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MARSHALL v. COACH HOUSE RESTAURANT

October 2, 1978

Ray MARSHALL, Secretary of Labor, United States Department of Labor, Plaintiff,
v.
COACH HOUSE RESTAURANT, INC., a corporation, and Leon Lianides, Individually and as President, Defendants



The opinion of the court was delivered by: HAIGHT

MEMORANDUM OPINION AND ORDER

This motion for summary judgment, pursuant to Rule 56, Fed.R.Civ.P., raises an unsettled question of law under the Fair Labor Standards Act of 1938 ("FLSA"), as amended, 29 U.S.C. § 201 Et seq. Before addressing the legal issue involved, a brief review of the facts, undisputed for the purpose of this motion, is appropriate.

 I.

 During the period of October 1976 through December 1976, an employee of the Wage and Hour Division, Employment Standards Administration, of the United States Department of Labor, conducted an investigation of the defendant, Coach House Restaurant, the asserted purpose of which was to make a routine check for compliance with FLSA. This investigation allegedly unearthed violations of the overtime compensation provisions *fn1" and record keeping requirements *fn2" of FLSA.

 Shortly after the conclusion of the Department's investigation, the union representing defendants' employees filed a grievance with respect to defendants' payment of overtime wages, thereby triggering the arbitration machinery of the collective bargaining agreement between the workers and the restaurant. *fn3" The issues to be arbitrated were stipulated as follows:

 
"Has the Employer made proper overtime payments to its employees under the collective bargaining agreement between the parties And under any applicable wage and hour law ? If not, what shall the remedy be?" *fn4"
 
After the parties had "presented their respective cases in full" the arbitrator found "(f)rom all of the evidence adduced at the hearing and from an examination of payroll records" that the employer had paid more than the minimum wage for forty hours per week and more than time and one-half for work in excess of forty hours per week. *fn5" The following award was rendered:
 
"The Coachhouse Restaurant Inc. has made proper overtime payments to its employees under the Collective Bargaining Agreement and under applicable wage and hour requirements from January 1, 1974 to (March 29, 1977)." *fn6"
 
Subsequent to the arbitral award, the Secretary of Labor filed the instant complaint on July 7, 1977, charging the defendants, Inter alia, *fn7" with violations of sections 7 and 15(a)(2) of FLSA, 29 U.S.C. §§ 207, 215(a)(2), to wit: failure to pay the statutorily required overtime compensation. The Secretary seeks injunctive relief under section 17 of FLSA, 29 U.S.C. § 217, restraining defendants from withholding such payments. Defendants on this motion assert that, as a matter of law, the Secretary is precluded from raising the issue of overtime payments since it was previously resolved by final and binding arbitration between the defendant and the employees' union. The Secretary contends that there is a disputed issue of fact as to whether he, his designees or attorneys, were ever "vouched in" to the arbitration proceeding. For the purposes of this discussion, however, the Court will assume that the Secretary neither received notice of the arbitration, nor actually participated or consented to be represented in that proceeding. *fn8"
 
II.
 
Before examining what little precedent is available on the issue raised, it is helpful to have some understanding of the scheme of FLSA. In pertinent part, FLSA mandates payment of certain overtime compensation to covered employees, 29 U.S.C. § 207 (see note 4, Supra ), and creates a cause of action in favor of aggrieved employees to recover from their employer any unpaid overtime and an additional equal amount as liquidated damages. FLSA § 16(b), 29 U.S.C. § 216(b). Suit may be brought "in any Federal or State court of competent jurisdiction . . ." Id. The Secretary of Labor is given a corresponding right to maintain an action on behalf of the employees to recover such unpaid overtime. Id. § 16(c), 29 U.S.C. § 216(c). Additionally, the Secretary alone is authorized to institute an injunctive proceeding in federal district court to restrain "any withholding of payment of minimum wages or overtime compensation found by the court to be due to employees under (FLSA)." Id. §§ 17, 11(a), 29 U.S.C. §§ 217, 211(a). The employees' right to sue directly under section 16(b) terminates when and if the Secretary elects to file a complaint under either section 16(c) or section 17. Id. § 16(b), (c), 29 U.S.C. § 216(b), (c).
 
III.
 
Turning now to the question of the preclusive effect of an arbitral award, the first precedent to be addressed is the Supreme Court's decision in Alexander v. Gardner-Denver Co., 415 U.S. 36, 94 S. Ct. 1011, 39 L. Ed. 2d 147 (1974). Gardner-Denver held that the submission to arbitration of a racial discrimination claim does not preclude that claim in a subsequent lawsuit by the employee under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e Et seq. If that holding is applicable to a wage claim such as is at issue here, then defendants' motion must be denied. If the employee is not foreclosed from litigating his wage claim by the prior arbitration to which he was a party, then, A fortiori, the Secretary of Labor, who was not a party to the arbitration, is not precluded from raising the issue anew in a FLSA suit.
 
Broadly speaking, four considerations prompted the Gardner-Denver decision: (1) the paramount national interest in preventing racial discrimination in employment; (2) the investment of plenary powers in the federal courts to secure Title VII compliance; (3) the inappropriateness of the arbitral forum for determining Title VII rights; and (4) the Court's perception that relatively little interference with the federal policy favoring arbitration of labor disputes would ensue. This ...

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