Appendix — Harold Levinson Associates, Inc. v. Chao

la

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

THIS SUMMARY ORDER WILL NOT BE PUBLISHED

IN THE FEDERAL REPORTER AND MAY NOT BE

CITED AS PRECEDENTIAL AUTHORITY TO THIS OR

ANY OTHER COURT, BUT MAY BE CALLED TO THE

ATTENTION OF THIS OR ANY OTHER COURT IN A

SUBSEQUENT STAGE OF THIS CASE, IN A RELATED

CASE, OR IN ANY CASE FOR PURPOSES OF COL-

LATERAL ESTOPPEL OR RES JUDICATA.

No. 04-0509-CV

Feb. 23, 2005

UPON DUE CONSIDERATION of this appeal from a

judgment of the United States District Court for the East-

ern District of New York, it is hereby ORDERED,

ADJUDGED AND DECREED that the judgment of the

district court is AFFIRMED.

ELAINE L. CHAO,

Plaintiff-Appellee,

V.

HAROLD LEVINSON ASSOCIATES, INC., A Corporation, and

EDWARD BERRO, Individually and as President,

Defendant-Appellants.

2a

ROBERT E. GOLDMAN, New York, N.Y. (Andrew M.

Lankler, Idelle R. Abrams, Lankler & Car-

ragher, LLP, New York, NY, on the brief), for

Appellant.

JOAN BRENNER, Attorney, United States Department

of Labor, Office of the Solicitor, Washington,

DC (Howard M. Radzely, Solicitor of Labor,

Steven J. Mandel, Associate Solicitor, Paul L.

Frieden, Counsel for Appellate Litigation, on

the brief), for Appellee.

PRESENT: SOTOMAYOR, KATZMANN, Circuit Judges,

and CEDARBAUM,* District Judge.

SUMMARY ORDER

Defendant-appellants Harold Levinson Associates and

Edward Bello appeal from a December 31, 2003 judgment

entered in the United States District Court for the Eastern

District of New York (Charles R. Wolle, J., sitting by des-

ignation). We assume the parties’ familiarity with the facts

and procedural history of this case. On this appeal, defen-

dant-appellants Harold Levinson Associates and Edward

Bello raise two issues previously decided by the district

court and this Court. See Harold Levinson Assocs., Inc. y.

Chao, 37 Fed. Appx. 19 (2d Cir. 2002); Herman v. Harold

Levinson Assocs., Inc., No. CV-95-1721 , 2001 WL 34088698

(E.D.N.Y. Apr. 20, 2001). They argue (1) that they are

* Hon. Miriam Goldman Cedarbaum, United States District Judge

for the Southern District of New York, sitting by designation.

3a

entitled to a credit of $529,000 against their liability under

Section 7(h) of the Fair Labor Standards Act, 29 U.S.C.

§ 207(h), and (2) that the formula for computation of dam-

ages specified by this Court on remand does not yield a just

and reasonable approximation of overtime hours worked

because it fails to take into account the growth of defen-

dants’ business over time. We note that the district court

was correct that these issues were decided against defen-

dants in this Court’s prior order and were outside the scope

of our order on remand. We do not reach plaintiff’s argu-

ment that the doctrine of the law of the case bars reconsid-

eration of these issues, however. The district court in its

discretion received new evidence and argument, and we

agree with its determination that defendants’ arguments are

wholly without merit. See F urlong v. Shalala, 238 F.3d 227,

235 n. 4 (2d Cir. 2001) (noting that doctrine of law of the

case is purely discretionary); DiLaura v. Power Auth., 982

F.2d 73, 76 (2d Cir. 1992) (noting that the doctrine is not a

limit on a court’s power to reconsider its decisions).

Defendants fail to establish that the $529,000 in question

was paid for any of the purposes specified at 29 U.S.C.

§ 207(h)(2), and thus their claim that this Court’s prior

denial of a § 207(h) credit was error is baseless.! See

Haroid Levinson Assocs., Inc., 37 Fed.Appx. at 20 (reject-

| Compare 29 U.S.C. § 207(h)(2) (providing, via cross-reference

to 29 U.S.C. § 207(e)(5), that credit is available for, inter alia, “com-

pensation provided by a premium rate for certain hours worked by the

employee” in excess of the maximum applicable workweek) with

Defs.’ Br. at 18 (arguing that pretrial stipulations bind this Court to

find that the funds in question were premium “pay for which no over-

time was worked”). Defendants fail to point to any evidence suggest-

ing that § 207(e)(5), (6) or (7), as incorporated in § 207(h)(2), are

applicable.

4a

ing claim to offset because “this case does not involve pay-

ments that satisfy the requirements of [§ 207(h)]”). As to

the calculation of damages, the district court correctly

found that the evidence adduced by defendants at the sec-

ond trial did not call into question the reasonableness of the

formula this Court previously settled on to determine over-

time hours worked between May of 1992 and October of

1993. See id. at 22. Defendants’ evidence consisted of a

damages calculation which assumed, quite implausibly,

that overtime person-hours grew in direct proportion to

gross sales measured in dollars or sales measured by the

number of cigarette cartons shipped (defendants do not

bother to specify which). There was no evidence to support

the crucial assumption that HLA took no steps to increase

productivity as its business grew; indeed, as the district

court correctly found, there was no direct evidence at all

concerning the impact of this growth on HLA’s personnel to

rebut the credible testimony of employees at the first trial

that their hours remained relatively constant during the

relevant period. See id. The calculations did not include

even the rudimentary step of controlling for change in the

number of employees over time, which would certainly

affect the number of overtime hours worked. This Court’s

instructions in its prior order yield a reasonable estimate of

damages, and the district court did not err in rejecting

defendants’ unreasonable and belatedly proffered alterna-

tive. See Anderson v. Mt. Clemens Pottery Co., 328 U.S.

680, 687-88, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946); Reich v.

Southern New England Telecomm. Corp., 121 F.3d 58, 67

(2d Cir.1997). Defendants assign no other error to the cal-

culation the district court performed pursuant to our

instructions.

Sa

For these reasons, we affirm the judgment of the district

court in all respects.

121 Fed.Appx. 918, 2005 WL 428787 (2nd Cir.(N.Y.))

6a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

No. 95 cv 1721 (CRW)

December 30, 2003

ELAINE L. CHAO, Secretary of Labor,

United States Department of Labor,

Plaintiff,

—against—

HAROLD LEVINSON ASSOCIATES, INC., A Corporation, and

EDWARD BERRO, Individually and as President,

Defendants.

FINDINGS OF FACT, CONCLUSIONS OF LAW,

AND JUDGMENT FOR PLAINTIFF ON REMAND

On August 4, 2003, the undersigned visiting Senior

United States District Judge (presiding in this case upon

intercircuit assignment) concluded a bench trial on remand,

then set a briefing schedule requiring final briefs and pro-

posed decisions to be filed by September 2, 2003. With the

case now ready for ruling, the court files this remand deci-

sion containing findings of fact, conclusions of law, and

directions for entry of final judgment. The clerk of court

shall enter judgment for plaintiff and against defendants in

the amount of $831,147.18 for actual damages and liqui-

dated damages allocated to the underpaid employees as set

forth in plaintiff’s exhibits 1 and 2 received in evidence at

trial. Plaintiff is also entitled to the costs of this action.

Ta

Background. In September of 2000, the court held a

bench trial and thereafter filed Findings of Fact, Conclu-

sions of Law, and a Judgment for plaintiff (the “earlier

judgment”), awarding plaintiff total damages of $991,669.16,

for distribution to employees and former employees of the

defendants.

Following appeal, the United States Court of Appeals

for the Second Circuit in an unpublished “summary order”

dated May 22, 2002, affirmed in part and vacated and

remanded in part. Following remand, the undersigned Senior

United States District Judge first held a hearing on plain-

tiff’s motion for recusal, then denied the motion. A one-

day bench trial followed several months later.

With the record now complete, and final briefs sub-

mitted, the court enters this remand decision that rules on

reserved evidentiary questions and decides the issue

remanded by the Court of Appeals. The court also addresses

and decides questions the defendants believe the Court of

Appeals left open.

The parties disagree about what issues the Court of

Appeals remanded. Plaintiff contends this court’s only task

is to recalculate the damages awarded to all but three

employees, and to recalculate for only one of the two rele-

vant time periods, the so-called PCX period from May of

1992 to October of 1993 which preceded defendants’

installation of a time clock. Defendants, in contrast, read

the Court of Appeals decision much differently, arguing

that the court should consider their proffered new expert

opinion testimony, then conclude that defendants may

credit excess overtime payments made during the so-called

ADP period against underpayments of overtime pay during

the earlier PCX period.

8a

The plaintiff proffers the only sound reading of the court

of appeals decision. At page three of the Summary Order,

that court wrote:

“We are unable, however, to accept the importation of

the average weekly hours worked for the ADP period

as the assumed number of hours worked for each

given week during the PCX period. The time-clock

records demonstrate that hours tended to fluctuate

from one week to the next. Given this reality and

given that many of the derived PCX hours are based

on departmental rather than individual averages, we

find that actual hours worked by each individual

employee for each specific PCX week cannot be

derived as a matter of reasonable inference. Because

damages are awarded for weeks during which the

derived hours exceeded the payroll record hours, but

not offset by weeks during which the payroll records

exceed the derived hours, assuming that in each week

of the PCX period each employee worked precisely

the average number of hours worked unfairly penal-

izes the defendants. We therefore remund for compu-

tation of damages (for all employees other than

Steven Hladek, Sylvia Capizzi, and Edward Krulish,

with respect to whom we affirm the damage amounts

for both the ADP period and the PCX period) based

on comparison of the total hours worked by each

employee for the entire PCX period (computed by

multiplying the imported ADP weekly average by total

PCX period weeks worked) against total hours com-

pensated for the PCX period. We leave to the District

Court’s discretion the issue of what pay rate should be

used for computing PCX period damages where an

9a

employee’s pay rate changed during the PCX period.”

[Emphasis supplied. ]

The court of appeals affirmed in explicit language all

other aspects of the court’s findings, conclusions, and the

earlier judgment that defendants had appealed. And the

Summary Order concluded with this final paragraph a;

page 7,

Thus, the sole issue for resolution on remand is calcu-

lation of damages for the PCX period for employees

other than Steven Hladek, Sylvia Capizzi, and Edward

Krulish. In all other respects, we affirm the judgment

of the District Court. The judgment of the District

Court is AFFIRMED in part, and VACATED AND

REMANDED in part.

Remanded Damage Recalculation. During trial on

remand, the court received in evidence the entire record of

the first bench trial, supplemented by exhibits proffered by

the plaintiff and testimony and exhibits proffered by

defendants. Plaintiff’s exhibits included remand exhibits 1

through 6 that accurately set forth the mathematical calcu-

lations called for by the above-quoted portions of the court

of appeals decision. Defendants have not presented any

credible challenge to those calculations. The plaintiff’s

exhibits and underlying payroll data from defendants’

records support the unpaid overtime pay damages and liq-

uidated damages for the PCX period calculated as directed

by the court of appeals: comparison of the total hours

worked by each employee for the entire PCX period (com-

puted by multiplying the ADP weekly average by total

PCX period weeks worked) against total hours compen-

sated for the PCX period.

10a

No recalculation is required for the ADP period when

defendants provided a time clock, nor for the employees

Hladek, Capizzi, and Krulish for either the PCX period or

ADP period. The court of appeals affirmed calculation of

damages sustained by those three employees in the second-

to-last paragraph of its decisicn.

The Previous Bench Decision Revisited. Before con-

cluding this remand decision and judgment, the court

reviewed the entire record, its earlier judgment, and its

detailed findings and conclusions. The court now holds

there is no evidentiary basis for the several contentions

urged by defendants following remand. »

Cases cited by defendant suggest a district court on

remand may in unusual circumstances reopen issues not

explicitly decided by a court of appeals. See U.S. y,

Cerami, 563 F.2d 26, 33 (2d Cir. 1977) (exceptional cir-

cumstances permit defendant to raise new issues before

trial court in second Rule 60(b)(6) proceeding); c.f U.S. v.

Uccio, 940 F.2d 7533, 758 (2d Cir. 1991) (dictum) (court

of appeals addresses reopened issues but adheres to its

previous decision). Contra U.S. v. Fernandez, 506 F.2d

1200, 1202 (2d Cir. 1974) (quoting J. Moore, Federal Prac-

tice, ]0.-404[10], at 571 (2d ed. 1974)):

Where a case has been decided by an appellate court

and remanded, the court to which it is remanded must

proceed in accordance with the mandate and such law

of the case as was established by the appellate court.

Munro v. Post, 102 F.2d 686, 688 (2d Cir. 1939) (district

court has duty to follow ruling made by court of appeals in

earlier stage of case).

lla

Recognizing that the court of appeals, in a second view of

this case, may be persuaded that this is an exceptional case

Tequiring the district court to reopen all issues, this court

during the remand trial permitted defendants to present all

their evidence and arguments, making a plenary trial record.

Rulings were reserved on plaintiff’s objections to admissi-

bility of defendants’ expert witness testimony and exhibits.

Rulings on plaintiff's objections. For the purpose of the

€xpanded review this court has undertaken, the court now

Overrules plaintiff’s objections to the foundation for defen-

dants’ new evidence. The court receives that challenged evi-

dence in order that the court may determine whether all

evidence supports its previous judgment and its findings of

fact and conclusions of law entered after the first trial. So

the defendants’ new evidence is received and considered.

The court finds, however, that the expert testimony is enti-

tled to little weight.

The expert witnesses had no more data to review than the

plaintiff used in its recalculation based on the new formula

prescribed by the court of appeals. The expert witnesses did

not use the above-quoted formula to calculate PCX period

backpay damages. Their attempt to credit alleged PCX

Overpayments against ADP unpaid overtime violates the law

precluding such adjustments in the absence of a valid pre-

payment plan that would comply with 29 U.S.C. section

207(f), such as a so-called Belo plan. The experts’ attempt

to use growth in sales and product carton volume to reduce

PCX period weekly hours was entirely unpersuasive. Defen-

dants failed to establish a correlation between hours ware-

house and driver employees worked, compared to the sales

and product volume they produced. The court reasonably

infers that employees performing assembly, loading, and

12a

delivery tasks may well be able to handle much greater vol-

ume without an increase in their hours at work or the num-

ber of employees performing the tasks. In addition, the

experts incorrectly understood the issues of law decided by

the court of appeals; they assumed payments of alleged

excess overtime and holiday pay in the PDX time period

could be offset against ADP period underpayments.

It is noteworthy that the witness Andrew De Francesco,

defendants’ present CFO, and a CPA, had no persenal knowl-

edge of defendants’ operations in the PCX period before he

held that position with defendants, so his opinions about

business operations during PCX period are suspect. The

court gives little weight to the testing of defendants’ witness

CPA, Alan A. Schachter, because he relied on the De

Francesco testimony and had little understanding of the law

governing required prepayment plans. And the other expert

witnesses Cort and Klebbersmith relied on flawed analyses of

data concerning comparative sales volume, carton count, and

number of employees performing work in the PCX and ACP

periods to support defendants’ claim of overpayments cred-

its from the later to the earlier PCX period. Defendants’ new

evidence presented during the remand trial was not persua-

Sive.

Findings of faci. Because defendant failed to keep accu-

rate records of hours worked and willfully failed to com-

pensate for overtime hours in both the PCX period and ACP

period, the court finds entirely inadequate their present

efforts to reconstruct hours employees worked in the PCX

period, and their claims of basic unfairness of the previous

judgment finding that the plaintiff had proved defendants

liable for underpayments and liquidated damages.

13a

With its present review of the plenary remand record now

complete, the court reaches the same findings of fact and

conclusions of law that were contained in its previous judg-

ment, except for the PDX period damages that are here

recalculated based on the plaintiff’s evidence.

Conclusions of law. This court’s conclusions of law are

those set forth in the previous judgment, as affirmed by the

court of appeals in all respects except for the method of cal-

culating PCX damages for all but three employees.

Judgment on remand. The clerk of court shall enter judg-

ment for plaintiff, requiring defendants Harold Levinson

Associates, Inc. and Edward Berro to pay to plaintiff the

sum of $423,823.59 in unpaid overtime wage compensation

and $407,323.59 in liquidated damages, for a total of

$831,147.18, as set forth in the plaintiff’s exhibits reflecting

the plaintiff’s recalculation of PCX damages, added to the

damages affirmed by the court of appeals.

The defendants are ordered to pay this total amount to the

plaintiff on or before January 28, 2004, by delivering to

plaintiff a certified check for $831,147.18 payable to the

U.S. Department of Labor, Wage and Hour Division, c/o

Bank of America, P.O. Box 845229, Dallas, Texas 75283-

5229. Simultaneously with the delivery of the original

check, defendants shall mail copies of the check and trans-

mittal letter to plaintiff’s counsel of record.

Neither defendants nor anyone on their behalf shall

directly or indirectly solicit or accept the return or refusal of

any sums paid under this judgment. Plaintiff shall distribute

the defendants’ payments to the employees involved, or to

their estates if that is necessary; any sums not distributed to

the employees named herein, or to their personal represen-

tatives because of inability to locate the proper persons or

14

l4a

because of such persons’ refu

be deposited with the Clerk of efusal to accept such sums, shall

such money with the TreasureiK Of this Court, who shall deposit

to 28 U.S.C. § 2041-2042. ‘urer of the United States pursuant

Plaintiff is awarded costs of

This judgment shall be jointS of this action from May 2, 1995.

defendants. oint and several against the two

SO ORDERED.

Dated this 30th day of Decemt

ember, 2003.

Is/_ C

C) CHARLES R. WOLLE

U CHARLES R. WOLLE, JUDGE

Si UNITED STATES DISTRICT COURT

Ez Sitting by designation in the

Eastern District of New York

Ee ee ee ae

lSa

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

THIS SUMMARY ORDER WILL NOT BE PUBLISHED

IN THE FEDERAL REPORTER AND MAY NOT BE

CITED AS PRECEDENTIAL AUTHORITY TO THIS OR

ANY OTHER COURT, BUT MAY BE CALLED TO THE

ATTENTION OF THIS OR ANY OTHER COURT IN A

SUBSEQUENT STAGE OF THIS CASE, IN A RELATED

CASE, OR IN ANY CASE FOR PURPOSES OF COL-

LATERAL ESTOPPEL OR RES JUDICATA.

Docket No. 01-6105

May 22, 2002

United States Secretary of Labor brought enforcement

action against employer alleging violation of Fair Labor

Standards Act (FLSA) overtime provisions. Following

bench trial, the United States District Court for the Eastern

District of New York, Wolle, J., entered judgment against

employer and awarded back-pay damages of just under $1

million. Employer appealed. The Court of Appeals held

that: (1) testimony by former employees sustained judg-

ment, but (2) District Court made improper assumption

regarding average weekly hours worked after employer’s

acquisition of time clock.

Affirmed in part and vacated and remanded in part.

|

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hash

Pipa

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l6a

HAROLD LEVINSON ASSOCIATES, INC., a Corporation, and

EDWARD BERRO, Individually and as President,

Defendants-Appellants,

Vv.

ELAINE L. CHAO, Secretary of Labor,

United States Dep’t of Labor,

Plaintiff-Appellee.

Appeal from the United States District Court for the

Eastern District of New York (Wolle, J.).!

Robert E. Goldman, Esq., Goldman & Weintraub, New

York, NY, for Defendants-Appellants.

Joan Brenner, Esq. (Eugene Scalia, Steven J. Mandel,

Paul L. Frieden, on brief), U.S. Dept. of Labor,

Office of the Solicitor, Washington, DC, for

Plaintiff-Appellee.

PRESENT: OAKES, KATZMANN, Circuit Judges, and

J. GARVAN MURTHA,” District Judge.

]

The Honorable Charles R. Wolle of the United States District Court

for the Southern District of Iowa, sitting by designation.

The Honorable J. Garvan Murtha of the United States District

Court for the District of Vermont, sitting by designation.

2

17a

SUMMARY ORDER

ON CONSIDERATION WHEREOF, IT IS HEREBY

ORDERED, ADJUDGED, AND DECREED that the judg-

ment of the District Court be and it hereby is AFFIRMED in

part, and VACATED AND REMANDED in part.

The defendants appeal the decision of the District Court fol-

lowing a bench trial finding the defendants liable for a failure

properly to pay overtime compensation as required by 29

U.S.C. § 207(a), and awarding total damages of $991,669.16

to plaintiff for distribution to employees and to former

employees of the defendants. For the reasons that follow, we

affirm the District Court’s finding of liability, but remand for

partial recalculation of damages.

We review a district court’s bench trial findings of fact for

clear error and its conclusions of law de novo. LeBlanc v.

Cleveland, 198 F.3d 353, 356 (2d Cir. 1999). Factual findings

“will not be set aside unless they are without adequate support

in the record, are against the clear weight of the evidence, or

are the product of an erroneous view of the law.” Ezekwo v.

New York City Health & Hosps. Corp., 940 F.2d 775, 780 (2d

Cir. 1991).

The District Court’s finding that the defendants had failed

properly to record overtime hours and pay proper compensa-

tion for such hours is not clearly erroneous. Several former

employees, all of whom the District Court found “credible,”

testified that they in many weeks worked more hours than they

were paid for, and that the defendants’ time records did not

properly reflect hours worked. The defense offered no wit-

nesses to rebut the testimony of the employees who testified

for the plaintiff. The District Court’s findings about various

irregularities within the defendants’ payroll system—that

employees received steady pay regardless of hours worked

even though no prepayment plan was in effect, that no pay

18a

stubs were provided during part of the period in question, and

that even after pay stubs were distributed, such pay stubs did

not indicate hours worked—were also based on ample evi-

dence and are not clearly erroneous.

A plaintiff need not compute FLSA damages with precision.

The burden is on an employer properly to record hours, and an

employee need only as a prima facie matter present an esti-

mate of damages that is satisfactory as “a matter of just and

reasonable inference.” Anderson v. Mt. Clemens Pottery Co.,

328 U.S. 680, 686-87, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946). It

then falls upon the employer to rebut the employee’s prima

facie case by providing “evidence of the ‘precise amount of

work performed’ or evidence to ‘negative the reasonableness

of the inference to be drawn from the employee’s evidence,’

[and if the employer fails to do so] the court may then ‘award

damages to the employee[s], even though the result be only

approximate.’” Reich v. Southern New England Telecommu-

nications Corp., 121 F.3d 58, 67 (2d Cir. 1997) (quoting Mt.

Clemens, 328 U.S. at 687-88). In this case, the District Court

reasonably chose to discredit the attempts by the employer to

utilize its own records to prove hours worked. Thus, the plain-

tiff needs merely to offer an estimate of damages that is satis-

~~ factory as a matter of reasonable inference.

This burden is not high, and a “representative sample” of

employees can provide a foundation for assumptions about the

overall employee pool, as long as a representative from each

relevant category of employees testifies. See Southern New

England Telecommunications Corp., 121 F.3d at 66-67 (inter-

nal citations omitted) (“it is well-established that the Secretary

may present the testimony of a representative sample of

employees as part of his proof of the prima facie case under

the FLSA. The Secretary’s burden in such cases, while not

overly onerous, is to establish a prima facie case.”’).

19a

The parties stipulated that calculation of hours for the

period during which a time-clock was in place (the “ADP

period”) would be based on such time-clock. The plaintiff

used the wage rates found in the defendants’ payroll records in

order to calculate the damages. We find this calculation

method clearly reasonable, and also find reasonable the deci-

sions of the plaintiff with respect to estimating weekly hours

for the three salaried employees and the employees who were

paid bi-weekly. We therefore affirm the District Court’s award

of $91,758.50 for the ADP period.

The PCX period calculations present more difficult issues.

As a general matter, we find reasonable the plaintiff’s attempt

to use the data derived from the time-clock as a basis for

reconstructing the hours worked during the period (the “PCX

period”) preceding the installation of the time-clock. Repre-

sentatives of each relevant employee category testified that

hours worked had remained steady throughout the PCX and

ADP periods, and the District Court specifically found that

employees generally worked similar hours during these two

periods. The defendants object to the importation of ADP

records by asserting that the company grew by 25% from the

PCX period to the ADP period, and that the ADP interval con-

tained two holiday seasons (rather than the one found during

the PCX period), which were especially busy. For these rea-

sons, the defendants argue that importing the ADP figures into

the PCX period overstates the Paychex hours. This argument

is not without some force. However, it was the defendants’

responsibility accurately to record hours. In the absence of

credible recordkeeping by the defendants, and given the testi-

mony that hours remained stable across the two periods, we

find that reference to the ADP figures provides a reasonable

method of calculating PCX period damages.

We are unable, however, to accept the importation of the

average weekly hours worked for the ADP period as the

20a

assumed number of hours worked for each given week during

the PCX period. The time-clock records demonstrate that

hours tended to fluctuate from one week to the next. Given

this reality and given that many of the derived PCX hours are

based on departmental rather than individual averages, we find

that actual hours worked by each individual employee for each

specific PCX week cannot be derived as a matter of reason-

able inference. Because damages are awarded for weeks dur-

ing which the derived hours exceeded the payroll record

hours, but not offset by weeks during which the payroll

records exceed the derived hours, assuming that in each week

of the PCX period each employee worked precisely the aver-

age number of hours worked unfairly penalizes the defen-

dants. We therefore remand for computation of damages (for

all employees other than Steven Hladek, Sylvia Capizzi, and

Edward Krulish, with respect to whom we affirm the damage

amounts for both the ADP period and the PCX period) based

on comparison of the total hours worked by each employee for

the entire PCX period (computed by multiplying the imported

ADP weekly average by total PCX period weeks worked)

against total hours compensated for the PCX period. We leave

to the District Court’s discretion the issue of what pay rate

should be used for computing PCX period damages where an

employee’s pay rate changed during the PCX period.

We reject the defendants’ argument that their purported

“overpayments” of overtime in certain weeks should offset

their liability for other weeks. The District Court found (cor-

rectly, in our view) that the defendants did not have a valid

prepayment plan complying with 29 U.S.C. § 207(f) or with

the guidance set forth in Wage and Hour Division Interpretive

Bulletin No. 4, 9953-67. While there is a difference of author-

ity with respect to whether premium pay which is creditable

pursuant to 29 U.S.C. § 207(h) may be credited across pay

periods, compare Howard v. City of Springfield, 274 F.3d

2ia

1141, 1149 (7th Cir. 2001) (“Because the statute contemplates

that overtime will be paid and calculated on a pay period basis,

it is consistent with that language to calculate and apply cred-

its in the same manner”) with Abbey v. City of Jackson, 883

F.Supp. 181, 186-87 (E.D. Mich. 1995) (not allowing a credit

across pay periods would result in a “windfall and the pur-

poses and goals of the statute would not be served”), this case

does not involve payments that satisfy the requirements of that

provision. The purported “overpayments” are largely based on

nothing more than assumptions that were stipulated for trial,

and provide no basis for a credit.

We also agree with the District Court that the defen-

dants’ violations were “willful” within the meaning of 29

U.S.C. § 255(a), and that the defendants do not satisfy the

good faith reasonable belief exception to liquidated dam-

ages provided by 29 U.S.C. § 260. A FLSA violation is

willful when “the employer either knew or showed reck-

less disregard for the matter of whether its conduct was pro-

hibited by the statute.” Herman v. RSR Security Services

Ltd., 172 F.3d 132, 141 (2d Cir. 1999) (quoting McLaughlin

v. Richland Shoe Co., 486 U.S. 128, 133, 108 S.Ct. 1677, 100

L.Ed.2d 115 (1988)). “The employer bears the burden of prov-

ing good faith and reasonableness, but the burden is a difficult

one, with double damages being the norm and single damages

the exception. To establish good faith, the employer must take

3 Our decision in this regard is not inconsistent with our decision to

remand. Our decision to remand effectively gives the defendants the ben-

efit of a credit for the PCX period, but does so not because as a matter of

law the defendants are entitled to credit one week’s overpayment against

another week’s liability, but because of the lack of foundation for the plain-

tiff’s actual computations of weekly hours for the PCX period. For the

ADP period (where the estimated hours are based directly on the time-

clock), we decline to award any credits or to order a comparison of aggre-

gate figures for the entire period.

22a

active steps to ascertain the dictates of the FLSA and then act

to comply with them.” RSR Security Services, 172 F.3d at 141-

42. The defendants’ attempt to subvert an earlier settlement

with the plaintiff, and the defendants’ utter failure to imple-

ment proper recordkeeping even after the investigation giving

rise to such settlement, support the finding that the defendants’

violations were willful and not rooted in a good faith reason-

able belief that its practices complied with FLSA.

Finally, we affirm the District Court’s holding that employ-

ees Steven Hladek, Sylvia Capizzi, and Edward Krulish were

not exempt from the overtime requirements of the FLSA. All

three employees performed some managerial functions, but

lacked the discretionary role in the organization required to

- Satisfy the “bona fide executive, administrative, or profes-

sionai capacity” exception provided in 29 U.S.C. § 213(a)(1).

It appears that the District Court declined to award liquidated

damages to Edward Krulish, presumably because of the close-

ness of the exemption issue. We affirm this decision.

Thus, the sole issue for resolution on remand is calculation

of damages for the PCX period for employees other than

Steven Hladek, Sylvia Capizzi, and Edward Krulish. In all

other respects, we affirm the judgment of the District Court.

The judgment of the District Court is AFFIRMED in part, and

VACATED and REMANDED in part.

37 Fed.Appx. 19, 2002 WL 1032708 (2nd Cir.(N.Y.))

23a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

No. Civ. A. CV-95-1721.

April 20, 2001

ALEXIS M. HERMAN, Secretary of Labor,

United States Department of Labor,

Plaintiff,

Vv.

HAROLD LEVINSON ASSOCIATES, INC., A Corporation, and

EDWARD BERRO, Individually and as President,

Defendants.

FINDINGS OF FACT, CONCLUSIONS OF LAW,

AND JUDGMENT FOR PLAINTIFF

WOLLE, J.

The undersigned United States District Judge, sitting by

intercircuit assignment, was assigned this case for final

pretrial proceedings and a bench trial. The trial was held

on several days in August and September of 2000, with

submission following closing arguments on September 27,

2000, and a schedule of final written proposed decisions

and briefs, the last brief filed on November 9.!

' I regret that five months have elapsed between filing of the last

briefs and filing of this decision. I have had to read, compare, and analyze

a large number of exhibits and testimony of many witnesses, including

expert witnesses. I have had difficulty comparing some witnesses testimo-

ny with the records of the defendant company. The company records did

not accurately capture the time employees actually worked during most

pay periods at issue in this lawsuit.

24a

Plaintiff has proved all of its claims; defendants have

not proved any defense to the claims. The clerk of court

shall enter judgment in favor of plaintiff and against defen-

dants for actual damages, liquidated damages, and costs of

this action, in accordance with the following findings and

conclusions.

FINDINGS OF FACT

For a better understanding of this court’s findings on

disputed questions of fact, the court precedes its fact-find-

ings with the parties’ stipulated facts contained within the

pretrial order approved by U.S. Magistrate Judge Viktor V.

Pohorelsky on June 28, 1999.

1. Defendant Harold Levinson Associates, Inc. is, and at

all times hereinafter mentioned, was a corporation duly

organized under the laws of the State of New York having

its principal office and place of business at 100 Commer-

cial Street, Plainview, New York, during the first portion

of the investigation period. Subsequently the defendant

moved to One Enterprise Place, Hicksville, New York

11801, where it is still doing business. Both places of busi-

ness are within the jurisdiction of this court and defendant

continues to be engaged in the business of wholesale dis-

tribution of candy, Cigarettes, tobacco, and related activi-

ties.

2. Defendant corporation, at all times material to this

action, regulated the employment of all persons employed

by said corporation, acted directly and indirectly in the

corporation’s interest in relation to said employees, and

was thus an employer of said employees within the mean-

ing of section 3(d) of the Act.

25a

3. Defendant Edward Berro, who resides at 9 Roseann

Drive, Woodbury, New York 11797, and who has main-

tained a place of business at One Enterprise Street,

Hicksville, New York 11801 is, and at all times hereinafter

mentioned was, President of the aforesaid corporation, in

active control and management of said defendant corpora-

tion, and was thus an employer of said employees within

the meaning of section 3(d) of the Act.

4. The business activities of the defendants, as described

herein, are related and performed through unified opera-

tion or common control for a common business purpose

and constitute an enterprise within the meaning of section

3(r) of the Act.

5. At all times hereinafter mentioned, defendants have

employed and are employing employees in and about their

place of business in the activities of said enterprise

engaged in commerce, or in the production of goods for

commerce, including employees handling, selling, or oth-

erwise working on goods or materials that have been

moved in or produced for commerce. Said enterprise, at all

times hereinafter mentioned, has had an annual gross vol-

ume of sales made or business done in an amount not less

than $500,000.00. Therefore, the said employees are

employed in an enterprise engaged in commerce or in the

production of goods for commerce within the meaning of

section (3)(s)(1)(A) of the Act.

6. Defendants admit that plaintiff’s transcriptions of the

defendants’ payroll records, as reflected in the “Levinson

Back Wage Computations—Detail Report” prepared by

William Devins and produced to defendants on or about

December 9, 1997, accurately reflect the names of defen-

dants’ employees, with some exceptions.

26a

7. Defendants admit that plaintiff’s transcriptions of the

defendants’ payroll records, as reflected in the “Levinson

Back Wage Computations—Detail Report” prepared by

William Devins and produced to defendants on or about

December 9, 1997, accurately reflect the pay period end

dates of the employees during their employment, except

for certain listed exceptions as reflected in Defendants’

Responses to Plaintiff’s Request to Admit, attached.

8. Defendants admit that plaintiff’s transcriptions of the

defendants’ payroll records, as reflected in the “Levinson

Back Wage Computations—Detail Report” prepared by

William Devins and produced to defendants on or about

December 9, 1997, accurately reflect the gross wages paid,

except for certain listed exceptions as reflected in Defen-

dants’ Responses to Plaintiff’s Request to Admit, attached.

9. Defendants admit that plaintiff’s transcriptions of the

defendants’ payroll records, as reflected in the “Levinson

Back Wage Computations—Detail Report” prepared by

William Devins and produced to defendants on or about

December 9, 1997, accurately reflect the “punch detail

report hours” for the time periods stated as reflected in

Defendants’ Responses to Plaintiff’s Request to Admit,

attached.

10. The plaintiff’s transcriptions of the defendants’ pay-

roll records, as reflected in the reports produced to defen-

dants on February 12, 1999, accurately reflect the

following data:

(a) the names and social security numbers of defen-

dants’ employees;

(b) the pay period end dates during their employment;

(c) the gross wages actually paid;

27a

(d) the “punch detail report hours”, for the time periods

stated;

(e) the hourly rates paid to employees.

11. The plaintiff’s computations of back wages due

accurately reflect the identities of defendants’ employees,

their periods of employment, their wages paid, and during

the ADP period their weekly hours actually worked.

12. The wages computed by plaintiff as due each week

in the ADP PERIOD REPORT for weeks in which over-

time hours were worked were obtained by multiplying

each employee’s regular rate times 40, plus time and one-

half that regular rate for each hour worked over 40 each

week as reflected on the “punch detail report hours” for

each employee, each week.

13. The collective bargaining agreement in force at defen-

dants’ company from May, 1992 through December, 1994

required all hourly employees to be paid time and one-half

for all hours worked in excess of 40 in a workweek.

[In addition to these thirteen paragraphs of stipulated

facts, the court finds the following facts established by a

preponderance of the evidence in this record. ]

14. This case concerns defendants’ payment of employ-

ees during the payroll periods from (1) May of 1992 to

October of 1993 (hereafter “Paychex”) when the Paychex

payroll company prepared payment records, and (2) Octo-

ber 1993 to December 1994 when the ADP payroll compa-

ny prepared pay records. In October 1993, defendants

installed a computerized time clock that produced records

of hours worked thereafter.

4

28a

15. Beginning in 1990, an FLSA investigator determined

that defendants had been violating the record-keeping and

overtime requirements of federal law by failing to record

and maintain actual hours employees worked and by fail-

ing to pay premium pay for hours worked in excess of

40 each week. Defendants agreed with the FLSA investi-

gator to make full restitution of $79,436 to 43 employees

adversely affected by the violations. The next year defen-

dants provided the investigator signed statements from the

employees whom defendants purported to pay the amounts

defendants had agreed to pay. But defendant Berro and the

defendant company’s representatives, working at Berro’s

direction, used threats of adverse employment action to

persuade most employees to sign the checks and receipts,

then return to the defendant company the money paid to

them in restitution. Defendants’ conduct in forcing

employees to return the moneys owed them for violations

of federal law persuasively proves that defendants have

not only ignored FLSA requirements then and more recent-

ly but have intentionally flaunted FLSA principles of law.

Subsequent actions by defendants in the pay periods here

in question confirm that Berro and the defendant company

have continually, willfully evaded and violated known

requirements of the FLSA.

16. The many employees that plaintiff presented to tes-

tify at trial provided credible testimony, without exception.

The court finds the employees’ testimony consistent with

the plaintiff’s contention that in the time periods May 1992

through October 1993 and October 1993 to December

1994, defendants made no sincere effort to have records

accurately reflect the lengthy hours that employees really

worked. Even when the time clock was installed in Octo-

ber 1993, the time clock included a generic program to

29a

deduct a lunch break that many employees did not take.

From May 1992 to October 1993, the payrolls were pre-

pared based on general schedules of hours for each

employee, and the employees almost always worked more

time than shown on the schedules. And the schedules did

not accurately reflect the employees’ time working at the

facility or on the road.

17. Throughout the period October 1993 to December

1994, the company did not accurately pay for hours actu-

ally worked. Hours on the ADP payroll were created not

from time actually worked but from schedules prepared to

have the gross pay defendants determined an employee

should earn match the salaries sent to ADP.

18. Throughout both time periods, employees routinely

worked Saturdays, were paid cash for their work, and

worked longer hours than shown on defendants’ records.

19. Throughout the time periods in question, employees

were hired by defendant Berro or his designees, with a net

take-home salary negotiated. They did not advise employ-

ees that they would be paid overtime compensation nor a

particular hourly rate. Warehouse employees were routine-

ly paid $80 to $120 in cash for weekend work regardless of

the number of hours actually worked. Warehouse employ-

ees credibly testified that they worked the number of hours

each week reflected on the plaintiff's summary exhibits.

Most warehouse workers worked about the same number

of hours each week, but with variations from one-fourth

hour to several hours. Many rode to and from work togeth-

er and worked from the time they arrived until the time

they left. Employees who were drivers credibly testified

they delivered to customers during many more hours than

the records reflected, as shown in the plaintiff’s summary

30a

exhibits. Drivers testified credibly that other drivers who

did not testify worked essentially the same number of

hours as the witnesses, including many overtime hours for

which no overtime was paid. Drivers continued to work

through lunch breaks even though the company excluded

break time from their payroll time.

20. Clerical employees credibly testified that all clerical

employees worked many hours for which they were not

compensated, and overtime for which they were not com-

pensated at one and one-half times their rate, as reflected

accurately on the plaintiff’s summary exhibits.

21. The warehouse employees, driver employees, and

clerical employees worked about the same number of

hours each week from October 1993 to December 1994 as

in the previous payroll periods before the company

installed a computerized time clock.

22. Notwithstanding testimony of defendants’ chief

financial officer Andrew DeFrancesco and the expert wit-

ness Alan A. Schachter, the court finds that the company

had no agreed plan to pay any employee in accordance

with a lawful prepayment plan; no such plan was in writ-

ing or pre-approved.

23. Although the collective bargaining agreement

between the defendant company and the union that repre-

sented its employees provided that employees would be

paid at a regular hourly rate plus one and one-half times

the rate for overtime hours in excess of 40 in a work

week, the company ignored those provisions in the collec-

tive bargaining agreement and the union did not protest or

seek to correct the record-keeping and overtime pay viola-

tions.

3la

24. The employees Hladek, Krulish, and Cappizzi per-

formed some supervisory and administrative duties, but

their principal tasks were ordinary non-exempt work, and

they spent most of their work time at non-exempt work.

Those employees were not exempt from the requirements

of overtime pay under the FLSA.

25. Only after January of 1995 did defendants begin

paying employees for actual hours worked, based on the

time clock installed during the ADP period. But even then,

defendants allowed employees to work longer heurs than

the time clock registered.

26. The plaintiff’s exhibits reflect as accurately as pos-

sible the actual time defendants’ employees worked and

the actual pay they received. The plaintiff properly ignored

those Paychex payroll records and time clock records that

did not square with the time employees said they actually

worked. The plaintiff’s summary exhibits provide reason-

ably accurate approximations of the hours employees

worked in each payroll period and overtime pay unpaid,

based on credible testimony of the employee witnesses.

Plaintiff’s witnesses properly used averaging to determine

the amount* defendants should have paid the employees,

because the defendants failed in their duty to keep accurate

records of hours worked and overtime hours for which pre-

mium pay was required.

27. Although the defendants’ employees rarely com-

plained that they were not paid in accordance with the

FLSA, employees did not know or understand their rights

under the FLSA. Until 1995 defendants did not provide

employees sufficient information about hours worked and

pay calculations from which they could determine the

actual hours for which they were paid, compared to the

32a

actual hours they worked. From May 8, 1992 until October

15, 1993, employees received their pay in cash in

envelopes with no pay stubs or other payroll information.

From October 15, 1993 through December 31, 1994, the

employees did not receive accurate information about their

arrival and departure times nor the working time deducted

from their pay for lunch breaks or other reasons.

28. Defendants did not prove their defense that they had

a so-called “Belo” prepayment plan with individual

employees and groups of employees to prepay overtime

compensation and stabilize employees’ weekly pay. Defen-

dants had no such written agreements or oral agreements

with employees. Defendants did not prove the fluctuation

in hours each employee worked was so great that a Belo

plan was necessary. Defendants did not calculate employ-

ees’ wages in accordance with such prepayment plans.

CONCLUSIONS OF LAW

1. Jurisdiction of this action is conferred upon the court

by Sections 16 and 17 of the Fair Labor Standards Act of

1938, as amended (29 U.S.C. § 201, et seg.) and 28 U.S.C.

§ § 1331 and 1345.

2. Defendants Harold Levinson Associates, Inc. and

Edward Berro are employers within the meaning of section

3(d) of the Fair Labor Standards Act. Defendants consti-

tute a covered enterprise within the meaning of section

3(s)(1)(A) of the Act.

3. The court overrules all objections made during trial

on which ruling was reserved. Objections have been con-

sidered in determining the weight to be given evidence.

Plaintiff’s exhibits, including summaries based on employ-

33a

ees’ testimony and inadequate yet useful records kept by

the defendant company, fairly represent and summarize the

evidence about hours employees actually worked and

amounts due for unpaid overtime compensation.

4. Defendants violated Section 7 of the Act by failing to

pay employees for all hours worked over forty in a week at

time and one-half the employee’s regular hourly rate.

5. Defendants violated Section 11(c) of the Act by fail-

ing to accurately record all the hours employees actually

worked either on a daily or weekly basis.

6. The court ruled in an Order dated August 7, 2000,

after receiving briefs and oral arguments of counsel, that

for purposes of computing proper overtime pay, each work

week stands alone. Federal law does not ordinarily allow

an employer to credit for past or future payroll time peri-

ods the money above minimum wags that employees are

paid in a given time period. See 29 C.F.R. §§ 778.104 and

106. Section 778.104 provides in pertinent part:

[p]ayment may not be delayed for a period longer than

is reasonably necessary for the employer to compute

and arrange for payment of the amount due and in no

event may payment be delayed beyond the next pay-

day after such computation can be made.

7. Defendants’ violations of the overtime and record-

keeping provisions of the FLSA were willful under the

Portal-to-Portal Act, 29 U.S.C. § 255, and therefore a

three-year statute of limitations applies. After the 1991

investigation, defendants did not seek an opinion from the

Wage and Hour Administrator or the Secretary of Labor

concerning their pay practices that are here challenged.

Before October of 1993, defendants defied the results of

34a

the Secretary’s investigation and continued to keep inac-

curate and incomplete records. Defendants did not record

the actual hours employees worked and did not compen-

sate employees at the rate of time and one-half their regu-

lar hourly rate for each hour worked in excess of 40 each

work week.

8. Defendants violated the law and their agreement with

the Secretary by forcing employees to return to defendants

the unpaid overtime compensation found due in the Secre-

tary’s 1991 investigation, unpaid wages in amounts defen-

dants had agreed to pay. Defendants threatened employees

with adverse employment consequences if employees

refused to make the requested pay-backs. The defendants’

records of payments were therefore false. This uncon-

scionable conduct proves persuasively that defendants’

violations of record-keeping and wage-payment require-

ments were intentional, willful violations.

9. During the period May 1992 to October 1993 defen-

dants falsified their records of hours worked; during the

period October 1993 to December 31, 1994, defendants

maintained multiple sets of payroll records, some purport-

ing to comply with the requirements of the Act. Defen-

dants willfully disregarded their obligations to pay

employees time and one-half their regular rate for hours

worked over 40 each work week as required by their con-

tract with the union and by the FLSA.

10. During the period May 1992 to October 1993, defen-

dants knew that employees were working more hours than

they were being paid for. Defendant Berro was present on

a daily basis and observed employees working. Defendants

scheduled and required the employees to work the number

of hours they did, often more hours than scheduled. Defen-

35a

dant Berro’s deposition testimony to the contrary was eva-

sive and not credible. Berro directed other management

personnel to pay employees his way, knowing that his way

violated the law. He rejected other officers’ suggestions

that he hire other employees and add another shift, believ-

ing his method of paying fixed salaries covering all hours

worked for all employees gave him better control of the

employees and the overall operation of the business.

11. During the period October 1993 to December 31,

1994, defendant Berro and management personnel work-

ing at his direction supervised the employees and knew

they were working the number of overtime hours they

actually worked. Defendants paid by schedules of work

rather than actual hours worked even after they had the

means to record and pay by actual hours after the installa-

tion of their time clock. During the period October 1993 to

December 1994 defendants failed to pay time and one-half

the regular rate for all hours worked over 40 each work

week even after the installation of their time clock. During

this period defendants conducted business with the actual

knowledge that employees were working on a weekly basis

more hours than they were being paid for, including over-

time hours for which no overtime rate was paid. The defen-

dants’ record-keeping and overtime violations of the Act

were willful. See McLaughlin v. Richland Shoe Co., 486

U.S. 128, 132-36 (1988); Herman v. RSR Sec. Servs., 172

F.3d 132, 141-42 (2d Cir.1999); Reich v. Waldbaum, Inc.

833 F.Supp. 1037, 1045 (S.D.N.Y.1993), aff’d, 52 F.3d 35,

39-41 (2d Cir.1995); Brock v. Super‘or Care, 840 F.2d

1054, 1062-64 (2d Cir.1988).

12. The court denies the plaintiff’s request for injunctive

relief because the plaintiff has not shown that the defen-

36a

dants are still violating the FLSA or that injunctive relief

is needed to prevent future violations of the FLSA.

13. Plaintiff has sustained the burden to prove the num-

ber of unrecorded hours all employees worked and the

back wages due to those employees who did not testify.

Testimony of the credible employees who did testify was

fairly representative of testimony those not testifying

would have presented. See Anderson v. Mt. Clemens Pot-

tery Co., 327 U.S. 680 (1946); Reich v. Southern New Eng-

land Tele. Corp., 892 F.Supp. 389, 405 (D.Conn.1995),

aff’d, 121 F.3d 58 (2d Cir.1997); Reich v. Waldbaum, Inc.,

833 F.Supp. 1037, 1045 (S.D.N.Y.1993), aff’d, 52 F.3d 35,

39-41 (2d Cir.1995); Dole v. DeSisto, 929 F.2d 789, 792-

93 (Ist Cir.1991); Martin v. Selker Bros., Inc., 949 F.2d

1286, 1297 (3d Cir.1991); McLaughlin v. DialAmerica

Marketing, 716 F.Supp. 812, 824-25 (D.N.J.1989), aff'd

sub nom. Donovan v. DialAmerica Marketing, 935 F.2d

1281 (3d Cir.1991), cert. denied, 502 U.S. 981 (1991).

14. Plaintiff established a prima facie case by a prepon-

derance of all the evidence. Employee witnesses provided

adequate evidence of the hours worked by drivers, cleri-

cals, and warehouse employees. Defendants failed credibly

to rebut the testimony of these employees. Defendants’

flawed records, together with employees’ credible testimo-

ny, established overtime compensation was not paid for all

hours employees worked over 40 in each work week. The

plaintiff’s proffered method of computation of unpaid

Overtime compensation, as set forth in Exhibits 3-9, is rea-

sonable.

15. Employees Hladek, Cappizzi, and Krulish are salaried

employees due overtime at additional half-timne their regu-

lar hourly rate for all hours worked in excess of 40 each

37a

week. Defendants did not prove they were exempt from the

Overtime provisions of the Act. See Arnold v. Ben

Kanowsky, Inc., 361 U.S. 388, 391-92 (1960); Donovan v.

Carls Drug Co., 703 F.2d 650, 652 (2d Cir.1983); Martin

v. Cooper Elec. Supply Co., 940 F.2d 896, 900-07 (3d

Cir.1991); 29 C.F.R. § 541.

16. For the period May 2, 1992 until December 31,

1994, defendants must pay $487,584.58 in unpaid over-

time compensation to 105 employees, as set forth in trial

Exhibit 10, plus $16,500 due to Edward Krulish, for a total

of $504,084.58 due those 106 employees.

17. After plaintiff credibly proved a prima facie case of

FLSA violations, defendants did not meet their burden to

rebut the plaintiff’s proof of FLSA violations. Defendants

did not prove their proffered, though unpleaded, defense

based on prepayment and delayed payment of overtime

compensation. Defendants did not prove they paid over-

time compensation to employees for all hours worked in

excess of 40 each week. See Reich v. State of New York,

3 F.3d 581 (2d Cir.1993).

18. Defendants did not plead or prove at trial the exis-

tence of a bona fide so-called “Belo” prepayment plan, nor

did defendants prove any defense to the plaintiff’s claims

of record-keeping and overtime violations of the Act. A

bona fide prepayment plan requires an explicit agreement

between the employer and employee, employees regularly

working hours less than 40 per week, and a weekly record

of the running amount of prepaid overtime. In this case,

there was no such agreement. Employees invariably

worked in excess of forty hours per week, and the defen-

dants kept no records of a running account of overtime

purported to be prepaid. Defendants failed to carry their

38a

burden to prove the existence of any valid prepayment

plan.

19. Defendants failed to carry their burden to prove they

had a reasonable and objective good faith basis for their

violations of the overtime and record-keeping provisions

of the FLSA, or that they had reasonable grounds for

believing that their record-keeping and overtime practices

were in compliance with the FLSA. See Reich v. Southern

New England Tele. Corp., 892 F.Supp. 389, 405 (D.Conn.

1995), aff’d, 121 F.3d 58 (2d Cir. 1997). Defendants were

not just reckless, they were willful in intentionally violat-

ing record-keeping and overtime pay requirements of the

FLSA.

20. Plaintiff is awarded $487,584.58 in liquidated dam-

ages, equal to the unpaid overtime compensation in the

amounts listed on plaintiff’s trial Exhibit 10. See Herman

v. RSR Sec. Servs. Ltd., 172 F.3d 132, 141-42 (2d

Cir.1999); Reich v. Southern New England Tele. Corp., 892

F.Supp. 389, 405 (D.Conn. 1995), aff’d, 121 F.3d 58 (2d

Cir. 1997); Brock v. Wilamosky, 833 F.2d 11, 19-20

(2d Cir. 1982); Martin v. Cooper Elec. Supply Co., 940

F.2d 896, 907-11 (3d Cir. 1991) (reh’g denied), cert.

denied, USS. , 112 S.Ct. 1473 (1992).

21. On or before May 14, 2001, the defendants are

ordered to deliver to plaintiff’s counsel, or other designat-

ed representative of plaintiff, a certified check or equiva-

lent payment in the total amount of $991,669.16 for

distribution to the employees who were underpaid during

periods here in question.

22. Neither the defendant Berro, nor the defendant com-

pany, nor any person on their behalf shall directly or indi-

|

'

i

£

£

Fa

39a

rectly solicit or accept their return by any employee of any

sums defendants pay to employees as damages, in accor-

dance with this decision and the judgment to be entered by

the clerk of court on April 30, 2001.

23. By noon on April 27, 2001, the parties shall submit

to the clerk of court a joint proposed judgment to be

entered by the clerk, or separate proposed judgments, from

which the court and clerk of court will enter final judgment

on April 30, 2001.

IT IS SO ORDERED.

2001 WL 34088698 (E.D.N.Y.)

Supreme Court, U.S.

FILED

AUG 3 1 2005

OFFICE OF THE CLERK

4‘

No. 04-1602

Jn the Supreme Court of the United States

HAROLD LEVINSON ASSOCIATES, INC., ET AL.,

PETITIONERS

Vv.

ELAINE L. CHAO, SECRETARY OF LABOR

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE RESPONDENT

IN OPPOSITION

PAUL D. CLEMENT

HOWARD M. RADZELY Solicitor General

Solicitor of Labor Counsel of Record

ALLEN H. FELDMAN Department of Justice

, me Washington, D.C. 20530-0001

Associate Deputy Solicitor (202) 514-2217

NATHANIEL I. SPILLER

Senior Counselor

TAMARA SUE KILLION

Attorney

Department of Labor

Washington, D.C. 20210

QUESTIONS PRESENTED

1. Whether the court of appeals correctly held that

petitioners’ liability for unpaid overtime compensation

may not be offset by a credit under Section 207(h)(2) of

the Fair Labor Standards Act of 1938, 29 U.S.C.

207(h)(2), which authorizes such credit for “extra com-

pensation” paid to employees that meet the qualifica-

tions set forth in 29 U.S.C. 207(e)(5)-(7), because peti-

tioners failed to establish that they paid the qualifying

extra compensation.

2. Whether the court of appeals was correct to

uphold the district court's finding that the Secretary

correctly calculated, as a matter of just and reasonable

inference, the amount and extent of work that em-

plovees performed without being properly compensated.

TABLE OF CONTENTS

Opinions below

Jurisdiction

PUI sk cs SRA ba SSSR KOK AORTA SES eS .

Argument

Conclusion

TABLE OF AUTHORITIES

Cases:

Anderson ve Mt. Clemens Pottery Co., 328 US.

680 (19-46) 10, 11, 12

Brock v. Wilamousky, 833 F.2d 11 (2d Cir.

1987)

Goodman v. Lukeus Steel Co., 482 U.S. 656

(1987)

Herman ve. RSR Sec. Servs, Ltd., 172 F.3d 132

(2d Cir. 1999)

Overnight Motor Trausp. Co. v. Missel,

BR. FET) 2 4 1 | <2 Sapa een ep gee rnamn 6 rd eee x

Reich vy. Southern New England Telecomm.

Corp., 121 F.8d 58 (2d Cir. 1997)

Walling v. AH. Belo Corp., 316 U.S. 624 (1942)

Statutes, regulations and rule:

Fair Labor Standards Act of 1938, 29 ULS.C. 201

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29 USC.

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Far eek SEE ais oe eA oe ea ;

(11)

IV

Statutes, regulations and rule—Continued:

29 U.S.C. 20700 5)7)

29 USC. 20705)

29 ULS.C. 207/06)

29 UUS.C. 207(e 7)

WQUSC.20TW)

29 ULS.C. 207(h)

29 LLS.C. 207(h (2)

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FSC

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29 TIS.C, 26

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Jn the Supreme Court of the Anited States

No. 04-1602

HAROLD LEVINSON ASSOCIATES, INC... ET AL..

PETITIONERS

F

ELAINE L. CHAO, SECRETARY OF LABOR

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE RESPONDENT

IN OPPOSITION

OPINIONS BELOW

The summary order of the court of appeals (Pet. App.

la-5a) is not published in the Federal Reporter but is

reprinted in 121 Fed. Appx. 918. The remand decision

of the district court (Pet. App. 6a-14a) is unreported.

The initial summary order of the court of appeals (Pet.

App. 15a-22a) is not published in the Federal Reporter

but is reprinted in 37 Fed. Appx. 19. The initial decision

of the district court (Pet. App. 23a-39a) is not reported

in the Federal Supplement but is available at 2001 WL

S4088698,

JURISDICTION

The judgment of the court of appeals was entered on

February 23, 2005. The petition for a writ of certiorari

was filed on May 24, 2005. The jurisdiction of this Court

is Invoked under 28 U.S.C. 125401).

STATEMENT

1. The Fair Labor Standards Act of 1938 (FLSA), 29

U.S.C. 201 ef seg., requires employers to pay overtime

pay to covered employees at a rate not less than one and

one-half times the employee's regular rate for any hours

worked over 40 in a workweek. 29 U.S.C. 207(a)q1),

215(a)(2).. For purposes of the FLSA, an employee's

“regular rate” of pay is defined to include “all remunera-

tion of employment paid to, or on behalf of. the em-

ployee,’ with certain enumerated exceptions. 29 U.S.C.

207(e). Those exceptions include, among others, certain

extra compensation provided at a premium rate for

hours worked over eight in a day; for work performed

other than on regular workdays; or for work performed

outside a workday or workweek established pursuant to

an employment contract or collective bargaining agree-

ment. 29 U.S.C. 207(e)(5), (6) and (7). An employer may

credit extra compensation paid that falls under any of

the exceptions listed in Section 207(e5)(7) against

overtime compensation payable to the employee under

Section 207. 29 U.S.C. 207(h)(2).

The FLSA also requires covered employers to keep

records of their employees’ wages and hours. 29 C.F LR.

211(¢); see 29 C.FLR. Pt. 516. The Secretary of Labor

may sue to redress violations of the FLSA’s minimum

wage, overtime, and record-keeping provisions. See 29

U.S.C. 216(¢), 217. In addition to recovering back pay

for affected employees, the Secretary may recover an

3

equal amount in liquidated damages, unless the em-

ployer shows that he acted in good faith and had reason-

able grounds for believing his actions did not violate the

FLSA. 29 U.S.C. 216(¢), 260.

2. Petitioners are a corporation and its president

who are engaged in the wholesale distribution of ciga-

rettes, tobacco, and candy and related activities. Pet.

App. 24a. In 1990, a Labor Department investigator

(letermined that petitioners had been violating the

FLSA’s record-keeping and overtime requirements. /d.

at 28a. Petitioners agreed to make full restitution and

provided the investigator with signed statements show-

ing that employees had been paid, but later forced em-

ployees to return the money. /bid. Between May 1992

and December 1994, the time period at issue in this case,

petitioners made no genuine effort to maintain records

that accurately reflected the lengthy hours that employ-

ees worked. /bid. Between May 1992 and October 1993,

when petitioners used Paychex, a payroll services com-

pany, to prepare its payment records, the payrolls were

based on general schedules of hours that did not accu-

rately reflect employees’ working time. /d. at 27a, 29a.

From October 1993 to December 1994, when petitioners

used ADP, another payroll services company, to prepare

their payment records, they created payroll hours for

ADP that did not reflect time actually worked. /d. at

29a.

The Secretary of Labor brought an enforcement ac-

tion against petitioners, alleging violations of the over-

time and record-keeping provisions of the FLSA. Pet.

App. 15a, 33a. After a bench trial, the district court

found, inter alia, that petitioners had “continually, will-

fully evaded and violated known requirements of the

FLSA.” /d. at 28a. The court also found that petition-

ers had no lawful prepayment (or pay stabilization)

agreement with its employees and that petitioners had

ignored provisions in the collective bargaining ayree-

ment calling for an overtime rate of one and one-half

times the regular rate for hours in excess of 40 hours in

a workweek. /d. at 30a, 52a (factual findings), 37a-3Sa

(legal conclusions).

Accepting the Secretary's calculations of actual time

worked, actual pay received, and overtime pay due peti-

tioners’ employees, the court awarded S4A87AS1.58 in

back wages to 105 emplovees and an equal amount in

liquidated damages (plus an additional $16,500 in back

wages to one of the three employees for whom an ex

emption from overtime defense was claimed but not

proved). Pet. App. 37a-39a.

3. On May 22, 2002, the court of appeals affirmed

the majority of the district courts findings, but vacated

and remanded the case solely for a “partial recalculation

of damages.” Pet. App. l7a. Finding that the damages

award “unfairly penalizes the | petitioners” by assuming

that “in each week of the PCX |7¢.. Paychex] period

each employee worked precisely the average number of

hours worked [during the ADP period].” the court in-

structed recalculation to be “based on comparison of the

total hours worked by each employee for the entire PCN

period (computed by multiplying the imported ADP

weekly average by total PCX-period weeks worked)

against total hours compensated for the PCX period.”

fd. at 20a. In so doing, however, the court also rejected

petitioners argument that they were entitled to an off

set for “overpayments” to their employees, recognizing

that “this case does not involve payments that satisfy

the requirements” of Section 207(h). 7d. at 2la. It ex-

plained that its “decision to remand effectively gives the

|petitioners] the benefit of a credit for the PCX period,

but does so not because as 2a matter of law |they| are

entitled to credit one week’s overpayment against an-

other week’s liability, but because of the lack of founda-

tion for the [Secretary's] actual computations of weekly

hours for the PCX period.” /d. at 21a n.3.

1. Following the remand order, the Secretary per-

formed the directed recalculations, and a bench trial was

held cn August 4, 2003. Pet. App. 6a. The district court

issued a decision on December 30, 2003, which upheld

the Secretary's calculations and awarded $831,147.18 in

actual and liquidated damages. /d. at Ga, 13a.” Based on

the “plenary trial record” (including new evidence) de-

veloped in the event that the court of appeals might be

persuaded to “reopen all issues,” /d. at lla, the court

reached the same finaings of fact and conclusions of law

it had adopted in its first decision “except for the

method of calculating PCX damages for all but three

emplovees.” Jd. at 13a.

5. The court of appeals affirmed. Pet. App. la-da.

The court initially noted that its earlier decision-had

rejected petitioners’ arguments that (1) they were enti-

tled, under Section 207(h), to a credit of $529,000

In effect, the court suggested that the use of the ADP departmental

averages in the original calculations resulted in overstating the amount

of owed overtime payments in weeks in which the recorded hours

worked by an employee (who worked only during the Paychex period)

were less than the departmental average. See Pet. App. 20a.

- The district court determined: “|The Secretary's] exhibits *

accurately set forth the mathematical calculations called for by the

court of appeals decision. {The petitioners] have not presented any

credible challenge to those calculations.” Pet. App. 9a.

6

against their liability,’ and (2) that the district court's

formula for damages did “not vield a just and reasonable

approximation of overtime hours worked.” /d. at 3a.

Nonetheless, the court considered the new evidence

brought before the district court and concluded that peti-

tioners’ arguments were “wholly without merit.” /bid.

Specifically, the court held that petitioners had failed to

show that any alleged “overpayment” was made “for any

of the purposes specified at 29 U.S.C. § 207(h)(2)." [bhid.

Moreover, the court held that the district court acted

reasonably in adopting the Secretary's recalculation of

damages and in rejecting petitioners’ “unreasonable and

belatedly proferred alternative.” /d. at da.

ARGU MENT

The court of appeals’ decision is correct and does not

conflict with any decision of this Court or any other

court of appeals. Further review of this fact-bound case

is unwarranted.

1. Petitioners’ principal contention (Pet. 17-26) is

that the circuits are divided over the question whether

an employer's payment of extra compensation to its em-

plovees may “be credited across work weeks or work

periods to offset liability for overtime wages” under 29

U.S.C. 207(h)(2). Pet. 16. No such question is presented

in this case, however, because petitioners failed to estab-

lish that any alleged overpayment to their employees

“was paid for any of the purposes specified at 29 U.S.C.

§ 207(h)(2).” Pet. App. 3a.’

* According to petitioners, this sum is derived from their expert's

calculation that petitioners had overpaid their employees 540.000, and

underpaid them 311,000, for a net overpayment of 3529,000, Pet. 13.

' Petitioners assert (Pet. 5 & n.1) that they paid $529.000 in extra

compensation during the ADP period as part of an agreement to make

7

Section 207(h)(2) allows a credit only for compensa-

tion paid pursuant to 29 U.S.C. 207(e)(5), (6) and (7), ve.,

compensation paid at a premium rate for hours that ex-

ceed an eight-hour workday, for Saturday, Sunday, or

holiday work, or for work outside a workday or work-

week established by an employment contract or collec-

tive bargaining agreement. See 29 C.F.R. 778.201(¢)

(“No other types of remuneration for employment may

be eredited.”). As the court of appeals explained, peti-

tioners “fail[ed| to point to any evidence suggesting that

§ 207(e)(5), (6) or (7), as incorporated in § 207(h)(2), are

applicable.” Pet. App. 3a.n.1. The court of appeals ac-

cordingly did not consider whether premium pay credit-

able pursuant to 29 U.S.C. 207(h)(2) may be credited

up the difference between what the employees would have earned in

overtime compensation before the period at issue in this case and what

they would earn under the collective bargaining agreement governing

that period. Even if true, there would be no claim that any extra

compensation relating to either the Paychex or ADP periods was paid

for the purposes specified in Section 207(e)(5)-(7). Instead, petitioners

defended on the basis of 29 U.S.C. 207(f), which addresses prepayment

plans for employees with unpredictable and irregular hours of work.

Under Section 207(1), an employer may, under certain conditions and

pursuant to a bona fide individual contract or a collective bargaining

agreement, pay the employee a set amount each week despite varving

hours worked by the employee, without incurring overtime-pay

liabilities in the weeks in which the actual hours worked would normally

entitle the employee to overtime pay. Those plans are known as “Belo”

plans, following the decision that approved their use. See Walling v.

Ad1. Belo Corp., 316 U.S. 624 (1942). The district court found that

petitioners did not have a “Belo” prepayment plan, Pet. App. 37a-3&a,

a finding that the court of appeals affirmed, id. at 20a, and that

petitioners no longer contest.