ARB CASE NO. 00-022
ALJ CASE NO. 99-CLA-5
DATE: August 27, 2001
In the Matter of:
ADMINISTRATOR, WAGE & HOUR
DIVISION, U.S. DEPARTMENT OF
LABOR,
PLAINTIFF,
v.
CHRISLIN, INC. D/B/A BIG WALLY'S and
WALTER A. CHRISTENSEN,
RESPONDENTS.
BEFORE: THE ADMINISTRATIVE REVIEW BOARD
Appearances:
For the Complainant:
Claire Brady White, Esq., Linda Jan S. Pack, Esq., Steven J. Mandel, Esq., U.S. Department of Labor, Washington, D.C.
For the Respondent: Evan N. Pickus, Esq., East Brunswick, New Jersey
ORDER DIRECTING SUPPLEMENTAL BRIEFING
Pursuant to 29 U.S.C.A. §216(e) (West 1998), the Administrator of the Wage and Hour Division ("Administrator") assessed $68,012.40 in civil money penalties against Respondents Chrislin, Inc., d/b/a Big Wally's and Walter A. Christensen (collectively "Chrislin") for violation of various child labor provisions of the Fair Labor Standards Act ("FLSA" or "Act"), 29 U.S.C.A. §201 et seq. (West 1998), and the regulations promulgated thereunder. Respondents objected to that assessment and the matter was referred to an Administrative Law Judge ("ALJ") who subsequently reduced the assessment to $56,762.50. Decision and Order (D&O) at n.7. Chrislin petitioned for review. As we discuss below, having reviewed the record and the parties' briefs, we have determined that supplemental briefing regarding the penalty assessment is necessary.
[Page 2]
Before the ALJ, a Department of Labor Wage and Hour Division investigator, John Warner, testified extensively about the penalty assessment process. He noted that the penalty calculus set out on the WH-266 form automatically applies a 150% multiplier to individual penalty amounts for violations that involve aggravating factors such as a serious injury or documentary proof that the employer had knowledge of the child labor laws. Because there were several aggravating factors in this case, including a serious injury and the fact that Chrislin had received documents from some of the minors' schools describing child labor law requirements, the 150% multiplier was applied, resulting in a total penalty amount of $66,000.
Warner testified that the 200% multiplier set out in WH-266 was not applied because Chrislin had no prior violations, had not falsified records, and in the investigator's judgment, was not likely to violate the child labor laws in the future. The fact that Chrislin was not likely to commit future violations also meant that the agency did not need to go to federal district court to secure a permanent injunction. Cf. Martin v. Funtime, Inc., 963 F.2d 110 (6th Cir. 1992) (The Administrator is justified in seeking a permanent injunction against a violator when evidence indicates a likelihood of future noncompliance).
Warner also testified that he thought the $66,000 penalty was likely to push Chrislin into bankruptcy and that it was the informal practice of his area office to reduce penalties when employers showed financial inability to pay the full amount. However, Warner decided the full penalty should be assessed because Chrislin was contending that it should not have to pay any penalty amount and because Warner considered the purpose of penalties to be not just deterrence, but also punishment:
The purpose [of child labor penalties] is to insure future compliance but it's also punitive, to punish people who have substantial violations and as I mentioned before there's nothing that says[,] our normal procedures has [sic] often been to take into account, you know the effect that this might have and to possibly work towards an accommodation for an administrative resolution [i]f the company said that's what they're interested in and at no time did your client ever express to my office that they would pay some fine. Your [Chrislin's attorney] statement this morning that some fine might be appropriate was never made to my office.
1 At the Board's request, errors in the transcript were corrected by the stenographic service. References are to the corrected transcript.
2 The ALJ reduced the assessment from $70,762.50 to $56,762.50 because he found that one of the cited violations had not been proved. D&O at 6.
3 We note that in promulgating the child labor civil money penalty regulations, the Administrator did not discuss whether or why calculations are subject to, and if so comply with, §202(b) of the Act. 40 Fed. Reg. 25792 (1975), as amended at 56 Fed. Reg. 8679 (1991).
4 The Administrator also argues that Chrislin put on no evidence whatsoever to support its bankruptcy claim. Administrator's Statement at 24. However, the employer did testify that Chrislin's profit margin was so small he would be unable to pay the fine. Whether the employer's testimony, apparently corroborated by the investigator, was sufficient to support a finding of fact to this effect is a question that must be reserved for consideration until the legal question whether financial viability is a material factor in penalty calculations is resolved.