USDOL v. Micro-Chart, Inc., 98-FLS-12 (ARB Nov. 4, 1998)
U.S. Department of Labor
Administrative Review Board
200 Constitution Avenue, N.W.
Washington, D.C. 20210
ARB CASE NO. 98-080
(ALJ CASE NO. 98-FLS-12)
DATE: November 4, 1988
In the Matter of:
U.S. DEPARTMENT OF LABOR PLAINTIFF,
v.
MICRO-CHART, INC., A CORPORATION,
AND GARY MAXTON, INDIVIDUALLY,
RESPONDENTS.
BEFORE: THE ADMINISTRATIVE REVIEW BOARD
For the Plaintiff:
Steven J. Mandel, Esq., William J. Stone, Esq., Barry H.
Joyner, Esq., U.S. Department of Labor, Washington, D.C.
For the Respondents:
Gary L. Maxton, pro se, New Carlisle, Ohio
FINAL DECISION AND ORDER
The Administrator of the Wage and Hour Division assessed a civil money
penalty (CMP) against Respondents Micro-Chart, Inc. and Gary Maxton under Section 16(e) of the
Fair Labor Standards Act (FLSA or the Act), 29 U.S.C. §216(e) (1994) and 29 C.F.R.
§578.3 (1997), for repeated and willful late payment of minimum wages and overtime to six
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of its employees. Respondents filed an exception requesting a hearing before a Department of Labor
Administrative Law Judge (ALJ). The ALJ agreed with the determination of the Wage and Hour
Administrator and ordered Respondents to pay the CMP. Respondents appeal on the grounds that
the FLSA does not prescribe any specific time within which wages must be paid, and that the
Department of Labor did not follow its own procedures when it assessed the CMP. We hold that
Respondents violated the FLSA when they failed to pay their employees on their regular payday, and
that the CMP was properly assessed. Therefore, we affirm the decision of the ALJ.
BACKGROUND
In 1992 and 1993, the Wage and Hour Division received complaints from
employees that Respondents had failed to pay their employees on their regular bi-weekly payday.
After investigation, the Wage and Hour Division found that Respondents violated the minimum
wage and overtime requirements of the Fair Labor Standards Act by not paying their employees on
time. T. (Transcript of hearing) 24-26. In each instance, Respondents paid back wages due and
promised to comply with the FLSA in the future. T. 24-26; 53-55.
In 1994 the Wage and Hour Division received additional complaints that
Respondents had failed to pay their employees' wages on time. A Wage and Hour investigator
determined from interviews with employees and payroll records that Micro-Chart usually paid its
employees on a bi-weekly schedule but that some employees had not been paid for as many as 14
weeks. T. 27. Respondents paid the back wages due after being notified of this violation, but Wage
and Hour assessed a CMP for repeated and willful violation of the FLSA. Using the Division's Civil
Money Penalty Report form, Wage and Hour assessed a CMP of $900 per employee but reduced the
penalty by 30 percent to $630 per employee due to the small size of Respondents' business. Wage
and Hour found that Respondents had paid six employees late which, when multiplied by the CMP
of $630 for each violation, resulted in a total CMP of $3,780. T. 29-35; see P (Plaintiff's
Exhibit) 1 and 2. Respondents filed a timely exception to the CMP and requested a hearing.
The ALJ held that Respondents violated the FLSA when they failed to pay
minimum wages due their employees on their regular pay day. ALJ Decision and Order (D & O)
at 4-5. He found that Respondents' warning to newly hired employees that the payroll could be
irregular did not shield them from liability, and that financial hardship is no defense to failure to pay
wages due on time. Id. The ALJ found that Wage and Hour properly assessed a CMP for
repeated and willful violations of the FLSA because the 1994 violations were the same as the
violations committed in 1992 and 1993, and Respondents had been informed by Wage and Hour of
the requirements of the Act. Id. at 6. Finally, the ALJ reviewed the methodology used by
Wage and Hour to calculate the CMP and found it reasonable. Id. at 7.
DISCUSSION
I. Whether Respondents' untimely wage payments violated the FLSA
We agree with the ALJ that Respondents violated the FLSA in 1994 when they
failed to make timely payments of wages. The Fair Labor Standards Act requires covered employers
to pay their employees the minimum wage and overtime pay. 29 U.S.C. §§ 206(a) and
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207(a)(1). Although the FLSA does not explicitly establish a time for payment of wages, the courts
have held that the Act implicitly requires payment on the employees' regular payday as established
by agreement or past practice of the parties. In a leading case on this issue the Ninth Circuit held
that the language and structure of the FLSA clearly contemplate that wages due be paid on the
employees' regular payday; thereafter they become "unpaid" and the employer has
violated the Act. Biggs v. Wilson, 1 F.3d 1537, 1540 (1993) . The court noted that Section
16 of the Act establishes a private right of action to collect "unpaid" minimum wages
and overtime and an equal amount in liquidated damages. "The only logical point that wages
become unpaid' is when they are not paid at the time work has been done, the minimum wage is
due, and wages are ordinarily paid -- on payday." Id. The court also reasoned that
wages must become "unpaid" at some point for the statute of limitations to begin
running, and "the most logical point a cause of action for unpaid minimum wages . . . accrues
is the day the employee's paycheck is normally issued, but isn't." Id.
Application of these principles to the facts of this case leads to the result
reached by the ALJ. Micro-Chart's practice was to pay its employees on a bi-weekly basis, T. 76,
but on numerous occasions in 1994 it made payments as much as seven or more weeks late. T. 78.
Therefore Respondents violated the payment requirement of the FLSA.
Respondents assert that the ALJ's reliance on Donovan v. Kaszycki & Sons
Contractors, Inc., 599 F. Supp. 860 (S.D.N.Y. 1984), is misplaced because the court did not
establish any specific time within which wages must be paid. Respondents' Appeal Petition (Pet.)
at unnumbered p. 2. But the court there held that the defendants violated the minimum wage and
overtime provisions of the Act by not paying workers for each workweek at the time the work was
performed. It rejected the argument that the employer's intent to make payment "at some
future date" was a defense to a violation of the Act. 599 F. Supp. at 869.
Respondents also rely on a holding of the district court in Biggs v.
Wilson, 828 F. Supp. 774, 777 (E.D.Cal. 1991), that payment is timely if it is "reasonably
prompt under the totality of the circumstances. . . ." Pet. at unnumbered p. 2. However, the
Ninth Circuit explicitly rejected that holding: "[p]aychecks are due on payday. After that, the
minimum wage is unpaid.'" Biggs v. Wilson, 1 F.3d at 1544. Other courts have
reached a similar conclusion. See Calderon v. Witvoet, 999 F.2d 1101, 1108 (7th Cir. 1993)
(placing a portion of minimum wages in a "bonus" account given to employees on their
last day of seasonal employment violates the FLSA requirement of prompt payment); Brooklyn
Savings Bank v. O'Neil, 324 U.S. 697, 707 (1945) (awarding liquidated damages where
employer failed to pay overtime compensation at the same time as regular wages although employer
had made late payment of overtime).
Department of Labor FLSA regulations and rulings also support the
conclusion that wages must be paid on the employees' regular payday. Thus, the regulations require
that "overtime compensation earned in a particular workweek must be paid on the regular pay
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day for the period in which such workweek ends." 29 C.F.R. § 778.106. Moreover, in
a 1961 Opinion Letter, the Department stated that "[W]hile the Act does not require that the
employee's compensation must be paid weekly, it does require the employer to pay minimum wages
due for the particular work week on the regular payday for the period such work week ends."
Opinion Letter, No. 63 (Nov. 30, 1961).
We affirm the ALJ's holding that Respondents violated the FLSA when they
paid their employees late.
II. Whether the Wage and Hour Division Appropriately Assessed a CMP against
Respondents
Section 16(e) of the FLSA provides that "[a]ny person who repeatedly
or willfully violated section 206 or 207 . . . shall be subject to a civil penalty of not to exceed ,000
for each such violation." 29 U.S.C. §216(e). Pursuant to that provision, the Wage and
Hour Division assessed a CMP for repeated and willful violations of the FLSA because Respondents
made late payments of wages in 1992, 1993, and 1994, and Wage and Hour had discussed the
requirements of the Act with Respondents in 1992 and 1993. See United States Dep't. of Labor
v. Baystate Alternative Staffing, Inc, Case No. 94-FLS-22, ARB Dec., Dec. 19, 1996, slip op.
at 7 (finding violations willful where employer's president and other managers had been notified
several times that their practices violated overtime requirements of the Act).
Respondents do not dispute these facts but argue that the Civil Money Penalty
Report form used by Wage and Hour -- WH-467 -- requires that there be unpaid wages due at
the time the CMP is assessed. Pet. at unnumbered p. 2. Because Respondents had paid the
wages due by the time Wage and Hour assessed the CMP, Respondents assert that they were not
properly subject to a CMP. Id. We reject this argument.
It is the language of Section 16(e) of the FLSA and its implementing
regulations, 29 C.F.R. §578, and not language on the CMP Report form which determines
whether a CMP may be assessed. Nothing in either the statutory provision or the regulations
indicates that a CMP may not be assessed where an employer has paid the back wages after a Wage
and Hour investigation has begun. Moreover, the interpretation suggested by Respondents is directly
contrary to the goal of the CMP provision, which is to sanction repeat and willful offenders of the
minimum wage and overtime provisions of the FLSA. If Respondents' interpretation were correct,
an employer could repeatedly violate the FLSA and avoid a CMP by paying back wages before the
completion of an investigation. Cf. Brooks v. Village of Ridgefield Park, 978 F.
Supp 613, 619 (D.N.J. 1997) (Allowing employer to escape payment of liquidated damages by
paying overtime compensation before liability was adjudicated would render provision of the Act
"toothless").
In any event, Respondents have misread the instructions on the Civil Money
1 The rows represent, respectively,
repeated violations, willful violations, and repeated and willful violations. The CMP is assessed by
finding the intersection of the appropriate column and row, depending on the facts of the case. The
Penalty Computation section of the CMP Report provides for a reduction or enhancement of the
penalty, again depending on the facts of the case, and for calculation of the total amount of the CMP
by multiplication of the result of all the above factors by the number of employees involved.
2 Respondents make a cryptic
reference to an Ohio state law but do not explain what that law provides or how it might be
applicable. The violations charged and penalties imposed here are based on federal law, which
makes no provision for disposing of this matter under state law.