Court Opinion

ID: 3019213
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:20:33.783088+00
Date Added: 2024-06-11T11:47:15.000360
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT

                                 ____________

                                  No. 96-2011
                                 ____________

Robert B. Reich, Secretary of          *
Labor, U.S. Department of              *
Labor,                                 *
                                       *
                    Appellee,          *
                                       * Appeal from the United States
      v.                               * District Court for the
                                       * District of Nebraska
Thomas J. Stewart, doing               *
business as Stewart Trucking           *
& Pallet,                              *
                                       *
                    Appellant.         *
                                 ____________

                     Submitted: December 12, 1996

                          Filed: August 8, 1997
                                 ____________

Before McMILLIAN and MAGILL, Circuit Judges, and WEBBER,* District
      Judge.
                        ____________

McMILLIAN, Circuit Judge.

      *The Honorable E. Richard Webber, United States District Judge
      for the Eastern District of Missouri, sitting by designation.
        Thomas J. Stewart appeals from a final judgment entered in the United States
District Court1 for the District of Nebraska in favor of the Secretary of Labor
(Secretary) in the amount of $13,506.50 in this action filed by the Secretary pursuant
to the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201-219 (1994) (FLSA). Reich
v. Stewart, No. 4:CV94-3307 (D. Neb. Mar. 7, 1996) (Judgment). For reversal,
Stewart argues that the district court erred in holding (1) his employees were engaged
in commerce or the production of goods for commerce; (2) he was not exempt from the
FLSA pursuant to 29 U.S.C. § 203(s)(1); and (3) his employees were entitled to
overtime pay. Stewart also argues that the district court lacked personal jurisdiction
over a represented employee. For the reasons discussed below, we affirm the order of
the district court.

                                   I. Background

       The following facts are taken primarily from the district court order. Between
September 1, 1991, and August 31, 1993, Stewart owned and operated a sole
proprietorship in Lincoln, Nebraska, called Stewart Trucking and Pallet (ST&P). Part
of ST&P's business consisted of "recycling," or repairing, broken shipping pallets for
resale to other local businesses. Among ST&P's local customers were Cook Family
Foods (Cook), Millard Refrigerated Warehouse (Millard), Gooch Milling, Nash-Finch,
Sunkist Meat, Lenco, American Signature, Seward Motor Freight, and Lincoln
Cartridge. Stewart regularly made truck deliveries of pallets to these businesses in
Lincoln, Nebraska. Cook purchased between 374 and 935 pallets per week from
ST&P for shipping boxes of processed hams to other states and Canada, with ninety-
seven percent of the shipments going outside of Nebraska. At that time, Cook's annual

    1
    The Honorable David L. Piester, United States Magistrate Judge for the District
of Nebraska. The parties consented to have this action proceed before a United States
Magistrate Judge pursuant to 28 U.S.C. § 636(c).

                                         -2-
gross volume of sales was $200,000,000. Millard also used ST&P's pallets to ship
meat to its other plants, one of which was located in Alabama.

        The pallets were repaired by "pallet builders," and each builder repaired the
pallets which were stocked on his or her work table when he or she arrived each
morning. The builders were paid on a piece-rate basis at fifty cents for each of the first
100 pallets repaired each day and sixty cents for each pallet repaired thereafter. The
number of pallets repaired per day by each builder varied depending on the skill and
experience of the builder and the condition of the pallets. Each builder recorded on a
slip of paper the number of pallets repaired each day, and, at 3:00 p.m. each weekday,
each builder submitted the slip of paper to Stewart's daughter, Jennifer Scurto, who
helped run ST&P. After checking the accuracy of each builder’s daily pallet count,
Scurto totaled the number of pallets repaired by each builder on a master sheet and paid
the builders every Friday in accordance with that total. Scurto also kept track of the
pallet builders’ tardiness and absenteeism. However, no records were kept of each
builder's daily or weekly hours.

       Between January and March 1992, Joseph Petty worked for ST&P as a part-
time general laborer and was paid by the hour. In March 1992, Petty became a full-
time pallet builder for ST&P and was paid primarily on a piece-rate basis.
Approximately thirty days after Petty became a full-time pallet builder, Stewart gave
Petty keys to ST&P, which Petty used to open ST&P around 5:00 a.m. each weekday
and to gain access on weekends. Stewart was aware that Petty worked weekends
because, occasionally, he explicitly authorized Petty to work on a particular weekend.
However, on several weekends, Stewart saw Petty at the shop and instructed him to go
home. On Monday mornings, Stewart would find the pallets that Petty had repaired
during the weekend, and he always compensated Petty for that work.

       Petty served as supervisor of the other pallet builders from October 1992 until
April 1993. This period was considered the “busy season,” which Petty testified

                                           -3-
coincided with the winter months. Petty’s work hours depended upon the seasonal
demands of ST&P. According to the United States Department of Labor’s pre-trial
investigation report (DOL’s report) and Petty’s trial testimony, he worked between
fifty-five and seventy-two hours per week. Petty was paid piece-rate for all but fifty
of his total hours during the non-peak season, during which he purportedly worked an
average of fifty-five hours per week, and for all but 167.25 of his total hours during the
peak season, during which he purportedly averaged seventy-two hours of work per
week. Petty did not receive overtime, or premium, pay for his workweeks which
exceeded forty hours.

       Scott Hoss worked as a pallet builder for ST&P for sixteen weeks during the fall
of 1992. Based upon the DOL’s report and the testimony adduced at trial, Hoss’s
average workweek consisted of forty to forty-five hours and occasional Saturday work.
During those sixteen weeks, Hoss worked twenty-five hours of overtime, for which he
did not receive premium pay.

       As of approximately January 1995, Stewart began paying ST&P’s pallet
builders an hourly wage and limited their hours to forty per week. The builders began
punching a time clock, and, as of April 1995, Scurto began entering the builders'
compiled time sheets into a computer. Petty was fired on January 21, 1995, for being
intoxicated on the job. Petty became intoxicated on the job approximately once every
three months, but, on January 21, 1995, he was particularly disruptive because of the
change in the pay system for pallet builders.

       The Secretary filed this action pursuant to the FLSA, alleging that Stewart
violated the FLSA's recordkeeping, minimum wage, and overtime provisions during the
period between September 1, 1991, and August 31, 1993. The Secretary filed this
action on behalf of four ST&P employees, Petty, Hoss, Matthew Worrell, and Jimmy
Uglow, and sought prospective injunctive relief barring future violations as well as back
wages and liquidated damages.

                                           -4-
        This case was tried without a jury on August 16-17, 1995. The district court
found that Stewart owed Petty $6,681.00 in overtime compensation and $6,681.00 in
liquidated damages. Reich v. Stewart, No. 4:CV94-3307, 1996 WL 325891 (D. Neb.
Mar. 7, 1996) (Memorandum of Decision) (slip op. at 22, 28-29). It further found that
Stewart owed Hoss $72.25 in overtime compensation and $72.25 in liquidated
damages. Id. at 24, 28-29. The district court denied relief for Worrell and Uglow
because it found that their pay exceeded the minimum wage and that they did not work
overtime. Id. at 17-18, 23. While the district court found that Stewart violated the
recordkeeping provision of the FLSA, 29 U.S.C. § 211(c), see id. at 29, it denied the
Secretary's request for prospective injunctive relief because ST&P currently appears
to be in compliance with the FLSA and there is no indication that future violations will
occur, id. at 15. Stewart appealed.2

                                   II. Discussion

       Under the FLSA, “it shall be unlawful for any person” to violate the minimum
wage, overtime, and recordkeeping provisions of that statute. 29 U.S.C.
§ 215(a)(2),(5). Employees who are “engaged in the production of goods for
commerce” are entitled to overtime compensation for working more than forty hours
in a week. See id. § 207(a). The ultimate question of whether an employee falls within
the FLSA’s protection is a question of law to be reviewed de novo. See Spinden v. GS
Roofing Prods. Co., 94 F.3d 421, 426 (8th Cir. 1996) (citing Icicle Seafoods, Inc. v.
Worthington, 475 U.S. 709, 714 (1986)), cert. denied, 117 S. Ct. 1254 (1997).
However, the amount of time an employee works and the duties he or she performs
present factual questions to be reviewed for clear error. See Fed. R. Civ. P. 52(a); see
also Spinden v. GS Roofing Prods. Co., 94 F.3d at 426.

     2
      Because the Secretary did not the appeal the district court’s order, the facts
pertaining to Worrell and Uglow are irrelevant to this appeal.

                                          -5-
A. Engaged in Commerce or the Production of Goods for Commerce

        Stewart argues that the Secretary failed to prove by “definite and certain
evidence” that ST&P was involved in commerce or the production of goods for
commerce. Brief for Appellant at 7, citing Johnson v. Blankenship, 152 F.2d 99 (8th
Cir. 1945) (requiring that the plaintiff establish by a preponderance of the evidence the
number of hours worked and the amount of wages due). Stewart maintains that
ST&P’s employees are exempt from the FLSA because they are involved in purely
local activities; specifically, ST&P's pallets were repaired in Lincoln, Nebraska, with
materials purchased in Lincoln, and were returned to businesses in Lincoln. Id. at 7-8,
citing Mitchell v. C.W. Vollmer & Co., 349 U.S. 427, 429 (1955) (the test to determine
whether an employee is engaged “in commerce” within the meaning of the FLSA is
“whether the work is so directly and vitally related to the functioning of an
instrumentality or facility of interstate commerce as to be, in practical effect, a part of
it, rather than isolated, local activity”), and Wirtz v. McDaniel, 325 F.2d 78, 82 (8th
Cir. 1963) (same). Stewart contends that the Secretary presented no evidence that the
pallets actually left Lincoln, Nebraska, and, therefore, the district court clearly erred
in assuming that to be true. Stewart claims that the evidence was neither sufficiently
definite nor certain to prove that ST&P was involved in commerce or the production
of goods for commerce.

        We disagree. The district court’s factual finding that, “during the time in
question, at least some of the pallets from ST&P were injected into the stream of
interstate commerce,” slip op. at 13, is not clearly erroneous. Stewart testified in his
pre-trial deposition that he was aware or had reason to know that pallets sold to his
customers were likely used for shipments outside of Nebraska. See App. for Appellee
at 14-15, 18-21. The evidence adduced at trial showed that, during the relevant period,
Cook purchased between 374 and 935 pallets per week from ST&P for shipping its
processed hams, see Tr. 22:6-23:3, and ninety-seven percent of those shipments went
outside of Nebraska, see Tr. 141:12-18.

                                           -6-
       Furthermore, the district court did not err in concluding that Petty and Hoss were
"engaged in the production of goods for commerce" within the meaning of the FLSA.
“Commerce" is defined under the FLSA as "trade, commerce, transportation,
transmission, or communication among the several States or between any State and any
place outside thereof." 29 U.S.C. § 203(b).

        [E]mployees are engaged in the production of goods "for"
        commerce when they are manufacturing, handling, working on, or
        otherwise engaging in the production of boxes, barrels, bagging,
        crates, bottles, or other containers, wrapping or packing material
        which their employer has reason to believe will be used to hold
        the goods of other producers which will be sent out of the State in
        such containers or wrappings. It makes no difference that such
        other producers are located in the same State and that the
        containers are sold and delivered to them there.

29 C.F.R. § 776.21(d) (1997). Because Stewart knew that the pallets rebuilt by Petty
and Hoss would likely carry Cook’s and other customers’ goods in interstate
commerce, see App. for Appellee at 14-15, 18-21, Petty and Hoss were engaged in the
production of goods for commerce.

B. Exemption under 29 U.S.C. § 203(s)(1)

      Stewart argues that ST&P is exempt from the FLSA pursuant to 29 U.S.C.
§ 203(s)(1)3 because, as the parties stipulated at trial, ST&P's gross receipts did not

    3
     29 U.S.C. § 203(s)(1) provides, in pertinent part,

"Enterprise engaged in commerce or in the production of goods for commerce” means
an enterprise that--

  (A)(i) has employees engaged in commerce or in the production of goods for

                                           -7-
exceed $500,000 during the relevant period. See Tr. 18:20-19:3. Stewart contends
that, by including a statutory dollar limitation in the definition of “enterprise,” Congress
intended to exempt small businesses from the FLSA. Brief for Appellant at 9, citing
Brennan v. Arnheim & Neely, Inc., 410 U.S. 512, 521 (1973) (one purpose of the
dollar-volume limitation is the exemption of small businesses). Thus, claims Stewart,
even if ST&P engaged in the production of goods for commerce, the FLSA does not
apply because ST&P's gross revenue was less than the statutory limit.

       We disagree. The district court did not err in holding that ST&P is not exempt
from the FLSA even though its annual dollar volume was less than $500,000 during the
relevant period. Stewart misinterprets § 203(s)(1) when he claims that the exemption
applies to any enterprise with gross receipts of less than $500,000. Rather, § 203(s)(1)
was enacted in 1961 to provide an alternative basis by which the FLSA governs certain
enterprises, rather than activities of certain employees. The Secretary's complaint is
based upon the activities of ST&P's employees under the individual coverage provision,
§ 207(a)(1), not the enterprise provision, § 203(s)(1). Therefore, ST&P's annual dollar
volume is irrelevant.

      Under the 1938 FLSA, monetary benefits extended only to employees engaged
in commerce or in the production of goods for commerce. Pub. L. 75-718, ch. 676, § 7,
52 Stat. 1063; see 29 U.S.C. § 207(a)(1). In 1961, Congress broadened the FLSA's
coverage4 to include “those employed in an enterprise engaged in commerce” in

commerce, or that has employees handling, selling, or otherwise working on goods
or materials that have been moved in or produced for commerce by any person; and
 (ii) is an enterprise whose annual gross volume of sales made or business done is not
less than $500,000 (exclusive of excise taxes at the retail level that are separately
stated).
   4
    Fair Labor Standards Amendments of 1961, Pub. L. No. 87-30, §§ 2, 6(a), 75 Stat.
65, 69.

                                            -8-
addition to the original coverage for “employees who [are] themselves engaged in
commerce or in the production of goods for commerce.” Brennan v. Arnheim & Neely,
Inc., 410 U.S. at 517; see Brennan v. Plaza Shoe Store, Inc., 522 F.2d 843, 846 (8th
Cir. 1975). Congress intended to extend the FLSA’s coverage “without departing from
the act’s [original] basis of coverage: engagement in ‘commerce’ or in the ‘production
of goods for commerce,’” and if the employer's annual dollar volume is insufficient to
trigger enterprise coverage, "[e]mployees individually engaged in such activities . . .
[will] continue to enjoy the act's benefits." S. Rep. No. 145, 87th Cong., 1st Sess.
(1961), reprinted in 1961 U.S.C.C.A.N. 1620, 1644. In fact, Stewart's contention that
the FLSA does not reach an employer with an annual dollar volume of less than
$500,000 was refuted by Congress’s recent rejection of a subsection of a proposed
amendment which would have repealed the individual coverage basis and limited
coverage to individuals employed by an enterprise as defined by § 203(s)(1). See 142
Cong. Rec. H5533-43 (daily ed. May 23, 1996) (reporting ayes 196, noes 229, not
voting 8).

C. Overtime Compensation

        Stewart argues that the district court applied improper computations in awarding
overtime compensation. Stewart claims that the Secretary's computations regarding
hours worked by Petty and Hoss were inaccurate because the Secretary concluded that
each builder made sixteen pallets per hour, equaling eight dollars per hour (fifty-cent
piece-rate), and divided each builder's weekly earnings by eight dollars to determine
the hours worked per week. Stewart contends that Petty and Hoss built more than
sixteen pallets per hour. Stewart also claims that Petty was paid an hourly rate as a
part-time employee until April 19, 1992, rather than mid-March 1992, and the
Secretary, failing to take that into account, calculated at piece-rate Petty’s hours from
mid-March and consequently overestimated Petty’s hours. Stewart contends that Petty
took breaks and often either missed work or was unproductive while at work because
of his alcohol consumption. Stewart claims that he paid Petty well, as evidenced by

                                          -9-
Petty's testimony that he was paid for his work and that he was happy with that pay and
was not seeking overtime compensation. See Tr. 54:21-55:23.

        The district court’s factual findings underlying its computations, including its
conclusion that Stewart had knowledge that Petty worked overtime, are not clearly
erroneous. The district court properly based its award of back wages to Petty on
credible testimony and documentary evidence due to Stewart’s violation of the FLSA
in failing to keep records of ST&P’s employees’ hours. Furthermore, Stewart
challenges the calculations set forth by the Secretary at trial, rather than the district
court’s determinations. The district court considered the evidence adduced at trial,
including the DOL’s report and various witnesses’ testimony, to determine the number
of hours each employee worked each week during certain periods. Slip op. at 19-24.
After multiplying the estimated weekly total by the number of weeks in the particular
period, the district court divided the employees’ total earnings during that period by the
total number of hours worked during that period to arrive at an hourly wage, which was
then used to compute the overtime compensation owed to each employee. Id.

       “[W]hen an employer has failed to keep proper records, courts should not
hesitate to award damages based on the ‘just and reasonable inference’ from the
evidence presented.” Martin v. Tony & Susan Alamo Found., 952 F.2d 1050, 1052
(8th Cir.) (citing Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946)),
cert. denied, 505 U.S. 1204 (1992). “For employees paid weekly, absent explicit proof
of a mutual agreement for a rate of pay capable of delineation in hourly terms, the court
must infer that the ‘regular rate’ is substantially that calculated by dividing the total
weekly compensation by the number of hours scheduled in the workweek.”
Mumbower v. Callicott, 526 F.2d 1183, 1187 (8th Cir. 1975) (in absence of statutorily
required time records, court relied upon employee recollections to compute back wages
for employee who "had her own key to the premises and served as her own
supervisor"), citing Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 580 n.16
(1942) (“Wage divided by hours equals regular rate.”). The district court’s approach,

                                          -10-
finding differing weekly hours for employees during peak and non-peak periods, was
meticulous and based upon "the just and reasonable inference[s]" from the evidence
presented. See Martin v. Tony & Susan Alamo Found., 952 F.2d at 1052. Because
Stewart failed to maintain employment records required under § 11(c) of the FLSA, 29
U.S.C. § 211(c), he will not be permitted to benefit from his failure to do so. See
Mumbower v. Callicott, 526 F.2d at 1186. Consequently, Stewart “cannot be heard
to complain that the damages lack the exactness and precision of measurement that
would be possible had [he] kept records in accordance with the [FLSA].” See
Anderson v. Mt. Clemens Pottery Co., 328 U.S. at 688. Moreover, Stewart failed to
show that the district court's determination that Petty missed work for alcohol-related
reasons once every three months was clearly erroneous.

        Stewart also argues that the district court erred in awarding Petty overtime
compensation for unauthorized overtime work. Stewart maintains that to recover for
Petty's unauthorized work, the Secretary must show that such work was necessary and
that the time spent at ST&P was for work. Brief for Appellant at 18.

       We hold that the district court did not err in concluding that overtime need not
be specifically authorized by the employer for the employee to be entitled to premium
pay. The key inquiry is not whether overtime work was authorized, but whether
Stewart was aware that Petty was performing such work.

       The term “work” is not defined in the FLSA, but it is settled that
       duties performed by an employee before and after scheduled
       hours, even if not requested, must be compensated if the employer
       “knows or has reason to believe” the employee is continuing to
       work and the duties are an “integral and indispensable part” of the
       employee’s principal work activity. . . . The employer who
       wishes no such work to be done has a duty to see it is not
       performed. He [or she] cannot accept the benefits without
       including the extra hours in the employee’s weekly total for
       purposes of overtime compensation. If the employer has the

                                         -11-
        power and desire to prevent such work, he [or she] must make
        every effort to do so.

Mumbower v. Callicott, 526 F.2d at 1188 (citations omitted). Even if Stewart had
prohibited Petty's overtime work, which, presumably, he did not do because he paid
Petty for such work, Stewart could not avoid liability under the FLSA because he had
actual and constructive knowledge that Petty worked overtime. See Reich v.
Department of Conservation & Natural Resources, 28 F.3d 1076, 1082 (11th Cir.
1994) (a court need only inquire whether, under the circumstances, the employer either
had knowledge of overtime hours being worked or had the opportunity through
reasonable diligence to acquire knowledge). Despite the fact that Stewart did not order
Petty to work overtime, “[s]uch extra work for the employer’s benefit and with his tacit
approval must be included in determining whether overtime compensation is statutorily
required.” Mumbower v. Callicott, 526 F.2d at 1188. Moreover, the fact that Petty did
not seek overtime pay is irrelevant because Petty cannot waive his entitlement to FLSA
benefits. See id. (the employer’s obligation to pay premium overtime compensation is
statutory and cannot be waived). “A contrary holding would be detrimental to the
[FLSA’s] legislative policy of spreading work to more employees by requiring
employers to pay each individual a premium for excessive hours.” Id., citing Overnight
Motor Transp. Co. v. Missel, 316 U.S. at 577-78.

D. Personal Jurisdiction

       Stewart argues that the district court lacked jurisdiction over Petty because the
record fails to show any written consent by Petty to be included in this lawsuit. Stewart
claims that 29 U.S.C. § 216(b)5 requires written consent by an employee to be included

    5
     29 U.S.C. § 216(b) provides, in pertinent part:

An action . . . may be maintained against any employer (including a public agency)

                                         -12-
in a class action or represented action or both. Stewart maintains that, unlike class
actions governed by Rule 23 of the Federal Rules of Civil Procedure, an employee must
"opt in" an action under the FLSA, rather than "opt out." Brief for Appellant at 20,
citing Bradford v. Peoples Natural Gas Co., 60 F.R.D. 432, 437 (W.D. Pa. 1973)
(FLSA action maintained by one or more employees for and in behalf of himself or
herself or themselves and others similarly situated “differs from the usual class action
in that parties must ‘opt in,’ rather that ‘opt out’ as provided in [Fed. R. Civ. P.
23(c)(2)]”). Because the Secretary failed to obtain Petty's consent to this lawsuit,
claims Stewart, any award of overtime back pay and liquidated damages should be
dismissed.

        Contrary to Stewart’s characterization of this issue as based upon personal
jurisdiction, he is asserting that the Secretary has failed to state a claim because
employee consent is an essential element of the Secretary’s claim. Because Stewart
raises this argument for the first time on appeal, we need not consider the merits of the
argument. See, e.g., Singleton v. Wulff, 428 U.S. 106, 120 (1976) (it is the general rule
that a federal appellate court “does not consider an issue not passed upon below”);
Stafford v. Ford Motor Co., 790 F.2d 702, 706 (8th Cir. 1986) (same); see also Alger
v. Hayes, 452 F.2d 841, 842-43 (8th Cir. 1972) (lack of personal jurisdiction is a
personal defense which may be waived if not timely asserted or properly preserved
thereafter). In any event, a private FLSA action brought by one or more employees
pursuant to § 216(b), which requires written consent, is distinguishable from this case

in any Federal or State court of competent jurisdiction by any one or more employees
for and in behalf of himself [or herself] or themselves and other employees similarly
situated. No employee shall be a party plaintiff to any such action unless he [or she]
gives his [or her] consent in writing to become such a party and such consent is filed
in the court in which such action is brought.

                                         -13-
brought by the Secretary in his representative capacity under § 216(c),6 which does not
require employee consent, because the consent requirement was deleted from § 216(c)
by the Fair Labor Standards Amendments of 1974. See Pub. L. 93-259, § 26, 88 Stat.
73.

                                   III. Conclusion

       For the foregoing reasons, we hold that the Secretary, on behalf of Petty and
Hoss, is entitled to recover overtime compensation and liquidated damages under the
FLSA because Petty and Hoss were, during the relevant period, employees engaged in
the production of goods for commerce. Accordingly, we affirm the order of the district
court.

       A true copy.

              Attest:

                        CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

   6
    29 U.S.C. § 216(c) provides, in pertinent part:

The Secretary may bring an action in any court of competent jurisdiction to recover
the amount of unpaid minimum wages or overtime compensation and an equal amount
as liquidated damages. . . . Any sums thus recovered by the Secretary of Labor on
behalf of an employee . . . shall be paid . . . directly to the employee or employees
affected.

                                         -14-