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(1) In general. -- Any enterprise that on March 31, 1990, was subject to section 6(a)(1) of the Fair Labor Standards Act of 1938 . . . and that because of the amendment made by subsection (a) is not subject to such section shall --

(A) pay its employees not less than the minimum wage in effect under such section on March 31, 1990;

(B) pay its employees in accordance with section 7 of such Act . . . .; and

(C) remain subject to section 12 of such Act . . . .

Section 3(b) of Pub L. No. 101-157, 103 Stat. 938 (codified in the notes to 29 U.S.C. 203).

Prior to the 1989 Amendments, enterprise coverage extended to a company engaged in commerce that "is engaged in the business of construction or reconstruction, or both," 29 U.S.C. 203(s)(4), without regard to the annual dollar volume of business. See generally Reich v. Troyer, No. CIV.A 96-0471, 1996 WL 198111 (E.D. La. Apr. 23, 1996) (denying a motion to dismiss for lack of jurisdiction because the Preservation of Coverage clause would grandfather FLSA enterprise coverage of a business that was enterprise-covered before the 1989 Amendments, if it had been engaged in construction or reconstruction, irrespective of the annual dollar volume of the business).

It is undisputed that Keystone's business activities have, starting prior to the 1989 Amendments, continuously included the installation, sanding, and refinishing of hardwood floors in buildings (Dec. 3, Stip. 2, 3, 4). ⁵ In fact, Keystone does not contest that its business activities constitute construction or reconstruction for purposes of the Act, nor that it has been engaged in these activities continuously from 1987 through the time it employed Robert Martin (Dec. 3, Stip. 2). Therefore, Keystone is a covered business under the Preservation of Coverage clause. ⁶

Keystone's argument, that the Preservation of Coverage clause applies to only those employees who were employed continuously since before March 31, 1990, lacks any statutory, regulatory, or other legal support. In fact, the FLSA, in defining an "enterprise," and the applicable regulations, clearly state that enterprise coverage is determined by evaluating the activities and organization of corporate or other business units rather than individual employees. See 29 U.S.C. 203(r)(1); 29 C.F.R. 779.236. See generally Maryland v. Wirtz, 392 U.S. 183 (1968), overruled on other grounds by National League of Cities v. Usery, 426 U.S. 833 (1976), overruled by Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985).

Keystone's assertion that the decision in Troyer does not support the application of the Preservation of Coverage clause to construction or reconstruction enterprises like Keystone is incorrect. In Troyer, the court specifically decided, with regard to the construction/reconstruction firm of Troyer Enterprises, that "it is clear that previously covered enterprises remain accountable under certain provisions of the FLSA by virtue of the grandfather clause." 1996 WL 198111, at *2. The court, however, did not have sufficient factual evidence to decide whether that particular firm had been continuously engaged in construction or reconstruction since March 31, 1990. In this case, there is ample evidence, including stipulations by the parties, to decide this question in favor of the Administrator.

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II. AMPLE EVIDENCE SUPPORTS THE ALJ'S CONCLUSION THAT KEYSTONE EMPLOYED A 17-YEAR-OLD WHO REPEATEDLY OPERATED A CIRCULAR SAW AND A NAIL GUN IN VIOLATION OF HAZARDOUS ORDER NUMBERS 5 AND 14

The ALJ reasonably determined that a "balance of the credible evidence" demonstrated that Martin repeatedly operated dangerous power equipment in violation of section 12(c) of the Act, 29 U.S.C. 212(c), and HO Nos. 5 and 14.

1. The FLSA prohibits "oppressive child labor," 29 U.S.C. 212(c), as a means of protecting the "safety, health, well-being, and opportunities for schooling of youthful workers." H.R. Rep. No. 1452, 75th Cong., 1st Sess., 6 (1937); S. Rep. No. 884, 75th Cong., 1st Sess., 2, 6 (1937); Administrator v. Thirsty's Inc., ARB No. 96-143 (May 14, 1997), aff'd sub nom. Thirsty's, Inc. v. U.S. Department of Labor, 57 F. Supp.2d 431 (S.D. Tex. 1999); Marshall v. Jerrico, Inc., 446 U.S. 238, 244 (1980); 29 C.F.R. 570.101(a). Indeed, the courts have held that there is a particularly compelling public interest in protecting the health and well-being of working children. See Lenroot v. Kemp, 153 F.2d 153, 156-57 (5th Cir. 1946); Lenroot v. Interstate Bakeries Corp., 146 F.2d 325, 327-28 (8th Cir. 1945); McLaughlin v. McGee Brothers, Inc., 681 F. Supp. 1117, 1137-38 (W.D.N.C.), aff'd, 867 F.2d 196 (4th Cir. 1989).

The FLSA defines "oppressive child labor" as hiring an employee under the age of sixteen in any occupation, ⁷or hiring an employee between the ages of sixteen and eighteen in "any occupation which the Secretary of Labor shall find and by order declare to be particularly hazardous." ⁸29 U.S.C. 203(l)(1), (2). Thus, children under the age of 18 may not be employed in any occupation which the Secretary has declared to be hazardous.

2. The Secretary of Labor has identified 17 occupations as particularly hazardous and, therefore, unsuitable for any minor below the age of 18. See 29 C.F.R. 570.50-68. As relevant to this case, HO No. 5 states that occupations involving the operation of power-driven wood-working machines are particularly hazardous. See 29 C.F.R. 570.55. The term "power-driven wood-working machines" is defined as "all fixed or portable machines or tools driven by power and used or designed for cutting, shaping, forming, surfacing, nailing, stapling, wire stitching, fastening, or otherwise assembling, pressing, or printing wood or veneer." 29 C.F.R. 570.55(b)(1) (emphasis added). HO No. 14 states that occupations involving the operation of circular saws, band saws, and guillotine shears are particularly hazardous. See 29 C.F.R. 570.65. The regulation defines the term "circular saw" as "a machine equipped with a thin steel disc having a continuous series of notches or teeth on the periphery, mounted on shafting, and used for sawing materials." 29 C.F.R. 570.65(b)(4).

3. It is undisputed that Robert Martin was 17-years-old during his employment at Keystone and that the floor refinishing jobs performed by Keystone during his employment sometimes involved the installation of new moulding around the bottom of the wall (Dec. 3, Stip. 7, 8, tr. 147). Also undisputed is that Keystone owned and its employees utilized both a compound miter saw (a circular saw) and a nail gun to install such moulding (Dec. 3, Stip. 13, 14). The miter saw clearly qualifies as a circular saw under HO No. 14, and the nail gun clearly is a wood-working tool as defined in HO No. 5. At issue is whether or not the youngster operated these hazardous pieces of machinery while working for Keystone.

Martin credibly testified that he would use the circular saw to make a five to ten second cut that had been pre-marked, and then return the piece of moulding to the person who had handed it to him (tr. at 222, 226). He further testified that he used the nail gun to add additional nails to moulding already fixed into place, or to continue the nailing that a more experienced employee had started (tr. at 222-23). Martin also demonstrated in detail for the ALJ how each of the power tools function (tr. at 221). McDowell and Chmielowsky, who worked at Keystone with Martin, testified that they observed him using the circular saw and/or the nail gun (tr. 24-26, 50, 73-75). Chmielowski's testimony corroborated Martin's, stating that a more experienced employee would mark a piece of moulding, pass it to Martin to make the cut, and then take back the piece (tr. 82).

Although Keystones' witnesses testified that they never saw Martin use the dangerous power tools, the testimony provides plausible reasons why the minor could have used these tools without their knowledge. For example, Tom Hazelwood explained that he stopped working for Keystone in the middle of August 1999, and therefor had no knowledge of what Martin may or may not have done for Keystone for the next four months (tr. at 175). Several employees testified that the work team often worked in more than one room at a time, with employees in one room unable to observe what the employees in another room were doing (tr. 50, 65, 68, 226). ⁹This fact, combined with the corroborating testimony of Robert Kanagie, that once moulding is marked it only takes five or six seconds to cut with a circular saw (tr. 274), provides a logical explanation for why Keystone's witnesses may not have observed Martin's use of the tools.

Keystone's assertion that Martin could not have used the circular saw or the nail gun because he was not an experienced carpenter is unconvincing. Miller, Chmielowski, and Hazelwood testified that, although they were never trained in the operation of Keystone's circular saw or nail gun, they all have used both of these power tools in their work for Keystone to help install moulding (tr. at 51-52, 65, 72-73, 77-78, 82-83, 160, 171).

In sum, there was abundant credible evidence establishing Martin's use of the circular saw and nail gun in violation of HO Nos. 14 and 5, respectively.

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III. THE CMP OF $2,400 IS APPROPRIATE FOR THE TWO HO VIOLATIONS UNDER RELEVANT STATUTORY AND REGULATORY AUTHORITY

Keystone argues that the ALJ failed to consider the appropriateness of the assessed CMP in light of the applicable statutory and regulatory authority. The record, however, shows that the ALJ evaluated the requisite child labor CMP factors. Additionally, this Board, reviewing the case de novo, should uphold the CMPs in light of all the relevant factors, including the gravity of the violations and the size of the business.

1. Section 16(e) of the FLSA requires the consideration of the "size of the business" and the "gravity of the violation" in assessing CMPs. 29 U.S.C. 216(e). "Size of the business" is reflected by the number of employees, sales volume, capital investment, financial resources, and other relevant information. See 29 C.F.R. 579.5(b). "Gravity of the violation” is reflected by a history of prior violations, evidence of willfulness or a failure to take reasonable precautions to avoid violations; the number of illegally employed minors and their records of proof of age; the length of time the minors were illegally employed and the hours of the day they were employed; the occupations in which the minors were employed; whether they were exposed to injury; and whether any injury occurred. See 29 C.F.R. 579.5(c). There exists some flexibility regarding the evaluation of these factors because "[t]here is no guidance as to the weight or import of any particular factor, nor do the regulations prescribe any numerical or percentage factor to guide an increase in the assessment for an aggravated violation or a mitigation of the assessment where appropriate." Thirsty's, supra.

2. The use of Form WH-266, which takes into account the size of the business and the gravity of the violations, has been endorsed by the Board as a viable tool to initially determine penalties, subject to independent review by the District Director, the ALJ, and the Board. See Chrislin, supra; Elderkin, supra; and Thirsty's, supra. Keystone does not challenge, per se, the Administrator's use of the grid or a computerized version thereof. Rather, Keystone appears to be asserting that the ALJ erred by not providing a sufficient explanation as to the appropriateness of the assessed CMPs in this case as required by the regulation at 29 C.F.R. 580.12(c), which states that

[t]he decision of the Administrative Law Judge shall include a statement of findings and conclusions, with reasons and basis therefore, upon each material issue presented on the record. The decision shall also include an appropriate order which may affirm, deny, reverse, or modify, in whole or in part, the determination of the Administrator.

A fair reading of the ALJ's decision, however, reveals that the ALJ carefully reviewed the stipulations, as well as the testimony of the Wage-Hour investigator concerning how the CMPs were computed in light of the size of Keystone's business and the gravity of its violations. With regard to size of business, the stipulations address several of the regulatory criteria. Keystone's stipulated annual gross receipts or sales from 1990 to 2000 was in excess of $250,000, and it employed 10 to 14 employees (full-time and part-time) between July and November 1999 (Dec. 3, stips. 12, 16). Also mentioned in the ALJ's decision is the investigator’s conclusion that Keystone was on solid financial footing, and was therefore able to pay the assessed penalty (Dec. 5). Furthermore, through its discussion of Keystone's violations of HO Nos. 5 and 14, the decision is replete with statements going to the gravity of the violations, It is, therefore, apparent from the entire decision that the ALJ considered the relevant penalty factors when evaluating the appropriateness of the CMPs for the two dangerous HO violations, thereby satisfying the statutory and regulatory requirements in that regard.

3. Considered de novo by this Board, no reduction in the CMPs should be made. Keystone's violations of the Act were serious, were committed by a company with annual gross sales exceeding $250,000, and were neither de minimis nor inadvertent. The penalties assessed for the HO violations, which are far below the maximum of $10,000 available for each employee subject to a violation, see 29 U.S.C. 216(e), are appropriate.

Multiple violations regarding the same child have been found not to be de minimis. ¹⁰See Administrator v. Q. & D. d/b/a Lamplighter Tavern, Case No. 92-CLA-21 (Sec'y May 11, 1994). This clearly applies to the instant case where Martin used two pieces of hazardous machinery on a repeated basis. Keystone's own expert witness testified about the likelihood of serious bodily injuries caused by inexperienced persons operating these tools (tr. at 201), and Liez acknowledged the occurrence of a serious injury requiring one of his own employees to be taken to the hospital after operating the same circular saw that Martin operated (tr. at 260). Thus, Keystone clearly committed serious violations which may in no way be characterized as de minimis in nature.

Similarly, the continued exposure of a minor to an obvious hazard, as existed in the present case, supports a finding that the violations of the child labor provisions of the Act were not inadvertent. See Chrislin, supra. Working for Keystone, Martin was continually exposed to hazard through the repeated use of the dangerous power tools. Keystone was in possession of Martin's social security number at the time of his hire and thus, at minimum, could have ascertained his correct date of birth (Dec. 3, Stip. 11).

In light of the overwhelming evidence of record in this case revealing the great danger to which Martin was continually exposed, the CMPs should be upheld by the Board.

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IV. KEYSTONE HAS BEEN ACCORDED A FULL AND FAIR OPPORTUNITY TO PRESENT ITS CASE

Keystone claims that it was treated unfairly when the investigator refused to interview certain additional employees at Keystone’s prompting after having completed his investigation. The employees in question claimed they did not see Martin use the prohibited power tools or thought it highly unlikely that Martin would ever be allowed to use the tools. These employees, however, all testified at the hearing where the violations and the penalties were considered de novo. ¹¹Therefore, Keystone's argument that the investigation was unfair on this basis is without merit.

The regulation at 29 C.F.R. 580.6(a) provides that "[a]ny person desiring to take exception to the determination of penalty shall request an administrative hearing pursuant to this part." Keystone timely requested and participated in just such a hearing on August 28 and 29, 2002, where the Administrator's earlier findings of child labor violations under the FLSA and her assessment of CMPs were at issue. In that proceeding, the ALJ proceeded to consider "whether the respondent has committed a violation of section 12 . . . and the appropriateness of the penalty assessed by the Administrator" (Dec. 4, citing 29 C.F.R. 580.12(b)).The ALJ was free to "affirm, deny, reverse, or modify, in whole or in part, the determination of the Administrator." 29 C.F.R. 580.12(c). Keystone, in effect, received at the hearing what it wanted in the investigation: to have the statements of certain employees considered and weighed, and made part of the record. Moreover, because this Board will now consider the full record de novo, Keystone cannot plausibly argue that it is being denied the opportunity to fully and fairly present its case. ¹²

CONCLUSION

For the foregoing reasons, that part of the ALJ's decision concluding that two HO violations occurred, and that the attendant CMPs assessed by the Administrator were appropriate, should be affirmed.

Respectfully submitted,

HOWARD M. RADZELY

Acting Solicitor of Labor

PAUL L. FRIEDEN

Counsel for Appellate Litigation

______________________________

ROGER W. WILKINSON
Attorney
U.S. Department of Labor
Office of the Solicitor
200 Constitution Ave, N.W.
Suite N-2716
Washington, DC 20210

CERTIFICATE OF SERVICE

I certify that on this 17th day of October, 2003, a copy of the foregoing Administrator's Brief In Response To Respondents' Opening Brief was sent by first class United States mail to:

Mervin M. Wilf, Esq.

One South Broad Street

Suite 1630

Philadelphia, PA 19107

Daniel Liez, President

Keystone Floor Refinishing Co., Inc.

d/b/a/ Keystone Floor Refinishing Co.

1530 Locust Street

Suite 265

Philadelphia, PA 19102

________________________

ROGER W. WILKINSON

Attorney

(202) 693-5555