The opinion of the court was delivered by: DEBEVOISE
The Secretary of Labor (sometimes referred to herein as the "government") filed this action on July 22, 1987 alleging that defendants had since at least July 1984 willfully violated and continued to violate the overtime and record keeping provisions of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (hereinafter "the Act"). The complaint seeks to enjoin the defendants prospectively from violating these statutory provisions and restrain defendants from withholding any unpaid overtime compensation found due since July 22, 1984 through the entry of judgment or compliance with the Act, and seeks an equivalent amount of liquidated damages.
Defendant, Haulaway Incorporated, (hereinafter "Haulaway") was incorporated in New Jersey in May 1970 and during the relevant period has been engaged in the trash removal business primarily in the State of New Jersey. Defendant, Joseph Scugoza, has, at all times relevant hereto, been the president of Haulaway; held 100% of the stock of Haulaway; and exercised day-to-day control over the business affairs of the corporate defendant. In this opinion when I refer to the "defendant" I shall mean the corporate defendant unless otherwise indicated.
A. Case Management Deficiencies
The most critical issue in this and probably all other FLSA overtime cases is the amount of unpaid overtime hours worked by a defendant's employees. Where, as in this case, the employer has failed to keep adequate records of hours worked, the government of necessity, must devise some reasonable method of ascertaining the overtime hours of affected employees.
At no time prior to trial did the government specify the amount of overtime pay it contended was due or its method of calculating that amount. Rather, it prevailed upon a gullible court to include the following provision in the final pretrial order:
Many employees will testify to the number of hours worked and the court will make a finding as to their hours. The amount of unpaid overtime compensation due those employees who do not testify will be based on the average number of hours worked found due by the court for the testifying employees. The [Secretary's] compliance officer will testify to application of the statutory formula for overtime compensation and the method for calculation of overtime due, depending on the court's finding of hours worked.
Thus, the record developed at trial will permit the court to find hours worked and plaintiff will then submit an exhibit listing the amount due each employee for incorporation into the Final Judgment.
This sounds most simple. The court merely hears employees' testimony, decides how many excess hours each worked, averages those results for non-testifying employees, and the Secretary will do all the rest.
I first sensed trouble when, immediately prior to trial, I attempted to find a basis for settlement. The government was unable to state a figure which it claimed would be due if its full claim was allowed. It had no figure derived from the evidence it had assembled which it would advance as total overtime pay due. It had no statement of the methodology it intended to apply to determine the number of overtime hours it claimed each employee worked. That ended settlement discussions.
The trial commenced on July 18, 1989 and the government called a number of employees to the stand to present evidence on the basis of which overtime hours were to be computed. I shall list some of the factors which, it developed, affected the determination of overtime hours:
1. During most or all of the 1984-1989 period defendant, a trash remover, served the communities of Upper Saddle River, Belleville, Butler and Parsippany-Troy Hills and it also had commercial routes identified as Paterson, Hackensack, Hoboken 1 and Hoboken 2. Each route takes a different time to complete; different days on the same route require different times to complete. Most of defendant's employees were assigned to the same route each day, but some worked on different routes in any given week or in different weeks. This was particularly true with respect to employees who worked in Butler, which had collection service only four days each week, and the employees assigned there had to be assigned to other routes on the remaining two days in each week.
2. Most employees, both drivers and helpers, usually worked the full six day week -- Saturday through the following Friday, with Sundays off. However, some employees worked less than a six day week and, of course, all employees had absences from time to time.
4. After collecting all the trash on a given route, it was necessary to take the trash to a landfill, or during later periods to a transfer station. The landfills or transfer stations serving the residential communities were: Upper Saddle River-Bergen County Landfill; Belleville-North Arlington or Kearny Landfill/Newark Transfer Station; Butler-Edgeboro Landfill; Parsippany-Troy Hills-Edgeboro Landfill. Each of the landfills and transfer stations was at a different distance from the communities served and from Hoboken, where the employees returned with the trucks at the end of their work day. There were different waiting times at different landfills and transfer stations; there were different waiting times at the same landfills and transfer stations on different days.
5. On some occasions after all the trash on a route was collected a truck and its crew did not go to the landfill or transfer station but took the load to the Hoboken yard where it remained overnight.
6. Belleville was served by three trucks with their drivers and helpers for a part of the period in question. Thereafter the same territory was served by four trucks and their helpers, thus reducing the time required to complete collections.
7. Prior to 1987 each driver and helper had to wash his truck after returning to defendant's Hoboken yard at the end of the day. The job took 15-20 minutes but there were often lengthy waits while other trucks were being washed. In 1987 defendant hired other persons to do the washing, and thereafter the drivers and helpers were able to leave immediately after returning to the yard.
8. Occasionally defendant gave a driver or helper extra pay for an unusually long trip or unusual circumstance.
9. Some helpers did not return to the defendant's Hoboken yard in the evening, but were dropped off nearer their own homes. On occasion some helpers did not go into the Hoboken yard in the morning but were picked up as their truck proceeded to its assigned route.
A number of employees testified about various of the above factors which affected the hours of their work and there was stipulated testimony of an even greater number of employees about these factors. There was some variation in the employees' testimony about the same matters. During the first three days of trial the mass of undigested data referred to above was introduced into evidence by way of testimony and stipulated testimony. By July 20, the third day of trial, it dawned upon me that the government had no intention of using its expertise in this field to pull together the vast array of data and by means of expert testimony or otherwise compute and present what it had concluded was the total overtime for which compensation had not been paid. As government counsel stated "after the Court [makes] a finding on . . . how many hours did people work . . . the government would then go back and present a schedule of the specific dollar amount due for each individual." (Tr. at 420, 421). The government correctly pointed out that such a procedure was contemplated by the pretrial order. However, awakening at last, I concluded that the procedure was "totally unacceptable" (Tr. at 421) and required the government to be prepared to present through a qualified witness or witnesses a schedule admissible in evidence showing exactly what it was that the government claimed was owing with respect to each employee.
The Court: I'm directing you to have a witness who will give the bottom line and the reasons for the bottom line and a schedule to back it up so that if, theoretically, if I mastered the testimony I could say thank you at the end of the defendants' case and end of your rebuttal case and give you a judgment.
Pretend I'm a jury. You are sending me out to the jury room.
Mr. Kay: I didn't pretend that you are a jury in preparing this case.
That colloquy took place on Thursday, July 20. I adjourned the trial until Wednesday, July 26 so that the government could prepare the report and correlate the supporting evidence which I had required.
Wednesday arrived and not unreasonably the defendants objected to being confronted for the first time with a complex report and testimony concerning it. I assured them that once we had gotten the government's case in manageable form we could turn to defendants' case and the manner in which they would be given a reasonable opportunity to meet the government's evidence and to present their own.
The government called to the stand Raymond A. Martoccia, an able and experienced compliance officer of the United States Department of Labor who for many years had, among other things, computed back wages in situations where, as in the present case, firms did not maintain records of hours worked. After testifying about his investigation of defendants, which began in March 1986, Martoccia, as an expert, gave his opinion about the amount of overtime which was unpaid for the period August 1984 through March 1989 and explained the basis for that opinion. He provided a figure for each of defendant's employees. The total figure (as later corrected) was $ 583,818.75.
The formula which Martoccia utilized was: The Number of Weeks x Uncompensated Overtime Hours x 1-1/2 x Regular Hourly Rate of Pay Equaled Unpaid Overtime Compensation Due. (Exh. P22).
This formula was applied in the manner described below to each of the 29 workers who testified or as to whom there was stipulated testimony. (Exh. P33, P33A).
With respect to each worker, based on his testimony, Martoccia calculated what his hours were if he worked a full six day week and what his average hours per day were. This was done for the period prior to 1987 when the employees were required to wash their trucks each night and it was done for the period after January 1, 1987 when that task was performed by others. With respect to each worker Martoccia was able to determine what his hourly rate of pay was and how many days he worked from defendant's ADP records.
Attached to this opinion as Appendix A are the two computation sheets prepared in order to compute the overtime pay which the government asserted was owing to Kenneth Lancaster, one of defendant's employees. Similar sheets were prepared with respect to each employee who testified or as to whom testimony was stipulated. I use the Lancaster sheets simply as an example of the government's method, emphasizing that it was one of the simpler computations.
In the upper left hand corner of the first page of the Lancaster computation there appear (i) the number of hours he worked in each week prior to 1987 (67 hours) (when drivers and helpers had to wash their trucks upon returning to Hoboken at the end of the working day); (ii) the number of hours he worked in each day prior to 1987 (11.16 hours); (iii) the number of hours he worked in each week in and after 1987 (60.5 hours); and (iv) the number of hours he worked in each day in and after 1987 (10.08 hours). These figures were based on Lancaster's testimony and on the assumption that he worked a full work week and full work day.
The balance of the first page of the Lancaster computation constitutes a formula for determining the number of uncompensated overtime hours in weeks when Lancaster worked 6, 5 and 4 days.
Overtime is the number of hours over 40 that somebody works times one and one-half their hourly rate of pay. In the present case the computation is complicated somewhat because each employee who worked a full six day week was paid for 40 hours at the regular rate and for 8 hours at double rate, which would be the equivalent of 16 hours at straight time.
The number of days worked in each week could be ascertained by dividing the hours shown as having been worked in any week by 8, since no matter how many hours were actually worked, these records never recorded more than an 8 hour day or 48 hour week.
In Lancaster's case the ADP records showed that he was paid $ 46.43 for 8 hours, resulting in an hourly pay rate of $ 5.8036. In a week in which Lancaster worked six days, he was shown on the ADP records as having worked only 48 hours and was paid accordingly -- 40 hours at the regular rate of pay ($ 5.8036) and 8 hours at double rate for a total of $ 325. In fact, however, if Lancaster worked a six day week, according to his testimony he actually worked 67 hours prior to 1987 and 60.5 hours after January 1, 1987.
As noted above, if a person worked a full six day week, the sixth day (deemed by defendants' records to be an 8 hour day) was paid at double the regular rate. Sometimes if an employee worked five days, the fifth day would be paid at double time rates, and sometimes if an employee worked four days, one of the days would be paid at double time. All this had to be taken into account when computing overtime due to each employee.
Returning to the first page of the Lancaster overtime computation, that page is essentially a breakdown of different length work weeks, i.e., 6 days, 5 days (with and without overtime paid on the last day) and 4 days (with and without overtime paid on the last day). With respect to the work week of each length, a credit for double time paid was applied and there was computed the difference between the time which was properly paid and uncompensated time.
For a six day week in Lancaster's case the table showed in its first column the Actual Hours Paid. That consisted of 40 hours of straight time plus 8 hours at double time, which was the equivalent of 56 total hours at straight time (40 16). The next column consisted of the Hours Properly Paid, i.e., the number of hours Lancaster could have worked in a six day week without defendant having incurred any obligation for overtime. Since Lancaster was paid double time for 8 hours of the first 48 hours, he could work for more than 48 hours without defendant being in violation of the requirement that it pay one and one-half the regular hourly rate for hours in excess of 40 each week. The Hours Properly Paid column computes the amount of hours Lancaster could work without the defendant becoming liable for overtime. In a six day week that number was 50.66 hours. In a five day week it was 45.33 hours if double time had been paid and 40 hours if such double time had not been paid. In a four day week the properly paid hours were 40 and 32, depending on the payment or non-payment of double time.
The next and last column on the first page of the Lancaster computation set forth Uncompensated Overtime Hours for six day weeks, five day weeks with and without double time and four day weeks with and without double time. The uncompensated overtime was derived simply by subtracting from Lancaster's actual hours worked in each of those categories of weeks the hours properly paid. For example, prior to 1987 Lancaster actually worked 67 hours in each six day week, according to his testimony. The number of hours for which he was properly paid was 50.66. Consequently for each six day week he worked prior to 1987 his uncompensated overtime amounted to 16.34 hours.
Thus on page 1 of the computation sheet there was provided the data which could be applied to ...