Herman v. Palo Group Foster Home

• Decision Date: 05 February 1999
• Docket Number: No. 97-2102,97-2102
• Citation: 183 F.3d 468
• Parties: (6th Cir. 1999) ALEXIS HERMAN, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR (SUCCESSOR TO ROBERT REICH), PLAINTIFF - APPELLEE, v. PALO GROUP FOSTER HOME, INC., A MICHIGAN CORPORATION; ABRAHAM JOSHUA, INDIVIDUALLY, AND DOING BUSINESS AS RAMSDELL FOSTER CARE; RAMSDELL FOSTER CARE, DEFENDANTS - APPELLANTS. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 468

183 F.3d 468 (6th Cir. 1999)

ALEXIS HERMAN, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR (SUCCESSOR TO ROBERT REICH), PLAINTIFF - APPELLEE, v. PALO GROUP FOSTER HOME, INC., A MICHIGAN CORPORATION; ABRAHAM JOSHUA, INDIVIDUALLY, AND DOING BUSINESS AS RAMSDELL FOSTER CARE; RAMSDELL FOSTER CARE, DEFENDANTS - APPELLANTS.

No. 97-2102

U.S. Court of Appeals, Sixth Circuit

Argued: February 5, 1999

Decided and Filed: May 17, 1999^*

Ordered Published: July 16, 1999.

Appeal from the United States District Court for the Western District of Michigan at Kalamazoo. No. 96-00280--Richard A. Enslen, Chief District Judge. [Copyrighted Material Omitted] John H. Hess (argued and briefed), Grand Rapids, Michigan, for Defendants-Appellants.

Paula W. Coleman (argued and briefed), William J. Stone, U.S. Department of Labor, Office of the Solicitor, Washington, D.C., for Plaintiff-Appellee.

Before: Jones, Nelson, and Boggs, Circuit Judges.

OPINION

Boggs, Circuit Judge.

The United States Secretary of Labor brought an action in district court to enjoin the Palo Group Foster Home, Inc. ("Palo"), its owner, Abraham Joshua, and Joshua's other business, Ramsdell Foster Care ("Ramsdell"), from violating certain provisions of the Fair Labor Standards Act ("FLSA" or "Act"), and to recover unpaid wages owed to Defendants' employees plus statutory liquidated damages. The district court granted summary judgment for the Secretary, awarded actual and statutory liquidated damages to the underpaid employees, and permanently enjoined Defendants from violating the FLSA. Herman v. Palo Group Foster Home, Inc., 976 F. Supp. 696 (W.D. Mich. 1997). We adopt the reasoning of Chief Judge Enslen's thorough opinion and affirm, discussing here only the errors charged on appeal.

I.

Joshua was the president of the now-defunct Palo, and the owner and administrator of Ramsdell. Both entities provided adult foster care for the sick, aged, and mentally ill in western Michigan. At all relevant times, Joshua was the primary individual in charge of establishing personnel practices for both businesses.

In 1983, the Department of Labor ("DOL") investigated Palo and discovered violations of the Act's minimum wage and overtime requirements that reflected $1,073.02 in unpaid wages to employees¹. The DOL also discovered that Palo had not kept the records required by the FLSA. The DOL compliance officer informed Joshua of the deficiencies, and Joshua agreed to comply with the requirements of the Act in the future.

The DOL followed up with an investigation in 1985. The investigators again found Palo in violation of the FLSA. In particular, they informed Joshua that in order to claim credit for meals and lodging provided to his employees, he was required to keep accurate records of the actual costs of those services. The DOL agents computed Joshua's credits for the 1983-1985 period from his other business records, and calculated his wage underpayments as $7,544.56. The agents specifically informed Joshua that the calculated credit applied only to the 1983-1985 period under investigation, and that he was required to maintain records showing the actual cost of food, lodging, and other facilities furnished to his employees if he wished to claim the credits in the future. To reinforce their point, the DOL agents gave Joshua DOL publication 1326, which details the requirements of the FLSA with respect to residential-care facilities.

The DOL investigated Palo again in 1995 after receiving a complaint from a former employee. Noting that Joshua was involved with Ramsdell, the DOL included that business also in its investigation. The compliance officer found that Defendants undercompensated their employees by (1) failing to consider hours worked during sleeping shifts as compensable, (2) paying set wages for each shift regardless of the actual hours worked, and (3) taking deductions for providing meals and lodging despite not having kept records of the actual cost of providing them, as required by the Act. The DOL determined that Palo employees were owed $47,509.27 in unpaid wages for the period between April 8, 1993 and June 1, 1996, and that Ramsdell employees were owed $13,044.39 in unpaid wages for the period between May 1993 and April 20, 1996. The DOL allowed some deductions for the provision of meals and lodging, even though Joshua produced no records supporting the deductions.

II.

Defendants charge four errors below. First, they assert that the district court "erred in determining that [Defendants'] response to the motion for summary judgment was deficient due to failure to submit adequate information." Second, they argue that the district court erred in shifting the burden of proof to them as to the adequacy of their records. Third, they claim that the district court erred in finding that they violated the minimum-wage and overtime provisions of the FLSA. Finally, they argue that the district court erred in finding that Defendants willfully violated the FLSA and in allowing the Secretary to collect the enhanced damages associated with willful violation.

Appellants' first assignment of error lacks both substance and merit. The record reveals that the district court did not "determine" that Defendant's response to the motion was "deficient" in any manner that carries legal significance. The district court commented on the paucity of Defendants' response, 976 F. Supp. at 699, but the only effect on the proceedings below was the one the district court stated: most of the Secretary's evidence went unrebutted. In fact, the district court considered Defendants' evidence even though it did not meet the Fed. R. Civ. P. 56(e) requirements. Ibid.

Appellant's second assignment of error lacks merit. The FLSA sets the minimum wage and overtime standards for most employers in the United States. Generally, an employee must be compensated at or above the statutory rate for the first forty hours per week of work, and at one and one-half times the employee's regular wage for overtime. There are exemptions from these requirements, and an employer seeking an exemption bears the burden of proving that it is applicable. Douglas v. Argo-Tech Corp., 113 F.3d 67 70 (6th Cir. 1997). Exemptions are construed narrowly against an employer seeking to assert an exemption. Auer v. Robbins, 519 U.S. 452, 462 (1997) (citing Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960)).

A plaintiff generally has the burden of proving that his employer violated the FLSA.

However, where the employer's records are inaccurate or inadequate... 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. Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687-88 (1946) (quoted and reaffirmed in United States Dep't of Labor v. Cole Enters., Inc., 62 F.3d 775, 779 (6th Cir. 1995)), superseded by statute on other grounds as stated in Carter v. Panama Canal Co., 463 F.2d 1289, 1293 (D.C. Cir. 1972).

Employers must keep records for each employee of the "hours worked each workday and total hours worked each workweek (for purposes of this section, a 'workday' is any fixed period of 24 consecutive hours and a 'workweek' is any fixed and regularly recurring period of 7 consecutive workdays)." 29 C.F.R. § 516.2(a)(7). "[A]n employer who makes deductions from the wages of employees for 'board, lodging, or other facilities' (as these terms are used in sec. 3(m) of the Act) furnished to them by the employer or by an affiliated person, or who furnishes such 'board, lodging, or other facilities' to employees as an addition to wages, shall maintain and preserve records substantiating the cost of furnishing each class of facility." 29 C.F.R. § 516.27(a). The district court found that Defendants failed to maintain records of the number of hours their employees actually worked each workday and the total number of hours they actually worked each workweek. The district court also found that Defendants did not provide documentation substantiating the cost of providing meals to their employees, nor did they show a legal or factual basis for finding that their records were sufficient despite their failure to comply with the regulations. Therefore, the district court shifted the burden to Defendants according to Cole.

In particular, Defendants did not keep track of the hours their employees were on duty but allowed to sleep. "An employee who is required to be on duty for less than 24 hours is working even though he is permitted to sleep or engage in other personal activities when not busy." 29 C.F.R. § 785.21. When employees are on duty for twenty-four hours or more, "the employer and the employee may agree to exclude bona fide meal periods and a bona fide regularly scheduled sleeping period of not more than 8 hours from hours worked,...