). Thus, where the records kept are inaccurate, the plaintiff meets his burden if he shows work was performed for which the employees were improperly compensated and if sufficient evidence is produced to establish "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 plaintiff's evidence." Id. at 687-88, 66 S.Ct. at 1192-93.

Plaintiff has provided sufficient evidence to sustain the burden that work was performed for which Waldbaum's employees were not compensated. Plaintiff called thirty-seven employee witnesses at trial. The vast majority of them testified that they had worked hours for which they were not paid. See, for example, Tr. 13 (Schuler); Tr. 78 (DiFabio); Tr. 153 (Phillips); Tr. 169 (Mirra); Tr. 297 (Voll); Tr. 487 (Skakel); Tr. 577-78 (Feeney); Tr. 659 (Zappolo). Many indicated that they worked more hours than were reflected on the Waldbaum payroll. Tr. 237 (Scheck); Tr. 276 (McAuley); Tr. 719 (Cedeno); Tr. 820-21 (Grazziano). They also testified that their overtime hours in particular were not accurately compensated. Tr. 404 (Thompson); Tr. 863 (Margerum); Tr. 378 (Borrellie).

Defendant argues that whatever deficiencies existed in payment were the result of the employees' failure to conform to the recording methods of Waldbaum. Defendant claims to base its payments on the time-cards of a punch clock system. It contends that the affected employees were required to punch in upon arriving at work, punch out at the beginning of lunch and break periods, punch in again at the conclusion of the breaks, and to punch out at the end of workshifts. Instructions regarding this policy were disseminated orally and in writing by the supervisors of the subject employees. Waldbaum also posted signs near the clocks informing the workers of the necessity of punching in and out. (Def.Exh. CA-CK).

Many of the employees testified that they knew of the policy. However, some indicated that they were not diligent in the time they punched, in part because the hours punched seemed to have no effect on the amount they were paid. Pl.Exh. 8 at 18 (Dunlavey Deposition); Tr. 357 (Scherer); see Tr. 590 (Feeney) (assistant managers and grocery manager rarely punched); Tr. 903 (Fanzo) (time spent after punching out was extra time for which he knew he would not get compensated). Others indicated that they would sometimes fail to punch altogether. Tr. 821 (Graziano); Tr. 438 (Lombardi); see Tr. 706 (Martino) (Fleetwood clock was broken, but employees were not paid full amounts for time worked as handwritten on cards). Deposition and witness testimony suggested that on...

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    ...of back pay (three years for willful violations), attorneys’ fees, and costs. 29 U.S.C. §216(c); see, e.g. , Reich v. Waldbaum, Inc. , 833 F. Supp. 1037, 1041 (S.D.N.Y. 1993), rev’d on other grounds , 52 F.3d 35 (2d Cir. 1995) (reversing trial court’s finding that employer’s failure to pay ......
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    ...of back pay (three years for willful violations), attorneys’ fees, and costs. 29 U.S.C. §216(c); see, e.g. , Reich v. Waldbaum, Inc. , 833 F. Supp. 1037, 1041 (S.D.N.Y. 1993), rev’d on other grounds , 52 F.3d 35 (2d Cir. 1995) (reversing trial court’s finding that employer’s failure to pay ......
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