U.S. Dept. of Labor v. Cole Enterprises, Inc.

• Decision Date: 30 June 1995
• Docket Number: No. 94-3070,94-3070
• Citation: 62 F.3d 775
• Parties: 130 Lab.Cas. P 33,268, 2 Wage & Hour Cas.2d (BNA) 1487 UNITED STATES DEPARTMENT OF LABOR, Plaintiff-Appellee, v. COLE ENTERPRISES, INC., and William C. Cole, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 775

62 F.3d 775

130 Lab.Cas. P 33,268, 2 Wage & Hour Cas.2d

(BNA) 1487

UNITED STATES DEPARTMENT OF LABOR, Plaintiff-Appellee, v. COLE ENTERPRISES, INC., and William C. Cole, Defendants-Appellants.

No. 94-3070.

United States Court of Appeals, Sixth Circuit.

Argued May 23, 1995.

Decided June 30, 1995. ^*

William J. Stone, Mary J. Rieser (argued and briefed), U.S. Dept. of Labor, Office of Sol., Washington, DC, for plaintiff-appellee.

Roger E. Friedmann (argued and briefed), Loeb, Vollman & Friedmann, Cincinnati, OH, for defendants-appellants.

Before: MILBURN and BATCHELDER, Circuit Judges; TODD, ^** District Judge.

TODD, District Judge.

Defendants Cole Enterprises, Inc., and William C. Cole appeal the judgment and amended judgment of the district court finding that they violated certain provisions of the Fair Labor Standards Act. On appeal, the Defendants contend that William C. Cole is not an employer within the meaning of Fair Labor Standards Act, that the district court incorrectly shifted the burden of proof to the Defendants, and that the evidence shows that no violation of the Fair Labor Standards Act occurred. For the reasons that follow, we affirm.

I.

A.

On June 4, 1992, the Secretary of Labor filed a complaint against Cole Enterprises, Inc. d/b/a the Echo Restaurant, and William C. Cole, the president and 50% shareholder of Cole Enterprises, Inc. The complaint alleged violations of the minimum wage and record keeping provisions of the Fair Labor Standards Act, ("FLSA"), 29 U.S.C. Secs. 206(a), 211(c), 215(a)(2), and 215(a)(5). The Secretary requested an injunction permanently enjoining further violations of FLSA and restraining Cole Enterprises, Inc., and William C. Cole from continuing to withhold unpaid minimum wages that were due their employees for the period June, 1990, through August, 1992 ¹. A bench trial was held on November 9-11, 1993. On December 2, 1993, the district court entered judgment in favor of the Secretary, awarding $3,466.10 in back wages plus prejudgment interest, and granting a permanent injunction. On February 1, 1994, the district court entered an amended judgment in the amount of $4,400.88, and incorporated an exhibit showing the total amount of back wages and interest due each of fourteen employees. This appeal followed.

B.

Defendant Cole Enterprises, Inc., is the owner of the Echo Restaurant, located in Cincinnati, Ohio. William C. Cole and his wife are the co-owners of the corporation, each owning 50% of the shares. William C. Cole is the president and vice president of the corporation. The restaurant is open to the public from 6:00 a.m. to 7:45 p.m. Tuesday through Saturday, serving breakfast, lunch and dinner. The waiters and waitresses employed at the Echo Restaurant were tipped employees, and their scheduled shifts were either 6:00 a.m. to 2:30 p.m. or 11:30 a.m. to 8:00 p.m. Most of the waiters and waitresses, however, began working prior to the beginning of their shift, and continued working after the shift ended, in order to prepare the restaurant for customers and clean up afterward. Nevertheless, the employees were told by Nancy and William C. Cole to record only the scheduled shift hours on their time sheets, not the actual hours they worked. Even if they recorded their actual hours, the employees were paid only for the scheduled shift hours.

II.

A.

We review the district court's findings of fact under the clearly erroneous standard. See Fed.R.Civ.P. 52(a); Bartling v. Fruehauf Corp., 29 F.3d 1062, 1067 (6th Cir.1994). When the findings rest on credibility determinations, Rule 52 requires even greater deference. Id. Conclusions of law are reviewed de novo. See Affiliated FM Ins. Co. v. Owens-Corning Fiberglas Corp., 16 F.3d 684, 686 (6th Cir.1994).

B.

The Defendants maintain that the district court erred in concluding that William C. Cole is an employer within the meaning of FLSA. This issue is a question of law, rather than fact. See Dole v. Elliott Travel & Tours, Inc., 942 F.2d 962, 965 (6th Cir.1991). Under FLSA, an "employer" is defined as "any person acting directly or indirectly in the interest of an employer in relation to an employee ..." 29 U.S.C. Sec. 203(d). In Fegley v. Higgins, 19 F.3d 1126 (6th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 203, 130 L.Ed.2d 134 (1994), we held that the test to be applied in determining whether a person is an "employer" responsible for FLSA obligations is one of "economic reality." Id. at 1131. More than one "employer" can be responsible for FLSA obligations. Thus, a corporate officer who has operational control of the corporation's covered enterprise is an "employer" under FLSA, along with the corporation itself. Id. One who is the chief executive officer of a corporation, has a significant ownership interest in it, controls significant functions of the business, and determines salaries and makes hiring decisions has operational control and qualifies as an "employer" for the purposes of FLSA. Id.

The Defendants argue that the evidence does not support a finding that William C. Cole had operational control over the Echo Restaurant. However, the evidence shows that Mr. Cole is the president of Cole Enterprises, Inc., and that he owns a significant portion of the corporation (50%). In their responses to the Secretary's first set of interrogatories, the Defendants indicate that Mr. Cole was engaged in running the business, that he was authorized to issue checks on the corporate accounts, that he and his wife had custody and control of the employment records, and were responsible for maintaining those records. The Defendants also admit in their responses that Mr. Cole and his wife determined the employment practices for the Echo Restaurant, including hiring, firing, rates of pay and hours of work. In addition, the testimony given at trial shows that Mr. Cole continued to work at the Echo Restaurant through August 1992. He was involved in scheduling of hours, payroll, and the hiring of employees.

The district court's findings of fact regarding the extent of Mr. Cole's operational control over the Echo Restaurant are supported in the record, and are not clearly erroneous. Therefore, we find that the district court correctly concluded that Mr. Cole is an "employer" for the purpose of FLSA liability.

C.

The Defendants also argue that the evidence fails to show that their employment records were inaccurate or inadequate; therefore, the district court erroneously required them to carry the burden of proving that the minimum wage was paid for all hours worked by the restaurant employees. In Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946) ², the Supreme Court specified how the burden of proof should be allocated in FLSA cases:

[W]here the employer's records are inaccurate or inadequate ... an employee has carried out his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the employee's evidence. If the employer fails to produce such evidence, the court may then award damages to the employee, even though the result be only approximate.

Id. at 687-88, 66 S.Ct. at 1192; Fegley, 19 F.3d at 1133.

An employer is required, pursuant to 29 U.S.C. Sec. 211(c), to make and keep records of employees' wages and hours, plus other employment conditions and practices. Regulations require payroll records to be kept for a period of three years, and time sheets for two years. See C.F.R. Secs. 516.5(a), 516.6(a)(1). Additional records are required for tipped employees. See 29 C.F.R. Sec. 516.28.

The evidence in this case demonstrates that the Defendants failed to keep accurate records of the actual hours worked by the employees. The employees were told by William C. Cole and his wife to record only the scheduled shift hours on their time sheets, for example, 6:00 a.m. to 2:30 p.m., not their actual hours worked. Although the Defendants argue that it was the employees' responsibility to accurately record their hours, the evidence clearly shows that this was not done. As the district court also found that the employees had produced sufficient evidence that they had, in fact, performed work for which they were not compensated, it was not error to shift the burden of proof to the Defendants as set forth in Mt. Clemens Pottery.

III.

A.

The district court found that the waiters and waitresses employed by the Echo Restaurant worked an average of one half-hour per day outside their scheduled shift hours, and that the Defendants had failed to compensate the employees for this extra work. The Defendants maintain that the evidence fails to support these conclusions.

The Defendants first argue that no pre-shift or post-shift work was performed by the employees, and that it was the restaurant's policy for employees to stop working at the end of their shift. The evidence, however, shows otherwise. Various employees testified that they performed both pre-shift and post-shift work, which included such tasks as setting up the dining room, preparing coffee and tea, filling condiment containers, setting out side dishes and desserts, cleaning tables and countertops, finishing serving customers, and putting away equipment. These activities constitute principal activities that are compensable under FLSA. See 29 C.F.R. Sec. 790.8. The employees testified that this work was required by the manager and by Mr. Cole himself. In any event, it is the responsibility of management to see that work is not performed if it does not want it to be performed. The management "cannot sit back and accept the benefits without compensating for them." 29 C.F.R. Sec....