United Slate, Tile and Composition Roofers, Damp and Waterproof Workers Association, Local 307 v. G & M Roofing and Sheet Metal Company, Inc.

Citations: 732 F.2d 495; 115 L.R.R.M. (BNA) 3700; 26 Wage & Hour Cas. (BNA) 1151; 1984 U.S. App. LEXIS 23562Docket: 82-3633, 83-3086

Court: Court of Appeals for the Sixth Circuit; April 13, 1984; Federal Appellate Court

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G. M. Roofing and Sheet Metal Company, Inc. appealed a decision by the United States Court of Appeals, Sixth Circuit, which held that G. M. violated the Labor-Management Relations Act and the Fair Labor Standards Act. The court found that G. M. breached a wage contract with the United Slate, Tile and Composition Roofers, Damp and Waterproof Workers Association, Local 307, and failed to pay overtime wages to six workers. Following the judgment in favor of Local 307, the court awarded $28,079.75 in attorney fees to the union.

The case arose when G. M. opened a branch in Cambridge, Ohio, while previously being located in the Canton-Louisville area under a contract with Local 88. G. M. was aware of Local 307's jurisdiction over Cambridge workers. In a meeting in July 1975, G. M.’s chairman, Jack George, orally agreed to adhere to the collective bargaining agreement with Local 307, which was later confirmed when G. M.’s vice president signed a supplemental agreement for cost-of-living wage adjustments. Although the main contract was not executed by G. M., the court determined that the company was bound by it from 1975 until the effective date of a new contract in March 1976.

The court identified three breaches by G. M.: (1) failure to pay the correct hourly rates for various worker classifications; (2) failure to compensate for overtime hours worked beyond the standard workday; and (3) failure to contribute forty cents per hour worked to Local 307's pension fund.

The second statutory claim under the Fair Labor Standards Act seeks unpaid overtime compensation, liquidated damages for that compensation, and attorney fees for individual workers. The lower court found that G. M violated 29 U.S.C. Sec. 207 but chose not to award duplicate compensation already granted to the workers through a union decision, nor did it grant liquidated damages. This decision stemmed from the court's belief that G. M mistakenly thought the Cambridge workers were compensated under a pre-existing agreement with the Canton Union Local, which allowed for early reporting without overtime. Although G. M's actions were incorrect, they did not warrant liquidated damages.

In a subsequent hearing related to attorney fees, the court awarded $28,079.75 after determining that such fees are mandatory under 29 U.S.C. Sec. 216(b). The current appeal consolidates challenges to both the substantive judgment and the attorney fees, presenting four main assignments of error: 1) the district court's finding of no valid bargaining agreement with Local 307; 2) the assertion that any contract was void as a "prehire" agreement; 3) the claim that Local 307 could not pursue the action due to failure to exhaust grievance procedures; and 4) the contention that the fee award exceeded the contingent fee arrangement and failed to account for hours spent on claims not eligible for fee recovery.

Regarding the existence of a contract between G. M and Local 307, the finding is factual and subject to a "clearly erroneous" standard of review, whereby the appellate court must defer to the lower court's factual determinations unless there is a strong conviction of error. Evidence, particularly credible testimony from Arnett, supports the conclusion that G. M agreed to the master agreement with Local 307 as of July 1975, affirming the obligation to adhere to that agreement.

G. M argues that any potential contract is unenforceable as a "prehire" agreement, which is defined as a labor contract established before the hiring of employees and before proof of union majority representation. Citing the Supreme Court case N.L.R.B. v. Local 103, G. M contends that while a company can enter a contract with a union before a majority is established, such a contract is unenforceable until a majority is confirmed through an election. 

Two critical points arise from this argument. First, even if prehire contracts lack enforceability under the Labor Management Relations Act, this does not exempt violations of the Fair Labor Standards Act, which protects individual workers' rights to minimum wage and hour standards, regardless of union contract validity. Second, the Supreme Court's decision in Jim McNeff, Inc. v. Todd refutes G. M's interpretation of Higdon. 

In Higdon, the Court determined that a minority union could not compel an employer to bargain based solely on a prehire agreement, emphasizing that such agreements do not confer the same legal rights as those established by a representation election. The Court aimed to protect employees' rights to choose their bargaining representatives and highlighted that prehire agreements should be voluntary and voidable if majority support is not demonstrated.

In Jim McNeff, the Supreme Court clarified that a union can enforce monetary obligations from a prehire agreement without infringing on employees' voting rights for their bargaining unit. The ruling established that enforcement of these obligations does not imply that the union represents a majority of employees but simply enforces an agreement that the employer voluntarily entered into and did not repudiate. The Chief Justice noted that the concerns present in Higdon regarding employee rights and voluntary agreements do not apply in this case, as the enforcement of such contracts is sanctioned by Congress specifically for unique situations in the construction industry.

Respondents' Section 301 action does not undermine the voluntary and voidable nature of a Section 8(f) prehire agreement, as the petitioner entered into the agreement voluntarily and has not indicated any intention to repudiate it. Despite the right to void the contract, the petitioner accepted its benefits and misled the union regarding its commitment. A Section 8(f) prehire agreement can be repudiated until a union gains majority status, yet an employer’s monetary obligations can still be enforced in a Section 301 action brought by a union before repudiation occurs, regardless of majority support.

The trial judge correctly determined that Local 307 could enforce the prehire agreement with G. M through a Section 301 suit. G. M argues that the grievance procedure established by the contract must be exhausted before the union can sue for enforcement, creating a conflict: the union must claim G. M did not repudiate the contract to sue, while also arguing it could not seek arbitration because G. M had repudiated it. Local 307 cites case law indicating that exhaustion of contractual remedies is not required when a company effectively repudiates the contract, as established in Vaca v. Sipes and Geddes v. Chrysler Corp. 

Additionally, Local 307 references cases allowing for exceptions to the exhaustion requirement under circumstances where pursuing remedies would be futile, as discussed in Glover v. St. Louis-San Francisco Railway. The main issue is that G. M contends the Local 307 contract is inapplicable, which differs from outright repudiation; G. M has never acknowledged being bound by the contract. Given that the grievance board requires company participation, asserting that Local 307 should pursue arbitration would be futile, as G. M denies any obligation under the contract. The precedent set in Jim McNeff supports the conclusion that no exhaustion of contractual remedies is necessary when there is no dispute over the contract's existence.

G. M contends that attorney fees awarded should be limited by the contingent fee contract between the plaintiff and their counsel, arguing that the trial court did not properly separate hours worked on the L.M.R.A. cause of action from those on the wage claim, the latter being eligible for fee recovery. The district court's fee award adhered to the Fair Labor Standards Act (FLSA) requirements, specifically 29 U.S.C. Sec. 216(b), which mandates that reasonable attorney fees be awarded to plaintiffs. However, neither the FLSA nor its legislative history clarifies what constitutes a "reasonable" fee or addresses the impact of contingent fee agreements on this determination.

It is established that while attorney fee awards under Sec. 216(b) are mandatory, the district court has discretion over the amount. The appellate court's review focuses on whether this discretion was abused in awarding an unreasonable fee. Determining a reasonable fee involves assessing various factors known to the trial court, reflecting the congressional intent of the FLSA to improve labor conditions and ensure that employees can pursue legal action without incurring legal fees.

Local 307 has met the preliminary criteria for recovering fees under Sec. 216(b) by prevailing on its FLSA complaint, necessitating an evaluation of the district court's award's reasonableness, especially concerning the alleged limitation set by the contingent fee arrangement. The court's review is informed by the Supreme Court's decision in Hensley v. Eckerhart, which aids in assessing what constitutes a "reasonable" fee in this context.

In Hensley v. Eckerhart, the Supreme Court addressed the awarding of attorney fees under the Civil Rights Attorney's Fees Awards Act of 1976, which allows federal civil rights litigants to obtain reasonable fees as part of court costs. The Court emphasized that the standards for fee awards in this context are broadly applicable to other cases where Congress has authorized fee recovery for a "prevailing party." 

The district court's first step in fee determination is to establish a reasonable hourly rate and the number of hours reasonably spent on the litigation, creating an initial estimate of the attorney's service value. Adequate documentation of hours is essential; inadequate or retrospective estimates should not be accepted at face value. 

Following this, the trial judge must assess the initial fee estimate against various factors, particularly the outcomes achieved by the litigant. The Court noted that the goal of fee recovery is not solely financial gain but to support the enforcement of congressional policies and rights, allowing plaintiffs to seek damages without incurring legal costs. An overemphasis on monetary judgments could deter attorneys from pursuing cases with significant statutory violations that might yield minimal financial damages.

The excerpt also raises the issue of whether a contingent fee agreement should limit the fee award. The court suggests that restricting fees to the contracted amount may undermine congressional intentions behind the Fair Labor Standards Act (F.L.S.A.) and the ability to address fundamental issues related to wage statutes. Thus, the court is inclined to reject the notion of using the contingency arrangement as a cap on attorney fees.

Contingent fee agreements in Fair Labor Standards Act (F.L.S.A.) litigation have been subject to scrutiny, with historical cases raising doubts about their validity. In *Skidmore v. John J. Casale, Inc.*, concerns were expressed about whether employee recoveries should be net, implying that attorney fees should be solely covered by the employer. Various circuit court decisions, including *Harrington v. Empire Const. Co.* and *Hayden v. Bowen*, established that such agreements do not influence a district court's assessment of attorney fees. The courts emphasized that the determination of reasonable fees rests solely with the district court, independent of any fee arrangement between the plaintiff and their attorney.

Moreover, the F.L.S.A. mandates that the employer is responsible for covering court costs and a reasonable attorney's fee, regardless of the plaintiff's fee agreement. While the existence of a contingency contract may inform the market value of legal services, it does not bind the court's discretion. The standards set forth in *Hensley v. Eckerhart* apply in these contexts, ensuring that excessive fee awards are avoided while considering the risks associated with contingent representation. A prevailing party is entitled to fees based on the market rate for reasonable hours worked on successful claims, which includes recognition of non-monetary benefits achieved for broader policy vindication. Ultimately, a fee award under Section 216(b) should not be constrained by any contingent fee agreement.

The appellant challenges the lower court's award of attorney fees, specifically criticizing its failure to separate hours spent on the Sec. 207 suit from those on the Sec. 301 cause of action. Both the Local and individual employees assert that the trial judge did not distinguish between compensable and non-compensable hours but maintain that only compensable hours were presented to the court and that the hours for both claims were the same due to overlapping facts. The appellees' argument is deemed inadequate, as the transcript from the attorney fee hearing does not confirm that only hours related to the Sec. 207 suit were submitted or demonstrate how the Sec. 301 action was intertwined with the Sec. 207 case. While the Hensley decision grants discretion to the district court in determining fee awards, it emphasizes the need for a clear rationale behind such awards. The absence of a concise explanation and the lack of factual support in the record for excluding time unrelated to the Sec. 207 complaint necessitate remanding the case for a reevaluation of the attorney fee award. The remainder of the district court's judgment is affirmed. Additionally, Congress’s intent behind the Fair Labor Standards Act (FLSA) is outlined, highlighting the detrimental labor conditions in commerce and the need for correction without significantly impacting employment. Documentation supporting claimed hours must be detailed and credible, as emphasized by previous case law, and the district court may consider other relevant factors, although many are typically included in the initial calculation of reasonable hours.