Scalia v. Emp'r Solutions Staffing Grp., LLC

• Decision Date: 02 March 2020
• Docket Number: No. 18-16493,18-16493
• Citation: 951 F.3d 1097
• Parties: Eugene SCALIA, Secretary of Labor, U.S. Department of Labor, Plaintiff-Appellee, v. EMPLOYER SOLUTIONS STAFFING GROUP, LLC, a limited liability company; Employer Solutions Staffing Group II, LLC, a limited liability company; Employer Solutions Staffing Group III, LLC, a limited liability company; Employer Solutions Staffing Group IV, LLC, a limited liability company, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

951 F.3d 1097

Eugene SCALIA, Secretary of Labor, U.S. Department of Labor, Plaintiff-Appellee,

v.EMPLOYER SOLUTIONS STAFFING GROUP, LLC, a limited liability company; Employer Solutions Staffing Group II, LLC, a limited liability company; Employer Solutions Staffing Group III, LLC, a limited liability company; Employer Solutions Staffing Group IV, LLC, a limited liability company, Defendants-Appellants.

No. 18-16493

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 3, 2020 Phoenix, Arizona

Filed March 2, 2020

Michael R. Shebelskie (argued), Hunton Andrews Kurth LLP, Richmond, Virginia; Rebecca J. Levine, Rebecca Levine Law PLLC, Edina, Minnesota; for Defendants-Appellants.

Katelyn J. Poe (argued), Attorney; Paul L. Frieden, Counsel for Appellate Litigation; Jennifer S. Brand, Associate Solicitor; Kate S. O’Scannlain, Solicitor of Labor; United States Department of Labor, Washington, D.C.; for Plaintiff-Appellee.

Before: Susan P. Graber, Andrew D. Hurwitz, and Eric D. Miller, Circuit Judges.

GRABER, Circuit Judge:

Employer Solutions Staffing Group and three related companies (collectively, "ESSG")¹ appeal from the summary judgment entered in favor of the Secretary of Labor in this action challenging ESSG’s failure to pay overtime to employees who worked more than 40 hours in a workweek, in violation of the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. §§ 201 – 219. ESSG also disputes the dismissal of its cross-claims against other defendants below for indemnification or contribution. We affirm.

BACKGROUND

ESSG, a staffing company, contracts with other companies to recruit employees and place them at jobsites for which ESSG handles administrative tasks, such as payroll processing. ESSG concedes that it qualifies as an "employer" of the recruited employees under the FLSA, 29 U.S.C. § 203(d).

In 2012, ESSG contracted with Sync Staffing, which placed the recruited employees at a jobsite run by TBG Logistics, where the employees unloaded deliveries for a grocery store. TBG maintained a spreadsheet of the employees’ hours. For each pay period in November 2012 and thereafter, TBG sent the spreadsheet to Sync, which forwarded it to ESSG.

Only one of ESSG’s employees, Michaela Haluptzok, was responsible for processing the TBG payroll. ESSG trained Haluptzok on the FLSA’s requirements. The first time that Haluptzok received one of the spreadsheets, she prepared and sent to Sync a report showing that employees who had worked more than 40 hours per week would receive overtime pay for those hours. But when a Sync employee called Haluptzok and told her—without explaining why this action would be appropriate—to pay all of the hours as "regular hours" instead of overtime, Haluptzok complied.

To follow the Sync employee’s instructions, Haluptzok had to dismiss numerous error messages from Defendant’s payroll software. Haluptzok understood that not paying overtime for the qualifying employees triggered the error messages, but she disregarded the messages anyway. After processing her first spreadsheet in this manner, Haluptzok did the same thing for every future spreadsheet. ESSG’s relationship with TBG and Sync ended on July 27, 2014; by that date, more than 1,000 violations had occurred in which employees did not receive their earned overtime pay.

The Secretary sued ESSG, TBG, Sync, and another company in August 2016, more than two years after the final overtime violation occurred. ESSG brought cross-claims for contribution or indemnification against the other defendants. The district court dismissed those claims under Federal Rule of Civil Procedure 12(b)(6). The district court also denied Defendant’s motion to file a third-party complaint seeking contribution from a grocery store where some recruited employees worked. The Secretary reached consent judgments with the other companies, so only ESSG remained in the case when the Secretary moved for summary judgment. The district court granted the Secretary’s motion, held that ESSG had violated the FLSA willfully, and ordered ESSG to pay approximately $78,500 in unpaid overtime wages plus an equal amount in liquidated damages.

STANDARD OF REVIEW

We review de novo a grant of summary judgment. Flores v. City of San Gabriel , 824 F.3d 890, 897 (9th Cir. 2016). We also review de novo "the application of legal principles to established facts." Id. at 905. Finally, we review de novo a dismissal under Rule 12(b)(6). Fields v. Twitter, Inc. , 881 F.3d 739, 743 (9th Cir. 2018).

DISCUSSION

We first address ESSG’s arguments that it cannot be liable for the actions of a low-level employee such as Haluptzok and that, regardless, any FLSA violations were not willful and instead occurred in good faith. We then discuss whether the FLSA allows a liable employer to seek indemnification or contribution from other employers.

A. Liability

Haluptzok knew that the relevant employees were working more than 40 hours per week without receiving overtime pay. ESSG chose Haluptzok as its agent for payroll processing, so it cannot disavow her actions merely because she lacked a specific job title or a certain level of seniority in the company. See United States v. Graf , 610 F.3d 1148, 1156 (9th Cir. 2010) ("As an inanimate entity, a corporation must act through agents." (quoting CFTC v. Weintraub , 471 U.S. 343, 348, 105 S.Ct. 1986, 85 L.Ed.2d 372 (1985) )); see also Restatement (Third) of Agency § 1.01 (defining "agent" as one who "act[s] on the principal’s behalf and subject to the principal’s control"). Allowing ESSG to evade liability simply because none of its "supervisors" or "managers" processed the payroll would create a loophole in the FLSA and run counter to the statute’s purpose of "protect[ing] all covered workers from substandard wages and oppressive working hours." Williamson v. Gen. Dynamics Corp. , 208 F.3d 1144, 1150 (9th Cir. 2000) (internal quotation marks omitted). Consistent with the law of agency, we impute Haluptzok’s actions to ESSG. Because Haluptzok admitted that she knew the recruited employees were not being paid overtime owed to them, the district court correctly found no dispute of material fact as to ESSG’s ultimate liability under the FLSA. See Forrester v. Roth’s I.G.A. Foodliner, Inc. , 646 F.2d 413, 414 (9th Cir. 1981) ("[A]n employer who knows or should have known that an employee is or was working overtime must comply with the provisions of [ 29 U.S.C. §] 207 [ (a) ].").

B. Willfulness

Ordinarily, a two-year statute of limitations applies to claims under the FLSA. 29 U.S.C. § 255(a). But for a "willful violation," the limitations period extends to three years. Id. Because the Secretary sued ESSG more than two years after the last violation, ESSG must have acted willfully for this action to be timely.

A violation is willful when "the employer either knew or showed reckless disregard for ... whether its conduct was prohibited by the [FLSA.]" McLaughlin v. Richland Shoe Co. , 486 U.S. 128, 133, 108 S.Ct. 1677, 100 L.Ed.2d 115 (1988). For more than a year, Haluptzok dismissed the payroll software’s repeated warnings that employees might not be receiving earned overtime pay. Although she (at least initially) acted on Sync’s instructions not to pay overtime, she never received any explanation from Sync that justified dismissing the software’s error messages. Thus, through its agent, ESSG recklessly "disregarded the very possibility that it was violating the statute." Alvarez v. IBP, Inc. , 339 F.3d 894, 908–09 (9th Cir. 2003) (internal quotation marks omitted).² Accordingly, the three-year statute of limitations applies to the Secretary’s claim, making this action timely.

C. Liquidated Damages

The FLSA mandates liquidated damages in an amount equal to the unpaid overtime compensation unless an employer acted in "good faith" and had "reasonable grounds" to believe that it was not violating the FLSA. 29 U.S.C. §§ 216(b), 260.

Because ESSG’s violations were willful, it could not have acted in good faith. See Chao v. A-One Med. Servs., Inc. , 346 F.3d 908, 920 (9th Cir. 2003) ("[A] finding of good faith is plainly inconsistent with a finding of willfulness.").

ESSG insists that an employer can act in good faith while willfully violating the FLSA. But, as a three-judge panel we cannot overrule Chao in the absence of intervening en banc or Supreme Court precedent. Miller v. Gammie , 335 F.3d 889, 892–93 (9th Cir. 2003) (en banc). Indeed, Chao aligns with precedent in most other circuits that have reached the issue. See Alvarez Perez v. Sanford-Orlando Kennel Club, Inc. , 515 F.3d 1150, 1166 (11th Cir. 2008) (agreeing with Chao , joining "the majority side of the circuit split on this issue," and collecting cases). Thus, we affirm the award of liquidated damages.

D. Indemnification/Contribution

The FLSA’s text does not expressly address whether an employer may seek indemnification or contribution from another employer, but ESSG contends that the statute implicitly permits those remedies. Alternatively, ESSG asks us to recognize those remedies under federal common law.

1. Whether the FLSA Implicitly Allows Indemnification or Contribution

"In determining whether a federal statute that does not expressly provide for a particular private right of action nonetheless implicitly created that right, our task is one of statutory construction." Nw. Airlines, Inc. v. Transp. Workers Union , 451 U.S. 77, 91, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981). We must ascertain "whether Congress intended to create the private remedy—for example, a right to contribution—that the [litigant] seeks to invoke." Id. In recent decades, the Supreme Court has adopted a "cautious course before finding implied causes of action." Ziglar v. Abbasi , ––– U.S. ––––, 137 S. Ct. 1843, 1855, 198 L.Ed.2d 290 (2017). Four factors guide our inquiry: (1) the statute’s text; (2) "the underlying purpose and structure of the statutory scheme"; (3) "the likelihood that Congress intended to supersede or to supplement...