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using the "single employer" or "integrated enterprise" test to determine the liability under the FLSA of a parent corporation for the acts of its subsidiaries
Summary of this case from Yaklin v. W-H Energy Services, Inc.Opinion
Case No. C-3-95-404
April 23, 1999
John R. Doll for plaintiff.
Robert J. Brown for defendant.
The Plaintiffs are a group of store managers and senior assistant managers who were formerly employed by Autoworks, Inc. ("Autoworks"), a wholly owned subsidiary of Defendant Hahn Automotive Corporation ("Hahn"). In a previous Decision and Entry, the Court determined that the Plaintiffs were not "exempt" employees, under the Fair Labor Standards Act (FLSA), while working at Autoworks and, therefore, that they were entitled to receive unpaid overtime compensation for their work. (Doc. #55). Following that ruling, the Plaintiffs filed a Motion for Summary Judgment (Doc. #88), contending that Hahn was their FLSA "employer," and that it is liable to them for the unpaid overtime compensation. In response, Hahn filed its own Motion for Summary Judgment (Doc. #93), insisting that Autoworks was the Plaintiffs' employer, and that Autoworks, alone, is responsible for providing them with unpaid overtime compensation. In a February 25, 1999, Decision and Entry, the Court noted that resolution of this issue turns upon whether Hahn exercised sufficient control over Autoworks to justify holding Hahn responsible for Autoworks' failure to comply with the FLSA. (Doc. #98 at 2). After reviewing the evidence submitted, however, the Court found itself unable to sustain either party's Motion for Summary Judgment.
Autoworks, which has filed a Chapter 11 petition in the Bankruptcy Court for the Western District of New York (See Doc. #82, Entry Setting Forth Court's Observations on Effect of Bankruptcy Proceeding, at 2), is not named as a Defendant in this litigation.
As a result, the Court conducted a March 8, 1999, bench trial, limited solely to the issue of the Defendant's status as the Plaintiffs' "employer" under the FLSA. Based upon the testimony and exhibits introduced at that proceeding, the Court now sets forth the following Findings of Fact and Conclusions of Law.
I. Findings of Fact
Defendant Hahn Automotive acquired Autoworks from Northern Automotive in late November, 1993. Hahn's acquisition included approximately 159 automobile parts retail stores located in seven states and a distribution center located in Ohio. Autoworks functioned as a wholly owned subsidiary of Hahn, and the Plaintiffs were employed as Autoworks managers or senior assistant managers. At all relevant times, Hahn maintained corporate offices, including payroll and personnel offices, in Rochester, New York. Although Autoworks had a regional office located in Michigan, many Autoworks records were maintained by Hahn in New York. The Michigan regional facility housed only Autoworks employees Fred Coe, Tom Labadie, and their secretaries. It did not include any type of payroll department.
In addition, various memoranda introduced into evidence indicate a corporate headquarters address for both Hahn and Autoworks at 412 West Main Street, Rochester, New York. The two corporate headquarters also shared identical telephone and fax numbers. Furthermore, Ira Jevotovsky and other Hahn employees often corresponded with the Plaintiffs, using Autoworks and Hahn Automotive letterhead interchangeably. When Hahn employee Barb Kelly sent the Plaintiffs any memoranda using Autoworks letterhead, she listed her telephone number as 716-464-3851, which was the telephone number for Hahn's payroll department in New York.
Additionally, while visiting Hahn's Rochester, New York, offices during an interview, Plaintiff David Bradner toured the facilities and observed no designated office space for Autoworks. He also failed to observe any signs or directories indicating that the building housed Autoworks offices. At the time of his interview, Bradner worked as an Autoworks manager, and he was seeking a corporate position with Hahn Automotive in New York. After receiving a job offer from Hahn, Bradner was not asked to provide proof of U.S. citizenship. Nor was he asked to fill out a new employee-benefits form, W-2 form, or any other personnel form reflecting a change in his employment status from Autoworks to Hahn. No new paperwork was needed because Hahn already possessed all of the necessary personal information.
In addition to maintaining many of Autoworks' records, Hahn established a number of Autoworks' payroll, administrative, and personnel policies and monitored the Plaintiffs closely to ensure compliance. For example, in December, 1993, Ira Jevotovsky, Hahn's Vice-President of Human Resources, sent a memorandum to Autoworks managers, describing new payroll procedures. (Pl. Tr. Exh. #5). Under the new procedures, Autoworks store managers were required to call Hahn's offices in Rochester, New York, and report their employees' work hours and other payroll information. Notably, the second page of Jevotovsky's memorandum advised that "Salaried Employees are considered to have worked a 40 hr[.] week. Their regular hours should not be read." Additionally, the memorandum stated that "Salaried Employees do not receive overtime." Jevotovsky's memorandum also instructed Autoworks managers to call and report new hires, terminations, employment status changes, and payroll rate changes. Finally, the memorandum stated that any Autoworks managers with questions should "contact the Payroll Department, Hahn Automotive Warehouse, Inc." Following his receipt of this memorandum, Autoworks Manager Kenneth Takacs called Rochester, New York, to report his store's payroll information. When doing so, he spoke with Barb Kelley, a Hahn employee. Takacs also spoke with Kelly whenever one of his employees experienced a payroll-related problem, such as an unprocessed raise or an inaccurate report of hours worked. Furthermore, after Hahn's acquisition of Autoworks, the Plaintiffs transmitted payroll information, including their employees' work hours, to Hahn's corporate offices, via a "J-CON" computer system.
It is undisputed that Hahn considered the Plaintiffs to be "salaried" employees who were exempt from the overtime compensation requirements of the FLSA. (See, e.g., Plaintiffs' Tr. Ex. #1 at 2).
In additional memoranda, Jevotovsky and other Hahn representatives advised Autoworks managers and/or hourly workers about the implementation of Hahn's policies on a variety of issues. These memoranda concerned, inter alia: (1) the participation of Autoworks workers in Hahn's 401(k) retirement plan (Pl. Tr. Exh. #4); (2) the enrollment of Autoworks employees in Hahn's employee-benefits plan (Pl. Tr. Exh. ## 6-7); (3) the implementation of Hahn's sexual harassment policy at all Autoworks stores (Pl. Tr. Exh. #8); (4) Jevotovsky's personal approval of leave-of-absence requests, under the Family and Medical Leave Act, for all Autoworks employees (Pl. Tr. Exh. ##10, 13); (5) pre-employment drug testing of Autoworks employees (Pl. Tr. Exh. #19); (6) the suspension of a call-in procedure regarding new hires and tax credits (Pl. Tr. Exh. #18); and (7) the completion and return of "Change in Personal Data" forms, which were to be submitted on Hahn letterhead by Autoworks employees (Pl. Tr. Exh. ##21, 25).
The record also contains other documents demonstrating that Hahn played an active role in Autoworks' personnel-related matters. For example, Autoworks employees seeking direct deposit of their paychecks were required to complete an "Authorization for Automatic Deposit" form. (Pl. Tr. Exh. #31). The form bears a Hahn Automotive letterhead, and it states, inter alia:
I hereby authorize the Payroll Department of Hahn Automotive Warehouse, Inc. to initiate credit entries and to initiate, if necessary, debit entries and adjustments for any credit entries in error, or [sic] my checking and/or savings account(s) listed above, and the depository named above to credit and/or debit the same to such accounts.
This authorization is to remain in full force and effect until the Payroll Department of Hahn Automotive Warehouse, Inc. receives written notification from me of its cancellation.
Additionally, the record contains an "Employer Response to Employee Request for Family or Medical Leave." (Pl. Tr. Exh. #32). Hahn Vice-President Ira Jevotovsky completed the form, as the "employer representative," for Autoworks employee Kevin Simmons. Among other things, Jevotovsky determined that Simmons was eligible for FMLA leave, that such leave would be counted against his FMLA leave entitlement, and that Simmons would be required to substitute accrued paid leave for unpaid FMLA leave. The Plaintiffs also have presented evidence establishing that Hahn's Payroll Department received and processed requests from Autoworks employees for extensions of their vacation eligibility. (Pl. Tr. Exh. ##29, 30).
Hahn also provided a variety of job-specific training courses for Autoworks managers. When a manager completed a particular training program, which was conducted by "Hahn University," he received a certificate from Rochester, New York, recognizing his accomplishment. The periodic training programs covered a variety of topics, including: (1) comprehension of profit/loss statements and other documents; (2) the proper relationship between Autoworks assistant managers and store managers; (3) employee scheduling; and (4) store planning.
Finally, after discovering that Autoworks "salaried" managers and senior assistant managers had been suspended without pay in possible violation of the FLSA, Hahn Vice President and Corporate Counsel David Beckerman sent a memorandum to all Autoworks management, stating, in relevant part:
We, at Headquarters, were not aware that this policy was in force and we do not believe that this policy is acceptable or in accordance with Hahn policy.
The Hahn policy is:
Managers or Senior Assistant Managers who are suspended for violations of company policy are to be suspended with pay. The only exceptions shall be if the suspension is due to an infraction or violation of a safety rule of major significance relating to the prevention of serious damage or danger to employees or company property.
As you are aware, Hahn purchased Autoworks, Inc. in October 1993. Any senior assistant manager or manager who was suspended without pay since October, 1993, should be contacted immediately and immediate arrangements for payment of all lost wages will be made. I am directing Tom Labadie, by this memo, to undertake a thorough investigation of this matter and report to me as soon as possible his findings. . . .
(Pl. Tr. Exh. #3 at 4) (Emphasis in original).
In an affidavit, Beckerman has acknowledged that seven Autoworks employees were suspended without pay after Hahn acquired Autoworks from Northern Automotive. (Pl. Tr. Exh. #3 at p. 2, ¶ 6). According to Beckerman, Hahn reimbursed each of these employees.
In its prior ruling on the parties' Motions for Summary Judgment, however, the Court noted that Autoworks, rather than Hahn, actually had issued the checks reimbursing the Plaintiffs. (See Doc. #98 at 22 n. 5). In any event, Beckerman's erroneous averment that Hahn issued the checks suggests that he considered Hahn and Autoworks to be one in the same.
II. Conclusions of Law
During the March 8, 1999, bench trial, the Plaintiffs attempted to establish that the Defendant was their FLSA "employer" under the "integrated enterprise" test, which the Sixth Circuit and other courts have used to find two entities so interrelated that they constitute a single employer, for purposes of imposing liability under a variety of statutes. See, e.g.,Armbruster v. Quinn, 711 F.2d 1332 (6th Cir. 1983); Szymula v. Ash Grove Cement Co., 941 F. Supp. 1032, 1036 (D.Kan. 1996) (recognizing that "under the FLSA, a parent corporation may be liable for the acts of its subsidiaries when the various entities act as an integrated enterprise").
The Sixth Circuit has not addressed the circumstances under which a parent corporation may be deemed an "employer" of its subsidiary's employees for FLSA purposes. In Dole v. Elliot Travel Tours, Inc., 942 F.2d 962 (6th Cir. 1991), however, the court did construe the Act's definition of "employer" in another context. The Dole court held that a corporate officer with operational control over significant aspects of a corporation's day-to-day functioning qualifies as an employer under the FLSA.Id. at 965-966. Accordingly, the court reasoned that such a person may be found jointly and severally liable, along with the corporation, for unpaid wages. Id. In reaching this conclusion, the Dole court noted that "`[t]he remedial purposes of the FLSA require the courts to define `employer' more broadly than the term would be interpreted in traditional common law applications.'"Id. at 965, quoting McLaughlin v. Seafood, Inc., 867 F.2d 875, 877 (5th Cir. 1989). The court also noted that "[t]he FLSA contemplates there being several simultaneous employers who may be responsible for compliance with the FLSA." Id., citing Falk v. Brennan, 414 U.S. 190, 195 (1973). Furthermore, the court stressed that "[i]n deciding whether a party is an employer, `economic reality' controls rather than common law concepts of agency." Id., citing Goldberg v. Whitaker House Cooperative, 366 U.S. 28, 33 (1961). Finally, the court recognized that "`[n]o one factor is dispositive; rather, it is incumbent upon the courts to transcend traditional concepts of the employer-employee relationship and assess the economic realities presented by the facts of each case.'" Id., quoting Donovan v. Sabine Irrigation Co., 695 F.2d 190, 195 (5th Cir. 1983).
In more recent decisions, the Sixth Circuit again has applied the "economic realities" test and found corporate officers individually liable under the FLSA, jointly and severally, along with their corporate entities. See Fegley v. Higgins, 19 F.3d 1126, 1131 (6th Cir. 1994); U.S. Dept. of Labor v. Cole Enterprises, Inc., 62 F.3d 775, 778-779 (6th Cir. 1995). In the present case, however, the Plaintiffs are not attempting to impose individual liability under the FLSA. Furthermore, they seek to hold the Defendant liable under the "integrated enterprise" test, set forth above, and not the "economic realities" test. Consequently, the remainder of the Court's analysis will address only the "integrated enterprise" test.
Under the "integrated enterprise" or "single employer" test, the Sixth Circuit considers four factors when determining whether to treat a parent corporation and its subsidiary as separate entities, or as a single employer, for purposes of statutory liability. Specifically, the court assesses the degree of: (1) interrelated operations, i.e., common offices, common record keeping, shared bank accounts and equipment; (2) common management, common directors and boards; (3) centralized control of labor relations and personnel management; and (4) common ownership or financial control. Id. at 1337; Swallows v. Barnes Noble Book Stores, Inc., 128 F.3d 990, 993-994 (6th Cir. 1997). "No one of these factors is conclusive, and all four need not be met in every case." Id. at 994.
A very important factor, however, is the extent of centralized control of labor relations and personnel. Armbruster, 711 F.2d at 1337; Schweitzer v. Advanced Telemarketing Corp., 104 F.3d 761, 764 (5th Cir. 1997); Cook v. Arrowsmith Shelburne, Inc., 69 F.3d 1235, 1240-1241 (2nd Cir. 1995); Frank v. U.S. West, Inc., 3 F.3d 1357, 1363 (10th Cir. 1993). The "integrated enterprise" analysis ultimately focuses upon whether the parent corporation was the final decision-maker with regard to the employment issue underlying the litigation. Swallows v. Barnes Noble Book Stores, Inc., 128 F.3d 990, 995 (6th Cir. 1997); Lusk v. Foxmeyer Health Corp., 129 F.3d 773, 777 (5th Cir. 1997); Cook, 69 F.3d at 1240;Frank, 3 F.3d at 1363.
In light of the foregoing factors, the Sixth Circuit has required a parent corporation and its subsidiary to be "highly integrated with respect to ownership and operations," in order to hold the parent corporation responsible for the labor violations of its subsidiary. Armbruster, 711 F.2d at 1338. Alternatively, the court has required a showing that "there is an amount of `participation [that] is sufficient and necessary to the total employment process,' even absent `total control or ultimate authority over hiring decisions.'" Id., quoting Rivas v. State Board for Community Colleges and Occupational Education, 517 F. Supp. 467, 470 (D.Colo. 1981); Swallows, 128 F.3d at 996.
In short, the Sixth Circuit has found the "integrated enterprise" doctrine applicable when two entities do not maintain an arm's-length relationship. Swallows, 128 F.3d at 996. "In other words, the policy underlying the single employer doctrine is the fairness of imposing liability for labor infractions where two nominally independent entities do not act under an arm's length relationship." Murray v. Miner, 74 F.3d 402, 405 (2nd Cir. 1996). "That policy is most implicated where one entity actually had control over the labor relations of the other entity, and, thus, bears direct responsibility for the alleged wrong. Id., citingFrank, 3 F.3d at 1363. Of course, "[o]wnership of a controlling interest in a given corporation enables the owner to exercise control of the normal incidents of stock ownership, such as the right to choose directions and set general policies, without forfeiting the protection of limited liability." Wood v. Southern Bell Telephone and Telegraph Co., 725 F. Supp. 1244, 1249 (N.D.Ga. 1989); Frank, 3 F.3d at 1363.
A. Application of the Evidence to the Integrated Enterprise Factors
In light of the four factors articulated in Armbruster andSwallows, the Court finds, by a preponderance of the evidence, that Hahn qualifies as the Plaintiffs' employer under the Fair Labor Standards Act. In its prior ruling on the parties' Motions for Summary Judgment, the Court resolved two of the four "integrated enterprise" factors, as a matter of law. In particular, the Court found common ownership or financial control, based upon Autoworks' status as a wholly owned subsidiary of Hahn. (Doc. #98 at 25). The Court concluded that Hahn and Autoworks did not share common management, however, because only one management-level Hahn employee also held a management-level position with Autoworks.
With respect to the other two "integrated enterprise" factors, the Court now concludes, based upon the evidence presented at the March 8, 1999, bench trial, that Hahn exercised centralized control over key aspects of Autoworks' labor relations and personnel management, and that Hahn and Autoworks were interrelated in their operations. As a means of analysis, the Court will address the "interrelationship of operations" factor first. The Court then will discuss the remaining factor, "centralized control over labor relations and personnel management."
1. Interrelationship of Operations
When examining this factor, the Court considers, inter alia, common offices, common record keeping, and shared bank accounts and equipment. Swallows, 128 F.3d at 994. Based upon the evidence presented at the March 8, 1999, bench trial, the Court concludes that Autoworks and Hahn are significantly interrelated, insofar as they share common offices, common record keeping, and common equipment. As noted supra, the corporate headquarters address for both Hahn and Autoworks has been identified as 412 West Main Street, Rochester, New York. The two corporate headquarters also share identical telephone and fax numbers. While visiting Hahn's Rochester, New York, facilities, however, Plaintiff David Bradner observed nothing to suggest that any of the office space was under Autoworks' control. The Court also notes that Ira Jevotovsky and Hahn's other New York-based employees corresponded with the Plaintiffs using Autoworks letterhead and Hahn letterhead interchangeably. Even when Autoworks letterhead was used, the Plaintiffs sometimes were asked to respond to inquiries by providing information, or directing questions, to Hahn Automotive or Hahn's Payroll Department in New York. Although Autoworks did maintain a separate office in Michigan, that facility housed only Autoworks employees Fred Coe, Tom Labadie, and their secretaries. It did not include any type of payroll department.
In short, based upon the specific Findings of Fact set forth above, the Court readily concludes, by a preponderance of the evidence, that Hahn and Autoworks shared common offices and equipment at the Rochester, New York, corporate headquarters.
The Court also finds interrelated operations based upon Hahn's maintenance of various Autoworks personnel, payroll, and administrative records in Rochester, New York. Once again, as set forth fully in the Court's Findings of Fact, the preponderance of the evidence demonstrates that Hahn collected and maintained,inter alia, Autoworks employee-benefits enrollment forms, "Change in Personal Data" forms, payroll records and data, authorizations for automatic deposit, requests for leave under the Family and Medical Leave Act (which Hahn Vice-President Ira Jevotovsky personally approved or rejected), and extensions of vacation time. These various records were kept at Hahn's corporate headquarters, and they frequently were maintained on letterhead bearing Hahn's name. For the foregoing reasons, the "interrelated operations" factor militates in favor of finding that Hahn and Autoworks operated as an integrated enterprise for purposes of imposing FLSA liability upon Hahn.
In opposition to this conclusion, Hahn contends that the Plaintiffs have failed to present evidence demonstrating its direct involvement in daily decisions concerning production, distribution, marketing, or advertising. (Doc. #101 at 3; Doc. #104 at 2). Hahn also asserts that the Plaintiffs have failed to establish that Hahn maintained Autoworks' books, issued its paychecks, prepared its tax returns, or commingled various accounts. (Id.). Although Hahn's assertions are correct, they are not dispositive on the issue of interrelated operations. The Court does not dispute that Hahn and Autoworks could have been more interrelated. Rather, the Court simply concludes, based upon the evidence presented, that the two entities were interrelated enough in their operations to support a finding of liability under the FLSA.
Notably, Lusk v. Foxmeyer Health Corp., 129 F.3d 773 (5th Cir. 1997), upon which Hahn relies to support its argument against interrelated operations, lends support to the Court's determination. Lusk involved an attempt by former employees of a subsidiary, FoxMeyer Drug Company ("Fox"), to hold the parent corporation, National Intergroup, Inc. ("NII"), liable for an allegedly discriminatory reduction-in-force. After discussing the various factors upon which Hahn relies, the Lusk court also refused to find interrelated operations resulting from NII's alleged approval of Fox's RIF plan. In so doing, the Lusk court noted the plaintiffs' failure to establish that the corporate officers who approved the RIF did so while acting on behalf of NII. Id. at 779. In the present case, however, the Court has expressly found that Ira Jevotovsky was employed solely as a Vice-President of Hahn. In addition, as set forth more fully,infra, the Court finds Jevotovsky, in his capacity as a Hahn Vice-President, responsible for the Plaintiffs' lack of overtime compensation. Consequently, the impediment that precluded a finding of interrelated operations in Lusk does not exist in the present case.
2. Centralized Control of Labor Relations and Personnel Management
The remaining factor, centralized control of labor relations and personnel management, is a paramount consideration in the Court's four-part analysis. See Swallows, 128 F.3d at 994;Trevino v. Celanese Corp., 701 F.2d 397, 404 (5th Cir. 1983) (reasoning that centralized control of labor relations is the most important factor). When considering the centralized control of labor relations and personnel management, the critical inquiry is which entity made the final decisions regarding the employment issue underlying the parties' litigation. Frank, 3 F.3d at 1363;Swallows, 128 F.3d at 995. In the present case, the only employment issue underlying the Plaintiffs' litigation is the non-payment of overtime compensation to Autoworks managers, in violation of the FLSA. With respect to this key issue, the Court finds that Hahn made the ultimate decision not to pay the Plaintiffs' overtime compensation.
In Lusk, 129 F.3d at 777, the Fifth Circuit Court of Appeals recently reasoned that all of the integrated-enterprise factors ultimately focus "on the question whether the parent corporation was a final decision-maker in connection with the employment matters underlying the litigation," and that "all four factors are examined only as they bear on this precise issue. . . ."
In a December 3, 1993, memorandum from Ira Jevotovsky, Hahn's Vice President of Human Resources, to Autoworks store managers, Jevotovsky stated, inter alia, that "salaried employees" are considered to have worked 40 hours per week, regardless of their actual hours worked, and that they would not receive overtime compensation. (Pl. Tr. Exh. #5). Although Jevotovsky's memorandum is typed on Autoworks stationary, the fax transmission notation at the bottom of the page indicates that it was sent from Hahn Automotive. Additionally, Jevotovsky closed the memorandum by stating: "If you have any questions about this procedure, please feel free to contact the Payroll Department,Hahn Automotive Warehouse, Inc. at 716-464-3851." (Emphasis added). This memorandum persuades the Court that Hahn mandated Autoworks' policy of not paying its managers overtime compensation. Because this policy, which lies at the core of the Plaintiffs' FLSA claim, was mandated by Hahn, the Court finds centralized control of labor relations and personnel management, at least with respect to the only employment decision at issue in this litigation. Cf. Murray v. Miner, 74 F.3d 402, 405 (2nd Cir. 1996) (noting that the "integrated enterprise" policy "is most implicated where one entity actually had control over the labor relations of the other entity, and, thus, bears direct responsibility for the alleged wrong"); Frank v. Capital Cities Communications, Inc., 88 F.R.D. 674, 677 (S.D.N.Y. 1981) ("Both the FLSA and the ADEA speak generically in terms of `employers.' The statutes do not specifically address that relatively common[,] modern phenomenon, the large corporation with subsidiaries, divisions and subdivisions. But the criteria must be practical and pragmatic. The statute prohibits `employers' from following certain practices. The question thus focuses upon the level in the intracorporate structure at which employment policies are formulated. In the case at bar, the plaintiffs complain that they have been the victims of age discrimination in respect to their compensation and promotion. Accepting those claims arguendo,plaintiffs are the victims of whatever `employers' formulated and implemented those discriminatory policies.") (Emphasis added).
On its face, of course, Jevotovsky's memorandum merely states a truism. Under the FLSA, "salaried" employees need not be paid overtime compensation. In a prior Decision and Entry, the Court concluded that Autoworks managers were not actually "salaried" employees, for FLSA purposes, because they were subject to disciplinary suspensions without pay. As the Court has noted,supra, however, Hahn erroneously believed that its Autoworks managers were "salaried," for purposes of Jevotovsky's memorandum and it treated them as such. (See, e.g., Memorandum in Support of Defendant's Motion for Summary Judgment, Plaintiffs' Tr. Exh. #1 at 2) ("Store managers and senior assistant managers at Autoworks retail stores are considered by Hahn to be executive employees exempt from the overtime provisions of the FLSA. As a result, these store managers are paid on a salary basis."). Given that Hahn mandated the challenged policy prohibiting overtime compensation for Autoworks "salaried" managers, the Court finds it appropriate to impose upon Hahn a corresponding obligation to ensure that such managers were, in fact, "salaried" for FLSA purposes.
Incidentally, the Court notes that Hahn subsequently did take action to ensure that Autoworks managers would be exempt from future overtime compensation under the FLSA. In a June 28, 1995, memorandum, Hahn directed Autoworks' management to implement Hahn's policy on disciplinary suspensions without pay. That policy states: "Managers or Senior Assistant Managers who are suspended for violations of company policy are to be suspended with pay. The only execptions shall be if the suspension is due to an infraction or violation of a safety rule of major significance relating to the prevention of serious damage or danger to employees or company property." (Pl. Tr. Exh. #3 at 4).
Parenthetically, the Court finds the fact that Jevotovsky, Hahn's Vice President of Human Resources, mailed the memorandum using Autoworks letterhead to be indicative of interrelated operations.
As the Sixth Circuit recently noted in Swallows, 128 F.3d at 995, the paramount concern is which entity made the final decision underlying the parties' litigation. In the present case, that entity is Hahn. Consequently, the Court finds that Hahn bears direct responsibility for the FLSA violations at issue. Hahn controlled the crucial day-to-day employment decision at issue in the present litigation, the non-payment of overtime compensation to Autoworks managers. Cf. Esmark, Inc. v. N.L.R.B., 887 F.2d 739, 753 (7th Cir. 1989) (noting that the ultimate determination is "whether the parent exercised such pervasive control of the subsidiary at the policymaking level that the purposes of the labor laws are served by treating the two entities as one"); Local 397 v. Midwest Fasteners, Inc., 779 F. Supp. 788, 800 (D.N.J. 1992) (applying the "integrated enterprise" test, and reasoning that the parent corporation, which was "the true wrongdoer," "should not escape liability simply because corporate formalities are observed").
Although broad, general policy statements by a parent regarding employment matters of its subsidiary typically are not enough to establish centralized control over labor relations and personnel matters, the present case is somewhat unusual because Hahn's "general policy" of not permitting overtime compensation for Autoworks managers lies at the heart of the FLSA violations.
As the Sixth Circuit noted in Armbruster, "the most important requirement is that there be sufficient indicia of an interrelationship between the immediate corporate employer and the affiliated corporation to justify the belief on the part of an aggrieved employee that the affiliated corporation is jointly responsible for the acts of the immediate employer. When such a degree of interrelatedness is present, we consider the departure from the `normal' separate existence between entities an adequate reason to view the subsidiary's conduct as that of both. . . ."Armbruster, 711 F.2d at 1337. For the reasons set forth above, the aggrieved Plaintiffs are justified in believing that Hahn is responsible for Autoworks' failure to comply with the overtime-compensation requirements of the FLSA. As a result, the final factor, centralized control of labor relations and personnel management, supports the Court's conclusion that Hahn is the Plaintiffs' employer under the FLSA.
Parenthetically, the Court notes that it would reach the same result under the "economic realities" standard applied by the Sixth Circuit to find corporate officers individually liable, under the FLSA, along with the corporate entity. This standard, like the "integrated enterprise" test, focuses upon control over labor relations. A critical inquiry under the "economic realities" standard, like the "integrated enterprise" standard, is what party had "operational control" over those aspects of employment covered by the FLSA. Dole v. Elliot Travel Tours, Inc., 942 F.2d 962, 965 (6th Cir. 1991); Rubin v. Tourneau, Inc., 797 F. Supp. 247, 252 (S.D.N.Y. 1992). For the reasons set forth more fully, supra, the Court concludes that Hahn exercised ultimate control over the employment decisions leading to the FLSA violations in this case.
In opposition to this conclusion, Hahn notes the Plaintiffs' failure to establish: (1) that it possessed the power to hire and fire Autoworks employees; (2) that it controlled the employees' work schedules; or (3) that it determined the employees' rate or method of payment. (Doc. #104 at 1). These facts, however, are not dispositive, and they do not prevent the Court from finding centralized control of labor relations and personnel management for purposes of FLSA liability. Hahn determined that the Plaintiffs would not receive overtime compensation, and Hahn's policy underlies the FLSA violations at issue. Accordingly, for the reasons set forth more fully above, the Court finds sufficient centralized control of labor relations and personnel management to hold Hahn liable under the FLSA.
The power to hire or fire is of limited importance in the present case, which involves FLSA violations, and not allegations of discriminatory hiring or firing practices.
III. Conclusion
Based upon the foregoing analysis, Defendant Hahn Automotive qualifies as the Plaintiffs' FLSA employer, under the "integrated enterprise" test. The Court finds: (1) that Hahn and Autoworks were significantly interrelated with respect to their operations; (2) that the two entities existed under common ownership and financial control; and (3), most importantly, that Hahn controlled the critical labor relations and personnel management issue underlying this litigation, the non-payment of overtime compensation to the Plaintiffs.
In reaching this conclusion, the Court has not considered Plaintiffs' Exhibits 36-47, which were offered for admission into evidence, but were neither admitted nor excluded by the Court, during the March 8, 1999, bench trial. In the course of that proceeding, the Court recognized that most of those Exhibits qualified as party admissions, and that the Defendant had stipulated to their authenticity. Nevertheless, the Court doubted their admissibility, because the Plaintiff had not introduced them through the vehicle of a witness' live testimony (i.e., the Exhibits were not mentioned during the Plaintiffs' case-in-chief). The Court deferred its ruling on admissibility, however, granting the Plaintiffs an opportunity to address the issue through a post-trial memorandum. In response, the Plaintiffs have provided the Court with a post-trial brief in which they argue for the admissibility of Exhibits 36-47, based exclusively uponZenith Radio Corp. v. Matsushita Elec. Indus. Co., 505 F. Supp. 1190, 1244 (E.D.Pa. 1980), aff'd in part, rev'd in part on other grounds, 723 F.2d 238, cert. granted in part, 471 U.S. 1002,rev'd on other grounds, 475 U.S. 574 (1986). In Zenith Radio, however, the District Court merely held that responses to interrogatories may constitute admissions under certain circumstances. The Zenith Radio decision does not address the need for witness testimony as a vehicle to introduce into evidence documents obtained through discovery that may constitute admissions of a party-opponent. Therefore, discerning no persuasive reason to deviate from the views it expressed during the March 8, 1999, bench trial, the Court excludes Plaintiffs' Exhibits 36-47 from evidence.
Upon further review, the Court also excludes Plaintiffs' Exhibits 23-24, which are memoranda from Hahn employees Barb Kelly and Ira Jevotovsky to Autoworks managers and others. At the March 8, 1999, bench trial, the Court conditionally admitted these exhibits. In so doing, the Court directed the Plaintiffs' counsel to provide documentation establishing that some of the Plaintiffs were employed by Autoworks when the two documents were disseminated. Although the Plaintiffs' counsel has complied with the Court's request, the Defendant properly notes that Exhibits 23-24, like Exhibits 36-47, were not introduced at trial through a qualifying witness' testimony. At the March 8, 1999, bench trial, the Court determined that Exhibits 23-24 could not be introduced through the testimony of the three testifying Plaintiffs, because those Plaintiffs did not work for Autoworks when the documents were distributed. Although the Plaintiffs' counsel has now verified that other non-testifying Plaintiffs were employed when Exhibits 23-24 were distributed, none of those Plaintiffs were utilized as a vehicle to introduce the two Exhibits at trial. Consequently, for the same reason that Plaintiffs' Exhibits 36-47 are inadmissible, the Court also finds Plaintiffs' Exhibits 23-24 inadmissible. In reaching this conclusion, the Court notes that the Defendant did object at trial to the admissibility of Exhibits 23-24, based upon the Plaintiffs' failure to identify the Exhibits through the testimony of a qualified witness. Finally, the Court also notes that Plaintiffs' Exhibit 23 essentially duplicates Plaintiffs' Exhibit 15, which was properly admitted at trial.
Having determined that the Defendant qualifies as the Plaintiffs' FLSA employer under the "integrated enterprise" test, the Court must address one final issue raised in the parties' post-trial briefs. Specifically, Hahn contends that it may not be found liable under the FLSA, because the Plaintiffs have failed to prove that it was an enterprise engaged in commerce or in the production of goods for commerce, as required by 29 U.S.C. § 203(s)(1), which states:
(s)(1) "Enterprise engaged in commerce or in the production of goods for commerce" means an enterprise that —
(A)(i) 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
(ii) is an enterprise whose annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes at the retail level that are separately stated)[.]
Given the Plaintiffs' failure to present any evidence establishing the foregoing requirements, the existence of which the Defendant denied in its Answer (Doc. #10 at ¶ 8), Hahn argues that the Plaintiffs' FLSA claims must be dismissed. The Court finds this argument unpersuasive. The Court expressly confined the scope of the March 8, 1999, bench trial to Hahn's status as an FLSA "employer" under the "integrated enterprise" test. Consequently, the Plaintiffs' failure to establish that Hahn is an enterprise engaged in commerce does not compel the dismissal of their claims. Nevertheless, the Court is unable to find the Defendant liable under the FLSA, and enter judgment against it, as long as the foregoing issue remains unresolved. Although the Court cannot envision Hahn being anything other than "an enterprise engaged in commerce or in the production of goods for commerce" under 29 U.S.C. § 203, Hahn has explicitly denied this allegation in its Answer.
Consequently, the Court hereby directs the Plaintiffs' counsel to serve the Defendant's counsel with a Request for Admission, within 10 days, directed toward this issue. If Hahn still denies qualifying as an enterprise engaged in commerce or in the production of goods for commerce, within the meaning of 29 U.S.C. § 203(s), the Court will conduct an evidentiary hearing on the issue. If, after conducting such a hearing, the Court determines that Hahn maintained its denial without any basis for doing so, the Court will consider imposing appropriate sanctions.