Opinion ID: 409442
Heading Depth: 1
Heading Rank: 1

Heading: The Propriety of a Restitutionary Injunction.

Text: 8 The Secretary contends on appeal that the district court should have issued the restitutionary injunction since it apparently found that Grantham had violated the Act. He urges us to reverse on the grounds that the trial judge's reliance on the employer's good faith was improper. Grantham contends that we cannot reverse the trial court's finding that he was not liable for back wages unless it is clearly erroneous, and that the denial of the injunction was a proper exercise of the court's discretion. He does not contest the issuance of the prospective injunction. We agree with the Secretary that the district court's consideration of Grantham's allegedly good intentions in connection with the decision whether to issue a restitutionary injunction was improper, and accordingly reverse the district court's order denying such an injunction. 9 While a restitutionary injunction need not issue as a matter of course upon a finding of past wages due, the district court's discretion to deny the injunction where it makes such a finding is severely limited and must be exercised with an eye to the purposes of the Act. Donovan v. Brown Equipment and Service Tools, Inc., 666 F.2d 148, 157 (5th Cir. 1982). Those purposes are first, the compensation of the employees for their losses and second, the correction of a continuing offense against the public interest by increasing the effectiveness of the Act's enforcement. Id. at 156. This latter purpose is accomplished by divesting a violator of any gains accruing through his violation and by protecting those employers who comply with the Act's wage requirements from the unfair competitive advantage which would otherwise be enjoyed by noncomplying employers. Id. at 157; see also Marshall v. Chala Enterprises, Inc., 645 F.2d 799, 803 (9th Cir. 1981); Marshall v. A & M Consolidated Independent School District, 605 F.2d 186, 189 (5th Cir. 1979); Wirtz v. Malthor, 391 F.2d 1, 3 (9th Cir. 1968). 10 An employer's good faith is not grounds for the denial of a restitutionary injunction since the remedy is not designed to penalize the employer, but rather to compensate the employees for earned wages which have not been paid. Brown, supra, at 156; A & M Consolidated, supra, at 190. In fact, a court's refusal to order payment of back wages forecloses the employees from ever recovering their wages, since the employees' right to sue for wages due terminates once the Secretary has brought suit for an injunction. 29 U.S.C. § 216(b) (1976). In light of the purposes of the Act, an injunction against withholding back pay is virtually indispensable. Brown, supra, at 156. 11 Grantham's focus on the clearly erroneous standard of review 2 of district court findings of fact does not necessarily aid his defense on the question whether a restitutionary injunction should issue, since the district court apparently found that he had committed past violations of the Act. The district court stated that Grantham has surely not measured up to the requirements and expectations of the Department. Record at 157-58. Its injunction forbidding future violations of both the record keeping and overtime provisions of the Act is a further indication that the court believed that past violations had occurred. There is normally no need to enjoin violations of the overtime provisions if there has been no violation in the past. Grantham himself admitted that he had not considered payment of commissions in his calculations of overtime, in violation of the department regulations defining regular and overtime pay. 29 C.F.R. § 778.117 (1981). 12 In addition, the compliance officer's testimony concerning Grantham's payroll provided convincing evidence of past violations. The officer compared the reduced hours that Grantham had entered in his payroll records with the number of hours recorded on three weekly assignment sheets, 3 on which the employees had entered the actual time they began and ended their shifts. He discovered that, with one exception, Grantham had consistently reduced by one-third the overtime hours shown on the assignment sheets, a mathematical manipulation by which an employer who pays for overtime hours at a straight-time rate can make it appear that proper overtime has been paid. 13 Grantham claimed that he reduced the hours to dock employees for meal breaks and time taken off for personal affairs. At trial, the night employees testified that they grabbed a bite to eat during slow periods and left their meals when a customer came into the station. Similarly, the day employees said that they usually ran across the street for a sandwich and also attended to the customers during their meals. While an employer is entitled to deduct personal time from an employee's pay, he cannot dock breaks when the employee must continue with any duties related to his work. Brennan v. Elmer's Disposal Service, Inc., 510 F.2d 84, 88 (9th Cir. 1975). Grantham claimed that a number of employees ate at restaurants and missed days and that he recorded the time missed in a diary, but he was unable to produce this diary at trial. It strains credulity to contend that the amount of personal time taken by employees would coincidentally correspond to the hours needed to be reduced to make the amount paid look like proper overtime payments. 14 Since the district court found that Grantham had committed past violations, it abused its small residue of discretion in denying the restitutionary injunction. Brown, supra, at 157. At trial, Grantham warned that he might be forced to close the gas station if required to pay back wages. An employer's unsubstantiated claims of economic hardship, however, are not grounds for refusal to award the employees what is due them. Marshall v. Chala Enterprises, Inc., 645 F.2d 799, 803 (9th Cir. 1981); Wirtz v. Malthor, 391 F.2d 1, 3 (9th Cir. 1968). 4 Neither is the fact that a given level of compensation is fair, or as Judge Cox emphasized, the fact that the employer has kept his employees satisfied, Record at 158, relevant to the consideration of whether an injunction should issue. Chala, supra. The issuance of a restitutionary injunction under the FLSA is not a decision that an employer is evil or exploitative, but merely an award of wages due the employees. We hold that, given the circumstances in this case, a restitutionary injunction should have been granted. 15