The ALJ found that a 15-year old minor (Dickey) only cleaned "already disassembled/harmless parts of the slicer… " and thus did not engage in the activity of cleaning the slicing machine. D. and O. at 5. Accordingly, the ALJ reduced the total penalty total to $56,762.50. D. and O. at 6 and n. 7.

   Chrislin has raised the following issues on appeal: (1) whether "bundling" the noninjured workers is proper; (2) whether the evidence in the record was adequately considered; and (3) whether the statutory and regulatory requirements for consideration of gravity of the violations and size of business were appropriately considered in the penalty determination.

   The Secretary's Order No. 1-2002, 67 Fed. Reg. 64272 (Oct. 17, 2002), § 4.c(13), delegates to the Administrative Review Board authority and responsibility to act for the Secretary in civil money penalty cases arising under Section 216(e) of the Fair Labor Standards Act and 29 C.F.R. Part 580. We review the ALJ's decision de novo. 29 U.S.C.A. § 216(e) (West 1998); 5 U.S.C.A. § 544 (West 1996). Administrator, Wage and Hour Division v. Sizzler Family Steakhouse, 90-CLA-35, slip op. at 4. (Sec'y 1995).

The Statute

   The Fair Labor Standards Act prohibits employment of "oppressive child labor." 29 U.S.C.A. § 212(c). The Act defines "oppressive child labor" as

a condition of employment under which . . . (2) any employee between the ages of sixteen and eighteen years is employed by an employer in any occupation which the Secretary of Labor shall find and by order declare to be particularly hazardous for the employment of children between such ages or detrimental to their health or well-being …. The Secretary of Labor shall provide by regulation or by order that the employment of employees between the ages of fourteen and sixteen years in occupations other than manufacturing and mining shall not be deemed to constitute oppressive child labor if and to the extent that the Secretary of Labor determines that such employment is confined to periods which will not interfere with their schooling and to conditions which will not interfere with their health and safety.

29 U.S.C.A. § 203(l). 29 U.S.C.A. § 216(e) provides for civil penalties for

child labor violations:

Any person who violates the provisions of section 212 . . . relating to child labor, or any regulation issued under section 212 . . . shall be subject to a civil penalty of not to exceed $10,000 for each employee who was the subject of such a violation . . . . In determining the amount of any penalty under this subsection, the appropriateness of such penalty to the size of the business of the person charged and the gravity of the violation shall be considered.

The Regulations

   The regulations implementing the child labor provisions of the FLSA are contained in 29 C.F.R. Part 570. Specifically the regulations relating to assessment of penalties for child labor violations are contained in 29 C.F.R. § 579.

The propriety of "bundling"

   Legality of "bundling" - We reject Chrislin's argument that "bundling" of similar violations is not authorized by either the statute, the regulations or case law. The Secretary has the discretion under the FLSA to impose penalties up to $10,000 for "each employee who was the subject of . . . a violation." The process of "bundling" or treating all similar violations alike and enhancing the penalty where a number of underage employees have been exposed to the same hazard, is consistent with the statute and regulations. See 29 C.F.R. § 579.5(c) ("In determining the amount of the penalty there shall be considered the appropriateness of such penalty to the gravity of the violation or violations, taking into account . . . the occupations in which the minors were . . . employed [and] exposure of such minors to hazards . . ."). Where minors are exposed to the same hazard and one minor is injured, it is reasonable to recognize that the injury could also have occurred to any of the other minors so exposed. Moreover, the bundling process is employed at the initial phase of assessing the penalty during the completion of the WH-266 form. The penalty amount assessed through use of the form is subject to review by WHD officials and may be adjusted.

The penalty assessment may be reviewed further by an ALJ and this Board. We note that the amount determined as a consequence of bundling represents only an initial indication of what the penalty should be, and is subject to the appropriate refinement. We therefore conclude that bundling is a reasonable process to employ in the initial phase of penalty development, and is consistent with the statute and pertinent regulations.

Bundling and Chrislin's Intent - Chrislin argues that WHD improperly bundled violations because not all of the minors were similarly employed. According to Christensen's testimony only two employees (Cutrona and Martinez) were hired with the intent to permit them to use the slicer; he intended none of the others to slice. Respondent's Initial Brief 5-6. However, Chrislin's intent is irrelevant as to whether a violation of the law occurred. The statute prohibits the "employment of oppressive child labor," and Chrislin indisputably "employed" minors in such work, that is, Chrislin "permitted" See 29 U.S.C.A. § 203(g), definition of employ the minors to work in prohibited occupations.

   Exposure to Similar Hazards – Chrislin argues that Andrew Sobel was not exposed to the same level of hazard as the other minors that were "bundled" in the hazardous occupation violations. Sobel did not use the slicer but did clean the slicer, with a brush. The probability of suffering a serious injury was therefore minimal. We agree. Sobel should not have been bundled with the others. His exposure to the blade was minimal, and the penalty assessed for this part of the violations should be reduced from $9,000 to $1,800 (hazardous operation violation with little likelihood of serious injury).

Reliability of employees' testimony

   Chrislin contends that the ALJ relied upon unreliable evidence in that oral testimony contradicted some statements in employees' interview sheets and one of the interview sheets was unsigned. Our review of the record leads us to conclude that the ALJ properly weighed the testimony of employee witnesses against their written statements taken by the investigator. We find specific support in the hearing record that these minors used/dissembled/cleaned the slicer. D. and O. at 9. We agree with the ALJ that "[t]he inconsistencies [between oral testimony and written statements] do not materially negatively affect the weight and credibility" of the testimony." Id. The ALJ acted within his discretion in admitting the unsigned interview statement of one of the underage employees, which was corroborated by employee testimony. T. 254-55; 295; D. and O. at 6 n.8; 29 C.F.R. § 580.7(b).

   Chrislin also objected to some of the ALJ's findings because they were based in part on the testimony of two former employees whom Chrislin alleges were motivated by animus against Respondents. The ALJ, however, had the discretion to assess the credibility of their testimony in the context of the record as a whole, as he explicitly found, D. and O. at 9-10, and review of the record does not demonstrate that he abused that discretion. It is an "established legal principle that the fact finder's credibility determinations are to be given great deference, particularly where the trier of fact has had the opportunity to observe variations in demeanor and tone of voice." Administrator, Wage and Hour Division v. Q. & D. d/b/a/ Lamplighter Tavern, No. 92-CLA-21, slip op. at 3-4, (Sec'y May 11, 1994); Administrator, Wage and Hour Division v. Merle Elderkin d/b/a Elderkin Farm, ARB Nos. 99-033, 048, slip op. at 11 (ARB June 30, 2000).

Evidence of willfulness

   We find that the ALJ properly weighed the evidence on the willfulness of the violations. 29 C.F.R. § 579.5(c). It is undisputed that copies of the child labor bulletin 101 were attached to the working papers sent by Sayreville High School to Chrislin relating to the employment of its students. In addition, although Christensen contended that he thought Cutrona and Martinez were participating in a state-sponsored internship program which would allow them to operate the slicer, he admitted that he had no documentation to that effect. T. 428-29. Although there were some conflicts in the testimony, the ALJ had a solid basis to discredit Christensen's explanation that he was not at the Parlin Shop store often and that he relied on his managers without knowing that they permitted underage workers to perform a prohibited occupation. Beginning in May 1996, when one of his managers left, Christensen spent most of his time at the Parlin store, and there was no dispute that he was at the store when Cutrona was injured and when she returned to work and resumed using the slicer. D. and O. at 8; T. 219. In addition, there were a number of occasions when all the employees working in the Parlin were under 18, meaning at least one of them used or cleaned the slicer after the store closed. T. 255. The record therefore supports the ALJ's findings of "indifference to, and knowing disregard of, legal responsibilities under the Act, " and "heedless exposure of minors to an obvious hazard, and the continued and persistent occurrence of not inadvertent violations." D. and O. at 8-9.

Consideration of regulatory factors

   The child labor provisions of the FLSA and the implementing DOL regulations are clear that in assessing penalties for child labor violations the WHD "shall take into consideration the size of the business and the gravity of the violation." 29 U.S.C.A. § 216 (e); 29 C.F.R. § 579.5 (a) (emphasis added.) The implementing regulations further state that in considering the size of the business the following factors shall be taken into account: number of employees, dollar volume of sales or business done, amount of capital investment and financial resources and such other information that may be available relative to the size of the business. 29 C.F.R. § 579.5 (b).

   The regulation also requires the WHD to consider information related to gravity including history of past violations, any evidence of willfulness or failure to take reasonable precautions, the number of minors, the age of the minors, records of required proof of age, the occupations in which the minors were employed, the exposure of the minors to hazards, resultant injuries, the duration of the illegal employment, and, as appropriate, the hours when it occurred. 29 C.F.R. § 579.5(c). The regulations also require, where appropriate, that credible assurance of future compliance and certain other matters be determined. 29 C.F.R. § 579.6 (d). Chrislin argues that the ALJ failed to consider any of the factors in 29 C.F.R. § 579.5.

Gravity considerations

   The ALJ found that the WHD considered gravity and related information including: willfulness, indifference to and heedless exposure, and serious injuries. D. and O. at 8. The ALJ notes and we agree that Chrislin was aware of the child labor requirements. D. and O. at 7. Christensen permitted Cutrona to return to work on the meat slicer after suffering her serious injury, and many of the hazardous occupation violations occurred when he was at the store. D. and O. at 8-9.

    Chrislin challenges the ALJ's finding that Cutron's injury was "serious." The record supports the ALJ's conclusion. The ALJ states that the record is clear – that the cut required nine stitches and that Cutrona still experiences numbness in the thumb. D. and O. at 8, n.14. Although the payroll records and the work schedule establish that Cutrona was off work for less than five days (contrary to Cutrona's testimony that she was off work for longer and that the work schedule was not always accurate), Cutrona's testimony that she continued to experience numbness along the laceration as of the time of the hearing (more than two years after the injury) indicates that there was permanent damage.

    WHD Form 266 defines serious injury as one causing permanent damage or five days or more off work. There is support in the record for the WHD's and the ALJ's determination that the injury is serious. We affirm this determination.

    We find the injury to Cutrona's thumb was borderline and thus was on the lower end of the scale. In Elderkin slip op. at 1, 2000 WL 960261, *1, for example, a minor suffered the loss of his arm, a life threatening and life altering injury. A cut on the finger and life threatening and life altering loss of an arm are not even close to similar in severity. We conclude that the penalty should have been above $1200 but far less than the $8500 assessed. We assess a penalty of $3000 multiplied by the 1.5 gravity factor for a total penalty of $4500 for the hazardous occupation violation resulting in a serious injury to a minor.

    For the same reason we also adjust the penalty assessed those minors exposed to the same hazard. We reduce each of their penalties to $2,500 multiplied by a gravity factor of 1.5 for a total penalty of $3750 each. The total for these individuals is $15,400.

Small Business Reduction

    The child labor provisions of the FLSA and implementing regulations require the WHD to consider the size of the business in assessing penalties for violations of the Act. The evidence establishes that the "Big Wally's" sandwich shops constituted a small business. During the early timeframe of the WHD investigation, in late 1996 and early 1997 Chrislin owned two sandwich shops (in Parlin and Matawan, New Jersey) with a gross income in 1996 of about $550,000. Exhibit P-3. Chrislin sold the Matawan store in February, 1997 and at the time of the investigation in August 1997, Chrislin owned only one store, in Parlin, New Jersey Chrislin, Inc. reported a gross income of under $300,000 in 1997. Exhibit D-9. Big Wally's had 16 employees at the beginning of 1997 but at the time of the investigation had 7 employees. Exhibit P-2. WHD Form 266 defines a small business as a business with gross revenues under $800,000 and less than 100 employees. According to WHD's own definition Chrislin, Inc. is a very small business.

   WHD initially contended that no reduction in the penalty for size of business was necessary because the Form WH-266 instructions make no adjustment for business size when a serious injury occurs. It cited the ALJ's statement in his D. and O. ("Nothing surrounding the imposition of the subject penalties suggests an objective other than achieving the purpose of the Act, the deterrence of like conduct, and Respondents' alleged inability to pay the fines cannot serve to reduce the penalties in light of the circumstances of this case." D. and O. at 9) as agreeing with this approach. In its Supplemental Brief, WHD contends that the ALJ considered size of business and was correct to make no adjustment in the penalty based on business size because he found Chrislin's violation was willful and there was a serious injury.

   There is little if any evidence that either WHD or the ALJ weighed the small size of Chrislin's business against the gravity of the violations, other than mechanically applying the instructions for completing the WH-266. The only references in the record to consideration of the size of the business are: the directions on the WH-266 form and in the instructions to disregard size of business when there is a serious injury; the ALJ's passing reference to the size of the business where he enumerated all the factors required by statute and regulation to be considered, D. and O. at 7; and the ALJ's unexplained conclusion that "Respondents alleged inability to pay the fines cannot serve to reduce the penalties due in light of the circumstances of this case." Id. at 9. Because the statute mandates that size of the business be considered in determining the penalty, this factor cannot be treated so lightly.

    WHD argues:

The Thirsty's holding is that the use of a standardized method of penalty assessment, utilizing a penalty "grid' system combined with a review within the assessing agency and by the ALJ is in accordance with the statute and regulations which set the standards for child labor penalties. The instant case, without doubt, is controlled by Thirsty's in the same context of child labor penalties.

Thirsty's establishes that the Form WH-266 is an "appropriate tool" to be used by the investigator to calculate a recommended assessment, in that the Form comports with the intent of the FLSA and the applicable regulations. The Board held that "although the [WH-266] penalty schedule did not reference each criterion of the regulatory guidelines, nevertheless it is a reasonable interpretation of those guidelines and within the broad authority granted as an agency charged with implementing those regulations." 1997 WL 453588, *2. Furthermore, as the Board observed, "a presiding administrative law judge has the authority to review the case and duly consider all the factors delineated by the pertinent regulations. An ALJ's scope of authority to change the Administrator's assessments is untrammeled, and specifically includes determination of the appropriateness of the assessed penalty." Id. at *4.

Statement of the Administrator in Opposition to Petition for Review at 20.

   WHD's brief also suggests that it did not consider the size of the business here because its investigator felt the burden was on Chrislin to request a reduction in the penalty or to seek an accommodation, or because WHD did not have the financial information available to determine the effect of the penalty on Chrislin. Supplemental Brief of the Acting Administrator at 10-12. However, the FLSA and the implementing regulations require the WHD to consider the size of the business as well as the gravity of the violation. It was incumbent upon WHD to ask for the data needed to evaluate the size of the business, particularly when dealing with an obviously small business. Similarly, it was incumbent upon the ALJ to evaluate the evidence relating to Chrislin as a small business in determining an appropriate penalty in this case.

    We will now proceed to do what the WHD and the ALJ failed to do: consider the evidence relevant to the size of Chrislin's business. Under the regulations on assessing penalties for child labor violations, we are enjoined to consider the appropriateness of the penalty to the size of the business taking into account the following factors – the number of employees, dollar volume of sales or business done, amount of capital investment and financial resources, and such other information as may be available relative to the size of the business. 29 C.F.R. § 579.5(b).

   As noted above, Chrislin had 16 employees at the outset of the period relevant to the investigation, and 7 at the close of that period. Its gross income in 1996 was $556,000 (when Chrislin owned two stores) Exhibit P-3, which was reduced to $ 299,000 in calendar year 1997.

   The Parlin store is Chrislin's sole source of income. T. 200. It was purchased for $200,000. The funds for purchase were obtained by remortgaging the Christensens' home, use of their savings, a business loan, and paper held by the store's previous owner. The paper held by the seller has been paid off; however, the Christensens have not been repaid for the loans they made to the business and, as of the time of the ALJ hearing, $35,000 remained due on the business loan. T 237. Chrislin generally has no more than $4,000-$5,000 on hand in its checking account. T. 237-238. The 1996 and 1997 personal net taxable income for Christensen and his wife was less than $10,000 Exhibit P-11.

   The evidence in the record thus establishes that Chrislin is a small business with limited financial resources upon which it may draw. Similarly, the evidence does not indicate that Christensen, a principal in Chrislin, has substantial resources. Based on the financial record presented, it is clear that a penalty of the amount which would apply based solely on the gravity of the violations here, without regard to the size of Chrislin's business, would cause Chrislin very significant financial difficulty. Under 29 C.F.R. 279.5, we must consider the appropriateness of the penalty relative to the size of Chrislin's business. When business size is considered using the instructions for Form WH-266, a 30 percent in penalty is applied. This would make the penalty here $16,143.75.

   WHD contend, however, that the gravity of the violations in this case warrants assessment of the penalty without regard to the small size of Chrislin's business and the devastating effect which a penalty so derived would have. It cites the Board's decision in Elderkin as authority for this proposition.

   In Elderkin, the Board weighed the gravity of the violations against the small size of the business, as required by the statute and regulations. It found that the violations were of very high gravity, including the extremely severe nature of the injury to one minor, severing of his arm by a piece of farm machinery that had no safety guard. The Board concluded that "[a]lthough the Elderkin Farm is small, and the evidence indicates serious financial difficulties, those facts, when weighed (as they must be) against the gravity of the violations, support a civil money penalty of $71,100 [as originally assessed by WHD]." Elderkin, slip op. at 15.

   Elderkin was a case of extremely serious violations of the Act warranting the unusual measure of not specifically reducing the penalty amount based on business size because to do so would have brought the penalty amount below the appropriate level (i.e. the level appropriate considering both gravity of the violations and business size). That is not this case. The injury in Elderkin was a twelve-year old's life-threatening loss of an arm. The injury here was a seventeen year-old's much less serious cut on the thumb. The minors in Elderkin began working with inherently hazardous machinery when they were as young as 7, 10, and 11 years old. The minors using or cleaning the slicer in this case were 16 and 17 years of age. The employer in Elderkin misled the investigator and concealed evidence. There is no indication here that Christensen has been anything other than fully cooperative. There were 41 violations of the Act in Elderkin, a significantly higher number than in the instant case.