DATE: June 30, 1993
CASE NO. 92-CLA-45
IN THE MATTER OF
ACTING ADMINISTRATOR,
WAGE AND HOUR
DIVISION,
PLAINTIFF,
v.
CHISM TRAIL, INC.,
d/b/a/ MAXI FOOD and
RAY CHISM, JR.,
RESPONDENTS.
BEFORE: THE SECRETARY OF LABOR
FINAL DECISION AND ORDER
This case arises under the child labor provisions of the
Fair Labor Standards Act of 1938, as amended (FLSA), 29 U.S.C.
212 and 216(e) (1988), and its implementing regulations, 29
C.F.R. Parts 570 and 579 (1990), and Part 580 (1991). Among
other things the child labor provisions of the FLSA prohibit
children between the ages of 16 and 18 from operating equipment
which the Secretary has found to be "particularly hazardous." 29
U.S.C. 203(1), 212 (1988). The Administrative Law Judge (ALJ)
upheld the Wage and Hour Division's determination that
Respondents (hereinafter "Chism Trail") had violated FLSA
Hazardous Occupation Order 12 (HO 12), 29 C.F.R.
570.63(a)(1)(i), pertaining to the operation by minors of an
automated scrap-paper baler, but reduced the penalty assessed
from $5,300.00 to $3,400.00. The Acting Administrator of the
Wage and Hour Division (herinafter "the Administrator") appealed
the Decision and Order (D. and O.), challenging the reduction of
the assessed penalty. Although given the opportunity, Chism
Trail did not file at timely brief.
The facts as found by the ALJ are in large part
uncontroverted and in any event are supported by substantial
evidence. Chism Trail operates several grocery stores in the
Memphis, Tennessee area, including a "Maxi Food" store located at
4082 Highway 61 South, in Memphis. D. and O. at 2. The parties
stipulated that at all relevant times Chism Trail's employees
were employed in an enterprise engaged in commerce or in the
production of goods for commerce within the meaning of
3(s)(1)(A) of the FLSA, 29 U.S.C. 203 (s)(1)(A) (1988).
Transcript (T.) 10; D and O. at 2. As a result of an
investigation the Wage and Hour Division determined that six
Chism Trail employees at the Maxi Food store who were minors
during the relevant period had operated an automated scrap-paper
baler in violation of HO 12. 29 C.F.R. 570.63. T. 35-40;
Government's Exhibit (GX) 1. Three children testified at trial:
Christopher Body, Doyle Bradburn, and Lee Royal Franklin. All
three testified that they had placed scrap paper in the baler.
D. and O. at 3 and 5; T. 13, 18, and 28. Christopher Body
testified that he had turned on the baler on one occasion. T.
17-18. All three testified that they had been instructed to
place items in the baler by supervisory personnel. T. 13, 19,
and 28. The Wage and Hour Investigator testified regarding three
other minors--Robert Barr, Eric Hulbert and Jermaine Oliver--who
told him that they had placed cardboard boxes in the baler when
they were under age 18 and employed by Chism Trail. T. 40-41; D.
and O. at 5.
It is uncontested that Chism Trail had an expressed policy
prohibiting minors from using the baler in the Maxi Food store,
and that the baler itself carried a boldly lettered sign
prohibiting minors from operating it. T. 77-79, 93, 106-107; D.
and O. at 5. Substantial evidence supports the ALJ's finding,
however, that at least three of the children were instructed to
operate the baler by their supervisors. T. 13, 17-18, 28, 102;
D. and O. at 5. I specifically affirm the ALJ's findings that
all six children operated the baler in violation of 29 C.F.R.
570.63(a)(1)(i), and that three of those children were
instructed to do so by supervisors in spite of Chism Trail's
expressed policy to the contrary.
The Administrator takes exception to the ALJ's reduction of
the amount of the penalty which the Administrator assessed.
Noting that the amount in controversy--a difference of $1900--is
small, the Administrator challenges the principle upon which the
ALJ's reduction is based. In assessing penalties related to each
minor the Administrator distinguished between violations which
had occurred prior to the amendment of the civil money penalty
(CMP) provision of the child labor provisions of the FLSA and
those which had occurred partly before and partly after, or
entirely after the amendment. Thus, Chism Trail was assessed
$600 for the 16 year old child and $500 for the 17 year old child
who operated the baler prior to November 1990, and $1000 for each
of three 17 year old children, and $1200 for the 16 year old
child who operated the baler after November 1990. R. and D. at
3. Although the ALJ approved the rationale underlying the
penalties assessed for pre-November 1990 violations, he rejected
the Administrator's twofold increase of penalties for post-
November 1990 violations. "[N]o rationale is provided to justify
a higher assessment on" the basis of the tenfold statutory
increase in the penalty maximum. "[T]here is no compelling
reason to raise all of the penalties for the violations" that
occurred after the effective date of the penalty amendment. "In
the absence of any justifiable rationale, or any reason other
than the raising of the ceiling for the higher penalties, such
apparently automatic increases are deemed unwarranted." D. and
O. at 8.
I disagree with the ALJ on this matter, and, for the reasons
stated below, affirm the violations as found and order the
payment of the penalty as originally assessed by the
Administrator.
Section 16(e)(3) of the FLSA, 29 U.S.C. 216(e)(3) (1988)
requires that "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." Prior to November 5, 1990,
the maximum penalty per employee who was found to be in violation
of the child labor provisions of the Act was ,000. 29 U.S.C.
§ 216(e) (1988). However, as noted above, in 1990 that
maximum was statutorily increased to $10,000. The ALJ ruled that
the tenfold increase in the maximum allowable penalty under the
CMP provisions of the Act should not necessarily affect the
amount of the penalty assessed, and therefore rejected the
Administrator's twofold increase in penalties for employees whose
violations occurred after the effective date of the increase in
CMP's. D. and O. at 8-9. The ALJ noted that the respondents
were cooperative in the investigation, that they had no prior
history of child labor violations or injuries to minors, and that
the president, Ray Chism, Jr., provided adequate assurances of
future compliance with the child labor laws. D and O at 9. "For
these reasons," he stated, "less rigorous penalties are
reasonable and appropriate in this case, and will achieve the
objectives of the child labor provisions of the Fair Labor
Standards Act." Ibid. Although I do not conclude that
the tenfold increase in penalty maximums enacted by Congress
requires that all CMP's automatically should be increased above
pre-1990 levels, I do conclude that, absent some significant
showing that such a result is inappropriate in a particular case,
penalty levels in post-1990 cases should reflect Congress' clear
intent to increase the cost to employers of failing to comply
with the requirements of the child labor provisions of the FLSA.
The twofold increase in post-1990 penalties in this case is well
within the realm of reasonableness, and the ALJ clearly erred
when he reduced those penalties.
The CMP provision for child labor violations was first added
to the FLSA in 1974, "in an effort to strengthen and promote
vigorous enforcement of the child labor restriction." S. Rep.
300, 93d Cong., 1st Sess. 31 (1974). The House Budget Committee
Report stated that the 1990 increase in the maximum assessable
penalty under the CMP provision from ,000 to $10,000 "is
consistent with the Secretary of Labor['s] . . . testimony on
increased child labor enforcement before the House Subcommittee
on Labor Standards, and the Department of Labor's overall
enforcement strategy for child labor violations." H.R. Rep. No.
881, 101st Cong., 2d Sess. 36 (1990). The Conference Report
noted that the increased CMP maximum constituted an additional
effort to "help deter violations and assist the Department of
Labor in its enforcement of the law regulating child labor."
H.R. Conf. Rep. No. 964, 101st Cong., 2d Sess. 690 (1990).
Hearings held on the child labor CMP issue (see footnote 5,
supra) reflect that the assessment of higher penalties was
intended to have its greatest impact on employers who commit
"egregious or flagrant violations" and those who employ minors in
hazardous occupations (such as the case at hand). Child Labor
Provisions of the Fair Labor Standards Act: Hearings Before the
Subcomm. on Labor Standards of the Comm. on Education and
Labor, 101st Cong., 2d Sess. 34, 36 (1990) (statement of then
Secretary of Labor Elizabeth Dole).
Several congressional supporters of increased CMP maximums
in child labor cases testified at the House Subcommittee
hearings. Congressman Lantos stated that he was "pleased . . .
that [the] Secretary [of Labor was] supporting increased civil
and criminal penalties," and stated that the government "cannot
continue the practice of merely slapping the wrist of businesses
which abuse child labor." Id. at 5. Congressman Schumer,
complaining about the previous cap on penalties, testified that
"we certainly want to see the existing law on child labor
enforced and socked with significant[ ] penalties. Id. at
14. Congressman Pease noted that under the new penalty structure
it would be "up to the Department [of Labor] to decide where in
the continuum to put the actual penalty." Id. at 6.
The Secretary promulgated regulations to implement the new
CMP provision at 29 C.F.R. § 579.9. The preamble to those
regulations specifically addresses the situation at issue here;
where some violations occurred before the effective date of the
increased CMP maximum and other violations occurred after the
effective date. In such situations "[t]hose violations occurring
before November 5 [1990] will be subject to the penalties under
the prior law and those occurring on or after November 5 will be
subject to the new penalties." 56 Fed. Reg. 8678 (1991). Then
Secretary Martin also stated in the preamble that although the
same factors would continue to be weighed in determining an
appropriate penalty, "[i]t is anticipated that these
considerations will result in relatively small increases
in assessments for nonserious violations and much larger
increases for very serious violations." Ibid.
(emphasis supplied).
Thus, the legislative history of the increased CMP provision
as well as the Department's own regulatory history establishes
that the substantial increase in the CMP maximum was to have an
impact on penalty sizes--even in cases which do not present the
most egregious violations. Here I am presented with an employer
who complied with the form of the law by posting a notice
prohibiting minors from operating the scrap-paper baler. In
practice, however, Chism Trail failed to prevent, and in some
cases ordered the commitment of child labor violations. D. and O.
at 3-5. These are not merely failures to complete paperwork.
Children were operating a piece of machinery which the Secretary
has determined is hazardous and therefore not to be used by
minors. These violations were happening with the tacit
acquiescence and in some cases the actual knowledge of the
employer. Ibid. For these reasons, I concur with the ALJ
that the penalties assessed by the Administrator for pre-November
1990 violations were appropriate, but conclude that the ALJ's
rejection of the Administrator's modest twofold increase for
post-November 1990 violations was clearly erroneous.
For the foregoing reasons I affirm that part of the ALJ's
decision which upheld the penalty assessed by the Administrator
with regard to Doyle Bradburn, Jr. and Eric Hulbert, and reverse
that part of the ALJ's decision which reduced the penalty
assessed by the Administrator with regard to Robert Barr, Jr.,
Christopher Body, Lee Royal Franklin, Jr., and Jermaine Oliver.
Accordingly, pursuant to 29 C.F.R. § 580.18(a), Chism Trail
is ordered to pay a penalty of $5,300.00 for violations of the child
labor provisions of the Fair Labor Standards Act, as amended, 29
U.S.C. §212 216(e) (1988 and Supp. III 1991).
SO ORDERED.
_____________________
Secretary of Labor
Washington, D.C.
