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Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 

---

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

EUGENE SCALIA, Secretary of Labor,

U.S. Department of Labor,

Plaintiff-Appellee,

v.

EMPLOYER SOLUTIONS STAFFING

GROUP, LLC, a limited liability

company; EMPLOYER SOLUTIONS

STAFFING GROUP II, LLC, a limited

liability company; EMPLOYER

SOLUTIONS STAFFING GROUP III,

LLC, a limited liability company;

EMPLOYER SOLUTIONS STAFFING

GROUP IV, LLC, a limited liability

company,

Defendants-Appellants.

No. 18-16493

D.C. No.

2:16-cv-02916-

ROS

OPINION

Appeal from the United States District Court

for the District of Arizona

Roslyn O. Silver, District Judge, Presiding

Argued and Submitted February 3, 2020

Phoenix, Arizona

Filed March 2, 2020

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2 SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP.

Before: Susan P. Graber, Andrew D. Hurwitz,

and Eric D. Miller, Circuit Judges.

Opinion by Judge Graber

SUMMARY*

Fair Labor Standards Act

The panel affirmed the district court’s summary judgment

entered in favor of the Secretary of Labor in an action

challenging four companies’ failure to pay overtime to

employees who worked more than 40 hours in a workweek in

violation of the Fair Labor Standards Act (“FLSA”).

Employer Solutions Staffing Companies (“ESSG”)

contracts with other companies to recruit employees and

place them at jobsites for which ESSG handled administrative

tasks. ESSG conceded that it qualified as an “employer” of

the recruited employees under FLSA. ESSG contracted with

Sync Staffing, which placed the recruited employees at a

jobsite run by TBG Logistics. One of ESSG’s employees,

Michaela Haluptzok, was responsible for processing the TBG

Logistics payroll. A Sync employee told Haluptzok to pay

overtime hours as “regular” hours, which was a FLSA

violation.

Consistent with the law of agency, the panel imputed

Haluptzok’s actions to ESSG. The panel held that because

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP. 3

Haluptzok admitted that she knew the recruited employees

were not being paid overtime owed to them, the district court

correctly found no dispute of material fact as to ESSG’s

ultimate liability under the FLSA.

Ordinarily, a two-year statute of limitations applies to

claims under FLSA, but for a “willful violation,” the

limitations period extends to three years. The panel held that

through its agent, Haluptzok, ESSG recklessly disregarded

the possibility that it was violating FLSA. Accordingly, the

three-year statute of limitations applied to the Secretary’s

claim, making the action timely.

FLSA mandates liquidated damages in an amount equal

to the unpaid overtime compensation claims unless the

employer acted in “good faith” and had “reasonable grounds”

to believe it was not violating FLSA. The panel held that

because ESSG’s violations were willful, it could not have

acted in good faith. Accordingly, the panel affirmed the

award of liquidated damages.

The panel held that there was no indication that Congress

intended to create a right to contribution or indemnification

for liable employers from another employer under FLSA. 

The panel further held that no right to contribution or

indemnification arose under federal common law.

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4 SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP.

COUNSEL

Michael R. Shebelskie (argued),Hunton Andrews Kurth LLP,

Richmond, Virginia; Rebecca J. Levine, Rebecca Levine Law

PLLC, Edina, Minnesota; for Defendants-Appellants.

Katelyn J. Poe (argued), Attorney; Paul L. Frieden, Counsel

for Appellate Litigation; Jennifer S. Brand, Associate

Solicitor; Kate S. O’Scannlain, Solicitor of Labor; United

States Department of Labor, Washington, D.C.; for PlaintiffAppellee.

OPINION

GRABER, Circuit Judge:

Employer Solutions Staffing Group and three related

companies (collectively, “ESSG”)1

appeal from the summary

judgment entered in favor of the Secretary of Labor in this

action challenging ESSG’s failure to pay overtime to

employees who worked more than 40 hours in a workweek,

in violation of the Fair Labor Standards Act of 1938

(“FLSA”), 29 U.S.C. §§ 201–219. ESSG also disputes the

dismissal of its cross-claims against other defendants below

for indemnification or contribution. We affirm.

BACKGROUND

ESSG, a staffing company, contracts with other

companies to recruit employees and place them at jobsites for

1 Four related companies with nearly identical names are defendants

here; they usually refer to themselves using the singular “ESSG.”

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SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP. 5

which ESSG handles administrative tasks, such as payroll

processing. ESSG concedes that it qualifies as an “employer”

of the recruited employees under the FLSA, 29 U.S.C.

§ 203(d).

In 2012, ESSG contracted with Sync Staffing, which

placed the recruited employees at a jobsite run by TBG

Logistics, where the employees unloaded deliveries for a

grocery store. TBG maintained a spreadsheet of the

employees’ hours. For each pay period in November 2012

and thereafter, TBG sent the spreadsheet to Sync, which

forwarded it to ESSG.

Onlyone ofESSG’s employees, Michaela Haluptzok, was

responsible for processing the TBG payroll. ESSG trained

Haluptzok on the FLSA’s requirements. The first time that

Haluptzok received one of the spreadsheets, she prepared and

sent to Sync a report showing that employees who had

worked more than 40 hours per week would receive overtime

pay for those hours. But when a Sync employee called

Haluptzok and told her—without explaining why this action

would be appropriate—to pay all of the hours as “regular

hours” instead of overtime, Haluptzok complied.

To follow the Sync employee’s instructions, Haluptzok

had to dismiss numerous error messages from Defendant’s

payroll software. Haluptzok understood that not paying

overtime for the qualifying employees triggered the error

messages, but she disregarded the messages anyway. After

processing her first spreadsheet in this manner, Haluptzok did

the same thing for every future spreadsheet. ESSG’s

relationship with TBG and Sync ended on July 27, 2014; by

that date, more than 1,000 violations had occurred in which

employees did not receive their earned overtime pay.

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6 SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP.

The Secretary sued ESSG, TBG, Sync, and another

company in August 2016, more than two years after the final

overtime violation occurred. ESSG brought cross-claims for

contribution or indemnification against the other defendants. 

The district court dismissed those claims under Federal Rule

of Civil Procedure 12(b)(6). The district court also denied

Defendant’s motion to file a third-party complaint seeking

contribution from a grocery store where some recruited

employees worked. The Secretary reached consent

judgments with the other companies, so onlyESSG remained

in the case when the Secretarymoved for summary judgment. 

The district court granted the Secretary’s motion, held that

ESSG had violated the FLSA willfully, and ordered ESSG to

pay approximately $78,500 in unpaid overtime wages plus an

equal amount in liquidated damages.

STANDARD OF REVIEW

We review de novo a grant of summary judgment. Flores

v. City of San Gabriel, 824 F.3d 890, 897 (9th Cir. 2016). We

also review de novo “the application of legal principles to

established facts.” Id. at 905. Finally, we review de novo a

dismissal under Rule 12(b)(6). Fields v. Twitter, Inc.,

881 F.3d 739, 743 (9th Cir. 2018).

DISCUSSION

We first address ESSG’s arguments that it cannot be

liable for the actions of a low-level employee such as

Haluptzok and that, regardless, anyFLSA violations were not

willful and instead occurred in good faith. We then discuss

whether the FLSA allows a liable employer to seek

indemnification or contribution from other employers.

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SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP. 7

A. Liability

Haluptzok knew that the relevant employees were

working more than 40 hours per week without receiving

overtime pay. ESSG chose Haluptzok as its agent for payroll

processing, so it cannot disavow her actions merely because

she lacked a specific job title or a certain level of seniority in

the company. See United States v. Graf, 610 F.3d 1148, 1156

(9th Cir. 2010) (“As an inanimate entity, a corporation must

act through agents.” (quoting CFTC v. Weintraub, 471 U.S.

343, 348 (1985))); see also Restatement (Third) of Agency

§ 1.01 (defining “agent” as one who “act[s] on the principal’s

behalf and subject to the principal’s control”). Allowing

ESSG to evade liability simply because none of its

“supervisors” or “managers” processed the payroll would

create a loophole in the FLSA and run counter to the statute’s

purpose of “protect[ing] all covered workers from

substandard wages and oppressive working hours.” 

Williamson v. Gen. Dynamics Corp., 208 F.3d 1144, 1150

(9th Cir. 2000) (internal quotation marks omitted). 

Consistent with the law of agency, we impute Haluptzok’s

actions to ESSG. Because Haluptzok admitted that she knew

the recruited employees were not being paid overtime owed

to them, the district court correctly found no dispute of

material fact as to ESSG’s ultimate liability under the FLSA. 

See Forrester v. Roth’s I.G.A. Foodliner, Inc., 646 F.2d 413,

414 (9th Cir. 1981) (“[A]n employer who knows or should

have known that an employee is or was working overtime

must comply with the provisions of [29 U.S.C. §] 207[(a)].”).

B. Willfulness

Ordinarily, a two-year statute of limitations applies to

claims under the FLSA. 29 U.S.C. § 255(a). But for a

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8 SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP.

“willful violation,” the limitations period extends to three

years. Id. Because the Secretary sued ESSG more than two

years after the last violation, ESSG must have acted willfully

for this action to be timely.

A violation is willful when “the employer either knew or

showed reckless disregard for . . . whether its conduct was

prohibited by the [FLSA.]” McLaughlin v. Richland Shoe

Co., 486 U.S. 128, 133 (1988). For more than a year,

Haluptzok dismissed the payroll software’srepeatedwarnings

that employees might not be receiving earned overtime pay. 

Although she (at least initially) acted on Sync’s instructions

not to pay overtime, she never received any explanation from

Sync that justified dismissing the software’s error messages. 

Thus, through its agent, ESSG recklessly “disregarded the

very possibility that it was violating the statute.” Alvarez v.

IBP, Inc., 339 F.3d 894, 908–09 (9th Cir. 2003) (internal

quotation marks omitted).2 Accordingly, the three-year

statute of limitations applies to the Secretary’s claim, making

this action timely.

C. Liquidated Damages

The FLSA mandates liquidated damages in an amount

equal to the unpaid overtime compensation unless an

employer acted in “good faith” and had “reasonable grounds”

2 ESSG questions whether our decision in Alvarez comports with the

“reckless disregard” standard set forth in Richland Shoe. See Flores v.

City of San Gabriel, 824 F.3d 890, 907–08 (9th. Cir. 2016) (Owens, J.,

concurring). Of course, we are not free to revisit Alvarez. See Miller v.

Gammie, 335 F.3d 889, 892–93 (9th Cir. 2003) (en banc). In any event,

based on Haluptzok’s admissions, we have little trouble concluding that

ESSG recklessly disregarded its obligations under the FSLA even under

the strictest reading of Richland Shoe.

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SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP. 9

to believe that it was not violating the FLSA. 29 U.S.C.

§§ 216(b), 260. Because ESSG’s violations were willful, it

could not have acted in good faith. See Chao v. A-One Med.

Servs., Inc., 346 F.3d 908, 920 (9th Cir. 2003) (“[A] finding

of good faith is plainly inconsistent with a finding of

willfulness.”).

ESSG insists that an employer can act in good faith while

willfully violating the FLSA. But, as a three-judge panel we

cannot overrule Chao in the absence of intervening en banc

or Supreme Court precedent. Miller v. Gammie, 335 F.3d

889, 892–93 (9th Cir. 2003) (en banc). Indeed, Chao aligns

with precedent in most other circuits that have reached the

issue. See Alvarez Perez v. Sanford-Orlando Kennel Club,

Inc., 515 F.3d 1150, 1166 (11th Cir. 2008) (agreeing with

Chao, joining “the majority side of the circuit split on this

issue,” and collecting cases). Thus, we affirm the award of

liquidated damages.

D. Indemnification/Contribution

The FLSA’s text does not expressly address whether an

employer may seek indemnification or contribution from

another employer, but ESSG contends that the statute

implicitly permits those remedies. Alternatively, ESSG asks

us to recognize those remedies under federal common law.

1. Whether the FLSA Implicitly Allows

Indemnification or Contribution

“In determining whether a federal statute that does not

expressly provide for a particular private right of action

nonetheless implicitly created that right, our task is one of

statutory construction.” Nw. Airlines, Inc. v. Transp. Workers

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Union, 451 U.S. 77, 91 (1981). We must ascertain “whether

Congress intended to create the private remedy—for example,

a right to contribution—that the [litigant] seeks to invoke.” 

Id. In recent decades, the Supreme Court has adopted a

“cautious course before finding implied causes of action.” 

Ziglar v. Abbasi, 137 S. Ct. 1843, 1855 (2017). Four factors

guide our inquiry: (1) the statute’s text; (2) “the underlying

purpose and structure of the statutory scheme”; (3) “the

likelihood that Congress intended to supersede or to

supplement existing state remedies”; and (4) the statute’s

legislative history. Nw. Airlines, 451 U.S. at 91; accord Tex.

Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 639

(1981).

ESSG largely ignores the relevant factors and argues that,

because employers face joint and several liability under the

FLSA, they necessarilymust have a right to seek contribution

from one another. Defendant emphasizes 29 C.F.R. § 791.2

(2019), which provides that “all joint employers are

responsible, both individually and jointly, for compliance

with all of the applicable provisions of the act.” A newer,

not-yet-effective version of this regulation refers expressly to

joint and several liability: “[A] joint employer is jointly and

severally liable with . . . any other joint employers for

compliance with all of the applicable provisions of the Act.” 

Id. (2020).3 Of course, the regulation does not clarify what

Congress intended when it enacted the FLSA in 1938; it

provides only the Secretary’s current interpretation of the

FLSA.

But the Supreme Court has rejected the argument that

joint and several liability always goes hand-in-hand with

3

 The newer version takes effect on March 16, 2020.

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SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP. 11

contribution. See Tex. Indus., 451 U.S. at 646 (“Nor does the

judicial determination that defendants should be jointly and

severally liable suggest that courts also may order

contribution, since joint and several liability simply ensures

that the plaintiffs will be able to recover the full amount of

damages from some, if not all, participants.”). And the

common law “provided no right to contribution among joint

tortfeasors.” Id. at 634. ESSG does not merely owe a debt to

its employees; it committed a wrong against them. Thus, we

remain unpersuaded that Congress necessarilycodified a right

to contribution when it enacted the FLSA.

We turn now to the four factors. The Second Circuit,

applying the four-factor framework from Northwest Airlines,

has held that the FLSA does not provide a right to

contribution orindemnification for liable employers. Herman

v. RSR Sec. Servs. Ltd., 172 F.3d 132, 144 (2d Cir. 1999). 

We agree.

First, the FLSA’s text says nothing about a right to

contribution or indemnification for employers who have

violated the statute. That silence “is not dispositive if, among

other things,” the statute’s text suggests that it was “enacted

for the special benefit of a class of which [ESSG] is a

member.” Nw. Airlines, 451 U.S. at 91–92. But, the FLSA’s

text suggests exactly the opposite. See 29 U.S.C. § 202

(noting the congressional policy behind the FLSA of

eliminating “labor conditions detrimental to the maintenance

of the minimum standard of living necessary for health,

efficiency, and general well-being of workers”).

Second, as its text suggests, the FLSA’s “central purpose”

is to “enact minimum wage and maximum hour provisions

designed to protect employees,” not employers. Williamson,

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12 SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP.

208 F.3d at 1154; see also Herman, 172 F.3d at 144 (stating

that the FLSA “was designed to regulate the conduct of

employers for the benefit of employees”). In other words,

ESSG belongs to the class whose conduct Congress intended

to control “for the protection and benefit of an entirely

distinct class.” Tex. Indus., 451 U.S. at 639 (quoting Piper v.

Chris-Craft Indus., Inc., 430 U.S. 1, 37 (1977)). The FLSA’s

statutory scheme resembles those of the Equal Pay Act and

Title VII of the Civil Rights Act, for which Northwest

Airlinesfound no implied right to contribution for employers. 

Similarly, the FLSA “has a comprehensive remedial scheme

as shown by the ‘express provision for private enforcement

in certain carefully defined circumstances,’” Herman,

172 F.3d at 144 (quoting Nw. Airlines, 451 U.S. at 93), and

for enforcement by the federal government in other

circumstances, 29 U.S.C. § 217. Indeed, “broader or more

comprehensive coverage of employees . . . would be difficult

to frame.” United States v. Rosenwasser, 323 U.S. 360, 362

(1945).

Third, “[t]he comprehensive character of the remedial

scheme expressly fashioned by Congress strongly evidences

an intent not to authorize additional remedies” beyond those

expressly allowed under the statute. Nw. Airlines, 451 U.S.

at 93–94. The FLSA provides “comprehensive statutory

remedies,” Williamson, 208 F.3d at 1155, and it is “not within

our competence as federal judges to amend . . .

comprehensive enforcement schemes” by adding private

remedies that Congress never intended to allow, Nw. Airlines,

451 U.S. at 94.

Fourth, and finally, the FLSA’s legislative history is

“silent on a right to contribution or indemnification” for

employers. Herman, 172 F.3d at 144 (collecting the relevant

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SCALIA V. EMPLOYER SOLUTIONS STAFFING GRP. 13

legislative history). In sum, we see no indication that

Congress intended to create a right to contribution or

indemnification for employers under the FLSA.

ESSG argues that allowing it to seek contribution or

indemnification from other employers would advance the

FLSA’s purpose in various ways, including by encouraging

employers to be more proactive about complying with the

statute. Maybe so, but such policy questions belong to

“Congress, not the courts, to resolve.” Tex. Indus., 451 U.S.

at 646. “If the statute itself does not ‘display an intent’ to

create ‘a private remedy,’ then ‘a cause of action does not

exist and courts may not create one, no matter how desirable

that might be as a policy matter, or how compatible with the

statute.’” Ziglar, 137 S. Ct. at 1856 (brackets omitted)

(quoting Alexander v. Sandoval, 532 U.S. 275, 286–87

(2001)). Following the Supreme Court’s “cautious course,”

id. at 1855, we decline to find an implied cause of action for

contribution or indemnification under the FLSA.

2. Whether a Right to Contribution or

Indemnification Arises Under Federal Common

Law

Federal courts have the authority to craft federal common

law in limited circumstances. First, we may undertake this

type of lawmaking “in those few instances where ‘a federal

rule of decision is necessary to protect [a] uniquely federal

interest.’” Mortgs., Inc. v. U.S. Dist. Court, 934 F.2d 209,

213 (9th Cir. 1991) (per curiam) (quoting Tex. Indus.,

451 U.S. at 640). “The right of recovery from another

wrongdoer, however, does not implicate any such interests.” 

Id. Thus, this category does not help ESSG.

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Similarly, we may create federal common law “in those

areas dominated by strong national or federal concerns such

as controversies between states, admiralty matters, or foreign

relations.” Id. Plainly, this category does not apply here.

Finally, “Congress may empower federal courts to make

federal common law when a statute contains sweeping

language and its legislative history indicates Congress’s

expectation that the courts will ‘give shape to the statute’s

broad mandate by drawing on common-law tradition.’” Id.

(quoting Nat’l Soc’y of Prof’l Eng’rs v. United States,

435 U.S. 679, 688 (1978)). In National Society of

Professional Engineers, for example, the Court addressed the

Sherman Act, for which “[t]he legislative history makes it

perfectly clear that [Congress] expected the courts to give

shape” to the statute’s broad contours. 435 U.S. at 688. By

contrast, neither the FLSA’s text nor its legislative history

suggests that Congress expected the courts to go beyond the

“judicial interpretation of ambiguous or incomplete

provisions” that proves necessary for “almost any statutory

scheme.” Nw. Airlines, 451 U.S. at 97.

When “Congress has enacted a comprehensive legislative

scheme” that includes “integrated procedures for

enforcement,” we presume that Congress did not intend for us

“to supplement the remedies enacted.” Mortgs., 934 F.2d

at 213. The FLSA is just such a comprehensive statute. It

includes procedures for both “private enforcement in certain

carefully defined circumstances,” Herman, 172 F.3d at 144

(internal quotation marks omitted), and (as in this case)

enforcement by the Secretary, § 217. Thus, this final

category also does not help ESSG.

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We thus join the Second Circuit in holding that the FLSA

does not imply a right to contribution or indemnification for

liable employers. We also decline to make new federal

common law that recognizes those rights.

AFFIRMED.

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