Donovan v. Unique Racquetball & Health Clubs, Inc.
| Decision Date | 15 January 1987 |
| Docket Number | No. CV 82-0644.,CV 82-0644. |
| Citation | 674 F. Supp. 77 |
| Parties | Raymond J. DONOVAN, Secretary of Labor, United States Department of Labor, Plaintiff, v. UNIQUE RACQUETBALL AND HEALTH CLUBS, INC. and Seyd Khayami and John Gerweck, Individually, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Jay S. Berke, Regional Solicitor by James A. Magenheimer, U.S. Dept. of Labor, New York City, for plaintiff.
Reynolds, Caronia & Gianelli by James T. Reynolds, Hauppauge, N.Y., for defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This action came to trial before this Court on February 7 and 8, 1985. The trial resumed on February 26, 1985, but the defendants failed to appear. The Court ordered a default judgment, and an inquest hearing was held during the afternoon of February 26, 1985. On appeal, the Second Circuit Court of Appeals specifically affirmed the default, but remanded the case to this Court to afford the defendants a hearing concerning what findings of fact, conclusions of law, and judgment should be rendered. Brock v. Unique Racquetball and Health Clubs, Inc., 786 F.2d 61 (2d Cir.1986). Pursuant to the ruling of the Second Circuit, hearings were held on July 2 and September 17 and 19, 1986.
1. Defendant Unique Racquetball and Health Clubs, Inc. ("Unique Racquetball" or "defendant corporation") is and at all times hereinafter mentioned was a corporation organized under and existing by virtue of the laws of the State of New York, having its corporate office at 55 Jericho Turnpike, Jericho, New York, within the jurisdiction of this Court, and at all times hereinafter mentioned was engaged in the operation of racquetball and health clubs at four locations in Nassau and Suffolk Counties.
2. Defendant Seyd Khayami resides at 16 Pheasant Run, Old Westbury, New York, within the jurisdiction of this Court and is, and at all times hereafter was, the President and owner of defendant corporation.
3. Defendant John Gerweck resides at 41 Lowland Road, Levittown, New York, within the jurisdiction of this Court, and is, and at all times hereinafter mentioned was, the Secretary of defendant corporation.
4. At all times relevant to this proceeding, defendant Khayami was joint owner of defendant corporation with his wife, and served as President. Defendant Gerweck was the Secretary of the corporation. Both individuals are Ph.D. graduates in economics from Pennsylvania State University.
5. Defendant Khayami is, and at all times hereinafter mentioned was, in active control and management of defendant corporation, regulated the employment of all persons employed by said corporation, acted directly and indirectly in the interest of defendant corporation in relation to said employees and was thus an employer of said employees within the meaning of the Fair Labor Standards Act of 1938, as amended, hereinafter called the "Act".
6. Defendant Gerweck is, and at all times hereinafter mentioned was, in active control and management of defendant corporation, regulated the employment of all persons employed by said corporation, acted directly and indirectly in the interest of defendant corporation in relation to said employees and was thus an employer of said employees within the meaning of the Act.
7. Each of the four racquetball and health clubs in question rents indoor racquetball courts by the hour to members and their guests. Each of the clubs has numerous racquetball courts, separate locker rooms for males and females, and other related facilities.
8. During the period of approximately March 1979 through March 1981, defendants employed some fifty persons as locker room attendants at the four clubs. The locker room attendants' primary responsibility was to keep the locker rooms clean, open up lockers, and hand out towels and toiletries to customers in the locker rooms. They would wash the sinks, showers, and toilets. In addition, it was an important part of their job to keep other parts of the club clean. They frequently did such things as vacuum the carpets in the lounge and aisle areas, sweep the courts, clean the whirlpool, take out the garbage, and police the trash from the parking lots.
9. Most of the locker room attendants were young boys and girls going through high school. Nineteen of them were minors under the age of sixteen, employed in violation of § 12 of the Act. The minors worked numerous hours after 7 p.m., often as late as 12 midnight or 1 a.m. They were frequently working more than three hours a day, eighteen hours per week, during weeks school was in session, in violation of the child labor provisions of §§ 12(c) and 15(a)(4) of the Act, and the regulations found at 29 C.F.R. Part 570 Subpart C.
10. The male locker room attendants worked for tips only, except during slow shifts when they sometimes received cash payments of $1/hr., off the books. The female locker room attendants received $2.50/hr., off the books, plus tips, if any. This pay practice resulted in failure to compensate these employees at the minimum wage specified by the Act. The failure to pay the locker room attendants minimum wages violated § 6(a)(1) of the Act.
11. In addition, defendants employed some sixty one front desk receptionists and other employees in violation of the overtime provisions of the Act. The front desk employees attended a desk at each club where they would greet customers coming to play racquetball, take their money in payment, take telephone reservations, show prospective members the club facilities, and give instructions to the locker room attendants. They received payroll checks from the Unique Racquetball bank account. They were rarely paid overtime wages for hours worked over forty despite the fact that they were regularly working such hours. The failure to pay these employees time and one half for all hours worked over forty in each workweek violated the overtime provisions of § 7(a)(1) of the Act.
12. Defendants maintained no payroll records of records of hours worked by the locker room attendants. Indeed, what little pay these attendants received was in cash and was "off the books." No deductions were made for such things as income taxes and social security. The only records kept for the desk receptionists and other employees were weekly sign-in sheets, which were inaccurate and incomplete, in violation of § 11(c) of the Act.
13. The Court has considered and rejects defendants' claim that they did not violate the child labor and minimum wage provisions of the Act because the locker room attendants were employed as "independent contractors." This defense centers around three young men, Steve Siegelman, James Maxwell, and Kevin Sears, who were serving as locker room attendants at the clubs when they were approached by Khayami and Gerweck and asked to "manage" the locker rooms. Steve Siegelman, twenty one years old at the time, was a locker room attendant at the Bethpage Club during May 1979 when he was approached by Khayami and asked to be the "manager" of the locker rooms. Khayami and Gerweck later asked James Maxwell and Kevin Sears to manage the Lake Grove and Farmingville locker rooms. Both were 17 years old at the time. As locker room "managers," Siegelman, Maxwell and Sears visited the clubs occasionally to drop off supplies and cash payments for the attendants. These supplies and payments were provided by Khayami. While the three young men were "managers," they continued to work as locker room attendants themselves. They did very little supervision of the locker room attendants, which was done instead by the desk receptionists, who were employed by Unique Racquetball.
14. Each club had a desk receptionist on duty at all times during operating hours. The desk receptionist answered the phone, took court reservations, made sure the club was clean, and took care of emergencies. The desk receptionists routinely inspected the locker room as part of their job, and gave instructions to the locker room attendants to perform tasks such as vacuuming the rugs, sweeping the courts, or cleaning the locker rooms. They served as the direct supervisors of the locker room attendants. Sometimes, if attendants did not come to work, the desk receptionists telephoned other attendants to substitute.
15. Each club also had a general manager. The function of the general managers was to insure that each club ran smoothly. Khayami was the general manager of the Bethpage Club, Gerweck was the general manager of the Lake Grove and Farmingville Clubs, and one Richard Densing was the general manager of the Oceanside Club. The general managers visited their respective clubs, often in the afternoon and evening hours, and inspected the operation, talked to customers, and generally were on-hand to coordinate the operation. During these visits they often gave instructions to the locker room attendants.
16. Defendants' violations of the minimum wage, child labor, and overtime and recordkeeping provisions of the Act, as described above, were willful violations.
17. As a result of defendants' violations of the minimum wage and overtime provisions of the Act, the amount of $134,936.000 is due to 111 employees of defendants for the period of March 12, 1979 through March 31, 1981. Of that amount, $104,906.66 is attributable to the minimum wage violation, and $30,029.94 is attributable to the overtime violations. The specific amounts of back wages due to each of defendants' employees is listed in Exhibit A.
18. Prejudgment interest is due on the back wages. The interest due is to be computed at the adjusted prime rate established by the Secretary of Treasury pursuant to 26 U.S.C. § 6621. Interest is to be calculated from the mid-point of the period with respect to which back wages are sought with respect to each employee. Interest pursuant to 26 U.S.C. § 6621 is calculated as follows:
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