Donovan v. Sabine Irr. Co., Inc.

• Decision Date: 14 January 1983
• Docket Number: No. 82-3120,82-3120
• Parties: 25 Wage & Hour Cas. (BN 1142, 96 Lab.Cas. P 34,323 Raymond J. DONOVAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. SABINE IRRIGATION CO., INC., et al., Defendants, C.H. Alberding, Defendant-Appellant. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 190

695 F.2d 190

25 Wage & Hour Cas. (BN 1142, 96 Lab.Cas. P 34,323

Raymond J. DONOVAN, Secretary of Labor, United States

Department of Labor, Plaintiff-Appellee, v. SABINE IRRIGATION CO., INC., et al., Defendants, C.H. Alberding, Defendant-Appellant.

No. 82-3120

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Jan. 14, 1983.

Kimball, McLeod & Dow, G. Allen Kimball, Lake Charles, La., for defendant-appellant.

Beate Bloch, Atty., U.S. Dept. of Labor, Washington, D.C., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before CLARK, Chief Judge, POLITZ and HIGGINBOTHAM, Circuit Judges.

POLITZ, Circuit Judge:

This action was brought by the Secretary of Labor under Section 17 of the Fair Labor Standards Act of 1938, as amended ("FLSA" or "Act"), 29 U.S.C. Sec. 201 et seq., to enjoin Sabine Irrigation Co., Inc. (Sabine), Charles H. Alberding and Joseph E. Scally from violating the Act's minimum wage requirement and to restrain them from continuing to withhold unpaid wages. Following a bench trial the district court entered judgment in favor of the Secretary against Alberding and Sabine, but dismissed the action against Scally. Donovan v. Sabine Irrigation Co., Inc., 531 F.Supp. 923 (W.D.La.1981). Alberding alone appeals, contending that the district court erred in (1) holding that he was an employer within the meaning of Section 3(d) of the Act, 29 U.S.C. Sec. 203(d), and as such had willfully violated the Act's minimum wage provisions throughout the period charged, and (2) imposing prospective and restitutionary injunctions. Finding no merit in these contentions, we affirm.

Background Facts

Sabine, a Louisiana corporation with its principal office in St. Charles, Louisiana, was engaged until early 1979 in the business of supplying water for irrigation to rice farmers in Calcasieu Parish, Louisiana. Water was pumped from the Sabine River into a central canal, and then diverted into the rice fields. This water was vital to the production of the rice crop, the bulk of which was sold in interstate commerce. Sabine's employees operated the pumping station, inspected and repaired levees and constructed and maintained the bridges, gates, flumes and underpasses.

Alberding and a co-venturer each purchased one-half of Sabine's stock in the early 1950s. Alberding transferred this stock in the early 1960s, but continued as corporate president, a position he has held for over 30 years. During the pertinent period, Scally served as Sabine's vice-president, and Alberding's wife, B.W. Alberding was secretary-treasurer. Sabine Water Canal, Inc. (Sabine Canal) and Washington-Youree Corporation (Washington), Louisiana corporations managed by Alberding in the capacity of president, with Scally as vice-president and B.W. Alberding as secretary-treasurer, each acquired 50% of Sabine's stock sometime prior to 1976. Tucker Moore, Alberding's son-in-law, owns 100% of the stock in both Sabine Canal and Washington, and is employed as a hotel manager by Gulf Beach Club, Inc. Alberding owns the controlling interest in Gulf Beach and serves as its president.

The period covered in the Secretary's complaint extends from October 1976 to November 1978. Throughout this period, Sabine utilized a Tulsa, Oklahoma business address and shared a Tulsa office with Sabine Canal, Washington, and multiple other corporations owned and operated by Alberding, including the Tulsa Apartments Corporation, Hotel Services Company and Universal Wholesale Supply Company. Primary responsibility for Sabine's daily operations was delegated to Joe Bond, on-site manager. Bond supervised the work crews until stricken with cancer in 1976, whereupon Gerald Clark assumed this duty. Mrs. Bond, who assisted her husband once he became ill and briefly held the post of general manager upon his death in April 1978, tabulated employee work hours and forwarded payroll work sheets to Miriam Covington, a 30-year employee of Hotel Services Company who managed the Tulsa office, and Shirley Goddard, an employee of Tulsa Apartments Corporation. Covington and Goddard regularly performed services for Sabine but were not on its payroll.

Due to the transient character of the workforce, the Bonds were allowed to compensate for the continuous turnover by filling vacant positions as they arose. However, the Bonds were not authorized to hire additional laborers, deviate from the $2.00 per hour pay rate established by the Tulsa office, write checks on Sabine's checking account with a St. Charles bank, or pay bills. The Tulsa office reimbursed the Bonds for any emergency purchases. Inquiries by Sabine's suppliers regarding arrears in payment on trade accounts were directed to Tulsa. Any proceeds from the sale of rice received by the Bonds were transmitted to the Tulsa office or deposited in Sabine's account. Alberding's permission was required for special purchases, the addition of extra men to the workforce and the transfer of funds from one or more of his other corporations when needed to meet Sabine's payroll and trade obligations.

The district court described the Tulsa office's pervasive control of Sabine's affairs, and Alberding's role therein, as follows:

At all times material to this action, Sabine's Tulsa office administered the business affairs of Sabine Irrigation Company and defendant Alberding maintained contact with the Tulsa office several times a week. Miriam Covington ... and Shirley Goddard ... were responsible for, and did pay, all bills incurred by Sabine Irrigation Company. If there were insufficient funds in the Sabine account, defendant Alberding would authorize Mrs. Covington to transfer funds from the Hotel Services account. On occasion, defendant Alberding would send a personal check or a check drawn on the account of some other corporation to cover the deficiency. All payroll checks for Sabine's employees were cut and mailed from the Tulsa office and all records regarding payment of Sabine's bills and payroll were kept in the Tulsa office. The Tulsa office deducted federal income tax and social security from the payroll and all records pertaining to these withholdings were kept in the Tulsa office. The Tulsa office deducted federal income tax and social security from the payroll and all records pertaining to these withholdings were kept in the Tulsa office. The Tulsa office handled all insurance arrangements for Sabine Irrigation and ensured that all ad valorem taxes were paid on Sabine real estate. Finally, the Tulsa office handled all Sabine's income tax returns.

531 F.Supp. at 926-27 (citations omitted).

Evidence of numerous ledger transactions reflecting the transfer of funds between Sabine, Alberding, Scally, or one of the many corporations owned and/or controlled by Alberding was offered at trial. According to the record, Sabine advanced sums toward the rent of Alberding's Chicago office, made a substantial loan and paid unidentified "fees" to one or more of Alberding's corporations, and shifted the benefit of a $12,000 crop damage loss to Alberding. Regardless of whether these and other adjustment entries in Sabine's books involved mere "paper" transfers or actual exchanges of funds, they tend to show Alberding's dominion over Sabine's financial affairs.

A decline in the world rice market during the post-Vietnam War era caused a devastating reversal of Sabine's fortunes. Only infusions of capital by Alberding, commencing in 1976, saved the corporation from financial collapse. Sabine ceased doing business in early 1979, when Alberding discontinued monetary support, but remains a viable corporate entity.

Based on these facts, the district court concluded that Alberding was an employer, with Sabine, of the corporation's irrigation personnel and enjoined both defendants from future violations of the FSLA's minimum wage provisions and from failing to make restitution of backpay accruing from October 1976 to January 1979. Appellant Alberding concedes that Sabine is an employer covered by the Act, and that it did not comply with federal minimum wage requirements in the years complained of, ¹ but argues that he is not an employer, that even if he were, his transgressions were not willful for purposes of the application of the three-year limitations and, finally, that the issuance of the injunction was improper.

Employer

An "employer" is defined under Section 3(d) of the Act as including "any person acting directly in the interest of an employer in relation to an employee." This term has been interpreted to encompass one or more joint employers, Falk v. Brennan, 414 U.S. 190, 94 S.Ct. 427, 38 L.Ed.2d 406 (1973); Hodgson v. Griffin and Brand of McAllen, Inc., 471 F.2d 235 (5th Cir.), cert. denied, 414 U.S. 819, 94 S.Ct. 43, 38 L.Ed.2d 51 (1973); Wirtz v. Lone Star Steel Co., 405 F.2d 668 (5th Cir.1968). 29 C.F.R. Sec. 791.2 (1982). Whether a party is an employer or joint employer for purposes of the FSLA is essentially a question of fact; accordingly, appellate review is subject to the clearly erroneous standard.

Our determination of Alberding's status is not circumscribed by formalistic labels or common-law notions of the employment relationship, Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947); Mednick v. Albert Enterprises, Inc., 508 F.2d 297 (5th Cir.1975). Instead, our analysis must focus upon the totality of the circumstances, underscoring the economic realities of the irrigation workers' employment. Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 748 (1978); Hodgson v. Griffin and Brand of McAllen, Inc. See Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947). In so doing, we adhere to the firmly-established guidon that the FLSA must be liberally construed to effectuate Congress' remedial intent. Donovan v. Janitorial Services, Inc., 672 F.2d 528 (5th Cir.1982); Donovan v. I-20 Motels, Inc., 664 F.2d 957 (...