FAIR LABOR STANDARDS ACT (“FLSA”) DIGEST
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FAIR LABOR STANDARDS ACT (“FLSA”) DIGEST
The Fair Labor Standards Act (FLSA or Act) was enacted in 1938 for the purpose of
eliminating labor conditions detrimental to a minimum standard of living required for the general
well-being of workers engaged in commerce or in production of goods for commerce. Overnight
Motor Transp. Co. v. Missel, U.S. Md.1942, 316 U.S. 572, reh’g. denied, 317 U.S. 706 (1942).
Section 216(e) of the Act contains provisions prohibiting the use of oppressive child labor. The
Act applies under the following circumstances: (1) a true employer/employee relationship exists;
(2) the requirements for individual or enterprise coverage are met; and (3) the work is performed
in the United States or a territory of the United States. Pursuant to 29 C.F.R. § 580.13, any party
dissatisfied with the decision of the ALJ may file an appeal within 30 days to the Administrative
Review Board. Otherwise, the ALJ’s decision becomes the final agency decision. Captions for
these cases are: Administrator, Wage and Hour Division, U.S. Department of Labor, Plaintiff v.
________________, Respondent. See 29 C.F.R. § 580.10.
STATUTORY AND REGULATORY AUTHORITY ................................................................. 10
A. Child labor provisions ......................................................................................................... 10
B. Fair Labor Standards Act of 1938, as amended .................................................................. 10
CHILD LABOR PROVISIONS ................................................................................................... 10
I. Generally .............................................................................................................................. 10
A. Purpose ............................................................................................................................ 10
B. “Oppressive child labor” defined .................................................................................... 10
C. Exempt from automatic stay provisions of the Bankruptcy Act ..................................... 11
D. Portal-to-Portal Act Inapplicable .................................................................................... 11
II. Jurisdiction [See also Fair Labor Standards Act] ................................................................ 11
A. Appeal to the ARB .......................................................................................................... 12
1. Untimely appeal accepted; unique circumstances ....................................................... 12
2. Untimely appeal not accepted ...................................................................................... 12
B. Jurisdiction of the district court....................................................................................... 13
No judicial review of Administrator’s decision ................................................................ 13
C. No new hearing permitted after record closed ................................................................ 14
III. Standard of Review ............................................................................................................ 14
A.
By the ALJ .................................................................................................................. 14
B.
By the ARB ................................................................................................................ 15
IV. Evidence ............................................................................................................................ 15
A. Burden of Proof ............................................................................................................... 15
1. “Occasional and incidental” Driving ........................................................................... 15
2. Determination of age.................................................................................................... 15
B. Hearsay ............................................................................................................................ 15
1. Public records exception .............................................................................................. 15
2. Investigator's testimony admissible ............................................................................. 16
C. Relevance ........................................................................................................................ 17
Post-investigation memorandum irrelevant ...................................................................... 17
V. Discovery ............................................................................................................................ 17
A. Sanctions; failure to comply ........................................................................................... 17
1. Dismissal ...................................................................................................................... 17
2. Default judgment ......................................................................................................... 17
3. Ruling against interests ................................................................................................ 18
4. Exclusion of evidence; independent recollection ........................................................ 19
B. Privileges ......................................................................................................................... 19
The “informant's privilege” .............................................................................................. 19
C. Witness testimony ........................................................................................................... 19
Credibility unaffected by discord between minors and employer .................................... 19
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VI. Employer/Employee relationship ...................................................................................... 20
A. The “economic realities” test, generally ......................................................................... 20
B. Employer-employee relationship exists .......................................................................... 20
1. Job service agencies; joint employment ...................................................................... 20
2. Trainees ........................................................................................................................ 21
3. Stuffing envelopes for publishing company ................................................................ 21
4. Crew leaders for minors canvassing to sell newspapers .............................................. 22
5. Minor working in agriculture ....................................................................................... 22
6. IRS tax regulations not controlling .............................................................................. 23
C. No employer-employee relationship exists ..................................................................... 23
VII. Relief ................................................................................................................................ 25
A. Determination of appropriate civil money penalty, generally ........................................ 25
B. All factors must be considered ........................................................................................ 25
1. The WH-266 schedule of penalties may be used (changed to WH-103) ..................... 26
2. The WH-266 (changed to WH-103) does not include all factors at 29 C.F.R. ............ 27
3. Amended schedule; penalty maximum ........................................................................ 28
C. Propriety of reduction of civil monetary penalty ............................................................ 28
1. Appropriate .................................................................................................................. 28
2. Not appropriate ............................................................................................................ 29
D. Exceptions to imposition of civil money penalty............................................................ 39
1. De minimus exception at 29 C.F.R. § 579.5(d)(1) ....................................................... 39
2. Inadvertent conduct exception at 29 C.F.R. § 579.5(d)(2) .......................................... 42
VIII. Types of dispositions ...................................................................................................... 43
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A. Consent findings ............................................................................................................. 43
B. Appointment of settlement judge .................................................................................... 43
C. Dismissal ......................................................................................................................... 43
1. Based on withdrawal of civil money penalties ............................................................ 43
2. Based upon failure to comply with discovery order .................................................... 43
D. Default judgment............................................................................................................. 44
E. Civil money penalty does not constitute “liquidated damages” ..................................... 44
FAIR LABOR STANDARDS ACT OF 1938 .............................................................................. 46
I. Generally .............................................................................................................................. 46
Purpose.................................................................................................................................. 46
II. Jurisdiction .......................................................................................................................... 46
A. Laches ............................................................................................................................. 46
Held inapplicable .............................................................................................................. 46
B. The Tenth Amendment and state and local government employees ............................... 47
C. Employees cannot waive application of the FLSA ......................................................... 47
D. The Portal-to-Portal Act is applicable............................................................................. 48
Portal to Portal Act Statute of Limitations........................................................................ 48
E. Collateral Estoppel ........................................................................................................... 48
III. Standard of Review ............................................................................................................ 49
IV. Evidence ............................................................................................................................ 49
A. Determination of back wages owed ................................................................................ 50
1. Established ................................................................................................................... 50
2. Not established ............................................................................................................. 52
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B. Statutory affirmative defenses of the employer .............................................................. 52
1. Statute of limitations .................................................................................................... 52
2. Good faith reliance on Administrator’s rulings ........................................................... 53
3. Good faith conduct by employer; reasonable grounds ................................................ 54
V. Discovery ............................................................................................................................ 54
A. Summary judgment ......................................................................................................... 54
1. Based on default........................................................................................................... 54
2. Denied; genuine issue of material fact exists ............................................................... 54
B. Privileges ......................................................................................................................... 55
Informant’s privilege upheld............................................................................................. 55
VI. Employer/employee relationship ....................................................................................... 56
A. The “economic reality test,” generally ............................................................................ 56
B. Independent contractor status .......................................................................................... 56
C. Employer/employee relationship established .................................................................. 58
1. Temporary employment agency .................................................................................. 58
2. Miscellaneous .............................................................................................................. 58
3. Cable splicer................................................................................................................. 59
D. Special relationships ....................................................................................................... 59
Prisoners............................................................................................................................ 59
1. Not an employee under the FLSA ............................................................................... 59
2. May be an employee; application of “economic reality” test ...................................... 60
E. State Sovereign Immunity ................................................................................................ 60
VII. Individual or enterprise status .......................................................................................... 61
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A. Establishing enterprise or individual coverage, generally .............................................. 61
B. Coverage established ....................................................................................................... 62
1. Enterprise ..................................................................................................................... 62
2. Individual employer status not precluded by finding of corporate employer status .... 62
3. Individual status ........................................................................................................... 63
VIII. Certain provisions under the FLSA ................................................................................ 63
A. “Production of goods for commerce” defined ................................................................ 63
B. Gross receipts must exceed $500,000 ............................................................................. 64
Irrelevant if complaint filed under individual coverage provision at § 207(a)(1) ............ 64
C. Bona fide commission ..................................................................................................... 65
D. Proper pay periods established by contract or business practice .................................... 65
IX. Anti-retaliation provisions ................................................................................................. 66
A. Protected conduct ............................................................................................................ 66
B. Burdens of production and persuasion ............................................................................ 67
1. Pretext .......................................................................................................................... 68
2. Mixed motives ............................................................................................................. 68
C. Remedies ......................................................................................................................... 68
D. The Patient Protection and Affordable Care Act (PPACA), Pub. L. 111-148, § 1558 (Mar.
23, 2010) as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L.
111-152 (Mar. 30, 2010) ....................................................................................................... 68
1. Prohibition on discrimination ...................................................................................... 68
2. Complaint procedure.................................................................................................... 70
X. Compensation...................................................................................................................... 74
A. Waiting time .................................................................................................................... 74
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1. While on duty, covered by the FLSA .......................................................................... 74
2. Off duty, not compensable under the FLSA ................................................................ 75
3. Time waiting while on-call .......................................................................................... 75
4. Rest and meal periods .................................................................................................. 76
5. Travel and shop time .................................................................................................... 76
6. “Custom or practice”; use of collective bargaining agreements .................................. 77
7. Donning and doffing required gear .............................................................................. 78
8. Waiting in line for equipment or to punch time clock ................................................. 78
9. Nursing mothers, express breast milk ......................................................................... 79
B. Non-cash benefits ............................................................................................................ 79
1. Voluntary acceptance by employee not required ......................................................... 79
2. Acceptable non-cash benefit ........................................................................................ 79
C. Unlawful deductions from wages .................................................................................... 80
1. Cash register shortages ................................................................................................ 80
2. Uniforms ...................................................................................................................... 80
D. De minimus time not compensable ................................................................................. 80
E. Disabled Worker’s Exception.......................................................................................... 81
XI. Exemptions from coverage ................................................................................................ 83
A. Generally ......................................................................................................................... 83
1. Employer’s burden to demonstrate exemption ............................................................ 83
2. All requirements for exemption must be satisfied ....................................................... 83
3. Examples of exemption coverage ................................................................................ 84
4. “Short test” and “long test” .......................................................................................... 85
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B. Management or executive employees ............................................................................. 85
1. Exemption established ................................................................................................. 86
2. Exemption not established ........................................................................................... 86
C. Administrative employees ............................................................................................... 89
1. Exemption established ................................................................................................. 89
2. Exemption not established ........................................................................................... 90
D. Professional employees ................................................................................................... 92
1. Categories of professionals .......................................................................................... 92
2. Exemption established ................................................................................................. 93
3. Exemption not established ........................................................................................... 93
4. “Combination of duties” exemption ............................................................................ 94
E. Motor carrier exemption .................................................................................................. 95
XII. Relief ................................................................................................................................ 96
A. Willful violation .............................................................................................................. 96
1. Standard for establishing.............................................................................................. 96
2. Civil money penalty assessment .................................................................................. 97
C. Pre-judgment interest .................................................................................................... 104
Disallowed where liquidated damages awarded, no double recovery ............................ 104
D. Attorney’s fees .............................................................................................................. 105
XIII. Types of dispositions .................................................................................................... 105
A. Approval of stipulations and settlement agreement ...................................................... 105
B. Consent findings............................................................................................................ 106
C. Dismissal ....................................................................................................................... 106
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Based on Fed.R.Civ.P. 41(a)........................................................................................... 106
D. Summary judgment ....................................................................................................... 106
Based on default.............................................................................................................. 106
E. Appointments Clause Challenge .................................................................................... 107
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STATUTORY AND REGULATORY AUTHORITY
A. Child labor provisions
1. Codified at 29 U.S.C. § 213(e)1
2. 29 C.F.R. Parts 516, 570, 575, 579, and 580.
B. Fair Labor Standards Act of 1938, as amended
1. Enacted in 1938 and codified at 29 U.S.C. §§ 201 et seq.
2. 29 C.F.R. Parts 516, 531, 536, 541, 547-553, 578, and 580.
The rules of practice and procedure to be applied in cases arising under the FLSA are located at
29 C.F.R. §§ 580.7 - 580.18.2
CHILD LABOR PROVISIONS
I. Generally
A. Purpose
The child labor provisions of the FLSA were enacted to protect working children from
physical harm and to limit their working hours to prevent interference with their schooling.
Administrator, Wage and Hour Division v. Thirsty’s Inc., 1994-CLA-65 (ARB, May 14, 1997).
See also Administrator, Wage and Hour Division v. Lynnville Transport, Inc., 1999-CLA-18
(ALJ, Aug. 29, 2000), aff’d. sub. nom., 316 F. Supp.2d 790 (S.D. Ia. 2004) (citing to 29 C.F.R.
§ 570.101, the purpose of the child labor provisions are to protect the “safety, health, well-being
and opportunities for schooling of youthful workers”); Administrator, Wage and Hour Division
v. Tacoma Dodge, Inc., 1994-CLA-80, 88, 91, 112 (ALJ on remand, Dec. 15, 1999).
B. “Oppressive child labor” defined
The phrase “oppressive child labor” is defined at Section 3(1) of the Act as including the
employment of a minor under 14 years of age, employment of minors of ages 14 and 15 in an
occupation involving transportation where work is performed during precluded time periods, and
the employment of minors ages 14 through 18 in any occupation in which the Secretary of Labor
has found to be particularly hazardous or detrimental to their health and well-being. See
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Administrator, Wage and Hour Division v. Lynnville Transport, Inc., 1999-CLA-18 (ALJ, Aug.
29, 2000), aff'd. sub. nom., 316 F.Supp.2d 790 (S.D. Ia. 2004).
C. Exempt from automatic stay provisions of the Bankruptcy Act
In In re James H. Crockett, Case No. 96-13449FM (Jan. 27, 1997), the bankruptcy court
held that an administrative proceeding under the Fair Labor Standards Act before an ALJ with the
Department of Labor constitutes an exercise of police or regulatory powers, which places the
proceeding within the exemptions to the automatic stay provisions of the Bankruptcy Code at 11
U.S.C. §§ 362(b)(4) and (b)(5).
D. Portal-to-Portal Act Inapplicable
In Administrator, Wage and Hour Division v. Fisherman’s Fleet, Inc., ARB Case No.
03-025, 2001-CLA-034 (ARB, June 30, 2004), the Board held that the Portal-to-Portal Act, by
its own terms, is only applicable to “enforce any cause of action for unpaid minimum wages,
unpaid overtime compensation, or liquidated damages, under the Fair Labor Standards Act;” it
does not apply to actions against an employer for alleged violations of the child labor laws.
In United States v. Fisherman’s Fleet, Inc., 2007 WL 4365356 (D. Mass. Dec. 12, 2007)
(unpub.), when Respondent failed to pay $132,575.00 in civil money penalties awarded by the
administrative law judge and affirmed by the Administrative Review Board, the Department of
Labor commenced an enforcement action in federal district court. Respondent asserted that the
enforcement action was time-barred by the two year statute of limitations contained at 28 U.S.C.
§ 2462 of the Portal-to-Portal Act. To the contrary, the district court agreed with the Department
of Labor and concluded:
Because the “civil penalty” assessed under § 216(e) does not constitute “liquidated
damages,” the limitations period set forth in § 255 is inapplicable. In the absence
of a particularized limitations period, 28 U.S.C. § 2462 provides the governing
statute of limitations. Under that section, any action “for the enforcement of any
civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained
unless commenced within five years from the date when the claim first accrued if,
within the same period, the offender or the property is found within the United
States in order that proper service may be made thereon.” (emphasis added).
Because this action was filed within five years of the Administrative Review
Board's Final Decision and Order, it is timely.
II. Jurisdiction [See also Fair Labor Standards Act]
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A. Appeal to the ARB
1. Untimely appeal accepted; unique circumstances
In Administrator, Wage and Hour Division v. Lamplighter Tavern, 1992-CLA-21 (Sec’y.
May 11, 1994), the Secretary accepted an appeal under “very unusual circumstances” where no
prejudice to the Administrator was established. In particular, the ALJ issued his decision on
August 10, 1992. Pursuant to 29 C.F.R. §§ 580.13 and 580.14(c), the Secretary noted that an
appeal must be received by him within thirty days, i.e., on or before September 9, 1992.
Respondent’s notice of appeal was postmarked on September 8, 1992 and date-stamped as being
received by the Secretary on September 10, 1992. The Secretary accepted the appeal and stated
the following:
We are essentially dealing with an appeal document that was at most a half a day
late in arriving at OAA. The rule does not specifically state that OAA's date stamp
shall be determinative of the time a document was actually received. It is a
common practice among members of the local bar to serve time sensitive
documents on OAA personally and to ask for a date stamped copy to establish
timely filing. Lamplighter's attorney did not have that luxury, as he is located in
Havertown, Pennsylvania. Moreover, it cannot be established with certainty that
Lamplighter's appeal did not arrive in the offices of OAA until the morning of
September 10. I am relunctant to deny appeal rights to a party under these very
unusual circumstances, especially when no prejudice to the Administrator has been
shown. Therefore, I decline to dismiss the appeal as untimely filed. However, this
should not be read as an invitation to flout the time period established in 29 C.F.R.
§ 580.14(c) (1993).
Slip op. at 2.
2. Untimely appeal not accepted
In Atlantic Adjustment Co. v. U.S. Dep’t. of Labor, 2000 WL 298920 (E.D. Pa. Mar. 14,
2000) (unpub.), Plaintiff pursued a mandamus action under 28 U.S.C. § 1361 requesting that the
district court accept its appeal of a civil monetary penalty assessment under the child labor
provisions at 29 C.F.R. §§ 580.6(a) and 580.8(c). The Department filed a motion to dismiss under
Fed. R. Civ.P. 12(b)(1) and 12(b)(6) to state that Plaintiff's appeal of the Administrator's decision
was untimely filed. Under the facts of the case, a civil monetary penalty assessment was delivered
to Plaintiff on September 29 and, according to the Department, the 15 day deadline for filing
exceptions to the assessment was October 14. The court noted the following:
The Plaintiff concedes that its appeal was filed late. Nonetheless, it seeks to be
excused from missing the deadline because it properly relied on and complied with
the representation of . . . an official in the Department of Labor. In effect, Plaintiff
is invoking the doctrine of equitable estoppel against the government.
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Slip op. at 2.
The district court cited to Heckler v. Community Health Services, 467 U.S. 51 (1984) and
OPM v. Richmond, 496 U.S. 51 (1990) to find that the Supreme Court has severely limited
application of equitable estoppel against the federal government. The court concluded that
equitable estoppel could not be applied in the case before it:
Plaintiff does not allege that the investigator made any false or ambiguous
representations. On the contrary, he provided Plaintiff with a copy of the
regulations which properly explained the time requirements for any appeal. Any
incorrect information came from Mr. Salvatore of OSHA, not from the Wage and
Hour Division.
Even if Mr. Salvatore were deemed to be speaking for the Wage and Hour Division,
Plaintiff could not under the case law have reasonably or justifiably relied on what
he said. Mr. Salvatore’s comments were oral, not in writing. By the time his
comments were made, Plaintiff had received a copy of the regulations accurately
stating the deadline for an appeal. Most significantly, Plaintiff was represented by
counsel before the deadline passed.
As a result, the district court dismissed Plaintiff's complaint.
3. ALJ without jurisdiction during pendency of interlocutory appeal
In Administrator, Wage and Hour Division v. Albertson’s, Inc., ARB Case No. 99-106,
1999-CLA-2 (ARB, Oct. 29, 1999), the ALJ had ruled that the “informer's privilege” did not bar
the production of un-redacted statements and hand-written questionnaires of 24 potential
witnesses. The ALJ determined that, because the 24 potential witnesses who might testify
regarding alleged child labor violations had been identified, the informer's privilege was no longer
applicable. An interlocutory appeal was taken by the Administrator. Subsequently, the
Administrator filed a motion for remand stating that the parties had reached a settlement and had
submitted their consent findings to the ALJ for approval. The ARB remanded the case because
the ALJ lacked authority to rule on the consent findings while the case was pending before the
ARB.
B. Jurisdiction of the district court
No judicial review of Administrator’s decision
In Acura of Bellevue v. Reich, 90 F.3d 1403 (9th Cir. 1996), cert. denied, 117 S. Ct. 945
(1997), the circuit court held that the Administrator’s findings (that an automobile dealership
violated the child labor laws) constituted an interim determination, which was not ripe for judicial
review. The court held that the findings first must be reviewed by an ALJ. The dealership alleged
financial hardship, which the circuit court found to be insufficient to circumvent the administrative
hearing process. Consequently, it declined to assert jurisdiction over the case.
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C. No new hearing permitted after record closed
In Administrator, Wage and Hour Division v. Merle J. Elderkin, ARB Case Nos. 99033 and 99-048, 1995-CLA-31 (ARB, Oct. 21, 2003), the ARB denied Respondent’s request for
a new hearing, which was filed three years after the ARB affirmed a civil money penalty
assessment against it. Citing to 29 C.F.R. §§ 18.34(c) and 18.54(a) as well as Fed. R. Civ. P.
Rule 59(a), the ARB reasoned that Respondent had “not made any showing that the material he
wishe(d) to introduce at the requested new trial was not readily available prior to the closing of
the record in this case.”
III. Standard of Review
A. By the ALJ
The ALJ's review of the Administrator's findings is de novo. The regulatory provisions at
29 C.F.R. § 580.12(b) and (c) provide the following:
(b) The decision of the Administrative Law Judge shall be limited to a
determination of whether the respondent committed a violation of section 12, or a
repeated or willful violation of section 6 or section 7 of the Act, and the
appropriateness of the penalty assessed by the Administrator. The Administrative
Law Judge shall not render determinations on the legality of a regulatory provision
or the constitutionality of a statutory provision.
(c) The decision of the Administrative Law Judge shall include a statement of
findings and conclusions, with reasons and basis therefor, upon each material issue
presented in the record. The decision shall also include an appropriate order which
may affirm, deny, reverse, or modify, in whole or in part, the determination of the
Administrator.
29 C.F.R. § 580.12(b) and (c).
In Administrator, Wage and Hour Division v. Thirsty’s Inc., 1994-CLA-65, slip op. at 6
(ARB, May 14, 1997), the ARB held that “[a]n increased penalty [found on ALJ review] is not a
punishment levied on an employer for seeking a hearing and review, but rather a possible outcome
of an adjudicator looking anew at a situation where violations of child labor laws occurred and
determining that the violations were of greater gravity than the Compliance Officer and
Administrator determined.”
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B. By the ARB
The Secretary's standard of review of an ALJ’s decision in a Fair Labor Standards Act case is
de novo. See 5 U.S.C. §§ 554, 557(b); 29 U.S.C. § 216(e). See Administrator, Wage and Hour
Division v. Elderkin Farm, ARB Case Nos. 99-033 and 99-048, 1995-CLA-31 (ARB, June 30,
2000) (de novo review is conducted by the ARB except that the ALJ’s credibility determinations
of a witness are entitled to deference). Where the ALJ’s findings of fact are supported by ample
evidence, the Secretary will adopt those findings. Administrator, Wage and Hour Division v.
D.D. & D., Inc., 1990-CLA-35 (Sec’y., Apr. 3, 1995); see also Administrator, Wage and Hour
Division v. Ahn’s Market, Inc., ARB Case No. 99-024, 1997-CLA-33 (ARB, July 28, 2000)
(holding that the ARB has authority to conduct a de novo review of the penalty assessed to
determine its appropriateness); Administrator, Wage & Hour Division v. Ronald and Debbie
Halsey, ARB Case No. 04-061, 2003-CLA-5 (ARB, Sept. 29, 2005),aff’d., 2007 WL 4106268 (D.
Ak., Nov. 16, 2007) (unpub.) (holding that an ALJ’s “grant of summary decision is also reviewed
de novo, i.e., under the same standard the ALJs employ”).
IV. Evidence
A. Burden of Proof
1. “Occasional and incidental” Driving
In Administrator, Wage and Hour Division v. Tacoma Dodge, Inc., 1994-CLA-80, 88,
91, 112 (ALJ on remand, Dec. 15, 1999), the ALJ held that Respondent had the burden of proving
that an exception to the child labor prohibitions applied. Specifically, in Takoma Dodge, it was
incumbent upon Respondent to prove that “the driving by the minors met the exception to the
hazardous order in that it was both 'occasional and incidental' under the definition applicable at the
time” of the ALJ’s decision.
2. Determination of age
In Administrator, Wage and Hour Division v. Henderson, 1991-CLA-83 (Sec’y., Apr. 18,
1995), the Secretary held that, in establishing the age of a worker, the “burden should fall upon the
employer, who is required to maintain records of employees birth dates, to submit evidence
challenging the accuracy of the investigator's report, if the employer believes the report to be
inaccurate.” See also Acting Administrator, Wage and Hour Division v. Ahn’s Market, Inc.,
1997-CLA-23 (ALJ, Nov. 6, 1998) (finding that the government established a prima facie case of
a violation where the minor testified that he wrongly stated his date of birth on the employment
application).
B. Hearsay
1. Public records exception
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Determination of age, Wage and Hour Form 103 admissible
In Administrator, Wage and Hour Division v. Henderson, 1991-CLA-83 (Sec’y., Apr. 18,
1995), the Secretary held that the ALJ erred in ruling that the investigator’s Wage and Hour Form
103, which contained the results of the compliance officer’s investigation, was hearsay and not
sufficient to establish the age of the minors in question. The Secretary cited 29 C.F.R.
§ 18.803(a)(8)(ii) and (iii) and Federal Rule of Evidence 803(8), which is the public records
exception to the hearsay rule and the Secretary held that the evidence was admissible as “matters
observed pursuant to duty imposed by law as to which matters there was a duty to report . . .or . . .
factual findings resulting from an investigation made pursuant to authority granted by law . . . .”
The Secretary noted that the burden of demonstrating the untrustworthiness of the report fell on
the employer, who was required to maintain records of employees’ birth dates. Because
Respondent did not challenge this evidence, it should have been considered. The Secretary also
advised that 29 C.F.R. § 580.7(b), a regulation governing civil money penalties in Fair Labor
Standards Act proceedings, provides that “testimony of . . . Department of Labor employees
concerning information obtained in the course of investigations and conclusions thereon . . . shall
be admissible. . . .” Thus, the Secretary reinstated the civil money penalties for the violations the
ALJ concluded had not been proven due to the lack of evidence of the employees’ ages.
2. Investigator's testimony admissible
[a] Based on notes of conversations with minors
In Administrator, Wage and Hour Division v. Salyer, 1993-CLA-18, 22, and 23 (ALJ,
Nov. 30, 1995), Respondents contended that a large portion of the compliance officer's
testimony -- largely based on notes of his conversations with minors during the
investigation – should have been excluded as inadmissible hearsay because, in addition to the
normal infirmities of hearsay, the testimony of minors is traditionally subjected to heightened
judicial review. The ALJ rejected this argument noting that 29 C.F.R. § 580.7 provides that,
notwithstanding the hearsay rule of 29 C.F.R. § 18.802, the testimony of current or former
departmental employees concerning information obtained in the course of investigations and
conclusions thereon was admissible in child labor proceedings. See also Administrator, Wage
and Hour Division v. Lamplighter Tavern, 1992-CLA-21 (Sec’y., May 11, 1994) (finding it was
proper for the ALJ to assess a penalty based upon the investigator’s testimony regarding the
employment of minors).
[b] Not based on excluded evidence
In Administrator, Wage and Hour Division v. Ahn’s Market, Inc., ARB Case No. 99-024,
1997-CLA-33 (ARB, July 28, 2000), the ARB upheld the ALJ’s admission of the investigator’s
testimony regarding what the minors told her, despite the fact that the ALJ excluded the written
questionnaires that were answered and signed by the minors as well as the investigator’s written
notes regarding what she was told over the telephone by certain minors. The ARB noted that the
documentary evidence was excluded by the ALJ because of the Administrator’s failure to comply
with the ALJ’s pre-trial discovery order. The ALJ had prohibited the investigator from testifying
16
regarding the contents of these documents which, in turn, “eliminated all record evidence of some
of the alleged violations which . . . required dismissal of the charges and penalty assessments that
were based exclusively on the answered questions.” The ARB concluded that:
Although the investigator would not have been free to testify as to the contents of
the excluded memos, she nevertheless was entitled, as the ALJ correctly held, to
testify as to her independent recollection of what the minors told her over the
telephone. The investigator’s testimony was itself evidence of the violations
independent of the memos and admissible pursuant to 29 C.F.R. § 580.7(b) even
if it was hearsay.
C. Relevance
Post-investigation memorandum irrelevant
In Administrator, Wage and Hour Division v. Blackhawk State Bank, 1993-CLA-82
(Sec’y., Nov. 20, 1995), the government introduced, in its petition for review of the ALJ’s decision,
an interpretative memorandum from the Wage and Hour Administrator to the Regional Wage and
Hour Administrators which purported to clarify and interpret a term in dispute in the case. The
Secretary found the interpretation to be irrelevant because it was not in existence at the time the
matter was investigated.
V. Discovery
A. Sanctions; failure to comply
1. Dismissal
In Administrator, Wage and Hour Division v. Vinton D. Erickson Farms, 1991-CLA-76
(Sec’y., July 13, 1995), Respondent was found to have repeatedly and intentionally failed to
comply with the ALJ’s discovery order. Under such circumstances, the ALJ properly applied the
sanction of dismissal. The Secretary found that, since the remedies for failure to comply with an
order to compel discovery are not expressly stated in the Rules of Practice and Procedure for
Administrative Hearings, 29 C.F.R. Part 18, it was proper to invoke Rule 37(b)(2) of the Federal
Rules of Civil Procedure, which expressly establishes the appropriateness of sanctions against
parties who fail to obey an order to provide discovery. See also 29 C.F.R. § 18.33. The Secretary
noted that the purpose of Federal Rule of Civil Procedure 37 is to allow the presiding judge to
fashion sanctions that are appropriate for the offense being sanctioned.
2. Default judgment
In Administrator, Wage and Hour Div., USDOL v. Moonwalks for Fun, Inc., ARB No.
13-027, ALJ No. 2012-CLA-8 (ARB, May 19, 2014), the Board found that the ALJ has the
17
authority to dismiss for failure to respond to the ALJ’s Order to Show Cause why a default
judgment should not be entered for failure to comply with the ALJ’s prehearing order requiring a
prehearing exchange. The Respondent’s communication with the attorney for the Wage and Hour
Division asking for a waiver of the fine was not responsive to the ALJ’s order to show cause.
In U.S. Dep’t. of Labor v. Chips Restaurant, Inc., 1998-CLA-5 (ALJ, Jan. 13, 1999),
Respondent failed to comply with the Notice of Docketing, which required that the parties
exchange and submit evidence in support of their respective positions. An order to show cause
was issued and no response was received. As a result, pursuant to 29 C.F.R. § 18.6(d)(2)(v), the
ALJ found Respondent in violation of Section 12 of the Act and assessed civil money penalties
against Respondent in the amount of $9,900.
In U.S. Dep’t. of Labor v. Fox Chapel Yacht Club, Inc., 1992-CLA-151 (Sec’y., Sept. 12,
1995), the Secretary agreed that Respondents demonstrated recalcitrance in the pre-hearing stage
of the administrative hearing. It was noted that the Department filed a motion for an order to show
cause why a default judgment should not be entered, the ALJ entered such an order, and
Respondents did not file a timely response to the order. It was further noted that Respondents
failed to respond to the notice of docketing, or to the Department's pre-hearing exchange. As a
result, the Secretary determined that Respondents had subjected themselves to the discretionary
powers of the ALJ and those powers included a full range of sanctions pursuant to 29 C.F.R. § 18.6.
The Secretary concluded that the ALJ’s entry of a default judgment was clearly authorized and it
was adopted on appeal.
3. Ruling against interests
In Administrator, Wage and Hour Division v. Elderkin Farm, ARB Case Nos. 99-033
and 99-048, 1995-CLA-31 (ARB, June 30, 2000), the Chief Administrative Law Judge ordered a
sanction less severe than default judgment for Respondent’s repeated failure to comply with
multiple discovery requests. The ARB recited the language of the Chief Administrative Law
Judge's order as follows:
[I]t shall be inferred that the admissions, testimony, documents or other evidence
that should have been produced are adverse to Respondent, . . . that matters
concerning which the Order [to Show Cause] was issued are taken as established
adversely to Respondent, . . . that Respondent may not introduce into evidence or
otherwise rely upon testimony in support of or in opposition to any claim or defense
that was the subject of these discovery requests at issue, . . . and that Respondent
may not object to the introduction and use of secondary evidence to show what the
withheld admissions, testimony, documents or other evidence would have
shown . . . .
Slip op. at 3. The ALJ who presided over the hearing then adopted the Administrator’s Findings
of Fact in accordance with the Chief Administrative Law Judge’s directive. In footnote 5 of its
decision on appeal, the ARB stated that an ALJ “has broad discretion to exact penalties for failure
to abide by discovery orders” under 29 C.F.R. § 18.6(d) and it found no abuse of discretion where
18
Respondent failed to comply with the multiple orders issued by the Chief Administrative Law
Judge.
4. Exclusion of evidence; independent recollection
In Administrator, Wage and Hour Division v. Ahn’s Market, Inc., ARB Case No. 99-024,
1997-CLA-33 (ARB, July 28, 2000), the ARB upheld the admission of the investigator’s testimony
regarding what the minors told her, despite the fact that the ALJ excluded the written
questionnaires that were answered and signed by the minors as well as the investigator's written
notes regarding what she was told over the telephone by certain minors. The ARB noted that the
documentary evidence was excluded by the ALJ because of the Administrator’s failure to comply
with the ALJ’s pre-trial discovery order. The ALJ “prohibited the investigator from testifying
regarding the contents of these documents which, in turn, eliminated all record evidence of some
of the alleged violations which . . . required dismissal of the charges and penalty assessments that
were based exclusively on the answered questions.” The ARB concluded that:
Although the investigator would not have been free to testify as to the contents of
the excluded memos, she nevertheless was entitled, as the ALJ correctly held, to
testify as to her independent recollection of what the minors told her over the
telephone. The investigator’s testimony was itself evidence of the violations
independent of the memos and admissible pursuant to 29 C.F.R. § 580.7(b) even if
it was hearsay.
B. Privileges
The “informant's privilege”
In Administrator, Wage and Hour Division v. Albertson’s, Inc., ARB Case No. 99-106,
1999-CLA-2 (ARB, Oct. 29, 1999), the ALJ ruled that the “informer’s privilege” did not bar the
production of un-redacted statements and hand-written questionnaires of 24 potential witnesses.
In support of this holding, the ALJ determined that, because the 24 potential witnesses who might
testify regarding alleged child labor violations had been identified, the informer’s privilege was no
longer applicable. An interlocutory appeal was taken by the Administrator. Subsequently,
however, the Administrator filed a motion for remand stating that the parties reached a settlement
and had submitted their consent findings to the ALJ for approval. The ARB remanded the case
because the ALJ lacked authority to rule on the consent findings while the case was pending before
the ARB.
C. Witness testimony
Credibility unaffected by discord between minors and employer
In Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec.
17, 1999), the ALJ held that the mere fact that there existed disagreement between the minors
and their employer, and that their departure from the company was “under less than happy
19
circumstances” did not render the testimony of the minors of little weight. The ALJ stated the
following:
However, presuming for argument’s sake, that the complaints triggering the subject
DOL investigation filed by these minors, were motivated by some animus, such
motive need not, and here does not, materially negatively affect the credibility of
these witnesses relative to the operative facts testified to by them. Indeed, many of
these facts testified to were corroborated time and again in this record.
Slip op. at 9.
VI. Employer/Employee relationship
A. The “economic realities” test, generally
In child labor cases, an employer will often argue that the minors are “independent
contractors” and not employees, thus removing the conditions of their employment from the scope
of the FSLA.
In Administrator, Wage and Hour Division v. Horizon Publishers & Distributors, 1990CLA-29 (Sec’y., May 11, 1994), the Secretary held that the test for determining whether an
employer-employee relationship exists under the FLSA is more expansive than that used in
common law. As a result, the Secretary rejected arguments by the employer that tests developed
by the Internal Revenue Service, National Labor Relations Authority, and state courts should be
utilized. Rather, the Secretary noted that the Supreme Court, in United States v. Silk, 331 U.S.
704, 723 (1947), set forth six factors in applying the “economic realities” test to FLSA cases: (1)
degree of control exerted by the employer over the worker; (2) the worker’s opportunity for profit
or loss; (3) the worker’s investment in the business; (4) permanence of the working relationship;
and (5) the degree of skill required to perform the work. Moreover, some courts have also
considered the extent to which the work was an integral part of the employer’s business. See also
Administrator, Wage & Hour Division v. Ronald and Debbie Halsey, ARB Case No. 04-061,
2003-CLA-5 (ARB, Sept. 29, 2003),aff’d.,2007 WL 4106268 (D. Ak., Nov. 16, 2007) (unpub.);
Reich v. Baystate Alternative Staffing, Inc., 1994-FLS-22 (ARB, Dec. 19, 1996); Administrator,
Wage and Hour Division v. Circulation Promoters, Inc., 1992-CLA-5, 1992-CLA-83 (Sec’y.,
Jan. 18, 1995).
B. Employer-employee relationship exists
1. Job service agencies; joint employment
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In Reich v. Baystate Alternative Staffing, Inc., 1994-FLS-22 (ARB, Dec. 19, 1996), the
ARB found that day workers, i.e. individuals who reported to an agency in the morning and were
assigned work according to the needs of employers calling that day, were not independent
contractors because the employers for which they performed services had complete control over
the manner in which the work was performed, the workers had no opportunity for profit or loss,
they did not provide any material, equipment, or helpers, and they were unskilled workers who
exercised little or no initiative in completing their assigned tasks.
In addition, the ARB stated that the factors for determining whether joint employment
exists are: 1) the nature and degree of control of the workers; 2) the degree of supervision, direct
or indirect, of the work; 3) the power to determine the pay rates or the methods of payment of the
workers; 4) the right, directly or indirectly, to hire, fire, or modify the employment conditions of
the workers; and 5) preparation of payroll and the payment of wages. The ARB noted that the
determination of the employment relationship does not depend on isolated factors, but on the
circumstances of the whole activity; the ultimate issue is whether, as a matter of “economic
reality,” the particular worker is an employee of the business or organization in question.
2. Trainees
In Reich v. Shiloh True Light Church of Christ, Case No. 95-2765, 1996 U.S. App.
LEXIS 10427 (4th Cir. May 7, 1996), the circuit court held that the general test used to determine
whether a trainee is entitled to the protections of the Act is whether the employee or the employer
is the primary beneficiary of the trainee's labor. The court of appeals affirmed the district court’s
finding that the employer, Shiloh Vocational Training Program (Shiloh), was the primary
beneficiary of the labor of the workers under the age of 16 years such that the FLSA applied.
Shiloh did not pay wages to the trainees who were under age 16 years, nor did Respondent charge
fees for their labor. The children did, on some occasions, receive lump sum payments, which
Shiloh characterized as “gifts.” The children also earned “imaginary” wages and raises, which
were then used as a mechanism for determining their actual wage when they turned 16 years old,
and they performed the same tasks as individuals over 16 years of age. The court found that the
underage workers were employees covered by the FLSA where Shiloh derived a substantial benefit
from the projects in which the children participated without incurring any costs in wages.
3. Stuffing envelopes for publishing company
In Administrator, Wage and Hour Division v. Horizon Publishers & Distributors, 1990CLA-29 (Sec’y., May 11, 1994), the Secretary held that an employer-employee relationship
existed between a mail order company and the minors who stuffed envelopes for it. Specifically,
the children were instructed on procedures for stuffing the envelopes as set forth by the employer,
the children did not have an opportunity for profit or loss and had no input in company decisions,
none of the children held any investment in the company, and no skills were required for the job
performed by the minors. The Secretary also found that the minors performed work that was
integral to the company as “Horizon is a mail-order business [and] sending solicitations for
purchases and of advertising material is certainly integral to its business.” Thus, although there
was no degree of permanence to the children’s work for the employer, i.e. one child worked only
2.1 hours for the company, and although the working relationship was somewhat informal, the
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Secretary concluded that, on balance, the ALJ properly found the existence of an employeremployee relationship.
4. Crew leaders for minors canvassing to sell newspapers
In Administrator, Wage and Hour Division v. Circulation Promoters, Inc., 1992-CLA-5,
1992-CLA-83 (Sec’y., Jan. 18, 1995), the ALJ utilized the “economic realities” test in assessing
whether “crew leaders were employees of CPI or independent contractors.” Under the facts of the
case, Circulation Promoters Incorporated (CPI) “used crews of school age children to canvass
homes door-to-door in targeted areas to induce homeowners to subscribe to a client newspaper.”
An adult was the crew leader and this person was charged with “logistics of the operation” and
recruitment of crew members. The Secretary noted that, “[g]iven the remedial purpose of the
FLSA, Federal courts have adopted an expansive interpretation of the definition relating to
employment status that goes beyond traditional common law applications.”
From this, the Secretary upheld the ALJ’s findings that the crew leaders were CPI’s
employees based upon the following factors: (1) contractual terms between CPI and the crew
leaders required that the leader “keep his crew canvassing for four hours a day, six days a week;”
(2) minors worked four hours a day, from 4:00 p.m. to 8:00 p.m., and were returned home by 9:00
p.m.; (3) the crew leader had “complete economic dependence upon the company;” (4) aside from
the nominal purchase of canvass bags used to carry the newspapers, the crew leader did not have
significant out-of-pocket expenses; (5) minimal skills and training were required of crew leaders;
and (6) there was no evidence to indicate that the vehicles used to transport the minors could not
also be used for personal purposes. The Secretary further held that the designation of the crew
leader in CPI’s contract as an “independent contractor” was not determinative and neither was the
fact that a Form 1099 was filed with the Internal Revenue Service as opposed to a W-2 Form.
5. Minor working in agriculture
In Administrator, Wage and Hour Division v. Elderkin Farm, ARB Case Nos. 99-033
and 99-048, 1995-CLA-31 (ARB, June 30, 2000), Respondent argued that a minor working on his
farm was not an employee because “he did not punch a time card, file any reports on his
employment, or work at any specific time.” Moreover, Respondent alleged that he did not pay the
minor, “did not direct him to do work, and was not aware of any work that (the minor) performed
on the farm.” The ARB disagreed. Initially, it noted that the Supreme Court held that the definition
of an “employee” under the FLSA is the broadest under any federal statute. United States v.
Rosenwasser, 323 U.S. 360, 363 n. 3 (1945). The ARB found that the minor operated a tractor on
the farm, assisted with the operation of farm equipment with Respondent’s knowledge and for the
Respondent’s benefit, worked in an area occupied by a bull, and worked inside a manure pit in
violation of 29 C.F.R. § 570.71. Further, the ARB noted that the minor had been working on the
farm on the day of his accident, when his clothes got caught in a feeder wagon that “pulled” him
in and cut off his right arm. The ARB then analyzed the case under the “economic reality” test to
conclude that the minor was not an independent contractor. It stated the following in finding a
direct employer-employee relationship existed:
22
While there is no evidence that Elderkin directly contolled the tasks performed by
Peter Gage on that day, all of these tasks--feeding the calves, scraping manure from
the barn, helping to rig a feed mixer machine, and reading the gauge on the feed
wagon . . . were integral to Elderkin's business. Peter obviously had no opportunity
for profit or loss, but rather was paid or given credit toward the cost of the broken
windows. It is clear he had no investment in the farm's facilities. There was no
particular skill required for the tasks he performed. Although the relationship
between Elderkin and Peter was an informal one, it is clear that Elderkin was aware
that Peter was working on his farm.
On balance, the ARB held that the minor was not an independent contractor.
6. IRS tax regulations not controlling
In Administrator, Wage & Hour Division v. Ronald and Debbie Halsey, ARB Case No.
04-061, 2003-CLA-5 (ARB, Sept. 29, 2005), aff'd., 2007 WL 4106268 (D. Ak., Nov. 16, 2007)
(unpub.), a 14 year old drowned while working for Respondents’ salmon fishing business.
Respondents cited to IRS tax regulations to argue that the minor was a self-employed independent
contractor. The tax regulations provide, inter alia, that a person who is engaged in commercial
fishing and is paid based on a share of the proceeds from the boat’s catch, as in this case, then the
person is deemed a self-employed independent contractor. The Board rejected the IRS tax
regulations as controlling under the child labor provisions of the FLSA.
To the contrary, the Board noted that “courts have adopted an expansive interpretation of
the definitions of ‘employee’ and ‘employer’ under the FLSA, to effectuate the Act’s broad
remedial purposes.” Consequently, the Board applied the “economic reality” test to determine that
an employer-employee relationship existed between Respondents and the minor for purposes of
the FLSA. In so holding, the Board upheld the ALJ’s rejection of Respondents’ contention that
the work was seasonal such that there was no employment relationship under the Act. The Board
held that “the child labor provisions preclude permanent employment.” It concluded that the ALJ
properly noted that the minor worked for Respondents for consecutive summers, which supported
a finding of an “ongoing working relationship.”
C. No employer-employee relationship exists
In Brock v. Bremco Industries, Inc., 1986-CLA-7 (ALJ, June 18, 1987), two minors were
injured when a propane tank, on which they were working, exploded. The ALJ held that no
employment relationship existed between the minors and Respondent to support coverage under
the CLA. Respondent was a gas and oil equipment manufacturer and, under the facts of the case,
a field service technician for Respondent took his son and nephew, both of whom were minors, on
some service calls. Generally, the minors sat in a truck while the technician conducted his work
in the field. Respondent did not know that the technician brought the minors with him on business.
In particular, the technician did not advise Respondent or seek permission. On one occasion,
however, the minors assisted the technician in removing 48 half-inch bolts from ten propane tanks.
23
One of the tanks exploded and the minors were injured. The ALJ noted the following regarding
the accident:
Of the nine previous tanks that had been serviced, none of those tanks had been
hooked-up. However, the tenth tank which was being worked on by the boys had
been hooked-up by the owner. Steve Mohler (the technician) began to cut a sixinch hole in the backside of the last tank with an acetylene torch not realizing that
it was hooked-up. Gas vapors entrapped in the tank caused it to explode injuring
both boys.
Slip op. at 3 (citation to transcript references omitted). Applying the “economic reality” test as set
forth in Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947) as well as the Sixth
Circuit’s decision in Western Union Telegraph Co. v. McComb, 165 F.2d 65 (6th Cir. 1947), cert.
denied, 333 U.S. 862 (1948), the ALJ determined that Respondent’s “operation as a whole must
be considered in determining whether a person is an employee.” The ALJ concluded that, given
the circumstances presented, “the work activity performed by the two boys was strictly an
aberration . . . .” He stated that there was no evidence to suggest that the technician could not have
completed his work without the assistance of the minors. The ALJ found the technician credible
and found that “the boys were taken along in order to allow him to spend time with his son.”
The ALJ further noted that Respondent had (1) no control over the minors, (2) no
opportunity for profit of loss with the minors, (3) received minimal benefit, if any, from the work
of the minors, (4) utilized no particular skill of the minors who removed the bolts, and (5) had no
permanency of relationship with the minors as the minors never performed work for the technician
previously and they were not paid and did not expect payment. The ALJ also found that the minors
“made no investment in equipment used to remove the bolts and covers.” Finally, the ALJ
reiterated that Respondent had no knowledge that the minors accompanied its technician on service
trips and “work was performed distant from where management would have observed its
occurrence.” As a result, Respondent was not liable for a civil money penalty.
In Martin v. Heron Lopez d/b/a Rio Fresh, 1990-CLA-10 (ALJ, Oct. 1, 1992), the
Administrator found that minors were improperly harvesting crops for a grower of onions and
charged Rio Fresh with the civil money penalty. Rio Fresh served as a packing and distribution
company for growers of various food crops. The record evidenced that the field men for Rio Fresh
were to check the progress of the harvesting activity and to advise the growers:
Mr. Cuellar (one of Respondent's field men) basically acted as an advisor to the
grower and to Rio Fresh so that the packing house would know what produce was
arriving in order to sell it and be prepared to process it. He also acted as an advisor
to the farm labor contractor for purposes of determining the produce to be picked,
but he was strictly an advisor since the grower made the final decision as to the
crops. Mr. Cueller did not intercede in problems with individual laborers. Rio
Fresh has instructed Mr. Cueller in the law as it relates to children being permitted
to perform farm labor. The growers make all the final decisions concerning the
24
growing and harvesting of the crops. Rio Fresh and its field men act as advisors
only to the growers.
Slip op. at 4. The issue before the ALJ was whether Rio Fresh was a “joint employer” (along with
the growers) of the minors working in the fields. The ALJ determined that Rio Fresh was not such
an employer and, as a result, he concluded that the company was not liable for any civil money
penalties. The record demonstrated that there was no legal relationship between Respondent and
the grower. Respondent did not hire the employees to harvest the crop; rather, the grower hired
the employees and paid their compensation. Moreover, Respondent did not have the authority to
hire and fire the grower’s employees and Respondent’s equipment, with the exception of one
“portable john,” was not used by the grower to harvest the crop. In addition, Respondent did not
(1) maintain any of the grower’s financial and employment books, (2) transport harvesters to the
job site, or (3) cultivate or harvest the crops. In sum, Respondent had no control over the grower’s
operations and the harvesting activities required by the grower required little or no skill by laborers.
From this, the ALJ declined to assess a civil money penalty against Rio Fresh.
VII. Relief
A. Determination of appropriate civil money penalty, generally
In determining an appropriate penalty under the child labor provisions of the Fair Labor
Standards Act, 29 C.F.R. § 579.5 specifies the factors to be considered, such as the gravity of the
offense, age of the minors, the size of Respondent’s company, any history of prior similar
violations, precautions taken to avoid the violations, the number of underage workers, duration of
the employment, the hazards to which the minors were exposed while so employed, and the
occurrences of any injuries.
In Administrator, Wage and Hour Division v. Elderkin Farm, ARB Case Nos. 99-033
and 99-048, 1995-CLA-31 (ARB, June 30, 2000), the ARB held that “once a CMP has been
challenged before an ALJ, the issue is not whether the penalty assessed by the Administrator
comports with the formula and matrix contained in Form WH-266,” but “the question is whether
the assessed penalty complies with the statutory provision regarding the CMP and the CMP
regulations.” See also Administrator, Wage and Hour Division v. Keystone Floor Refinishing
Co., ARB Case Nos. 03-056 and 03-067, 2002-CLA-017 (ARB, Nov. 29, 2004) (finding that,
under the statute, the maximum penalty that may be assessed for each employee is $10,000).
B. All factors must be considered
Assessment of the penalty amount requires that the size of the business and the gravity of
the violation be taken into consideration. 29 C.F.R. § 579.5(a) and (b). A determination of the
gravity of the violation requires that the ALJ consider the history of any prior violations, the
25
number of minors involved, the lack of precautions or willingness to avoid violations by the
employer, whether proper records, such as proof of age, are maintained, exposure of the minors to
hazards and any resulting injuries, duration of the illegal employment, and hours of the day during
which the employment occurred. In addition, two alternatives at §§ 579.5(d)(1) (for de minimus
violations) and (d)(2) (inadvertent error) permit a lessening of the penalty, or a finding of no
penalty, if all the listed criteria are satisfied. Keesling v. Supermarkets General Corp. ,
1990-CLA-34 (Sec’y., Jan. 13, 1993).
In U.S. Dep’t. of Labor v. Thirsty’s Inc., 1994-CLA-65 (ALJ, May 16, 1996), aff’d. in
part and rev’d. in part, Administrator, Wage and Hour Division v. Thirsty’s Inc., 1994-CLA-65
(ARB, May 14, 1997), the ALJ found that the Administrator did not assess the appropriate civil
money penalty for hours violations of the child labor provisions of the Fair Labor Standards Act
when consideration was not given to all the available evidence as required by 29 C.F.R. § 579.5;
rather, the penalty was determined by using Form WH-266, which has pre-assigned dollar values
for each violation. The ALJ reduced the penalty assessment pursuant to § 579.5(d)(2) and noted
that the penalty imposed by the Wage and Hour Division amounted to ten to twenty percent of
Respondent's annual profit, which did not effectuate the purpose of the Act “to correct . . . and to
eliminate the conditions . . . [of] oppressive child labor’ without substantially curtailing
employment or earning power. See 29 U.S.C. §§ 202(b) and 203(1).
1. The WH-266 schedule of penalties may be used (changed to WH-103)
In Administrator, Wage and Hour Division v. Thirsty’s Inc., 1994-CLA-65 (ARB, May
14, 1997), the ARB found that “[t]he grid and matrix schedule incorporated in form WH-266 is an
appropriate tool to be used by a field Compliance Officer to recommend penalties through the
enumeration and determination of the gravity of factual violations.” Slip op. at 5. The ALJ found
that the use of Form WH-266 violated the regulatory scheme found that 29 C.F.R. § 579.5(b) and
(c), which provide that certain factors shall be considered in determining the appropriateness of an
assessed penalty. The ALJ found that the Administrator only considered one of the regulatory
factors, and characterized the form as a “numbers game” that eliminated the regulatory procedure
to determine a penalty only after all the evidence was considered in light of the factors delineated
in the regulations.
The Administrator argued before the ARB that the “standardized penalty schedule
permitted the enforcement of child labor laws in a consistent and uniform manner, free from
subjective appraisals and is allowable within statutory and regulatory criteria . . . .” The
Administrator conceded that the “standardized penalty schedule may result in certain imprecision
in determining a penalty in a specific case,” but argued that “this imprecision is preferable to the
subjective appraisals of the employer’s culpability by a Compliance Officer.” Slip op. at 4.
The ARB granted deference to the Administrator’s interpretation, “although the penalty
schedule did not reference each criterion of the regulatory guidelines, nevertheless it is a
reasonable interpretation of those guidelines and with the broad authority granted an agency
charged with implementing those regulations.” Slip op. at 4 (citation omitted). The Board
supported this conclusion by noting that the regulations did not provide guidance as the weight or
26
import of any particular factor and, since the schedule penalty was reduced based on the size of
the business, any error in not considering the other factors was harmless. The Secretary approved
of the ALJ’s reduction of the civil money penalty where mitigating factors were present.
The ARB further held that Respondent’s due process rights were not violated because the
Administrator’s recommended determination was subject to review by an ALJ and, when Congress
increased the maximum civil money penalties, it did not raise the issue of the well-established
practice of using a schedule of penalties. The ARB reaffirmed that an ALJ has authority to change
the Administrator’s assessments of civil monetary penalties, but it reversed the ALJ’s finding in
the instant case that the schedule of penalties is in violation of the regulations or of an employer’s
right to due process. See also Lynnville Transport, Inc. v. Chao, 316 F.Supp.2d 790 (S.D. Ia.
2004); Administrator, Wage and Hour Division v. Ahn’s Market, Inc., ARB Case No. 99-024,
1997-CLA-33 (ARB, July 28, 2000) (holding that the Form WH-266 schedule is properly used by
field compliance officers and is “merely a starting point”); Administrator, Wage and Hour
Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec. 17, 1999).
In Administrator, Wage and Hour Division v. Schronk Road Markets, Inc., 2001-CLA73 (ALJ, May 19, 2003), the ALJ determined that the Administrator’s penalty assessment using
the WH-103 was proper for the 18 supported violations where Respondent employed minors in
excess of regulatory allowances. 29 C.F.R. § 570.35(a)(4) and (a)(6).
2. The WH-266 (changed to WH-103) does not include all factors at 29 C.F.R.
Section 579.5; final determination of penalty made after APA hearing
Although agreeing for the most part with the Administrator’s determinations regarding the
computation of a civil money penalty for child labor violations, the ALJ, in Administrator, Wage
and Hour Division v. Salyer , 1993-CLA-18, 22 and 23 (ALJ, Nov. 30, 1995), found that a Child
Labor Civil Money Penalty Form (Form WH-266) used by the Administrator did not include all
of the factors required to be considered by 29 C.F.R. § 579.5. Consequently, the ALJ considered
the Administrator’s recommendation of penalties, but noted that the regulations require that the
final determination of the penalty to be made following an APA hearing. 29 C.F.R. § 579.5(f); 5
U.S.C. § 554; see also Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5
(ALJ, Dec. 17, 1999) (determining that the Form WH-266 may be properly used to assess civil
monetary penalties but the “adjudicatory process . . ., in reviewing the appropriateness of the
penalties, is acknowledged in preservation of the due process rights of employer”).
In Administrator, Wage and Hour Division v. Thirsty’s Inc., 1994-CLA-65, slip op. at 6
(ARB, May 14, 1997), the ARB held that “[a]n increased penalty [found on ALJ review] is not a
punishment levied on an employer for seeking a hearing and review, but rather a possible outcome
of an adjudicator looking anew at a situation where violations of child labor laws occurred and
determining that the violations were of greater gravity than the Compliance Officer and
Administrator determined.” See also Administrator, Wage and Hour Division v. Ahn’s Market,
Inc., ARB Case No. 99-024, 1997-CLA-33 (ARB, July 28, 2000) (holding that the ARB has
authority to conduct a de novo review of the penalty assessed to determine its appropriateness);
27
Administrator, Wage and Hour Division v. Elderkin Farm, ARB Case Nos. 99-033 and 99-048,
1995-CLA-31 (ARB, June 30, 2000) (holding that the ARB must review findings de novo and
may, therefore, substitute its judgment for that of the ALJ).
3. Amended schedule; penalty maximum
In Administrator, Wage and Hour Division v. Zukiewicz, Inc., 1991-CLA-66 (Sec’y., Jan.
31, 1996), the Secretary held that the ALJ improperly prohibited a reduction of the civil money
penalty where the penalty assessed exceeded the $1,000.00 statutory maximum per child. The
Secretary further noted, however, that the civil money penalty per child was raised from $1,000 to
$10,000, for violations occurring after Section 16(e) of the FLSA was amended by the Omnibus
Reconciliation Act of 1990, effective November 5, 1990. Pub. L. No. 101-508, 104 Stat. 1388-29
(1990).
In Administrator, Wage and Hour Division v. Elderkin Farm, ARB Case Nos. 99-033 and 99048, 1995-CLA-31 (ARB, June 30, 2000), the ARB cited to the legislative history supporting an
increase in the maximum civil money penalty from $1,000 to $10,000:
Several factors led to this change in the law: investigations of child labor violations
had soared; there was evidence that employer’s often considered the lower penalties
as a cost of doing business; inflation had devalued the sting of the $1,000 maximum
penalty; and the actual penalty ultimately paid often was just a fraction of the
maximum amounts permitted.
Slip op. at 15.
In Administrator, Wage and Hour Division v. Sayler, 1993-CLA-18, -22, -23 (ARB, Sept.
27, 1996), the ALJ had decreased the civil money penalty assessed by the Administrator of the
Wage and Hour Division for the violations that occurred subsequent to the November 5, 1990
amendments to the Fair Labor Standards Act, which increased the maximum allowable penalty
from $1,000.00 to $10,000.00 for each violation. See the Omnibus Reconciliation Act of 1990,
Pub. L. No. 101-508, 104 Stat. 1388-29 (1990), amending 29 U.S.C. § 216(e). The Administrator
argued that the ALJ’s Decision was inconsistent with Acting Administrator, Wage and Hour
Division v. Chism Trail, Inc., 1992-CLA-45, slip op. at 9 (Sec’y., June 30, 1993). In that case,
the Secretary noted that “the legislative history of the increased [civil money penalty] provision as
well as the Department’s own regulatory history establishes that the substantial increase in the
[civil money penalty] maximum was to have an impact on penalty sizes -- even in cases which do
not represent the most egregious violations.” The ARB held that the legislative history of the
amendments clearly provides for more vigorous enforcement of the child labor restrictions and
that the ALJ’s reduction in the civil money penalties was contrary to the congressional purpose.
Slip op. at 3. As a result, the Administrator’s original assessment of $23,500.00 was reinstated.
C. Propriety of reduction of civil monetary penalty
1. Appropriate
28
[a] No prior violations; cooperation with investigation no injuries;
assurances of future compliance
In Administrator, Wage and Hour Division v. D.D. & D., Inc., 1990-CLA-35 (Sec’y.,
Apr. 3, 1995), the Secretary appears to have approved the ALJ’s consideration of whether a less
rigorous penalty than that imposed by the Administrator will still achieve the objective of the child
labor provisions in accordance with 29 C.F.R. § 579.5. Although the Secretary modified some
aspects of the ALJ’s reduction of the penalty, he found that factors, such as Respondent's
cooperation with the investigation, a lack of prior violations, the fact that no minors suffered
injuries, and Respondent's credible assurance of future compliance, supported a reduction in the
original assessment of penalties by 40 percent.
[b] Minor cleaning already disassembled/harmless parts of a slicer
In Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec. 17,
1999), the ALJ noted that 29 C.F.R. § 570.61(a)(4) prohibits the cleaning of hazardous machines.
However, he noted the following:
A meat slicing machine used in a retail delicatessen is specifically cited as an
example of such a machine. However, the already disassembled harmless guard
and carrier of a meat slicing machine cannot rationally be considered a machine at
all! The regulation prohibits only the cleaning of a machine. The evidence simply
does not establish that (the minor) cleaned a slicing machine in violation of the
regulations. . . .
Also, that (the minor) once cut his finger while voluntarily removing a piece of
meat from the slicing machine, adds nothing to the propriety/validity of the making
of this invalid (cleaning) fine.
Slip op. at 5-6.
However, it is noted that, in Administrator, Wage and Hour Division v. Maelal, Inc.,
1992-CLA-43 (Sec’y., Apr. 14, 1995), the Secretary held that it was error for the ALJ to vacate a
civil money penalty on the grounds that the minors cleaned an assembled meat slicer that was
unplugged. The ALJ had reasoned that cleaning the meat slicer under these circumstances was
less hazardous than operating it. The Secretary disagreed and held that “the ALJ was without
discretion under Hazardous Order No. 10 to distinguish between the hazards posed by operating a
meat slicer and cleaning a meat slicer, or the hazards posed by various cleaning methods.”
2. Not appropriate
[a] Minors operating dangerous machinery
i. Generally
29
Most often, it is inappropriate to reduce the civil money penalty where a minor has operated
dangerous machinery in contravention of the Secretary’s Hazardous Occupations (“HO”) orders
under the Act and its implementing regulations. In U.S. Dep’t. of Labor v. Jerral D. Parris,
1995-CLA-8, slip op. at 10 (ALJ, May 24, 1996), aff’d. in part and rev’d. in part,(ARB, Mar. 27,
1997), the ALJ found that the facts did not support a reduction of the penalty assessed by the Wage
and Hour Division. The violations were of a severe nature, involving minors operating dangerous
machinery. Respondents had a history of prior violations, and the duration of the illegal
employment was significant, encompassing over two years. Considering Respondent’s lack of
cooperation and disdain for the administrative proceeding, the civil money penalty was necessary
to achieve the purposes of the Act.
Moreover, the Secretary held, in Administrator, Wage and Hour Division v. D.D. & D.,
Inc., 1990-CLA-35 (Sec’y., Apr. 3, 1995), that it was error for the ALJ to re-categorize violations
involving minors under the age of 16 from HO 10 to Reg. 3, based on the same spilt of opinion
and HO 10's lack of reference to employees under age 16. The Secretary concluded that 29 C.F.R.
§ 570.33(e) expressly makes the Hazardous Occupations Order applicable to those under the age
of 16 years.
However, in Administrator, Wage and Hour Division v. Triton Industries, 2006-CLA-2
(ALJ, May 3, 2006), the ALJ found that mitigating circumstances compelled a reduction of the
civil money penalty from $2,400.00 to $200.00. Under the facts of the case, Respondent employed
a minor for 16 weeks at the request of his father, who was also an employee of Respondent. For
eight weeks, the minor spent time cutting grass and babysitting for Respondent. For the remaining
eight weeks, he worked at Respondent's shop “sweeping, moving hoses, and picking up parts.”
The ALJ found it undisputed that, without Respondent's owner’s knowledge, the minor’s father
and the shop foreman had the minor drive a forklift to move pallets on occasion. The ALJ
determined:
While classified as dangerous activities, the minor here had a valid driver's license
at the time he drove the vehicles and knew to wear a seat belt. As to the forklift, he
testified that the equipment had roll cages, that he never lifted anything more than
a foot off the ground and on the few occasions he operated the machines no
accidents ever occurred. (citation omitted). These details coupled with the fact that
the minor totally worked at the shop no more than 8 days during which time he, for
the most part, simply swept and cleaned up the area, that neither of [Respondent's
owners] knew of his operating company vehicles and equipment nor had [the
Respondent] ever before or since been charged with such violations, causes me to
find it is far more appropriate that a de minimus civil penalty of $100.00 for each
violation be imposed.
ii. Meat slicers
Hazardous Occupations Order No. 10 (“HO 10”), relating to use, disassembly, cleaning
and/or reassembly, of a power driven meat slicer, has been subject to a split of opinion among
ALJs as to whether it applies to restaurants as opposed to meat processing plants. The Secretary
30
of Labor’s position, however, is that HO 10 also applies to restaurants. See Dole v. Stanek, Inc.,
116 Lab. Cas. (CCH) 35,372 (N.D. Iowa 1990); Administrator, Wage and Hour Division v. D.D.
& D., Inc., 1990-CLA-35 (Sec’y., Apr. 3, 1995) (holding that HO 10 applies to restaurants such
that a reduction in the amount of the civil money penalty should not have been granted);
Administrator, Wage and Hour Division v. Henderson, 1991-CLA-83 (Sec’y., Apr. 18, 1995)
(finding that operation of a meat slicer at the Piggly Wiggly Supermarket is covered by HO 10).
In Administrator, Wage and Hour Division v. Maelal, Inc., 1992-CLA-43 (Sec’y., Apr.
14, 1995), the Secretary held that it was error for the ALJ to vacate a civil money penalty on
grounds that the minors cleaned an assembled meat slicer that was unplugged. The ALJ had
reasoned that cleaning the meat slicer under these circumstances was less hazardous than operating
it. The Secretary disagreed and held that “the ALJ was without discretion under Hazardous Order
No. 10 to distinguish between the hazards posed by operating a meat slicer and cleaning a meat
slicer, or the hazards posed by various cleaning methods.”
It is noted that HO 10 was amended in 1997 to provide that certain occupations in or about
slaughtering or meat packing establishments, rendering plants, or wholesale, retail, or service
establishments are prohibited for minors between 16 and 18 years of age. See 20 C.F.R. § 570.61
(1997). In Administrator, Wage and Hour Division v. Starvin’ Sam's Minimart #3, Inc., 1999CLA-30 (ALJ, June 30, 2000), the ALJ applied the 1997 amended version of HO 10 to find that
its prohibition applied to a minor's operation of a power-driven meat slicer at Respondent's
delicatessen.
In Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec. 17,
1999), the ALJ held that a minor suffered a “serious” injury to her thumb while operating a meat
slicer. The injury required nine stitches and she testified that she continues to experience numbness
in her thumb. As a result, the ALJ upheld the imposition of increased civil monetary penalties on
this ground. But see U.S. Dep’t. of Labor v. Ed Hudson and Janice Hudson d/b/a CJs Country
Market & Pizza Pro, 2001-CLA-24 (ALJ Jan. 7, 2003) (holding 16 year old’s injury to finger
while operating meat slicer requiring eight stitches was not “serious” to support increased penalty
because minor did not miss work, “the finger fully healed in three months and although she
suffered a decrease in sensation, she had no loss of motion”; also noting that Employer did not
display open “contempt” for child labor laws unlike in Chrislin).
iii. Paper balers
In Administrator, Wage and Hour Division v. Zukiewicz, Inc., 1991-CLA-66 (Sec’y., Jan.
31, 1996), the Secretary held that even under pre-1991 amendments to HO 12, the use of a paper
baler for recycling (as opposed to the purpose of producing a final product), was a covered activity.
The Secretary reasoned that use of a baler for recycling falls within the meaning of “remanufacturing” under 29 C.F.R. § 570.63. Moreover, in reviewing the penalty assessment, the
Secretary took into account that Respondent was a repeat offender and had been cited for the same
violation several years earlier. See also Administrator, Wage and Hour Division v. Ahn’s
Market, Inc., ARB Case No. 99-024, 1997-CLA-33 (ARB, July 28, 2000) (loading and operating
a baler at a market in violation of HO 12; 11 minors between the ages of 16 and 18 years were
31
involved; and the size of the employer’s business, where the annual gross volume of sales was
$1.7 million, did not warrant a reduction in the civil money penalty amount of $7,200);
Administrator, Wage and Hour Division v. Henderson, 1991-CLA-83 (Sec'y., Apr. 18, 1995)
(loading and unloading a paper baler at the Piggly Wiggly Supermarket); Acting Administrator,
Wage and Hour Division v. Supermarkets General Corp. , 1990-CLA-34 (Sec’y., Jan. 13, 1993)
(loading and unloading paper baler violated HO 12).
In Administrator, Wage and Hour Division v. Ahn’s Market, Inc., ARB Case No. 99-024,
1997-CLA-33 (ARB, July 28, 2000), the ARB noted that the employer testified that its policy was
not to permit any minor under 18 years of age to operate a baler. Signs were openly displayed on
the baler to this effect and monthly meetings were held by the night manager during which the
policy was discussed. The company’s owner as well as the night manager testified that minors
were permitted to load the baler. Citing to Administrator, Wage and Hour Division v. Chism
Trail, Inc., 1992-CLA-45 (Sec’y., June 30, 1993), a case involving similar facts, the ARB found
that the company committed violations of the version of the HO 12 which was in effect during the
time the violations were being committed. In so holding, the ARB held that the subsequent
amendments to the FLSA, which permitted 16 and 17 year old minors to load a baler (but not
operate or unload it), could not be retroactively applied. As a result, the civil money penalty
assessed against the company was upheld.
iv. Skid loader
In Administrator, Wage and Hour Division v. Lynnville Transport, Inc., 1999-CLA-18
(ALJ, Aug. 29, 2000), the ALJ concluded that minors’ operation of a skid loader violated the
Secretary of Labor’s Hazardous Order 7, located at §§ 570.58(a)(1) and (b)(5). He noted that the
regulatory language at § 570.58(a)(1) provided that occupations involving the operation of an
elevator, crane, derrick, hoist or high-lift truck are particularly hazardous for minors between the
ages of 16 and 18 years. Moreover, subsection (b)(5) prohibits the operation of industrial trucks
by minors. Respondent argued that the minors did not use the loader in any manner prohibited by
the regulations. The ALJ stated the following:
The evidence regarding the minors’ use of the skid loader is quite simple. They
used the skid loader in such a manner as was necessary to clean the respondent’s
trailers and surrounding loading sites. They pushed or pulled manure or other
materials around by lowering the shovel of the skid loader to its lowest level so that
the shovel was on the floor or they manipulated the shovel by levers so that the
shovel could transport the materials at a low level to a dumping site. The parties
agree that the minors were not required to raise the shovel of the skid loader to a
high level at any time during the performance of their work-related duties.
I find it is the mere use of the skid loader by minors that is precluded by Section
570.58(a)(1). How the minors used the equipment, which is clearly covered by
Hazardous Order 7, is not important to the resolution of this case. I recognize that
Section 570.58(b)(5) indicates that the use of a low-lift truck for the transportation
of material is not intended to be covered by the Hazardous Order, but Lynnville’s
32
employees were not using a low-lift truck. They clearly were using a high-lift truck,
which is contrary to Hazardous Order 7, and the operation of such a truck by minors
is precluded by the hazardous order even if the minors’ use of the equipment was
consistent with that normally performed by low-lift trucks.
Slip op. at 9. The ALJ's decision was upheld by the United States District Court in
Lynnville Transport, Inc. v. Chao, 316 F.Supp.2d 790 (S.D. Ia. 2004).
v. Fork lift operator
In Secretary of Labor v. Fisherman’s Fleet, Inc., 2001-CLA-34 (ALJ, Oct. 24, 2002), the
ALJ assessed a $99,431.25 penalty against Employer on grounds that Employer permitted 17
minors to operate a forklift (which resulted in the death of one of the minors) in contravention of
Hazardous Order 7, permitted minors to work in excess of hours permitted under the regulations,
and failed to maintain accurate birth records for four minors.
On appeal, in Administrator, Wage and Hour Division v. Fisherman’s Fleet, Inc., ARB
Case No. 03-025, 2001-CLA-34 (ARB, June 30, 2004), the Board affirmed the ALJ’s findings of
violations under the Act, but held that the $99,431.25 penalty assessed against Employer was too
low. The Board noted that the ALJ reduced the penalty amount by 25 percent. However, the
Board determined that the fact that Employer was a closely held business of only 10 to 12 regular
employees and annual gross sales of $3.5 million supported a finding that the company was a
medium-sized business, not a small business:
Given its yearly multimillion dollar sales and its ample facilities and equipment,
FFI is clearly a medium-sized company. Because workforce size is only one of the
factors to be considered, the relatively small FFI workforce does not compel a
different conclusion.
Slip op. at 7. Moreover, the Board concluded that the fact that the company did not have
a history of violations did not warrant reducing the penalty as the “number of minors illegally
employed and the ages at the time of employment are factors that accentuate the gravity of the
company's violation.” Slip op. at 7; see also U.S. Dep’t. of Labor v. J. Rental, Inc. d/b/a Hank
Parker’s Rental, 2006-CLA-17 (ALJ, June 6, 2007) (finding that Employer violated HO 7 at 29
C.F.R. § 570.58 by requiring minors to drive forklifts as part of their job duties).
vi. Commercial deep sea fishing
In Administrator, Wage & Hour Division v. Ronald and Debbie Halsey, 2003-CLA-5
(ALJ, Feb. 2, 2004), aff’d., ARB Case No. 04-061 (ARB, Sept. 29, 2005), aff’d., 2007 WL
4106268 (D. Ak., Nov. 16, 2007) (unpub.), the ALJ upheld the Administrator’s imposition of a
maximum penalty of $11,700 where a 14 year old drowned in a capsized boat while assisting
Respondents with their net salmon fishing business. Although Respondents did not have a history
of repeat violations, they professed ignorance of the child labor laws and maintained that the
penalty would nearly offset their gross receipts. The ALJ nevertheless upheld the maximum
33
penalty based on the inherently hazardous work of the minor and its tragic consequences in this
case. On appeal, the ARB and the U.S. District Court of Alaska agreed. Citing to 29 C.F.R.
§§ 570.33(f)(1) and 570.119(f)(1), the ARB noted that the FLSA specifically prohibits
employment of minors between 14 and 16 years of age in occupations involving the
“[t]ransportation of property . . . by water.”
vii. Power-driven woodworking machines
In Administrator, Wage and Hour Division v. Keystone Floor Refinishing Co., ARB Case
Nos. 03-056 and 03-067, 2002-CLA-017 (ARB, Nov. 29, 2004), the Board upheld imposition of
a civil money penalty where a 17 year old operated a miter saw and nail gun for a floor finishing
business in violation of Hazardous Order No. 5 found at 29 C.F.R. § 570.55.
viii. Saws and shears
In Administrator, Wage and Hour Division v. Keystone Floor Refinishing Co., ARB Case
Nos. 03-056 and 03-067, 2002-CLA-017 (ARB, Nov. 29, 2004), a civil money penalty was
properly imposed where a 17 year old employee operated a miter saw to refinish floors in violation
of Hazardous Order No. 14 found at 29 C.F.R. § 570.65.
[b] Failure to cooperate; disdain for administrative proceeding
In U.S. Dep't. of Labor v. Jerral D. Parris, 1995-CLA-8, slip op. at 10 (ALJ, May 24,
1996), aff’d in part and rev’d in part, (ARB, Mar. 27, 1997), the ALJ found that the facts did not
support a reduction of the penalty assessed by the Wage and Hour Division. The violations were
of a severe nature, involving minors operating dangerous machinery. Respondents had a history
of prior violations, and the duration of the illegal employment was significant, encompassing more
than two years. Considering Respondent’s lack of cooperation and disdain for the administrative
proceeding, the civil money penalty was necessary to achieve the purposes of the Act. See also
Administrator, Wage and Hour Division v. Lamplighter Tavern, 1992-CLA-21 (Sec’y., May 11,
1994) (civil monetary penalty upheld because “investigation history of this case is one of noncooperation and general evasiveness”).
[c] Extensive or repeat violations
In Administrator, Wage and Hour Division v. Thirsty’s Inc., 1994-CLA-65 (May 14,
1997), the Wage and Hour Compliance Officer uncovered approximately 400 specific violations,
with varying ranges of severity of noncompliance with work periods for children under the age of
16 -- with some children being subjected to multiple violations over a period of months -- the
violations could not be considered de minimus pursuant to 29 C.F.R. § 579.5(d)(1). See also
Administrator, Wage and Hour Division v. Shronk Road Markets, Inc., 2001-CLA-73 (ALJ,
May 19, 2003) (many minors were employed in violation of the Act more than once “and the ease
with which Respondent could have discovered these violations constitutes a reckless disregard for
compliance with the Act;” violations occurred over a two year period of time; lack of prior
violations and non-hazardous nature of the minors’ work not sufficient to mitigate penalty
34
amount); Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec. 17,
1999) (“the circumstances surrounding these violations support a finding of heedless exposure of
minors to an obvious hazard (meat slicer), and the continued and persistent occurrence of not
inadvertent violations”).
In Reich v. Baystate Alternative Staffing, Inc., 1994-FLS-22 (ARB, Dec. 19, 1996), the
ARB affirmed the assessment of a $150,000 civil money penalty where the violations involved
hundreds of employees over a period of several years, where the underpayment of wages was
almost equal to the proposed penalty, and where Respondent's profit for that period of time was
almost $3,000,000.
In Administrator, Wage and Hour Division v. Lamplighter Tavern, 1992-CLA-21
(Sec’y., May 11, 1994), the Secretary noted that there was no instructive case law as to what
constituted de minimus violations under § 579.5(d)(1). However, he concluded that the violations
at issue in the case at bar were not de minimus: “Here we have multiple violations regarding each
child: age, records, and hours violations with regard to three of the four children; age and records
violations regarding the fourth child.” Slip op. at 5. See also Administrator, Wage and Hour
Division v. Circulation Promoters, Inc., 1992-CLA-83 (Sec’y., Jan. 18, 1995) (total penalty was
only two percent of employer’s gross dollar volume during the years of violations; fact that penalty
for prior violations was set for one-half of the original amount requested irrelevant; most children
were under 14 years of age and many were under 12 years old; violations were willful as the
employer knew of the restrictions on the employment of minors but took no precautions to prevent
abuses from reoccurring which, in turn, supported use of multiplier).
In Acting Administrator, Wage and Hour Division v. Supermarkets General Corp., 1990CLA-34 (Sec’y., Jan. 13, 1993), the Secretary noted that numerous minors operated a paper baler
in violation of HO 12 and the employer's conduct was willful “given the large number and routine
nature of these violations.” The Secretary was also unimpressed with the fact that the employer
told the minors not to operate the paper baler as such did not “constitute taking reasonable
precautions to avoid violations.” In this vein, the Secretary cited to Donovon v. ELSA of New
Hampshire, Inc., 615 F. Supp. 106, 108 (D.N.H. 1984) wherein the district court held that it was
insufficient for central management to tell branch managers to not violate labor laws. The
Secretary also determined that the employer's history of prior violations under the FSLA detracted
from its credibility in assuring future compliance.
[d] Minors engaged in more than incidental or occasional driving of a
vehicle
In Administrator, Wage and Hour Division v. Blackhawk State Bank, 1993-CLA-82
(Sec’y., Nov. 20, 1995), a 17 year old cooperative education student worked as a bookkeeping
trainee, and drove bank-owned vehicles on at least 107 separate occasions. Driving duties ceased
when the student was transferred from the bookkeeping department to the teller trainee program.
The issue was whether the student's driving was occasional. Because the issue involved an
exception to a remedial statute, the exception is to be narrowly construed, and Respondent bears
the burden of proving entitlement to the exemption by a preponderance of the evidence. The
35
Secretary concluded that the ALJ erred in finding the driving to be occasional because it was only
a very small percentage of the student’s total employment history with the bank. The Secretary
noted that it is a basic tenet of the Department’s enforcement law that an employer’s compliance
must be measured on a workweek-by-workweek basis. In the instant case, where the student’s
employment was considered to include only the relevant period, the driving could not be found to
have been occasional. See also U.S. Dep’t. of Labor v. J. Rental, Inc. d/b/a Hank Parker’s
Rental, 2006-CLA-17 (ALJ, June 6, 2007).
Similarly, in Reich v. Delon Olds Co., 1994-CLA-59 (ALJ, Mar. 4, 1996), the ALJ found
that regardless of their job designation, minors whose principal functions were to wash and drive
courtesy cars (i.e., transporting customers to or from work or home), and who were assig ned to
either task as needed, were not driving under the exemption of 29 C.F.R. §570.52(b)(1) for
“occasional” and “incidental” operation of vehicles on public highways.
Drive for Teen Employment Act, effect of
In Administrator, Wage and Hour Division v. Tacoma Dodge, Inc., et al., 1994-CLA-80,
88, 91, 112 (ALJ on remand, Dec. 15, 1999), the ALJ noted that, in his original decision, he found
that the car dealerships had violated the child labor provisions of the FSLA:
I concluded that assessments against Tacoma and BNS were correct because these
respondents violated the Act as each of the minors employed with them drove
during non-daylight hours. I also found that the assessments against North Seattle
and Thomason must be sustained because these respondents failed to prove that the
driving by the minors on public roads was ‘occasional and incidental’ so as to fall
within the exception provided at 29 C.F.R. § 570.52(b)(2).
The ARB directed, however, that the ALJ consider how the provisions of the Drive for
Teen Employment Act affected the foregoing conclusions of law with respect to the four
respondents. On remand, the ALJ stated the following:
I initially conclude that the amendment to the Act has no effect on the conclusions
of law that I rendered with respect to Tacoma. As I found in the original decision,
the minor who drove on public roads for this respondent did so during non-daylight
hours and therefore the driving does not fall under the ‘occasional or incidental'
exception.
…
The same rationale applies to one of the child labor violations pertaining to BNS.
I found as a fact in the original decision that one of the minors involved in driving
on public roads for this employer provided courtesy transportation for customers
on two occasions during non-daylight hours. I also concluded in the original
decision with respect to this company that the minor who drove during non-daylight
hours, even once, cannot fall under the ‘occasional or incidental’ exception.
36
By its language, Hazardous Order No. 2 prohibits, with limited exceptions, the employment
of minor children age 16 or 17 in occupations which involve motor vehicle driving. One exception
is that the driving is “incidental and occasional.” See also 12 U.S.C. §§ 203(1) and 212(c); 29
C.F.R. § 570.52. The HO 2 was amended by enactment of the Drive for Teen Employment Act of
1998 at 29 U.S.C. § 219(e).
[e] Excessive hours
In Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec. 17,
1999), the ALJ held that imposition of civil money penalties for the “hours-violations” of two
minors was upheld where Respondent merely argued that it exercised “due diligence” and had a
“good faith belief” that it was acceptable to train the minors. The ALJ concluded, to the contrary,
that “this proposition that employment of minors in excess of lawfully restricted hours is excusable
where the minors are being trained, finds no statutory, regulatory, or decisional support, and
Respondents fail to identify any such support.” See also Administrator, Wage and Hour Division
v. Lamplighter Tavern, 1992-CLA-21 (Sec’y., May 11, 1994).
[f] Record-keeping violations
In Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec. 17,
1999), the ALJ upheld the assessment of a civil monetary penalty in the amount of $412.50 for
failure to comply with the record-keeping provisions of the child labor laws where Respondent
presented no defense or argument against assessment of this penalty. See also Administrator,
Wage and Hour Division v. Lamplighter Tavern, 1992-CLA-21 (Sec’y., May 11, 1994) (holding
that failure to maintain birth records for any employee under the age of 19 years constituted a
violation of 29 C.F.R. §516.2(a)(3)); Administrator, Wage and Hour Division v. Keystone Floor
Refinishing Co., ARB Case Nos. 03-056 and 03-067, 2002-CLA-017 (ARB, Nov. 29, 2004)
(failure to maintain birth record for 17 year old employee).
[g] Minimum sales volume at $500,000
The requirement of a minimum annual sales volume of $500,000 before an employer may
be held liable for a penalty under the “enterprise coverage” component of the Act was part of the
1989 amendments that became effective on March 31, 1990. 29 U.S.C. § 203(c)(1)(A);
Administrator, Wage and Hour Division v. Keystone Floor Refinishing Co., ARB Case Nos. 03056 and 03-067, 2002-CLA-017 (ARB, Nov. 29, 2004); see also U.S. Dep’t. of Labor v. J. Rental,
Inc. d/b/a Hank Parker’s Rental, 2006-CLA-17 (ALJ, June 6, 2007).
In Administrator, Wage & Hour Division v. Ronald and Debbie Halsey, ARB Case No.
04-061, 2003-CLA-5 (ARB, Sept. 29, 2005), aff'd., 2007 WL 4106268 (D. Ark., Nov. 16, 2007)
(unpub.), the Board noted that Section 12(c) of the FLSA states “[n]o employer shall employ any
oppressive child labor in commerce or in the production of goods for commerce or in any enterprise
engaged in commerce.” A 14 year old minor was employed in Respondent’s commercial salmon
fishing business, and he drowned when the boat capsized. Respondent argued that it was exempt
from the provisions of the Act because its annual gross sales volume was less than $500,000. Thus,
37
the Board stated that there are two types of coverage—(1) individual coverage, i.e. the minor was
employed in oppressive child labor in commerce as defined at 29 U.S.C. § 203(b); or (2) enterprise
coverage, i.e.the enterprise is engaged in commerce with annual gross volume sales of at least
$500,000 and where the only regular employees of the business are not the owners. Thus, citing
to Zorich v. Long Beach Fire Dep’t. & Ambulance Serv., Inc., 118 F.3d 682 (9th Cir. 1997), the
Board concluded that the minor was individually covered “by the Act even though the Halseys’
salmon business did not meet the $500,000 sales requirement.”
Investigation began when sales volume less than $500,000
In Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec. 17,
1999), Respondents argued that a minor was hired in June 1997, and the government’s
investigation began in August 1997, when its sales were below the $500,000 threshold such that
the civil money penalty was invalid. The ALJ cited to 29 C.F.R. § 779.266(b) as well as the district
court's decision in Martin v. Deiriggi, 1991 WL 323416 (N.D. W. Va.), aff'd., 985 F. 2d 129 (4th
Cir. 1992), to hold that, because the total sales of Respondents for the 12 month period immediately
preceding the second quarter of 1997 (April 1996 through March 1997) was $518,019, the
assessment of a civil monetary penalty was valid.
[h] Alleged inability to pay penalties
In Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec. 17,
1999), the ALJ held that an employer’s argument that it is unable to pay the assessed penalties
“cannot serve to reduce the penalties” in light of the circumstances of the case, i.e. minors operated
meat slicers and one minor was seriously injured.
In Administrator, Wage and Hour Division v. Elderkin Farm, ARB Case Nos. 99-033
and 99-048, 1995-CLA-31 (ARB, June 30, 2000), the ALJ reduced the civil money penalty
assessed by the Administrator, totaling $71,000, on grounds that Respondent filed for Chapter 13
bankruptcy and had not been able to make needed capital improvements on the farm because of a
lack of income. The ALJ concluded that “another large judgment against [Elderkin] could force
him out of business entirely.” As a result, the ALJ decreased the penalty by 50 percent. The ARB
disagreed with the reduction in penalty to state that, when the “serious financial difficulties” were
weighed against the gravity of the violations, the civil money penalty of $71,000 was appropriate.
First, two of the child labor violations were “extremely severe,” i.e. the minor’s right arm was
severed while operating a feed mixer which was missing a protective guard.
Second, the ARB noted that the other minors operated dangerous farm machinery, worked
inside manure pits, and worked in a yard occupied by a sow with suckling pigs or a cow with a
newborn calf and “[t]hese types of violations intrinsically are of elevated gravity given the
potential for serious physical harm.” The ARB also found that children aged 7, 10, and 11 years
old were performing these tasks and they “were not even marginally eligible to work in agriculture
in hazardous occupations, for which the minimum age is 16.” In addition, the ARB found that
Respondent failed to keep records of his minor employees, “actively misled” Wage and Hour
38
investigators, refused to provide documents to investigators, and denied investigators access to
certain areas of his farm.
In sum, the ARB determined that 41 child labor violations were committed which,
combined with the inherently dangerous work performed by the minors, Respondent's concealment
and falsification, and the flaws in the Respondent’s assurances of future compliance, a civil money
penalty of $71,000 was appropriate. See also Administrator Wage & Hour Division v. Ronald
and Debbie Halsey, 2003-CLA-5 (ALJ, Feb. 2, 2004), aff’d., ARB Case No. 04-061 (ARB, Sept.
29, 2005), aff'd., 2007 WL 4106268 (D. Ak., Nov. 16, 2007) (unpub.) (finding that although an
$11,700 penalty nearly equaled commercial fishing season’s earnings “does not render it
disproportionate per se” in light of 14 year old’s drowning); Administrator, Wage and Hour
Division v. Shronk Road Markets, Inc., 2001-CLA-73 (ALJ, May 19, 2003) (determining that a
penalty of $8,100 proper given that Respondent has $800,000 in business volume).
D. Exceptions to imposition of civil money penalty
1. De minimus exception at 29 C.F.R. § 579.5(d)(1)
[a] Applicable
In Administrator, Wage and Hour Division v. City of Wheat Ridge, Colorado,
1991-CLA-22 (Sec’y., Apr. 18, 1995), the Respondent employed 12 minors for a short period to
distribute towels at a public swimming pool. The Secretary agreed with the ALJ that the civil
money penalty should be vacated, although he modified some of the ALJ’s analysis. First, the
ALJ erred in his conclusion that the fact that the civil money penalty would be paid with taxpayer
money, rather than from profit, was a relevant consideration. The Secretary found that such a
factor was not “necessarily a relevant consideration.” Rather, a more pertinent consideration is
whether the public entity is big enough to have sufficient financial and staff resources to provide
that entity with access to information on child labor requirements. Second, the ALJ found under
§ 579.5(d)(1) that the violation was de minimus. The ALJ indicated that, although 12 minors were
involved and there was a separate record-keeping violation, the aggregate of these factors did not
bootstrap the violation to something greater than “de minimus.” The Secretary noted that 12
minors was a significant percentage of the relevant workforce, although only a single job
classification was involved and the duration of the underage employment was very short.
Rather than resolve the de minimis issue, the Secretary found that the criteria of subsection
(d)(2) was satisfied because there was no previous history of child labor violations, the underage
employees were not exposed to hazard or danger, none was injured, and Respondent gave credible
assurances of future compliance. Despite conflicting testimony, the Secretary accepted the ALJ's
finding that the violations were inadvertent. Finally, the Secretary noted that subsection (d)(2)
requires a determination where a civil money penalty is necessary to achieve the objectives of the
FLSA. Under the circumstances of the case, including the fact that immediate steps were taken to
achieve compliance upon being informed the violation and the very brief duration of underage
employment, the Secretary affirmed the ALJ’s vacating of the civil money penalty.
39
In Administrator, Wage and Hour Division v. Horizon Publishers and Distributors,
1990-CLA-29 (Sec’y., May 11, 1994), the Secretary concluded that envelope stuffing by minors
constituted de minimus violations of the child labor laws. The children had flexible schedules and
the amount of work done by each minor was minimal, i.e. an average of 17 hours worked per child.
Moreover, the Secretary noted that the employer gave credible assurances of future compliance,
which were supported by its lack of a history of violations of the Act as well as the fact that the
employer immediately ended employment of the minors when its practices were brought into
question by the Administrator.
In Administrator, Wage and Hour Division v. Navajo Manufacturing, 1992-CLA-13
(Sec’y., Feb. 21, 1996), Respondent had employed underage minors in processing goods for
shipment from a warehouse. The minors had been hired at the behest of their parents (who were
employees) for periods ranging from two days to one month during breaks from school. No minors
were injured, Respondent had no history of non-compliance with the FLSA, Respondent
cooperated with investigation and terminated employment of the minors upon notification of the
violation, and Respondent made a credible assurance that it would comply with the FLSA in the
future. The ALJ vacated the civil money penalty. In doing so, he weighed the evidence, took into
consideration the mitigating circumstances pursuant to 29 C.F.R. § 579.5(d), and concluded that
the violations were de minimus and that the assessment of a civil money penalty was not
mandatory.
The Secretary found that the ALJ’s conclusion that a civil money penalty was not
mandatory was contrary to the legislative intent of the FLSA. The Secretary focused, however, on
“the amount of analysis or, in the ALJ’s words, ‘conscientious consideration,’ which is to be
expected of those Department officials who determine and review cmp assessments.” Slip op. at
6. The Secretary agreed with the ALJ that the analysis preceding the initial penalty assessment in
the matter had been too perfunctory, although he also faulted the ALJ for extending the analysis
too far beyond the regulatory elements of 29 C.F.R. § 579.5, thereby substituting the ALJ’s own
standards for the regulatory standards The Secretary especially faulted the ALJ for paying too
much attention to the nature of the work performed by the minors, stating that it was dispositive
that the violations involved underage children working in a warehouse. See 29 C.F.R.
§§ 570.34(b)(9) and 570.35. Although the Secretary reinstated the penalties, he reduced them by
75 percent.
In Administrator, Wage and Hour Division v. Triton Industries, Inc., L.L.C., 2006-CLA2 (ALJ, May 3, 2006), Respondent employed the 16 year old son of one of its employees for a
total of 16 days. During that time period, the minor spent half the time mowing Respondent’s
grass and babysitting. The other half of the time was spent at Respondent’s shop where the minor
swept, moved hoses, and picked up parts. On occasion, however, the minor’s father had his son
drive a forklift to move pallets, or drive a vehicle to get gas. The Wage and Hour investigator
testified that Respondent had no previous history of child labor violations, did not know of the
minor’s activities driving the forklift or vehicles, and “exhibited no willingness in allowing the
circumstances to take place.” Because of the circumstances of the case, the investigator
recommended that the assessed penalty amount of $2,400.00 be reduced. The Administrative Law
40
Judge reviewed the factors at 29 C.F.R. § 579.5(c) and reduced the penalty to $100.00 for each
violation for a total de minimus penalty amount of $200.00.
[b] Not applicable
In U.S. Dep’t. of Labor v. J. Rental, Inc. d/b/a Hank Parker’s Rental, 2006-CLA-17
(ALJ, June 6, 2007), the ALJ determined that a penalty of $9,240.00 assessed against the
Respondent was proper and that, “based on the number of total violations (including violations of
operating a fork lift) and the same children were involved in multiple violations,” the ALJ
concluded that he could not find that the violations were de minimus.
In Administrator, Wage and Hour Division v. Shrock Road Markets, Inc., 2001-CLA-73
(ALJ, May 19, 2003), the ALJ concluded that Respondent’s violations under the Act were not de
minimus:
Many factors . . . prevent the violations from being classified as de minimus
including: the age of the minors in question [fourteen and fifteen-year-olds]; the
repetitive nature of the violations; the fact that the violations took place after Labor
Day and before June 1st; testimony regarding the large number of minor employees
[50 percent], at least a few of whom were hired through community outreach
programs; and the Respondent’s inability or unwillingness to keep track of its
employees.
Slip op. at 11. A penalty of $8,100 for 18 minors employed in violation of the Act was assessed.
In Secretary of Labor v. Fisherman’s Fleet, Inc., 2001-CLA-34 (ALJ Oct. 24, 2002),
aff’d., ARB Case No. 03-025 (ARB, June 30, 2004), the ALJ concluded that 14 occupation
violations and 17 forklift violations committed by Respondents, resulting in the death of one
minor, were not de minimus.
In Administrator, Wage and Hour Division v. Thirsty’s Inc., 1994-CLA-65 (ARB, May
14, 1997), the Wage and Hour Compliance Officer uncovered approximately 400 specific
violations, with varying ranges of severity of noncompliance with work periods for children under
the age of 16 -- with some children being subjected to multiple violations over a period of
months -- the violations could not be considered de minimus pursuant to 29 C.F.R. § 579.5(d)(1).
The ALJ determined that Respondents’ violation of the child labor prohibitions was not de
minimus in Administrator, Wage & Hour Division v. Ronald and Debbie Halsey, 2003-CLA-5
(ALJ, Feb. 2, 2004), aff'd., ARB Case No. 04-061 (ARB, Sept. 29, 2005), aff'd., 2007 WL 4106268
(D. Ak., Nov. 16, 2007) (unpub.) where a 14 year old working for a commercial deep sea fishing
enterprise drowned when his boat capsized.
In Administrator, Wage and Hour Division v. Lamplighter Tavern, 1992-CLA-21
(Sec’y., May 11, 1994), the Secretary noted that there was no instructive case law as to what
41
constituted de minimus violations under § 579.5(d)(1). However, he concluded that the violations
at issue in the case at bar were not de minimus:
Here we have multiple violations regarding each child: age, records, and hours
violations with regard to three of the four children; age and records violations
regarding the fourth child.
Slip op. at 5.
In Acting Administrator, Wage and Hour Division v. Supermarkets General Corp., 1990CLA-34 (Sec’y., Jan. 13, 1993), the Secretary held that the employer’s violations were not de
minimus where the ALJ cited to 88 time and hour violations. The Secretary stated that “[g]iven
the high number of violations and the percentage of minors involved (seventeen of forty-six minors
employed), I conclude that the violations are not de minimus.”
2. Inadvertent conduct exception at 29 C.F.R. § 579.5(d)(2)
This exemption requires that Respondent establish that it “had no previous history of child
labor violations, that the violations themselves involved no intentional or heedless exposure of any
minor to any obvious hazard or detriment to health or well-being and were inadvertent, and that
the person so charged has given credible assurance of future compliance. . . .” 29 C.F.R.
§ 579.5(d)(2).
[a] Applicable
In U.S. Dep’t. of Labor v. Mike Bludau d/b/a B&B Metal Buildings, Inc., 1994-CLA-58,
slip op. at 4-5 (ALJ, Mar. 12, 1996), the ALJ determined that the imposition of a civil money
penalty was not necessary to achieve the objectives of the Act under the particular circumstances
of the case. Respondent was initially assessed a $2,400.00 penalty for employing a 16 year old
who drove a fork lift and pick up, duties considered hazardous by the Department of Labor.
Respondent, whom the ALJ found to be a very credible witness, testified that he did not know the
minor drove a fork lift and that it was not within the minor’s job duties. Respondent did not
heedlessly expose the minor to obvious hazardous duties and was intending to help the minor earn
credits at school. Respondent had no history of prior violations, no injuries occurred, and no
allegation that the work interfered with the minor's school attendance. Because any violation that
occurred was unintentional and because Respondent was repentant and assured future compliance,
the ALJ did not impose a civil money penalty for the violations.
[b] Not applicable
In Administrator, Wage and Hour Division v. Chrislin, Inc., 1999-CLA-5 (ALJ, Dec. 17,
1999), the Secretary held that “the circumstances surrounding these violations support a finding of
heedless exposure of minors to an obvious hazard (meat slicer), and the continued and persistent
occurrence of not inadvertent violations.” As a result, the exception to the civil money penalty
was not applicable. See also Administrator, Wage and Hour Division v. Circulation Promoters,
42
Inc., 1992-CLA-83 (Sec’y., Jan. 18, 1995) (total penalty was only two percent of employer’s gross
dollar volume during the years of violations; fact that penalty for prior violation was set for onehalf of the original amount requested irrelevant; most children were under 14 years of age and
many were under 12 years old; violations were willful as the employer knew of the restrictions on
the employment of minors but took no precautions to prevent abuses from reoccurring which, in
turn, supported use of multiplier).
VIII. Types of dispositions
A. Consent findings
In Secretary of Labor v. Pounders, Inc., 1999-CLA-4 (ALJ, May 9, 2000), the ALJ issued
a Decision and Order Adopting Consent Findings in a case filed under the child labor provisions
at 29 U.S.C. § 216(e) and 29 C.F.R. Parts 579 and 580. See also 29 C.F.R. § 18.9; Secretary of
Labor v. Blue Diamond Mfg. Co., 2000-CLA-29 (ALJ, May 14, 2001); Administrator, Wage and
Hour Division v. Butler Country Club, Inc., 1999-CLA-9 (ALJ, Jan. 6, 1999).
B. Appointment of settlement judge
In U.S. Dep’t. of Labor v. Brothers Reid, Inc., 1999-CLA-17 (ALJ, Mar. 30, 1999), Chief
Judge Vittone noted that the parties agreed to the appointment of a settlement judge pursuant to 29
C.F.R. § 18.9(e)(1) and the matter was referred accordingly.
C. Dismissal
1. Based on withdrawal of civil money penalties
In Secretary of Labor v. New England Fire Equipment, 1998-CLA-51 (ALJ, Mar. 11,
1999), the ALJ issued an Order of Dismissal based on the government’s motion to withdraw its
request for civil money penalties. The government noted that “additional information” had come
to its attention which resulted in its withdrawal of the penalties.
In Administrator, Wage and Hour Division v. Cornforth-Campbell Motors, Inc., 1994CLA-73 (ALJ, May 24, 1999), the ALJ granted the Department’s request for dismissal. The ALJ
vacated the assessment of a civil money penalty “as the evidence of record fail[ed] to establish any
violations of the child labor provisions of the Act under the definition of ‘occasional and
incidental’of Section 2(a) of the Drive for Teen Employment Act . . . as made applicable to this
case by virtue of Section 2(b)(2) of that statute.”
2. Based upon failure to comply with discovery order
43
In Adminstrator, Wage and Hour Division v. Vinton D. Erickson Farms, 1991-CLA-76
(Sec’y., July 13, 1995), Respondent was found to have repeatedly and intentionally failed to
comply with the ALJ’s discovery order. Under such circumstances, the ALJ properly applied the
sanction of dismissal. The Secretary found that, since the remedies for failure to comply with an
order to compel discovery are not expressly stated in the Rules of Practice and Procedure for
Administrative Hearings, 29 C.F.R. Part 18, it was proper to invoke Rule 37(b)(2) of the Federal
Rules of Civil Procedure, which expressly establishes the appropriateness of sanctions against
parties who fail to obey an order to provide discovery. See also 29 C.F.R. § 18.6. The Secretary
noted that the purpose of Federal Rule of Civil Procedure 37 is to allow the presiding judge to
fashion sanctions that are appropriate for the offense being sanctioned.
D. Default judgment
In U.S. Dep’t. of Labor v. Chips Restaurant, Inc., 1998-CLA-5 (ALJ, Jan. 13, 1999), a
decision and order finding Respondent in violation of the child labor provisions at 29 U.S.C.
§§ 201 and 216 was issued. Respondent failed to comply with the Notice of Docketing, which
required that the parties exchange and submit evidence in support of their respective positions. An
order to show cause was issued and no response was received. As a result, pursuant to 29 C.F.R.
§ 18.6(d)(2)(v), the ALJ found Respondent in violation of Section 12 of the Act and assessed civil
money penalties against Respondent in the amount of $9,900.
In U.S. Dep’t. of Labor v. Fox Chapel Yacht Club, Inc., 1992-CLA-151 (Sec’y. Sept. 12, 1995),
the Secretary agreed that Respondents demonstrated recalcitrance in the pre-hearing stage of the
administrative proceeding. It was noted that the Department filed a motion for an order to show
cause why a default judgment should not be entered, the ALJ entered such an order, and
Respondents did not file a timely response to the order. It was further noted that Respondents had
failed to respond to the notice of docketing or to the Department's pre-hearing exchange. As a
result, the Secretary determined that Respondents subjected themselves to the discretionary powers
of the ALJ and those powers included a full range of sanctions pursuant to 29 C.F.R. § 18.6. The
Secretary concluded that the ALJ’s entry of a default judgment was clearly authorized, and it was
adopted on appeal.
E. Civil money penalty does not constitute “liquidated damages”
In United States v. Fisherman’s Fleet, Inc., 2007 WL 4365356 (D. Mass. Dec. 12, 2007)
(unpub.), when Respondent failed to pay $132,575.00 in civil money penalties awarded by the
administrative law judge and affirmed by the Administrative Review Board, the Department of
Labor commenced an enforcement action in federal district court. Respondent asserted that the
enforcement action was time-barred by the two year statute of limitations contained at 28 U.S.C.
§ 2462 of the Portal-to-Portal Act. To the contrary, the district court agreed with the Department
of Labor and concluded:
Because the ‘civil penalty’ assessed under § 216(e) does not constitute ‘liquidated
damages,’ the limitations period set forth in § 255 is inapplicable. In the absence
of a particularized limitations period, 28 U.S.C. § 2462 provides the governing
44
statute of limitations. Under that section, any action ‘for the enforcement of any
civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained
unless commenced within five years from the date when the claim first accrued if,
within the same period, the offender or the property is found within the United
States in order that proper service may be made thereon.’ (emphasis added).
Because this action was filed within five years of the Administrative Review
Board's Final Decision and Order, it is timely.
45
FAIR LABOR STANDARDS ACT OF 1938
I. Generally
Purpose
The FLSA was enacted in 1938 for the purpose of eliminating labor conditions detrimental
to a minimum standard of living required for the general well-being of workers engaged in
commerce or in the production of goods for commerce. Overnight Motor Transp. Co. v. Missel,
U.S. Md.1942, 316 U.S. 572, reh’g. denied, 317 U.S. 706 (1942). There is coverage under the
FLSA where: (1) an employer/employee relationship is established; (2) the requirements for either
individual or enterprise coverage are met; and (3) the work is performed in the United States or a
territory of the United States.
Citing to 29 U.S.C. § 202(a), the court in Hogan v. Allstate Ins. Co., 361 F.3d 621 (11th
Cir. 2004), held that the FLSA establishes minimum standards to eliminate “labor conditions
detrimental to the maintenance of the minimum standard of living necessary for health, efficiency,
and general well-being of workers.”
In Chao v. Gotham Registry, Inc., 514 F.3d 280 (2nd Cir. 2008), the court held that the
purpose of the FLSA’s overtime provisions are to “remedy the ‘evil of overwork’ by ensuring that
workers were adequately compensated for long hours as well as by applying financial pressure on
employers to reduce overtime.”
II. Jurisdiction
A. Laches
Held inapplicable
In Herman v. Suwannee Swifty Stores, Inc., 19 F.Supp.2d 1365 (M.D. Ga. 1998), the
court declined to dismiss the government’s motion for partial summary judgment based upon
Suwanee’s argument that “two and a half years passed between the investigation and the lawsuit”
and that “many of their managers have left the company.” The company did not argue that the
statute of limitations had run, and the government conceded that it is barred from recovery of back
46
wages for periods before April 1992. The court, without elaboration, declined to apply laches to
the case.
B. The Tenth Amendment and state and local government employees
In Garcia v. San Antonio Transit Authority, 469 U.S. 528 (1985), the Supreme Court held
that the FLSA applied to state and local government employees.
C. Employees cannot waive application of the FLSA
In O’Brien v. Encotech Constr. Serv. Inc., 183 F.Supp.2d 1047 (N.D. Ill. Jan. 18, 2002),
the district court held that an agreement signed by employees waiving application of the FLSA
was void on grounds that it was against public policy.
Moreover, in Andrako, et al v. U.S. Steel Corp., Civ. Action No. 07-1629 (W.D. Pa. May
8, 2008), the court held that there is “no per se requirement that a union employee proceed through
a collectively-bargained grievance and arbitration process prior to, or in lieu of, bringing a statutory
claim for wages under the FLSA.” Citing to Barrentine v. Arkansas-Best Freight Systems, Inc.,
450 U.S. 728 (1981), the court found that the Supreme Court “made clear that employees’ statutory
rights to minimum wages and overtime pay under the FLSA are separate and distinct from
employees’ contractual rights arising out of an applicable collective bargaining agreement.”
In Chao v. Gotham Registry, Inc., 514 F.3d 280 (2nd Cir. 2008), the Secretary of Labor
filed a civil contempt petition for Employer’s violation of a consent decree requiring it to pay time
and one-half wages to nurses working overtime. To avoid payment of overtime under the consent
decree, Employer, as a nursing employment agency that contracted with area hospitals, provided
the following “Notice” to its nurses:
You must notify GOTHAM in advance and receive authorization from GOTHAM
for any shift or partial shift that will bring your total hours to more than 40 hours in
any given week. If you fail to do so you will not be paid overtime rates for those
hours.
The court found that “[i]nformation that Gotham’s nurses regularly worked overtime was
communicated to Gotham each week on the nurses’ time sheets.” From this, the court stated that
“an Employer’s actual or imputed knowledge that an employee is working is a necessary condition
to finding the employer suffers or permits that work” under 29 U.S.C. § 207(a).
Based on the timesheets, Employer had a “duty to make every effort to prevent . . .
performance” of overtime work. The court held that “[t]his duty arises even where the Employer
has not requested the overtime be performed or does not desire the employee to work, or where
the employee fails to report his overtime hours.” Citing to 29 C.F.R. § 785.13, the court held that
the “mere promulgation of a rule against . . . (overtime) work is not enough” to escape liability
under the FLSA, such as the above-referenced “Notice” from Gotham to its nurses. In sum, the
47
court found that Employer violated the consent decree and failed to properly pay overtime in
accordance with the FLSA’s requirements.
D. The Portal-to-Portal Act is applicable
In IBP, Inc. v. Alvarez, 546 U.S. 21 (2005), the Court explained that the Portal-to-Portal
Act of 1947 relieves an employer of responsibility of compensating employees for “activities
which are preliminary or postliminary to [the] principal activity or activities” of a given job.” See
also 29 U.S.C. § 254(a) (1999). Not all preliminary or postliminary activities can go
uncompensated; however, “activities performed either before or after the regular work shift,” the
Supreme Court has noted, are compensable “if those activities are an integral and indispensable
part of the principal activities.” IBP, 546 U.S. at 28.
See also Steiner v. Mitchell, 350 U.S. 247, 256 (1956); De Asencio et al v. Tyson Foods, Inc.,
500 F.3d 361 (3rd Cir. 2007).
In Magers v. Seneca Re-Ad Industries, Inc., ARB Nos. 16-038, -054, ALJ No. 2016FLS-3 (ARB Jan. 12, 2017), the ARB found that the Portal-to Portal Act discretion to reduce or
disallow liquidated damages is given to courts and not to an ALJ or to the ARB. The ARB found
that Section 16(b) of the FLSA specifically applies to make the Employer liable in the amount of
unpaid minimum wages plus an additional equal amount as liquidated damages. The ARB was
unpersuaded by the Employer contention that because it had a Subminimum Wage Disability
Certificate because the Employer had not established that it was entitled to an exemption from
the obligation to pay the federal minimum wage. The ARB also found that Section 11 of the
Portal to Portal Act’s permitting reduction of, or disallowing of liquidated damages applies only
to court actions and not to administrative proceedings.
Portal to Portal Act Statute of Limitations
In Magers v. Seneca Re-Ad Industries, Inc., ARB Nos. 16-038, -054, ALJ No. 2016FLS-3 (ARB Jan. 12, 2017), the ARB found that the Portal-to Portal Act Statute of Limitations
as to damages only applies to courts and not to administrative proceedings. On appeal, the WHD
Administrator supported the Employer’s contention that the Portal to Portal Act’s statute of
limitation applies to the proceeding. The ARB disagreed, finding that the relevant portion of that
Act refers to a statute of limitations for an “action,” which refers only to judicial and not to
administrative proceedings. The ARB noted that this may seem anomalous, but found that
“Congress purposely established a completely separate administrative process for challenges to
the subminimum wage for disabled workers and did so without imposing a statute of
limitations.” Id. at 22.
E. Collateral Estoppel
In Administrator, Wage and Hour Div., USDOL v. ZL Restaurant Corp., ARB No. 16070, ALJ No. 2016-FLS-4 (ARB Jan. 31, 2018), the ALJ granted the Administrator’s motion to
stay the FLSA proceedings while the Secretary of Labor prosecuted a related action against
48
Respondents in the U.S. District Court for the District of New Mexico. After the District Court
entered judgment, the ALJ granted partial summary decision on the issue of whether Respondents
engaged in repeated and willful violations, holding that he was bound by the district court’s
decisions. The ARB affirmed this ruling finding that collateral estoppel prevented the
Respondents from relitigating these issues.
III. Standard of Review
The ALJ’s review of the Administrator’s findings is de novo. The regulatory provisions at 29
C.F.R. § 580.12(b) and (c) provide the following:
(b) The decision of the Administrative Law Judge shall be limited to a
determination of whether the respondent committed a violation of section 12, or a
repeated or willful violation of section 6 or section 7 of the Act, and the
appropriateness of the penalty assessed by the Administrator. The Administrative
Law Judge shall not render determinations on the legality of a regulatory provision
or the constitutionality of a statutory provision.
(c) The decision of the Administrative Law Judge shall include a statement of
findings and conclusions, with reasons and basis therefor, upon each material issue
presented in the record. The decision shall also include an appropriate order which
may affirm, deny, reverse, or modify, in whole or in part, the determination of the
Administrator.
29 C.F.R. § 580.12(b) and (c).
Moreover, the Secretary’s standard of review in of an ALJ’s decision in a Fair Labor
Standards Act case is de novo. See 5 U.S.C. §§ 554 and 557(b); 29 U.S.C. § 216(e). Additionally,
under 29 C.F.R. § 525.22(g), “[w]here [a] request for review [of the ALJ’s decision] is granted . . .
the Secretary shall review the record and shall either adopt the decision of the ALJ or issue
exceptions. The decision of the ALJ, together with any exceptions issued by the Secretary, shall
be deemed to be a final agency action.” In Magers v. Seneca Re-Ad-Industries, Inc., ARB Nos.
16-038, -054, ALJ No. 2016-FLS-3 (ARB Jan. 12, 2017), the regulations governing the type of
petition filed made the nature of the ARB’s review unclear. The ARB said that because of this
provision, it was not formally “adopting” the ALJ’s decision, but instead indicating where it agreed
with his conclusions and reasoning for some aspects of the decision, and taking “exceptions” where
it did not agree.
IV. Evidence
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A. Determination of back wages owed
1. Established
In Magers v. Seneca Re-Ad Industries, Inc., ARB No. 2018-0061, ALJ No. 2016-FLS00003 (ARB Sept. 14, 2020) (per curiam), on remand, the ALJ properly allowed additional
evidence on back wages for a period in which Petitioners had not previously introduced evidence
based on the assumption that there was a three-year limitations period under the Portal to Portal
Act. The ARB ruled in the remand order that the limitations period did not apply, and the ALJ
then correctly determined on remand that back wages should be awarded for the entire period in
which Respondent failed to pay minimum wage required by the FLSA.
In Magers, the ARB had, in an earlier decision, affirmed the ALJ’s determination that
Respondent violated the FLSA’s minimum wage provision because it was not entitled to employ
certain employees under the FLSA’s disabled workers exception provision. The ARB remanded
for the ALJ to recalculate damages. The ALJ issued a decision on remand, and Respondent
appealed.
Respondent first argued that the ALJ was prohibited from awarding back pay for the period
from the start of the employees’ employment until December 27, 2012. The ALJ, in the first
decision, had not included damages for this period because the parties had assumed that the
limitations period of the Portal-to-Portal Act applied, and the Petitioners had thus not introduced
evidence for this earlier period. See Magers v. Seneca Re-Ad Industries, Inc., ALJ No. 2016-FLS00003, slip op. at 3 (ALJ Aug. 1, 2018). The ARB agreed with the ALJ that its remand order “did
not instruct the ALJ to exclude any periods of employment, but instead agreed with the ALJ’s
conclusion that the back pay period was not limited by the Portal-to-Portal Act.” Slip op. at 5
(citing original remand order). The ARB agreed with the ALJ that none of the prior rulings on the
cases determined that the violations occurred over a limited period of time, or that the petitioning
employees should not be paid damages for all periods in which Respondent paid them less that the
minimum wage in violation of the FLSA.
Respondent’s second argument was the ALJ erred by reopening the record to receive
evidence for the calculation of back wages. The ARB rejected this argument, stating that ALJs
have the discretion to reopen a record for the receipt of additional pertinent evidence, including on
remand. The ARB determined that the ALJ did not abuse that discretion in this case because
evidence on wages for the pre-December 28, 2012 period was pertinent and necessary for the ALJ
to provide a ruling consistent with the remand order.
In United States Department of Labor v. Five Star Automatic Fire Protection, 987 F.3d
436 (5th Cir. 2021), the Fifth Circuit ruled that testimony of employees of an El Paso, Texas fire
sprinkler installation and service company about the amount of time they spent doing unpaid work
before and after their shifts was sufficient to support a trial court’s award for their unpaid overtime
wages claim, especially considering the company’s failure to keep accurate wage records. The
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U.S. Department of Labor brought the lawsuit on behalf of 53 construction employees who were
awarded about $246,000 in back pay and damages by the court. If an employer’s records are
inaccurate or inadequate, a worker seeking wages has a low bar to showing she was an employee,
worked the hours at issue, and was not paid. The employees’ consistent testimony that they had to
begin working at least 15 minutes before their scheduled shifts, that they had to return the company
truck from the job site after their shifts, and that they were instructed not to record either time
period was sufficient to justify the trial court’s award. The court also found that slight variations
in testimony of six employees as to whether lead supervisor actually told employees they could
not record, or would not receive compensation for, work activities performed outside eight-hour
shift did not negate reasonable inferences that they believed they would not be compensated for
that work and that variations in employees’ testimony regarding nature of loading work that
employees were required to perform before shift started did not negate reasonable inferences from
their testimony that they would not be compensated for that work.
In Herman v. Harmelech, 2000 WL 420839 (N.D. Ill., Apr. 14, 2000) (unpub.), the court
noted that the FSLA requires that an employer properly maintain records as to wages and hours
worked by its employees. 29 U.S.C. § 211(c); 29 C.F.R. § 516.2. Where an employer fails to
maintain and preserve adequate records:
. . . the Secretary can meet her burden of proof as to back wage liability by (1)
showing that work was performed which was not properly compensated, and (2)
producing sufficient evidence to show the amount and extent of that work as a
matter of just and reasonable inference.
Slip op. at 8 (citing to Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946)). In
Harmelech, the court found that back wages were properly calculated by the Secretary based on
“copies of paychecks and verification by the affected employees.” The burden then shifts to the
employer to produce evidence “of the precise amount of work performed or with evidence to
negate the reasonableness of the inference to be drawn from the employee's evidence.” If the
employer fails to carry this burden, then the back wages may be awarded even though the amount
is approximate. In Harmelech, Judith Harmelech argued that the burden should not shift to her as
she “had no control over recordkeeping.” The court rejected this argument to state:
. . . the duty to maintain records is an affirmative duty. An employer cannot shirk
her responsibility merely by isolating herself from the daily operations of the
company. Judith had a duty to ensure that the records were properly maintained
and preserved regardless of her limited role in creating those records.
Slip op. at 9. Upon employer’s failure to produce evidence to counter the Secretary’s calculation
of back wages owed, the court held that the Secretary was “entitled to the full amount of backwages
sought.”
In Metzler v. Hickey's Carting, Inc. , 1997 U.S. App. LEXIS 24445, Case No. 96-6272
(2d Cir. Sept. 16, 1997) (unpub.), the government alleged that Hickey failed to “keep accurate
records of hours worked by its employees and pay overtime as required by the Act” in accordance
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with an executed consent judgment. The court agreed and noted the testimony of numerous
witnesses who stated that they “worked multiple hours each week that were neither compensated
nor reflected on Hickey’s time records.”
Citing to Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946), the court in Metzler
held that, initially, the Secretary must establish a prima facie case of unpaid wages. This burden
was established, according to the court, by “testimony from multiple Hickey employees regarding
the number of uncompensated hours worked by them and their coworkers; the Secretary’s
investigator also testified, and produced documentary evidence showing the inaccuracy of
Hickey’s own time records.” Slip op. at 4. Therefore, the court held that the burden shifted to the
employer to “prove the precise extent of uncompensated work.” The court found Hickey’s records
to be inaccurate and incomplete such that it adopted the Secretary’s findings as to the amount owed
The court concluded that the Secretary’s determination constituted a reasonable approximation of
actual hours worked.
2. Not established
In Herman v. Express Sixty-Minutes Delivery Service, Inc., 161 F.3d 299 (5th Cir. 1998),
the Secretary argued that office workers of the company were not paid for overtime in
contravention of 29 U.S.C. § 207(a)(1). The court, however, held that the Secretary “failed to
present sufficient credible evidence” to support its back wage claims. Specifically, the court noted
that the testimony of two witnesses regarding overtime allegedly worked was conflicting:
The Secretary’s claim for back wages was supported at trial by the testimony of
Shirley Kenyon who presented an exhibit purporting to reflect the overtime due
these employees. Kenyon’s testimony was rebutted by Lynn Clayton’s testimony,
which indicated that the employment dates Kenyon used were incorrect and that
Kenyon assumed that each employee worked a 55-hour week, rather than the 45hour week actually worked. Lynn Clayton further testified that her office
employees were being paid time and a half for overtime hours prior to the
Secretary's investigation. Although Clayton had changed her method of record
keeping, she testified that the office employees were being paid the same amount
today as they were getting paid before the Secretary’s investigation. (citation
omitted). The district court concluded that the Secretary failed to present sufficient
credible evidence to support claims for back wages for the office workers. We
perceive no error in this conclusion, and the Secretary fails to point to any evidence
in the record and fails to cite any binding precedent to support its position that a
violation of the Act occurred.
Id. at 306-307.
B. Statutory affirmative defenses of the employer
1. Statute of limitations
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The Portal-to-Portal Act of 1947 provided a statute of limitations for actions seeking back
wages owed. 29 U.S.C. § 255. There is a two year statute of limitations “after the cause of action
occurred” for an employee to file a complaint in federal or state court. However, the Act provides
for a three-year statute of limitations where the violations were willful. 29 U.S.C. § 255(a). It is
the complainant's burden to establish that a violation is willful. Cox v. Brookshire Grocery Co.,
919 F.2d 354, 356 (5th Cir. 1990).
The FLSA statute of limitations only applies to the initiation of a new action and does not
apply to bar the Administrator from presenting evidence of past violations in support of civil
money penalties based on willful and repeat conduct. In Hong Kong Entertainment (Overseas)
Investments, Ltd., ARB No. 13-028 (ARB Nov. 25, 2014), the Respondent hotel and casino had
been the subject of an investigation by the Wage and Hour Division in 2001 and had entered into
a consent agreement to pay $591,535.02 for failure to pay overtime in compliance with the FLSA.
In 2007, the WHD investigated again and the Respondent signed a Back Wage Compliance and
Payment Agreement for $309.816.21 regarding overtime due under the FLSA. WHD
Administrator later imposed a $191.400 civil money penalty. The Respondent argued that the
five-year statute of limitations under 28 U.S.C.A. § 2462 precluded the Administrator from using
evidence of its past violations from its 2001 investigation to establish willful and repeat conduct
in support of the assessment of civil money penalties relating to the 2007 investigation. The ALJ
held that the statute of limitations did not prevent the Administrator’s use of evidence of past
violations to show willful or repeat violations, but only applied to an action, suit or proceeding
initiated in court. The ARB agreed. In addition, the ARB agreed with the Administrator’s
contention on appeal that the regulation at 29 C.F.R. § 578.4(a)(5) provides no limitations period
for establishing a repeated violation. The regulatory history did indicate, however, that the length
of time since the previous violation would be taken into consideration in determining the size of
the penalty.
2. Good faith reliance on Administrator’s rulings
Section 10 of the Portal-to-Portal provides the following with regard to reliance upon the
Administrator’s rulings:
. . . no employer shall be subject to any liability or punishment for . . . failure of the
employer to pay minimum wages or overtime compensation under the . . . [Act] . .
. if he pleads and proves that the act or omission complained of was in good faith
in conformity with and in reliance on any written administrative regulation, order,
ruling, approval, or interpretation, of the . . . [Administrator of the Wage and Hour
Division of the Department of Labor], or any administrative practice or
enforcement policy . . . with respect to the class of employees to which he belonged.
Such . . . defense . . . shall be a bar to the action or proceeding, notwithstanding that
after such act or omission, such administrative regulation, order, ruling, approval,
interpretation, practice, or enforcement policy is modified or rescinded or is
determined . . . to be invalid or of no legal effect.
53
29 U.S.C. § 259(a) and (b)(1). This defense must be timely asserted and is limited to an employer's
alleged failure to comply with minimum wage and overtime provisions of the FLSA, but not to
actions involving retaliatory discharge, child labor, or record-keeping violations. Conklin v.
Joseph C. Hofgesang Sand Co., 565 F.2d 405, 406-07 (6th Cir. 1977).
3. Good faith conduct by employer; reasonable grounds
Section 11 of the Portal-to-Portal Act provides for reduced liquidated damages where an employer
establishes that it acted in good faith and on reasonable grounds:
. . . if the employer shows to the satisfaction of the court that the act or omission
giving rise to such action was in good faith and that he had reasonable grounds for
believing that his act or omission was not a violation of the [Act], the court may, in
its sound discretion, award no liquidated damages or award any amount thereof not
to exceed the amount specified in section 16 of such Act.
29 U.S.C. § 260.
The employer, in Reich v. Baystate Alternative Staffing, Inc., 1994-FLS-22 (ARB Dec.
19, 1996), disagreed with the Wage and Hour investigator's interpretation of their status as an
employer. The ARB held that it was not sufficient, however, for Respondents to rely on their
counsel's opinions after they were advised by the Wage and Hour investigator that they were
responsible for making overtime payments and that they had an obligation to make further
inquiries by requesting an opinion from the Administrator. See 29 C.F.R. §§ 578.3(c)(3), 778.3,
and 790.13. Failure to comply with the investigator’s directives constituted “reckless disregard”
of the requirements of the Act.
V. Discovery
A. Summary judgment
1. Based on default
In Sec’y. of Labor v. Sunrise Properties & Development, Inc., 1999-FLS-15 (ALJ Jan. 4,
2000), the ALJ granted the government’s request for summary judgment on grounds that the
employer “failed to respond to discovery requests and that its officers failed to appear at properly
noticed depositions.” The ALJ also noted that the employer failed to respond to the ALJ’s order
to show cause. As a result, the government’s motion for default judgment was granted pursuant
to 29 C.F.R. § 18.6(d)(2). See also Administrator, Wage & Hour Division v. Blood, Sweat &
Tears, Inc., 1999-FLS-2 (ALJ Nov. 8, 1999) (failure to comply with a pre-hearing order).
2. Denied; genuine issue of material fact exists
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In Administrator, Wage and Hour Division v. Cliff’s Concrete, Inc., 1999-FLS-26 (ALJ
Nov. 30, 1999), the Administrator filed a motion for summary judgment alleging that the employer
failed to timely file exceptions to the letters of assessment such that, pursuant to 29 C.F.R. § 580.5,
the civil money penalties contained therein should be declared final. In support of his summary
judgment motion, the Administrator submitted an affidavit stating that he had not received the
employer's objections within 15 days as required by 29 C.F.R. § 580.4. However, counsel for the
employer submitted a contrary affidavit asserting that the exceptions had been timely filed. The
ALJ concluded that he had two directly conflicting affidavits before him such that a genuine issue
of material fact existed and summary judgment was improper.
B. Privileges
Informant’s privilege upheld
In Wirtz v. Continental Finance & Loan Co., 326 F.2d 561 (5th Cir. 1964), the employer
was charged with violating numerous provisions of the FLSA, and it propounded two
interrogatories upon the Secretary of Labor seeking the names of all persons who had filed
complaints charging violations of the Act as well as the names of witnesses which the Secretary
planned to call at the time of trial. The Secretary refused to answer the interrogatories, but he did
provide the employer with a list of 45 people believed to have knowledge of facts relevant to the
trial of the issues.”
On appeal, the Secretary argued that “there is a vital public interest in preserving anonymity
of employees who complain to the government that their employer is paying substandard wages.”
He maintained that the government relies on informants to enforce the FLSA, but notes that they
“are particularly susceptible to the fear of retaliation . . ..” The court held that it was “perfectly
plain that the names of informers (were) utterly irrelevant” to the issues of whether the employer
complied with the FLSA’s hourly wage requirements. It determined that the most effective
protection from retaliation was the anonymity of the informers, “[t]he pressures which an employer
may bring to bear on an employee are difficult to detect and even harder to correct.” The court
cited to similar rulings by other circuit courts under the FLSA in Mitchell v. Roma, 265 F.2d 633
(3d Cir. 1959) (“[a] distinction must be drawn between telling an employer which employees were
underpaid and who gave the information about underpayment”); Wirtz v. B.A.C. Steel Products,
Inc., 312 F.2d 14 (4th Cir. 1963) (witness statements were privileged and confidential and need
not be released; “most of the information needed to prosecute or defend the case was in the
Respondent's possession from the beginning; this was the Respondent's books and records”).
As for disclosing the names of witnesses to be called at trial, the court declined to rule on
the issue and stated that “[w]e do not now have before us the question whether the names of
witnesses may be compelled at a pre-trial hearing or at a date shortly before trial,” but the court
stated that “[w]e have no doubt . . . that the obtaining of such names is no part of the discovery
process before the filing of defensive pleadings.”
See also Brock v. On Shore Quality Control Specialists, Inc., 811 F.2d 282 (5th Cir. 1987);
Hodgson v. General Motors Acceptance Corp., 54 F.R.D. 445 (S.D. Fla. 1972) (court issued order
55
denying motion to compel production of written statements); Wirtz v. Robinson & Stephens, Inc.,
368 F.2d 114 (5th Cir. 1966).
VI. Employer/employee relationship
The Act does not apply unless an employer/employee relationship exists. See 29 U.S.C.
§§ 206 and 207. An “employee” is defined as “any individual employed by an employer.” 29
U.S.C. § 203(e)(1). 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. § 203(d). The term “employ”
includes to suffer or permit to work. 29 U.S.C. § 203(g); 29 C.F.R. § 785.11 (“[w]ork not
requested but suffered or permitted is work time”).
A. The “economic reality test,” generally
The courts employ the “economic reality test” to determine whether an employer/employee
relationship exists sufficient to invoke the FLSA protections. In United States v. Silk, 331 U.S.
704 (1947), the Supreme Court set forth general elements of this test as including degree of control
exercised by the employer over the employee, opportunity for profit or loss on behalf of the
employee, investment by the employee, permanency of the employment relationship, and the skill
level required of the employee. See also Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28
(1961); Morrison v. International Programs Consortium, Inc., 253 F.3d 5 (D.C. Cir. 2001)
(whether an employee is an independent contractor is for the fact-finder to decide; it was error for
the district judge to grant summary judgment on the issue); Henthorn v. Dept. of Navy, 29 F.3d
682, 684 (D.C. Cir. 1994).
B. Independent contractor status
The focus of the inquiry in determining whether an individual is an employee or an
independent contractor is whether the worker “is economically dependent on the business to which
he renders service . . . or is, as a matter of economic fact, in business for himself.” See Dole v.
Snell, 875 F.2d 802, 804 (10th Cir. 1989) (citing to Bartels v. Birmingham, 332 U.S. 126 (1947)).
The employer may be an enterprise or an individual depending upon the outcome of the “economic
reality” test.
There are a number of occupations wherein the courts have held that the worker is an
independent contractor and is, therefore, not covered by the FLSA. The Fifth Circuit set forth a
number of factors to be considered in determining whether a worker is an independent contractor.
In Herman v. Express Sixty-Minutes Delivery Service, Inc., 161 F.3d 299 (5th Cir. 1998),
the circuit court upheld a finding that delivery service drivers were independent contractors, and
not employees, under the FLSA utilizing the “economic reality” test. Under the facts of the case,
56
the company operated a courier delivery service, and it contracted with area businesses to deliver
packages 24 hours a day. The court held that the purpose of applying the five factor “economic
reality” test was to “determine
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