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October 25, 1973

James D. Hodgson, Secretary of Labor, U.S. Department of Labor, Plaintiff
A. W. Crossley, Inc. et al., Defendants

Pollack, District Judge.

The opinion of the court was delivered by: POLLACK

POLLACK, District Judge.

This is a civil action by the Secretary of Labor against A. W. Crossley, Inc. ("AWC"), a construction firm, Culligan Water Conditioning Newburgh Corp. ("Culligan"), which installs and services water softening equipment, and Alfred W. Crossley ("Crossley"), the president of both of those firms, for alleged violations of the Fair Labor Standards Act as amended, 29 U.S.C. § 201 et seq. The Secretary seeks an injunction against future violations of the overtime and record keeping provisions of the Act, as well as back wages for five allegedly affected employees.

 This is not Crossley's first confrontation with the Secretary over the quality of his compliance with the Act. On prior inspections in 1958, 1963, and 1967 minor violations of section 7 of the Act were found and satisfied. In both 1963 and 1967 a condition of joint employment between AWC and Culligan was found to exist. The Department of Labor has defined joint employment, inter alia, as occurring

Where the employee performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek, a joint employment relationship generally will be considered to exist . . . where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer. (29 C.F.R. § 791.2(b) (3) (1972) (emphasis added)).

 The evidence herein established that Crossley is the principal behind both AWC and Culligan, thus invoking the "common control" definition.

 AWC is a party to a collective bargaining agreement with a labor union which represents its employees, who are all paid a union approved wage. Culligan is apparently not unionized; nevertheless, its employees are paid well in excess of the federally mandated minimum wage. Both AWC and Culligan have employees engaged in commerce. The latter has an annual gross volume of sales of not less than $250,000 exclusive of excise taxes at the retail level which are separately stated.

 The investigation by the Secretary, which preceded this action, was commenced in June 1971 upon the complaint of one, Robert Durling, a former employee of Culligan whose employment was terminated by Culligan following an unexpected visit to Durling's home by a supervisor at about 8:30 in the morning; he found Durling there with a Culligan-owned truck, picked up by Durling a half hour earlier, at the commencement of the work day at 8 A.M. Durling claimed he had stopped off for coffee; there was an unproven suggestion that it was for a nap. Whatever he was doing, it is clear that he was not servicing his route that morning.

 Acting on Durling's complaint against his former employer, Compliance Officer Earnest DeGraw went to the offices of AWC and Culligan respectively to conduct a Fair Labor Standards Act inquiry in June 1971. He had learned from the agency's file of the earlier inspections referred to above and the results thereof. His "investigation" consisted of interviewing Durling, the complainant, at the latter's home; examining various books maintained by AWC and Culligan; and interviewing three employees of Culligan selected by him and one employed by both AWC and Culligan; no other employees of AWC were interviewed, and no supervisory personnel of any nature whatsoever were sought out or interviewed at all for corroborative or any other information.

 Durling told Officer DeGraw that he had worked certain hours in excess of forty (40) in a given week on certain occasions. Durling had no records to evidence this claim. Officer DeGraw made no effort to verify this self-serving statement made shortly after the discharge of Durling, either by interviews of other employees or supervisory personnel or by recourse to time sheets which Durling turned in or by the company books and records. Instead, he chose to accept and proceed on Durling's story standing alone. The Court, unlike Officer DeGraw, had the opportunity to observe Durling on the witness stand, with benefit of both direct and cross examination, for a considerable period of time. The Court finds Durling's testimony to be vague, indefinite and unreliable and on his responses and the demeanor evidence resolves the issue of credibility against him and against the plaintiff on his behalf in all respects. That is to say, the Court finds as a fact that on the basis of the evidence of and pertaining to Durling, the plaintiff has not established by a fair preponderance of the credible evidence that Durling ever did in fact work any hours in excess of forty hours in any given week.

 Pursuing his investigation, Officer DeGraw requested certain records from Culligan. His request lacked any recognizable degree of specificity. However, a request by a Fair Labor Standards Act Compliance Officer has two goals in view -- the calculation of hours actually worked by employees and the wages properly payable therefor; and the ascertainment of whether the record-keeping provisions of the Act, 29 U.S.C. § 211(c); 29 C.F.R. § 516.1-.33 (1972), are being complied with.

 Based on examination of the records that he did receive in response to his request, Officer DeGraw then proceeded to hypothesize the number of hours worked and wages received by certain other employees of Culligan.

 Officer DeGraw then interviewed three selected employees of Culligan to determine if there were some irregularities in their compensation. All three of these employees of Culligan -- Edward Ettell, Kenneth Mullen, and Arthur D. Riel -- appeared and testified at the trial.

 Officer DeGraw testified that, with one exception to be discussed in greater detail below, AWC was in compliance. He did not find it necessary to nor did he in fact conduct any personal interviews with AWC employees to arrive at this conclusion.

 Officer DeGraw, who has a background in accounting which includes experience with a major trunk airline as well as an accounting firm, and also thirteen years as an office manager for Armour & Co., quite naturally expected, and in fact requested, formal accounting records of the type with which he was professionally familiar in large business enterprises. He testified at the trial that, while he did request, and was in fact given payroll and other records, it "did not occur" to him to ask for time cards or time sheets, cf. 29 C.F.R. § 516.6(a) (1) (1972), or any other form of informal record by which a small business might elect to keep track of such facts as time signed in and out, hours worked or individual earnings. (See 29 C.F.R. § 516.1(a) (1972) "No particular order or form or records is prescribed by the regulations in this part.") In point of fact, each employee called as a witness by the Secretary testified, without contradiction, that, to the extent that he was on an hourly wage basis, he did in ...

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