Appeal and cross-appeal from a final judgment of the United States District Court for the Southern District of New York, Kevin Thomas Duffy, Judge requiring defendant to pay Secretary of Labor $160,094.91 for willful violations of overtime compensation provisions of Fair Labor Standards Act, 29 U.S.C. § 201 et seq. See 639 F. Supp. 1166 (1986), Docket Nos. 87-6026, 87-6028. Affirmed in part, reversed and remanded in part.
Kearse, Altimari, and Mahoney, Circuit Judges.
Defendant Judith Wilamowsky, doing business as Continental Word Processing, Inc. ("Continental" or the "Company"), appeals from so much of a final judgment of the United States District Court for the Southern District of New York, Kevin Thomas Duffy, Judge, as found that Continental had willfully violated the overtime compensation provisions of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (1982) ("FLSA" or the "Act"), and required the Company to pay plaintiff Secretary of Labor (the "Secretary"), on behalf of certain of its employees, $76,436.33 as compensation for unpaid overtime for the period June 1, 1982, to December 31, 1985, plus an equal amount as statutory "liquidated damages" for the same period, and $7,222.25 in overtime compensation for the period January 1, 1986, to June 30, 1986. On appeal, Continental contends that the district court erred (1) in concluding the the Company's compensation schedule did not comply with the Act, (2) in awarding liquidated damages, and (3) in ruling that the proper limitations period was three years rather than two. The Secretary cross-appeals, contending principally that the district court should also have awarded liquidated damages for the period January 1, 1986, to June 30, 1986, and should have granted injunctive relief. For the reasons below, we reverse so much of the judgment as denied liquidated damages for the period after December 31, 1985, and in all other respects we affirm.
The basic facts are not in dispute. Continental is an employment agency that provides temporary word processor operators to law firms and other businesses in the New York metropolitan area on an around-the-clock basis, seven days a week. The Company's main office, which is open 9 a.m. to 5 p.m., Monday through Friday, takes calls from firms requesting such operators on a temporary basis, short term or long term, and places operators with these clients on the basis of their work skills and availability.
Although the parties have stipulated that, for the purposes of this litigation and on the present record, the word processor operators are "employees" of Continental within the meaning of the Act, the employment relationship is not of the traditional sort. Word processor operators may accept assignments from more than one agency and thus may be "employees" of more than one employment agency at a time; they are not required to accept any given assignment and may decline jobs for any reason, without penalty; they may agree, at a client's request, to stay on a job beyond the hours originally requested from Continental; and they may accept assignments directly from clients. Operators are also free to work during any work period and to work different hours from day to day or from job to job.
In a given week, Continental employs approximately 200 temporary word processors. These operators may work in one or more of three work periods -- a day shift, from 8 a.m. to 5 p.m.; an evening shift, from 5 p.m. to 12 midnight; and a night shift, from midnight to 8 a.m. Continental pays its operators at different hourly rates for each shift. From June 1, 1982, to February 1, 1985, the basic pay scale for the most experienced operators was $12 per hour during the day shift, $15 per hour during the evening shift, and $18 per hour during the night shift. On February 1, 1985, these rates were increased to $13 per hour during the dad shift, $16.50 per hour during the evening shift, and $19.50 during the night shift. Operators whose work for a client extended from one shift into another were paid for hours worked in the latter shift either at the rate scheduled for the latter shift or at the rate payable for the initial shift, whichever was higher.
Section 7 of the FLSA requires in general that an employee who works more than 40 hours in a given week be paid for the excess at a rate "not less than one and one-half times the regular rate at which he is employed." 29 U.S.C. § 207(a) (1). At the times pertinent to this action, Continental treated the rate scheduled for the day shift as the operator's "regular rate" of pay and treated the amounts by which the rates for evening and night work exceeded the day rate as premiums creditable toward any statutorily required payments for overtime. Continental claims that any operator who logged more than 40 hours of client work in a given week was paid either (a) the total wages payable according to the scale rates for time actually worked, or (b) the day shift rate for 40 hours plus one-and-one-half times that rate for any hours worked in excess of 40, whichever was higher.
The Secretary commenced the present action in February 1985, alleging that Continental had failed to pay its operators one-and-one-half times their regular rate of pay for time worked in excess of 40 hours per week, in violation of 29 U.S.C. §§ 207(a)(1) and 215(a)(2). The Secretary's principal premise was that the operator's regular rate of pay was the weighted average hourly rate of all compensation received by him or her, i.e., a rate that is properly calculated by adding all of the wages payable for the hours worked at the applicable shift rates dividing by the total number of hours worked. The Secretary sought, inter alia, an award of back wages for underpaid employees, an equal amount of liquidated damages pursuant to 29 U.S.C. § 216, and an injunction against further violations.
The parties entered into a stipulation in which they agreed, inter alia, that Continental's operators were entitled to be paid one-and-one-half times their regular rate of pay for hours worked in excess of 40, but disagreed as to how the regular rate of pay was to be computed. To illustrate the disagreement, the stipulation set forth examples, the clearer of which may be summarized as follows. In a given week, employee X worked during three shifts for which Continental paid him at the following rates:
Hours Worked Rate Amounts Paid
Total 50.00 [sic] $702.75
Continental contended that the Act entitled X to $12 per hour for 40 hours ($480) plus $18 (time and a half) per hour for the remaining 10 [sic ] hours ($180), or a total of $660. Under the Company's interpretation, therefore, X's actual compensation of $702.75 exceeded the statutory minimum. The Secretary, on the other hand, contended that X's regular rate of pay was $702.75 (the total paid according to the Company's scale) divided by 50 [sic ] (the total hours worked), or $14.06 per hour. He contended that X should have been paid $14.06 per hour for 40 hours ($562.40) plus $21.09 (time and a half) per hour for the remaining 10 [sic ] hours ($210.90), or a total of $773.30. Under this interpretation, X was paid $70.55 less than the statutory minimum.
Following motions by both sides for summary judgment, the district court, in an opinion reported at 639 F. Supp. 1166 (1986), concluded that the statutory regular rate was, as argued by the Secretary, the weighted average hourly rate of all compensation received by the employee. The court noted that the record included several affidavits of Continental's temporary word processors to the effect that they believed the "regular rate" to be the amount paid for work performed between 8 a.m. and 5 p.m., Monday through Friday, and affidavits from a like number of such employees stating that they had never been advised by the Company that any particular period constituted either the normal workday or the normal workweek. Accordingly, given the acknowledged ability of these employees to work in any shift they wished and for however long they wished, the court found that the Company had "no 'applicable employment contract or collective[-]bargaining agreement' determining in 'good faith [. . .] the basic, normal, or regular workday' as required by [29 U.S.C. § ] 207(e)(7)," and that the higher rates paid to operators working the evening night shifts were an integral part of the employees' regular rate. Id. at 1169. The court concluded that Continental had failed to pay the minimum overtime wages required by the FLSA.
The court found that Continental had known it was covered by the Act, yet had failed to conform its practices to the Act's requirements. Accordingly, applying the standard set by this Court in Donovan v. Carls Drug Co., 703 F.2d 650 (2d Cir. 1983), the court concluded that the Company's violation was "willful" and applied a three-year, rather than a two-year, statute of limitations pursuant to 29 U.S.C. § 255(a). It thus awarded the Secretary $76,436.33 for the period June 1, 1982, to December 31, 1985, ...