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ZACHOLL v. FEAR & FEAR

United States District Court, N.D. New York


April 5, 2004.

SUSAN ZACHOLL and SYLVIA ELLINWOOD, Plaintiffs,
v.
FEAR & FEAR, INC., Defendant

The opinion of the court was delivered by: FREDERICK SCULLIN, Chief Judge, District

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

  Plaintiffs Susan Zacholl and Sylvia Ellinwood were employees of Defendant Fear & Fear, Inc. Plaintiffs brought this action pursuant to the Fair Labor Standards Act ("FLSA" or the "Act"), 29 U.S.C. § 201 et seq., seeking to recover allegedly unpaid overtime wages and commission fees, as well as liquidated damages and attorneys' fees. A jury trial commenced on December 8, 2003.

  Sylvia Ellinwood was employed by Defendant as a customer service representative from October 22, 1997 to April 1998, and was awarded 138 hours of overtime compensation. Susan Zacholl was employed by Defendant as a customer service representative from October 22, 1997 to September 1998, and was awarded 211 hours of overtime compensation. However, the jury concluded that, at all other times when Plaintiffs were branch managers, the administrative exemption to the FLSA applied and, thus awarded them no overtime compensation for such time.*fn1

  Presently before the Court are Plaintiffs' motions for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure for that period of time for which the jury found the administrative exemption to the FLSA applied; and liquidated damages, pursuant to 29 U.S.C. § 216(b).

  II. DISCUSSION

 A. Plaintiffs' motion for judgment as a matter of law

  A motion for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure should be granted when "`there is no legally sufficient evidentiary basis for a reasonable jury to find for [the prevailing party] on that issue.'" Bean v. CSX Tramp., 289 F. Supp.2d 277, 279-80 (N.D.N.Y. 2003) (quoting Fed.R.Civ.P. 50(a)(1)). The standard is similar to that for a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. See id. at 280 (citation omitted). Under a Rule 50 motion, a court must consider all of the evidence produced at trial and not simply the evidence favorable to the nonmoving party. See id. (citations omitted). "`In doing so, however, the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence.'" Id. (quotation omitted). Therefore, when "reviewing the entire record, the court should consider only that evidence favorable to the nonmoving party and any evidence supporting the moving party is uncontradicted and unimpeached." Id. (citation omitted).

  Plaintiffs claim that the trial evidence demonstrates that their duties as customer service representatives and as branch managers were essentially the same. They assert that any additional duties, which they performed while employed as branch managers, were not administrative activities as defined by § 213 of the Act.*fn2 For example, Plaintiffs state that they engaged in the physical act of opening and closing the doors at the beginning and end of the day, decided who would clean the bathrooms, counted the checks and made deposits and that such activities cannot be considered administrative, but merely the duties of a production worker.

  Plaintiffs argue, therefore, that Defendant failed to satisfy its burden of proving, by a preponderance of the evidence, that they were administrative employees as defined by the Act and, thus, exempt from the FLSA's overtime pay requirements.

  In response, Defendant maintains that there was sufficient evidence in the record to support the jury's finding that Plaintiffs were administrative employees. For example, Defendant states that a review of the evidence shows that branch managers were responsible for the operations of their offices, had keys to their offices, ordered supplies, trained and supervised customer service representatives and ensured that company policies were followed. Additionally, they ensured that financial records were accurate and made bank deposits. Plaintiffs were also licensed insurance brokers and, therefore, necessary to the operations of Defendant's business. Moreover, Defendant states that Plaintiffs operated their respective branches with little oversight from the main office. Thus, they had the ability to discipline and fire employees. Furthermore, Plaintiffs were compensated on a different basis than customer service representatives and their compensation was dependant upon the overall success of their branch. Defendant essentially argues that Plaintiff's primary duties, as defined by Bennett, 225 F. Supp.2d at 216 (citations omitted) (defining "primary duty" under 29 C.F.R. § 541.103 (2003)), involved the running of their branch offices and the supervision of the other employees in that office and that, although Plaintiffs sold insurance policies, which was a task similar to that of a customer service representative, they were also responsible for much more. Such evidence, Defendant argues, clearly supports the jury's finding that Plaintiffs were exempt from the FLSA's overtime pay requirements under the administrative exemption.

  The Court agrees, based upon all of the evidence adduced at trial, that a reasonable person could conclude that, during the time that they were employed as branch managers, Plaintiffs were administrative employees within the meaning of the Act. Plaintiffs balanced the cash drawers at the close of the business day, sold insurance policies, ordered office supplies, made deposits and maintained business books. More importantly, Plaintiffs supervised other employees, possessing the power to dock their pay or even fire them for poor work or misconduct. See Minutes of Trial, held on December 8, 2003, testimony of Kevin Fear, ("Trial Tr.") at 24-27; Defendant's Memorandum of Law at 6-7.*fn3 Such tasks require some level of independent judgment and discretion and can also be seen as duties that "service" the business. For example, firing other employees for substandard performance requires a great deal of discretion and independent judgment. Additionally, Plaintiffs exerted their control over the branch and its internal workings by handling all of its banking and overseeing all final work. Looking at the evidence produced at trial and reviewing it under the stringent Rule 50(b) standard, the Court concludes that a reasonable juror could have found that Plaintiffs' duties as branch managers were administrative in nature and, therefore, that they were exempt from overtime pay under the administrative exemption to the FLSA. Accordingly, the Court denies Plaintiffs' motion for judgment as a matter of law.

 B. Plaintiffs' motion for liquidated damages

  In addition to unpaid overtime, successful FLSA claimants are entitled to liquidated damages in the full amount of the unpaid overtime compensation — i.e., double damages. See 29 U.S.C. § 216(b) (1994). Liquidated damages are not punitive damages but, instead, are compensatory in nature and should not be treated by the court as a disfavored penalty. See Reich v. Southern New England Telecomms. Corp., 121 F.3d 58, 71 (2d Cir. 1997) (citations omitted); Walton v. United Consumers Club, Inc., 786 F.2d 303, 310 (7th Cir. 1986). Nevertheless, courts do have discretion to deny an award of liquidated damages where the employer proves that, although it failed to pay appropriate wages, it acted in good faith and had objectively reasonable grounds for believing that its failure to pay overtime wages did not violate the Act. See Reich, 121 F.3d at 70-71. The employer bears the difficult burden of proving good faith and reasonableness. See Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 142 (2d Cir. 1999). "To establish good faith, the employer must take active steps to ascertain the dictates of the FLSA and then act to comply with them." Id. (citation omitted).*fn4

  Plaintiffs assert that Defendant did not offer any reason for failing to pay them overtime compensation, other than its lack of knowledge that they were working overtime. Plaintiffs argue that a lack of knowledge is insufficient to show that Defendant acted in good faith or with reasonableness when it failed to compensate them for the overtime hours they worked. For example, Plaintiffs argue that the bank slips and telephone records show that they were indeed working overtime and that Defendant was or should have been aware of such overtime when reviewing the bank deposit slips. Additionally, Plaintiffs assert that Defendant made no attempt to consult another person or entity, i.e., an attorney or the Department of Labor, with regard to its overtime policy.*fn5 Plaintiffs also claim that Defendant's failure to keep time records of the hours or times that they worked is a violation of the FLSA, which, standing alone, is sufficient to warrant an award of liquidated damages.

  As might be expected, Defendant asserts that it acted in good faith and had reasonable grounds for believing that its failure to pay overtime wages did not violate the Act. Specifically, Defendant argues that the trial evidence showed that it acted in good faith by adopting and enforcing its written overtime policy and that, when overtime was approved, the employees were paid for such overtime. Moreover, Defendant argues that Plaintiffs admitted in their testimony that they never sought prior approval to work overtime and never informed Kevin Fear or Susan Abbatiello, the Office Administrator, that they were working overtime. In fact, Defendant asserts that the first time it knew of any overtime claim was after Plaintiffs had resigned from their employment with Defendant.*fn6

  In the present case, ample evidence exists to show that Defendant acted in good faith and had reasonable grounds for believing that its failure to pay Plaintiffs overtime wages was not in violation of the Act.

  Defendant had an overtime policy in place which required Plaintiffs to seek prior approval before working overtime. Plaintiffs testified that they never sought approval from an office administrator to work overtime. Moreover, not only did Plaintiffs not approach Defendant about receiving compensation for their overtime work but they also did not consistently and contemporaneously record their overtime hours. In fact, they did not even inform Defendant that they were working overtime or approach Defendant regarding overtime compensation until they left Defendant's employment.

  The testimony also revealed that, when employees sought prior approval for overtime work in accordance with the terms of the overtime policy, Defendant paid overtime compensation. Kevin Fear, Defendant's President, also called the Department of Labor to discuss the status of branch managers and to inquire whether they were entitled to overtime compensation.

  Accordingly, the Court finds that the evidence sufficiently shows that Defendant acted in good faith, with reasonable grounds for believing that its failure to pay Plaintiffs overtime wages was not in violation of the Act and, therefore, it denies Plaintiffs' post-trial motion for liquidated damages.

  III. CONCLUSION

  After carefully considering the file in this matter, the parties' submissions, and the applicable law, and for the reasons stated herein, the Court hereby

  ORDERS that Plaintiffs' motion for judgment as a matter of law be DENIED; and the Court further

  ORDERS that Plaintiffs' request for an award of liquidated damages, pursuant to 29 U.S.C. § 216(b), is DENIED; and the Court further

  ORDERS that the Clerk of the Court enter judgment in favor of Defendant and close this case.

  IT IS SO ORDERED.


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