Perez v. Timberline South LLC et al

Filing 68

OPINION and ORDER on Remand. Signed by District Judge Thomas L. Ludington. (KWin)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION

THOMAS E. PEREZ,

Case No. 16-11552

Plaintiff,

Judge: Thomas L. Ludington
Magistrate Judge: Patricia T. Morris

v.
TIMBERLINE SOUTH, LLC,
JIM PAYNE,
Defendants.

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OPINION AND ORDER ON REMAND
On April 29, 2016, Plaintiff, Thomas Perez,1 on behalf of the U.S. Department of Labor,
filed suit against Timberline South LLC and Jim Payne. ECF No. 1. Timberline is organized as a
Michigan limited liability company and is based in Gaylord, Michigan. ECF No. 18. Employees
cut raw timber, load it onto their trucks, and transport it to mills within Michigan. ECF No. 19.
Defendant does not own the mills that process the lumber. Id. The complaint alleged that
Defendants violated 29 U.S.C. §§ 207 and 215(a)(2) by paying “their employees at their regular
rate for hours worked in excess of forty (40) hours per week without a one and one-half regular
rate overtime premium and failed to properly calculate the regular rate for those employees who
were paid both an hourly rate and a cord rate in order to determine the appropriate overtime
premium.” ECF No. 1 at PageID.3. Some Timberline employees are paid hourly rates, some nonhourly rates, and some a combination of hourly rates as well as day, cord, piece, and/or load rates.
Defendants recorded hours worked for hourly employees. Defendants did not record hours worked

1

Eugene Scalia succeeded Thomas Perez as Secretary to the US Department of Labor and is the current
named Plaintiff.

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for most non-hourly employees and have never paid an overtime wage of one and one-half times
the regular hourly rate for hours worked beyond forty for any employee. Defendants assert they
did not compute a “regular [hourly] rate,” because Timberline’s compensation structure included
compensation for travel to work time, lunch pay, fuel, daily rates, piece rates, and a company
mobile phone. ECF NO. 19-3.
In April 2017 Plaintiff moved for summary judgment asserting that the facts giving rise to
liability are not in dispute. ECF No. 18. Defendants filed a cross motion for summary judgment
alleging that Timberline is not a covered enterprise under the Fair Labor Standards Act or if so, is
exempt from the relevant provisions. ECF No. 19. On October 6, 2017, Plaintiff’s Motion for
Summary Judgment was granted in part, Defendants’ motion for summary judgment was denied,
Plaintiff’s motion to amend their complaint was granted, and supplemental briefing was directed
to determine damages. ECF No. 33. This Court concluded that Timberline is a covered enterprise
under the FLSA and the Forestry, Agricultural, Administrative Employees, and Motor Carrier
Exemptions are inapplicable. Id. Next, 29 U.S.C. § 254(a) was analyzed, which provides that
employers are generally not liable for compensation for activities including travel to the actual
place of performance of the principal activity of employment and activities preliminary to or
postliminary to said employment. 29 U.S.C. § 254(b)(2) provides an exception providing that such
activities are compensable if there is a custom or practice to compensate for such time. Id. After
analyzing the facts and the US code provisions, this Court held that Defendants had a custom of
compensating employees for commute and meal time, Defendants failed to meet their burden
under the Mt. Clemens burden shifting scheme2 to negate Plaintiff’s damage estimates, and
Plaintiff’s data and calculations were reasonable. Id.; ECF No. 46. After supplemental briefing

2

328 U.S. 680 (1946).
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from the parties, judgment was entered against Defendants for a total of $439,437.42 for damages
and an equal amount for liquidated damages. ECF No. 46.
Defendants appealed the judgment. ECF No. 48. On appeal, the Sixth Circuit affirmed this
Court in its decision that Timberline is a covered enterprise under the Fair Labor Standards Act
and that none of the Timberline employees were exempt from the FLSA overtime requirements.
ECF No. 57. In addition to evaluating 29 U.S.C. § 254(a) and (b), the Sixth Circuit cited 29 C.F.R.
§ 785.34 and 29 C.F.R. § 785.35 which state that while ordinary commute time may be
compensable, normal commute time is not considered work time. Therefore, since “the FLSA only
requires overtime compensation for actual work or employment,” the Circuit held for the first time3
that “ordinary home-to-work and work-to-home commute time does not qualify as ‘work’ under
the FLSA even if the employer has paid for such time, and therefore that time is not subject to
overtime requirements.” Id. (internal quotations omitted). After establishing this rule, the Sixth
Circuit stated that “[a]ny ordinary commute and bona fide meal time that can be established must
not be included in determining how many hours of overtime each employee worked, although
Defendants may not use the amounts paid for those otherwise non-compensable work periods as
an offset against the amounts owed.” Id. (emphasis added). Lastly, the Sixth Circuit upheld this
Court’s calculation method of liquidated damages but vacated the amount because the liquid
damages are based on the amount of unpaid overtime compensation. Id.
I.
This Court held a telephonic status conference with counsel after the Sixth Circuit issued
its opinion. It was apparent the parties held differing opinions on the remaining issues after remand.
Therefore, the parties were directed to file supplemental briefs explaining their perspective on the

3

The Circuit explained that while a handful of District Courts have addressed the issue, no circuit court
has.

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remaining issues. ECF No. 65. Defendants argued that the Sixth Circuit’s instructions required reopening discovery to determine how much of the Secretary’s damage calculations included noncompensable hours for meal and commute time. ECF No. 66. Plaintiff contended
[t]he only issue on remand is an issue the parties have already briefed (or had the
opportunity to brief); that is, whether Defendants carried their burden to provide
precise evidence of time allegedly spent commuting and on bona fide meal breaks
under burden the [sic] shifting framework set forth in Anderson v. Mt. Clemens
Pottery Co. As the parties have repeatedly briefed this issue with ample opportunity
to present relevant evidence, no additional briefing should be necessary nor should
additional evidence be admitted into the fully developed record. ECF No. 67 at
PageID.4564 (citations omitted).
II.
A.
When calculating overtime damages, the Portal-to-Portal Act provides guidance on
whether meal and commute time should be included.
(a) Except as provided in subsection (b), no employer shall be subject to any
liability or punishment under the Fair Labor Standards Act of 1938 . . . on account
of the failure of such employer to pay an employee minimum wages, or to pay an
employee overtime compensation, for or on account of any of the following
activities of such employee . . .
(1) walking, riding, or traveling to and from the actual place of performance
of the principal activity or activities which such employee is employed to
perform, and
(2) activities which are preliminary to or postliminary to said principal
activity or activities,
which occur either prior to the time on any particular workday at which such
employee commences, or subsequent to the time on any particular workday at
which he ceases, such principal activity or activities. For purposes of this
subsection, the use of an employer’s vehicle for travel by an employee and activities
performed by an employee which are incidental to the use of such vehicle for
commuting shall not be considered part of the employee’s principal activities if the
use of such vehicle for travel is within the normal commuting area for the
employer’s business or establishment and the use of the employer’s vehicle is
subject to an agreement on the part of the employer and the employee or
representative of such employee.
29 U.S.C. § 254 (emphasis added).

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Accordingly, employers are excused from the FLSA minimum wage and overtime requirement
provisions for the time employees commute to and from work. Therefore, employers do not have
to pay their employees for their time commuting to work.
The section continues and provides that
(b) Notwithstanding the provisions of subsection (a) which relieve an employer
from liability and punishment with respect to any activity, the employer shall not
be so relieved if such activity is compensable by . . . .
...
(2) a custom or practice in effect, at the time of such activity, at the
establishment or other place where such employee is employed, covering
such activity, not inconsistent with a written or nonwritten contract, in effect
at the time of such activity, between such employee, his agent, or collectivebargaining representative and his employer.
29 U.S.C. § 254.
Therefore, (b) is an exception to (a) and requires that an employer who has a custom or practice of
compensating an employee for commute time is not exempt from the FLSA requirements and must
continue to pay its employees for that designated commute time. Defendant has never disputed
that it had a custom of compensating its employees for commute and meal time.
In addition to the FLSA, the Department of Labor promulgated several regulations
regarding 29 U.S.C. § 254. First, 29 CFR § 785.34 provides additional guidance stating that even
though commute time can be compensable “by express contract or by custom or practice,”
“ordinary travel from home to work need not be counted as hours worked even if the employer
agrees to pay for it.” “Ordinary travel” time, even if compensable pursuant to a 29 U.S.C. § 254(b)
custom or practice is therefore not subject to the employer’s obligation to pay minimum wage or
overtime compensation.
29 CFR § 785.35 further provides that “[n]ormal travel from home to work is not
worktime.” They also explain that “bona fide meal periods are not worktime.” 29 CFR § 785.19.
The regulations differentiate between travel to and from work (non-work time) and travel as part
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of the employment (work time). 29 C.F.R. § 785.38 states that “[t]ime spent by an employee in
travel as part of his principal activity, such as travel from job site to job site during the work day,
must be counted as hours worked. Where an employee is required to report at a meeting place to
receive instructions or to perform other work there, or to pick up and to carry tools, the travel from
the designated place to the work place is part of the day’s work, and must be counted as hours
worked regardless of contract, custom, or practice.”
The Sixth Circuit having reviewed the law and regulations concluded stating that the FLSA
“does not treat ordinary home-to-job-site travel as compensable” [and t]he same is true of ‘bona
fide meal periods.” ECF No. 57 (citations omitted).
This Court previously found that Defendant had a custom and practice of paying for
commute and meal time and therefore did not determine if and how much meal time or commute
time was included in the amount of calculated overtime. The Sixth Circuit concluded that “any
ordinary commute and bona fide meal time that can be established must not be included in
determining how many hours of overtime each employee worked.” Id. (emphasis added).
Accordingly, the Sixth Circuit, having read 29 U.S.C. § 254(b) differently, returned the case to
this Court.
The Anderson v. Mt. Clemens test places the burden on the employee to demonstrate that
he was not properly compensated, but the burden shifts to defendants if defendants did not keep
accurate records for employees. Monroe v. FTS USA, LLC, 860 F.3d 389, 398–99 (6th Cir. 2017).
The Supreme Court explained that
[w]hen the employer has kept proper and accurate records the employee may easily
discharge his burden by securing the production of those records. But where the
employer’s records are inaccurate or inadequate and the employee cannot offer
convincing substitutes a more difficult problem arises. The solution, however, is
not to penalize the employee by denying him any recovery on the ground that he is
unable to prove the precise extent of uncompensated work. Such a result would
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place a premium on an employer’s failure to keep proper records in conformity with
his statutory duty; it would allow the employer to keep the benefits of an
employee’s labors without paying due compensation as contemplated by the
[FLSA]. In such a situation we hold that an employee has carried out his burden if
he proves that he has in fact performed work for which he was improperly
compensated and if he produces sufficient evidence to show the amount and extent
of that work as a matter of just and reasonable inference. The burden then shifts to
the employer to come forward with evidence of the precise amount of work
performed or with evidence to negative the reasonableness of the inference to be
drawn from the employee’s evidence. If the employer fails to produce such
evidence, the court may then award damages to the employee, even though the
result be only approximate. Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680,
687–88 (1946).
B.
Defendants believe discovery should be reopened to determine the amount of meal time
and commute time that was included in the Secretary’s overtime calculations. However, there have
already been three rounds of supplemental briefing, in addition to cross-motions for summary
judgment. See e.g., ECF Nos. 18, 19, 38, 41, 44, 45, 66, 67. Additional discovery is extremely
unlikely to produce any new testimony that Defendants have not already provided. Therefore,
additional briefing will not be ordered.
The Secretary explained that “all [but one] employment agreements between Timberline
and its employees are verbal.” ECF No. 18 at PageID.142. It is undisputed that Timberline does
not pay its employees overtime. Id. In addition, “Defendants did not keep records of actual hours
worked each day and each week for those employees earning day and cord rates. Defendants
neither maintained records for total pay for overtime hours for each employee, nor recorded a
‘regular rate’ for each workweek.” Id. at PageID.143. Initially Plaintiff determined that Defendants
owed their employees $468,595.80 in back wages. ECF No. 18-17 at PageID.1738. Jeffrey Wrona,
who worked for the Secretary, explained that he used the business records to determine the number
of hours the hourly employees worked (43 out of 50 employees). Id.; ECF No. 38 at PageID.3725.

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For employees paid by day or cord, the number of hours worked were initially determined after
employee interviews. ECF No. 18-17 at PageID.1738.
In its first supplemental brief, Plaintiff explained that it estimated the time worked for the
remaining seven employees (who were not paid hourly) by “(1) averaging the number of hours
similarly situated employees worked per week or (2) averaging the number of hours individual
employees worked each workweek based upon time records previously kept for each employee
prior to Defendants changing the employee compensation to non-hourly and ceased keeping the
required records.” ECF No. 38 at PageID.3726. In their second supplemental brief, Plaintiff
explained another accounting error and concluded that Defendants’ employees are owed
$445,533.49 in back wages. ECF No. 44 at PageID.4201.
In its motion for summary judgment and response to Plaintiff’s motion for summary
judgment, Defendants dispute the contention that they did not have sufficient records, citing to
time records kept for some employees. See ECF No. 24, 24-3, 24-4, 24-5. Defendants also
explained that they submitted a recalculation document that credits back fuel and phone
compensation to correctly get to an accurate overtime calculation. ECF No. 19; 19-9. However, it
is unclear what records this recalculation document is based on.
In their first supplemental brief, Defendants challenged the admissibility of Mr. Wrona’s
declaration. They also explained that they paid significantly more than the industrial average, “[i]f
those gross industry wages are converted into a workweek of 40 regular hours, plus 20 overtime
hours, each and every week for 52 weeks per year, the gross industry wages actually received by
Timberline’s non-hourly employees, on average, still exceed what would be owed to these
employees based on an industry average wage, plus 20 hours per week of overtime.” ECF No. 41
at PageID.4099. However, Defendants failed to explain why the industry standard wage was

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relevant to a determination of whether Defendants themselves paid overtime. The only reference
to payments for meal time and commute time are two sentences at the end stating “Further, Plaintiff
failed to account for 29 C.F.R. § 778(b), which provides that otherwise non-compensable hours
such as drive-to-work time do not qualify toward overtime compensation. Attached as Exhibit K
are employee affidavits showing some, but not necessarily all, employees who did not agree or
understand that these hours would be included as hours worked or for overtime.” ECF No. 41 at
PageID.4115; ECF No. 45 at PageID.4366-4367. Defendants repeat this argument in their second
supplemental brief. ECF No. 45.
C.
Here, after three rounds of briefing, Defendants have been unable to provide evidence
regarding the amount of time their employees spent commuting or eating meals. Plaintiff argues
that it was unable to compute any alleged bona fide meal or commute time included in pay records
“because Defendants’ failed to keep contemporaneous records of such time or produce any
credible evidence supporting such time.” ECF No. 67 at PageID.4565. It is impossible to remove
any potential meal or commute time from the Secretary’s calculations because Defendants have
repeatedly been unable to provide more detailed records establishing the time taken for meals or
commuting. The most detailed evidence Defendants offered is affidavits from 5 employees (out of
50) that they commuted two hours daily and took a 30-minute lunch break when possible. This is
simply inadequate to demonstrate how much time each employee spent on those activities in order
to exclude that time from the calculation. Therefore, the Secretary’s calculations for overtime are
sufficient because Defendants cannot provide evidence to rebut the Secretary’s calculations.
This conclusion is in line with the Sixth Circuit’s opinion. They included a footnote
explaining that,

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The Secretary argued to the district court that even if Defendants’ employees’ travel
time and lunch breaks were included in the recorded hours, Defendants did not meet
their burden to negate the reasonableness of the Secretary’s damages computations,
that there was an agreement to treat these hours as hours worked, and that
Defendants did not establish that the travel time did not constitute work time or that
their employees received bona fide meal breaks. The district court did not address
any of these arguments, and the Secretary does not argue these alternative bases for
affirmance on appeal. Accordingly, we leave these issues to the district court. ECF
No. 57, n. 12.
To the extent that this Court did not previously address the issue of whether Defendants met their
burden to negate the reasonableness of the Secretary’s damages computations for meal and
commute time, it now expressly holds that Defendants have repeatedly failed to provide sufficient
explanation that any potential meal time or commute time that was covered by Defendants was not
part of any contractual agreement to work. Therefore, even though under the FLSA and CFR the
time spent eating meals and commuting is generally (if not always) not included in the calculation
of overtime, Plaintiff made a reasonable estimation of total hours worked and Defendants failed to
meet their burden to negate the reasonableness of Plaintiff’s calculations. The Secretary’s
calculations are adequate to determine unpaid overtime and any commute or meal time that is
included is not error. Accordingly, this Court again finds that Defendant owes Plaintiff total
damages of $439,437.42 and an equal amount in liquidated damages.4
III.
Accordingly, IT IS ORDERED that judgment is entered in favor of Plaintiff Secretary of

4

The $439,437.42 figure is lower than Plaintiff sought in their second supplemental brief ($445,533.49).
The Court again reduces the amount of damages out of an abundance of caution by $6,060 due to an
apparent typographical error and a potential calculation error of $36.07. See ECF No. 46.

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Labor and against Defendants Timberline South LLC and Jim Payne in an amount of $439,437.62
for overtime wages, plus an equal amount in liquidated damages, for a total of $878,874.84.

Dated: April 10, 2020

s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge

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