Secretary's evidence for many classifications to an extent sufficient to enable me to conclude that the inferences the Secretary suggests are unreasonable. Again, the effect of defendants' argument would be a per se rule: the court could either accept the inferences the Secretary suggests, or reject plaintiff's case entirely and enter judgment for defendants. I decline to adopt this approach.
In instances where the Secretary's evidence did not support the total number of hours suggested by the compliance officers, the findings of fact make adjustments based on reasonable inferences from the evidence adduced at trial. For many of the classifications, the Secretary's computations of hours actually worked and backwages due were reasonable. In the few instances where the Secretary's computations were not consistent with the hours reflected by the evidence at trial, I have rejected the Secretary's computations, and will require the submission of backwage computations based on the findings of fact, supra.
Lastly, I mention the nature of defendants' witnesses. In many instances, defendants' witnesses were current employees, some of whom recently became management employees. These employees have obvious credibility problems. See Ho Fat Seto, 850 F.2d at 589. Other defense witnesses were not employed at times relevant to this action. When the evidence of these witnesses is deleted and the remaining credible testimony of defendants' case is considered, there is no great inconsistency in the evidence.
I briefly review defendants' employee evidence. Defendants' witnesses from JPM testified primarily to hours worked after January, 1988, a period which is irrelevant to this action. Defendants presented no evidence from Hoch classification 306 employees, the only Hoch classification for which backwages are sought based on pattern or practice testimony. Defendants presented two Lackawanna/JPM tractor-trailer drivers. The testimony of John Smith was not credible; the testimony of Thomas Reese supports the Secretary's evidence.
After considering the inconsistencies in the evidence, and formulating the findings accordingly, the evidence permits determination of hours worked, and, therefore, backwages due with reasonable accuracy. "Unless the employer can provide accurate estimates [of hours worked], it is the duty of the trier of facts to draw whatever reasonable inferences can be drawn from the employees' evidence . . . ." Mount Clements Pottery, 328 U.S. at 693. Defendants' credible evidence most assuredly does not rebut the Secretary's case. Therefore, I conclude that defendants violated section 7 of the Act and failed to pay overtime wages for hours worked as detailed in the findings of fact, supra.
D. Statute of Limitations
Although no statute of limitations was expressly included in the FLSA as originally adopted in 1938, in the Portal-to-Portal Act of 1947, 29 U.S.C. §§ 216, 251-262, Congress enacted a two year limitations period for actions under the FLSA. In 1966, Congress modified the limitations period to allow for a three year period for "willful" violations.
The Supreme Court recently stated "ordinary violations of the FLSA are subject to the general 2 year statute of limitations. To obtain a 3 year exception, the Secretary must prove that the employer's conduct was willful . . . ." McLaughlin v. Richland Shoe Co., 486 U.S. 128, , 100 L. Ed. 2d 115, 124, 108 S. Ct. 1677 (1988). The Secretary, therefore, must prove "the employer either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute," id. at , 100 L. Ed. 2d at 123, to seek relief for violations three years prior to the filing of the complaint. Further, "neither an employer's good faith nor his ignorance of the governing statutes or regulations precludes a finding of willfulness." Donovan v. Sabine Irrigation Co., Inc., 695 F.2d 190, 196 (5th Cir. 1983); Hill v. J.C. Penney Co., Inc., 688 F.2d 370 (5th Cir. 1982); Brennan v. Heard, 491 F.2d 1 (5th Cir. 1974).
The Secretary's evidence more than adequately proves defendants knew or should have known of the requirements of the FLSA. Defendant companies were investigated on seven occasions before this suit was commenced. The Secretary showed that defendants had been repeatedly informed about the problems which resulted from defendants' wage computation methods. Defendants were told, orally and in writing, of the requirements of the FLSA. Employee witnesses credibly testified that they inquired of the individual defendants about lunch breaks and methods of payment. Defendants' responses were clear. E.g., "We don't take lunch breaks around here." However, defendants continued to deduct wages from employees for lunch breaks.
During the course of the investigation which preceded this action, Compliance Officer Dietrick credibly testified that he was, to say the least, given the proverbial "run-around" when he attempted to locate Hoch classification 306 time records. Defendants, however, were able to produce such records when pressed by the Court. The records then proved to be thoroughly unreliable.
In sum, as further discussed below in connection with the award of liquidated damages under section 16(c) of the Act, the record is replete with evidence that defendants were repeatedly informed of what was necessary to comply with the FLSA. It also clearly shows that defendants made no serious attempt, much less a good faith attempt, to comply with the FLSA. Therefore, I conclude defendants willfully violated the FLSA, and a three year statute of limitations is applicable to this action.
Apart from their challenges to the sufficiency of the Secretary's evidence, defendants assert only one defense. As discussed above, section 7(a)(1) of the Act requires employers to pay employees who work over forty hours during a work week one and one-half times the regular rate of pay. 29 U.S.C. § 207(a)(1). Section 13(b) of the Act exempts certain employees from the requirements of section 7(a)(1). Among those exempted are "any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service [under 49 U.S.C. § 3102]." 29 U.S.C. § 213(b)(1). Thus, employees who are regulated by the Secretary of Transportation are automatically exempted from section 7 of the Act. 29 C.F.R. § 782.1. Such employees, however, are not exempted from the minimum wage provisions, section 6, of the Act. Wirtz v. Pioneer Steel Co., 212 F. Supp. 945, 948 (E.D.S.C. 1963).
Essentially, the Secretary of Transportation regulates classes of employees who transport property by motor vehicle and engage in activities directly affecting the safety and operation of motor vehicles transporting property on public highways in interstate commerce. 29 C.F.R. § 782.2. Defendants contend that all employees of Solid Waste are exempt from the overtime provisions of the Act beginning June 24, 1987, the date JPM first shipped waste in interstate commerce.
The Secretary does not contend that the exemption is not applicable to defendants, but takes the position that application of the exemption became applicable to the separate operating divisions of Solid Waste at different times. Thus, the critical legal issue is whether the exemption applies to all employees of defendant Solid Waste once one operating division commences the interstate transportation of waste, or whether the exemption should be applied to each operating division at the time the division begins interstate transportation.
I begin with the "well settled" principle that exemptions from the FLSA are to be narrowly construed against the employer. Mitchell v. Kentucky Finance Co., 359 U.S. 290, 295, 3 L. Ed. 2d 815, 79 S. Ct. 756 (1959); A. H. Phillips, Inc. v. Walling, 324 U.S. 490, 493, 89 L. Ed. 1095, 65 S. Ct. 807 (1945); Guthrie, 722 F.2d at 1143. It is the employer's burden to prove entitlement to an exemption. Idaho Metal Works v. Wirtz, 383 U.S. 190, 209, 15 L. Ed. 2d 694, 86 S. Ct. 737 (1966). The employer must clearly and precisely show that his employees fall within the scope of the exemption claimed. Id.; A. H. Phillips v. Walling, 324 U.S. 490, 89 L. Ed. 1095, 65 S. Ct. 807 (1945).
Turning to the terms of the exemption itself, "the exemption is applicable to any employee with respect to whom" the Secretary of Transportation regulates working hours and conditions. 29 C.F.R. § 782.1(a) (emphasis added). "The exemption of an employee from the hours provisions of the [FLSA] under section 13(b)(1) depends on both the class to which his employer belongs and on the class of work involved in the employee's job." 29 C.F.R. § 782.2(a). The employer must be subject to section 204 of the Motor Carriers Act, 49 U.S.C. § 3102, and the employee must "engage in activities of a character directly affecting the safety of operation of motor vehicles in the transportation on the public highways of . . . property in interstate commerce. . . ." Id.
How the exemption applies to defendants' employees is clearly stated in the regulation. Based on the principle that the exemption "depends not only upon the class to which the employer belongs but also the activities of the individual employee," the exemption does not apply to "truck drivers employed by a private carrier on interstate routes who engage in no safety-affecting activities of the character described [in the regulation] even though other drivers of the carrier on interstate routes were subject to the jurisdiction of the Motor Carrier Act. . . ." 29 C.F.R. § 782.2(c)(2); see Goldberg v. Faber Industries, 291 F.2d 232 (7th Cir. 1961).
Thus, employees of private carriers who are engaged in "intrastate," as opposed to "interstate," commerce are not exempted from the overtime provisions of the FLSA. Baird v. Wagoner Transportation Co., 425 F.2d 407, 413 (6th Cir.), cert. denied, 400 U.S. 829, 27 L. Ed. 2d 59, 91 S. Ct. 58 (1970). Employees are exempt if the interstate work is shared indiscriminately and the employees form part of a "pool" of interstate drivers. Brennan v. Schwerman Trucking, 540 F.2d 1200 (4th Cir. 1976). Further, employees whose duties related to interstate commerce are an "infinitesimal" portion of their work are not exempted from the FLSA. Coleman v. Jiffy-June Farms, Inc., 324 F. Supp. 664, 669 (S.D.Ala. 1970), aff'd, 458 F.2d 1139 (5th Cir. 1971), cert. denied, 409 U.S. 948, 93 S. Ct. 292, 34 L. Ed. 2d 219 (1972), overruled on other grounds, McLaughlin v. Richland Shoe Co., 486 U.S. 128, 100 L. Ed. 2d 115, 108 S. Ct. 1677 (1988); see Kimball v. Goodyear Tire & Rubber Co., 504 F. Supp. 544, 548 (E.D.Texas 1980).
When applied to the facts of defendants' interstate transportation of waste, these principles render defendants' claim that all employees of Solid Waste were exempt from the overtime provisions of the FLSA manifestly incorrect. The Secretary does not contest that defendants' transportation of waste after June 24, 1987 was an activity involving interstate commerce. Thus, the issue is the timing of when the different employee classifications and operating divisions became involved in interstate commerce.
In her post-trial submissions, the Secretary concedes that defendants have met their burden of proof in establishing the exemption for JPM classifications 200, 201, and 202 employees who delivered waste to the Souderton yard after June 24, 1987. This concession is supported by the evidence adduced during trial. After that date, waste from the Souderton yard was delivered to Souderton for re-loading to travel to landfills in Ohio and West Virginia. The route slips and landfill logs provide proof that the waste was delivered to Souderton as part of a continuous movement in interstate commerce.
Concerning JPM classification 203 tractor-trailer drivers, careful analysis of defendants' payroll records and the wage transcription sheets shows that these employees were not involved in interstate commerce during the period for which the Secretary is seeking backwages, with the exception of two employees, Snyder and Moyer. However, the wage computation sheets submitted as Appendix F show that the Secretary does not seek overtime wages for the period in which they were involved in interstate transportation.
Although the evidence concerning Hoch Sanitation employees was not presented in a clear manner, there is sufficient circumstantial evidence in the record to conclude that Hoch employees, other than classification 306, were engaged in interstate commerce after September 30, 1987. In addition to vague testimony from former employees and a supervisor, this conclusion is supported by the landfill log sheets. Also, the credible testimony on the issue establishes that waste transported by Hoch classification 306 employees did not travel in interstate commerce until after November 30, 1987.
Defendants have failed to introduce any credible evidence to establish the destination of waste transported to the Buckhorn facility, and thus fail to establish the prerequisites of interstate destinations for waste transported to that facility.
Lastly, defendants have failed to establish that all Lackawanna employees were eligible for the exemption prior to December, 1988. Defendants' payroll records reflect that only certain Lackawanna employees made trips to out-of-state destinations before that time. For employees who were involved in the transportation of waste in interstate commerce, the Secretary does not seek wages for a four month period following the last trip interstate. This is more than reasonable. The conclusion that Lackawanna employees were not part of a pool of interstate drivers before December, 1988 is bolstered by Pat Mascaro's testimony that Lackawanna employees "principally" transported waste in Pennsylvania before that date.
V. Injunctive Relief
The complaint seeks relief under both sections 16(c) and 17 of the FLSA. The Secretary seeks a restitutionary injunction including an award of liquidated damages as discussed above, and a prospective injunction.
Once a finding of past due wages is made . . . the district court's discretion to refuse the Secretary's request for a restitutionary injunction is limited, and must be tempered by considering whether the prerequisites for this remedy have been met and the policy reasons underlying Congress' enactment of the legislation have been fulfilled. Thus the court must ascertain whether an injunction commanding restitution of delinquent back-pay furthers the FLSA's twin purposes of compensating injured employees, and of redressing a continuing public wrong by depriving a violator of any gains accruing to him through his violations, and protecting those employers who comply with the Act's wage requirements from having to compete unfavorably with those who do not.
Donovan v. Sabine Irrigation Co., Inc., 695 F.2d 190, 197 (5th Cir. 1983) (citations omitted).
The evidence establishes that the Secretary is entitled to a restitutionary injunction of backwages for minimum wage and overtime violations which were rampant through defendants' operations. In some cases, the wage computation sheets reveal that individual employees worked significant numbers of overtime hours and were not compensated adequately. Some employees are entitled to awards in excess of $ 1000 individually. From the scope of defendants' operations as detailed by the evidence at trial, it is clear to me that their business is substantial and profitable enough to support continuing and substantial expansion. Contributions to this profitability should not come at the expense of the individual employee who has not been paid a fair wage as defined by the FLSA. Therefore, I will compel the remission of wages to which employees are entitled.
A. Liquidated Damages
Section 16(c) of the Act provides that an employer who violates the backwage provisions of the FLSA "shall be liable to the . . . employees affected [for] . . . an equal amount in liquidated damages." 29 U.S.C. § 216(c). Section 11 of the Portal-to-Portal Act, 29 U.S.C. § 260, provides the employer with a defense to an award of liquidated damages.
Essentially, the defense provides that the district court has discretion to award no liquidated damages, or to award an amount of liquidated damages less than the amount provided by . . . the FLSA, if, and only if, the employer shows that he acted in good faith and that he had reasonable grounds for believing that he was not violating the Act.
Marshall v. Bruner, 668 F.2d 748, 753 (3d Cir. 1982); see Brock v. Claridge Hotel & Casino, 846 F.2d 180, 187 (3d Cir.), cert. denied, 488 U.S. 925, 109 S. Ct. 307, 102 L. Ed. 2d 326 (1988); Williams v. Tri-County Growers, Inc., 747 F.2d 121, 129 (3d Cir. 1984); Guthrie v. Lady Jane Collieries, Inc., 722 F.2d 1141, 1149 (3d Cir. 1983).
The employer bears the "plain and substantial burden of persuading the court by proof that his failure to obey the statute was both in good faith and predicated upon such reasonable grounds that it would be unfair to impose a verdict upon him more than a compensatory verdict." Rothman v. Publicker Industries, 201 F.2d 618, 620 (3d Cir. 1953), quoted in, Brunner, 668 F.2d at 753. Good faith is a "subjective requirement, shown if the employer had 'an honest intention to ascertain and follow the dictates of the Act.'" Williams, 747 F.2d at 129, quoting, Brunner, 668 F.2d at 753; see also Brock, 846 F.2d at 187. "The reasonableness test is an objective one, which 'ignorance alone' will not satisfy." Brock, 846 F.2d at 187, quoting, Brunner, 668 F.2d at 753. If the district court believes the defense is proven, it must make specific findings to support not awarding liquidated damages. Brock, 846 F.2d at 187.
However, "if the employer fails to come forward with plain and substantial evidence to satisfy the good faith and reasonableness requirements, the district court is without discretion to deny liquidated damages." Williams, 747 F.2d at 129. On the record here, to find either of the elements of the defense fulfilled by defendants' evidence would be clearly erroneous.
In addition to the evidence discussed above in connection with the prior investigations of defendants which found on more than one occasion the same type of violations that the investigations prior to this action also found, and the flagrant disregard of the record-keeping requirements, there is evidence which hints at an intent to violate the Act. Defendant Pat Mascaro clearly testified that he knew the basic requirements to pay employees under a legal fluctuating work week method. However, defendants' payroll records showed that these requirements were not met. Further, the amounts actually shown on the records reflect that defendants made a conscious effort to mold a fluctuating work week method to conform to the amount of pay employees received under a per trip method.
Pat Mascaro's testimony on this issue was remarkable. After testifying that prior investigations of defendants found violations of the fluctuating work week method and that Deputy Regional Director McGrath had provided detailed information about the requirements of that wage computation method, N.T., 3/23 at 104-106, he testified that he "thought" tractor-trailer drivers for JPM were paid under the fluctuating work week method. Id. at 106. He then testified that after the investigation which lead to this action was concluded, he learned the actual method of paying these records did not comply. Mascaro testified that the manner for computing wages was "you know, a unilateral move on the part of the payroll clerk." Id. at 107. Mascaro then attempted to implicate a former employee as responsible for the violation. Id. at 107-11.
This is an attempt to hang responsibility for a flagrant violation on lower level employees. It is probative of a conscious attempt to circumvent, or at least reckless disregard of, the requirements of the FLSA. Mascaro was specifically informed of the requirements of a proper method; he made no attempt to determine whether his company was complying with the law, although he knew that it had not done so previously. As an employer, he bears the responsibility for conforming the conduct of his personnel to the law.
Thus, the evidence shows, rather than an "honest intention to ascertain and follow the dictates of the Act," an intention either to "pawn off" responsibility for complying with the FLSA, or circumvent its requirements whenever possible. Defendants failed to show that the violations were the result of good faith.
Although that failure alone is sufficient to require an award of liquidated damages, I further conclude that defendants' conduct cannot meet the requirements of an objectively reasonable attempt to comply with the FLSA. Prior investigations of the Secretary found record-keeping violations. In conferences and correspondence from the Department of Labor to defendants, the importance of accurate record-keeping was repeatedly highlighted. Findings 234-239, GX 28 at 3, GX 29. The failure of defendants to keep accurate records after repeatedly being advised of the necessity of doing so supports the conclusion that defendants' conduct was objectively unreasonable. Bueno v. Mattner, 829 F.2d 1380, 1386-87 (6th Cir. 1987), cert. denied, 486 U. S. 1022, 108 S. Ct. 1994, 100 L. Ed. 2d 226 (1988). The conclusion that defendants' conduct was objectively unreasonable is further supported by the practice of deducting lunch breaks regardless of whether or not such breaks were taken without making an effort to ascertain whether employees were taking the breaks. Cf. Brennan v. Elmer's Disposal Service, Inc., 510 F.2d 84, 88 (conclusion that wage computation method violates FLSA strengthened by flat hourly lunch deduction without reference to hours worked).
Employees need not establish that violations were intentional to obtain a liquidated damages award. Williams, 747 F.2d at 129. The evidence here comes very close to establishing that the violations of the record-keeping and overtime provisions were intentional. The record is not "silent as to any efforts [defendants] made to ascertain and follow the dictates of the FLSA." Id. To the contrary, the evidence shows defendants were informed of and attempted to ascertain the requirements of the FLSA, and then attempted to evade the requirements. Therefore, I conclude defendants have failed to meet their burden, and shall award liquidated damages under section 16(c) of the Act.
"In deciding whether to issue a prospective injunction, the district court must evaluate the previous conduct of the employer and the dependability of his promise for future compliance." Donovan v. Sabine Irrigation Co., Inc., 695 F.2d at 197. In light of the seven prior investigations of defendants which found many of the same violations that the instant action uncovered, the repeated failures of defendants to make reasonable attempts to comply with the dictates of the FLSA, and defendants' wholesale disregard for the record-keeping requirements of the Act, despite repeated admonitions of their significance, the only reasonable conclusion is that an injunction against further noncompliance with the FLSA is necessary to conform defendants' conduct to the law.
CONCLUSIONS OF LAW
1. Jurisdiction is proper under sections 16 and 17 of the FLSA and 28 U.S.C. § 1331.
2. Defendants Solid Waste, JPM, Hoch, Lackawanna, Pasquale Mascaro, Joe Mascaro and Mike Mascaro are employers within the meaning of section 3(d) of the Act, and are therefore jointly and severally liable for violations of the Act.
3. Defendants constitute an enterprise within the meaning of section 3(r) of the Act.
4. Defendants violated section 12(c) of the Act by employing minors as outside helpers on vehicles. That occupation constitutes oppressive child labor as defined by Hazardous Order No. 2, 29 C.F.R. § 570.52.
5. Defendants violated section 7 of the Act by failing to pay certain non-exempt employees time and one-half their regular rate of pay for hours worked in a week in excess of forty. These violations resulted from defendants' failure to pay hourly employees for hours worked during periods defendants deducted for meal breaks, totaling 2 1/2 hours per week, the failure to include "bonus" payments in the employees' regular rate of pay, and the failure to pay the following classes of employees in accordance to the hours worked:
Classification 200 employees worked 12 hours per day and are entitled to 2 1/2 hours for lunch breaks not taken.
Classifications 201 and 202 worked an additional 5 hours per week for which they were not compensated, including 2 1/2 hours for lunch breaks not taken.
Classification 203 employees worked an average of 6 1/4 hours per trip between Souderton and Dunmoore.
Classification 301 employees are entitled to an additional 17 1/2 hours per week including 2 1/2 hours for lunch breaks not taken and hours worked that were not properly recorded in the period before August 31, 1987. Employees Joann Imalka, Sharon Levandowski and Deborah Tomazewski are entitled to an additional 5 hours per week of compensation. Employee Homer Butler is entitled to an additional 17 hours per week of compensation.
Classifications 200, 201, 202 and 300 employees are entitled to an additional 2 1/2 hours per week of compensation, and to have bonus payments included in their base rate of pay.
Classifications 303 and 305 employees are entitled to payment based on the hours worked as reflected by defendants' payroll records with bonus payments included in their base rate of pay, and an additional 2 1/2 hours per week for lunch breaks not taken.
Classification 306 employees are entitled to payment of wages based on a 70 hour work week.
Tractor-trailer drivers of Lackawanna are entitled to wages based on work weeks computed using the hours per trip as follows:
For trips from Dunmoore to Abington, 6 1/2 hours.
For trips from Dunmoore to Lower Merion, 7 hours.
For trips from Abington to Morrisville, 3 1/2 hours.