Hugler v. Kazu Constr., LLC
| Decision Date | 17 April 2017 |
| Docket Number | Civ. No. 16–00077 ACK–KSC |
| Citation | 262 F.Supp.3d 1032 |
| Parties | Secretary of Labor, United States Department of Labor, Edward HUGLER, Plaintiff, v. KAZU CONSTRUCTION, LLC, a corporation; and Vernon Lowry, an individual, Defendants. |
| Court | U.S. District Court — District of Hawaii |
Abigail G. Daquiz, United States Department of Labor, Seattle, WA, Martin D. Cristopher Santos, United States Department of Labor Office of the Solicitor, Los Angeles, CA, for Plaintiff.
Christopher S. Yeh, Darin Robinson Leong, Kristi K. O'Heron, Marr Jones & Wang, Honolulu, HI, for Defendants.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT
For the reasons set forth below, the Court GRANTS IN PART AND DENIES IN PART Defendants' Motion for Partial Summary Judgment, ECF No. 43.
Defendant Kazu Construction, LLC ("Kazu Construction") is a limited liability company whose sole member is Defendant Vernon Lowry ("Mr. Lowry"). Defs. Concise Statement of Facts, ECF No. 44, ¶ 1 ("Defs. CSF"). From 2012–2014, Kazu Construction was the contractor for the development of the Makaha Oceanview Estates ("MOE Project"). Id.; ECF No. 78 at 10. At issue in this case are Defendants' employment and recordkeeping practices under the Fair Labor Standards Act, 29 U.S.C. §§ 206, 207, 215(a) (2) and 215(a) (5) ("FLSA"). Compl. ¶ 1, ECF No. 1. The Secretary of Labor ("Secretary") alleges that Defendants failed to pay certain employees minimum wage and overtime compensation by engaging in a practice of banking hours in excess of 40 hours a week. Id. ¶¶ 10–11. In addition, Defendants failed to make, keep, and preserve accurate records of the hours worked by employees. Id. ¶ 12.
The Department of Labor learned about this allegedly unlawful scheme after a former Kazu Construction employee, Dennis Tadio, filed a complaint with the state labor agency on July 7, 2014 seeking unpaid wages. Opp. at 12; Lee Decl., Ex. 1, ECF No. 83 (Tadio complaint). The state agency specialist then referred Mr. Tadio to the U.S. Department of Labor, Wage and Hour Division to investigate a possible overtime violation. Opp. at 13; Tadio Decl. ¶ 7, ECF No. 84; Lee Decl. ¶ 3, ECF No. 83.
The Secretary filed his complaint on February 22, 2016. ECF No. 1. Defendants filed the instant Motion for Partial Summary Judgment on November 16, 2016. ECF No. 43 ("Motion" or "MSJ"). The Secretary filed his Opposition and accompanying Concise Statement of Disputed Facts on February 13, 2017. ECF Nos. 77–78 ). Defendants filed their Reply on February 20, 2017. ECF No. 88 ("Reply").
This Court held a hearing on Defendants' Motion on April 10, 2017.
Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Federal Rule of Civil Procedure ("Rule") 56(a) mandates summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to the party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; see also Broussard v. Univ. of Cal., at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).
"A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323, 106 S.Ct. 2548 ); see also Jespersen v. Harrah's Operating Co., 392 F.3d 1076, 1079 (9th Cir. 2004). "When the moving party has carried its burden under Rule 56 [ (a) ] its opponent must do more than simply show that there is some metaphysical doubt as to the material facts [and] come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio, 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and internal quotation marks omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ().
"An issue is ‘genuine’ only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is ‘material’ only if it could affect the outcome of the suit under the governing law." In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505 ). When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. 1348 ; see also Posey v. Lake Pend Oreille Sch. Dist. No. 84, 546 F.3d 1121, 1126 (9th Cir. 2008) ().
The parties first dispute whether the applicable statute of limitations is two or three years, and regardless, whether the Secretary is entitled to equitable tolling. The ordinary statute of limitations for an FLSA violation is two years; however, "a cause of action arising out of a willful violation may be commenced within three years after the cause of action accrued." 29 U.S.C. § 255(a).
"A violation of the FLSA is willful if the employer ‘knew or showed reckless disregard for the matter of whether its conduct was prohibited by the [FLSA]." Chao v. A–One Med. Servs., Inc., 346 F.3d 908, 918 (9th Cir. 2003) (quoting McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133, 108 S.Ct. 1677, 100 L.Ed.2d 115 (1988) ) (alteration in original); Flores v. City of San Gabriel, 824 F.3d 890, 906 (9th Cir. 2016) () (internal quotation and citation omitted) (alteration in original).
The Ninth Circuit has found willfulness where the employer was "on notice of its FLSA requirements, yet took no affirmative action to assure compliance with them." Alvarez v. IBP, Inc., 339 F.3d 894, 909 (9th Cir. 2003). "[T]he three-year term can apply where an employer disregarded the very possibility that it was violating the statute." Id. at 908–09 () (internal citation and quotation omitted).
Defendants seem to imply that willfulness only arises "when an employer knows that its current position had previously been invalidated or questioned in a prior legal proceeding." MSJ at 10. However, while this is one way in which willfulness may be shown, the Court agrees with the Secretary that courts have found willfulness in variety of circumstances. See Opp. at 14 & n.41. A district court in Oregon found willfulness where experienced business people required employees to split their time between two companies in order to evade FLSA overtime requirements, of which they were aware. Perez v. Oak Grove Cinemas, Inc., 68 F.Supp.3d 1234, 1245 (D. Or. 2014). A district court in Nevada also found willfulness where the defendant allegedly paid workers on a per job basis, regardless of the hours worked, and that workers were not paid for training time, among other issues. Cholette v. Installpro, Inc., No. 2:10-CV-02153-KJD, 2012 WL 2190844, at *2 (D. Nev. June 13, 2012). Because the pay structure disregarded the hours worked, the court found that the defendant was reckless in risking a violation of FLSA minimum wage and overtime requirements. Id.
In addition, several courts have found willfulness where the employers failed to make any real effort to keep records of the employee's hours. See, e.g., Thornton v. Crazy Horse, Inc., No. 3:06-CV-00251-TMB, 2012 WL 2175753, at *11 (D. Alaska June 14, 2012) (); Xuan v. Joo Yeon Corp., No. 1:12-CV-00032, 2015 WL 8483300, at *5 (D. N. Mar. I. Dec. 9, 2015) ().
Here, Mr. Lowry has declared that he "stated in the presence of employees that [he] did not want employees working overtime" and that it "has never been [his] understanding or intent that Kazu employees were working overtime." Lowry Decl. ¶ 7, ECF No. 44–5. However, this is insufficient to merit summary judgment. In the first place, as a matter of law the regulations dictate that:
[i]n all such cases it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. It cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so.
29 C.F.R. § 785.13. Thus, merely stating that Mr. Lowry did not want or intend for employees to work overtime is insufficient to relieve Defendants of their burden to pay any overtime worked. If Defendants were or should have been aware that overtime might be accruing, they needed to "make every effort" to prevent it from being performed. See Forrester v. Roth's I.G.A. Foodliner, Inc., 646 F.2d 413, 414 (9th Cir. 1981) (...
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