ARB CASE NO. 00-022
ALJ CASE NO. 99-CLA-5
DATE: November 27, 2002
In the Matter of:
ADMINISTRATOR,
WAGE AND HOUR DIVISION,
UNITED STATES 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 Plaintiff:
Claire Brady White, Esq., Steven J. Mandel, Esq., U.S. Department of Labor, Washington, D.C.
For the Respondents:
Evan N. Pickus, Esq., Pickus & Landsberg, East Brunswick, New Jersey
FINAL DECISION AND ORDER
This case arises under the child labor provisions of the Fair Labor Standards Act of 1938 (FLSA), as amended, 29 U.S.C.A. §§ 203(1), 212(c), and 216(e) (West 1998). The Respondents, Chrislin, Inc. and Walter Christensen (Chrislin), are appealing the decision of the Administrative Law Judge (ALJ) who concluded that Chrislin violated the child labor provisions of the FLSA and assessed a penalty of $56,762.50. We affirm the ALJ's decision as to the violations of the child labor provisions, with one exception, but reduce the penalties because the ALJ did not adequately consider the gravity of the violations and the size of the business in assessing the penalties.
Background
"Big Wally's" is a small sandwich shop in Parlin, New Jersey owned and operated by Respondent Chrislin, Inc., a corporation established by Walter A. Christensen and his wife. In 1997 the Wage and Hour Division of the Department of Labor (WHD) received a complaint regarding violations of the child labor provisions of the FLSA at the shop. The WHD investigated the Parlin, New Jersey shop and learned that Chrislin also had owned a sandwich shop in Matawan, New Jersey in the previous year. That shop was sold in February, 1997 to a former employee. Under Labor Department regulations, an enterprise or establishment is covered by the Fair Labor Standards Act if its gross receipts during a 12-month period immediately preceeding the quarter in which the investigation is conducted exceeds the amount specified in the statutes. 29 C.F.R. § 779.266 (2002). Therefore the WHD included the Matawan shop in its investigation for the period of time it was owned by Chrislin.
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The two shops employed a total of about 16 employees including a number of high school students between ages 16 and 18 and two students age 15 (with the school's and the parents' permission). At the time of the investigation Chrislin had 7 employees. Chrislin's combined gross income from the two shops in 1996 was $556,000 and in 1997, the year of the investigation, it was $299,000. P-11. The WHD defines a small business for the purpose of issuance of penalties as gross revenues of less than $800,000 and less than 100 employees. Mr. and Mrs. Christensen's 1996 and 1997 personal net taxable income was less than $10,000. They do not appear to have access to other income. Exhibit P-11.
Wage and Hour Administrator's Findings
The WHD found that Chrislin violated the child labor provisions of the Fair Labor Standards Act (FLSA) as follows: Two minors (Ryan Dickey, age 15 and Justin Lebowitz, age 15) were employed in violation of the child labor time/hours limitations; the firm failed to keep a record of date of birth on five minors; seven minors (Devon Cutrona, age 17; Danielle Martinez, age 17; Bryan Flegler, age 17; Richard Ferri, age 16; Mike Somers, age 16; Andrew Sobel, age 16 and Ryan Dickey when age 16) used or cleaned a meat slicing machine in violation of hazardous occupation order #10 and one minor (Dickey, when age 15) was employed in violation of the hazardous order relating to employment of minors under the age 16. T. 136-140; ALJ Decision and Order (D. and O.) at 2-3. One minor (Cutrona, age 17) suffered a laceration to her right thumb requiring nine stitches as a result of her operation of the machine. T. 137.
Penalties were assessed according to Form WH-266 in the W-H Field Operations Handbook (prepared by the Wage and Hour Division). Exhibit P-2. The form is used as a guide by the WHD investigator to initially determine penalties. WHD supervisors then review these penalties to assure their compliance with the child labor provisions of the FLSA and the implementing regulations.
According to Form WH-266 the penalty for the two hours violations was $450 per violation. Because the investigator found that Chrislin had knowledge of the child labor violations, he followed the Form WH-266 directions that these penalties be multiplied by a factor of 1.5. Thus the assessed penalty was $675 per violation or $1,350. The recordkeeping violation resulted in an assessment of $412.50.
Again, using the Form WH-266, the investigator assessed penalties for unlawful operation of the meat slicer by seven minors with one minor suffering a serious injury. The WHD investigator applied the form's assessment of $8,500 for the injured worker. This penalty was multiplied by the 1.5 gravity factor bringing the penalty to $12,750. However, the regulations cap each individual's penalty at $10,000, so this penalty was assessed at $10,000. 29 U.S.C.A. §216(e)(1) (1990); 29 C.F.R § 579.1(a) (2002)
In accordance with the form, a penalty of $6,000 was assessed for each of six additional minors using/cleaning the meat slicer and multiplied by the 1.5 gravity factor (for knowledge) bringing the total penalty to $9,000 per worker or a total of $54,000. The $6,000 penalty is based on the rationale that each of the six noninjured workers was exposed to the same injury hazard as the injured worker (if Devon Cutrona had not suffered an injury, the form would have required an assessment of $1,200 per worker multiplied by the gravity factor of 1.5 for a total per worker of $1800). In sum, the penalties assessed for those hazardous occupations violations totaled $64,000. Exhibit P-2.
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Additionally, the investigator assessed a hazardous occupation penalty in the amount of $1500 against Chrislin because Dickey was a minor under age 16 when he cleaned parts of the meat slicer (not the slicing blade). This penalty was also multiplied by the 1.5 factor. Id. This total penalty assessed was $2250.
WHD cited Chrislin for three violations involving Dickey; one for allowing Dickey to clean the meat slicer; another for allowing Dickey to clean the meat slicer when under 16; and a third for an hours of work violation. The total of the penalties for Dickey was $11,925. Because of the $10,000 per employee cap WHD reduced the penalty by $1,925. Thus the total penalties assessed Chrislin were $66,088.
To summarize, WHD assessed the following penalties:
Chrislin timely appealed the findings of the WHD to the ALJ.
ALJ's Decision and Order
The ALJ held hearings in September 1999. The ALJ issued his Decision and Order on December 17, 1999, affirming the WHD Administrator in part and reversing in part.
1A Wage and Hour representative testified at the hearing that bundling "Arefers to a higher penalty, a more severe fine for an employer where other workers have been exposed to a hazardous situation" but have not been injured themselves. T. 141-142.
2 The regulations do not speak of "whether there was an injury," or "whether there was a serious injury." Instead, they refer to "any resultant injury." Therefore, the specific injury is to be considered.
3 We note that the instructions for preparing the WH-266, Wage and Hour Field Operations Handbook, Chapter 54, Child Labor Civil Money Penalty Report," (CMP Report) pp. 5-15, do address size of the business in the instructions for completing Part E of the form for Reduction of penalties. See, e.g., §§ (a) (2) and (h). However, the instructions themselves contemplate review of the CMPs calculated on the form WH-266 and, for the reasons discussed in the text, those assessments are subject to further review by the ALJ and the Board.
4 There was testimony from several employees, who were minors during the period under investigation, that Christensen instructed the minor employees, other than Cutrona and Martinez, not to use the slicer and that he did not know that minors other than Cutrona and Martinez were using the machine (e.g., T. 322, 356, 377), as well as testimony that he advised employees that they could operate the slicer if they were 16 (T. 262-3); the investigator testified that an unidentified minor employee told him that Christensen said to cease use of the slicer if an official might be present (T. 87-8, 99).