Opinion
5:01-CV-1953 (FJS/DEP)
April 5, 2004
STEFAN D. BERG, ESQ., BERG LAW OFFICE, Syracuse, New York, for Plaintiffs
STEWART L. WEISMAN, ESQ., OFFICE OF STEWART L. WEISMAN, Manlius, New York, for Plaintiffs
ALAN R. PETERMAN, ESQ., HISCOCK BARCLAY, LLP, Syracuse, New York, for Defendants
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
Plaintiffs Susan Zacholl and Sylvia Ellinwood were employees of Defendant Fear Fear, Inc. Plaintiffs brought this action pursuant to the Fair Labor Standards Act ("FLSA" or the "Act"), 29 U.S.C. § 201 et seq., seeking to recover allegedly unpaid overtime wages and commission fees, as well as liquidated damages and attorneys' fees. A jury trial commenced on December 8, 2003.
Sylvia Ellinwood was employed by Defendant as a customer service representative from October 22, 1997 to April 1998, and was awarded 138 hours of overtime compensation. Susan Zacholl was employed by Defendant as a customer service representative from October 22, 1997 to September 1998, and was awarded 211 hours of overtime compensation. However, the jury concluded that, at all other times when Plaintiffs were branch managers, the administrative exemption to the FLSA applied and, thus awarded them no overtime compensation for such time.
The administrative exemption to the FLSA allows an employer to avoid the Act's duty to pay overtime compensation "for those employees who are `employed in a bona fide executive, administrative, or professional capacity.'" Bennett v. Progressive Corp., 225 F. Supp.2d 190, 215 (N.D.N.Y. 2002) (quoting 29 U.S.C. § 213(a)(1)).
Presently before the Court are Plaintiffs' motions for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure for that period of time for which the jury found the administrative exemption to the FLSA applied; and liquidated damages, pursuant to 29 U.S.C. § 216(b).
II. DISCUSSION
A. Plaintiffs' motion for judgment as a matter of law
A motion for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure should be granted when "`there is no legally sufficient evidentiary basis for a reasonable jury to find for [the prevailing party] on that issue.'" Bean v. CSX Tramp., 289 F. Supp.2d 277, 279-80 (N.D.N.Y. 2003) (quoting Fed.R.Civ.P. 50(a)(1)). The standard is similar to that for a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. See id. at 280 (citation omitted). Under a Rule 50 motion, a court must consider all of the evidence produced at trial and not simply the evidence favorable to the nonmoving party. See id. (citations omitted). "`In doing so, however, the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence.'" Id. (quotation omitted). Therefore, when "reviewing the entire record, the court should consider only that evidence favorable to the nonmoving party and any evidence supporting the moving party is uncontradicted and unimpeached." Id. (citation omitted).
Plaintiffs claim that the trial evidence demonstrates that their duties as customer service representatives and as branch managers were essentially the same. They assert that any additional duties, which they performed while employed as branch managers, were not administrative activities as defined by § 213 of the Act. For example, Plaintiffs state that they engaged in the physical act of opening and closing the doors at the beginning and end of the day, decided who would clean the bathrooms, counted the checks and made deposits and that such activities cannot be considered administrative, but merely the duties of a production worker.
In determining whether the administrative exemption applies, courts look to see if the employee's "`primary duty consists of either performances of office or nonmanual work directly related to management policies or general business operations of the employer or the employer's customers'" and whether "`such primary duty includes work requiring the exercise of discretion and independent judgment.'" Reich v. Am. Int'l Adjustment Co., Inc., 902 F. Supp. 321, 323 (D. Conn. 1994) (quotation and footnote omitted). With respect to the first prong, the administrative operations of a business include work that constitutes the "servicing" of a business, which, for example, includes advising the management, planning, negotiating, representing the company, purchasing, promoting sales, and business research and control. See Bennett, 225 F. Supp.2d at 216. "`Servicing' a business . . . denotes employment activity ancillary to an employer's principal production activity[.]" Martin v. Cooper Elec. Supply Co., 940 F.2d 896, 904-05 (3d Cir 1991) (citation omitted). With respect to the second prong, "`the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered.'" Vela v. City of Houston, 276 F.3d 659, 677 (5th Cir. 2001) (quotation omitted).
"Primary duty" means the major part, or over fifty percent, of the employee's time is spent on such work. However, in situations where the employee does not spend over fifty-percent of her time in managerial duties, she might nevertheless have management as her primary duty if other factors, such as the relative importance of the managerial duties, the frequency with which the employee exercises discretionary powers, her relative freedom from supervision, and the relationship between her salary and the wages paid to other employees for the kind of non-exempt work performed by the supervisor are present. See Bennett, 225 F. Supp.2d at 216; Cooke v. Gen. Dynamics Corp., 993 F. Supp. 56, 59 (D. Conn. 1997).
Plaintiffs argue, therefore, that Defendant failed to satisfy its burden of proving, by a preponderance of the evidence, that they were administrative employees as defined by the Act and, thus, exempt from the FLSA's overtime pay requirements.
In response, Defendant maintains that there was sufficient evidence in the record to support the jury's finding that Plaintiffs were administrative employees. For example, Defendant states that a review of the evidence shows that branch managers were responsible for the operations of their offices, had keys to their offices, ordered supplies, trained and supervised customer service representatives and ensured that company policies were followed. Additionally, they ensured that financial records were accurate and made bank deposits. Plaintiffs were also licensed insurance brokers and, therefore, necessary to the operations of Defendant's business. Moreover, Defendant states that Plaintiffs operated their respective branches with little oversight from the main office. Thus, they had the ability to discipline and fire employees.
Furthermore, Plaintiffs were compensated on a different basis than customer service representatives and their compensation was dependant upon the overall success of their branch. Defendant essentially argues that Plaintiff's primary duties, as defined by Bennett, 225 F. Supp.2d at 216 (citations omitted) (defining "primary duty" under 29 C.F.R. § 541.103 (2003)), involved the running of their branch offices and the supervision of the other employees in that office and that, although Plaintiffs sold insurance policies, which was a task similar to that of a customer service representative, they were also responsible for much more. Such evidence, Defendant argues, clearly supports the jury's finding that Plaintiffs were exempt from the FLSA's overtime pay requirements under the administrative exemption.
The Court agrees, based upon all of the evidence adduced at trial, that a reasonable person could conclude that, during the time that they were employed as branch managers, Plaintiffs were administrative employees within the meaning of the Act. Plaintiffs balanced the cash drawers at the close of the business day, sold insurance policies, ordered office supplies, made deposits and maintained business books. More importantly, Plaintiffs supervised other employees, possessing the power to dock their pay or even fire them for poor work or misconduct. See Minutes of Trial, held on December 8, 2003, testimony of Kevin Fear, ("Trial Tr.") at 24-27; Defendant's Memorandum of Law at 6-7.
Plaintiffs cite several cases to support their position that their duties, while employed as branch managers, were not administrative. See Bennett, 225 F. Supp.2d at 190; Ahern v. State of New York, 807 F. Supp. 919 (N.D.N.Y. 1992); Martin, 940 F.2d 896; Vela, 276 F.3d 659; Reich, 902 F. Supp. 321. However, those cases present facts that are both similar to, and distinguishable from, the instant case.
Plaintiffs argue, and a reading of the cases discloses, that Plaintiffs' duties are most like those described in Martin. In that case, the court held that the salespersons were not administrative employees under the Act. The appellate court found that the district court did not err by concluding that the inside salespeople, i.e., those who sell products for the benefit of the employer, with minor freedom to negotiate and depart from standard selling prices, were production rather than administrative employees. See Martin, 940 F.2d at 903. Although the job duties of the employees in Martin are similar to some of Plaintiffs' duties in the instant case, i.e., selling Defendant's product — insurance policies, the evidence shows that Plaintiffs' duties included other tasks as well. For example, Plaintiffs had supervisory obligations and a great deal of discretion in running the branch properly. See Plaintiffs' Memorandum of Law at 1-2; Trial Tr. at 24-27. Mr. Fear testified that Plaintiffs took care of everything in the branch, made sure employees reported to work on time and were performing their work properly, as well as overseeing all of the work to be sure it was done properly, doing all banking and balancing of money at the end of the day and making bank deposits. See Plaintiffs' Memorandum of Law at 1-2; Trial Tr. at 24-27. Plaintiffs even had the authority to fire an employee. See Trial Tr. at 26-27. Thus, the only thing that Plaintiffs have in common with the salespeople in Martin is that they sold a product for their respective employers.
Such tasks require some level of independent judgment and discretion and can also be seen as duties that "service" the business. For example, firing other employees for substandard performance requires a great deal of discretion and independent judgment. Additionally, Plaintiffs exerted their control over the branch and its internal workings by handling all of its banking and overseeing all final work. Looking at the evidence produced at trial and reviewing it under the stringent Rule 50(b) standard, the Court concludes that a reasonable juror could have found that Plaintiffs' duties as branch managers were administrative in nature and, therefore, that they were exempt from overtime pay under the administrative exemption to the FLSA. Accordingly, the Court denies Plaintiffs' motion for judgment as a matter of law.
B. Plaintiffs' motion for liquidated damages
In addition to unpaid overtime, successful FLSA claimants are entitled to liquidated damages in the full amount of the unpaid overtime compensation — i.e., double damages. See 29 U.S.C. § 216(b) (1994). Liquidated damages are not punitive damages but, instead, are compensatory in nature and should not be treated by the court as a disfavored penalty. See Reich v. Southern New England Telecomms. Corp., 121 F.3d 58, 71 (2d Cir. 1997) (citations omitted); Walton v. United Consumers Club, Inc., 786 F.2d 303, 310 (7th Cir. 1986). Nevertheless, courts do have discretion to deny an award of liquidated damages where the employer proves that, although it failed to pay appropriate wages, it acted in good faith and had objectively reasonable grounds for believing that its failure to pay overtime wages did not violate the Act. See Reich, 121 F.3d at 70-71. The employer bears the difficult burden of proving good faith and reasonableness. See Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 142 (2d Cir. 1999). "To establish good faith, the employer must take active steps to ascertain the dictates of the FLSA and then act to comply with them." Id. (citation omitted).
The question of willfulness is a question for the jury. See Fowler v. Land Mgmt. Groupe, Inc., 978 F.2d 158, 163 (4th Cir. 1992). Its relevancy is only necessary to extend the Act's statute-of-limitations period from two to three years. See id. at 162. Since an order from Judge Paris prohibited Plaintiffs from recovering for alleged overtime work past the two-year limitations period, the question of Defendant's willfulness was not presented to the jury. Although willfulness is not required to award liquidated damages, "a jury's finding of non-willful behavior . . . can provide an objective basis to premise a finding of good faith on the liquidated damages issue[.]" Mayhew v. Wells, 125 F.3d 216, 221 n. 4 (4th Cir. 1997) (citing Brinkley Obu, 36 F.3d at 357 (citing Fowler v. Land Management Groupe, Inc., 978 F.2d 158, 163) (4th Cir. 1992)). The statutory language of 29 U.S.C. § 216(b) does not address the issue of willfulness. See 29 U.S.C. § 216(b). Thus, Defendant's willful or non-willful conduct is not critical to the Court's determination of whether to award liquidated damages in this case.
Plaintiffs assert that Defendant did not offer any reason for failing to pay them overtime compensation, other than its lack of knowledge that they were working overtime. Plaintiffs argue that a lack of knowledge is insufficient to show that Defendant acted in good faith or with reasonableness when it failed to compensate them for the overtime hours they worked. For example, Plaintiffs argue that the bank slips and telephone records show that they were indeed working overtime and that Defendant was or should have been aware of such overtime when reviewing the bank deposit slips. Additionally, Plaintiffs assert that Defendant made no attempt to consult another person or entity, i.e., an attorney or the Department of Labor, with regard to its overtime policy. Plaintiffs also claim that Defendant's failure to keep time records of the hours or times that they worked is a violation of the FLSA, which, standing alone, is sufficient to warrant an award of liquidated damages.
Defendant's overtime policy prohibited overtime work without prior approval from either Kevin Fear or an Office Administrator.
As might be expected, Defendant asserts that it acted in good faith and had reasonable grounds for believing that its failure to pay overtime wages did not violate the Act. Specifically, Defendant argues that the trial evidence showed that it acted in good faith by adopting and enforcing its written overtime policy and that, when overtime was approved, the employees were paid for such overtime. Moreover, Defendant argues that Plaintiffs admitted in their testimony that they never sought prior approval to work overtime and never informed Kevin Fear or Susan Abbatiello, the Office Administrator, that they were working overtime. In fact, Defendant asserts that the first time it knew of any overtime claim was after Plaintiffs had resigned from their employment with Defendant.
Defendant relies upon Mayhew v. Wells, 125 F.3d 216 (4th Cir. 1997), to support its contention that liquidated damages should not be awarded absent Defendant's knowledge that Plaintiffs were working overtime. In Mayhew, the Fourth Circuit affirmed the trial court's decision not to award liquidated damages, finding that the plaintiff's failure to approach the defendant about receiving re-numeration for his overtime work, among other things, showed the defendant's good faith. See id. at 221.
In the present case, ample evidence exists to show that Defendant acted in good faith and had reasonable grounds for believing that its failure to pay Plaintiffs overtime wages was not in violation of the Act.
Defendant had an overtime policy in place which required Plaintiffs to seek prior approval before working overtime. Plaintiffs testified that they never sought approval from an office administrator to work overtime. Moreover, not only did Plaintiffs not approach Defendant about receiving compensation for their overtime work but they also did not consistently and contemporaneously record their overtime hours. In fact, they did not even inform Defendant that they were working overtime or approach Defendant regarding overtime compensation until they left Defendant's employment.
The testimony also revealed that, when employees sought prior approval for overtime work in accordance with the terms of the overtime policy, Defendant paid overtime compensation. Kevin Fear, Defendant's President, also called the Department of Labor to discuss the status of branch managers and to inquire whether they were entitled to overtime compensation.
Accordingly, the Court finds that the evidence sufficiently shows that Defendant acted in good faith, with reasonable grounds for believing that its failure to pay Plaintiffs overtime wages was not in violation of the Act and, therefore, it denies Plaintiffs' post-trial motion for liquidated damages.
III. CONCLUSION
After carefully considering the file in this matter, the parties' submissions, and the applicable law, and for the reasons stated herein, the Court hereby
ORDERS that Plaintiffs' motion for judgment as a matter of law be DENIED; and the Court further
ORDERS that Plaintiffs' request for an award of liquidated damages, pursuant to 29 U.S.C. § 216(b), is DENIED; and the Court further
ORDERS that the Clerk of the Court enter judgment in favor of Defendant and close this case.
IT IS SO ORDERED.