Soler v. G & U, INC.

• Citation: 768 F. Supp. 452
• Decision Date: 24 July 1991
• Docket Number: 78 Civ. 6257(CHT)—78 Civ. 6261(CHT),80 Civ. 3506(CHT) and 83 Civ. 9122(CHT).,No. 78 Civ. 6252(CHT),78 Civ. 6252(CHT)
• Parties: Francisco SOLER, et al., Plaintiffs, v. G & U, INC., Charles Gratz, d/b/a Charles Gratz Farm, et al., Defendants. Jann S. FLING, et al., Plaintiffs, v. PEAT-GRO FARMS, INC., Defendant. Pablo LIVAS, et al., Plaintiffs, v. BIERSTINE FARMS, INC., Defendant. Gilberto GONZALEZ, et al., Plaintiffs, v. CEDAR VALLEY GROWERS, INC., Defendant. Freddy VALENTIN, et al., Plaintiffs, v. Raymond MYRUSKI, Defendant. Cecilio ENCARNACION, et al., Plaintiffs, v. W.K.W. FARMS, INC., Defendant. SOLER, et al., Plaintiffs, v. U.S. SECRETARY OF LABOR, et al., Defendants. G & U, INC., et al., Plaintiffs, v. U.S. DEPARTMENT OF LABOR, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

768 F. Supp. 452

Francisco SOLER, et al., Plaintiffs, v. G & U, INC., Charles Gratz, d/b/a Charles Gratz Farm, et al., Defendants.

Jann S. FLING, et al., Plaintiffs, v. PEAT-GRO FARMS, INC., Defendant.

Pablo LIVAS, et al., Plaintiffs, v. BIERSTINE FARMS, INC., Defendant.

Gilberto GONZALEZ, et al., Plaintiffs, v. CEDAR VALLEY GROWERS, INC., Defendant.

Freddy VALENTIN, et al., Plaintiffs, v. Raymond MYRUSKI, Defendant.

Cecilio ENCARNACION, et al., Plaintiffs, v. W.K.W. FARMS, INC., Defendant.

SOLER, et al., Plaintiffs, v. U.S. SECRETARY OF LABOR, et al., Defendants.

G & U, INC., et al., Plaintiffs, v. U.S. DEPARTMENT OF LABOR, et al., Defendants.

Nos. 78 Civ. 6252(CHT), 78 Civ. 6257(CHT)—78 Civ. 6261(CHT), 80 Civ. 3506(CHT) and 83 Civ. 9122(CHT).

United States District Court, S.D. New York.

July 24, 1991.

COPYRIGHT MATERIAL OMITTED

Farmworker Legal Services of New York, Inc., New Paltz, N.Y. (Dan Getman, Charlotte Sibley, of counsel), for plaintiffs.

Keane and Beane, P.C., White Plains, N.Y. (Edward F. Beane, Susan T. Travis, of counsel), for defendants.

Otto G. Obermaier, U.S. Atty., S.D.N.Y., New York City, for the Government.

OPINION

TENNEY, District Judge.

Plaintiffs, approximately 100 migrant farmworkers ("migrant workers" or "workers"), instituted this consolidated action under the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq. (1988) ("FLSA"), against defendants, six farm owners in Orange County, New York ("owners").¹ The workers seek to recover "rent" deducted from their wages by the owners for the on-site housing which the owners provided during the 1978-83 growing seasons. The workers argue that in deducting the "rent" from their wages, the owners violated the minimum wage provisions of the FLSA. See 29 U.S.C. § 206.²

In a prior decision, the court stayed the proceedings in this case, pending an administrative hearing before an Administrative Law Judge ("ALJ") and a final determination by the United States Department of Labor's Wage and Hour Administrator ("Administrator"). See Soler v. G & U, Inc., 477 F.Supp. 102 (S.D.N.Y.1979). In November 1983, the Administrator issued his final decision, in which he found, inter alia, that the on-site housing was primarily for the benefit of the workers rather than the owners, and that its fair rental value was therefore deductible from the workers' wages. Administrator's Decision, Exh. E to Plaintiffs' Notice of Motion for Partial Summary Judgment ("Plaintiffs' Notice of Motion"). Thereafter, the workers and the owners sought judicial review of the Administrator's decision under the Administrative Procedure Act, 5 U.S.C. § 706(2) (1988) ("APA"), and cross-moved for summary judgment pursuant to Fed.R.Civ.P. 56(c).

This court found that the housing provided to the migrant workers was primarily for the benefit and convenience of the owners, and that, therefore, its costs could not be included as "wages" under § 203(m) of the FLSA.³ After concluding that the Administrator failed to consider all the relevant factors, this court set aside — as arbitrary and capricious — his determination that the housing was primarily for the benefit of the workers, and granted summary judgment in favor of the plaintiffs. Soler v. G & U, Inc., 615 F.Supp. 736 (S.D.N.Y.1985). The Second Circuit reversed, finding that this court had exceeded the scope of its review authority under the APA, and that the Administrator's decision was not arbitrary and capricious. The case was remanded for this court "to review the Administrator's determinations relating to the fair rental value of the housing facilities." Soler v. G & U, Inc., 833 F.2d 1104, 1105, 1111 (2d Cir.1987), cert. denied, 488 U.S. 832, 109 S.Ct. 88, 102 L.Ed.2d 64 (1988). Once again, the migrant workers and the owners have cross-moved for summary judgment based on the administrative record.

For the reasons set forth below, the Administrator's decision is affirmed in part and reversed in part. In addition, the court's prior award of liquidated damages is replaced with an award of prejudgment interest.

BACKGROUND

Defendant owners are in the business of growing and harvesting crops such as onions, lettuce, and celery. In addition to their permanent employees, the owners hire migrant workers on a seasonal basis and pay them the hourly minimum wage. During the main growing season, the owners provide on-site housing to most of the migrant workers.⁴ If housing were not provided, it is unlikely that the workers would be able to obtain off-site housing. Both sides agree that the migrant workers could not afford to work for the owners if housing were not provided. Soler, 615 F.Supp. at 739.

Prior to 1978, the on-site housing was provided to the migrant workers free of charge. In 1978, however, Congress amended the FLSA's minimum wage provisions to apply to agricultural workers.⁵ Since the FLSA provides that the wage paid to an employee may include the reasonable cost to the employer of furnishing the employee with lodging, see 29 U.S.C. § 203(m), the owners began to charge the migrant workers for their housing. From 1978-83, the owners charged each worker between $8 and $12.50 a week for the lodging. In general, the owners withheld $.25 per hour from the wages of each worker for whom housing was provided.

In July 1978 — after complaining to the Department of Labor that the wage deductions were unfair — the migrant workers petitioned the Administrator to determine the fair value of the housing. Thereafter, the Administrator ordered that a hearing be held by an ALJ. The ALJ concluded that the determination of the fair rental value of the on-site housing would require the services of a real estate appraisal expert. Accordingly, the ALJ directed the Department of Housing and Urban Development to make an appraisal of the subject lodgings ("the HUD appraisal"). In addition, the owners hired a different real estate appraiser to make an independent appraisal ("the owners' appraisal"). During the course of the administrative hearing, the ALJ heard a total of twenty-nine days of testimony from twenty-six witnesses, including the two real estate appraisers.

Both appraisers agreed that their assignments were unique and that the "market data" approach was the only viable method of valuation in this case.⁶ Administrator's Decision at 4. In using the market data approach, a fair rental value is determined by 1) comparing the property in question to similar property in the general geographic area, 2) determining the rental value of the similar property, and 3) making whatever adjustments are needed to the rental value, if any, to reflect the differences between the property in question and the comparable property. Id.; HUD Appraisal at 7-8, Exh. C to Plaintiffs' Notice of Motion.

In conducting his appraisal, the HUD appraiser examined fifteen low income housing units in the general area of the owners' farms. After eliminating both the high and low extremes of the rental spectrum, the HUD appraiser calculated that the typical rent for the rural housing was $20 per person, per week. HUD Appraisal at 11. This figure was based upon an average occupancy of two persons per bedroom and included adjustments for utilities.⁷ Id. at 9.

The HUD appraiser recognized that the rural rental housing was superior to the workers' housing in several respects. To account for the differences, the appraiser made downward adjustments from the $20 rural rental baseline in three areas: 1) "market limitations," 2) "livability," and 3) "functional utility." Market limitations involved an adjustment primarily to reflect the remote location of the migrant housing, far removed from towns and villages. See Tr. 2971-71, 3028, 3093, 3730.⁸ For two of the migrant worker camps, the downward adjustments for market limitations were 20% and 15%; for the remaining properties the downward adjustment was 10%. Livability focused on whether the housing satisfied a tenant's basic needs, with emphasis on sanitary facilities. See Tr. 2958-60. Deductions for livability were as high as 55%. See HUD Appraisal at 33. Functional utility related to the attractiveness and usefulness of the property, with emphasis on the layout, room and closet size, and the type of walls and floors. See Tr. 2959-60. Deductions for functional utility were as high as 40%. HUD Appraisal at 24.

Based upon his inspections of the on-site lodging, the HUD appraiser determined the percentage deduction for each individual housing unit under each of the three above mentioned categories. The sum of the three percentages was then subtracted from the $20 baseline figure to arrive at the weekly per person fair rental value of each of the units. The HUD appraiser calculated the fair rental values to range from $0 to $18, with twenty-six of the thirty-two sites having values of $10 or less.

Both the ALJ and the Administrator accepted the HUD appraiser's calculations with a few exceptions. First, both the ALJ and the Administrator rejected the appraiser's standard 10% deduction for market limitations. See ALJ's Recommended Decision at 38-39, Exh. G to Plaintiffs' Notice of Motion; Administrator's Decision at 12. As discussed supra, the HUD appraiser predicated the 10% market limitation deduction primarily on the fact that the migrant worker housing was located at a distance from towns and villages. However, since the comparable units used by the HUD appraiser in setting the $20 baseline were also rurally located, and because "the presence of the housing at the farm is a positive factor for the migrant workers at least with respect to transportation cost savings," the ALJ and the Administrator did not accept the HUD appraiser's standard 10% deductions.⁹ Id. Second, the Administrator accepted the ALJ's recommendation that $1 be added to each weekly rental calculated by the HUD appraiser to reflect excessive maintenance costs. See Administrator's Decision at 12; ALJ's Recommended Decision at 41-43.

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