Sec'y of United States Dep't of Labor v. Am. Made Bags, LLC

• Decision Date: 15 February 2022
• Docket Number: 5:19CV863
• Parties: SECRETARY OF UNITED STATES DEPARTMENT OF LABOR, Plaintiff, v. AMERICAN MADE BAGS, LLC, et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

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SECRETARY OF UNITED STATES DEPARTMENT OF LABOR, Plaintiff,
v.
AMERICAN MADE BAGS, LLC, et al., Defendants.

No. 5:19CV863

United States District Court, N.D. Ohio, Eastern Division

February 15, 2022

MEMORANDUM OF OPINION AND ORDER

[RESOLVING ECF NO. 74]

Benita Y. Pearson, United States District Judge

Pending before the Court is Plaintiff's Motion for Summary Judgment. ECF No. 74. The motion has been fully briefed. ECF Nos. 81, 84. The Court has reviewed the filings, exhibits, and applicable law. For the reasons stated below, Plaintiff's motion is granted.

I. Background^[[1]]

1. Defendant American Made Bags, LLC and Defendant Thomas W. Armour II

Defendant American Made Bags, LLC (“AMB”) is a manufacturer of promotional products, including, but not limited to, tote bags, messenger bags, and backpacks. ECF No. 67-2

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at PageID #: 490. Defendant Thomas W. Armour II (“Armour”) was the sole owner of Defendant AMB and often made important operational decisions, including (1) setting corporate policies such as human resources and payroll, (2) hiring decisions, and (3) setting, and negotiating, the price of goods manufactured by AMB.^[2] Id. at PageID #: 537, 576, 638 - 639.^[3]Between 2014 and 2019, Defendant AMB generated approximately $1 million in revenue, and nearly all its customers and suppliers were located outside the State of Ohio.^[4] Id. at PageID #: 541 - 542.

A majority of Defendants' workers were sewers/seamstresses, printers/screen printers, helpers/floor hands, or designers/artists.^[5] Id. at PageID #: 568 - 569, 574, 577, 585. Many worked for extended periods of time, lasting multiple years, or even decades. Id. Defendants had several individuals in supervisory roles, as (1) Misty Tomlin (“Tomlin”) served as an Office Manager/Secretary tasked with answering the phone, managing payroll, and handling bookkeeping, (2) Clint Bott served as a supervisor for the helpers and printers, (3) Milica Vukojevic served as a “manager/sewer[, ]” and (4) an individual served as a “manager/cutter.” Id. at PageID #: 566, 580, 595.

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Sewers, as their title suggests, primarily sewed items such as bags and backpacks, often using Defendants' sewing machines, thread, and fabrics. Id. at PageID #: 558. Sewers needed one year of experience, and, once hired, could be trained in two weeks or less. Id. at PageID #: 559 - 560. About half of the employees relevant to this case were sewers. Id. at PageID #: 585 - 596. Helpers performed various responsibilities, such as cutting material after it was sewn, catching shirts after they were printed, and installing drawstrings on back packs. Id. at PageID #: 563-65, 568, 574. About one-fifth of the employees relevant to this case were helpers. Id. at PageID #: 585 - 596. Printers handled the printing of shirts using screen printing machines provided by Defendants. Id. at PageID #: 569. About one-tenth of the employees relevant to this case were printers. Id. at PageID #: 585 - 596. Designers were primarily tasked with creating the artwork used on Defendants' products. Id. at PageID #: 577 - 579. Only one of the employees relevant to this case was a designer. Id. at PageID #: 588.

While Defendants provided sewers with sewing machines, thread, and fabric, some sewers opted to use their own sewing device, and, usually, sewers would also bring their own scissors. Id. at PageID #: 503 - 504, 560. If a sewer's work product was not satisfactory, Defendant Armour would direct the sewer to re-do the work, although that was rare because the sewers typically produced quality work. Id. at PageID #: 562 - 563. Printers would utilize their own tools to spread ink, but Defendants provided a printing machine, materials to print on (e.g., fabric, shirts, bags, etc.) and typically, ink. Id. at PageID #: 496 - 497, 571 - 572.

2. Defendant AMB's Collective Bargaining Agreements

Defendant AMB's predecessor, Akron Promotional Products, signed a collective bargaining agreement with the International Chemical Workers Council Local No. 852-c (“ICWUC Local 852-c”) (the “First CBA”), which remained in effect from April 1, 2007, until

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February 4, 2019, when the First CBA was replaced by an agreement between Defendant AMB and International Chemical Workers Council Local No. 211-c (“ICWUC Local 211-c”) (the “Second CBA”). ECF Nos. 72-1, 72-2. The First CBA provided that the ICWUC Local 852-c is the “exclusive representative of the bargaining agency of the plant, ” which is defined as “[a]ll production, shipping, [and] receiving[] at the employer[']s Akron Plant, excluding all office and plant clerical employees, guards, professional employees and all supervisors as defined by the National Labor Relations Act.” ECF 72-1 at PageID #: 1697. The Second CBA contains virtually identical language.^[6] ECF 72-2 at PageID #: 1720. The First CBA and Second CBA contain a wage schedule setting hourly rates of pay along with regular raises. ECF Nos. 72-1 at PageID #: 1718, 72-2, PageID #: 1739. Also, both the First CBA and the Second CBA require Defendants to pay overtime hours at one and one-half times the regular rate of pay. ECF Nos. 72-1 at PageID #: 1703, 72-2 at PageID #: 1727. The First CBA provides, “[e]mployees will be required to perform the duties to which they may be assigned.” ECF No. 72-1 at PageID #: 1705. The Second CBA similarly provides, “[e]mployees will be required to perform the duties to which they may be assigned, ” and “the methods, processes and means of operating the facility are wholly and exclusively the responsibility of [Defendant AMB].” ECF No. 72-2, PageID #: 1723, 1727.

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3. The First Investigation of Defendants

In 2014, Plaintiff investigated Defendants for Fair Labor Standards Act (“FLSA”) (29 U.S.C. § 201, et seq.) violations. ECF No. 67-1 at PageID #: 448. Ultimately, Plaintiff found that Defendants committed multiple violations of the FLSA by (1) misclassifying their employees as independent contractors, (2) failing to pay overtime, and (3) failing to create and maintain required records. ECF No. 48-3 at PageID #: 361. The same year, Wage and Hour Investigator Stephen Banig (“WHI Banig”) met with Defendant Armour and articulated both the overtime payment and record maintenance obligations in accord with the FLSA. ECF No. 48-4 at PageID #: 370. As a result of the investigation, Defendants agreed to pay over $47, 000 in back wages to 38 employees and agreed to “comply with all applicable provisions of the [FLSA] in the future.” ECF No. 48-5 at PageID #: 373. The back wages were to be paid in installments but Defendants failed to meet their obligation, as the final payment was due July 20, 2016, but they were still making payments in August 2020. ECF 67-2 at PageID #: 527.

Along with their monetary obligations, Defendants agreed to several non-monetary commitments designed to ensure future FLSA compliance. Defendants were instructed to: (1) conduct independent audits, (2) attend an FLSA seminar, (3) provide FLSA training to employees, (4) provide written assurance to Plaintiff regarding future compliance, including an explanation of how Defendants will comply in the future, and summaries of any changes in pay and record keeping practices, and (5) include new categories on non-exempt employees' pay stubs that set forth regular hours worked, overtime hours worked, regular rate, overtime rate, amount of regular pay, and amount of overtime pay. ECF No. 48-5 at PageID #: 375 - 376, 528 - 530. Defendants failed to meet these obligations as well. Id.

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4. Defendants' FLSA Violations from March 2015 - February 2018 and January 2019 - September 2019^[[7]]

Defendants' records for the period of March 2015 to February 2018 establish employees worked overtime hours and were not compensated accordingly. ECF Nos. 48-2 at PageID #: 314 - 41, 67-1 at PageID #: 465 - 67, 470 - 473.^[8] From January 2017 to February 2018, Defendants' time records show that Defendants paid workers their normal hourly rate for overtime hours, instead of one and one-half times their regular rate. Id., Id.

Between March 2015 and February 2018, Defendants' wage records did not consistently include pertinent information required under the FLSA, including (1) employees' regular rates of pay, (2) employees' straight time earnings, (3) employees' total pay for overtime hours, if any, and (4) employees' total wages. ECF No. 67-1 at PageID #: 464 - 465. Also, Defendants did not provide employees with pay stubs and paid all wages with handwritten checks that contained no indication as to how employees' wages were calculated. Id. at PageID #: 465. Defendants' employees had no way of confirming how their wages were calculated or whether they were paid overtime, and if so, how much. Id.

Between January 2019 and September 2019, Defendants failed to pay workers overtime wages at one and one-half times their regular rates for hours worked in excess of forty hours per week, similar to their actions from January 2017 to February 2018. ECF Nos. 67-1 at PageID #: 457, 67-10. During the same period, Defendants continued to violate the FLSA by (1) paying

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workers an artificially low normal hourly rate for the first forty hours, (2) paying workers a purported overtime rate at one and one-half times the artificial hourly rate for hours worked in excess of forty hours per week, and (3) paying workers a purported piece rate or bonus, consisting of a number of pieces multiplied by a rate per piece (e.g., 1, 000 x $0.20). ECF No. 67-1 at PageID #: 457. Elaborating on the first action, Defendants paid employees an artificially low hourly rate, which was used to calculate overtime wages, and supplemented each employee's pay with “production bonuses.” Id. Defendant Armour testified that these “bonuses” were either a “piece rate” or a “speed bonus[, ]” used as “a way to get [employees] a way to make the money that they wanted to earn per week, ” and a way to “add[] money to their hourly rate.”...