Opinion
Case No. 6:18-cv-01121-MK
09-30-2019
ADAN DELGADO ROJAS, Plaintiff, v. WILLIE'S WOODWORKING, LLC, an Oregon limited liability company, and DALE MCCLEARY, an individual. Defendants.
FINDINGS AND RECOMMENDATION
:
Pursuant to Federal Rules of Civil Procedure 55(b), Plaintiff Adan Delgado Rojas ("Plaintiff") moves to enter default judgment against Defendants Dale McCleary and Willie's Woodworking, LLC (the "LLC") (collectively, "Defendants"). For the reasons set forth below, this Court should grant Plaintiff's motion for default judgment and enter judgment accordingly.
BACKGROUND
Plaintiff brought this action on June 26, 2018, and Defendants received personal service on July 23, 2018. ECF Nos. 1, 5. On November 19, 2018, Plaintiff filed his Motion for Entry of Default pursuant to Federal Rule of Civil Procedure 55(a). ECF No. 8. The motion was served on Defendants by electronic mail and United States mail on November 13 and 19, 2018, respectively. ECF No. 10. Defendants have failed to file any responsive pleadings or otherwise defend within 60 days of receiving the waiver request, and that failure is shown by declaration. See Johnson Decl. ¶ 7 (ECF No. 9). The clerk granted Plaintiff's Motion for Entry of Default on November 20, 2018. ECF No. 11. On Plaintiff's Motion for Default Judgment, the Court conducted a hearing for accounting. ECF Nos. 12, 15, & 25. Prior to the hearing, Plaintiff filed his Amended Memorandum and Declaration in Support of Plaintiff's Motion for Entry of Default Judgment. ECF Nos. 21, 22.
Plaintiff alleges the following. Plaintiff was hired by Defendants in January 2016 to work as a carpenter at an hourly rate of $25.00. Compl. ¶¶ 1, 3, & 32 (ECF No. 1). At all material times, Defendants operated a commercial and residential custom woodworking and finish carpentry business. Id. at ¶ 24. The LLC's annual gross sales volume was in excess of $500,000. Id. at ¶ 26. Plaintiff was classified as a W-2 employee. Id. at ¶¶ 4, 12. Defendants directed and controlled Plaintiff's work and assigned him tasks. Id. at ¶ 2. These tasks were either directly or indirectly in the interest of Defendants. Id. at ¶ 27. As a condition of employment, Plaintiff was required to pay all fuel, automobile insurance, and maintenance expenses. Id. at ¶ 35. Plaintiff claims he was unpaid for regular working hours, overtime, and business expenses from June 2016 to October 2016 and from April 2017 to May 2017. Id. at ¶¶ 9, 39, & 42. He seeks relief under the Fair Labor Standards Act ("FLSA") and Oregon wage and hour laws. See id. at 1.
LEGAL STANDARD
A defendant must file a responsive pleading within twenty-one (21) days of being served or within sixty (60) days if the defendant has timely waived service under Fed. R. Civ. P. 4(d). Fed. R. Civ. P. 12(a)(1)(A). If the defendant fails to file a responsive pleading or defend (as shown by affidavit or otherwise), the clerk must enter the defendant's default. Fed. R. Civ. P. 55(a).
The district court has broad discretion to enter a default judgment. See Fed. R. Civ. P. 55(b); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980); Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987) (per curiam) ("Rule 55 gives the court considerable leeway as to what it may require as a prerequisite to the entry of a default judgment.").
When considering an entry of a default judgment the courts consider:
(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986) (citation omitted).
When considering a default judgment, the court may generally take the factual allegations of the complaint as true, other than those relating to the amount of damages. TeleVideo Sys., 826 F.2d at 917-18 (citation omitted); see Fed. R. Civ. P. 8(b)(6). The court is not bound to admit facts that are not well-pleaded or admit conclusions of law. DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (quoting Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). A claim is well-pleaded "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A hearing or referral may be held to conduct an accounting, determine damages, establish the veracity of allegations through evidence, or investigate any other matter. Fed. R. Civ. P. 55(b)(2).
DISCUSSION
I. Entry of Default Judgment
This Court examines the seven factors laid out in Eitel and generally takes the factual allegations as true other than those relating to damages.
a. Factors 1 , 5, and 7
As the Court found in the previous Opinion and Order, refusal to grant default judgment would be prejudicial to Plaintiff because Plaintiff would have no other avenue to collect the unpaid regular and overtime wages. Op. and Order 4 (ECF No. 15). There does not appear to be a material dispute concerning the hourly rate of $25 and Defendants' failure to compensate Plaintiff. Id. at 5. Upon Plaintiff's submission of an accounting sufficient enough to enter a default judgment, the seventh factor, the strong policy underlying the Federal Rules of Civil Procedure "must be found in Plaintiff's favor." Id.
b. Factor 4
The fourth Eitel factor inquires the sum of money at state in the action. Eitel, 782 F.2d at 1471. While the Court may generally take the factual allegations of the complaint as true, allegations relating to the amount of damages require an extensive evidentiary review. TeleVideo Sys., 503 F.3d at 917-18. The Court will address the fourth factor below in damages.
c. Factor 6
The sixth Eitel factor requires the Court to consider whether the default was due to excusable neglect. Eitel, 782 F.2d at 1472. Nothing in the record before the Court suggests excusable neglect. Defendants were served and made aware of this action against them but have failed to appear. Defendants were also served Plaintiff's Motion for Entry of Default and have not responded. The Court therefore should find that the sixth factor favors an entry of default judgment.
d. Factors 2 and 3
The second Eitel factor concerns the merits of Plaintiff's substantive claim and the third concerns the sufficiency of the complaint. Eitel, 782 F.2d at 1471. One main purpose of the FLSA is to ensure that employees are paid for all hours worked. See Ballaris v. Wacker Siltronic Corp., 370 F.3d 901, 913 (9th Cir. 2004); 29 C.F.R. § 778.223 ("an employee must be compensated for all hours worked."). As a preliminary matter, a plaintiff must establish that there is the appropriate employment relationship, as defined under the FLSA and Oregon's wage and hour laws. See 29 U.S.C. § 207; Or. Rev. Stat. § 652.020(3)(c). "Employ" is defined as "to suffer or permit to work." 29 U.S.C. § 203(g); Or. Rev. Stat. § 653.010(2). The FLSA applies to employees employed by an employer who is engaged in commerce or the production of goods for commerce. 29 U.S.C. § 202. An employer is engaged in commerce or in the production of goods for commerce if it (1) "has employees engaged in commerce or in the production of goods for commerce, or that has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person;" and (2) has an annual gross income of at least $500,000. 29 U.S.C. § 203(s)(1).
Taking the factual allegations of the complaint as true, this Court should find that Plaintiff has established that the FLSA and Oregon's wage and hour laws govern this working relationship. Specifically, Defendants hired Plaintiff as a carpenter, classified him as a W-2 employee, and directed and controlled Plaintiff's work and assigned him tasks, which were either directly or indirectly in the interest of Defendants. Defendants are qualified employers because at all material times Defendants operated an enterprise in commerce or in the production of goods, and the LLC's annual gross sales volume was in excess of $500,000.
With respect to wages, the FLSA provides that
Every employer shall pay to each of his employees who in any workweek is engaged in commerce or in the production of goods for commerce or is employed in an enterprise engaging in commerce or in the production of goods for commerce, wages at the following rates . . . not less than . . . $7.25 an hour ...29 U.S.C. § 206. Additionally, a workweek over forty (40) hours is to be compensated at "one and one-half times the regular rate." Based on Plaintiff's allegation that Defendants failed to pay him for all hours worked and for overtime and the evidentiary support submitted for the accounting hearing, the Court should find that Plaintiff sufficiently pled Defendants' violation of FLSA and the claim has merit.
Under Oregon law, "[e]very employer shall establish and maintain a regular payday, at which date the employer shall pay all employees the wages due and owing to them." ORS § 652.120(1). Upon the termination of an employment relationship, "all wages earned and unpaid at the time of the discharge or termination become due and payable not later than the end of the first business day after the discharge or termination." ORS § 652.140. According to Plaintiff, Defendants failed to pay him for all wages due and owed, failed to pay him on a regular payday, and failed to pay him for all wages due and owing to him upon termination. The Court should find that Plaintiff sufficiently pled Defendants' violation of Oregon law and the claim has merit.
II. Damages
Under 29 U.S.C. § 216(b), a violation of section 206 or section 207 of the FLSA statute allows the court to award: unpaid wages, overtime compensation, and an additional equal amount as liquidated damages. State ex rel. v. Cushing, 253 Or. 262, 265 (1969). Under ORS § 652.150, penalty wages for nonpayment of compensation continue for thirty (30) days from the due date.
a. Unpaid Regular and Overtime Wages
Plaintiff has submitted evidence that he worked 1,227.5 total regular and overtime hours during the period from June 5, 2016 through May 27, 2017. See Johnson Am. Decl. Ex. 1 (ECF No. 22) ("Damages Spreadsheet"). He acknowledges the receipt of compensation for 191.5 of those hours. See Johnson Am. Decl. Ex. 2 (ECF No. 22) ("October 7, 2016 Paystub"); Delgado Rojas Decl. Ex. 2 (ECF No. 14) ("October 21, 2019 Paystub"). Therefore, Defendants failed to compensate Plaintiff for 1,036 total hours. The October 21, 2019 Paystub shows that Defendants paid Plaintiff at the $25.00 hourly rate. Additionally, Plaintiff agreed to work on a "piece rate" basis for 237 of those hours at $23.63 an hour. Am. Memo. Supp. Pl.'s Mot. Entry Default J. 8 (ECF No. 21).
Plaintiff has also provided sufficient documentation showing that Defendants are liable to Plaintiff for overtime wages. Plaintiff's evidence shows he worked a total of 221.5 hours of overtime during the period from June 5, 2016 through May 27, 2017. See Damages Spreadsheet (ECF No. 22). Plaintiff only received compensation for 6.5 of those overtime hours, leaving 215 uncompensated overtime hours. See October 7, 2016 Paystub (ECF No. 22). Additionally, Plaintiff worked 40 hours of overtime on the "piece rate" basis. Am. Memo. Supp. Pl.'s Mot. Entry Default J. 9 (ECF No. 21). Plaintiff's overtime hourly rate for the 40 hours overtime on the "piece rate" basis should be one and one-half of $23.63, which is $35.45 per hour. The amount is $1,418. The remaining 175 (215 minus 40) uncompensated overtime hours should be compensated at one and one-half of $25, which is $37.50 per hour. The amount is $6,562.50. Therefore, the total amount owed to Plaintiff for overtime is $7,980.50.
Consequently, Plaintiff should be compensated at $25.00 per hour for 624 (1,036 minus 237 minus 175) regular hours, which equals $15,600.00, and Plaintiff is owed $23.63 per hour for 197 (237 minus 40) "piece work" regular hours, which equals $4,655.11. Combined, the total owed to Plaintiff for unpaid regular wages is $20,225.11.
Plaintiff acknowledges that Defendants have also paid him $5,000.00 in cash and paid $1,245.00 worth of Plaintiff's rent. Am. Memo. Supp. Pl.'s Mot. Entry Default J. 11-12 (ECF No. 21). Accordingly, Plaintiff's unpaid regular and overtime wage should be reduced by $6,245.00. Thus, this Court should find that Plaintiff is entitled to damages of $21,990.61 for unpaid regular and overtime wages ($20,255.11 plus $7,980.50 minus $6,245.00).
b. Liquidated Damages
Under the FLSA, an employer who violates the overtime provision is also liable to the employee for liquidated damages equal to the amount of the unpaid regular and overtime compensation. See 29 U.S.C. § 216(b). Therefore, Plaintiff should be entitled to an additional $21,990.61 in liquidated damages.
c. Oregon Statutory Penalty
An employer must pay all unpaid wages at the time of termination or discharge are due the business day after the end of the employment relationship. See ORS § 652.140. If an employer fails to timely pay the wages due, "then, as a penalty for the nonpayment, the wages or compensation of the employee shall continue from the due date thereof at the same hourly rate for eight hours per day until paid." ORS § 652.150(1). The penalty, however, can only continue for up to thirty (30) days from the due date. Id.
In this case, the last day of Plaintiff's employment was May 27, 2017. See Damages Spreadsheet 6 (ECF No. 22). Since Plaintiff has yet to receive all unpaid wages, Plaintiff is entitled to penalty wages for eight hours per day for thirty days. The Court should find that Plaintiff is entitled to penalty damages in the amount of $6,000.00 ($25 hourly rate times 30 days times 8 hours).
d. Unreimbursed Business Expenses and Unpaid Benefits
Plaintiff alleges that Defendants violated the FLSA and is entitled to compensation for the "kickbacks" Plaintiff provided to Defendants—a direct economic benefit to Defendants—that reduced his pay from the agreed upon hourly rate. Compl. ¶¶ 37, 40 (ECF No. 1). Plaintiff alleges that he provided kickbacks "to Defendants in the form of unreimbursed purchases, use of Plaintiff's personal vehicle, tools and equipment, and other business expenses." Id. at ¶ 15.
Under the FLSA, "there would be a violation of the Act in any workweek when the cost of [the kickbacks] cuts into the minimum or overtime wages required to be paid him under the [FLSA]." 29 C.F.R. § 531.35. The District has also addressed the issue of kickbacks, where the employer paid the employees "a[n] hourly wage in excess of the federal minimum wage." Allison v. Dolich, No. 3:14-CV-1005-AC, 2016 WL 5539587, at *7 (D. Or. Sept. 28, 2016). Because "customarily tipped employees essentially had to withdraw tips previously deposited in their bank accounts and give such funds to back-of-house staff or managers for the ultimate benefit of Defendants" in order to receive their wage, the Court found that "[t]o the extent these payments decreased the effective hourly wage to a rate below the federal minimum wage, Defendants violated the minimum wage provisions of the Act." Id.
Unlike the Allison plaintiffs, Plaintiff's reduced hourly rate does not fall below the federal minimum wage as the result of the kickbacks. The Court therefore should not award Plaintiff for the unreimbursed business expenses under this theory.
Moreover, Plaintiff in his complaint did not seek unreimbursed expenses but requested reimbursement in the Amended Memorandum in Support of Plaintiff's Motion for Entry of Default Judgment, including vehicle fuel, tools and supplies, driving time, vacation time, paid holidays, and the May 30, 2018 trip to Bend, Oregon. The complaint does not allege any facts related to driving time, vacation time, and paid holidays. See Compl. (ECF No. 1). To the remaining expenses, although the complaint alleges that Plaintiff was required to use his personal vehicle, pay all fuel, automobile insurance, and maintenance expenses, and to use his personal cell phone and cellular data to conduct Defendants' business "as a condition of employment[,]" Plaintiff did not plead that the parties had an agreement to reimburse him. Compl. ¶¶ 34-36 (ECF No. 1). While Plaintiff does claim such an agreement in his Amended Memorandum in Support of Plaintiff's Motion for Entry of Default Judgment, the Defendants did not receive service for such allegation. Consequently, the Court should not award Plaintiff compensation for unreimbursed business expenses and benefits.
e. Pre-judgment and Post-judgment Interest
Plaintiff seeks pre-judgment and post-judgment interest. In a district court civil case recovering a money judgment, interest is allowed "at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment." 28 U.S.C. § 1961(a). The weekly average of the 1-year constant maturity Treasury yield was 1.90 percent on September 18, 2019. Selected Interest Rates, Board of Governors of the Federal Reserve System (Sept. 18, 2019), available at https://www.federalreserve.gov/releases/h15/ (last visited Sept. 26, 2019).
"Pre[-]judgment interest is a measure that 'serves to compensate for the loss of use of money due as damages from the time the claim accrues until judgment is entered, thereby achieving full compensation for the injury those damages are intended to redress." Schneider v. Cty of San Diego, 285 F.3d 784, 789 (9th Cir. 2002) (quoting West Virginia v. United States, 479 U.S. 305, 311 n.2 (1987) (internal quotation marks omitted)). Generally, the post-judgment rate of interest is presumed to be the appropriate rate of pre-judgment interest. Western Pacific Fisheries, Inc. v. SS President Grant, 730 F.2d 1280, 1289 (9th Cir. 1984) (pre-judgment rate set at post-judgment rate unless substantial evidence demonstrates "that the equities of the particular case require a different rate.").
"Plaintiffs' claims accrued when Defendant allegedly failed to pay compensation owed to Plaintiffs for any workweek at the regular payday for the period in which the workweek ended ..." Gessele v. Jack in the Box, Inc., 6 F. Supp. 3d 1141, 1152 (D. Or. March 19, 2014) (emphasis added); see ORS § 652.120(1) ("Every employer shall establish and maintain a regular payday, at which date the employer shall pay all employees the wages due and owing to them.").
Here, nothing in the record suggests the requirements of a different rate. The Court therefore should presume the same post-judgment interest rate as the pre-judgment interest rate of 1.90 %, compounded annually. Plaintiff's pre-judgment interest starts to accrue from the day Plaintiff's claim accrued. Gessele, 6 F. Supp. at 1152.
f. Attorney's Fees and Costs
Plaintiff is entitled to reasonable attorney fees and costs of the action under the FLSA. 29 U.S.C. § 216(b). Plaintiff submitted a Motion for Attorney Fees and Costs. The Court will address attorney's fees and costs in a separate Findings and Recommendation.
RECOMMENDATION
For the reasons explained above, the Court should enter a default judgment for Plaintiff as follows:
• $21,990.61 as unpaid regular and overtime wages,
• $21,990.61 as liquidated damages,
• $6,000 as Oregon statutory penalty, and
• Pre-judgment interest at 1.90 % starting from the day Plaintiff's claim accrued and post-judgment interest at 1.90 %.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.
DATED this 30th day of September, 2019.
/s/Mustafa T. Kasubhai
Mustafa T. Kasubhai
United States Magistrate Judge