USDOL v. Thirsty's Inc., 94-CLA-65 (ALJ May 16, 1996)
DATE: May 16, 1996
CASE NO: 94-CLA-65
In the Matter of:
U.S. DEPARTMENT OF LABOR,
Plaintiff,
v.
THIRSTY'S INCORPORATED,
Respondent.
APPEARANCES:
THOMAS A. PAIGE, Esquire
U.S. Department of Labor
Office of the Solicitor
525 S. Griffin Street, Suite 501
Dallas, Texas 75202
For the Plaintiff
SARA A. WELCH, Esquire
Vinson & Elkins
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002
For the Respondent
BEFORE: SAMUEL J. SMITH
Administrative Law Judge
DECISION AND ORDER MODIFYING CIVIL MONETARY PENALTY This matter arises pursuant to Section 216 of the Fair Labor
Standards Act of 1938 (the "Act" or "FLSA"), 29 U.S.C. 216, as
amended, and in accordance with the applicable regulations contained at
29 C.F.R. Parts 579 and 580. A civil monetary penalty in the amount of
$10,497.50 was assessed against Thirsty's Incorporated, Respondent, as a
result of the employment of minors in violation of the child labor
provisions of Section 212 of the Act and the regulations promulgated
thereunder at 29 C.F.R. Part 570. This matter has been referred to the
undersigned administrative law judge for formal hearing and decision.
On February 12, 1996, the undersigned convened a formal hearing in
this matter at Houston, Texas. Both Plaintiff and Respondent were
represented by counsel, who were afforded full opportunity to present
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evidence and argument. At said hearing, Plaintiff's Exhibits 1-3 were
admitted into evidence (Tr. at 5).[1] No exhibits were submitted by
Respondent (Tr. at 5). Although given the opportunity, neither party
has submitted posttrial briefs, choosing instead to present closing
arguments at the hearing. Respondent did submit two relevant
administrative law judge decisions in lieu of a posttrial brief, in
response to which Plaintiff has submitted the Secretary's final decision
rendered in one of the cases submitted by Respondent.
Background
By way of notice dated December 4, 1992, the United States
Department of Labor, Wage and Hour Division, assessed a civil monetary
penalty against Respondent in the amount of $10,497.50. This penalty
was assessed pursuant to Section 216(e) of the FLSA for violations of
the child labor provisions of said act. The violations were based upon
Respondent's employment of thirty-two (32) minors beyond the prescribed
maximum hours per day and hours per week such a minor is allowed to
work.
Respondent does not contest the occurrence of the violations
alleged by Plaintiff. What is contested however is the amount of the
penalty assessed for said violations. Respondent asks that the penalty
be reduced or eliminated, based upon the specific factual circumstances
of this case.
Issue
The sole issue presented by the parties for resolution herein is
whether or not the amount of the civil monetary penalty assessed against
Respondent is appropriate in light of the factors to be considered in
assessing any such penalty. See 29 C.F.R. 579.5. If not, the
undersigned has the authority to either modify or vacate the penalty
imposed, pursuant to 29 C.F.R. 580.12.
EVIDENCETestimony of Ernestine B. Dennis
Ms. Ernestine Dennis is employed by the U.S. Department of Labor,
Wage and Hour Division, as a compliance specialist (Tr. at 10). She has
held such employment for over thirteen (13) years (Tr. at 10). In this
capacity, she was responsible for the investigation of Respondent during
1992 (Tr. at 12). This investigation concerned Respondent's employment
of minors during the period from December, 1989, to December, 1991 (Tr.
at 12). According to her testimony, Respondent is in the business of
selling non-alcoholic frozen drinks, and has an annual sales revenues in
excess of $500,000.00 (Tr. at 12, 32).
A large portion of Ms. Dennis' testimony related her findings with
respect to the violations occasioned by Respondent's employment of
numerous children, most of whom were fourteen (14) and fifteen (15)
years of age (Tr. at 13, 14).[2] All such violations constituted what
are known as "Regulation Three violations" or "hours violations" (Tr. at
13). Regulation Three provides that a child aged fourteen (14) or
fifteen (15) may work a non-agricultural job so long as said work is
confined to the following periods:
1. Outside school hours;
2. Not more than 40 hours in any 1 week when school is not
in session;
3. Not more than 18 hours in any 1 week when school is in
session;
4. Not more than 8 hours in any 1 day when school is not in
session;
5. Not more than 3 hours in any 1 day when school is in
session; and
6. Between 7 a.m. and 7 p.m. in any 1 day when school is in
session, but the evening hour is 9 p.m. when school is
not in session.
(Tr. at 13-14; Seealso 29 C.F.R. 570.35,
579.3(b)(2)).[3] During her testimony, Ms. Dennis reviewed Plaintiff's
Exhibits 1 and 2, describing each violation of the aforementioned hour
limits she discovered (See Tr. at 15-29; Seealso
PX-1, PX-2).
More important to the issue presented for resolution, Ms. Dennis
also reviewed and discussed the contents of Plaintiff's Exhibit 3, which
she identified as the form used by the Wage and Hour Division to
determine the amount of penalty to be assessed (Tr. at 29-33; Seealso PX-3). According to the form and Ms. Dennis' testimony, a
civil monetary penalty is only to be assessed if one or more of six
criteria is present in a particular case (Tr. at 29; PX-3 at 1). In
this case, Ms. Dennis found that two criteria were met, and that
therefore, the assessment of a penalty was appropriate (Tr. at 29; PX-3
at 1).[4]
Finding that the assessment of a penalty was appropriate, Ms.
Dennis went on to Sections B-1 and B-2 of the form, the former of which
applies to violations occurring prior to November 5, 1990, and the
latter which applies to violations occurring thereafter (Tr. at 30; PX-3
at 1-2).[5] From this form, Ms. Dennis calculated a total assessment in
the amount of $13,050 (Tr. at 30; PX-3 at 3). From this total
assessment, Respondent was given a fifteen percent (15%) discount for
having fewer than 100 employees (Tr. at 30). This resulted in a total
penalty of $11,092.50 (Tr. at 31; PX-3 at 3). Ms. Dennis testified that
this assessment was made after a recalculation of an initial assessment,
made in the amount of $10,497.50 (Tr. at 31-32). Plaintiff seeks
payment of the lesser amount here, due to a dispute as to whether
Respondent ever received a written request for the larger of the two
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(Tr. at 32). Ms. Dennis further testified that neither penalty was the
maximum which could have been assessed against Respondent, which she
chose not to impose because it was the first investigation of this
Respondent (Tr. at 33).
On cross-examination, Ms. Dennis admitted that Respondent
cooperated fully in her investigation, providing her with all relevant
records and with employees to assist her in going through said records
(Tr. at 34).
Testimony of James Read Boles
Mr. James Read Boles is the president, sole director, and
controlling shareholder of Respondent (Tr. at 36). He testified that
Respondent is primarily involved in the business of selling frozen
beverages (Tr. at 37). In 1991, Respondent had approximately fifteen
(15) locations, all of which were situated in shopping malls (Tr. at
38, 40, 52). Four of these locations were actual stores, each of which
had annual gross revenue somewhere between $220,000 and $320,000 (Tr. at
40, 52). Approximately seven locations consisted of pushcarts or
stands, each of which average about $75,000 in annual gross sales (Tr.
at 52). The remaining four locations had characteristics of both the
smaller stands and larger stores, each with an annual gross revenue
somewhere between the aforementioned figures (Tr. at 52). Respondent's
annual net profit from all locations ranged between $50,000 and $100,000
(Tr. at 40).
Mr. Boles testified that at the time of the violations, Respondent
had approximately eighty (80) employees (Tr. at 40). There was a very
high turnover rate with these employees, with approximately 1100 to 1200
different workers employed over the two-year period in question (Tr. at
40-41). He described the typical position with Respondent, testifying
that the duties were not hazardous (Tr. at 47-48). The working
environment is also safe in that each location is situated in a shopping
mall (Tr. at 48).
According to Mr. Boles' testimony, Respondent has never had any
other alleged child labor law violations (Tr. at 42). With regards to
this investigation, Respondent fully cooperated with the investigator
and provided employees to assist (Tr. at 42-43). Prior to this
investigation, Mr. Boles had attempted to educate the store managers as
to the child labor laws (Tr. at 43-44). However, he testified that the
large majority of these managers had little or no managerial experience
(Tr. at 39-40, 44). He attributed the violations to this inexperience,
as well as to several "mitigating factors" peculiar to several of the
children (Tr. at 44-46).
In response to these violations, Mr. Boles testified that
Respondent has refused to employ anyone under sixteen (16) years of age
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(Tr. at 46). He feels that the penalty imposed against Respondent was
unfair in that numerous factors were not considered in determining the
amount (Tr. at 49).
FINDINGS OF FACT AND CONCLUSIONS OF LAWCredibility Evaluations
At the hearing in this matter, the undersigned had the opportunity
to evaluate the credibility of Ms. Dennis and Mr. Boles, as they
testified on direct and cross-examination. To the extent relevant to
the findings herein, the undersigned has concluded that both witnesses
were credible and has been presented with no reason to question the
truthfulness of their testimony. With respect to Ms. Dennis, the
undersigned credits her testimony as to the nature and findings of her
investigation in this matter, and more importantly, also credits the
testimony as to her determination of the penalty assessed. As for Mr.
Boles, the undersigned credits his testimony as to the nature of
Respondent's business, as well as the effects that the penalty imposed
has had on that business.
Child Labor Provisions of the FLSA
Pursuant to the child labor provisions of the FLSA, "[n]o employer
shall employ any oppressive child labor in commerce or in the production
of goods for commerce or in any enterprise engaged in commerce or in the
production of goods for commerce." 29 U.S.C. 212(c). Section 203 of
the FLSA defines what employment practices are to be deemed "oppressive
child labor." 29 U.S.C. 203(l). For children fourteen (14) and
fifteen (15) years of age, the FLSA gives the Secretary of Labor power
to provide by regulation or order what "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 well-being." 29 U.S.C.
203(l).
Acting pursuant to this authority, the Secretary of Labor has
promulgated numerous regulations to define what employment will not be
"oppressive," and therefore allowable. One such regulation, entitled
"Periods and conditions of employment," provides in pertinent part:
(a) Except as provided in paragraph (b) of this section,
employment in any of the occupations to which this subpart is
applicable shall be confined to the following periods:
(1) Outside school hours;
(2) Not more than 40 hours in any 1 week when
school is not in session;
(3) Not more than 18 hours in any 1 week when
school is in session;
(4) Not more than 8 hours in any 1 day when school
is not in session;
(5) Not more than 3 hours in any 1 day when school
is in session;
(6) Between 7 a.m. and 7 p.m. in any 1 day, except
during the summer (June 1 through Labor Day) when
the evening hour will be 9 p.m.
29 C.F.R. 570.35(a). Violations of these provisions are punished by
penalties imposed under Section 216 of the FLSA and the implementing
regulations. See 29 U.S.C. 216; 29 C.F.R. Parts 579, 580.
Respondent's Violations
It is undisputed that Respondent has committed numerous violations
of the hours regulations promulgated by the Secretary. There are
thirty-two (32) such violations which have been charged by the
Department of Labor's Wage and Hour Division, violations which have
resulted from Respondent's employment of thirty-one children beyond the
hours prescribed (See PX-3). In addition, there has been an
additional two charges related to the employment of one child under the
age of fourteen (14), employment which is prohibited altogether,
regardless of the hours.
Wage and Hour's Determination of the Penalty AssessedMaximum Penalty Allowable
Section 216(e) of the FLSA provides the maximum civil penalty that
can be assessed for each employee who was the subject of a violation.
Prior to November 5, 1990, the maximum was ,000. 29 U.S.C. 216(e)
(1988). Thereafter, pursuant to an amendment of the statute, the
maximum penalty was increased to $10,000 per minor child who was the
subject of a violation. 29 U.S.C. 216(e) (1992). Therefore, it is
apparent that the maximum penalty which could have been imposed upon
Respondent, who employed 32 minors who were the subjects of the
violations charged, was close to $300,000.
Penalty Imposed
According to Ms. Dennis' testimony, the penalty imposed upon
Respondent in the amount of $10,497.50, was calculated using Wage and
Hour Form WH-266 (Tr. at 29). This form lists the possible violations
of the child labor provisions and assigns a dollar value to each
(See PX-3). Ms. Dennis identified the number of violations
appropriate for each box on this form, and multiplied that number by the
dollar value assigned to it. Adding these figures, Ms. Dennis
calculated the appropriate fine. From this fine, Ms. Dennis subtracted
a fifteen percent (15%) discount based upon the fact that Respondent had
less than 100 employees (Tr. at 30).
In computing this penalty, Ms. Dennis testified that she charged
only for each minor who was a subject of a violation or violations (Tr.
at 33). She could have charged for each violation itself, which would
have resulted in a much larger total penalty (Tr. at 33). However, she
chose not to do so in that this was the first investigation of
Respondent (Tr. at 33).
Proper Assessment of a Penalty
The Secretary of Labor has provided express guidelines to be
followed in the assessment of a penalty imposed for violations of the
child labor provisions. The applicable regulation provides that such a
penalty "shall be based on the available evidence of the
violation or violations and shall take into consideration the
size of the business of the person charged and the gravity of the
violation as provided in paragraphs (b) through (d) of this section."
29 C.F.R. 579.5 (emphasis added).
After a careful review of this section, the undersigned finds that
Wage and Hour's penalty assessment in the instant case was violative of
the Secretary's express guidelines. By utilizing the dollar values
assigned to each violation by Form WH-266, Ms. Dennis did not base the
penalty "on the available evidence" of these particular violations, as
required by Section 579.5. Rather, her penalty was primarily based upon
a predetermined dollar value given to a general violation, not the
violation in question. The only factor of Section 579.5 which was
applied by Ms. Dennis' use of Form WH-266 was that of the business'
size, which accounted for the fifteen percent (15%) discount.
It is apparent that despite the use of the "boilerplate" form, Ms.
Dennis did consider at least one of the other factors contained at
Section 579.5. For example, she did testify that she utilized the form
based upon each minor, rather than each violation, due to the fact that
this was the first investigation of Respondent. However, consideration
of all the factors delineated by the Secretary, not just a few, is
mandated. As such, the undersigned finds that the method utilized by
Wage and Hour in assessing the penalty was violative of the Department's
own regulations.[6] Therefore, the undersigned shall evaluate each
factor as it applies to the evidence presented at the hearing to
determine whether the penalty should be affirmed, decreased, or vacated
in its entirety.[7]
Factors to be Considered Under Section 579.5The Size of Respondent's Business
Section 579.5(b) of the applicable regulations provides:
[i]n determining the amount of such penalty there shall be
considered the appropriateness of such penalty to the size of
the business of the person charged with the violation or
violations, taking into account the number of employees
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employed by that person . . ., 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 of
such person.
29 C.F.R. 579.5(b).
1. Number of Employees
Mr. Boles credibly testified that Respondent had approximately
eighty (80) employees during the time period in question (Tr. at 40).
Ms. Dennis properly considered this fact when crediting Respondent with
a fifteen percent (15%) discount from the original penalty calculated
(PX-3 at 3, Sec. C). Once again however, this fifteen percent is a
predetermined amount on Form WH-266, made without any consideration of
the particular facts of this case. In any event, the evidence is clear
that Respondent is a relatively small business organization.
2. Dollar Volume of Sales or Business Done
Mr. Boles' uncontradicted testimony, which has been accepted by the
undersigned, indicates that Respondent has annual gross revenue per shop
ranging between $75,000 and $300,000 (Tr. at 40). Respondent's net
profit was approximately $50,000 to $100,000 per year at the time of the
violations (Tr. at 40). The penalty imposed therefore amounts to
somewhere between ten percent (10%) and twenty (20%) of Respondent's net
profit. Although Ms. Dennis testified as to her awareness at the time
of the investigation that Respondent had annual revenue greater than
$500,000.00, there is no evidence to indicate that she considered this
fact at all in assessing the penalty. To the contrary, her adherence to
Form WH-266 tends to indicate that this factor was in fact disregarded.
3. Amount of Capital Investment and Financial Resources
Unfortunately, there was little if any direct evidence presented as
to this factor. However, it is clear from Mr. Boles' testimony that
Respondent does not have a tremendous amount of capital investment or
financial resources. The majority of the business' locations consist of
pushcarts which, according to Mr. Boles, required very little capital
expenditure (Tr. at 38). It is also apparent that each location's
capital is limited to its supplies, a normal household blender, and
typical retail equipment, such as a cash register (Tr. at 47-48). The
financial resources of the business are most likely minimal in that the
operation does not have a high profit margin (Tr. at 40). Once again,
it is apparent that Ms. Dennis considered none of these factors in
determining the appropriate penalty.
4. Other Evidence Related to the Size of Respondent
Respondent is obviously a relatively small business operation run
by Mr. Boles. He purchased the business in 1987, during a point at
which it was close to bankruptcy, losing over $200,000 a year (Tr. at
36-37, 40). It is clear from this evidence that Mr. Boles is an
entrepreneur who has taken over a small company, increased its size
somewhat, and improved its overall profitability. The undersigned finds
all of this evidence to be relevant to the proper assessment of a
penalty for the violations Respondent has committed.
The Gravity of the Violations
As further provided in Section 579.5:
[i]n determining the amount of such penalty there shall be
considered the appropriateness of such penalty to the gravity
of the violation or violations, taking into account, among
other things, any history of prior violations; any evidence of
willfulness or failure to take reasonable precautions to avoid
violations; the number of minors illegally employed; the age
of the minors so employed and records of the required proof of
age; the occupations in which the minors were so employed;
exposure of such minors to hazards and any resultant injury to
such minors; the duration of such illegal employment; and, as
appropriate, the hours of the day in which it occurred and
whether such employment was during or outside school hours.
29 C.F.R. 579.5.
1. History of Prior Violations
Both Mr. Boles and Ms. Dennis testified at the hearing that
Respondent has had no previous investigations related to child labor law
violations (Tr. at 33, 42). Ms. Dennis properly considered this fact
when she decided to assess a penalty for each minor, rather than for
each violation (Tr. at 33).
2. Willfulness or Failure to Take Reasonable Precautions
The credible testimony of Mr. Boles indicates that these violations
were not occasioned by any wilfulness or a failure to take reasonable
precautions. In particular, he testified that prior to the
investigation, he had circulated a newsletter to all employees and store
managers, detailing the intricacies of the child labor laws (Tr. at 43-
44). He also testified as to a memorandum sent to all store managers
regarding the subject (Tr. at 44). This credible testimony establishes
that Respondent was aware of the relevant laws and regulations, knew it
had employees subject thereto, and took reasonable steps to ensure that
they were not violated. It also tends to negate any finding of
willfulness in that as a businessman, Mr. Boles had every right to
believe that his store managers were following the laws he had informed
them about. It is apparent from the exhibits and Ms. Dennis' testimony
that none of these factors were considered by her in making the penalty
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assessment.
Also of relevance to the issue of willfulness is the nature of
Respondent's business. In order to maintain its profitability,
Respondent is required to employ relatively inexperienced store managers
(Tr. at 38-39, 44). It is also understandably a business with a staff
composed primarily of high school-aged children, resulting in an
extremely high turnover rate (Tr. at 41). Mr. Boles testified that
during the two-year period investigated, Respondent employed
approximately 1100 to 1200 different individuals, while employing only
80 to 85 people at any one time (Tr. at 40-42). The very nature of this
business lends itself to inadvertence in the scheduling of these
children, which leads the undersigned to conclude that the violations
were not precipitated by Respondent's willfulness.
Finally, the undersigned takes notice of the fact that at all times
during the investigation, which took approximately six weeks, Respondent
provided Ms. Dennis with its full cooperation, even assisting with the
investigation itself (Tr. at 34, 42-43). This fact tends to support the
finding that Respondent's violations were not willful and that
Respondent wished to remedy any such violations as quickly as possible.
3. Number of Minors Illegally Employed
In this case, there were thirty-two (32) minors who were the
subjects of the violations charged, a factor which was considered by Ms.
Dennis in her assessment. Although this number may seem substantial at
first blush, it is relatively low when one considers that during the
time period in question, Respondent employed over one thousand
individuals, most of whom were subject to the child labor laws. The
evidence does not indicate that Ms. Dennis considered this fact.
4. The Age of the Minors Employed
All but one of the subject minors were either fourteen (14) or
fifteen (15) years of age. The one exception was a thirteen year old
child who was approximately two weeks away from her fourteenth birthday
at the time of the violation (See PX-1 at 6; PX-2 at 26). In any
event, the ages of the minors was necessarily considered by Ms. Dennis
in her use of Form WH-266, which penalizes violations at different
monetary rates based upon the age of the minor involved (See PX-
3).
5. The Minors' Occupations and Their Exposure to Hazards
It is apparent that all the subject minors were employed by
Respondent as clerks at the stores or stands. In this capacity, they
would take the customer's order, mix the beverage in a normal household
blender, and take the customer's payment. It can hardly be said that
[Page 7]
these tasks subjected the children to any amount of harm. In fact, Mr.
Boles testified that aside from a few minor cuts, Respondent has had no
workplace injuries (Tr. at 48). Furthermore, all Respondent's stores
are located in shopping malls, indicating that the work environment is
well lighted and protected by security personnel (Tr. at 48-49). As
such, the undersigned finds that the minors were subject to very little
harm, if any, as a result of the violations.
6. The Duration of Illegal Employment
The violations in this case took place over a two-year period,
which is a relatively lengthy time frame. There is no evidence as to
whether Ms. Dennis took this factor into consideration, but it is
unlikely in that this factor is not represented on Form WH-266. As for
each individual minor's employment, the duration varies drastically.
Several individuals were employed for only a few weeks, while others
were employed for a substantial period of time. Once again, it does not
appear that these factors were considered.
7. The Hours of the Day and Whether School was in Session
These factors were clearly summarized by Ms. Dennis in her
description of the individual violations (See PX-2).
Unfortunately however, in utilizing Form WH-266, the amount charged for
each violation was based solely upon the minor's age, rather than the
specific violations occasioned by that minor's employment.
Consequently, an instance in which a fifteen year old minor worked
twenty minutes past a particular time limitation would be assessed the
same penalty as an instance in which another fifteen year old minor
worked two hours past that time limitation. Therefore, it cannot be
said that Ms. Dennis considered these factors in assessing the
penalty.[8] In reviewing these factors now, the undersigned notes that
it is difficult to weigh them in that the nature of the particular hours
violations ranged drastically from one minor to the other.
Other Considerations
In addition to the consideration of the size of business and
gravity of the violations, the Secretary has further provided:
[b]ased on all the evidence available, including the
investigation history of the person so charged and the degree
of willfulness involved in the violation, it shall further be
determined where appropriate,
(1) Whether the evidence shows that the
violation is "de minimis" and that the person so
charged has given credible assurance of future
compliance, and whether a civil penalty in the
circumstances is necessary to achieve the objectives
[Page 8]
of the Act; or
(2) Whether the evidence shows that the person
so charged had no previous history of child labor
violations, that the violations themselves involved
no intentional or heedless exposure of any minor to
any obvious hazard or detriment to health or well-
being and were inadvertent, and that the person so
charged has given credible assurance of future
compliance, and whether a civil penalty in the
circumstances is necessary to achieve the objectives
of the Act.
29 C.F.R. 579.5(d).
1. Were the Violations "De Minimis"?
As has been previously noted by the Secretary, the term "de
minimis" implies that "the law does not care for or take notice of, very
small or trifling matters." Echaveste v. Horizon Publishers and
Distributors, 90-CLA-29, Final Decision & Order (Sec'y May 11,
1994), aff'donrecon. (July 21, 1994)
(quotingBlack's Law Dictionary 388 (5th ed. 1979)).
After a review of all the evidence, the undersigned is unable to
find that the violations committed by Respondent were "very small" or
"trifling." The significant amount of children involved and the number
of violations committed prohibit such a finding. At least statutorily,
the federal government has a legitimate interest in protecting children
from what it deems to be employment harmful to their best interests.
The regulations adopted by the Secretary have attempted to effectuate
these interests. Respondent's admitted violations of these regulations
cannot be overlooked.
2. Is a Reduction of the Penalty Warranted?
The Secretary has acknowledged that if either of the alternatives
contained at 29 C.F.R. 579.5(d) is established, a reduction in the
penalty assessed is appropriate. Echaveste v. City of Wheat Ridge,
Colorado, 91-CLA-22, Final Decision and Order, at 5 (Sec'y April 18,
1995). In this case the undersigned finds that the factors of Section
579.5(d)(2) have been satisfied, and that a reduction in the penalty
assessed is appropriate.
The undersigned has previously found that Respondent has no
previous history of investigations under the child labor laws, and that
there was no willfulness involved in these particular violations. It
[Page 9]
has also been found that the violations involved no "intentional or
heedless exposure of any minor to any obvious hazard or detriment to
health or well-being," and that said violations were "inadvertent."
See 29 C.F.R. 579.5(d)(2).
Based upon the credible testimony of Mr. Boles, the undersigned
further finds that Respondent has given adequate assurances of future
compliance with the child labor laws. In particular, Mr. Boles
testified that since the investigation, Respondent has simply refused to
hire any child under the age of sixteen (Tr. at 46, 49). Crediting this
testimony, it is highly unlikely that any future violations will be
committed by this Respondent.[9]
Finally, it is noted that the penalty assessed, amounting to
somewhere between ten and twenty percent of Respondent's annual net
profit, has not served to achieve the purposes of the FLSA. At the time
of the Act's enactment, Congress expressly stated that its purpose was
"to correct and as rapidly as practicable to eliminate the conditions
above referred to . . .," including what it deemed to be "oppressive
child labor." 29 U.S.C. § 202(b); Seealso 29 U.S.C.
§ 203(l). However, in effectuating this purpose, Congress was
careful to note that it wished to do so "without substantially
curtailing employment or earning power." 29 U.S.C. § 202(b).
By imposing a penalty amounting to such a large proportion of
Respondent's annual net profit, the Department of Labor has failed to
effectuate this purpose. In response to this relatively large penalty,
Respondent has discontinued its employment of fourteen (14) and fifteen
(15) year old children altogether. To uphold such a penalty and the
method used in its calculation, would most likely set a precedent which
would discourage and or inhibit other entrepreneurs, and corporations
alike, from hiring such children. It is simply more economical for any
such business or corporation to not employ such children, rather than
face the risks of being assessed a penalty equal to as much as twenty
percent of its annual net profit. This would result in a situation in
which children of this age, who wished to be employed, might find it
difficult or impossible to find such work, depriving them of the
discipline and learning experiences associated with employment in
general.
Of course, such a large penalty may be appropriate in certain
circumstances. However, by using a boilerplate form which cannot
account for such circumstances, the Wage and Hour Division has
effectively lumped all employers into one category, imposing the same
fines for violations which occur under drastically different situations.
Doing so effectively eliminates the discretion which the Secretary
obviously thought should be applied to the assessment of any such
penalty. Certainly, use of Form WH-266 or other standard forms like it
may lend itself to administrative efficiency. But administrative
[Page 10]
efficiency does not justify the denial of due process guaranteed to each
individual employer by the applicable regulations.
In avoiding the numbers game associated with Form WH-266, and
considering all the evidence in light of the factors delineated by the
Secretary, the undersigned finds that a reduction in the penalty
assessed in this case is appropriate. In making this finding, the
undersigned has been persuaded by the following circumstances: the
nature and size of Respondent's business, Respondent's annual net
profit, the lack of any prior history of violations, the lack of
willfulness with regard to these violations, Respondent's cooperation
and assistance with the investigation, the relatively safe nature of the
occupations in which these minors were employed, Respondent's credible
assurance of future compliance, and the fact that the purposes of the
FLSA have not been carried out.
The undersigned finds that based upon the foregoing factors, a
seventy-five (75%) reduction in the penalty imposed is appropriate.
This results in a civil monetary penalty in the amount of $2,624.38.
The undersigned finds that this penalty is substantial enough to carry
out the government's legitimate interests in punishing Respondent for
its actions and in ensuring that it will comply with what the government
deems to be the children's best interests. Yet it is not so substantial
as to discourage Respondent from hiring such children in the future.
Of course, it is impossible to determine the effects that this
holding will have on other employers who employ minors. However, it is
evident that by considering the circumstances of each individual case,
any such employer is assured of a fair and reasonable penalty assessment
for any violations it may commit, and is therefore not discouraged from
hiring such children. Only in this way will it be assured that the
Department's enforcement of the child labor laws will not substantially
curtail the employment available to these children.
ORDER
For the foregoing reasons, it is HEREBY ORDERED that the
civil money penalty assessed against Respondent shall be reduced to the
amount of $2,624.38. Said sum shall be paid for violations of the child
labor provisions of the Fair Labor Standards Act, and shall be remitted
to "Wage and Hour Division, United States Department of Labor."
Entered this 16th day of May, 1996, at Long Beach, California.
SAMUEL J. SMITH
Administrative Law Judge
[ENDNOTES]
[1] The following abbreviations will be utilized herein:
Tr. = Transcript of the February 12, 1996, hearing
PX = Plaintiff's Exhibit
[2] One violation found by Ms. Dennis related to the employment of
a thirteen (13) year old child (Tr. at 14).
[3] For the purposes of these requirements, school is considered to
be "in session" from Labor Day through June 1 of each year (Tr. at
13).
[4] The two factors found in this case were the employment of an
illegal-age minor (i.e., thirteen or younger) and more than one
minor illegally employed (Tr. at 29; PX-3 at 1).
[5] Ms. Dennis was unable to explain why the recommended penalties
were increased for violations occurring after November 5, 1990 (Tr.
at 34). However, as discussed below, this increase was apparently
related to a congressional increase in the maximum fine allowable
under Section 216 of the FLSA.
[6] Of course, it is possible that Ms. Dennis did consider these
other factors in making her decision to charge for each minor who
was the subject of a violation, rather than for each violation
itself. However, the evidence, including Ms. Dennis' own
testimony, does not so indicate. As such, the undersigned must
conclude that she in fact did not consider these additional
factors.
[7] The undersigned deems it inappropriate to increase the penalty
even if review of the factors should indicate that a higher penalty
than that assessed by Wage and Hour is warranted. To do so would
in effect punish Respondent for exercising its right to request an
administrative hearing.
[8] Ms. Dennis' failure to consider these factors most likely
resulted because she charged a fine for each minor, rather than
each violation. By doing so, her failure to consider these factors
probably resulted in a lower penalty than would have been assessed
otherwise.
[9] Of course, it is not certain that no future violations will
occur. As Mr. Boles testified, children who seek employment often
present falsified age records in order to obtain employment (Tr. at
46-47). No employer who employs high school-aged children can
completely ensure that violations will not occur because of this
reason.
