United States District Court, D. Oregon
THOMAS E. PEREZ, Secretary of Labor, United States Department of Labor, Plaintiff,
OAK GROVE CINEMAS, INC., an Oregon domestic business corporation; BARRINGTON MANAGEMENT, LLC, an Oregon domestic limited liability company; BARRINGTON VENTURE, LLC, an Oregon domestic limited liability company; and DAVID EMAMI, an individual and in his official capacity, Defendants
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For Plaintiff: Janet M. Herold, Regional Solicitor, Bruce L. Brown, Associate Regional Solicitor, Susan Brinkerhoff, Trial Attorney, Katherine M. Kasameyer, Trial Attorney, OFFICE OF THE SOLICITOR, U.S. DEPARTMENT OF LABOR, Seattle, Washington.
For Defendants: Edwin A. Harnden, Richard C. Hunt, Damien T. Munsinger, BARRAN LIEBMAN LLP, Portland, Oregon.
FINDINGS OF FACT & CONCLUSIONS OF LAW
Marco A. Hernandez, United States District Judge.
In this wage action brought under the Fair Labor Standards Act, 29 U.S.C. § § 201-219 (FLSA), Plaintiff Thomas Perez, the United States Secretary of Labor, brings three claims against Defendants Oak Grove Cinemas, Inc., Barrington Management LLC, Barrington Venture LLC, and David Emami. Plaintiff first brings a claim against all Defendants for failure to pay overtime wages to thirty-five individuals who performed work for one or more of the Defendant companies. Second, Plaintiff brings a recordkeeping violation claim against all Defendants. Third, Plaintiff brings a retaliation claim against David Emami.
This Court conducted a four-day bench trial in October 2014. These are my Findings of Fact and Conclusions of Law. Fed.R.Civ.P. 52(a)(1). As explained herein, Plaintiff established that all Defendants violated the FLSA's overtime and recordkeeping provisions and further established that David Emami violated the anti-retaliation provision. As a result, Plaintiff is awarded $512,290.26 in damages as well as injunctive relief.
FINDINGS OF FACT
David Emami is the sole shareholder of Oak Grove Cinemas, Inc. (OGC), and is that company's president. He also has a one-percent ownership interest in the two Barrington companies. His wife, Diana Emami, owns the remaining ninety-nine percent interest in the Barrington companies. OGC operates a movie theater. Barrington Management manages and leases different properties owned by the Emamis. The nature of Barrington Venture's business was not clearly established at trial although it appears to also manage properties.
David Emami has a master's degree in applied economics from Portland State University. He has owned or managed businesses in Oregon since at least the 1980s. He has been associated with at least thirty-three different business entities in Oregon. Ex. 31. He is familiar with wage and hour laws including minimum wage and overtime exemptions for movie theater employees. He also knows that independent contractors do not receive overtime wages. Diana Emami has a business administration degree from Vilnius University. OGC employs Diana Emami to do its payroll work. In this capacity, she adds up hours of its employees, submits payroll information to a third party, and distributes paychecks. Diana Emami performs similar bookkeeping functions for both Barrington companies.
During the relevant time period from February 2010 through February 2013, OGC employed several individuals who did no work for its movie theater operations. Instead, these workers performed construction, maintenance, landscaping, and similar tasks at OGC and various properties owned by the Emamis, including their personal residences and commercial properties managed by the Barrington companies. David Emami testified that all three Defendant companies shared employees.
Several of the workers who testified explained that they kept two time cards for each pay period. On one they recorded their morning start time and then later, in mid-afternoon, they recorded their end
time. However, they then immediately " clocked in" on another time card which they would use to record the remainder of that day's hours. E,g., Ex. 17 at 4 (time cards for July 16-31, 2012 for Filemon Santos Camarillo with one showing hours worked for OGC from 6:00 a.m. - 2:30 p.m., with a thirty-minute lunch from 12-12:30, and the other showing hours worked for Barrington on the same dates from 2:30 p.m. to anywhere from 5:30 to 7:30 p.m., as well as hours on weekends). The workers clocked in and out by placing time cards in a punch-type time clock or by handwriting their time on time cards.
For all hours worked, these workers typically received two checks each time they were paid - one check from OGC and one check from Barrington. E.g., Ex. 15 at 5 (paychecks to Osbaldo Perez from OGC and Barrington Management dated March 5, 2010); Id. at 6 (paychecks to Osbaldo Perez from OGC and Barrington Venture dated July 5, 2012). Most of the workers testified that they did not know why they received two checks each time. However, Armando Beas explained that David Emami told him that the workers received two checks because David Emami did not want more than 40 hours per week on the OGC payroll and thus, additional hours were paid with a Barrington Management or Barrington Venture check. The workers did not consider themselves to be employed by two separate companies. They thought they were employed by the Emamis, and paid little attention to the actual employing enterprise. The tasks and jobs they performed were consistent throughout the day and did not change when they clocked out and then back in again. Their rate of pay did not change. Their work location did not change.
David Emami hired workers for all of the Defendant companies. He determined the rate of pay, sometimes after obtaining input from other subcontractors he hired. He determined where workers would work on any particular day. He regularly visited the various sites where his workers were located, providing instruction to the workers and sometimes exhorting them to work faster. Although David Emami tried to downplay his supervisory role and his presence at the various work sites, I reject this testimony as not credible. The consistent testimony of the workers that David Emami had them fill out job applications, frequently told them where to work, and frequently visited them at the work sites is more reliable than David Emami's testimony indicating that he stayed at his Lake Oswego home doing some sort of unspecified " work."
The testifying workers acknowledged that they used some of their own small tools such as hammers and nail bags. However, David Emami provided all of the landscaping equipment and tools as well as other construction tools such as saws, levels, drills, and screw guns, either directly or through his subcontractors. Workers also used forklifts or bobcats which they did not provide themselves. The testifying workers stated that they held no other jobs nor had their own companies when they worked for OGC and Barrington. They did not have their own clients. Armando Beas testified that he never received a Form 1099 from Defendants.
David and Diana Emami both testified that the workers asked to become independent contractors. As a result, they treated the workers as employees while working for OGC, but as independent contractors while working for Barrington, even though there was no difference in location, pay, or duties. The Emamis' testimony on this issue is not credible when weighed against the consistent testimony of the workers that they were employees of the Emamis. If the workers had sought to be independent
contractors, they would have likely requested the appropriate tax forms and would have demonstrated at least some indicia of independent contractor status. Additionally, it is illogical that if the workers wanted to be independent contractors, the Emamis would have kept them as employees of OGC for part of the time they worked each day. Instead, they would have treated the workers as independent contractors for all hours worked.
Six workers testified at trial. They all kept time cards. E.g., Exs. 10, 11, 15, 16, 17, 19 (various time and pay records for Armando Beas, Pedro Camarillo, Osbaldo Perez, Luis Tuyub, Filemon Santos Camarillo, and Jhonny Zuloaga). According to Diana Emami, she used the time cards to prepare the payroll. For time attributed to OGC, she added up the hours and sent the information to Quick Books payroll service along with the hourly rate. Quick Books calculated the appropriate deductions, prepared the payroll checks, and sent them back to Diana Emami electronically. Diana Emami printed the checks and the pay stubs, or what she referred to as the " check stubs," on paper stock especially formatted for this purpose. The pay stub contained deduction information and was separated from the actual paycheck by a perforated line. Diana Emami stated she folded the paper on the perforated line and put the folded paper, meaning both the pay check and the pay stub, in an envelope for the employee. She also testified that the information she received from Quick Books contained, in a single page, the pay check, the pay stub, and then a duplicate of the pay stub. Diana Emami removed the duplicate of the pay stub before putting the pay check and pay stub in an envelope for the worker.
Diana Emami issued paychecks on the 5th and the 20th of each month. To illustrate her practice, she explained that for hours worked in the month of September, a worker would receive a check on the 20th of September, and another on the 5th of October. The checks issued on those two dates paid the worker for hours worked from September 1st through September 30th. According to Emami, she considered the first of the two checks a " draw" against the worker's wages owed at the end of the month. In contrast to the OGC checks where the amounts were calculated by Quick Books, for the time attributable to either one of the Barrington companies, Diana Emami performed the calculations by adding the hours worked and multiplying those by the worker's hourly rate. Diana Emami prepared the Barrington paychecks herself. No deductions were made from the paychecks issued to workers by either of the Barrington companies because the Emamis considered the workers to be independent contractors for those hours.
The employee time cards show that the employees kept time for two periods: from the 1st through the 15th of the month, and then from the 16th to the end of the month. E.g., Exs. 10, 11, 15-20 (various time and pay records for several workers); see also Exs. 506-514 (time cards for several workers). This is consistent with the receipt of paychecks dated the 20th of the month and the 5th of the next month.
Diana Emami testified that payroll records for the thirty-five Exhibit A workers were lost in a sewer backup which flooded the basement area in the Emamis' home where those records were kept. Thus, the Emamis were unable to produce complete
payroll records to Plaintiff during Plaintiff's investigation and in this lawsuit. Plaintiff was able to obtain copies of checks issued to the thirty-five employees by directly subpoenaing Defendants' bank. See Ex. 21 (summary chart of Umpqua Bank records). Plaintiff also obtained some pay-related documents directly from the Exhibit A employees. Defendants were eventually able to locate some time cards. In the end, while there are some payroll records, they are far from complete.
CONCLUSIONS OF LAW
I. Employees v. Independent Contractors
Defendants' Fourth Affirmative Defense asserts that the Exhibit A workers were independent contractors, not employees. As noted above, the Emamis testified that several of their workers requested that they be independent contractors. As a result, the Emamis considered their workers to be independent contractors for any hours worked over 40 in a week and one of the Barrington companies then paid them for the excess hours without the deductions made when they were paid by OGC.
Under the relevant authority, the workers are properly considered employees for all hours worked. An " employee" " means any individual employed by an employer" subject to certain exceptions not applicable here. 29 U.S.C. § 203(e)(1). An " employer" " includes any person acting directly or indirectly in the interest of an employer in relation to an employee[.]" 29 U.S.C. 203(d). To employ " includes to suffer or permit to work." 29 U.S.C. § 203(g).
The FLSA is to be construed expansively in favor of coverage, recognizing that broad coverage is essential to accomplish the goals of this remedial legislation. See Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 296-97, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985); Hale v. Arizona, 967 F.2d 1356, 1362 (9th Cir. 1992). " [N]either the common law concepts of 'employee' and 'independent contractor' nor contractual provisions purporting to describe the relationship are determinative of employment status." Mathis v. Hous. Auth. of Umatilla Cnty., 242 F.Supp.2d 777, 783 (D. Or. 2002) (internal quotation marks and brackets omitted); see also Real v. Driscoll Strawberry Assocs., Inc., 603 F.2d 748, 754 (9th Cir. 1979) (courts use expansive interpretation of the definitions of " employer" and " employee" under the FLSA; common law concepts of " employee" and " independent contractor" are " not conclusive determinants of the FLSA's coverage" ).
Rather, to determine employment status for the remedial purposes of the FLSA, the " economic realities test" is the applicable standard. Boucher v. Shaw, 572 F.3d 1087, 1091 (9th Cir. 2009); Real, 603 F.2d at 755. Courts consider the facts as a whole and rely on six factors to analyze the economic realities of the relationship:
1) The degree of the alleged employer's right to control the manner in which the work is to be performed; 2) the alleged employee's opportunity for profit or loss depending upon his managerial skill; 3) the alleged employee's investment in equipment or materials required for his task, or his employment of helpers; 4) whether the service rendered requires a special skill; 5) the degree of permanence of the working relationship; and 6) whether the service rendered is an integral part of the alleged employer's business.
Donovan v. Sureway Cleaners, 656 F.2d 1368, 1370 (9th Cir. 1981) (internal quotation marks omitted).
The factors are aids used to determine the degree of dependence by the individual on the entity. E.g.,
Tony & Susan Alamo Found., 471 U.S. at 301
(workers entirely dependent on employer for long periods suggests employment relationship); Usery v. Pilgrim Equip. Co., 527 F.2d 1308, 1311 (5th Cir. 1976) (factors are " tools to be used to gauge the degree of dependence of alleged employees on the business with which they are connected. It is dependence that indicates employee status" ).
David Emami hired the workers. He determined their rate of pay. He often told them where to work on any particular day and frequented the various locations where the workers performed an array of tasks as he determined. He controlled the manner in which the work was to be performed. He frequently told them to hurry up. His supervisory employee or subcontractor also directed the workers, but those individuals were employed by David Emami.
The workers had no opportunity for " profit or loss" depending on their managerial skill. David Emami testified that the workers generally were all performing primitive construction work and were unskilled. While the workers had some investment in their own small tools, they did not provide any of the landscaping equipment or more specialized or heavy equipment used at various projects. The workers did not employ helpers. Although the jobs performed by the OGC employees were not an integral part of the movie theater business, the evidence showed that in addition to running a movie theater, OGC supplied the labor for the Emamis' other businesses. The trial testimony of all the witnesses established that running the movie theater is not the primary purpose of the Emamis' collective property-related businesses. Given that all three businesses shared all of the workers, it is clear that the workers' landscaping and construction work was an integral part of the Emamis' property-related business interests. Moreover, as noted above, none of the employees worked for a non-Emami entity during the time they worked for the Emamis. They did not have other clients. They did not own their own companies. Additionally, the workers were paid by the hour, not by the job, often punching a time clock.
The only evidence suggesting that the employees were independent contractors is the non-credible testimony of the Emamis. All relevant facts show that the " economic reality" of the relationship between the workers and the Emamis is that the workers were entirely dependent on the Emamis and their businesses. Finally, while only six employees testified, Defendants presented no evidence suggesting that they treated the remaining twenty-nine employees any differently than the six who appeared at trial. It is reasonable to conclude that all the Exhibit A individuals were employees for all of the hours they worked for the Emamis and any of the three Defendant companies.
II. Covered Employer - Single Enterprise
Under 29 U.S.C. § 203(s)(1)(A)(ii), an " [e]nterprise engaged in commerce or in the production of goods for commerce means an enterprise . . . (ii) . . . whose annual gross volume of sales made or business done is not less than $500,000[.]" There is no dispute that OGC meets this threshold and is thus a covered enterprise. However, Defendants' Second Affirmative Defense contends that Barrington Management and Barrington Venture were not covered " enterprises" within the meaning of the statute because the gross volume of business conducted by each of those entities in most years was less than $500,000. They also assert that their businesses were not a common enterprise under 29 U.S.C. § 203(r)(1) because they were not engaged in " related activities." The evidence at trial established otherwise.
The FLSA defines " enterprise" to mean
the related activities performed (either through unified operation or common control) by any person or persons for a common business purpose, and includes all such activities whether performed in one or more establishments or by one or more corporate or other organizational units including departments of an establishment operated through leasing arrangements, but shall not include the related activities performed for such enterprise by an independent contractor.
29 U.S.C. § 203(r)(1). As the Ninth Circuit has explained, " [i]f these three elements - related activities, unified operation or common control and common business purpose - are present, different organizational units are grouped together for the purpose of determining FLSA coverage." Chao v. A-One Med. Servs., Inc., 346 F.3d 908, 915 (9th Cir. 2003). In cases where the facts support a conclusion that multiple entities constitute a single " enterprise" for FLSA purposes, it is irrelevant that one of the entities does not meet the $500,000 threshold. Id. at 914-15. In assessing the three relevant elements, the court should liberally construe the FLSA. Reich v. Bay, Inc., 23 F.3d 110, 114 (5th Cir. 1994). Courts should look to the " actual or pragmatic operation and control" of the enterprise. Donovan v. Grim Hotel Co., 747 F.2d 966, 970 (5th Cir. 1984).
Although part of OGC's business was running the movie theater, the testimony established that it simultaneously had the purpose of providing labor for the maintenance and construction of other properties owned or managed by one of the two Barrington companies. Thus, the three companies are " related" and engage in " related activities" by sharing the OGC labor pool for the work required at all of the Emami properties. Second, the three companies were under the common control of the Emamis who together own 100% of the entities, hire the workers, set wages, supervise the work, and do all of the employment-related bookkeeping. There is no question that the performance of the employees was controlled by the Emamis. Third, the three companies had a common business purpose of property management with OGC supplying the labor and the other two companies providing the need for the labor.
Because Defendants' three businesses have related activities, are under the common control of the Emamis, and have a common business purpose, they are properly treated as a single enterprise engaged in commerce under sections 203(r)(1) and 203(s)(1)(A).
III. David Emami's Individual Liability
Under 29 U.S.C. § 203(d), an " employer" is defined as " any person acting directly or indirectly in the interest of an employer in relation to an employee[.]" The Ninth Circuit has noted that " [t]he overwhelming weight of authority is that a corporate officer with operational control of a corporation's covered enterprise is an employer along with the corporation, jointly and severally liable under the FLSA for unpaid wages." Boucher, 572 F.3d at 1094 (internal quotation marks omitted); see also Solis v. Velocity Exp., Inc., No. 03:09-cv-00864-MO, 2010 WL 2990293, at * 2 (D. Or. July 26, 2010) (noting that an " individual may be personally liable for FLSA violations if he or she exercises control over the nature and structure of the employment relationship or economic control over the relationship," and that a " corporate officer may qualify as an employer if he or she had a significant ownership interest in the corporation with operational control of significant aspects of the corporation's day-to-day functions; the power to hire and fire employees; the power to
determine salaries; or the responsibility to maintain employment records." ) (internal quotation marks and brackets omitted).
David Emami, as sole shareholder of OGC, has a significant ownership interest of that entity. While he is only a one-percent owner of the Barrington companies, he performs work for those companies by ensuring that the Barrington companies' projects are built on time and by assisting Diana Emami in managing those companies. As previously noted, he hired the employees and frequently directed their work. And, as the sole shareholder of OGC, he had the authority to hire and fire, sign ...