R. Alexander Acosta Sec'y Labor v. Timberline S. LLC, Case No. 16-cv-11552

CourtUnited States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
Writing for the CourtHon. Thomas L. Ludington
PartiesR. ALEXANDER ACOSTA Secretary of Labor, United States Department of Labor Plaintiff, v. TIMBERLINE SOUTH LLC, a Michigan limited liability company, and JIM PAYNE, an individual, Defendants.
Decision Date06 October 2017
Docket NumberCase No. 16-cv-11552

R. ALEXANDER ACOSTA Secretary of Labor,
United States Department of Labor Plaintiff,
TIMBERLINE SOUTH LLC, a Michigan limited liability company, and
JIM PAYNE, an individual, Defendants.

Case No. 16-cv-11552


October 6, 2017

Hon. Thomas L. Ludington
Hon. Patricia T. Morris


On April 29, 2016, Plaintiff Secretary of Labor filed a Complaint in this Court against Defendants Timberline South LLC, a timber felling concern, and its manager Jim Payne, alleging violations of the overtime and recordkeeping provisions of the Fair Labor Standards Act of 1938. The Wage and Hour Division of the Department of Labor ("Wage and Hour") initiated an investigation of Timberline's employee compensation practices in July 2015. Investigators Jeffrey Wrona and Randy Whitemire conducted the investigation, which included the time period from August 25, 2013 through August 20, 2015 (the "Investigation Period"). The investigators concluded that Timberline employees frequently worked in excess of forty hours per week, Timberline did not pay any of its employees a rate of one and one-half times their regular rate for hours worked beyond forty hours per week, and that Timberline did not maintain records of hours worked for most non-hourly employees. Plaintiff seeks recovery of unpaid

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overtime compensation in amount of $468,595.08, an equal amount of liquidated damages, and injunctive relief restraining Defendants from further violations of the Act.

Plaintiff moved for summary judgment on April 19, 2017, asserting that the facts giving rise to liability are not in dispute, as it is apparent from the face of the employer's records that Defendants failed to comply with the overtime and recordkeeping provisions of the FLSA. Defendants moved for summary judgment on April 20, 2017, asserting that Timberline is not a covered enterprise under the FLSA or is exempt from the FLSA under numerous provisions. The parties agree that Timberline operations are conducted wholly within the state of Michigan, and that Timberline purchases and uses equipment manufactured out of state. The parties dispute whether purchasing and using equipment manufactured out of state subjects Timberline to FLSA coverage, and dispute the applicability of various exemptions under the FLSA. The parties dispute whether the Wage and Hour Investigators used reliable methods to calculate overtime due. Finally, the parties dispute whether Defendants made a good faith and reasonable determination that the wage and hour provisions of the FLSA do not apply to Timberline operations, so as to insulate them from liability for liquidated damages.

Plaintiff filed a Motion to Strike on May 11, 2017, seeking to strike certain exhibits attached to Defendants' Motion for Summary Judgment, and the portions of Defendants' Motion for Summary Judgment that rely on such evidence. Specifically, Plaintiff seeks to strike the USDOT Company Snapshot of Timberline Logging, Inc., and portions of Jim Payne's affidavit stating that Timberline drivers maintain CDL licenses. These documents were produced for the first time as an attachment to Defendants' Motion for Summary Judgment. Defendants rely on this evidence in their Motion for Summary Judgment to support the argument that Timberline drivers are subject to the Secretary of Transportation's authority to set qualifications and

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maximum hours and, therefore, that its drivers are exempt from the overtime provisions of the FLSA under the Motor Carrier Exemption.

Plaintiff filed a Motion to Amend Complaint on April 19, 2017. Plaintiff's Proposed Amended Complaint seeks 1) to add additional employees and former employees of Defendants identified during discovery to whom Plaintiff alleges overtime compensation is due; 2) to allege additional recordkeeping violations of the Act identified during discovery; and (3) to amend the Complaint to conform to facts identified during discovery. Defendants oppose the Motion on grounds of futility, undue delay, and prejudice.

For the reasons that follow, Plaintiff's Motion for Summary Judgment will be granted in part and denied in part; Defendants' Motion for Summary Judgment will be denied; Plaintiff's Motion to Strike will be denied; Plaintiff's Motion to Amend will be granted; supplemental briefing on damages will be ordered; and Defendants will be enjoined from further violations of the overtime and record keeping provisions of the Act.


Defendant Timberline South, LLC ("Timberline") is organized as a Michigan limited liability company and is based in Gaylord, MI. Pl.'s Mot. Summ. J. at 2, ECF No. 18; Defs.' Mot. Summ. J. at 4, ECF No. 19. Timberline engages exclusively in harvesting and felling raw timber and delivering the timber to mills located solely within the state of Michigan. Def. Mot. at 2. Timberline harvests the timber from professionally managed timber stands owned by state and private entities. Id. Timberline is a small business employing less than thirty employees at any given time. Id. Prior to the formation of Defendant Timberline South, LLC, Defendant Payne operated a company known as Timberline Logging, Inc., ("Timberline Logging"), a timber

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harvesting business based in Tennessee. Pl.'s Mot. at 2, 6. Timberline Logging went out of business in 2010. Timberline South, LLC was founded at or about the same period of time. Id. Timberline's business operations occur solely within the state of Michigan. Id.

Defendants have no financial or ownership interest in the mills they deliver timber to. Pl.'s Mot. at 3; Defs.' Mot. at 4. The equipment used by Timberline in its logging operations, including harvesters and forwarders, was purchased in Michigan but manufactured outside Michigan. Pl's Mot. at 3-4; Defs.' Mot. at 3. It is undisputed that Timberline qualifies as an "enterprise" under Section 203(r)(1) of the Act. Defs.' Resp. at 2, ECF No. 24. It is undisputed that Timberline is also an "employer" under Section 203(d) of the Act. Id. Timberline has had an annual gross volume of sales of more than $500,000 for each year relevant to this litigation. Pl.'s Mot. Ex. B (Defs.' Admiss.) at 4, ECF No. 18-3; Ex. E (Defs.' Interrogs.) at 10, ECF No. 18-6.

Timberline employees work in a variety of roles including equipment operators, loaders, mechanics, truck drivers, and administrative staff. Pl.'s Mot. at 3; Defs.' Mot. at 5, 12, 18. More than eight Timberline employees are engaged in felling operations during each workweek of the Investigation Period. Defs.' Resp. at 16. Timberline's administrative employees are paid on an hourly, not salary basis. Pl.'s Mot. Ex. C (Payne Tr.) at 96, ECF No. 18-4; Ex. G (Empl. Hrs. and Gross) at 1, 26, 51, ECF No. 18-8. Timberline's trucks operate under USDOT registration numbers, and its drivers maintain Commercial Drivers Licenses ("CDLs"). Defs.' Mot. Ex. DX 6 (USDOT Registration Numbers), ECF No. 19-7; Def. Resp. at 12.

Some Timberline employees are paid hourly rates, some non-hourly rates, and some a combination of hourly rates as well as day, cord, piece, and/or load rates. Pl's Mot. at 4; Ex. I (Payroll Journal), ECF No. 18-10; Defs.' Mot. at 4. Defendants recorded hours worked for hourly employees. Pl's Mot. Ex. P (Wrona Decl.) ¶¶ 10-17; ex. Q (Wage and Hour Form 55).

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Defendants did not record hours worked for most non-hourly employees, did not compute regular hourly rates for employees, and have never paid an overtime wage of one and one-half times the regular hourly rate for hours worked beyond forty. Payne Tr. at 168-170, 280. Defendants assert they did not compute a "regular [hourly] rate," because Timberline's compensation structure included compensation for travel to work time, lunch pay, fuel, daily rates, piece rates, and a company mobile phone. Payne Aff. ¶ 11-12.


Wage and Hour initiated an investigation of Timberline in July 2015 that covered the time period from August 25, 2013 through August 20, 2015 (the "Investigation period"). Pl's Mot. at 9; Def. Mot. at 2. Investigator Wrona calculated overtime wages due to hourly employees based on payroll records produced by the Defendants as well as interviews with employees. Wrona Decl. ¶¶ 10-17; Wage and Hour Form 55. Wrona calculated overtime wages due to non-hourly employees based upon employee interviews. Wrona Decl. ¶¶ 10-17.

For example, for an employee working 60 hours and earning $1,500 in a given week, I would determine the regular rate by dividing 1,500 by 60, to obtain a regular rate of $25 per hour. Then I would multiply half the regular rate that week, $12.50, by the number of overtime hours worked, 20, to determine back wages due that workweek of $250.

Id. Mr. Wrona knew that employee estimates often included drive time and meal time, which were included in his calculations. Def. Mot. Ex. DX-5 (Wrona Dep.) at 53-54. For some employees paid a combination of hourly, cord, and day rates, when he did not estimate hours worked based on an interview Mr. Wrona divided gross pay for a workweek by the hourly rate to determine hours worked. Id. at 57-58. In one case, Mr. Wrona divided a gross pay of $2,448 by an hourly rate of $22.00 to determine that the employee worked 111.27 hours that week. Id. He

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then multiplied the hours in excess of 40, or 71.27, by a 0.5 multiplier to calculate the overtime due. Id.

The record contains declarations of eight employees and a deposition of one employee containing estimated hours worked. Pl's Mot. Ex. O (Empl. Decl.), ECF No. 18-16; Ex. U (Cheryl Klein Dep.), ECF No. 18-22. "Wage and Hour ultimately determined that Defendants failed to pay $468,595.08 in back wages to...

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