Opposition Brief — DialAmerica Marketing, Inc. v. Martin

No. 91-362 | 6get

Iu the Supreme Court of the United States

OCTOBER TERM, 1991

DIALAMERICA MARKETING, INC., PETITIONER

v.

LYNN MARTIN, SECRETARY OF LABOR

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF FOR THE RES”? ONDENT

IN OPPOSITION

KENNETH W. STARR

‘ icitor (rene ral

De partme nt of Justices

DAVID S. FORTNEY Washington, D.C. 20530

De puty Solicito) Of Labe (2UZ 514-2217

ALLEN H. FELDMAN

Associate Solie itor

STEVEN J. MANDEL

Deputy Associate Solicitor

MARK 8S. FLYNN

Attorney

Department of Labo

Washington, D.C PM PZT0

QUESTION PRESENTED

Whether the district court erred in awarding back-

pay for minimum wage violations to approximately

400 home workers performing the same job based on

the representative testimony of 43 of the workers con-

cerning their average production rates.

(I)

TABLE OF CONTENTS

Page

Opinions below 1

Jurisdiction aa era 1

eo Guise alow. phe een Reese pees 2

Argument 8

Conclusion ......... een 14

TABLE OF AUTHORITIES

Cases:

Anderson V. Mt. Clemens Pottery Co., 328 U.S. 680

(1946) _.. 4, 5, 3, 9, 11, 12, 18

Beliz v. W.H. McLeod & Sons Packing Co., 765 F.2d

1317 (5th Cir. 1985) .... n 13-14

Brennan V. General Motors Acceptance Corp., 482

F.2d 825 (5th Cir. 1973) ..... : 9

Brock v. Seto, 790 F.2d 1446 (9th Cir. 1986) 13

Dole v. Solid Waste Servs., Inc., 733 F. Supp. 895

(E.D. Pa. 1989), aff’d, 897 F.2d 521 (3d Cir.),

cert. denied, 110 S. Ct. 3271 (1990) 11

Donovan V. Bel-Loc Diner, Inc., 780 F.2d 1113 (4th

Cir. 1985) 8, 10

Donovan V. Burger King Corp., 672 F.2d 221 (1st

Cir. 1982) 11

Donovan V. DialAmerica Marketing, Inc., 757 F.2d

1376 (3d Cir.), cert. denied, 474 U.S. 919

(1985) 3

Donovan V. New Floridian Hotel, Inc., 676 F.2d 468

(11th Cir. 1982) 8

Donovan V. Simmons Petroleum Corp., 725 F.2d 83

(10th Cir. 1983) : 9,10

Marshall v. Van Matre, 634 F.2d 1115 (8th Cir.

1980) 10

McLaughlin Vv. Ho Fat Seto, 850 F.2d 586 (9th Cire

1988), cert. denied, 488 U.S. 1040 (1989) 9

Secretary of Labor v. DeSisto, 929 F.2d 789 (lst

Cir. 1991) 9,12

(111)

IV

Statute and regulations: Page

Fair Labor Standards Act, 29 U.S.C. 201 et seq. 2-3

29 U.S.C. 211 (c) 3

29 C.F.R.:

Section 516.2 <= =O le

Section 516.31 10

Iu the Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-362

DIALAMERICA MARKETING, INC., PETITIONER

Uv.

LYNN MARTIN, SECRETARY OF LABOR

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF FOR THE RESPONDENT

IN OPPOSITION

OPINIONS BELOW

The order of the court of appeals summarily affirm-

ing the district court’s judgment (Pet. App. Al) is

unreported. The opinion of the district court (Pet.

App. A3-A39) is reported at 716 F. Supp. 812.

JURISDICTION

The judgment of the court of appeals was entered

on May 30, 1991. A petition for rehearing was de-

nied on June 26, 1991. Pet. App. A2. The petition

for a writ of certiorari was filed on August 29, 1991.

The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1).

(1)

9

_

STATEMENT

1. Petitioner is a corporation engaged in telephone

marketing. Pet. App. A4. Between 1976 and 1982,

petitioner employed ‘‘home researchers”’ to locate the

telephone numbers of magazine subscribers whose

subscriptions were about to expire. /d. at A4-A5. Re-

searchers would travel to petitioner’s office where

they were given a box or boxes of cards listing the

names and addresses of magazine subscribers. /d.

at A5. The researchers attempted to locate each sub-

scriber’s telephone number, primarily through the

use of directory assistance. /d. at A5, A28. The re-

searchers were paid on a piecework basis: they re-

ceived a flat rate for each telephone number located.

Id. at A6. Petitioner did not require the researchers

to work a maximum or minimum number of hours

or to complete a specified number of cards (although

researchers could not pick up a new group of cards

until all cards in their possession had been proc-

essed), and “[e]ach home researcher tailored his or

her home research to fit his or her individual needs

and life styles.” /d. at A5-A6.

Petitioner maintained records for each home re-

searcher, listing for each week the number of cards

the home researcher received, the number of cards

for which the researcher found telephone numbers, the

applicable piece rate, and the total amount petitioner

paid the researcher. Pet. App. A6-A7. Petitioner

kept no record of the number of hours worked by the

researchers and did not require them to keep track

of their hours. 7d. at A7.

2. The Secretary of Labor brought this action al-

leging that petitioner’s pay practices with respect to

the home researchers violated the minimum wage and

recordkeeping provisions of the Fair Labor Standards

3

Act (FLSA), 29 U.S.C. 201 et seg. Pet. App. A4.

After a trial, the district court held that petitioner

committed a “patently obvious” violation of FLSA

recordkeeping requirements because it neither recorded

the number of hours worked by the home researchers

nor required the workers to do so. /d. at A23. See

29 U.S.C. 211(c); 29 C.F.R. 516.2. Petitioner has

not challenged that ruling, either before this Court

or in the court of appeals.’

As to the allegations of minimum wage violations,

the inquiry at trial focused on determining the home

researchers’ production-rate—that is, the number of

cards reviewed or completed per hour. The employ-

er’s records revealed the total number of cards re-

viewed weekly by each employee, and the total amount

paid to each, but not the hourly wage. Determination

' This suit originally encompassed two groups of workers,

home researchers and “distributors.”’ Distributors distributed

cards to certain home researchers (‘‘distributees”) who could

not or would not travel to petitioner’s office. Petitioner paid

the distributors one cent above the piece rate and issued one

check for the gross amount of all telephone numbers located

by their distributees. See Pet. App. A6; Donovan vy. Dial-

America Marketing, Inc. (DialAmerica 1), 757 F.2d 1376,

1386 & n.13 (3d Cir.), cert. denied, 474 U.S. 919 (1985).

Initially, the district court ruled that both home researchers

and distributors were independent contractors and not em-

ployees covered by the FLSA, and dismissed this action in its

entirety. On the Secretary’s appeal, the court of appeals

agreed with the district court that the distributors were in-

dependent contractors, but held that the home researchers were

employees. DialAmerica I, 757 F.2d at 1379. This Court denied

certiorari on the latter question. 474 U.S. 919. On remand

from the court of appeals, the district court then determined

that petitioner had not complied with the minimum wage re-

quirements of the FLSA for the home researchers, and the

court of appeals affirmed.

4

of the production rate, as applied to the total number

of cards processed, would permit an estimate of the

total number of hours worked by the researchers,

from which it was possible to calculate the hourly

wage the workers were actually paid. Pet. App. A10-

Al4,

In an effort to estimate the workers’ rate of produc-

tion, the district court heard the testimony of 43

former home researchers. Twenty-four appeared as

trial witnesses and the depositions of 19 others were

entered into evidence. Pet. App. A8. The home re-

searchers testified as to the nature of their work and

the number of hours it took them to complete a given

number of cards. 7d. at A8-A9. In addition, an ex-

pert witness testified as to the time needed to process

the cards and procure telephone numbers by various

methods, id. at A20-A23, and a Department of Labor

compliance officer suggested formulas that would aid

the court in determining the workers’ production

rates. 7d. at Al10-A17, A29-A30.

The court began its analysis of the evidence by

noting that the burden is on the plaintiff to estab-

lish that an employee has performed work for which

che was not properly compensated. Pet. App. A24.

The court explained, however, that under Anderson

v. Mt. Clemens Pottery Co., 328 U.S. 680, 687

(1946), if an employer fails to maintain records

mandated by the FLSA, an employce ‘meets the re-

quired burden if he or she can prove that work was

performed for which the worker was not properly

compensated and if he or she produces sufficient evi-

dence to show the ‘amount and extent of that work

as a matter of just and reasonable inference.’”’ Pet.

App. A24-A25 (emphasis omitted), quoting Mt.

Clemens, 328 U.S. at 687. The burden then shifts to

5

the employer to “produce evidence of work performed

or to negate the reasonableness of the inference to be

drawn from the employee’s evidence.” Pet. App. A25.

The court further observed that, under Mt.

Clemens, once an employee has proved the existence

of minimum wage violations, the uncertainty created

by the absence of records should not bar a reasonable

assessment of damages. The court observed that

courts have a great deal of discretion in estimating

the “approximate” amount to be awarded, see Mt.

Clemens, 328 U.S. at 688, and can determine dam-

ages “as a matter of ‘just and reasonable inference’ ”

without hearing testimony from all employees. Pet.

App. AZ6.

Applying these principles, the district court held

that the Secretary had established a pattern of “pro-

nounced” minimum wage violations for all home re-

searchers, including those who had not testified at

trial or by deposition. Pet. App. A4. The court found

it reasonable to conclude that the work patterns es-

tablished through the testimony of the 43 workers

were fairly representative of the approximately 350

non-testifying researchers. The court observed that,

although the home researchers worked at different

times of the day and without supervision, “their basic

research task was straightforward and uniform.” /d.

at A28. The court further noted that ‘‘[t]he sheer

commonality of their testimony breathes credibility

into the claims of the testifying home researchers,

and permits this Court to feel comfortable in draw-

ing inferences therefrom.” /d. at A29. Relying on

the patterns established by the testimony, the court

found that “{t]he average rate for all employees was

53 ecards hour, a number derived by averaging the

midpoint rates [itself an average of the low and high

6

numbers testified to] for all testifying witnesses.”

Ibid. Applying this production rate, it was _ pos-

sible to estimate the hours worked by each employee

to complete the total number of cards processed, id. at

A29-A30, and to calculate the pay each received for

each estimated hour of work. Because the estimated

hourly rate paid to each worker fell below the mini-

mum wage, the court concluded that petitioner vio-

lated the minimum wage law “for every home re-

searcher.” Jd. at A29; see also id. at A5 n.5, A13.°

The court held that DialAmerica’s evidence failed

to rebut the Secretary’s showing of violations. Pet.

App. A19, A3-A31. The company submitted a tele-

phone test that it had administered to deponent home

researchers, which purportedly showed that the pro-

duction (cards/hour) rate was much higher than that

alleged by the Secretary. Jd. at A18. The court

deemed the test ‘‘unconvincing,” id. at A30, based on

testimony by the home researchers that the test did

not reproduce the conditions under which they actu-

* In addition, the court found (Pet. App. A29-A30) that the

Department of Labor compliance officer’s testimony, which

was largely based on petitioner’s own records, constituted

“substantial other evidence” supporting its determination that

the testimony of the 43 home researchers established a pattern

of minimum wage violations for the entire group of home

researchers. The compliance officer testified that “[a]t a

production rate of 60 cards per hour * * * 91% of the 4,922

person-work weeks in 1982 would have resulted in minimum

wage violations.” Jd. at Al8. Ata production rate of 50 cards

per hour, “every employee was subjected to a minimum wage

violation” during that period. /bid. (emphasis in original).

Even at a rate of 90 cards per hour—a rate much higher than

the estimated production average of 53 cards per hour, and

one that was achieved by only three researchers—‘‘53 of the

person-work weeks resulted in minimum wage violations.”

Ibid.

7

ally worked. The court also found that petitioner’s

evidence was outweighed by the “pattern established

by the testimony of so many home researchers and

the records submitted in evidence.” /d. at A19, A30-

A31. In sum, the court concluded that the Secretary

had demonstrated “an unrebutted pattern of mini-

mum wage violations by DialAmerica” as to its home

researchers. Jd. at A28.

Finally, the court concluded that the “assignment

of the 53 cards/hour average to each employee will

yield the most equitable result in determining the

amount of back wages to be awarded to both testify-

ing and non-testifying home researchers.”’ Pet. App.

A30. The court therefore ordered the payment of

back wages based on the 53 cards/hour production

rate, and directed the parties to apply to a magistrate

for implementation of the decision. /d. at A31-A33.

The magistrate recommended that the district

court accept the Secretary’s calculations of back

-wages due in the amount of $154,413.73, with pre-

judgment interest.* The district court entered a final

judgment adopting the magistrate’s recommenda-

tions. Pet. App. A41-A42. The court of appeals af-

firmed without opinion. /d. at Al.

’ This aggregate amount was obtained by adding together

the amount of backpay due each home researcher, which was

calculated by multiplying the difference between the minimum

wage rate and the sub-minimum wage that each worker was

estimated to have received, see pp. 5-6, supra, times the esti-

mated number of hours worked (based on the 53 cards hour

production rate and the number of cards the worker proc-

essed). See Pet. App. A10-A14; A32, A34-A36.

8

ARGUMENT

Contrary to petitioner’s assertion (Pet. 6), the

court of appeals’ ruling is not in conflict with the de-

cision of this or any other court, and is correct as a

matter of fact and law. Further review is unwar-

ranted. -

1. The decision does not contravene this Court’s

decision in Anderson y. Mt. Clemens Pottery Co., 328

U.S. 680, 687 (1946); rather, it is fully consistent

with it. In Mt. Clemens, the Court held that an em-

ployee claiming a minimum wage violation need not

“prove the precise extent of uncompensated work”

where his inability to do so is the result of an em-

ployer’s failure to maintain records required by the

FLSA. Rather, the employee “has carried out his

burden if he proves that he has in fact performed

work for which he was improperly compensated” and

then produces “sufficient evidence to show the amount

and extent of that work as a matter of just and rea-

sonable inference.” 328 U.S. at 687.

Under cases applying Mt. Clemens, the district

court was correct to rely on representative testimony,

in the absence of adequate recordkeeping, to deter-

mine the pattern and degree of wage violations.

“Courts have frequently granted back wages under

the FLSA to non-testifying employees based upon the

representative testimony of a small percentage of the

employees * * *. The requirement is only that the

testimony be fairly representational.” Donovan vy.

Bel-Loc Diner, Inc., 780 F.2d 1113, 1116 (4th Cir.

1985); see also Donevan v. New Floridian Hotel, Inc.,

676 F.2d 468, 472 (11th Cir. 1982) (“it is clear that

each employee need not testify in order to make out

a prima facie case of the number of hours worked as

a matter of ‘just and reasonable inference’ ’’); ac-

9

cord, McLaughlin v. Ho Fat Seto, 850 F.2d 586, 589

(9th Cir. 1988), cert. denied, 488 U.S. 1040 (1989) ;

Donovan vy. Simmons Petroleum Corp., 725 F.2d 83,

86 (10th Cir. 1983); Brennan v. General Motors Ac-

ceptance Corp., 482 F.2d 825, 829 (5th Cir. 1973).*

The use of representative testimony is fully in keep-

ing with the Mt. Clemens decision: As the Court

pointed out, barring recovery in the absence of precise

proof of the exact amount of undercompensation

would “place a premium on an employer’s failure to

keep proner records” and “penalize the employee” by

allowing the employer “to keep the benefits of an em-

ployee’s labors.” 328 U.S. at 687.

Petitioner acknowledges (Pet. 7-10) that repre-

sentative testimony is sometimes appropriate to es-

tablish a minimum wage violation, but contends (Pet.

6) that, as a matter of law, a district court should

not accept such testimony with respect to work per-

formed at home. There is no basis in the case law

4In Secretary of Labor v. DeSisto, 929 F.2d 789 (1st Cir.

1991), the court of appeals held that the testimony of one

employee was insufficient to establish a pattern of wage viola-

tions, even under Mt. Clemens’ “minimal burden” standard,

for 244 employees holding a variety of positions at different

locations. Recognizing that representative testimony was a

well-accepted method of establishing wage violations in the

absence of employer records, the court noted that “[fu]sually,

an employee can only represent other employees only if all

perform substantially similar work.” 929 F.2d at 793. In

remanding that case for a new trial, the court of appeals dis-

tinguished the district court’s decision in this case, noting

that both testifying and nontestifying employees in this case

performed the same job of home researcher, tbid., and that

the higher ratio of testifying to nontestifying employees in

this case stood in “‘stark” contrast to the low ratio there. 929--

F.2d at 793 n.2.

10

or in logic for this assertion.” Employers are required

to maintain records showing the number of hours

worked by homeworkers covered by the Act, 29 C.F.R.

516.2, 516.31, and their failure to do so creates the

same difficulties of proof for homeworkers as it does

for other classes of employees. Cf. Marshall v. Van

Matre, 634 F.2d 1115, 1118-1119 (8th Cir. 1980)

(applying Mt. Clemens paradigm to homeworker op-

eration where employer failed to maintain records of

hours worked). A rule prohibiting representative

testimony in this context would contravene the teach-

ing of Mt. Clemens that workers should not be penal-

ized for their employers’ failure to maintain adequate

records by being held to an unduly stringent standard

5 Petitioner contends that representative testimony can be

used to establish wage violations for a larger group only where

(1) employees work together in regular shifts with super-

vision; (2) the employer has engaged in systematic falsifica-

tion or fraud; or (3) there is “substantial other evidence”

supporting the representative testimony, such as employer

admissions or testimony from government investigators based

on employee interviews or surveys. Pet. 7-10.

There is no support in the cases for this rigid tripartite

formulation, and no court has adopted it. Cf. Bel-Loe Diner,

780 F.2d at 1116 (rejecting contention that Secretary was

obliged to present testimony pertaining to each shift and

stating that the “requirement is only that the testimony be

fairly representational”) ; see also Simmons Petroleum Corp.,

725 F.2d at 86 n.3 (“Employer asserts that the rule that the

use of representative testimony can establish a pattern of vio-

lations is limited to situations where the employees leave 2

central location together at the beginning of a work day, work

together during the day, and report back to the central loca-

tion at the end of the day. This rule is not supported by case-

law.”). In any event, the instant case satisfies petitioner’s

restrictions since the district court found that the testimony of

the Department of Labor compliance officer constituted “sub-

stantial other” evidence of minimum wage violations.

11

of proof. 328 U.S. at 687-688. Under petitioner’s

theory, the Secretary could establish her case only by

presenting the testimony of all 400 homeworkers as

to their precise individual rates of production. Such

a requirement places an onerous burden on both the

Secretary and the district court and would, in many

cases, obviate recovery. See Dole vy. Solid Waste

Servs., Inc., 733 F. Supp. 895, 926 (E.D. Pa. 1989)

(noting that refusal to allow representative testi-

mony in a complex case would lead to a “mammoth”

trial), aff’d, 897 F.2d 521 (3d Cir.) (unpublished

opinions), cert. denied, 110 S. Ct. 3271 (1990); Don-

ovan v. Burger King Corp., 672 F.2d 221, 225 (1st

Cir. 1982) (representative testimony avoids burden-

ing the district court). Nothing in Mt. Clemens man-

dates this result.

2. Petitioner also challenges (Pet. 2-3, 14-16) the

district court’s use of an average production rate as

a basis for its finding that the home researchers had

“in fact performed work for which [they] were im-

properly compensated” and for the calculation of the

amount of backpay due. Petitioner contends that it

is not reasonable to calculate the total amount of

backpay from an estimate of the researchers’ average

per hour production rate because the wide variation

in work patterns casts doubt on the conclusion that

the production rates of the testifying group reflect

those of the workers as a whole. See Pet. App. A10.

In effect, petitioner challenges the district court’s

factual findings that the range of work rates estab-

lished by the testifying researchers mirrors the

larger group—that is, that the testifying group is

“representative.” In complaining of the Secretary’s

failure to demonstrate the statistical validity (Pet.

12

11) of this finding, however, petitioner miscon-

strues the burden of proof allocated in Mt. Clemens.

Once the employee provides evidence of the “amount

and extent” of a violation ‘as a matter of just and

reasonable inference,” the burden shifts to the em-

ployer “to come forward with evidence of the precise

amount of work performed or with evidence to nega-

tive the reasonableness of the inference to be drawn

from the employee’s evidence.” 328 U.S. at 687-688.

Absent such evidence, the court may award damages

“though the result be only approximate.” Jd. at 688.

Although petitioner had the opportunity to do so,

it did not succeed in proving with precision the

amount of work performed; petitioner’s evidence,

which consisted of tests it conducted indicating a

higher average production rate, was rejected by the

district court as inherently flawed and contrary to

the testimony of the researchers themselves. Nor did

petitioner demonstrate that the court’s method for

calculating backpay was unreasonable. The court’s

conclusion that the average work rate of the testify-

ing group was “fairly representative” was plausible

in light of the size of the representative group, and

the uniformity of the task performed by all the re-

searchers. Cf. Secretary of Labor vy. DeSisto, 929

F.2d 789 (1st Cir. 1991) (testimony of one re-

searcher inadequate to establish work habits of 244

workers performing many different jobs). It was up

to petitioner to demonstrate, by statistical methods

or otherwise, that the average production rate of the

testifying researchers was not, or could not be, repre-

sentative of all the workers. This petitioner failed

to do.

In arguing that the approach adopted by the court

is “inequitable” or disadvantageous to the employer,

13

petitioner focuses on the use of the 53 card per hour

average rate used to calculate the amount of wages

due the testifying employees, many of whom reported

a higher or lower average rate of work. Pet. 14-15;

see Pet. App. A43-A44. As petitioner recognizes,

however (Pet. 2, 14-15), while the use of an overall

average rate may overcompensate some employees, it

undercompensates others. Because the testimony of

a large number of employees was taken into account,

and the employees’ testimony was found to be repre-

sentative, there is every reason to believe that such

inaccuracies will balance out; and there is no reason

to believe that petitioner’s overall monetary liability

is any greater than it would have been had the court

heard testimony from more researchers, or attempted

more precisely to calculate the back wages due the

researchers who did testify.

In any event, it was clearly permissible under Mt.

Clemens, 328 U.S. at 688, to use an average rate

even though it might provide only an “approximate”

measure of damages. As the district court explained

(Pet. App. A30), whatever imprecision results from

the use of representative testimony is directly at-

tributable to petitioner’s failure to maintain appro-

priate records. “The employer cannot be heard to

complain that the damages lack the exactness and

precision of measurement that would be possible had

he kept records in accordance with the requirements

* * * of the Act.” Mt. Clemens, 328 U.S. at 688; see

Brock y. Seto, 790 F.2d 1446, 1448 (9th Cir. 1986)

(“Mt. Clemens Pottery leaves no doubt that an award

of back wages will not be barred for imprecision

where it arises from the employer’s failure to keep

records as required by the FLSA.”); Beliz v. W.H.

McLeod & Sons Packing Co., 765 F.2d 1317, 1330-

14

1331 (5th Cir. 1985) (“Because precise evidence of

the hours worked by each individual is not available

due to the failure of [the employer] to keep adequate

records, the workers may satisfy their burden with

admittedly inexact or approximate evidence.’’).

CONCLUSION

The petition for-a writ of certiorari should be

denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

DAVID 8. FORTNEY

Deputy Solicitor of Labor

ALLEN H. FELDMAN

Associate Solicitor

STEVEN J. MANDEL

Deputy Associate Solicitor

MARK S. FLYNN

Attorney

OCTOBER 1991

‘YU. S. GOVERNMENT PRINTING OFFICE, 1991 312324 45139