Hall et al v. Plastipak Holdings, Inc et al

Filing 60

OPINION AND ORDER granting 53 Defendants' Motion for Summary Judgment. Signed by District Judge Robert H. Cleland. (LWag)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

ROBERT HALL, et al.,
Plaintiffs,
Case No. 15-11428

v.
PLASTIPAK HOLDINGS, INC., et al.,
Defendants.
/

OPINION AND ORDER GRANTING
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
Pending before the court is Defendants’ Motion for Summary Judgment. (Dkt.
#53.) The motion is fully briefed. The court conducted a hearing on the motion on May
17, 2017. For the following reasons, the court will grant Defendants’ motion.
I. BACKGROUND
Plaintiffs are five current and former employees of Plastipak Packaging, Inc.’s
facility in Westland, Michigan. They allege that Defendant Plastipak Packaging, Inc.
(“Plastipak”) has violated the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et
seq., by failing to pay them sufficiently for those hours worked above the 40-hour
weekly threshold identified within the law.
Defendants argue that, as Plaintiffs agree that they were “salary non-exempt”
employees, it is true that they are entitled to overtime pay, but regulations–in particular
29 CFR 778.114–permit a “fluctuating workweek method” of overtime pay calculation
like that Plastipak used. They claim that Plaintiffs have already admitted during their
deposition testimony that the four requirements to allow the use of this method of

calculation are satisfied. Defendants also argue that Plaintiffs’ allegations that their
employer would reduce their vacation pay whenever they worked less than 40 hours per
week was belied by Plaintiffs’ deposition testimony that Plastipak only reduced their
bank of vacation pay for time that they had requested to take off. They further point to a
determination by the United States Department of Labor, whose audits in 2013 and
2016 found that Plastipak’s challenged practices were consistent with the FLSA. In sum,
Defendants assert that Plastipak’s pay practices are actually in excess of what the
FLSA requires. Finally, Defendants contend that Defendants Plastipak Holdings, Inc.,
Plastipak Technologies, LLC, and William C. Young are not “employers” under the
FLSA because they did not exercise control of the terms and conditions of Plaintiffs’
work, and thus are due a grant of summary judgment in their favor as well.
Plaintiffs respond, firstly, that Defendants’ motion is premature as discovery is
not set to close for a number of months. They continue that genuine issues of fact exist
as to whether Plastipak’s pay practices as implemented actually conform to the
fluctuating workweek overtime calculation method, because Plaintiffs were not paid
time-and-a-half for overtime hours, and Plaintiffs had to consume vacation or paid time
off during weeks when they worked less than 40 hours. They also argue that it is
unclear whether the Plaintiffs understood and agreed to the fluctuating workweek
arrangement.
They point out that Defendants’ claims regarding Department of Labor audits are
not supported by any admissible evidence beyond an affidavit of a Plastipak employee.
Further, Plaintiffs contend that Defendants’ reliance upon Department of Labor
regulations is misguided, as they include language stating that “compliance . . . cannot
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be rested on any application of the fluctuating workweek overtime formula.” Plaintiffs
also assert that dismissal of Defendants other than Plastipak would be immature as
they have not had the opportunity to conduct full depositions of Mr. Young or company
representative for the other Defendants.
In reply, Defendants claim that the years-long period during which named
Plaintiffs received paystubs describing their pay in detail, coupled with other indicia that
they were informed of the policy, undermines their insistence that they did not
understand the fluctuating workweek method of overtime calculation. They also answer
Plaintiff’s contentions regarding the undeveloped state of discovery by pointing out that
the instant case has been pending for two years, and Plaintiffs unilaterally cancelled the
deposition of the complained-of affiant. Defendants argue that the use of banked
vacation time occurred when Plaintiffs requested time off, that they were paid the same
weekly pay when they refused to work overtime, and that employers are of course
expected to deduct from accumulated time off when employees take time away from
work. They also advance the position that the regulatory language identified by Plaintiffs
does not apply in the instant case, where employees are paid overtime and were not
misclassified as salary exempt.
This court has already had occasion to address and reject Defendants’
arguments in the context of a motion to dismiss. (Dkt. #35, Pg. ID 645-49.) Defendants
also advanced similar arguments in a motion for reconsideration in support of their
contention that conditional class certification would be unduly burdensome in light of the
alleged weakness of Plaintiffs’ claims–a view the court rejected along with reference to

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its earlier decision. (Dkt. #51, Pg. ID 978.) The court will once again address these
arguments, this time with an eye to the standard on summary judgment.
II. STANDARD
Summary judgment is proper “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). “In deciding a motion for summary judgment, the court must
view the evidence in the light most favorable to the non-moving party, drawing all
reasonable inferences in that party’s favor.” Sagan v. United States, 342 F.3d 493, 497
(6th Cir. 2003). The movant has the initial burden of showing the absence of a genuine
dispute as to a material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “[T]hat
burden may be discharged by showing . . . that there is an absence of evidence to
support the nonmoving party’s case.” Bennett v. City of Eastpointe, 410 F.3d 810, 817
(6th Cir. 2005) (internal quotation marks omitted).
The burden then shifts to the nonmovant, who must put forth enough evidence to
show that there exists “a genuine issue for trial.” Horton v. Potter, 369 F.3d 906, 909
(6th Cir. 2004) (citation omitted). Summary judgment is not appropriate when “the
evidence presents a sufficient disagreement to require submission to a jury.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 243 (1986). In evaluating a summary judgment
motion, “the judge’s function is not himself to weigh the evidence and determine the
truth of the matter but to determine whether there is a genuine issue for trial . . .
credibility judgments and weighing of the evidence are prohibited.” Moran v. Al Basit
LLC, 788 F.3d 201, 204 (6th Cir. 2015) (internal quotation marks and citations omitted).
III. DISCUSSION
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Defendants do not dispute that they paid the same hourly rate for overtime hours
that they nominally paid Plaintiffs for their standard hours. The plain text of the
regulation upon which Defendants rely states in part that:
. . . Since the salary in such a situation is intended to compensate the
employee at straight time rates for whatever hours are worked in the
workweek, the regular rate of the employee will vary from week to week
and is determined by dividing the number of hours worked in the
workweek into the amount of the salary to obtain the applicable hourly rate
for the week. Payment for overtime hours at one-half such rate in addition
to the salary satisfies the overtime pay requirement because such hours
have already been compensated at the straight time regular rate, under
the salary arrangement.
. . . Where all the legal prerequisites for use of the “fluctuating workweek”
method of overtime payment are present, the Act, in requiring that “not
less than” the prescribed premium of 50 percent for overtime hours
worked be paid, does not prohibit paying more. On the other hand, where
all the facts indicate that an employee is being paid for his overtime hours
at a rate no greater than that which he receives for nonovertime hours,
compliance with the Act cannot be rested on any application of the
fluctuating workweek overtime formula.
29 C.F.R. § 778.14(a) & (c).
Under Plaintiffs’ reading, these provisions inexplicably contradict. They say that
“payment for overtime hours at one-half [the rate received for nonovertime hours] in
addition to the salary satisfies the overtime pay requirement,” but that an employer does
not comply with the FLSA if an employee is “paid for his overtime hours at a rate no
greater than that which he receives for nonovertime hours.”
Resolving the apparent contradiction requires a nuanced understanding of the
nonovertime hourly rate. Plaintiff’s reading is erroneous because it ignores the essential
character of the fluctuating work week, which recalculates the base pay rate according
to the total hours worked. Because an employee’s base hourly rate reduces
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proportionately according to each hour worked, an employer who merely compensates
an employee for overtime hours “at a rate no greater than that which he receives for
nonovertime hours” would essentially pay the employee nothing at all for overtime hours
beyond the normal salary. That is to say, an employee who worked 40 hours in one
week and received a salary of $400 can be said to have worked for an hourly rate of
$10. If the employee received the same compensation for 60 hours without an overtime
premium, she would have earned an hourly rate of $6.66. What the law requires is that
for the 20 overtime hours, the employer pay her an additional $3.33 an hour over and
above her normal salary. An illustration of this principle is contained in 29 C.F.R.
§ 778.14(b). Plaintiffs supply no law to the contrary.
Absolutely no suggestion exists that Defendants paid less than a 0.5 hourly
premium for overtime hours. In fact, the undisputed facts are that Plastipak greatly
exceeded this premium, because it established the “base rate” for calculating overtime
pay base rate by simply dividing the normal weekly salary by 40 hours rather than the
larger, total number of hours worked. Defendants then paid 1.0 times the calculated
hourly base rate. To put it another way, Defendants’ practice was to pay the employee
in the latter of the two scenarios described above an hourly rate of $10 for overtime
hours when they would have only been required to pay $3.33. As no issue of material
fact exists as to whether, assuming the below requirements are met, Defendants’ hourly
overtime pay practices satisfy the requirement of the FLSA, the court will grant
summary judgment on this question.
Defendants concede that “[t]he Sixth Circuit places the burden on employers to
show application of the fluctuation workweek method.” (Dkt. #53, Pg. ID 1019.) The
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parties agree that the four requirements for Defendants to operate under the fluctuating
workweek method under 29 C.F.R. § 778.114 are:
(1)

the employee’s hours must fluctuate from week to week;

(2)

the employee must receive a fixed salary that does not vary with
the number of hours worked during the week (excluding overtime
premiums);

(3)

the fixed amount must be sufficient to provide compensation every
week at a regular rate that is at least equal to the minimum wage;
and

(4)

the employer and employee must share a “clear mutual
understanding” that the employer will pay that fixed salary
regardless of the number of hours worked.

Mitchell v. Abercrombie & Fitch, Co., 428 F. Supp. 2d 725, 734 (S.D. Ohio 2006), aff’d,
225 F. App’x 362 (6th Cir. 2007) (citations omitted). Plaintiffs do not challenge the
satisfaction of the first or third requirements. Therefore, the court will grant summary
judgment for Defendants on those questions.
A. Variation of Fixed Salary
Plaintiffs argue that a genuine issue of fact exists over whether Defendants
impermissibly required Plaintiffs to spend banked vacation time for two-week periods
when they worked less than 80 hours. As Defendants rightly point out, the fact that an
employer sometimes requires employees to use vacation time is hardly, by itself, proof
of an impermissible practice. This court’s previous opinion rejected a similar argument
operating under a different standard, stating that the cited cases make “relatively clear
that only deductions of a disciplinary nature are allowed under the fluctuating work week
. . . [d]eductions to ‘make up the difference’ for an employee who was scheduled, for
example, to work only thirty-two hours are of an entirely different sort[.]” (Dkt. #35, Pg.
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ID 647.) Defendants now contend that Plastipak only made deductions when Plaintiffs
specifically requested time off and cite to deposition testimony by four of the named
Plaintiffs.
The court may grant summary judgment even prior to the close of discovery
where further discovery “would not provide relevant evidence on the single dispositive
issue in this case.” Grimmett v. Dace, 34 F. Supp. 3d 712, 727 n.19 (E.D. Mich. 2014)
(citing Maki v. Laakko, 88 F.3d 361, 367 (6th Cir. 1996)). During his deposition, Steven
Trent testified that hours were deducted when he took time off, but he could not
remember a time when he was forced to use vacation time. (Dkt. #53-2, Pg. ID 1087.)
Roderick Smartt testified that any time he used vacation time represented instances that
he had requested off. (Dkt. #53-3, Pg. ID 1135.) Ebony Martin testified that she did not
recall a time when she was forced to use vacation time at the employer’s behest. (Dkt.
#53-4, Pg. ID 1186-87.) Jason Trent testified that he did not view paystubs indicated a
reduction in vacation time were the result of him “being docked for time when [he] was
working less than [full time.]” (Dkt. #53-5, Pg. ID 1227.) Defendants do not cite to the
deposition of Robert Hall in their motion nor do Plaintiffs cite it within their response
because it occurred on March 27, 2017 (Dkt. #58-3, Pg. ID 1617), and the transcript
became available after these materials were filed. He testified that if an employee were
sick, he or she would be forced to use vacation hours but would then also be expected
to make up the lost hours as overtime or risk discipline. (Dkt. #58-3, Pg. ID 1622.)
When faced with a similar argument, the court in Mitchell v. Abercrombie & Fitch,
Co., concluded that summary judgment was appropriate because Plaintiffs had “failed to
create an issue of fact by testifying, without more, that they believed they would be
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docked in any given week they worked less than 40 hours.” 428 F. Supp. 2d 725, 736
(S.D. Ohio 2006), aff’d, 225 F. App’x 362 (6th Cir. 2007). The court explained in further:
Abercrombie’s policy requiring that MITs and Assistant Managers code 40
“hours” of combined benefit and work time per week subject to disciplinary
action does not show a “significant likelihood” that Plaintiffs’ fixed salaries
were subject to docking. Plaintiffs have shown neither “actual deductions,”
nor a “clear and particularized policy” which “ ‘effectively communicates’
that deductions will be made in specified circumstances.” None of the
documents adduced by Plaintiffs indicate that MITs or Assistant Managers
will be docked in salary under circumstances outside the scope of 29
C.F.R. § 778.114.
Instead, each Plaintiff received a fixed salary regardless of how many
hours he or she worked. Plaintiffs concede that they never earned less
than their salary and that their pay was never docked. Abercrombie’s pay
and time records for Plaintiffs also establish that they always received
their full salary. In weeks that Plaintiffs worked fewer than 40 hours in a
workweek, they received their full salary, and their accrued paid benefit
time was reduced by the number of hours below 40. In sum, Plaintiffs
receive a fixed salary that did not vary with the number of hours worked
during the week.
Id. at 737 (citing Auer v. Robbins, 519 U.S. 452, 452, 117 S. Ct. 905, 137 L.Ed.2d 79
(1997)).
Plaintiffs in turn point to their pay stubs, which indicate that during two-week
period when they worked less than 80 hours, their vacation days were deducted to
make up the difference. Nevertheless, Plaintiff’s paystubs, standing on their own, are
not sufficient to establish a genuine issue of material fact. It is undisputed that these
deductions from vacation time occurred. What is in question is whether they were
performed for a permissible reason.
Plaintiffs do not present any evidence for their contention that Defendants
impermissibly deducted their vacation time and otherwise do not dispute that, setting
aside overtime, they were paid the same amount every week regardless of the hours
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worked. Aside from bald speculation, they do not provide an example of an instance
where they were paid less than their weekly salary for working less than 40 hours in a
week. Thus, summary judgment in Defendants’ favor is appropriate on this question as
well.
B. Presence of a Clear Mutual Understanding
It is likewise Defendants’ burden to establish a clear mutual understanding
between the parties that the employees were working on a salaried basis. The Sixth
Circuit has indicated that such a burden is met in the following circumstances:
the district court observed that [plaintiff] had signed and acknowledged the
explanatory calculation form indicating that she understood the Fair Labor
Standard Act’s fluctuating work week method of overtime compensation,
that [plaintiff’s] claim was based on her post hoc self-serving assertion at
trial, that [plaintiff] had presented no corroborating evidence whatsoever to
support her asserted misunderstanding of the manner in which her rate of
pay was calculated, and that her demeanor at trial discounted her
credibility as a witness.
Highlander v. K.F.C. Nat. Mgmt. Co., 805 F.2d 644, 648 (6th Cir. 1986).
The district court in that case had heard testimony at a bench trial. Here the court
makes no determination as to witness credibility, but Plaintiffs Steven Trent, Roderick
Smart, and Ebony Martin all signed acknowledgment forms explaining the method of
calculation method. (Dkts. ##53-6, 53-7, 53-8.) Though it was attached to a previous
filing without being included in Defendants’ instant motion, it appears that Robert Hall
also signed a copy of this acknowledgment form in 2006. (Dkt. #41-3, Pg. ID 714.)
Jason Trent testified that he signed a verification form for an employee handbook
containing the same language along with a statement indicating that he understood that
the handbook outlined his “privileges and benefits, as well as [his] responsibilities and
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obligations” as an employee. (Dkt. #53-5, Pg. ID 1200.) Each of the named Plaintiffs
except for Robert Hall also signed a copy of that statement (Dkt. #53-10, 53-11, 53-12,
53-13.) Similar to the circumstances in Highlander is the fact that Plaintiffs supply no
corroborating evidence to support their claims of confusion beyond their own post hoc
testimony. Indeed Plaintiffs, including Hall, do not dispute that they received the sheet
with the handbook explanation of how their wages were calculated or the
acknowledgment document.
They contend, through their own deposition testimony, only that no one verbally
explained this document to them and that they understood they were being paid
“straight time” at their normal hourly rate for overtime. The Sixth Circuit has held that in
FLSA cases, uncorroborated testimony by Plaintiffs operating on first-hand knowledge
is sufficient to create a genuine issue of material fact where that testimony is
inconsistent with Defendants’ factual account. Moran v. Al Basit LLC, 788 F.3d 201, 205
(6th Cir. 2015). However, as explained supra, Plastipak’s practice was consonant with
Plaintiffs’ averred understanding. Employees were paid an overtime premium of 1.0
times their normal non-overtime rate, resulting in payments of at least double what the
FLSA mandates for overtime.
The law does not require Plaintiffs to be experts at calculating the fluctuating
workweek formula for employers to compensate them according to the method. Nor
does the law require employers to supplement written agreements with verbal
explanations. Instead, it only demands that the parties have a clear mutual
understanding “that the fixed salary is compensation (apart from overtime premiums) for
the hours worked each workweek, whatever their number, rather than for working 40
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hours or some other fixed weekly work period[.]” 29 C.F.R. § 778.114(a). One must read
this with an understanding that, of course, the FLSA contemplates some manner of
overtime for additional hours. Put differently, the parties must understand that the
employee will not be docked pay for working less than 40 hours in a week. The
Department of Labor Letter Ruling Defendants attached to their brief explains:
the Department’s regulations do not require that the “clear and mutual
understanding” extend to the method used to calculate overtime pay. . . .
Rather, 29 C.F.R. § 778.114 only requires that the employees have a
“clear and mutual understanding that they would be paid on a salary basis
for all hours worked.”
(Dkt. #53-17, Pg. ID 1311 (citations omitted).)
Plaintiffs point to nothing, either within their own testimony or without, suggesting
that they carried the mistaken belief–setting aside their vacation time argument
addressed above–that they would receive less than their normal salary for working less
than 40 hours in a week. Even drawing all inferences in favor of Plaintiffs, Defendants
have carried their burden of showing that a clear mutual understanding existed between
the parties. To hold otherwise would be to convert the “clear, mutual understanding”
requirement into an almost insurmountable hurdle on summary judgment. Summary
judgment on this question is also warranted.
C. Department of Labor Audit
In an earlier opinion, this court stated that even assuming arguendo that the
Department of Labor had approved the company’s pay program:
Defendants have given this court no reason to believe Plaintiffs are
unreasonable in asserting that the regulations have not been followed with
respect to the plaintiffs in this case, nor have they shown that the court
would necessarily be bound by the Department of Labor determination to
which Defendants allude. . . . The court has not been presented with the
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agency document or determination to which Defendants refer and cannot
gauge its persuasive or precedential value at this point in the case.
(Dkt. #33, Pg. ID 586.) The same remains true today, though the court does not
foreclose the possibility of Department of Labor determinations being dispositively
persuasive, see Heavenridge v. Ace-Tex Corp., No. 92-75610, 1993 WL 603201, at *4
(E.D. Mich. Sept. 3, 1993) (“Even though there appears to have been no mutual
understanding, [defendant] is insulated from liability due to its reliance on the
Department of Labor investigation and determination that it should pay [plaintiff] on a
fluctuating workweek basis.”). However, the question is moot at this time because the
court will grant summary judgment for the reasons stated above.
D. Non-Plastipak Defendants
The court has also previously had occasion to address the arguments advanced
by Defendants as to the inclusion of Defendants other than Plastipak:
It may be that there are several simultaneous employers who may be
responsible for compliance with the FLSA. The remedial purposes of the
FLSA require the courts to define ‘employer’ more broadly than the term
would be interpreted in traditional common law applications. In deciding
whether a party is an employer, ‘economic reality’ controls rather than
common law concepts of agency. . . . all of the Plastipak entities (Packing,
Holdings, and Technologies) allegedly have the same or similar
incorporators and resident agents . . . the overwhelming weight of
authority is 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.
(Dkt. #33, Pg. ID 585 (quotations and citations omitted).)
Defendants now offer that Plaintiffs have completely failed to supply any
evidence that Plastipak Holdings, Inc., has ever served as their employer, that Plastipak
Technologies, LLC is essentially an empty shell company without assets, and that Mr.
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Young exerts no control over employees at Plastipak. Plaintiffs respond in their brief
without citation to any evidence in the record that they believe Plastipak Holdings, Inc.,
is the sole shareholder of Plastipak Packaging, Inc., and that they believe further
discovery will allow them to establish the role of Plastipak Technologies, LLC and Mr.
Young in the employment of Plaintiffs. Whether, in light of the paucity of evidence prior
to the close of discovery, it is simply too early to slam the door shut on Plaintiffs’ efforts
to make this inquiry, is also a moot question. Whatever conduct of Plastipak that
Plaintiffs wish to attribute to the other Defendants, it cannot sustain a claim against
them for the same reasons explained above. Therefore, the court will grant summary
judgment as to these Defendants as well.
IV. CONCLUSION
IT IS ORDERED that Defendants’ Motion for Summary Judgment (Dkt. #53) is
GRANTED. A separate judgment shall issue.
s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
Dated: May 25, 2017

I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, May 25, 2017, by electronic and/or ordinary mail.
s/Lisa Wagner
Case Manager and Deputy Clerk
[phone]

S:\Cleland\JUDGE'S DESK\C2 ORDERS\15-11428.HALL.MSJ.PostHearing.bss.wpd

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