Donovan v. New Floridian Hotel, Inc.

• Decision Date: 17 May 1982
• Docket Number: No. 80-5348,80-5348
• Citation: 676 F.2d 468
• Parties: 25 Wage & Hour Cas. (BN 645, 94 Lab.Cas. P 34,194 Raymond J. DONOVAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. The NEW FLORIDIAN HOTEL, INC., a Florida Corporation d/b/a Biscaya Retirement Club, a/k/a Biscaya Hotel, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 468

676 F.2d 468

25 Wage & Hour Cas. (BN 645, 94 Lab.Cas. P 34,194

Raymond J. DONOVAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. The NEW FLORIDIAN HOTEL, INC., a Florida Corporation d/b/a Biscaya Retirement Club, a/k/a Biscaya Hotel, et al., Defendants-Appellants.

No. 80-5348.

United States Court of Appeals Eleventh Circuit.

May 17, 1982.

Gars, Dixon & Shapiro, Robert Dixon, Sandy Karlan, Miami, Fla., for Bosem & The New Floridian Hotel.

Power & McDonald, Thomas W. Power, Robert P. McDonald, Washington, D. C., amicus curiae, for Foodservice & Lodging Institute.

Donald S. Shire, Dept. of Labor, Greg O'Duden, Washington, D. C., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before TJOFLAT, HILL and ANDERSON, Circuit Judges.

R. LANIER ANDERSON, III, Circuit Judge:

The Secretary of Labor brought this action under § 17 of the Fair Labor Standards Act, 29 U.S.C.A. § 217 (West 1975) ("FLSA") to enjoin The New Floridian Hotel, Inc., A. Lionel Bosem, and Bobby Goodis from violating the minimum wage, overtime compensation, and recordkeeping provisions of the FLSA and its related regulations. Finding that the defendants had repeatedly and willfully violated the FLSA, the district court enjoined the defendants from committing further violations and awarded 207 employees a total of $189,435.22 in back wages. ¹ The New Floridian Hotel, Inc. and A. Lionel Bosem appeal, raising three issues. First, appellants argue that certain individuals who received awards of back pay were not "employees" within the meaning of the FLSA. Second, appellants argue that the district court's award of back pay to individuals who did not testify at trial was erroneous as a matter of law. Finally, appellants urge that the district court improperly denied them credits for the reasonable cost of meals and lodging supplied to various employees. For the reasons set forth below, we affirm.

I.

This case concerns the operation of three Miami Beach retirement facilities, the Biscaya Retirement Club ("Biscaya"), the Coronet Kosher Retirement Club ("Coronet"), and the President Madison Retirement Club ("President Madison"). These establishments provided room and board to their residents and employed a staff of service workers. Appellant The New Floridian Hotel, Inc., managed the operation of the Biscaya. Appellant A. Lionel Bosem was the principal officer, stockholder and managing official of The New Floridian Hotel, Inc. Bosem also ran the President Madison, and Bosem and Goodis were partners in the operation of the Coronet. The complaint alleged that appellants and Goodis had violated §§ 6(a) and 15(a)(2) of the FLSA, 29 U.S.C.A. § 206(a) (West 1978) and § 215(a)(2) (West 1965) by failing to pay their employees the applicable minimum wage rates. The complaint also charged that appellants and Goodis had violated §§ 7 and 15(a)(2) of the FLSA, 29 U.S.C.A. § 207 (West Supp.1981) and § 215(a)(2) (West 1965) by failing to pay employees at a rate of one a one-half times the regular rate of wage for hours in excess of 40 worked in any one week. Additionally, the complaint alleged violation of the recordkeeping provisions of the Act, 29 U.S.C.A. § 211(c) and § 215(a)(5) (West 1965), and the corresponding regulations, 29 C.F.R. Part 516 (1981).

The alleged violations of the FLSA appeared in several guises. With respect to employees working at the Coronet, the evidence indicated that the payroll records had been systematically falsified. A payroll employee at the Coronet testified that she had been instructed to reduce the hours worked by Coronet employees by one-half and double the hourly wage rate actually paid to these employees. This practice masked the fact that the Coronet employees were being paid less than the minimum wage or were not being adequately compensated for their overtime. Eighty-six employees were affected by this procedure.

The employees at the Biscaya had also been the victims of minimum wage and overtime violations. In fact, some individuals were paid as little as $.17 per hour for their work. The workers included kitchen help, maids, waitresses, and other employees, including a group of the individuals who had been placed at the Biscaya following their release from mental hospitals and who performed assorted tasks. In addition, four employees at the President Madison had been denied proper compensation for overtime.

The appellants were unable to produce many of the records which they were required to maintain under the FLSA and the regulations. These records included records reflecting hours worked by employees, the cost of providing employees meals and lodging which were claimed as credits against minimum wage payments, the individuals who were entitled to meals and lodging, and the amount of the credits actually deducted from employees' salaries.

In its Findings of Fact and Conclusions of Law, the district court ruled that appellants and Goodis had violated the FLSA and enjoined them from committing further violations. Following a motion for reconsideration, the district court held a hearing to reexamine the issue of which employees were entitled to back pay. The district court thereafter modified its original ruling and held that fifty-eight individuals were not entitled to recover back wages because the evidence was insufficient to support the compliance officer's calculation of their entitlement to back wages. In addition, the awards to several other employees were modified by the court. The court left intact its award with respect to the remaining individuals and entered judgment. This appeal follows.

II.

Appellants' first argument is that five former mental patients who performed tasks at the Biscaya and later the Coronet were not "employees" within the meaning of the FLSA. These individuals were paid between $.17 and $.55 per hour, and some may have received room and/or board for their work. The substance of appellants' argument is that they did not intend to create an employment relationship, but merely gave the former mental patients tasks to keep them occupied. We find appellants' argument to be devoid of merit.

It is well-established that the issue of whether an employment relationship exists under the FLSA must be judged by the "economic realities" of the individual case. Weisel v. Singapore Joint Venture, Inc., 602 F.2d 1185, 1189 (5th Cir. 1979). That the appellants may not have had the intention to create an employment relationship is irrelevant; "it is sufficient that one person 'suffer or permit (another) to work.' " Brennan v. Partida, 492 F.2d 707, 709 (5th Cir. 1974). ² Here, the district court found that these five mental patients did work which was of economic benefit to the appellants. ³ This finding is not clearly erroneous. Therefore, the district court correctly concluded that these individuals were employees and were entitled to back wages for their work. ⁴

III.

Appellants' second argument is that the district court committed error in awarding back pay to employees who did not testify during the five-day trial. Appellants claim that the record does not support the district court's finding that there was a definite pattern of hours worked for the various groups of nontestifying employees. Appellants also urge that the district judge, in the hearing held on November 15, made "findings of fact" that no such pattern existed, and that therefore his later finding that there was such a pattern must be clearly erroneous. We find ample support in the record for the district court's findings and therefore reject appellants' argument.

Appellants did not produce the required employment records for many of the workers in question, and they supplied insufficient records with respect to others. Appellants also failed to produce certain payroll records until the eve of trial. Therefore, the task of determining the number of hours worked by employees at each of the three facilities was difficult at best. The Supreme Court in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946), addressed the problems associated with an employer's failure to maintain the records required by the FLSA. After weighing the competing equities and finding that employees should not be penalized by an employer's failure to comply with its statutory duty to maintain proper records, the Supreme Court specified the burden of proof applicable in determining whether an employee is entitled to back pay under the FLSA. The Court held:

In such a situation, we hold that 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 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 employee's evidence. If the employer fails to produce such evidence, the court may then award damages to the employee, even though the result be only approximate.

Id. at 687-88, 66 S.Ct. at 1192 (citation omitted). This standard has been applied in many Fifth Circuit cases. See, e.g., Skipper v. Superior Dairies, Inc., 512 F.2d 409, 419-20 (5th Cir. 1975); Brennan v. General Motors Acceptance Corp., 482 F.2d 825, 829 (5th Cir. 1973). ⁵

Essentially, appellants argue that the Secretary did not make out the prima facie case required under Mt. Clemens with respect to those employees who did not testify. However, it is clear that each employee need not testify in order to make out a prima facie case of the number of hours worked as a matter of "just and reasonable inference." See, e.g., Brennan v. General Motors Acceptance Corp., supra. In this case, twenty-three employees actually testified at trial....