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Labor Standards File No. 6737-033005 OAH Docket No. 11-1900-19544-2 |
STATE
OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE COMMISSIONER OF LABOR AND INDUSTRY
|
In the Matter of the Order to Comply: Labor Law Violation of Daley Farm of |
FINDINGS OF FACT,
CONCLUSIONS AND RECOMMENDATION |
The
above-entitled matter came on for hearing before Administrative Law Judge Barbara
L. Neilson at 9:30 a.m. on March 29, 2011, at the Office of Administrative
Hearings,
Kelly S. Kemp Assistant Attorney General, appeared on behalf of the Department of Labor and Industry (Department). Meghan A. Burroughs, Attorney at Law, appeared on behalf of Daley Farm of Lewiston (Daley Farm or Respondent).
STATEMENT OF ISSUES
The
issue presented in this case is whether Daley Farm owes back overtime wages and
liquidated damages to the employees identified in Exhibit B attached to the Amended
Notice of Hearing, and whether any further relief should be ordered.
The
Administrative Law Judge concludes that Daley Farm owes the identified
employees back pay for unpaid overtime and liquidated damages, but recommends
minor adjustments in the amounts to be paid to two employees.
Based upon all of the files, records and proceedings herein, the Administrative Law Judge makes the following:
FINDINGS OF FACT
Factual
Background
1.
Daley Farm is a 3,500-acre family-owned dairy and feed
operation located in
2.
Mark Daley is a partner and the Dairy Manager of Daley Farm.[2]
3.
Mr. Daley’s sister, Michelle DePestel, is a partner and the
CFO of Daley Farm. Ms. DePestel is also
the Office Manager of Daley Farm and has performed the book-keeping and payroll
duties for the farm since approximately 2004.[3]
4.
In 2005, Daley Farm employed 41 employees. Its employees were paid twice a month.[4]
5.
The Minnesota Fair Labor Standards Act (FLSA)[5]
generally requires that covered employees be paid a minimum wage[6] and, if
they work more than 48 hours in a workweek, they be paid overtime for the extra
hours at a rate of at least 1-1/2 times the regular rate.[7] The Department is responsible for enforcing
the FLSA.[8]
6.
The Department employs three basic approaches when
conducting FLSA investigations: “inform
and educate” investigations, Departmental investigations, and self-audit
investigations. Under the “self-audit”
approach, an employer is given a packet of information and a copy of the statute
and is asked to perform a calculation regarding minimum wage and/or overtime
paid and any balance due.[9]
7.
It is undisputed that Daley Farm pays its employees more
than the state minimum hourly wage. Full-time
employees receive paid vacation and are eligible to receive milk and beef from
the farm. Daley Farm also provides full
health care coverage for full-time employees who have been employed at Daley
Farm for at least three months.[10]
8.
Daley Farm has never paid its employees overtime wages. Daley Farm believes its employees are exempt
from the FLSA under Minn. Stat. § 177.23, subd. 7(2), because they are employed
in agriculture on a farming operation and are paid a salary greater than the
individual would be paid if they worked 48 hours at the state minimum wage plus
17 hours at 1-1/2 times the state minimum wage per week. Daley Farm bases its position in part on a 2005
decision in its favor in a conciliation court case in
9.
For the purposes of this case only, the Department
stipulated that the employees of Daley Farm for whom back pay is sought were
employed in agriculture.[12]
Department’s Investigation
10.
In 2005, after receiving a complaint regarding the
Respondent’s overtime practices, the Department assigned Michelle Dreier, a
Senior Labor Investigator, to conduct the investigation as a self-audit. Ms. Dreier initially sent a packet of
self-audit forms to Daley Farm (including a Master Sheet form and a Minimum
Wage/Overtime Computation form) and asked Daley Farm to complete them. Daley Farm filled out the self-audit forms in
a manner that indicated the number of hours worked by its employees on a
bi-monthly basis and returned the forms to the Department in June of 2005. Because the Department considers a seven-day
consecutive period to be a work week, Ms. Dreier asked Daley Farm to repeat the
self-audit on a weekly basis. Daley Farm
thereafter resubmitted the self-audit forms but did not provide a Master Sheet.[13]
11.
After reviewing Daley Farm’s second response and supporting
materials, Ms. Dreier concluded that the salaried employees all made over the
thresholds set forth in the statute and were not owed any overtime, but certain
hourly employees were working more than 48 hours per week and were owed overtime. Because some of the materials provided by
Daley Farm were difficult to decipher and Daley Farm had not submitted a Master
Sheet, Ms. Dreier decided to change the audit approach to a Departmental audit
rather than a self-audit. She sent Daley
Farm a records request and also sought the names and addresses of its
employees.[14]
Daley Farm subsequently provided copies
of pay stubs and time cards to the Department.[15]
12.
Ms. Dreier calculated the hours worked by Daley Farm
employees during the audit period using a seven-day work week. She deducted from hours worked a one-hour
lunch break and any vacation time taken by the employee. Based upon her review of the materials
provided by Daley Farm, Ms. Drier concluded that overtime was owed to certain
hourly employees.[16]
Procedural History
13.
On October 16, 2006, the Department served Respondent with an
Order to Comply: Labor Law Violation
alleging that Respondent had failed to pay certain of its employees time-and-a-half
for all hours worked over 48 in a work week during the audit period of April 1,
2003, to April 1, 2005. The Department
also provided Respondent with a copy of a Master Sheet it had prepared showing
the amount of overtime due to each employee.[17]
14.
On March 18, 2008, after attempts to resolve the issues in
this matter were unsuccessful, the Department issued a Notice and Order for
Hearing and Pre-Hearing Conference initiating this contested case proceeding.
15.
On June 12, 2008, Daley Farm brought a Motion for Summary
Disposition arguing that its employees are not subject to the FLSA’s overtime
pay provision. Citing Wenigar v. Johnson,[18] Daley
Farm argued that its workers were excluded from the definition of “employee”
set forth in Minn. Stat. § 177.23, subd. 7(2), because they were paid more on
an hourly basis than they would have been paid if they had worked 48 hours at
the applicable state minimum wage plus 17 hours at 1-1/2 times the state
minimum wage per week. They further
contended that they fell within the agricultural worker exemption in the
federal Fair Labor Standards Act and
16.
Oral argument on the motion was heard on July 24, 2008. The OAH record with respect to the motion
closed on that date.
17.
On August 27, 2008, the Administrative Law Judge issued a
decision recommending that the Commissioner of Labor and Industry grant the
Respondent’s motion for summary disposition and dismiss the Department’s Order
to Comply: Labor Violation. Based on the holding in Weniger, the Administrative Law Judge concluded that the Daley Farm
workers at issue in this case were exempt from the overtime requirements of the
Minnesota FLSA under Minn. Stat. § 177.23, subd. 7(2).
18.
On October 6, 2008, the Department filed exceptions to the
Administrative Law Judge’s Recommended Order.
19.
On December 22, 2008, Assistant Commissioner Patricia Todd issued
an Order in which she did not adopt the Administrative Law Judge’s
recommendation and instead denied the Respondent’s motion for summary
disposition and affirmed the Department’s Order to Comply: Labor Law Violation. The Assistant Commissioner
determined that Respondent’s employees are not excluded from the Minnesota FLSA’s
overtime provisions as a matter of law. On
January 25, 2009, Assistant Commissioner Todd issued an Amended Order in which
she corrected a typographical error.
20.
Respondent thereafter petitioned the Court of Appeals for a
Writ of Certiorari to review the Assistant Commissioner’s Order. On February 10, 2009, the Minnesota Court of
Appeals granted the Department’s motion to dismiss the appeal and discharged
the writ of certiorari. The Court noted
that, if the Commissioner finds an employer violated the FLSA, the Commissioner
is required under Minn. Stat. § 177.27, subd. 7, to order the employer to pay the
aggrieved parties back pay, gratuities, and compensatory damages (less any
amount actually paid to the employee by the employer), as well as an additional
equal amount as liquidated damages. Because
the award of damages to the employees and the amount of civil penalty and
costs, if any, against the Respondent had not been determined, the Court
determined the December 22nd Order was interlocutory in nature and
the appeal was premature.[19]
21.
On May 8, 2009, in response to an inquiry from OAH staff,
the Department provided the Office of Administrative Hearings with copies of
the Assistant Commissioner’s decisions and the appellate record.
22.
On September 22, 2010, the Department returned the official
record in this matter to the Office of Administrative Hearings for further
proceedings.
23.
On September 23, 2010, the Department issued an Amended
Notice and Order for Prehearing Conference.
The Amended Notice indicated that the issue of whether the Respondent
had violated the overtime requirements set forth in Minn. Stat. § 177.25 was
already decided by the Assistant Commissioner’s Order. It identified the remaining issues for
hearing as (1) whether the Respondent owed back wages/compensatory
damages to the individuals identified in Exhibit B attached to the Notice in
the amounts identified therein; and (2)
whether the Respondent owed an equal amount as additional liquidated
damages. This matter was subsequently
scheduled for hearing on March 29, 2011.
24.
Prior to the hearing, Sara Elliott (then a Senior Labor
Investigator for the Department) and Marlene Burges (then a Lead Worker for the
Department’s Labor Standards Division) used the records provided by Daley Farm to
recalculate the amount of overtime due. They
used the time cards provided by Respondent to determine the hours worked by
each employee, and the pay stubs provided by Respondent to verify the rate of
pay. They based their calculations on a
seven-day work week that ran from Sunday to Saturday. Like Ms. Dreier, they did not count a
one-hour lunch break or vacation hours in the hours worked by each
employee. Ms. Elliott double-checked the
calculations in the weeks prior to the hearing and corrected certain
errors. Hearing Exhibit 10 provides the
Department’s best estimate of the amount the Department believes is owed. Hearing Exhibit 11 summarizes the totals from
Exhibit 10.[20]
25.
During the hearing on March 29, 2011, the parties noted that
some of the materials filed in this matter identify private employee data, such
as social security numbers, and requested that those materials be considered to
have been filed under seal. The request
was granted by the Administrative Law Judge.
Overtime Pay Computation
26.
The Department submitted minimum wage and overtime pay computations
for Daley Farm employees who worked more than 48 hours in a workweek during the
audit period. The Department arrived at
these figures by comparing Daley Farm employee time cards with pay stubs and
other records. The task was complicated by
the fact that for several months during the audit period the Daley Farm employee
time punch clock malfunctioned and incorrectly date-stamped every entry as having
occurred in March.[21]
27.
At the close of the hearing the parties agreed that, with
the exception of two employees (Istel DeWet and Gerhard DeWet), the
computations in Exhibits 10 and 11 accurately reflect the rate of pay and hours
worked by the identified Daley Farm employees.
Daley Farm does not dispute the accuracy of the Department’s
calculations.
28.
Based on these calculations and the December 22, 2008, Order
and January 25, 2009, Amended Order of the Assistant Commissioner in this
matter, the Administrative Law Judge finds that Daley Farm owes the following
employees back pay for unpaid overtime in the amounts listed below:
|
Employee |
Amount of
Unpaid Overtime Due |
Employee |
Amount of
Unpaid Overtime Due |
|
Ashley
Appel |
$50.64 |
Johannes
Badenhorst |
$128.79 |
|
Alicia
Becker |
$4.01 |
Andrew
Borck |
$65.79 |
|
Carol
Borck |
$482.76 |
Ken
Borck |
$1,474.18 |
|
Lance
Christie |
$1,339.55 |
Sonja
Daley |
$414.36 |
|
Michelle
DePestel |
$182.96 |
Istel
DeWet |
$1,358.49 |
|
Gerhard
DeWet |
$1,899.30 |
Brian
Duane |
$2,585.61 |
|
Steve DuBois |
$731.23 |
Gina Echeverry |
$180.05 |
|
Lisa Ellinghuysen |
$145.73 |
Joe Filla |
$582.74 |
|
Jasmine Garcia |
$156.99 |
Kamen
Georgiev |
$538.05 |
|
Courtney
Hager |
$14.90 |
Wendy
Henkes |
$8,424.83 |
|
Reagan
Hulbert |
$78.15 |
Michael
Hyland |
$100.66 |
|
Ryan
Jacobs |
$798.27 |
Elena
Kravchenico |
$173.66 |
|
Yevgeniy
Kravchenico |
$333.42 |
Andrew
Lea |
$14.40 |
|
Stefanie
Kruger |
$3,817.40 |
Brandon
Leuhmann |
$562.50 |
|
Christina
Mann |
$149.86 |
Bill
McNally |
$464.95 |
|
Kyle
Mollert |
$2,321.94 |
Kary
Mueller |
$81.10 |
|
Christian
Oliver |
$2,699.18 |
Tammy
Reps |
$276.28 |
|
Kevin
Reps |
$114.15 |
Nichole
Rettman |
$1,356.31 |
|
Tom
Rodgers |
$152.48 |
Svetlana
Saenko |
$365.34 |
|
Viktor
Saenko |
$4,646.71 |
Daniel
Sass |
$55.05 |
|
Steve
Schultz |
$610.58 |
Dean
Spaeth |
$357.08 |
|
Derrick
Swanson |
$11.45 |
Andrei
Tarassov |
$2,891.06 |
|
Vasily
Velikarnov |
$1,691.46 |
Michael
Wolford |
$469.03[22] |
29.
The evidence at
the hearing established that the last two paychecks attributed to Gerhard DeWet
in Exhibit 10 for the weeks of May 22 and May 29, 2004, instead should have
been attributed to his wife, Istel DeWet.
It was undisputed that Gerhard DeWet’s last day of employment at Daley
Farm was May 15, 2004, and that Istel DeWet began employment with Daley Farm
the following week at the same rate of pay.[23] Accordingly, the overtime amounts for those
two weeks ($37.57 and $11.44) were subtracted from Gerhard DeWet’s total back
wages due and added to Istel DeWet’s total back wages due.
30.
As noted in the Conclusions below, the FLSA requires that
the Commissioner “shall” also order payment to each employee listed above of an
additional equal amount as liquidated damages.
Therefore, Daley Farm owes Ashley Appel the total amount of $101.28,
Johannes Badenhorst the total amount of $257.58, and so on for each employee.[24]
31.
The Department is not seeking a civil penalty in this
matter.
32.
The Department requested injunctive relief in the form of an
order directing Daley Farm to start paying its employees overtime wages.
Based upon the foregoing Findings of Fact, the
Administrative Law Judge makes the following:
CONCLUSIONS
1.
The Administrative Law Judge and the Commissioner are
authorized to consider this matter under Minn. Stat. §§ 14.50 and 177.27, subd.
4.
2.
Respondent received due, proper and timely notice of the
hearing and this matter is, therefore, properly before the Commissioner and the
Administrative Law Judge.
3.
The Department has complied with all relevant procedural
legal requirements.
4.
Minnesota Statutes § 177.25, subd. 1, provides, in part:
No employer may employ an employee for a workweek longer than 48 hours, unless the employee receives compensation for employment in excess of 48 hours in a workweek at a rate of at least 1½ times the regular rate at which the employee is employed.[25]
5.
any individual employed in agriculture on a farming unit or operation who is paid a salary greater than the individual would be paid if the individual worked 48 hours at the state minimum wage plus 17 hours at 1-1/2 times the state minimum wage per week . . . .[26]
6.
Individuals who meet the above exemption are also exempted
from the FLSA’s overtime pay requirements.
7.
Minn. R. 5200.0211, subp. 1, defines salary, in part, as
follows:
A salary is
not an hourly rate. An employee is paid
a salary if the employee, through agreement with an employer, is guaranteed a
predetermined wage for each workweek.
8.
Because the employees at issue in this matter were paid an
hourly wage and not a salary, the Department concluded in its December 22, 2008
Order issued in this proceeding that the employees did not meet the exception
described in Minn. Stat. § 177.23, subd. 7, and that they are covered by
the overtime wage provisions of the FLSA.
The Department concluded further that, by not paying its employees
overtime pay, Daley Farm violated the FLSA.
9.
If an employer is found to have violated provisions of the
FLSA, the Commissioner shall order the employer to cease and desist from
engaging in the violative practice and to pay the aggrieved parties back pay,
gratuities, and compensatory damages, less any amount actually paid to the
employee by the employer, as well as an additional equal amount as liquidated
damages.[27]
10.
With the exception of the adjustments made to the
compensation amounts calculated for Istel and Gerhard DeWet, the Department has
accurately calculated the overtime back pay compensation owed the Daley Farm
employees identified in Exhibit B of the Amended Notice of Hearing.
11.
Based on its December 22, 2008, Order and the evidence
presented at the March 29, 2011, hearing, the Department has established that
Daley Farm owes the identified employees the overtime wages listed in Finding 28,
and an additional equal amount as liquidated damages.
Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:
IT IS HEREBY RECOMMENDED:
that the Commissioner order Daley Farm
to pay each of the subject employees (1)
back pay in the amounts listed in Finding 28 above to compensate them
for unpaid overtime, and (2) an
additional equal amount as liquidated damages.
Dated: April 28, 2011
|
s/Barbara L. Neilson |
|
BARBARA L. NEILSON |
|
Administrative Law Judge |
Reported: Digitally recorded (no transcript prepared).
This
Report is a recommendation, not a final decision. The Commissioner of Labor and Industry will
make the final decision after reviewing the record and may adopt, reject or
modify these Findings of Fact, Conclusions, and Recommendation. Under Minn. Stat. § 14.61, the Commissioner’s
decision shall not be made until this Report has been available to the parties
to the proceeding for at least ten (10) days.
An opportunity must be afforded to each party adversely affected by this
Report to file exceptions and present argument to the Commissioner. Parties should contact Ken Peterson,
Commissioner, Department of Labor and Industry,
Under Minn. Stat. § 14.62, subd. 1, the
agency is required to serve its final decision upon each party and the Administrative
Law Judge by first class mail or as otherwise provided by law. If the Commissioner fails to issue a final
decision within 90 days of the close of the record, this report will constitute
the final agency decision under Minn. Stat. § 14.62, subd. 2a. The record closes upon the filing of
exceptions to the report and the presentation of argument to the Commissioner,
or upon the expiration of the deadline for doing so. The Commissioner must notify the parties and
the Administrative Law Judge of the date on which the record closes.
MEMORANDUM
The
Assistant Commissioner has already decided the legal issue presented in this
case, and has determined that the FLSA exemption for agricultural workers does
not apply to the Daley Farm employees involved in this case. The only issues currently before the
Administrative Law Judge are the computation of overtime wages and liquidated
damages. During the hearing, Daley Farm
agreed that the Department’s calculation as reflected in Exhibits 10 and 11 accurately
reflected the hours worked and the rate of pay for the identified Daley Farm
employees, with the exception of minor adjustments to the amounts calculated
for two employees. The recommendation of
the Administrative Law Judge sets forth the final calculations, as
adjusted.
Although
the Department is not seeking to impose an additional civil penalty in this
matter, it is seeking an award of unpaid overtime and liquidated damages for
the affected employees. Daley Farm
alleges that it will be harmed if it is required to pay a penalty above and
beyond the amount of unpaid overtime, and will be forced to cut back on building
upkeep, feed expenses, or labor expenses.
Daley Farm argues that it reasonably relied on court decisions in
determining that it did not have to pay overtime, and contends that it would be
unfair for the Department to punish it under the circumstances, particularly since
it provides ample compensation and benefits to its employees. However, the Minnesota FLSA specifies that
the Commissioner “shall” award an additional amount equal to each individual
employee’s back pay as liquidated damages.
Therefore, it does not appear that the Commissioner may waive that
award.
The
Commissioner has the further authority to order the Respondent to cease and
desist from failing to pay overtime wages.
Under the circumstances, the Commissioner may wish to consider staying
any such order until the disputed legal issues have been resolved on appeal.
B. L. N.
[1] Testimony of Mark Daley.
[2] Testimony of M. Daley.
[3] Testimony of Michelle DePestel.
[4] Testimony of Michelle Dreier; Ex. 3.
[5]
[6]
[7]
[8]
[9] Testimony of M. Dreier.
[10] Testimony of M. DePestel; Testimony of M. Daley; Testimony of M. Dreier.
[11]
Testimony of M. Daley; Testimony of M. DePestel; Exhibit 100; Douglas v. Daley Farm of
[12] Stipulation of Department during March 29, 2011, hearing.
[13] Testimony of M. Dreier; Exs. 1-4.
[14] Testimony of M. Dreier.
[15] Testimony of M. Dreier; Exs. 5-7.
[16] Testimony of M. Dreier.
[17] Ex. 8; Testimony of M. Dreier; see also Minn. Stat. § 177.27, subd. 4.
[18]
712 N.W.2d 190, 197 (
[19]
Order of the Court of Appeals in In the
Matter of the Order to Comply Labor Law Violation of Daley Farm of
[20] Testimony of Sara Elliott; Exhibits 10-11.
[21] Testimony of M. Dreier and M. DePestel.
[22] Exs. 10-11.
[23] Testimony of M. DePestel
[24]
[25]
[26]
[27]