filed: December 4, 1991; As Corrected December 6, 1991. Second Correction December 17, 1991.
On Appeal from the United States District Court for the Western District of Pennsylvania. D.C. Civil No. 89-01520
Before: Sloviter, Chief Judge, Cowen and Rosenn, Circuit Judges
This appeal requires us to determine the standards for defining employment relationships under the Fair Labor Standards Act, "willful" violations of that statute, and the method for computing damages for such violations in the absence of employer records. The defendant in this case, a distributor of gasoline, oil, and related products, appeals the order of the United States District Court for the Western District of Pennsylvania determining that the operators of six gas stations were employees rather than independent contractors, and that defendant willfully violated the requirements of the Fair Labor Standards Act. Also before us is the award by the district court of liquidated damages to compensate the station operators for wages lost as a result of the statutory violations. Subject only to a minor mathematical adjustment, we will affirm the judgment of the district court.
The Secretary of Labor brought this action under the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (1988) ("FLSA" or "the Act"), to enjoin Selker Brothers, a distributor of gasoline, oil and other related products, from violating the Act's minimum wage, overtime, recordkeeping and anti-retaliation provisions. The action also named Bernard Selker, the President of Selker Brothers, in his personal capacity. Following his death on April 15, 1991, his executrix, Helen Selker, was substituted as a party. We refer to the defendants collectively as "Selker." The Secretary sought liquidated damages pursuant to section 216(c) of the Act, as well as back wages under the three-year statute of limitations set out in section 255(a), on the ground that Selker's violations had been willfully committed.
Selker Brothers owned twenty gas stations, of which seven were directly operated by Bernard Selker and his family,*fn1 five were leased, and eight were operated by commissioned operators. This appeal concerns six of the eight stations Selker classified as independent contractor stations.*fn2 Two stations were in Franklin, Pennsylvania, one at Eighth and the other at Thirteenth Street. The remaining stations were located in Rimersburg, Seneca, Tionesta, and Snydersburg, Pennsylvania. It is stipulated that Selker owned the gas the stations sold, station operators had no investment in the gas, and Selker determined the price of gas at every station. The operators had keys to the pumps, but Selker did not give them the keys to the gasoline storage tanks. Nor did he allow the operators to paint cars or do body work at the stations.
The only compensation the station operators received from Selker was three cents commission on every gallon of gas sold and ten cents per gallon commission on sales of kerosene. This commission was not negotiable; it was set by Selker and could not be changed by the operators. For credit card sales of gasoline, operators were required by Selker to add a surcharge of three percent.
Each station had an island for pumping gas, a building for an office, as well as a sales area, storage area and garage. None of the station operators had written leases. The operators paid no rent, but did pay a portion of the stations' monthly utilities, which Selker deducted from their commission checks along with other deductions for supplies, shortages and start up inventory. Selker controlled the hours of operation of each station and illumination of the stations at night. Selker maintained no records of the wages, hours, and other conditions of employment for the station operators or for other persons employed at the stations.*fn3
The Eighth Street Station in Franklin was run by Michael Cassano, who worked on average sixty hours per week, and employed workers to pump gas and do mechanical work. From July 20, 1986 through August 1988, Selker paid Cassano $19,826.01. Cassano supplemented these earnings by selling non-gasoline items including batteries, oil, candy and tobacco. His earnings from these sales averaged $400 per month. Bernard Selker fired Cassano and one of his assistants on August 31, 1988. Cassano testified that he complained to Bernard Selker that earnings based on commissions per gallon fell short of the minimum wage and Selker admitted the arrangement could be illegal. The district court found that Cassano and the assistant were fired because they complained to the Department of Labor about FLSA violations at the station.*fn4
The Thirteenth Street station was operated by William Koch from July 1986 through July 1989. Koch did not testify, but the district court found that he was paid a total of $21,520.37 in commissions during this three year period.
The Rimersburg station was an old-style station, a registered landmark with an old-fashioned pit but no lift. William McKinney operated this station from February 1986 through March 1988. From February 1986 to July 1987, he was paid on an hourly basis. In July 1987, Selker changed the method of payment to a commission basis. McKinney testified that the reason for the change, as explained to him by Bernard Selker, was that paying the hourly rate to the employees resulted in excessive overhead. From July 1987 to March 1988, McKinney was paid $7,202.21 in total commissions, and earned an average profit of $7.50 per month from the sale of non-gasoline items. McKinney testified that he used the pit as little as possible. He purchased the existing inventory of potato chips, soft drinks, candy, tobacco, motor oil and batteries from Selker at the time the station was converted to a commission basis. The district court found that Selker Brothers required McKinney to make this purchase. Upon terminating his tenure as station operator, McKinney sold the existing station inventory back to Selker Brothers.
Keith Zellefrow took over the operation of the Rimersburg station in April, 1988 and closed off the garage area to open a take-out restaurant. Zellefrow worked an average of 102 hours per week between April 1988 and January 1990, and was paid a total of $13,802.93 in commissions for gasoline sales.
The Tionesta station was run by six different operators between June 1986 and July 1988. Each received commissions from which station utility costs were deducted. Irvin Jenkins operated the station from June through August of 1986 but did not testify at trial. Keith Justice operated the Tionesta station from April 1987 through July 1987. He testified that he worked an average of 83 hours per week, and earned a total of approximately $270 per week from both gasoline and non-gasoline sales. The district court found that Justice worked an average of 98 hours per week*fn5 for a total of 15 weeks and received commissions totalling $2,700.14. Based upon this estimate of hours worked, the district court awarded him $1,993.18 in back wages. Selker Brothers purchased the inventory when Justice quit.
The Snydersburg station was operated by Margaret and Roy Wolbert from May 1986 until December 18, 1987. The Wolberts kept the station open from 7:00 a.m. to 9:00 p.m. Monday through Saturday, and from 9:00 a.m. to 9:00 p.m. on Sundays. They earned approximately $100 per month from mechanical work and approximately $10 per month from the sale of non-gasoline items. Their son also worked at the station for a total of 37 weeks. The Wolberts received commissions totalling $11,608.29 between July 20, 1986 and December 1987. Raymond Hummell operated the Snydersburg station from April 1988 to June 1988. He made no profit from the sale of non-gasoline items, but earned a total of $480 by performing mechanical work. He worked 85 hours per week for total of eleven weeks and received commissions totalling $1,654.89.
The Seneca station was operated by Charles Kinear and his son Richard, from 1986 to March 1989. The station was open 94 hours per week. The Kinears rented the station garage to a mechanic, and received thirty percent of all labor performed, plus a mark-up on all parts used. In 1989, the Kinears sold their equipment to Al and Larry Stover, who performed their own mechanical work and hired others to pump gas. The district court found that the Department of Labor introduced insufficient evidence to substantiate the Kinears' earnings and therefore assessed no damages. The Secretary has not appealed the district court's findings with regard to this station.
The district court entered an order enjoining Selker from violating the minimum wage, overtime, retaliatory discharge and recordkeeping provisions of the FLSA. From the applicable findings of fact and conclusions of law, the sum of back wages due the aggrieved employees amounted to $142,220.91. The district court awarded liquidated damages in the amount of $140,143.19. The court ordered Selker to pay ...