The opinion of the court was delivered by: CHARLES H. TENNEY
The Secretary of Labor ("the Secretary") brings this action against Waldbaum, Inc. ("Waldbaum"), alleging willful violations of the recordkeeping and overtime provisions of the Fair Labor Standards Act of 1938 ("FLSA" or the "Act"), as amended, 29 U.S.C. § 201 et seq. These violations are alleged to have taken place between May 1986 and October 1989 at 20 stores owned by Waldbaum. The Secretary brings suit under 29 U.S.C. §§ 216(c) and 217, seeking back wages for 262 employees and injunctive relief. Beginning on October 18, 1992, a nine day bench trial was held before this court. For the reasons stated below, Waldbaum is found to have violated the Act, although the violations are not found to be willful. Accordingly, an injunction will be issued. The court also awards back wages, in amounts to be determined by recalculations in accordance with this opinion. Liquidated damages are awarded up to the full amount of the wages withheld.
Waldbaum operates a chain of grocery stores within New York State and is engaged in commerce within the meaning of § 3(s)(2) of the FLSA. Joint Final Pre-Trial Order, Stipulated Fact ("JFPTO Stip. F.") P 2. The twenty stores that are the loci for the alleged violations are in Bronx, Westchester, Putnam, and Rockland counties. From May 15, 1986 until the time of trial, employees at the stores, with the exception of the store managers or co-managers, were paid in accordance with a collective bargaining agreement (the "Agreement") between Waldbaum and Local 338, Retail, Wholesale and Chain Store Food Employees, and in accordance with Waldbaum's compensation policies. Id. at P 4.
Each week, Waldbaum's store managers or their designees prepared forms called weekly payroll records. The payroll records contain the name of each employee at the subject store for the payroll week and the number of regular, overtime, and Sunday hours
for which the employee should be compensated. These calculations were based upon time card entries submitted by the employees. The payroll records were then submitted to Waldbaum's main office in Central Islip, New York. Id. at PP 7-8. The information from the payroll records were keypunched by data processing or payroll office personnel into the defendant's computer, and a paycheck was generated. Id. at P 9. Defendant claims that employees were given an opportunity to notify Waldbaum of any discrepancy between the time cards and the payroll records as reflected in the paychecks.
Plaintiff has conducted eight investigations of Waldbaum since 1962 for violations of the FLSA. Tr. 994, 1163-64. One of those investigations began in 1985 by the Manhattan office of the Labor Department and covered stores in Brooklyn, Queens, and Long Island. Richard Mormile, an investigator for the plaintiff, testified without contradiction that the Secretary's findings of violations of §§ 7 and 11 of the Act in those stores were presented three times to representatives of Waldbaum's "higher management." Tr. 1166. Because Waldbaum did not comply with requests made by the Secretary regarding those investigations, plaintiff brought suit for violations in those stores in the Eastern District of New York, where that action is still pending as Reich v. Waldbaum, Inc., 86 Civ. 0861.
Section 7 of the FLSA provides that:
No employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular [hourly] rate at which he is employed.
29 U.S.C. § 207(1). Compliance with § 7 is safeguarded in part by § 11(c) which requires subject employers to "make, keep, and preserve such records of the persons employed by him and of the wages, hours, and other conditions and practices of employment maintained by him . . . ." 29 U.S.C. § 211(c). The statutory mechanism is completed by 29 U.S.C. §§ 215(a)(2) and (a)(5), which makes unlawful violations of §§ 207(1) and 211(c), respectively.
Among the requirements imposed by the Secretary's implementing regulations are that employees keep and preserve for three years records of (1) the total daily and weekly hours employees work; (2) employees' regular hourly rates of pay for each week that overtime is worked; (3) total daily or weekly earnings; (4) total wages paid; and (5) total weekly premium pay for overtime hours. 29 C.F.R. §§ 516.2 and 516.5; Donovan v. Kaszycki & Sons Contractors, Inc., 599 F. Supp. 860, 867-68 (S.D.N.Y. 1984).
The recordkeeping requirements of the Act are fundamental to the Act's effectiveness. "Failure to keep accurate records can obscure a multitude of minimum wage and overtime violations." Wirtz v. Mississippi Publishers Corp., 364 F.2d 603, 607 (5th Cir. 1966). In challenges to the wages paid as reflected in the employer's records,
due regard must be given to the fact that it is the employer who has the duty under § 11(c) of the Act to keep proper records of wages, hours, and other conditions of employment and who is in the position to know and to produce the most probative facts concerning the nature and amount of work performed. Employees seldom keep such records themselves; even if they do the records may be and frequently are untrustworthy.
Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687, 90 L. Ed. 1515, 66 S. Ct. 1187 (1946). Thus, where the records kept are inaccurate, the plaintiff meets his burden if he shows work was performed for which the employees were improperly compensated and if sufficient evidence is produced to establish "the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the [plaintiff's] evidence." Id. at 687-88.
Defendant argues that whatever deficiencies existed in payment were the result of the employees' failure to conform to the recording methods of Waldbaum. Defendant claims to base its payments on the time-cards of a punch clock system. It contends that the affected employees were required to punch in upon arriving at work, punch out at the beginning of lunch and break periods, punch in again at the conclusion of the breaks, and to punch out at the end of workshifts. Instructions regarding this policy were disseminated orally and in writing by the supervisors of the subject employees. Waldbaum also posted signs near the clocks informing the workers of the necessity of punching in and out. (Def. Exh. CA-CK).
Many of the employees testified that they knew of the policy. However, some indicated that they were not diligent in the time they punched, in part because the hours punched seemed to have no effect on the amount they were paid. Pl. Exh. 8 at 18 (Dunlavey Deposition); Tr. 357 (Scherer); see Tr. 590 (Feeney) (assistant managers and grocery manager rarely punched); Tr. 903 (Fanzo) (time spent after punching out was extra time for which he knew he would not get compensated). Others indicated that they would sometimes fail to punch altogether. Tr. 821 (Graziano); Tr. 438 (Lombardi); see Tr. 706 (Martino) (Fleetwood clock was broken, but employees were not paid full amounts for time worked as handwritten on cards). Deposition and witness testimony suggested that on several occasions, the employees were instructed to punch out at the end of a shift and return to work. Tr. 277 (McAuley); Pl. Exh. 18 at 19 (Leto Dep.); Pl. Exh. 31 (Turner Dep.); see Tr. 438 (Lombardi). Some indicated that despite accurate punching, they were not compensated for the time worked. Pl. Exh. 13 at 9 (Hagopian Dep.); Tr. 305 (Voll); Tr. 524 (Kallman); Tr. 738 (Warth); Tr. 807 (Schaentzler). Others indicated that they were paid according to a schedule apparently fixed by the Agreement, regardless of the hours worked. Tr. 534 (Ryan); Tr. 893-94 (A. Stokes); Tr. 630 (M. Leon); see Tr. 835-36 (McKeon) (did not punch, but was always paid for 40 hours and 8 hours of overtime); Pl. Exh. 17 at 37-38 (Lee Dep.); Pl. Exh. 33 at 11 (Williams Dep.); Pl. Exh. 20 at 13, 20-21. (Mellor Dep.). Still others indicated that they never saw signs in their respective stores, or that the signs were put up after the period relevant to the allegations. Tr. 929-30 (Mullervy) (no notices until 1990). Finally, plaintiff suggests that no individual was ever punished or disciplined for failing to accurately punch his or her card. Tr. 821 (Graziano); Tr. 590 (Feeney); see Tr. 894-95 (Stokes) (sometimes did not punch card because no one cared what was on them as long as there were four punches per day). Indeed, several witnesses indicated that they were chastised for accurately punching their card when the result was that they should be paid more than the man-hours that had been allotted for that store or that shift. See Tr. 276-77 (McAuley).
What is more damaging to defendant's contentions regarding the method of recordation are the actual hours paid. In relation to the issue of damages, discussed below, defendant repeatedly argues that conditions varied from week to week depending on the weather, the time of year, the volume of shipments, and other conditions. Testimony of the employees verified this contention. Tr. 512 (Kallman); Tr. 550 (Grant); Tr. 890 (Stokes); Tr. 813 (Schaentler). Yet the number of hours for which these employees were paid remained remarkably constant. For example, Waldbaum in its brief in a section attacking representative testimony as a means of determining damages quotes approvingly from the trial testimony of Daniel Borrelie who testified that the hours worked varied from store to store and from week to week. Def. Post-Tr. Mem. 79 (citing Tr. 389, 420-22). Yet for all of the weeks listed for Borrellie in March, April, August, and September of 1989, Borrellie was paid for exactly forty hours of work and, except for slight deviations on two occasions, eight hours of double time compensation. Pl. Exh. 35 at 22. Similarly, P. Krauss is listed as having been paid for 49.5 hours for all but two weeks between February 2, 1987 and January 2, 1988, during which time he was only paid double time on four occasions totalling fourteen hours. Id. at 126-27. R. ...