Court Opinion

ID: 4659124
Source: CourtListenerOpinion
Date Created: 2021-02-10 16:00:42.875257+00
Date Added: 2024-06-11T08:01:57.712553
License: Public Domain

Case: 19-51119             Document: 00515738778            Page: 1     Date Filed: 02/09/2021

                  United States Court of Appeals
                       for the Fifth Circuit
                                                                                  United States Court of Appeals
                                                                                           Fifth Circuit

                                                                                         FILED
                                                                                   February 9, 2021
                                            No. 19-51119                            Lyle W. Cayce
                                                                                         Clerk

   United States Department of Labor,

                                                                         Plaintiff—Appellee,

                                                versus

   Five Star Automatic Fire Protection, L.L.C.,

                                                                     Defendant—Appellant.

                          Appeal from the United States District Court
                               for the Western District of Texas
                                    USDC No. 3:16-CV-282

   Before Dennis, Higginson, and Willett, Circuit Judges.
   Don R. Willett, Circuit Judge:
              Seventy-five years ago in Anderson v. Mt. Clemens Pottery Company, the
   Supreme Court fashioned a burden-shifting framework for federal wage
   claims where an employer fails to maintain proper records. 1 Under Mt. Clem-
   ens, if “the employer’s records are inaccurate or inadequate,” a plaintiff need
   only show by “just and reasonable inference” that she was an employee,

              1
                  328 U.S. 680, 687 (1946), superseded by statute on other grounds, 29 U.S.C. §
   254(a)).
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                                    No. 19-51119

   worked the hours, and wasn’t paid. 2 It’s a lenient standard rooted in the view
   that an employer shouldn’t benefit from its failure to keep required payroll
   records, thereby making the best evidence of damages unavailable. In this un-
   paid-overtime case, the district court applied Mt. Clemens because Five Star’s
   bare-bones timesheets left numerous evidentiary gaps. The Department of
   Labor filled those gaps with consistent testimony that Five Star urged em-
   ployees not to record their pre- and post-shift work hours. DOL used this
   testimony to estimate unpaid hours and calculate back wages. Five Star’s
   only rebuttal evidence was a summary chart based on the company presi-
   dent’s memory. As this chart failed to negate any raised inferences of unpaid
   work, we affirm the district court’s judgment.
                                         I
          Five Star Automatic Fire Protection, LLC is a fire-sprinkler
   installation and service company based in El Paso. Luis Palacios and his wife,
   Veronica, run the company as President and Vice President, respectively.
   Five Star has five separate departments—this lawsuit implicates only the
   construction department. During the relevant timeframe, Five Star had 53
   construction employees. Construction employees typically work in two-man
   crews with one foreman (sprinkler fitter) and one helper (laborer).
          Most of the time, the crews work at client jobsites, not at Five Star’s
   facility where pipe is cut and welded (the “shop”). But occasionally, the con-
   struction employees work in the shop or at Palacio’s personal ranch. Most of
   the jobsites are close to Five Star’s shop, but others are up to an hour away.
   Several jobsites are out of state and require crews to stay out of town during
   the workweek.

          2
              Id.

                                         2
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                                         No. 19-51119

           During typical day shifts at jobsites, construction employees work
   from 7 am to 3:30 pm. 3 The crews must first report to the shop and load the
   materials needed for the workday. The crews then drive a company truck to
   the jobsite. When the day’s work is completed, the crew drives back to the
   shop to drop off the company vehicle. The foreman usually drives the truck
   to and from the jobsite.
           Five Star pays its construction employees by the hour. Employees
   must record their own time, by handwriting on the company timesheets how
   many hours they worked each day. Employees only include the total number
   of hours worked at a jobsite, the shop, or the ranch. So when an employee has
   worked at two or more locations in one day, he does not record his start and
   stop time for each location nor does he indicate the order in which he worked
   at those places.
           In September 2015, DOL’s Wage-and-Hour Investigator Sandra Alba
   initiated an inquiry into Five Star’s compensation practices. Alba
   interviewed nine employees as well as Mr. and Mrs. Palacios. And she
   analyzed all timesheets spanning the two-year investigative period, except for
   two weeks for which time records were missing.
           Alba presented her findings to Mr. and Mrs. Palacios. She told them
   that construction employees were working, without compensation, before
   and after their recorded shifts. Alba told Mr. and Mrs. Palacios that they
   owed back wages for this uncompensated time. Mr. Palacios disagreed, stat-
   ing that employees needed to record their hours, and if they were working
   before and after the regular shift hours, they should have recorded that time.
   He declined to pay the back wages or consider Alba’s calculations.

           3
             Some jobsites are only accessible at night, so construction employees also work
   nightshifts.

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           DOL then filed a complaint against Five Star in federal court, alleging
   overtime and recordkeeping violations of the FLSA and seeking back wages
   and liquidated damages for the affected employees. The case was tried by
   consent before a magistrate judge. 4 DOL called six former employees to tes-
   tify.
           The district court first made preliminary factual findings about Five
   Star’s liability, without calculating damages. After recounting the evidence
   presented at trial, the court found that Five Star failed to keep accurate
   records of off-the-clock time for the investigative period. The court then
   found that while the typical construction shift was 7 am to 3:30 pm, Five Star
   required employees to arrive at the shop no later than 6:45 am and didn’t
   compensate its employees for the 15-minute gap. The court further found
   that, while the typical workday ended at 3:30 pm, that was the time
   employees left the jobsite. And Five Star didn’t compensate employees for
   the required travel time back to the shop. Finally, the court found that Five
   Star had some face-of-the-record violations concerning errors on the payroll
   records; the parties do not dispute this finding.
           Following these preliminary conclusions on liability, the court granted
   the parties’ request to submit additional briefing on damages. In its final or-
   der, the court adopted the preliminary findings concerning liability and pro-
   ceeded to evaluate damages. The court agreed with DOL’s calculations and
   held that Five Star was liable to 53 construction employees for $121,687.37 in
   back wages, $121,687.37 in liquidated damages, and $2,604.35 for face-of-
   the-record violations. Five Star appeals the court’s findings as to liability for
   the 47 non-testifying employees and the back-wages calculation for all 53 em-
   ployees.

           4
               See 28 U.S.C. § 636(c).

                                              4
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                                                  II
           After a bench trial, we review findings of fact for clear error and legal
   conclusions de novo. 5 The calculation of unpaid overtime is a mixed question
   of law and fact—the number of overtime hours is a finding of fact, but the
   methodology used to calculate back wages based on that number is a question
   of law. 6 “When reviewing mixed questions of law and fact, this court reverses
   only if the findings are based on a clearly erroneous view of the facts or a
   misunderstanding of the law.” 7
                                                  III
           Five Star argues that the district court erred in relying on the
   testimony of six former employees to (1) find Five Star liable to 53 employees
   and (2) calculate the damages resulting from that liability. The court
   permitted this representative evidence under the Mt. Clemens burden-
   shifting framework.
           In Mt. Clemens, the Supreme Court noted that, typically, a plaintiff
   who brings an unpaid-wages claim under the FLSA “has the burden of
   proving that he performed work for which he was not properly
   compensated.” 8 But “where the employer’s records are inaccurate or
   inadequate and the employee cannot offer convincing substitutes,” an
   employee can attempt to fill the evidentiary gap. 9 “[A]n employee has carried

           5
               Ransom v. M. Patel Enters., Inc., 734 F.3d 377, 381 (5th Cir. 2013).
           6
               Id.
           7
               Id.
           8
            328 U.S. at 686–87. The FLSA states that an employer who violates the overtime
   provisions is liable for the unpaid overtime and “an additional equal amount as liquidated
   damages.” 29 U.S.C. § 216(b).
           9
               Mt. Clemens, 328 U.S. at 687.

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   out his burden if he proves that he has in fact performed work for which he
   was improperly compensated and if he produces sufficient evidence to show
   the amount and extent of that work as a matter of just and reasonable
   inference.” 10
           The burden then “shifts to the employer to come forward with
   evidence of the precise amount of work performed or with evidence to
   negative the reasonableness of the inference.” 11 When an action involves a
   group of employees, a “representative sample,” if reliable, can shift the
   burden to the employer. 12 The representative proof is reliable “if the sample
   could have sustained a reasonable jury finding . . . in each employee’s
   individual action.” 13 If the employer fails to negate the inferences raised by
   the representative evidence, “the court may then award damages to the
   employee[s], even though the result be only approximate.” 14
           As a preliminary matter, Five Star argues that its records were
   adequate because nobody, including DOL, has explained what adequate
   records should look like. Five Star misses the point. The adequacy of the
   records has to do with the evidence available to establish liability and
   damages, not the employer’s failure to conform to a certain recordkeeping
   standard. As the Court noted in Mt. Clemens, “[w]hen the employer has kept
   proper and accurate records,” then “the employee may easily” satisfy his

           10
                Id.
           11
                Id. at 687–88.
           12
             Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1047 (2016) (referring generally
   to Mt. Clemens).
           13
                Id. at 1046–47.
           14
                Mt. Clemens, 328 U.S. at 688.

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   burden to show he worked overtime without overtime compensation. 15 But
   where, as here, the records do not allow employees to show the
   uncompensated overtime work they completed, the burden-shifting
   framework applies.
          Five Star next argues that, even if Mt. Clemens applies, the district
   court erred because the representative evidence offered at trial failed to raise
   “just and reasonable” inferences of liability. Alternatively, Five Star argues
   that if DOL did raise such inferences, Five Star negated them. Finally, Five
   Star contends that the damages calculation failed to account for the variances
   among employees’ schedules and work assignments. We first address Five
   Star’s liability then turn to the damages calculations.
                                         A
          To raise just and reasonable inferences as to Five Star’s liability, DOL
   called six former employees (representing both foremen and helpers) at trial.
   Those employees consistently testified that:

          • Jorge Cobian, Five Star’s lead supervisor, required them (at
            the risk of discipline) to report to Five Star as early as 6:30
            am and no later than 6:45 am, even though the official shift
            (and compensation clock) began at 7 am.
          • Before 7 am, the employees engaged in compensable activ-
            ities, such as loading material onto company trucks.
          • Employees didn’t leave the jobsites until 3:30 pm, and the
            amount of time to drive the company truck back to Five
            Star’s headquarters (to return the truck) varied depending
            on the location of the jobsite. The average drive time was
            30 minutes.
          • Cobian either instructed employees not to record time be-
            fore 7 am and after 3:30 pm or told them that, if they did

          15
               328 U.S. at 687.

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             record the time, Five Star wouldn’t compensate them for
             it.
   DOL acknowledges that employees performed work at different jobsites but
   argues that all employees “typically started and ended their workday at Five
   Star’s premises and witnessed one another performing uncompensated
   work.”
          Five Star offers three main arguments to undermine or negate these
   inferences. None is persuasive.
          First, Five Star argues that the former employees’ testimony was
   unreliable. Five Star points to inconsistent statements regarding whether
   Cobian (or anyone at the company) actually told employees they couldn’t
   record, or wouldn’t receive compensation for, time before 7 am and after 3:30
   pm. For example, one former employee testified that no one instructed him
   to write down his time before 7 am, although he never asked about it. Another
   stated that he just thought he would only be paid from 7 am to 3:30 pm.
   Others claimed that Cobian specifically told them that they would only be
   paid for eight hours per day. Despite these slight variations, all of this
   testimony supports the inference that the employees believed they could not,
   or should not, record their pre- and post-shift time, and that the company
   failed to compensate for this time.
          Relatedly, Five Star argues that the employee testimony varied when
   it came to what loading work employees did before 7 am. Five Star notes that
   it has two types of crews—underground and overhead. For the underground
   crews, a third party delivers most materials directly to the jobsite. On the
   other hand, the overhead crews have to load their own materials for each
   workday before heading to the jobsite. But as DOL points out, most
   employees work on overhead crews, and those who worked on underground
   crews still had to load some materials for most of their jobsites.

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           Second, Five Star contends that the testifying employees lacked
   “personal knowledge” of the work performed by those who didn’t testify. 16
   Five Star claims that because some crew members worked out of town or
   performed different activities during the day, the testifying employees
   couldn’t know what the non-testifying employees were doing. But the
   employees who testified stated that they personally saw other employees
   completing similar pre- and post-shift work.
           Finally, Five Star offers a string of arguments concerning its general
   efforts to correct timesheet errors and its openness to addressing employee
   concerns. 17 But these general efforts do not undermine the specific testimony
   that employees worked, per company instruction, before and after their
   recorded hours.
           Our decision in Brennan v. General Motors Acceptance Corporation
   confirms the district court’s liability determination. 18 In Brennan, employees
   had three different job titles, all of which involved collecting on overdue
   accounts and repossessing vehicles. 19 The employees had long, irregular
   hours so the employer depended on the employees to report their own time
   on company timesheets. 20 Even though upper management encouraged
   employees to record their overtime accurately, the employees’ immediate

           16
                See Olibas v. Barclay, 838 F.3d 442, 450 (5th Cir. 2016).
           17
               To the extent Five Star argues that it was improper to award liquidated damages
   because these facts demonstrate good will, the argument fails. “Even if [Five Star] acted in
   good faith based upon a reasonable belief that it did not violate the FLSA, the district court
   still had discretion to award liquidated damages.” Bernard v. IBP, Inc. of Nebraska, 154 F.3d
   259, 267 (5th Cir. 1998).
           18
                482 F.2d 825 (5th Cir. 1973).
           19
                Id. at 827.
           20
                See id.

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   supervisor pressured them not to report overtime hours. 21 Fifteen of the
   company’s twenty-six employees testified, and the district court found that
   the company violated the FLSA as to all twenty-six employees. 22 The
   company argued on appeal that it was unaware that employees were not
   recording overtime hours. 23 We rejected that argument, holding that the
   record showed that the supervisor had actual knowledge or, at a minimum,
   constructive knowledge that the employees were working, but not reporting,
   overtime hours. 24 We further stated that “[t]he company cannot disclaim
   knowledge when certain segments of its management squelched truthful
   responses.” 25 Thus, based on the representative testimony of a de facto
   policy of underreporting time, we affirmed the district court’s finding that
   the employer violated the FLSA’s overtime requirements. 26
         So too here. All testifying employees stated that their lead supervisor,
   Cobian, either said or implied that they shouldn’t record pre- and post-shift
   time. So even though Five Star’s manual instructed employees to record all
   of their time, the record shows that the de facto policy was that they
   shouldn’t. Although the sample size here was arguably small (6 of 53
   employees—11% of the relevant employees), Five Star points to no authority
   saying 11% is insufficient for extrapolation purposes. And more importantly,
   Five Star failed to negate the inferences raised by the 11% of employees who

         21
              Id.
         22
              Id.
         23
              Id.
         24
              Id. at 827–28.
         25
              Id. at 828.
         26
              Id. at 829.

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   testified. We find no error in the magistrate judge’s holding that Five Star is
   liable for unpaid overtime for all 53 construction employees.
                                             B
          Five Star also disputes the district court’s damages award of
   $121,687.37 in back wages. All of Five Star’s arguments concern the
   variations in the employees’ schedules and alleged overgeneralizations by
   Alba, the DOL investigator.
          This is how Alba arrived at the number the district court adopted:
   Alba made initial calculations based on employee interviews, as Five Star
   didn’t provide her with any time sheets until almost two years into the
   investigation. Once she had the timesheets, Alba reviewed all of them for the
   two-year investigative period. 27
          Because the time records were incomplete, Alba relied on her
   employee interviews and the testimony at trial to calculate the amount of
   unpaid time employees worked. During regular day shifts, employees had to
   arrive sometime between 6:30 am and 6:45 am to get ready for the day’s work.
   Alba took a “conservative approach” and estimated that, on average, all
   construction employees worked for 15 uncompensated minutes before their
   shifts officially started. For post-shift work, which only applied to foremen
   who had to drive the company truck back to Five Star at 3:30 pm, Alba
   calculated an average of 30 minutes per day. Alba explained that this was also
   a conservative estimate because some employees told her that the post-shift
   drive time could take up to an hour. So in total, she added 15 minutes a day
   for laborers and 45 minutes a day for foremen.

          27
           Five Star provided no timesheets for two of the weeks in that period—a week in
   September 2013 and the week of Christmas that same year.

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          Alba added these averages to each employee’s weekly timesheets.
   Following the FLSA’s overtime requirement, Alba calculated damages for
   the weeks when employees exceeded 40 hours before or after she added the
   average pre- and post-shift time. 28 Alba didn’t calculate damages for four
   weeks of the year to account for vacations and holidays.
          Alba made other adjustments. If the timesheets showed that an
   employee worked only at the ranch or the shop for the day, Alba did not add
   uncompensated time since there would be no pre-7 am loading or post-3:30
   pm driving. But when the timesheets showed that the employee worked at
   the ranch or shop for only part of the day, Alba added the pre- and post-shift
   averages because it was impossible to tell from the timesheets whether the
   employee started or ended the day at the ranch, the shop, or the jobsite.
          Overall, Alba’s final calculations were higher than what she initially
   estimated, but she presented the lesser amount in an effort to settle the case.
   After excluding four employees who were owed less than $20 for the entire
   timeframe, Alba offered the amount that the district court adopted:
   $120,417.62.
          Five Star contends that these calculations failed to account for
   variations in the employees’ schedules. For example, Five Star states that
   when employees were working the night shift, at the ranch, or in the shop,
   they wouldn’t have the pre-work loading time and post-work driving time.
   The employees that testified at trial said they spent anywhere from 2.5% to
   30% of their time on the night shift. Five Star also argues that Alba didn’t
   account for all of the employees’ vacation time, as crews had at least one full

          28
               See 29 U.S.C. § 207.

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   day off for six different weeks in the year, which doesn’t include days off for
   personal reasons.
          To substantiate these schedule variations, Five Star provided the
   district court with a summary chart showing, among other things, which
   employees worked night shifts, out of town, or at the shop or ranch. Mr.
   Palacios created the chart based off his memory of different work projects.
   The district court found this chart unreliable because “Five Star’s
   timesheets simply do not allow for the retrospective analysis its president
   proffers.” We agree.
          In short, Five Star mainly contests that the damages award was an
   approximated number. But that’s what Mt. Clemens allows when, as here,
   FLSA-required time records are incomplete.
                                        IV
          Five Star fails to show that the district court committed any error
   concerning its finding of FLSA liability or calculation of damages. We thus
   AFFIRM.

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