Kaiser v. At the Beach, Inc., Case No. 08-CV-586-TCK-FHM

CourtUnited States District Courts. 10th Circuit. Northern District of Oklahoma
Writing for the CourtTERENCE KERN
PartiesMICHELLE KAISER, et al., Plaintiffs, v. AT THE BEACH, INC., Defendant.
Docket NumberCase No. 08-CV-586-TCK-FHM
Decision Date28 December 2011

MICHELLE KAISER, et al., Plaintiffs,
AT THE BEACH, INC., Defendant.

Case No. 08-CV-586-TCK-FHM


Dated: December 28, 2011

Table of Contents

Findings of Fact

I. § 213(a)(1) Exemptions

A. Before August 15, 2008
B. August 15, 2008-December 1, 2008
C. After December 1, 2008
II. Hours Worked
III. Statute of Limitations/Liquidated Damages
IV. Beaucourt's Testimony
V. Damages
Conclusions of Law
I. § 213(a)(1) Exemptions
A. Before August 15, 2008
B. August 15, 2008-December 1, 2008
C. After December 1, 2008
1. Salary Level Test
2. Salary Basis Test
3. Duties Test
a. Primary Duty of Management
b. Directed Work of 2 or More Employees and Authority to Hire/Fire
II. Hours Worked
A. Reasonableness of Plaintiffs' Estimates
B. Prospecting
III. Statute of Limitations/Liquidated Damages
IV. Beaucourt's Testimony
V. Damages
A. General Law and Regulations
B. Rejection of FWW Method
C. Court's Formula for Regular Rate
1. Total Renumeration
2. Divisor
D. Court's Formula for Back Due Wages
VI. Non-Testifying Plaintiffs
VII. § 207(i) Exemption
VIII. Calculations

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On November 24, 2009, the Court certified the above-styled case as a collective action under the Fair Labor Standards Act ("FLSA").1 This collective action, which includes twenty-six Plaintiffs, was tried to the Court without a jury on March 21-25, 2011. As ordered by the Court, the parties submitted proposed findings of fact and conclusions of law with citations to the trial record. (See Docs. 189, 190.) The Court enters the following Findings of Fact and Conclusions of Law in accordance with Federal Rule of Civil Procedure 52.2

Findings of Fact

1. Defendant At The Beach, Inc. ("ATBI") owns and operates tanning stores in several states. Customers purchase tanning packages and tan in the store. Each store has tanning products for sale, such as tanning lotion.

2. ATBI hires employees to manage its individual stores. All Plaintiffs were employed by ATBI as store managers and/or assistant store managers in Oklahoma, Kansas, Colorado, and/or Arizona. ATBI store managers are supervised by district managers, and district managers are supervised by regional managers.

3. Barbara Young started ATBI as a family-owned business consisting of two stores in Oklahoma City, Oklahoma. Young's children, Hoyl Belt ("Belt") and Candi Chappell ("Chappell"), were employed by ATBI at relevant times.

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4. In 2004, ATBI had 19 stores. From 2006 - 2008, the approximate time period of the alleged FLSA violations, ATBI grew from 20 stores to 40 stores. At the time of trial, ATBI owned 58 stores, had over 400 employees, and had a large corporate headquarters in Denver, Colorado.

5. At certain relevant times, ATBI's employee handbook provided:

Nonexempt - All nonexempt employees are paid on an hourly basis and are expected to confine their work to the normal workday and workweek unless their manager authorizes overtime in advance. Hourly paid employees will be paid overtime for all authorized hours worked in excess of 40 hours within a workweek. Workweek is defined as opening of business Monday through close of business Sunday.
Exempt - All exempt employees are paid on a biweekly salary basis. Hours worked by salaried employees are often irregular and begin and end beyond the normal workday. Salaried employees are exempt from the overtime provisions of the Federal Wage and Hour Law and do not receive overtime pay.

(See Pls.' Ex. 43 at 31 (emphasis added).) Prior to August 15, 2008, all store managers and assistant store managers were paid a fixed salary3 and therefore fell into the "exempt" category, as defined in the ATBI handbook.

6. According to Cindy Stuart ("Stuart"), ATBI's office manager and payroll supervisor, the handbook was created by Belt. Belt did not testify at trial, and ATBI provided no explanation for its initial decision to pay managers and assistant managers on a salary basis rather than an hourly basis.

7. On or around July 2008, the United States Wage and Hour Division of the Department of Labor ("DOL") conducted an investigation of ATBI ("2008 DOL Investigation"). Following such investigation, DOL investigator Barbara Sullivan ("Sullivan") cited ATBI for "failure to pay non-exempt salaried managers overtime wages." (Def.'s Ex. 1.) Sullivan determined that ATBI owed

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back wages to 301 employees in unpaid overtime in the total amount of $68,197.08. On November 3, 2008, Stuart signed a document entitled Summary of Unpaid Wages ("DOL Summary"), agreeing to pay the 301 listed employees the amounts calculated by Sullivan for unpaid overtime.

8. The DOL Summary contains a "Gross Amounts Due" column. Sullivan calculated gross amounts due based on a 48-hour workweek - or eight hours of overtime - for every relevant employee. As to the gross amount due, Sullivan stated: "The gross amounts of back wages due to each manager were calculated as follows: Bi-weekly wages x .834 = amount due per employee. The hourly rate = salary + bonuses + commissions/48." (See Def.'s Ex. 1 (footnote in original) (alteration to footnote added).) Thus, Sullivan used her finding of Plaintiffs' average total weekly hours (48) as the divisor in determining their regular hourly rate of pay. In determining the overtime owed, she used the DOL's Coefficient Table for Computing Extra Half-time for Overtime, DOL Form WH-135, which provides a .83 rate for 48 hours of overtime. As explained in the Court's Conclusions of Law, Sullivan's calculations therefore assumed Plaintiffs had been paid "straight-time" rates for all 48 hours worked, such that only an additional "half time" was owed for the 8 unpaid overtime hours.

9. Stuart sent checks for back due wages through July 7, 2008 in the amounts set forth in the DOL Summary. Plaintiffs did not accept such checks and proceeded with this litigation. See Kaiser, 2010 WL 5114729, at * 9-11 (ruling on parties' cross motions for summary judgment on issue of waiver).

10. At all times prior to August 15, 2008, ATBI did not keep contemporaneous time records or consistently require Plaintiffs to clock in or clock out.

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11. On August 15, 2008, as a result of the 2008 DOL Investigation, ATBI changed its salaries and payroll structure. It raised store managers' salaries from $1500/month to $1820/month.5 It also began classifying assistant store managers as hourly employees entitled to overtime.

12. After August 15, 2008, ATBI implemented some form of clock in/clock out policy using the computers in each store. However, ATBI did not present any evidence or cross-examine any Plaintiffs regarding their hours worked using contemporaneous time records. Thus, such records played no role in this case and are not part of the record.

13. Plaintiffs Jones, Madden, and Phillips did not testify at trial. All other 23 Plaintiffs testified at trial.

14. Plaintiffs Kaiser, Colvin, Richardson, Shipley, Ashton, Chancellor, Still, Cantrell, McCullough, Ingram, Howard, Morgan, Vaughn, and Briscoe were employed at stores in Oklahoma.

15. Plaintiffs Thompson, Carmody, Balakas, Fritz, Mullen, Rauch, and Olson were employed at stores in Colorado.

16. Plaintiff Bayack was employed at a store in Kansas.

17. Plaintiff Stein was employed at a store in Arizona.

18. Stuart and Chappell testified at trial as to ATBI's corporate practices and policies. Stuart was ATBI's office manager and payroll supervisor at all relevant times. Stuart did not make decisions as to whether an employee was classified as exempt or non-exempt under the FLSA but simply followed directions from ATBI's management. Chappell was the regional manager over Oklahoma and Kansas at all relevant times. Chappell has worked in nearly every capacity within

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ATBI, including sales, store manager, district manager, and regional manager. Effective 2010, she became the Chief Operations Officer.

I. § 213(a)(1) Exemptions

A. Before August 15, 2008

19. At all times prior to August 15, 2008, Plaintiffs' salaries ranged from $1100/month - $1500/month. Reduced to a weekly equivalent, Plaintiffs' salaries ranged from $253.85/week - $364.15/week. Such salaries were inadequate for Plaintiffs to qualify for exempt status. See Conclusions of Law 87-89.6

B. August 15, 2008 - December 1, 2008

20. On or around August 15, 2008, following the 2008 DOL Investigation, ATBI (1) raised store managers' salaries to $1820/month, payable in amounts of $910 on a semimonthly basis, i.e., on the 1st and 15th of the month; and (2) began paying assistant store managers an hourly rate plus overtime pay for hours worked in excess of 40. Store managers' salaries were still inadequate for Plaintiffs to qualify for exempt status based on the timing of the $910 payments on a semimonthly rather than biweekly basis. See Conclusions of Law 87-89.7

21. On December 1, 2008, ATBI made a $455.00 "adjustment payment" to store managers. According to Stuart, ATBI understood its full FLSA salary obligations in August 2008, but waited approximately 105 days to change from $910.00 semimonthly payments to the $910.00 biweekly payments required by the FLSA. It did so, according to Stuart, for the benefit of its employees:

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Well, when we changed the payroll structure, we allowed employees the time to get their finances together by changing the pay dates, the biweekly from semimonthly, the 1st and the 15th. So this check was to supplement the difference between those 90 days.
. . .
I'm saying we did it as a courtesy to our employees to adjust their financial situations.
. . .
[I]f I had an ACH or an EFT coming out on the 1st for my home mortgage, and I was expecting a paycheck on the 1st, and if all of a sudden my pay period changed to the 5th or the 8th or whatever the other Monday was, then that mortgage could actually bounce.

(Tr. 895, 931.) This explanation does not make logical sense, did not stand up on cross-examination, and is not credible. Instead, the Court finds that ATBI still did not understand its salary...

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