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Acosta v. Maranto

United States District Court, W.D. Oklahoma

April 27, 2018

R. ALEXANDER ACOSTA, Secretary of Labor, United States Department of Labor, Plaintiff,
v.
MARGARET MARANTO, et al., Defendants.

          ORDER

          TIMOTHY D. DeGIUSTI UNITED STATES DISTRICT JUDGE.

         Presently before the Court is Plaintiff's Motion for Summary Judgment [Doc. No. 75] filed pursuant to Fed.R.Civ.P. 56 and LCvR56.1. Plaintiff R. Alexander Acosta, Secretary of Labor, seeks a judgment as a matter of law on all claims and an order granting injunctive and monetary relief against Defendants Meers Store & Restaurant, Inc. (“Meers”) and Margaret Maranto. Defendants have responded in opposition to the Motion [Doc. No. 112], and Plaintiff has replied [Doc. No. 114]. The Motion is fully briefed and ripe for decision.

         This case involves claims by the United States Department of Labor (“DOL”) that Defendants violated the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201-19, by failing to pay minimum wages to certain employees, failing to pay overtime compensation, failing to comply with child labor provisions, and failing to maintain required records. Plaintiff seeks injunctive relief prohibiting further FLSA violations, an assessment of unpaid wages and compensation owed to Defendants' employees, liquidated damages, and a three-year period of recovery for willful violations. Specifically, by its Motion, Plaintiff seeks to recover unpaid wages of $167, 843.68, and an equal amount as liquidated damages.

         Defendants' opposition to the Motion is largely based on a defense to Plaintiff's claims previously asserted in a motion for summary judgment filed by Meers. By its motion, Meers sought to avoid FLSA liability by arguing that Margaret Maranto was solely responsible for adopting and implementing the alleged pay practices that violated FLSA and that she acted without knowledge or authority from Meers in committing the violations. After Defendants filed their response to Plaintiff's Motion, the Court denied Meers' motion because Meers did “not present sufficient facts or legal authority to support its position.” See 9/19/17 Order [Doc. No. 115] at 5. In light of this ruling, all contentions in Defendants' response to Plaintiff's Motion that merely refer to Meers' motion for summary judgment or repeat Meers' ultra vires arguments are disregarded.[1]

         Defendants also oppose Plaintiffs' Motion by submitting an affidavit of Randall O'Neal, their designated expert witness regarding wage-and-hour matters.[2] However, contemporaneously with the Motion, Plaintiff filed a Daubert [3] motion to exclude expert testimony by Mr. O'Neal, and after full briefing, the Court granted the motion. See 3/28/18 Order [Doc. No. 124]. The Court found that Defendants had failed to establish the admissibility of Mr. O'Neal's expert opinions. Id. at 7. Therefore, Defendants' references to Mr. O'Neal's affidavit and arguments in opposition to summary judgment based on his opinions are also disregarded.

         Standard of Decision

         Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A material fact is one that “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if the evidence is such that a reasonable jury could return a verdict for either party. Id. at 255. All facts and reasonable inferences must be viewed in the light most favorable to the nonmovant. Id.

         The movant bears the initial burden of demonstrating the absence of a dispute of material fact warranting summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). If the movant carries this burden, the nonmovant must then “set forth specific facts” that would be admissible in evidence and that show a genuine issue for trial. See Anderson, 477 U.S. at 248; Celotex, 477 U.S. at 324; Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998). “To accomplish this, the facts must be identified by reference to affidavits, deposition transcripts, or specific exhibits incorporated therein.” Adler, 144 F.3d at 671; see also Fed. R. Civ. P. 56(c)(1)(A). “The court need consider only the cited materials, but may consider other materials in the record.” See Fed. R. Civ. P. 56(c)(3). The Court's inquiry is whether the facts and evidence identified by the parties present “a sufficient disagreement to require submission to a jury or whether it is so onesided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 251-52.

         Statement of Undisputed Facts [4]

Meers is a corporation that operates a restaurant and, during the relevant time period, employed 84 individuals identified in Exhibit A to the Complaint [Doc. No. 1-1] as servers, hostesses, cooks, kitchen staff, and bussers.[5] Margaret Maranto is a part-owner of Meers and served as its general manager together with her husband, Joe Maranto. Both Mr. and Mrs. Maranto had full management authority. Mrs. Maranto's functions included setting Meers' employee policies, hiring and firing employees, scheduling and directing their work, setting compensation, computing hours worked from time cards each pay period, and communicating with Meers' accountants regarding payroll. Mrs. Maranto represented Meers during DOL's investigation and provided information regarding pay practices, record keeping, and child labor.

         Defendants' employees handled goods that had been moved in interstate commerce, including time cards from Tennessee, liquid sweetener from New York, and kitchen equipment from Indiana, California, Mexico, and Italy. Meers had an annual gross sales volume of $500, 000 or more for calendar years 2012, 2013, 2014, and 2015.

         Beginning in November 2014, DOL investigated Meers' compliance with FLSA's requirements regarding minimum wages, overtime compensation, record keeping, and child labor restrictions. Two investigators from DOL's Wage and Hour Division, Cheryl Masters and Lindsey Arnold, visited Meers' restaurant, made written requests for payroll and time records, communicated with Meers' managers and attorney regarding requested documents, interviewed witnesses, and obtained written statements from 19 employees. Despite requests for records from the previous three years, Defendants produced time cards covering a three-month period from October 15, 2014, to January 19, 2015. These time cards were generated by a time clock used to record time worked by Meers' employees; employees were required to clock-in at the beginning of each shift and clock-out for breaks and at the end of each shift.

         The investigation resulted in findings that Defendants had committed minimum wage violations affecting certain employees due to four identified policies or practices (see 29 U.S.C. § 206(a)(1)): 1) requiring employees to clock-out for all breaks regardless of duration and excluding breaks, including ones less than 20 minutes, from the computation of hours worked;[6] 2) making computational errors when converting worktime on employees' time cards to a decimal number for payment purposes by incorrectly rounding fractions of hours (for example, recording 4:45 as 4.45 rather than 4.75 hours);[7] 3) failing to include bussers on Meers' payroll and paying no wages for their work (instead, allowing bussers to be paid from servers' tips); and 4) failing to pay servers a sufficient amount during the restaurant's slow season when their wages as tipped employees (who received an hourly rate plus tips in accordance § 203(m)) were insufficient to reach the minimum wage threshold.

         The investigation also resulted in a finding that Defendants had violated FLSA's requirement to pay overtime compensation at one and one-half times an employee's regular rate for hours worked in excess of 40 hours in a workweek. See 29 U.S.C. § 207(a)(1). Meers' payroll was administered by an accounting firm that issued employees' pay checks. Each pay period, Mrs. Maranto reported to the accountant an amount of hours worked for each employee that she computed from the employee's time card and transferred to a handwritten summary sheet, omitting any overtime hours. Mrs. Maranto then made cash payments to any employees who had worked overtime, compensating them at their regular rates for the hours not reported to the accountant and thus not included in their payroll checks. Mrs. Maranto engaged in this practice on a routine basis during the investigation period. She also routinely destroyed the time cards and summary sheets after each pay period, except during the three-month period for which records were provided to DOL.

         In addition to destroying payroll records, Defendants failed to keep other records as required by 29 U.S.C. § 211(c) and implementing regulations. See 29 C.F.R. §§ 516.1, 516.2, 516.4, 516.6. Defendants did not consider bussers to be employees (see supra note 5) so there was no record of their employment or payments they received. Defendants did not record tips received by servers. At least two employees were paid in cash only, and Defendants did not retain any pay records for these employees. Due to Mrs. Maranto's underreporting of wage information to Meers' accountants, the payroll records kept by the accountants were inaccurate. Defendants failed to keep a list of all employee names and addresses during 2012 to 2014, and did not display a required FLSA minimum wage poster in the workplace.

         During the investigation period, Defendants allowed two minors to work as bussers when they were younger than 14 years old and, therefore, prohibited from working in a nonagricultural occupation. See 29 C.F.R. § 570.2. One of the minors later worked as a busser in violation of federal regulations restricting the work hours of children 14 and 15 years of age. See 29 C.F.R. § 570.35(a) (no more than three hours on school days or eight hours on non-school days, no more than 18 hours per school week, and no working past 7:00 p.m. from Labor Day to June 1 or 9:00 p.m. from June 1 to Labor Day). Another employee who was younger than 18 years of age during the investigation period operated a meat slicer and a dough mixer on a regular basis as a primary part of his job duties, in violation of 29 C.F.R. §§ 570.61 and 570.62.

         During her testimony in this case, Mrs. Maranto has admitted these errors occurred. Defendants do not dispute the facts and evidence presented by Plaintiff to establish them.[8]In fact, Defendants concede that FLSA violations occurred, but blame Mrs. Maranto for committing them. See, e.g., Defs.' Resp. Br. at 6 (“Margaret Maranto told employees that Meers refused to pay overtime” and “Mrs. Maranto engaged in the practice of withholding some of the [wage] information instead of providing it to the CPA firm”). In deposition testimony, however, Mr. Maranto also derided FLSA's requirements, stating that Meers' employees were not entitled to receive overtime compensation or to be paid for work breaks of any duration. See J. Maranto Dep. 114:11-115:2, 142:2-18. Records of Meers' payroll and employee practices after the investigation period showed that many of the same FLSA violations continued to occur. See Masters Aff. [Doc. No. 75-1], ¶ 34.

         With their brief, Defendants present evidence intended to show that they relied on the advice of Meers' accountant, Danny Delciello, to ensure FLSA compliance and to pay employees properly. This evidence consists of conclusory statements in affidavits of Mr. and Mrs. Maranto that they followed the advice of Mr. Delciello prior to his death in 2014, and “if [they] were violating the law with regard to minimum wage or overtime, it was the result of [their] reliance on our CPA.” See J. Maranto Aff. [Doc. No. 112-1], ¶ 11; M. Maranto Aff. [Doc. No. 112-2], ¶ 10. Both Mr. and Mrs. Maranto deny “intentionally or willfully violating the law, ” and both say, “We were doing our best to follow the law.” Id. Despite these statements, Defendants provide no facts to show that Mr. Delciello provided advice regarding the minimum wage issues identified by DOL (deducting break periods, rounding fractional hours, and not paying bussers or making seasonal adjustments in wages of tipped employees).[9] Further, regarding overtime, Mr. Maranto has testified that Mr. Delciello specifically advised him that Meers was required to pay one and one-half times the regular rate for overtime hours. See J. Maranto Dep. 170:6-171:8.[10] As stated supra, Mrs. Maranto has admitted intentionally omitting employees' overtime hours from the payroll summaries she created, and withholding information from Meers' accountants about overtime payments to employees. There is no evidence the accountants knew of this practice.[11]

         Due to a lack of payroll records and a limited amount of historical information, DOL investigators calculated an amount of unpaid wages due to Meers' employees using estimation methods, as described in the affidavit of Cheryl Masters, to reconstruct back wages owed for each category of worker (part-time kitchen staff, full-time kitchen staff, servers, hostesses, bussers, and kitchen managers). For example, to calculate unpaid wages for improperly deducting work breaks of less than 20 minutes, Ms. Masters used time records and interview statements to estimate a total amount of off-the-clock (“OTC”) work time, and determined an average amount of OTC time for different categories of workers during slow seasons and busy seasons. In a similar manner, Ms. Masters estimated overtime compensation owed by determining the average number of hours worked by employees in each category and reconstructing hours worked and overtime wages due to ...


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