Dole v. Trusty, Civ. No. 88-2085.

• Decision Date: 02 March 1989
• Docket Number: Civ. No. 88-2085.
• Citation: 707 F. Supp. 1074
• Parties: Elizabeth H. DOLE, Secretary of Labor, United States Department of Labor, Plaintiff, v. Ray TRUSTY, Lavada Trusty, and Randy Trusty, Individually, and Ray Trusty Hauling, Inc., also known as Ray Trusty Hauling, Defendants.
• Court: U.S. District Court — Western District of Arkansas

707 F. Supp. 1074

Elizabeth H. DOLE, Secretary of Labor, United States Department of Labor, Plaintiff, v. Ray TRUSTY, Lavada Trusty, and Randy Trusty, Individually, and Ray Trusty Hauling, Inc., also known as Ray Trusty Hauling, Defendants.

Civ. No. 88-2085.

United States District Court, W.D. Arkansas, Fort Smith Division.

March 2, 1989.

Daniel Curran, Office of the Sol., Dallas, Tex., for plaintiff.

Ernie Witt, Witt Law Firm, P.C., Paris, Ark., for defendants.

MEMORANDUM OPINION

MORRIS SHEPPARD ARNOLD, District Judge.

This is an action brought by the Secretary of Labor to enforce the overtime and record-keeping provisions of the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 207, 211(c), 215(a)(2), and 215(a)(5). This court has jurisdiction over this cause by virtue of 29 U.S.C. § 217, and there is no question that the Act applies since defendant^* is engaged "in commerce," and does a gross annual business of not less than $250,000, as required by 29 U.S.C. § 203(s)(1).

I.

It is conceded by all parties that prior to January, 1987, defendant paid its truck drivers, who hauled milk from producers to processing plants, a fixed sum for each trip, or partial trip, that they made, irrespective of the number of hours consumed by those trips. Though the length of the trips was subject to some variation, depending principally on how long it took the drivers to unload, drivers earned an average hourly rate of $6.00 to $8.00, a rate comparable to other truck drivers in the area, and certainly reasonably generous when one considers the general levels of wages and employment in Logan County where the defendant's business was located. The remuneration received, moreover, rather obviously exceeds that fixed by the minimum wage provisions of the relevant statute.

The Secretary nevertheless asserts that the FLSA has been violated because overtime has not been paid. 29 U.S.C. § 207(a)(1) provides that a covered employee who works more than forty hours in any week is entitled to be paid for the excess hours "not less than one and one-half times the regular rate at which he is employed." An important question in this case, therefore, is how the relevant drivers' "regular rate" is to be calculated.

For the period during which defendant's drivers were being paid by the trip, that question is definitively answered by the Secretary's regulation codified as 29 C.F.R. § 778.112, which fixes a method for determining the "regular rate" within the meaning of the statute when an employee agrees to do a certain job for a fixed sum. The regular rate, according to this regulation, the validity of which defendant concedes, is simply the price of the jobs completed during any workweek divided by the number of hours required to complete them. If the number of hours worked exceeds forty, then the employee is legally entitled to receive, in addition to the salary agreed to, half the regular rate for each such hour worked.

It follows from these considerations that defendant was in violation of the FLSA at least until early February, 1987, when Mr. Blankenship, one of plaintiff's witnesses, began his investigation of defendant's practices on behalf of the plaintiff.

II.

Defendant does not seriously dispute this first conclusion. But defendant vigorously denies that it is liable thereafter, for it maintains that the arrangement with its drivers was changed in response to the remonstrations of the Department of Labor in February of 1987.

Defendant's records certainly do reflect at least an attempt to react to the requirements of FLSA. After being apprised of its violation of the Act, defendant adopted the device of waiting until the end of every workweek to see how many hours each driver worked and then, after the fact, choosing an hourly rate that would compensate each at exactly the trip rate formerly used, but would not require the payment of any overtime. In the spring of 1988, defendant adopted a second method of calculating pay. It compensated all of its drivers at a fixed rate of $5.50 per hour, but then added a bonus to each driver's pay to make the result come, again, to exactly the old trip rate. In other words, defendant adopted two methods, the first involving a variable hourly rate, the second a variable bonus, both retroactively arrived at, in order to duplicate the results generated by the trip-rate pay plan previously adhered to.

Plaintiff asserts that these devices are bare-faced ruses, mere bookkeeping shams resorted to in order to evade the clear prohibition of the relevant statute. That is certainly not an obviously incorrect view of the matter. But the court does not understand that plaintiff is arguing that, once a job-rate scheme of compensation has been entered into in ignorance of the implications of the wage-hour laws for that arrangement, the mode of compensation cannot be changed by contract to avoid those implications. If the Secretary is so arguing, the court declines to accept her argument. In other words, the court holds that the statute does not prohibit all private ordering responses to its overtime provisions.

The question in this case therefore reduces itself to what agreement, if any, the defendant came to with its employees after the investigation of defendant's wage practices was undertaken by the Department of Labor in 1987. The fact that the total compensation of each employee after this investigation remained the same as it was before is not necessarily helpful, and certainly not dispositive, in deciding this question. Indeed, this is exactly what one would expect from rational economic actors. Certainly the defendants will have no incentive to offer more pay than previously; and there is evidence from which the court concludes that the employees were basically content with the amount of pay they were receiving. A restructuring of the employer-employee arrangement that would avoid the impact of 29 C.F.R. § 778.113, though not, of course, its mandate, would be exactly what one would predict would happen.

The evidence on what actual conversations took place between defendant and its truck drivers after the Labor Department's investigation is conflicting. Mr. Ray Trusty testified that more or less immediately thereafter the company started telling its drivers that they would be paid $5.50 an hour, that the time spent at the processing plants was "down...