Perez-Benites et al v. Candy Brand, LLC et al
Filing
252
MEMORANDUM OPINION AND ORDER denying 194 Motion for Summary Judgment; denying 197 Motion for Partial Summary Judgment; denying 198 Amended Motion for Summary Judgment; granting 203 Motion for Partial Summary Judgment; granting 205 Motion for Summary Judgment; Status Conference being held 5/20/11 to discuss remaining issues for trial. Signed by Honorable Robert T. Dawson on May 20, 2011. (cnn)
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
EL DORADO DIVISION
ROSALINO PEREZ-BENITES,
LUIS ALBERTO ASENCIO-VASQUEZ, and
PASCUAL NORIEGA-NARVAEZ,
on behalf of themselves and
all others similarly situated,
v.
PLAINTIFFS
No. 1:07-CV-1048
CANDY BRAND, LLC,
ARKANSAS TOMATO SHIPPERS, LLC,
CHARLES SEARCY, RANDY CLANTON, and
BROOKS LISENBEY,
DEFENDANTS
MEMORANDUM OPINION AND ORDER
Currently before the Court are five separate motions for
summary judgment.
All are ripe for consideration.
The first is a
Motion for Summary Judgment on behalf of Defendant Randy Clanton
(Docs. 194-196), for which Plaintiffs filed a Response (Doc. 220221) and Defendant Clanton filed a Reply (Doc. 224).
The second is
a Motion for Partial Summary Judgment on behalf of Defendants Candy
Brand, LLC, Arkansas Tomato Shippers, LLC, and Charles Searcy
(Docs. 197 and 201), for which Plaintiffs filed a Response (Doc.
225).
The third is an Amended Motion for Summary Judgment on
behalf of Defendant Brooks Lisenbey (Docs. 198-200), for which
Plaintiffs
Plaintiffs’
filed
a
Motion
Response
for
(Docs.
Partial
226-227).
Summary
The
Judgment
fourth
is
Related
to
Violations of the Fair Labor Standards Act and H-2A Employment
Contracts (Docs. 203-204, 207, 208-218), for which Defendants filed
Responses (Docs. 228-229, 231, 232-244), and Plaintiffs filed a
Reply (Doc. 246). The fifth and final motion is Plaintiffs’ Motion
for Summary Judgment Related to Employer Status and Liability of
Charles Searcy, Randy Clanton, Brooks Lisenbey, and Arkansas Tomato
Shippers, LLC (Docs. 205-207, 208-218), for which Defendants filed
Responses (Docs. 228, 230-231, 234-244), and Plaintiffs filed a
Reply (Doc. 245).
As
explained
herein,
the
Court
has
made
the
following
determinations:
Motion for Summary Judgment on behalf of Randy Clanton (Doc.
194) is DENIED;
Motion for Partial Summary Judgment on behalf of Defendants
Candy Brand, LLC, Arkansas Tomato Shippers, LLC, and Charles Searcy
(Doc. 197) is DENIED;
Amended Motion for Summary Judgment on behalf of Defendant
Brooks Lisenbey (Doc. 198) is DENIED;
Plaintiffs’ Motion for Partial Summary Judgment Related to
Violations of the FLSA and H-2A Employment Contract (Doc. 203) is
GRANTED; and
Plaintiffs’ Motion for Summary Judgment Related to Employer
Status and Liability of Charles Searcy, Randy Clanton, Brooks
Lisenbey, and Arkansas Tomato Shippers, LLC (Doc. 205) is GRANTED.
I. Background
Plaintiffs are Mexican nationals who were employed in the
2
Defendants’ tomato farming and packing shed operations in and
around
Bradley
County,
guestworker visas.
Arkansas,
pursuant
to
H-2A
temporary
Defendants are Candy Brand, LLC, an Arkansas
corporation formed by Defendant Arkansas Tomato Shippers, LLC
(“ATS”), and Randy Clanton Farms, Inc.
ATS is owned, in part, by
Defendant Charles Searcy.
Mr. Searcy served as managing member of
both ATS and Candy Brand.
ATS owned a tomato packing facility at
Hermitage, Arkansas, which was leased to Candy Brand each year
during
the
tomato
harvest.
Defendant
Randy
Clanton
is
the
president and sole shareholder of Randy Clanton Farms, Inc., and a
producer of tomatoes.
Mr. Searcy and Mr. Clanton, along with
Defendant Brooks Lisenbey formed the senior management team of
Candy Brand between 2003 and 2007, sharing primary responsibility
for managing the operations and jointly making decisions affecting
the company.
All three individual Defendants were involved in the
day-to-day management of Candy Brand’s tomato harvesting, packing,
and selling operation.
Candy Brand contracted with two outside companies, AgWorks,
Inc., in 2003 and International Labor Management Corporation (ILMC)
from 2004 through 2007, to process the H-2A visa paperwork required
to obtain Mexican workers to harvest and pack tomatoes in Arkansas.
Ag Works and ILMC also served as Candy Brand’s agents in their
interactions with the U.S. Department of Labor (“DOL”) regarding
the H-2A guestworker program. Defendants did their own recruitment
3
and hiring of guestworkers, sending the names of Mexican nationals
selected to AgWorks or ILMC, which in turn coordinated with Mexican
firms to process prospective H-2A workers’ visas, handle Consular
interactions, and transport workers from Monterrey, Mexico, to
Hermitage, Arkansas.1
During the period relevant to this litigation, Defendants were
certified to employ approximately 1,800 H-2A workers.
Plaintiffs
bring claims on behalf of themselves and others similarly situated,
alleging that Defendants failed to reimburse the H-2A workers
during their
first
week
of
employment
for
costs
the
workers
incurred for passports, visas, visa processing, transportation, and
border crossing.
Plaintiffs claim that Defendants’ failure to
reimburse the workers for these costs in the first work week
reduced the workers’ first weeks’ earnings below the minimum wage
requirements of the Fair Labor Standards Act (“FLSA”), 29 U.S.C.
§§ 201-219, and the applicable Adverse Effect Wage Rate (“AEWR”)
mandated by
the
terms
and
conditions
of
the
H-2A
employment
contracts.
Plaintiffs also allege that Defendants failed to pay overtime
1
The record reflects that in 2007, Defendant Candy Brand
paid for and provided a bus for H-2A workers to travel from
Monterrey to Hermitage; otherwise from 2003-2006, transportation to
and from Monterrey was coordinated and made available to H-2A
guestworkers through Mexican companies that were retained by
Defendants, and Plaintiffs paid the cost of this transportation at
the time of transport.
4
wages for work done in the tomato packing sheds when that work
exceeded 40 hours per week.
Claims for overtime pay are made
pursuant to the FLSA.
Finally, Plaintiffs allege that when H-2A workers completed
50% of their contract periods, the Defendants failed to provide
them with adequate reimbursement for their travel expenses and
subsistence costs in journeying from their hometowns in Mexico to
the consular offices in Monterrey, and then to Hermitage, Arkansas,
in violation of the H-2A contract.
Plaintiffs also allege that
once the contract period ended, Defendants failed to reimburse
Plaintiffs for travel back to Mexico and for subsistence costs for
travel in violation of the contract.
Plaintiffs allege two separate claims for damages.
Count I
includes all FLSA-based collective action claims for minimum wage
deficiencies and for failure to pay overtime compensation to those
working in the tomato packing sheds.
Count II includes all breach
of employment contract claims based on the H-2A contracts, as
embodied in the relevant clearance orders.
The Count II claims
arise from Defendants allegedly failing to pay the AEWR in the
first work week as mandated by the DOL for H-2A workers, failing to
comply with the minimum wage and overtime provisions of the FLSA,
as required by the contracts, failing to keep accurate and adequate
records with respect to the workers’ earnings, and failing to
furnish workers with accurate hours and earnings statements.
5
On
October
31,
2008,
the
Court
granted
preliminary
certification of Plaintiffs’ Count I FLSA claims for minimum wage
and overtime violations.
The Court certified an opt-in class for
the Count I claims pursuant to 29 U.S.C. § 216 (b). (Doc. 66) There
are 97 individuals who consented to participate in this opt-in
class.
On March 23, 2010, the Court certified two Rule 23 (b)(3)
classes seeking relief for the Count II breach of contract claims
based on the H-2A contracts.
The two Rule 23 classes consist of:
(1) all non-supervisory workers employed by Defendants at any time
between 2003 and the date of judgment in this matter who were
employed pursuant to H-2A temporary work visas, and (2) all nonsupervisory
workers
employed
in
the
Defendants’
packing
shed
operations at any time between 2003 and the date of judgment in
this matter -–irrespective of visa status-– who did not receive
overtime pay during work weeks when they worked more than forty
(40) hours. (Doc. 174)
Shortly after this litigation was initiated in the summer of
2007, the decision was made to cease Candy Brand’s operations in
the tomato farming business.
A decision was also made to cease
ATS’s involvement in the tomato farming business and sell off ATS’s
assets.
Therefore, as of the date of this order, both Defendant
Candy Brand and Defendant ATS are not conducting tomato related
business, though they remain viable limited liability companies.
6
The various motions for summary judgment revolve around the
same few issues of both fact and law.
The individual Defendants
raise the issue of whether they are “employers” pursuant to the
FLSA and H-2A contracts, whether the Arkansas LLC Act or any other
corporations law provision would shield the individual Defendants
from liability for acts committed by the LLC Defendants, and
whether the “agriculture exemption” applies to Count I opt-in
packing shed workers and Count II, Class (2) packing shed workers
seeking overtime pay.2
Defendant Clanton’s Motion for Partial Summary Judgment (Docs.
194-196) asks that the Court limit his FLSA liability to only those
Plaintiffs who worked in the tomato fields, not any who worked in
the packing
shed.
Mr.
Clanton argues
that
he
was
not
an
“employer,” as defined by the FLSA, of the packing shed workers,
because he did not directly supervise them. He also seeks immunity
from Plaintiffs’ H-2A contract claims pursuant to the Arkansas LLC
Act
(A.C.A.
4-32-304),
which
limits
liability
for
breach
of
contract to the LLC itself, and not to the individual members of
the LLC.
2
Defendants also question whether the five-year statute
of limitations on contracts is applicable in light of the fact that
the FLSA has a different statute of limitations.
Defendants’
argument on this point was ruled upon in a previous order. The
Court held that the FLSA does not provide an exclusive remedy for
violations of its provisions (Doc. 173). Plaintiffs’ breach of
contract claims are not preempted by the FLSA.
7
Defendant
Lisenbey’s Amended
Motion
for
Summary
Judgment
(Docs. 198-200) also argues that he was not an FLSA “employer” of
any of the Plaintiffs, whether working in the fields or the packing
sheds.
Instead, Mr. Lisenbey asserts that he was merely the buyer
and seller of produce for his employer, Mckinstry Trading.
Mr.
Lisenbey also argues that he was not an “employer” under the H-2A
contract, and even if he were, the Arkansas LLC Act would shield
him from liability.
Defendants Candy Brand, ATS, and Searcy assert in their Motion
for Partial Summary Judgment (Docs. 197 and 201) that the Plaintiff
class members who were packing shed workers are not entitled to
overtime pay under the FLSA because Candy Brand qualifies for the
“agriculture exemption” for its packing shed activities. Defendant
Searcy maintains that he cannot be sued individually for H-2A
breach of contract claims, due to protections provided by the
corporate/LLC structure. Moreover, these Defendants argue that the
statute of limitations of the FLSA should control over the statute
of limitations governing the H-2A contracts, and thus Plaintiffs
should not recover on the five year statute of limitations for
their breach of contract claims.
Plaintiffs move for summary judgment on two issues, both of
which are also raised by Defendants in their Motions for Summary
Judgment.
First, Plaintiffs argue that individual Defendants
Clanton, Lisenbey, and Searcy, as well as Defendant ATS are all
8
“employers” along with Candy Brand with respect to all Plaintiffs,
whether field workers or shed workers, and with respect to both
FLSA claims and H-2A contract claims.3 (Docs. 205-206).
Second,
Plaintiffs move for Partial Summary Judgment with respect to
whether Defendants’ failure to adequately reimburse Plaintiffs
during their first work weeks for expenses incurred for passports,
visas, visa processing, border fees, and transportation expenses
violated the minimum wage provisions of the FLSA and the H-2A
employment contracts; whether Plaintiffs were properly reimbursed
at both the 50% and 100% points of their H-2A work contracts;
whether Defendants are entitled to the overtime exemption for
agriculture work for those Plaintiffs working in the packing sheds;
and whether Plaintiffs are entitled to a three-year statute of
limitations on their FLSA claims and to liquidated damages. (Docs.
203-204).
The Court will address the arguments and claims made in all
five summary judgment motions in order to determine if a genuine
issue of material fact exists regarding:
1) whether Defendants
are considered “employers” pursuant to the FLSA and the H-2A
contracts; 2) whether Defendants are liable for overtime pay; 3)
whether
Plaintiffs
are
entitled
to
reimbursement
for
certain
expenses and how that reimbursement would affect minimum wage/AEWR
3
The parties apparently agree that Defendant Candy Brand
is an “employer” under the FLSA and H-2A contract definitions.
9
wage rates for work done by Plaintiffs; 4) whether Plaintiffs’
claims are affected by statute of limitations questions; and 5)
whether Plaintiffs are entitled to liquidated damages for their
FLSA claims.
II.
Standard of Review
In determining whether summary judgment is appropriate, the
moving party bears the burden of establishing both the absence of
a genuine issue of material fact and that it is entitled to
judgment as a matter of law. See Fed. R. Civ. P. 56(c); Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106
S. Ct. 1348, 89 L. Ed. 2d 538 (1986); Nat’l. Bank of Commerce of El
Dorado, Ark. v. Dow Chem. Co., 165 F.3d 602 (8th Cir. 1999).
The
Court must review the facts in a light most favorable to the party
opposing a motion for summary judgment and give that party the
benefit of any inferences that logically can be drawn from those
facts. Canada v. Union Elec. Co., 135 F.3d 1211,
1212-13 (8th Cir.
1998) (citing Buller v. Buechler, 706 F.2d 844, 846 (8th Cir.
1983).
In order for there to be a genuine issue of material fact,
the non-moving party must produce evidence “such that a reasonable
jury could return a verdict for the nonmoving party.” Allison v.
Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
Once the moving party demonstrates that the record does not
disclose a genuine dispute on a material fact, the non-moving party
10
may not rest upon the mere allegations or denials of his pleadings,
but his response, by affidavits or as otherwise provided in Rule
56, must set forth specific facts showing that there is a genuine
issue for trial. Ghane v. West, 148 F.3d 979, 981 (8th Cir.
1998)(citing Burst v. Adolph Coors Co., 650 F.2d 930, 932 (8th Cir.
1981)).
legal
Furthermore, “[w]here the unresolved issues are primarily
rather
than
factual,
summary
judgment
is
particularly
appropriate.” Aucutt v. Six Flags Over Mid-America, Inc., 85 F.3d
1311, 1315 (8th Cir. 1996)(quoting Crain v. Bd. of Police Comm’rs,
920 F.2d 1402, 1405-06 (8th Cir. 1990)).
III. Discussion
A.
Employer Status of Defendants Clanton, Lisenbey, Searcy, and
ATS
1.
Analysis of the Law on Employer Status
a.
FLSA and H-2A Contract Definitions
The FLSA defines “employer” as “any person acting directly or
indirectly in the interest of an employer in relation to an
employee. . .” 29 U.S.C. § 203 (d).
The FLSA further defines an
“employee” as “any individual employed by an employer,” (id. at
§ 203 (e)(1)) and “employ” as “to suffer or permit to work” (id. at
§ 203 (g)). There may be multiple simultaneous employers under the
FLSA.
Corley v. Carco Capital Corp., 2006 WL 1889563 (W.D. Ark.
July 10, 2006)(citing Darby v. Bratch, 287 F.3d 673, 681 (8th Cir.
2002); Brown v. L&P Industries, LLC, 2005 WL 3503637 (E.D. Ark.
11
Dec. 21, 2005); Donovan v. Agnew, 712 F.2d 1509, 1510 (1st Cir.
1987).
The
federal
regulations
defining
the
employer/employee
relationship for temporary employment of foreign workers in the
United States are nearly identical to the statutory definitions
found in the FLSA.
For the 2003-2007 time period pertaining to
Plaintiffs’ claims, Title 20 of the Code of Federal Regulations,
section 655.100 (b) defines an H-2A guestworker “employer” as one
who “suffers or permits” a person to work.4
Such an employer is
characterized by his ability to “hire, pay, fire, supervise or
otherwise control the work of any such employee.” Id.
The guestworker program regulations also contemplate liability
for joint employers:
“[a]n association of employers. . . shall be
considered as a joint employer with an employer member if it shares
with the employer member one or more of the definitional indicia.”
Id.; see also Martinez-Bautista v. D&S Produce, 447 F.Supp.2d. 954,
961 (E.D. Ark. 2006); Salazar-Calderon v. Presidio Valley Farmers
Ass’n,
765
F.2d
1334,
(5th
Cir.
1985)(labor
contractor
that
petitioned in its name for H-2 guestworkers and individual growers
who used H-2 workers’ services were joint employers and therefore
both responsible for violations of H-2 regulations); Hernandez v.
4
The regulations governing the H-2A program in effect
during the period relevant to this lawsuit (2003-2007) are from
1987. All citations to the Code of Federal Regulations in this
Memorandum are from the 1987 regulations.
12
Two Brothers Farm, LLC, 579 F.Supp.2d 1379, 1383 (S.D. Fla. 2008)
(claims for breach of the H-2A employment contract may be brought
against individuals who meet the definition of “employer” under the
H-2A regulations).
Recovery is possible against any Defendants found to be
“employers” for both FLSA violations and breaches of the H-2A
employment contracts as embodied in the relevant work clearance
orders, which were virtually identical for all potential class
members between 2003 and 2007.
b.
LLC Act Immunity for Corporate Officers
Defendants Clanton, Lisenbey, and Searcy argue that Candy
Brand’s corporate structure should shield them from individual
liability.
They cite the Arkansas LLC Act’s shielding provisions
for this proposition of law.
Act
limits
liability
for
A.C.A. § 4-32-304.
acts
committed
by
The Arkansas LLC
the
LLC
to
the
corporation itself, and not to the individual members or officers
of the LLC.
Defendants Candy Brand, ATS, and Charles Searcy in
their Amended Motion for Partial Summary Judgment (Doc. 197) cite
general principles of corporations law, as well as supporting
Arkansas cases, in urging the Court to find that “[i]t is axiomatic
that shareholders, officers, or employees of a corporate entity are
not a proper party relative to a breach of contract claim against
the corporate entity. . . Generally, individual defendants would
not even be permitted to defend in their individual capacity for
13
breach of contract claims against a corporate entity.” (Doc. 197,
p. 12.)
Defendants’ arguments on this issue are unpersuasive.
The
Supremacy Clause of the U.S. Constitution trumps state law on the
issue of liability and immunity for breach of contract.
See U.S.
Const., Art. VI, Cl. 2; Louisiana Pub. Serv. Comm’n v. FCC, 476
U.S. 355, 369 (1986) (“[A] federal agency acting within the scope
of its congressionally delegated authority may pre-empt state
regulation.”); see also Chapman v. Houston Welfare Rights Org., 441
U.S. 600, 613 (1979)(“[E]ven though th[e] [Supremacy] Clause is not
a source of any federal rights, it does ‘secure’ federal rights by
according them priority whenever they come in conflict with state
law.
In that sense all federal rights, whether created by treaty,
by statute, or by regulation, are ‘secured’ by the Supremacy
Clause.”)
In our instant case, the DOL, through the authority delegated
it by Congress, enacted regulations governing participation in the
federal H-2A guestworker program. As part of those regulations, an
enforceable
contract
was
made
between
H-2A
workers
and
any
individuals or entities that fall within the DOL’s definition of
“employer.”
The definition of “employer” in the H-2A contract
setting is expansive, just as it is under the FLSA’s definition.
The federal government, when enacting the legislation governing how
and whether U.S. employers may petition for foreign workers to
14
assist with temporary, seasonal work, contemplated that such an
“employer” with the ability to “hire, pay, fire, supervise or
otherwise control the work of any such employee” would be required
to compensate H-2A workers at a rate not less than the federal
minimum wage, the prevailing wage rate in the area, or the “Adverse
Effect Wage Rate” (“AEWR”), whichever is higher.
655.102 (b)(9).
See 20 C.F.R. §
The AEWR is the minimum wage rate that the DOL
determines is necessary to ensure that wages of similarly-situated
domestic workers will not be adversely affected by the employment
of H-2A workers.
20 C.F.R. § 655.100 (b).
Defendants cannot avail themselves of either common law or
state contract law provisions as a shield from liability for a
federally-mandated obligation to pay H-2A workers the rate that is
necessary to maintain domestic wage parity.
If Defendants are
“employers” pursuant to the federal regulations governing the terms
of the H-2A guestworker contracts, then they are liable for any
breaches of those contracts.
Though there is little guidance in the case law of the Eighth
Circuit on the individual liability of corporate officers and
shareholders in FLSA and H-2A contract violations, the few cases
that have been decided bear out the Court’s holding.
A corporate
officer with operational control of the corporation’s day-to-day
functions is an employer within the meaning of the FLSA.
In Wirtz
v. Pure Ice Co., Inc., 322 F.2d 259, 262-63 (8th Cir 1963), the
15
controlling
stockholder
of
a
corporation
was
not
deemed
an
“employer” under the FLSA, but the Court observed that such an
individual
would
be
an
employer
if
he
owned
stock,
had
the
authority to manage and direct the business, and could hire and
fire employees.
action against
An injunction pursuant to an FLSA enforcement
a
corporate employer
was
upheld
on
appeal
in
Chambers Construction Co. v. Mitchell, 233 F.2d 717, 724 (8th Cir.
1956), where the Court found that the president and general manager
of a corporation “was engaged in the active management of the
affairs of the corporation, although he was ‘shown not to have
assumed any special obligation individually to pay the wages or
salaries of Chambers Construction Company’s employees. . .’”
More recently, in Darby v. Bratch, 287 F.3d 673, 681 (8th Cir.
2002), the Eighth Circuit affirmed that “individual liability does
exist under the FLSA” (citing Rockney v. Blohorn, 877 F.2d 637 (8th
Cir. 1989), which compares the definition of “employer” under ERISA
to the same definition under the FLSA).
District courts in Arkansas have applied the Eighth Circuit’s
general guidance on employer liability for FLSA violations.
In
Corley v. Carco Capital Corp., 2006 WL 1889563 (W.D. Ark. July 10,
2006), found joint liability was found under the FLSA for a
defendant company that held 100% of the stock in the company that
was plaintiffs’ listed employer.
The individual defendant who was
chairman of the board, a shareholder, had supervisory authority
16
over employees, and had authority to set, alter, and terminate
plaintiffs’ salaries, was also found to be a joint employer and
personally liable for plaintiffs’ damages. Id. at *2.
Similarly,
in Brown v. L&P Industries, LLC, 2005 WL 3503637 (E.D. Ark. Dec.
21, 2005), the Court found an individual defendant who was the
owner of an LLC liable as a joint employer under the FLSA, even
though the individual lived out of state. Id. at *12-13.
The Court
found that the defendant was an “employer” pursuant to the FLSA and
was personally liable for plaintiff’s unpaid overtime compensation
and liquidated damages.
The Court considered that the individual
defendant “maintained telephone contact with L&P personnel on a
daily basis. . . held final authority over all of L&P’s functions,
including decisions about employee compensation, and he made the
final decision to terminate Brown [the plaintiff].”
For all of
these reasons, the individual defendant in that case was found to
be an employer under the FLSA and could not hide behind the LLC’s
corporate structure to avoid personal liability.
Other circuits have found that “a corporate officer with
operational control of a corporation’s covered enterprise is an
employer along with the corporation, jointly and severally liable
under the FLSA for unpaid wages.” Donovan v. Agnew, 712 F.2d 1509,
1511 (1st Cir. 1987); see also Dole v. Elliott Travel & Tours,
Inc., 942 F.2d 962, 966 (6th Cir. 1991)(“To be classified as an
employer, it is not required that a party have exclusive control of
17
a corporation’s day-to-day functions.
The party need only have
operational control of significant aspects of the corporation’s
day-to-day functions.”).
A determination of whether an individual
is an employer within the meaning of the FLSA is not governed by
formalistic
labels
relationship.
or
a common
law
notion
of
the
employment
Donovan v. Sabine Irrigation Co., 695 F.2d 190, 194
(5th Cir. 1983).
Rather, the focus is on the totality of the
circumstances of whether the individual in question is sufficiently
involved in the day-to-day operations of the corporation.
194-195.
Id. at
With this standard in mind, the Court will apply the law
on employer liability to the facts of the case.
2.
Application of the Law to the Undisputed Facts
a.
Defendant Clanton
Defendant Randy Clanton asks the Court to find that he was an
employer of Plaintiff field workers only, not packing shed workers.
Clanton argues that he was not a member of the Candy Brand, LLC,
entity, and that he did not exercise the necessary control over the
packing shed employees to subject him to personal liability for
their overtime claims.
(Doc. 195, p. 3).
The Court disagrees.
To be an “employer” of H-2A workers
pursuant to the H-2A contract, Mr. Clanton need only have the
ability to “hire, pay, fire, supervise or otherwise control the
work of any such employee.”
standard is easily met.
20 C.F.R. § 655.102 (b)(9).
This
There is no precedent for parsing out the
18
workers into those who spent most of their time in the fields and
those who spent most of their time in the packing shed.
Clanton
clearly
supervised
or
controlled
the
work
of
Mr.
H-2A
employees, and that fact meets the requirements for purposes of
finding employer liability.
Furthermore, an examination of the deposition testimony
reveals that Mr. Clanton was not merely directing field workers
exclusively; he was actively participating in the hiring, firing,
and management of the business as a whole, of which an integral
part
was
the
H-2A
workers’
field
and
packing
shed
labor.
Plaintiffs have painstakingly cited to multiple pages of deposition
testimony taken in this case.
Those facts evidence Mr. Clanton’s
employer status both under the H-2A contract provisions and the
FLSA.
An individual such as Mr. Clanton who has a significant
ownership interest and operational control of major aspects of the
corporation’s day-to-day functions
test
for
FLSA
employer
meets the “active management”
liability,
as
described
in
Chambers
Construction Co. v. Mitchell, 233 F.2d 717, 724 (8th Cir. 1956),
and explained further in Brown v. L&P Industries, LLC, 2005 WL
3503637 (E.D. Ark. Dec. 21, 2005).
Below are some of the undisputed facts that establish Mr.
Clanton’s status as employer, both under the H-2A contracts and the
FLSA, and subject him to joint and several liability:
(1)
Clanton was president and 100% shareholder of Randy
19
Clanton
Farms,
Inc.,
and
through
that
ownership,
a
partner and owner of Defendant Candy Brand, LLC. Candy
Brand/ATS/Searcy Dep. Vol. I at 37, 39, 111; R. Clanton
Dep. at 15-16.
(2)
Clanton had the authority to hire and fire Candy Brand
employees, react to labor costs, modify or recommend
changes to Candy Brand’s work rules, and serve as a
contact for workers seeking to return to Candy Brand the
following year.
Clanton
Dep.
K. Clanton Dep. at 35-36, 125-126; R.
at
89-90,
134-135,
209-210;
Candy
Brand/ATS/Searcy Dep. Vol I at 58-59, 102-103, 181-184.
(3)
Clanton had the authority to set wages for both field and
packing shed workers.
K. Clanton Dep. at 35, 149; Candy
Brand/ATS/Searcy Dep. Vol II at 33-34 and Vol. I at 8990.
(4)
Clanton
hired
and
trained
field
supervisors
and
determined when field crews would start the work day. R.
Clanton Dep. at 137-139; Candy Brand/ATS/Searcy Dep. Vol.
II at 33-34, 54-56, 71-74, 89-90.
(5)
Clanton visited the packing shed daily and supervised the
work there.
R. Clanton Dep. at 146; M. Martinez Morales
Dep. at 26-27; B. Burboa Leyva Dep. at 27; D. Arriaga
Guzman Dep. at 22.
(6)
Clanton had the authority to request that individual H-2A
20
workers be added to Candy Brand’s list of workers to
cross from Mexico to the U.S., make the determinations as
to how many field and packing shed workers Candy Brand
needed to request on its H-2A worker applications, and
directed
how
all
H-2A
worker
crossings
should
be
coordinated so that workers would arrive in Arkansas on
particular dates.
Candy Brand/ATS/Searcy Dep. Vol. I at
95-96, 108-109, 144-145, 176; Docs. 209-7 and 209-19; R.
Clanton Dep. at 32-34, 64-65.
(7)
Clanton had the authority to sign Candy Brand employee
payroll checks.
Candy Brand/ATS/Searcy Dep. Vol. I at
79-80.
(8)
Clanton was aware that Candy Brand’s non-reimbursement
policy for visa and travel fees may not be in compliance
with FLSA requirements, as he had discussed the relevant
case law with Defendant Searcy.
Candy Brand/ATS/Searcy
Dep. Vol. I at 194-195.
For these and other reasons enumerated by Plaintiffs in their
Brief (Doc. 245), there is no genuine issue of material fact that
Defendant Clanton is an employer under both the H-2A contracts and
the FLSA.
b.
Defendant Lisenbey
Defendant Brooks Lisenbey argues that he was neither employed
by Candy Brand nor an owner of Candy Brand.
21
However, as refuted
above, those two facts do not negate the fact that Defendant
Lisenbey actively managed employees or had the authority to hire,
fire, pay, supervise, or otherwise exert operational control over
the business and the Plaintiff workers who bring this lawsuit.
It is undisputed that Defendant Lisenbey was an employee of
his wife’s company, Mckinstry Trading5, and was tasked with the job
of selling Candy Brand’s tomatoes for McKinstry.
In his capacity
as salesman of Candy Brand’s inventory, Mr. Lisenbey was directly
and substantially involved in the day-to-day management of Candy
Brand.
Mr.
Lisenbey’s
duties
and
responsibilities
primarily
included supervising the packing shed operations. But Mr. Lisenbey
was also generally involved with the hiring and supervision of H-2A
workers for Candy Brand.
He traveled to Mexico on behalf of Candy
Brand to learn about the process of hiring H-2A workers (B.
Lisenbey Dep. at 114-118) and then went to Monterrey, Mexico, to
visit with the Consulate there (B. Lisenbey Dep. at 123-124).
Far
from the mere produce salesman Mr. Lisenbey makes himself out to
be, he meets both the U.S. government’s H-2A contract definition
and the FLSA’s definition of “employer.”
5
Mckinstry Trading was the community property by marriage
of Mr. and Mrs. Lisenbey and was transferred to Mr. Lisenbey as
part of his divorce proceedings. Mckinstry Trading was one of the
owners of ATS and Candy Brand. ATS owned the packing shed facility
that is discussed in the instant case, and Mr. Lisenbey purchased
this packing facility outright on behalf of one of his other
companies after this lawsuit was filed.
22
Below are some of the undisputed facts that establish Mr.
Lisenbey’s status as employer and subject him to joint and several
liability:
(1)
Candy Brand’s interrogatory responses and other documents
list Mr. Lisenbey as one of the three managers of the
Candy Brand business and as the supervisor/manager of the
packing shed operations. Docs 210-4 and 210-8; see also
K. Clanton Dep. at 47-48.
(2)
Lisenbey had the authority to hire and fire employees,
including the supervisors of the H-2A workers, and could
determine whether workers would be paid on an hourly
basis or by a daily rate.
R. Clanton Dep. at 135-135,
279-280; K. Clanton Dep. at 35-36; B. Lisenbey Dep. at
81-82, 168-169.
(3)
Lisenbey traveled to Monterrey, Mexico, on behalf of
Candy
Brand
and
informed
Candy
Brand’s
consular
processing agent that he had hand selected and hired some
of the Candy Brand H-2A workers. Rodriguez, Jr./Solstice
Dep. at 33-38.
(4)
Both
Defendants
Clanton
and
Searcy
consulted
with
Lisenbey before determining how many field and packing
shed workers would be requested on H-2A applications. R.
Clanton Dep. at 32-34, 64-65; Candy Brand/ATS/Searcy Dep.
Vol. I at 108-109, 144-145, 176; Doc 209-19.
23
(5)
Lisenbey disciplined Candy Brand workers he thought were
doing a poor job (B. Lisenbey Dep. at 70-71), sent a memo
to workers related to procedures for clocking in and out
and
threatened
noncompliance
them
with
with
rules
non-payment
(Doc.
of
213-4),
wages
and
made
for
an
announcement to Candy Brand employees about what fees
they should and should not have to pay to become H-2A
workers at Candy Brand (B. Lisenbey Dep. at 130-133).
(6)
Lisenbey was so intimately involved in the Candy Brand
business that he signed an indemnification agreement with
Defendants Searcy and Clanton, stating among other things
that if money were paid to Candy Brand by the U.S.
Department of Agriculture for the tomato crop years 20032007, the money would be split evenly between Lisenbey’s
company and Clanton’s company. Doc. 207-1.
For these and other reasons enumerated by Plaintiffs in their
Brief (Doc. 245), there is no genuine issue of material fact that
Defendant Lisenbey is an employer under both the H-2A contracts and
the FLSA.
c.
Defendant Searcy
Mr. Searcy admits that he is an employer as defined by the
FLSA (Doc. 243, ¶ 1).
However, he contends that each H-2A
employment contract mandated by the DOL listed only Candy Brand as
the employer, and thus Candy Brand is the only proper defendant
24
employer in an H-2A breach of contract action.
Plaintiffs correctly point out that because Mr. Searcy meets
the definition of “employer” under the FLSA, he also meets the
definition under the H-2A regulations.
As discussed herein, there
is no prohibition against seeking damages for both FLSA claims and
H-2A breach of contract claims. Most district courts in the Eighth
Circuit agree that the FLSA’s savings clause, which allows states
to enact stricter wage, hour, and child labor provisions than the
federal government, indicates that the FLSA does not provide an
exclusive remedy for its violations.
In fact, “it would seem that
state law may offer an alternative legal basis for equal or more
generous relief for the same alleged wrongs.” Cortez v. Neb. Beef,
Inc., 2010 WL 604629 (D. Neb. Feb. 16, 2010).
Furthermore, the record reflects that the employer listed on
the 2004-2006 contracts is in fact “Charles Searcy, Plant Manager.”
(Docs. 245-1, 245-2, 245-3).
appear
The name “Candy Brand” does not
in the 2004 and 2005 contracts.
For these and other
reasons, the evidence is such that there is no genuine issue of
material fact that Defendant Searcy is an employer under both the
H-2A contracts and the FLSA.
d.
Defendant ATS
Defendant ATS is a joint employer along with Candy Brand.
Candy Brand was owned by and under the control of ATS, and ATS
employees supervised the Candy Brand packing shed workers (B.
25
Lisenbey Dep. at 73, 77-79, 87-90; Candy Brand/ATS/Searcy Dep. Vol.
I at 48-49).
Defendant Searcy had the authority to sign both Candy
Brand employee payroll checks and ATS employee payroll checks. Mr.
Searcy was the managing member of both Candy Brand and ATS, and he
routinely dispensed with formalities in operating both entities.
Specifically, the facts show that there was no formal process with
respect to Candy Brand making draws against the ATS line of credit.
If Candy Brand needed money, Mr. Searcy would write himself a check
from one corporate account to the other (Candy Brand/ATS/Searcy
Dep. Vol II at 319-320). As ATS financed Candy Brand’s operations,
Mr. Searcy provided a personal guarantee for loans obtained by both
ATS and Candy Brand.
In addition, Mr. Searcy negotiated the terms
of the $2 million line of credit between ATS and Candy Brand on
behalf of both entities (Candy Brand/ATS/Searcy Dep. Vol. II at
233-234).
Mr. Searcy was the person who made the decision to cease
operating Candy Brand and to sell off the assets of ATS sometime in
2007 or 2008 (Candy Brand/ATS/Searcy Dep. Vol. II at 321-22).
In
short, there is no distinction between Candy Brand and ATS: both
companies are essentially Defendant Searcy, and admittedly so.
The economic ties between ATS and Candy Brand were such that
the two companies met the standard concerning FLSA joint employment
under 29 C.F.R. § 791.2 (b).
The regulation states: “[w]here the
employers are not completely disassociated with respect to the
employment of a particular employee and may be deemed to share
26
control of the employee, directly or indirectly, by reason of the
fact that one employer controls, is controlled by, or is under
common
control
employment
with
the
employer.
.
exists.
relationship
other
Id.
See
.”
then
a
joint
Hearnsberger
v.
Gillespie, 435 F.2d 926, 930-31 (8th Cir. 1970)(where individual
defendant
was the primary stockholder in separate corporate
defendant, economic ties between the two entities meant that joint
employment was “firmly sustained by the Act and by caselaw”).
Furthermore, Candy Brand and ATS are an integrated enterprise
pursuant to the four-factor test announced in Sandoval v. American
Building Maintenance Industries, Inc., 578 F.3d 787, 793-796 (8th
Cir. 2009).
The doctrine announced in Sandoval establishes a
standard by which courts may essentially pierce the corporate veil
for purposes of establishing employer liability in labor and
employment law cases.
This doctrine has been applied in the
context of the FLSA (see Pearson v. Component Tech. Corp., 247 F.3d
471, 486 (3d Cir. 2001) and other federal employment statutes to
determine
liability of
subsidiary.
entities
a
parent
corporation
for acts
of
its
The test involves whether separately incorporated
have
(1)
interrelation
of
operations;
(2)
common
management; (3) centralized control of labor relations; and (4)
common ownership or financial control. Id.
dispositive.
27
No one factor is
Applying the four Sandoval factors to Mr. Searcy’s common
ownership and management of ATS and Candy Brand, it is clear that
all four factors are met, and ATS is liable to Plaintiffs as an
employer
pursuant
to
the
H-2A
contracts,
whether
under
the
integrated enterprise doctrine or pursuant to the plain language of
29 C.F.R. § 791.2 (b).
B.
Overtime Exemption for Agriculture Work
Defendants argue that they were not required to pay overtime
wages to packing shed employees because that the work qualified for
an agricultural exemption from FLSA overtime provisions. 29 U.S.C.
§ 213 (b)(12).6
Defendants are entitled to this exemption if they
can show that the packing shed work was performed by a farmer as an
incident to that farmer’s farming operations.
The problem is that
if that farmer packs produce grown by other farmers, he loses the
exemption. Farmers Reservoir & Irrigation Co. v. McComb, 337 U.S.
755, 766 n. 15 (1949)(“[P]rocessing on a farm of commodities
produced by other farmers is incidental to or in conjunction with
the farming operations of the other farmers and not incidental to
or in conjunction with the farming operation of the farmer on whose
premises the processing is done.
Such processing is, therefore,
not within the definition of agriculture.”); Marshall v. Gulf &
Western Industries, Inc., 552 F.2d 124, 126 (5th Cir. 1977)(“The
6
It is undisputed that packing shed workers often worked
more than 40 hours per work week and were not paid overtime wages.
28
fact that tomatoes grown by independent farmers were processed by
Gulf
&
Western
prevents
it
from
receiving
the
claimed
[agricultural] exemption.”)
The Court is persuaded that the packing shed workers employed
by Defendants packed tomatoes grown by individuals and entities
other than Candy Brand, including Dale McGinnis, Lowry Farms, Inc.,
A-W Produce, Inc., and others.
employees
packed
tomatoes
Defendants do not deny that their
grown
by
other
farmers;
however,
Defendants counter that such outside produce was only de minimis to
Defendants’ overall operation (Doc. 232).
Defendant Searcy states
in an affidavit that he believes that repacking outside tomatoes
accounted for less than two percent of the packing shed production
of Candy Brand as a whole.
This amount, he argues, is de minimis.
It is Defendants’ burden to show they are entitled to the
agricultural exemption. Mitchell v. Kentucky Finance Co., 359 U.S.
290, 291 (1959); 29 C.F.R. § 780.2.
Defendants have failed to meet
that burden. Though Defendant Searcy’s opinion is that the outside
tomatoes were a very small percentage of total packing production,
he provides no evidence to counter Plaintiffs’ compelling showing
that Candy Brand’s federal tax returns reflect outside purchases of
produce accounting for over 10% of Candy Brand’s total operational
expenses in 2006 and 2007 (Docs. 211-19 and 211-20). Those outside
purchases do not even include the tomatoes farmed by Dale McGinnis
and A-W Produce.
Dale McGinnis’s employee, Ascension Fonseca,
29
testified that he deferred to Mr. McGinnis regarding how and when
to plant tomatoes on McGinnis’s land, and Mr. McGinnis checked on
tomato plant growth, applied fungicide, and loosened the soil in
preparation for planting, among other farming tasks (Fonseca Dep.
at 25, 31-36, 44-47, 59). Though Candy Brand’s employees harvested
Mr. McGinnis’s tomatoes, the evidence shows that Candy Brand was
not the exclusive farmer of the crop.
In fact, Mr. McGinnis was
paid by Candy Brand for tomatoes grown on land that Candy Brand
leased from other persons. Docs. 209-35 and 209-36.
A-W’s farms were in Texas, some 700 miles away from Candy
Brand’s Arkansas operations. A-W provided its own labor in growing
the tomatoes.
Though Defendant Clanton counseled A-W at times
during the 2005 season, and Candy Brand shared some costs involved
in
growing
the
tomatoes
that
year,
Candy
Brand
described as an investor in A-W’s tomato crop.
can
best
be
When Candy Brand
packed A-W’s crop, Candy Brand was not the farmer of that crop for
A-W was the farmer.
Candy Brand was on notice that it may be liable for overtime
wages due to the fact that its packing shed workers packed tomatoes
for several other growers.
In 2003, AgWorks, Inc., which was
Defendants’ agent in their interactions with the DOL in applying
for H-2A guestworkers, advised Candy Brand in writing that packing
shed employees may be eligible for overtime pay (Doc. 207-4, p. 6).
Defendants expressed in writing their legal concern over their
30
decision to not pay overtime wages to H-2A workers (Doc. 210-7).
Nevertheless, the facts show that Defendants failed to consult a
legal expert regarding overtime compensation and the agricultural
exemption, and Defendants apparently decided to take their chances
that the exemption would apply. The Court holds that the exemption
does
not
apply,
compensation
owed
and
to
Defendants
are
the
I
Count
liable
opt-in
for
any
Plaintiffs
overtime
who were
employed in the Defendants’ packing shed and Count II, Class (2)
Plaintiffs who worked in the packing shed facilities.
C.
Reimbursement of Plaintiffs’ Expenses
1.
Analysis of the Arriaga Case
The U.S. Department of Labor recently affirmed that under the
FLSA, employers are obligated to reimburse travel and immigrationrelated costs to temporary foreign guestworkers if the costs reduce
the workers’ wages below the federal minimum wage during the first
work week.
Doc. 213-11.
The DOL cited favorably to the 11th
Circuit case of Arriaga v. Florida Pacific Farms, LLC, 305 F.3d
1228 (11th Cir. 2002), in issuing its Field Assistance Bulletin in
2009, noting that “travel and immigration-related costs for workers
hired under the H-2B program are for the primary benefit of their
employers, and the employers therefore must reimburse the employees
for these costs in the first work week if the costs reduce the
employees’ wages below the minimum wage.” Field Assistance Bulletin
No. 2009-2 (Aug. 21, 2009).
This reasoning is not limited to the
31
H-2B context, as the DOL added that “[t]he same type of analysis .
. . would have to be performed whenever an employee must travel for
temporary employment from the point of hire to a distant worksite
location.” Id. at 9 n.3.
This Court agrees with other courts in concluding that the
Arriaga decision is well-reasoned and correctly decided, and that
Plaintiffs are entitled to reimbursement of the expenses they
incurred to travel to the United States and work for Defendants.
See, e.g., Morante-Navarro v. T & Y Pine Straw, Inc., 350 F.3d
1163, 1166 n.2 (11th Cir. 2003)(H-2B guestworkers entitled to
reimbursement); De Leon-Granados v. Eller & Sons Trees, Inc., 581
F.Supp.2d 1295, 1315 (N.D. Ga. 2008)(H-2B guestworkers entitled to
reimbursement); Martinez-Bautista v. D&S Produce, 447 F.Supp.2d
954,
963-64
(E.D.
Ark.
2006)(H-2A
guestworkers
entitled
to
reimbursement); De Luna-Guerrero v. North Carolina Grower’s Ass’n,
338 F.Supp.2d 649, 662 (E.D. N.C. 2004)(H-2A guestworkers entitled
to reimbursement).
In Arriaga, the Eleventh Circuit addressed whether an employer
must reimburse foreign H-2A guestworkers’ visa and travel costs
under
the
FLSA.
The
court
ruled
that
the
costs
of
H-2A
guestworkers’ visas and travel from their home country to the
United
States
were
incurred
“for
the
primary
benefit
and
convenience of their employer.” Arriaga, 305 F.3d at 1242.
In
ruling that workers’ international travel and guestworker visas
32
were not the same as board and lodging (which are not reimbursable
costs), the Court emphasized that employees’ visa and travel costs
were “an inevitable and inescapable consequence” of the employer’s
hiring foreign
guestworkers.
Id.
Because
these
costs
were
inherent in the employer’s choice of foreign employees, they were
an “incident of and necessary to the employment,” 29 C.F.R.
§ 531.32 (a).
Thus, the employers were obligated under the FLSA to
reimburse the foreign workers if failure to do so would drop the
workers’ wages below the minimum wage. Arriaga, 305 F.3d at 1242.
An employer cannot escape its minimum wage obligations by requiring
employees to pay directly for costs that it would be prohibited
from deducting from their pay.
Id. at 1236.
Reimbursement of costs was appropriate during the workers’
first work weeks.
The Arriaga court held that employees’ travel
and visa costs were not expenses they would have incurred normally
in the course of life, but rather, like a work uniform or tools,
were costs necessitated by the job itself.
Id. at 1243-44.
Because these expenses arose pre-employment, reimbursement during
the first work week would have been mandatory.
Id. at 1237.
It is important to make clear that Arriaga’s holding is based
on the FLSA, not on H-2A regulations.
In applying the holding of
Arriaga to the case at bar, it is evident that the pre-employment
costs associated with H-2A workers’ employment with Defendants
should have been reimbursed during the first work weeks.
33
The
passport,
visa
processing,
crossing expenses
that
visa,
workers
transportation,
bore
as
and
a condition
border
of their
employment in Arkansas were not costs that would have arisen in the
ordinary course of life.
See Arriaga, 305 F.3d at 1243-44.
Defendants knew that their H-2A workers bore substantial costs in
obtaining visas to work in Arkansas. These costs included the fees
that workers paid to Defendants’ agents in Mexico who performed the
critical service of processing visas smoothly and insuring that
workers arrived in Arkansas during designated times.
Moreover,
Defendants were well aware of the pass-through costs that their H2A workers bore personally in paying visa processing agents and
passport, visa, and border crossing fees.
As early as March 2003, Defendants’ agent AgWorks sent them a
set of requirements associated with the employment of H-2A workers,
including a summary of the Arriaga decision (Doc. 207-4, pp. 9-10).
Defendants Searcy and Clanton discussed the implications of the
Arriaga decision with one another, but without reading the opinion
or consulting an attorney, they opted not to follow Arriaga and
reimburse workers for pre-employment costs. Candy Brand/ATS/Searcy
Dep. Vol. I at 194-95, 206-08.
In addition, from as early as
November 2005, Defendants’ agent ILMC mailed Defendants several
letters warning them of legal issues related to the failure to
reimburse workers for visa and travel expenses (Docs. 207-12, 20929, 209-30).
These warnings were unavailing.
34
The
Court
finds
that
all
Plaintiffs
were
entitled
to
reimbursement of these pre-employment costs during their first work
weeks, and Defendants are liable for failing to do this.
2.
Analysis of the FLSA Minimum Wage Law and the H-2A
Contracts’ AEWR Requirement
To participate in the H-2A guestworker program, employers file
forms
with
the
federal
government
that
comply
with
federal
regulations. 20 C.F.R. § 655.101 (b). These regulations establish
the minimum benefits, wages, and working conditions that must be
offered to employees and form the contracts between employers and
employees.
See Arriaga, 305 F.3d at 1233 n.5 (“clearance orders
ultimately become the work contract between the employers and the
farmworkers”).
To
ensure
that
the
employment
of
H-2A
workers
did
not
adversely affect the wages and working conditions of U.S. workers,
Defendants were obligated to pay the higher of the federal minimum
wage, the prevailing wage, or the Adverse Effect Wage Rate (“AEWR”)
for each hour worked.7
Payment of the AEWR is important for many
reasons, not the least of which is protection of U.S. workers from
facing unfair competition if employers were permitted to undercut
wages by paying foreign workers a drastically reduced wage.
In addition to the requirement that Defendants pay the AEWR to
7
It is undisputed that in the instant case, the AEWR was
the highest of the three wage rates listed.
35
H-2A workers, Defendants were also contractually obligated to
“comply
with
applicable
federal,
related laws and regulations.”
State,
20 C.F.R.
and
local
employment
§ 655.103 (b).
is one such law that the H-2A contracts incorporate.
The FLSA
As a result,
failure to pay the federal minimum wage, in addition to being a
violation of the FLSA, also constitutes a breach of the H-2A
contract.
It is undisputed that Defendants did not reimburse workers
during the first work weeks for the passport, visa processing,
visa, transportation, and border crossing expenses the workers
incurred for Defendants’ benefit.
The legal effect of requiring
employees to bear these costs is the same as if Defendants deducted
these expenses from employees’ wages.
Arriaga, 305 F.3d at 1236.
Failure to reimburse Plaintiffs for these expenses during their
first work weeks effectively reduced Plaintiffs’ wages below the
AEWR in violation of the H-2A contracts. Defendants are liable for
these deficiencies.
Moreover, the H-2A contracts require that travel and daily
subsistence costs for workers’ transportation to the place of
employment be reimbursed at the 50% point of the contract.
Defendants’ own clearance order from 2003 (Doc. 210-22) states:
“After fifty percent of the employment period is complete, the
employer
will
reimburse
the
worker
for
reasonable
cost
of
transportation and subsistence from the place of recruitment to the
36
grower’s
location.”
reimbursement
for
20
C.F.R.
transportation
§
655.102
and
daily
(b)(5)(i)(requiring
subsistence
costs
incurred from the place “from which the worker has come to work for
the employer to the place of employment”).
However, Defendants
admit that they paid H-2A workers at the 50% point of their
contracts a $100 flat payment for the costs of transportation and
subsistence, regardless of the actual costs of transportation
incurred by the workers, and ignored the daily subsistence rate set
forth each year in the Federal Register.8
Defendants’ breached the
H-2A contracts when they failed to pay full transportation and
subsistence costs at the 50% point of the contracts.
Similarly, Defendants’ breached the H-2A contracts when they
failed to pay full transportation and subsistence costs at the end
of the contract terms for reimbursement of travel from Arkansas
back to Plaintiffs’ homes in Mexico.
The federal regulations
regarding this requirement state that return transportation and
costs of daily subsistence “from the place of employment to the
place from which the worker . . . came to work for the employer”
must be reimbursed at the end of the contract terms.
§ 655.102 (b)(5)(ii).
20 C.F.R.
Defendants were obligated to pay for the H-
2A workers’ transportation each year from Hermitage, Arkansas, to
8
Defendants’ partial
initial travel costs at
absolve Defendants from
incurred during the first
reimbursement
the 50% point
liability for
work weeks of
37
of $100 for Plaintiffs’
of the contracts cannot
minimum wage violations
the contracts.
the
workers’
homes.
They
were
also
required
to
pay
daily
subsistence costs for the workers’ trips home.
D.
Liquidated Damages and Three-Year Statute of Limitations for
FLSA Claims
Liquidated damages are not punitive, but rather are “intended
in part to compensate employees for delay in payment of wages owed
under the FLSA.”
Hultgren v. County of Lancaster, 913 F.2d 498,
509 (8th Cir. 1990)(citing Brooks Savings Bank v. O’Neill, 324 U.S.
697, 707 (1945)).
An award of liquidated damages is mandatory
under 29 U.S.C. § 216 (b) absent an employer’s showing of good
faith and reasonable grounds for the belief that it was not in
violation of the FLSA.
Braswell v. City of El Dorado, 187 F.3d
954, 957 (8th Cir. 1990).
If the employer fails to come forward
with plain and substantial evidence to satisfy both the good faith
and reasonableness requirements, the court must award liquidated
damages.
Williams v. Tri-County Growers, Inc., 747 F.2d 121, 129
(3d Cir. 1984).
double
damages
The employer’s burden is “a difficult one, with
being
the
norm
and
single
damages
being
the
exception.” Chao v. Barbeque Ventures, 547 F.3d 938, 941 (8th Cir.
2008).
In this case, Defendants were aware of their obligation to pay
packing shed workers overtime wages and to reimburse their H-2A
employees’ pre-employment expenses. Defendants’ U.S. agents during
the relevant time period, AgWorks and ILMC, assisted Defendants
with the H-2A application process and in doing so alerted them to
38
the possibility of liability.
The DOL sent Defendants multiple
letters,
FLSA
advising
them
of
requirements
reimbursement of expenses for H-2A workers.
related
to
Deposition testimony
establishes that Defendants Searcy and Clanton were aware of the
Arriaga decision and its implications, but they failed to obtain
legal advice regarding their business’s compliance with Arriaga’s
requirements.
Defendants admit that packing shed workers were
never given overtime pay.
This fact is undisputed.
Defendants admit that they did not reimburse Plaintiffs for
passports,
visas
and
visa
processing,
transportation,
border
crossing expenses, or transportation and subsistence costs after
the
first
work
week,
announced in Arriaga.
in
contravention
of
FLSA
requirements
They also admit that their policy and
practice was to reimburse H-2A workers only $100 each for the costs
of transportation from their homes in Mexico to the Defendants’
workplace in Hermitage, Arkansas, regardless of the fact that the
actual costs of transportation incurred by Plaintiffs exceeded
$100.
Even though Defendants’ agents AgWorks and ILMC provided
Defendants with detailed instructions and worksheets describing how
to
properly
calculate
travel
reimbursement
under
the
H-2A
regulations (including estimates for travel costs from various
cities all over Mexico, not simply from the Consular offices in
Monterrey), Defendants did not take into account Plaintiffs’ actual
costs for transportation and continued to reimburse them a flat
39
rate of $100 each after the 50% point of the contracts was
completed.
After
the
completion
of
the
contracts each
year,
it
is
undisputed that Defendants failed to reimburse Plaintiffs for
transportation costs from Monterrey to class members’ home cities
in
violation
of
the
contract.
The
evidence
is
clear
that
Defendants also failed to pay any H-2A class member for the costs
of daily subsistence during travel, whether at the 50% point or at
the 100% point of the contract period, again in violation of the H2A regulations.
Though Defendant Searcy admitted in deposition to
this failure to reimburse as “just a screw-up on our part,” the
poor judgment Defendants exhibited is striking.
Lack of knowledge is not enough to establish good faith.
Chao, 574 F.3d at 941.
It is “hard to mount a serious argument
that an employer who has acted in reckless disregard of its FLSA
obligations has nonetheless acted in good faith.”
Jarrett v. ERC
Props., 211 F.3d 1078, 1084 (8th Cir. 2000).
In light of the
evidence
of
of
Defendants’
reckless
disregard
the
FLSA’s
requirements, the Count I opt-in Plaintiffs are entitled to an
award of liquidated damages in an amount equal to the unpaid
minimum and overtime wages they are due under the FLSA.
Regarding
the
statute
of
limitations
applicable
to
FLSA
claims, the statute extends the limitations period from two years
to
three
years
if
Plaintiffs can
40
prove
that
the
Defendants’
violation of the Act was “willful.”
29 U.S.C. § 255 (a).
A
“willful” violation is one where “the employer either knew or
showed reckless disregard for the matter of whether its conduct was
prohibited by the [FLSA].” McLaughlin v. Richland Shoe Co., 486
U.S. 128, 133 (1988).
The regulations interpreting the FLSA state
that a violation shall be deemed “in reckless disregard . . . if
the employer should have inquired further into whether its conduct
was in compliance with the Act” and failed to do so.
29 C.F.R. §
578.3 (c)(3).
The
Court
finds
that
the
Defendants
acted
in
reckless
disregard for the matter of whether their conduct was prohibited by
the FLSA, and the three-year statue of limitations will apply to
Plaintiffs’ FLSA claims.9
IV.
Conclusion
Motion for Summary Judgment on behalf of Randy Clanton (Doc.
194) is DENIED;
Motion for Partial Summary Judgment on behalf of Defendants
Candy Brand, LLC, Arkansas Tomato Shippers, LLC, and Charles Searcy
(Doc. 197) is DENIED;
9
Defendants are subject to liability for Plaintiffs’
breach of the H-2A contract for the full five years of the statute
of limitations period for written instruments. There is nothing
remarkable about a contract claim that relies on the FLSA and has
a longer statute of limitations than the FLSA. As discussed above,
Defendants are considered employers for the purposes of determining
liability for violations of the FLSA and for breaches of the H-2A
employment contracts.
41
Amended Motion for Summary Judgment on behalf of Defendant
Brooks Lisenbey (Doc. 198) is DENIED;
Plaintiffs’ Motion for Partial Summary Judgment Related to
Violations of the FLSA and H-2A Employment Contract (Doc. 203) is
GRANTED; and
Plaintiffs’ Motion for Summary Judgment Related to Employer
Status and Liability of Charles Searcy, Randy Clanton, Brooks
Lisenbey, and Arkansas Tomato Shippers, LLC (Doc. 205) is GRANTED.
The parties are to attend a Status Conference in El Dorado
today to discuss the remaining issues to be set for trial.
IT IS SO ORDERED this 20th day of May 2011.
/s/ Robert T. Dawson
Robert T. Dawson
United States District Judge
42
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