Brock v. Wackenhut Corp.

Citations: 662 F. Supp. 1482; 28 Wage & Hour Cas. (BNA) 557; 1987 U.S. Dist. LEXIS 5384Docket: 85 Civ. 7850 (EW)

Court: District Court, S.D. New York; June 22, 1987; Federal District Court

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The case involves the Secretary of Labor suing The Wackenhut Corporation for violations of the Fair Labor Standards Act (FLSA), specifically regarding minimum wage and overtime pay. The Secretary seeks a restitutionary injunction for back wages, liquidated damages, and a prospective injunction to prevent future violations. Wackenhut argues that the Secretary has not proven the allegations and claims good faith efforts to comply with the FLSA should negate liquidated damages.

The background reveals a history of compliance monitoring by the Department of Labor (DOL) over twenty years, including numerous discussions between DOL officials and Wackenhut about past wage issues. In 1979, Wackenhut entered into a National Compliance Agreement with DOL, committing to adhere to FLSA provisions, highlighting its awareness of obligations under the law.

In February 1984, a DOL investigation initiated due to a complaint uncovered wage discrepancies among Wackenhut employees in New York City. Compliance Officer Edward Liburd identified about 190 employees who had not received proper overtime pay, ultimately calculating $16,301.02 in back wages owed to 146 security guards. Despite a promise from Wackenhut management to take corrective action, the company opted to make the requested payments rather than verify the findings, indicating a calculated avoidance of compliance.

In October 1985, Wackenhut issued checks totaling $16,301.02 to individual employees for unpaid wages, but many checks became stale, prompting the issuance of duplicate checks in April 1986. Approximately $6,000 remains unpaid due to undeliverable checks. At trial, Wackenhut contested the Secretary's evidence of overtime violations, arguing that the earnings histories relied upon did not accurately reflect the hours worked, but rather the hours paid, which could include corrections from previous weeks. To ascertain actual hours worked, examination of installation time records and daily sign-in sheets was necessary. The Court ordered Wackenhut to produce these records, which they did for four employees identified by the Secretary. The records revealed that these employees did not receive proper overtime pay for certain weeks, and for three of the employees, there was no evidence of correction for prior underpayments.

Some violations occurred before and after a significant conference in March 1985, with one employee receiving more overtime in some weeks than deserved, which addressed earlier underpayments. Wackenhut attributed its overtime payment failures to clerical errors and the inadequate totaling of hours by area supervisors, who managed multiple sites without a systematic approach. During this period, Wackenhut's payroll was prepared by only three employees for approximately 450 guards, leading to frequent errors. Following an investigation, Wackenhut implemented a new computer program in November 1985 to automatically calculate overtime, with no evidence of violations reported since its implementation. The parties agree that Wackenhut qualifies as an "employer" under the Fair Labor Standards Act (FLSA), but dispute the sufficiency of the Secretary's proof regarding 145 alleged overtime violations.

The Secretary asserts that employee earnings histories provide a prima facie case of overtime violations, highlighting instances where hours over 40 were not compensated at the appropriate overtime rate. Wackenhut counters that these records do not definitively prove violations, as the hours reported may be adjusted to account for unpaid overtime in previous weeks. Wackenhut claims that discrepancies could arise from clerical errors or non-payment in that week, challenging the Secretary to demonstrate that the listed overtime hours are not inflated due to such errors. The burden lies with Wackenhut to prove inaccuracies in the records, as established in *Anderson v. Mt. Clemens Pottery Co.*, where the Supreme Court ruled that insufficient employer records allow employees to infer unpaid work. Wackenhut's refusal to conduct a self-audit and its decision to settle underpayment claims rather than produce necessary records further imply its responsibility for compliance. Despite knowing the Secretary's evidence, Wackenhut provided limited documentation to demonstrate corrections of underpayments. The lack of adequate record-keeping should not benefit Wackenhut, as it hinders the ability to ascertain FLSA violations. Consequently, the burden of proof regarding payment corrections remains with the employer, aligning with the principle that the cost of maintaining accurate records is a necessary obligation under the FLSA.

The Secretary's analysis of Wackenhut's employee earnings histories supports a reasonable inference of overtime pay violations affecting 145 employees, with Wackenhut only correcting underpayment for one of three identified work weeks. Wackenhut has acknowledged one minimum wage violation but provided no evidence of correction. The statute of limitations for Fair Labor Standards Act (FLSA) claims is two years, extendable to three years for willful violations under the Portal-to-Portal Act. Wackenhut did not assert a statute of limitations defense in its initial answer or during the trial, thereby waiving this defense. Regarding liquidated damages, the FLSA allows employers to be liable for unpaid wages plus additional damages, which are compensatory rather than punitive. Wackenhut claimed good faith in its payroll practices, citing employee training and low percentages of violations compared to total payroll transactions. However, the court must assess good faith based on facts at the time of violations, and Wackenhut's lack of corrective measures prior to the investigation undermines its defense. Thus, Wackenhut's arguments do not satisfy the good faith requirement under section 260.

Wackenhut failed to prove that its errors did not violate the Fair Labor Standards Act (FLSA) or that its failure to update its system was a good faith omission, thus not meeting the burden of proof to avoid liquidated damages. The Secretary requested a nationwide injunction against Wackenhut for future FLSA violations, but the court determined that such relief was unwarranted. It noted that previous cases granting injunctions involved aggravated misconduct, such as false reporting and deliberate record-keeping failures, which were not evident in Wackenhut's actions. Although Wackenhut's back wage violations were relatively small in total payroll context, they were significant for the affected employees and constituted violations of the law. Wackenhut has since implemented a new computer system to ensure accurate record-keeping and payment of overtime, addressing prior inadequacies. The court balanced these factors and concluded that prospective injunctive relief was unnecessary, as it would not harm employees or public interest. Consequently, Wackenhut is ordered to distribute all back wages owed, along with equivalent liquidated damages, and to send checks for these damages to affected employees. An order addressing the correction of a specific underpayment issue and funds for employees whose whereabouts are unknown may also be included.

Harris received an overtime premium for 13 hours during the week ending September 15, 1985, despite not exceeding 40 hours of work that week. An installation time sheet indicated that 8 hours of overtime were paid to rectify an underpayment from the week ending August 11, 1985. Additionally, although Harris received overtime for 8 non-overtime hours the week ending June 23, 1985, there was no evidence linking this payment to an underpayment for the week ending June 16, 1985, as identified by the Secretary. Wackenhut did not provide earnings histories for all 145 employees at trial, leading the Court to rely on Liburd's uncontradicted testimony, which indicated that these employees received less overtime pay than what was reflected in their records for certain weeks. Furthermore, no motion to dismiss based on statute of limitations was filed post-trial, making it too late to raise such a defense. Various precedents are cited regarding the handling of similar cases and defenses.