Solis v. Cindy's Total Care, Inc. et al
Filing
57
OPINION AND ORDER: In consideration of the foregoing findings of fact and conclusions of law, the Court finds that the plaintiff Secretary of Labor has proven, by a preponderance of the evidence, that defendants Cindys Total Care, Inc. and Nam Saeng Sim violated the Fair Labor Standards Act, both in failing to pay overtime wages for weekly hours in excess of 40, and for failing to make and maintain appropriate records as to employees hours and wages. The Court does not find defendant Byung Sook Kim liable. For the violation of the overtime-wage provisions of the FLSA, the Court awards plaintiff compensatory and liquidated damages, to be distributed to the 32 employees whom the Court has found to have been denied overtime pay. Cindys Total C are, Inc. and Nam Saeng Sim are jointly and severally liable for paying these damages. Plaintiff shall submit proposed damages calculations for each of the 32 employees to the Court, consistent with the discussion in this opinion, by January 20, 2012 ; defendants may object to such calculations by January 27, 2012. The Court further enjoins Cindy's Total Care, Inc. and Nam Saeng Sim, their officers, agents, employees and those persons in active concert or participation with defendants, from violating the provisions of the Act contained in 29 U.S.C. §§ 207, 211(c), 215(a)(2), 215(a)(5). It is hereby ORDERED that judgment is entered in favor of plaintiff, Secretary of Labor, and against defendants, Cindy's Total Care, Inc. and Nam Saeng Sim. Judgment is entered in favor of defendant Byung Sook Kim, whom the Court finds is not liable for violating the FLSA. Plaintiff shall submit an application for the amount of their fees and costs, a request for prejudgment interest, and an appropriate form of a judgment no later than January 20,2012. The defendants shall submit any opposition to this submission no later than January 27, 2012. (Signed by Judge Paul A. Engelmayer on 1/5/2012) (ft)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
HILDA L. SOLIS, Secretary of Labor, United States
:
Department of Labor,
:
:
Plaintiffs,
:
-v:
:
CINDY’S TOTAL CARE, INC., d/b/a CINDY’S NAM
:
SAENG SIM, NAM SAENG SIM, individually, and
:
BYUNG SOOK KIM, individually,
:
:
Defendants.
:
:
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10 Civ. 7242 (PAE)
OPINION AND ORDER
PAUL A. ENGELMAYER, District Judge:
This opinion sets forth the Court’s findings of fact and conclusions of law pursuant to
Federal Rule of Civil Procedure 52, following a three-day nonjury trial in this case, brought
under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. (“FLSA” or the “Act”).
The Secretary of Labor (“the Secretary”) brought this action following an investigation of
Cindy’s Total Care, Inc. (“Cindy’s”), a nail-care salon operating in New York City. The
Department of Labor initiated its investigation after receiving complaints from employees, who
alleged that Cindy’s was failing to pay overtime wages, and failing to maintain complete and
accurate records as to employee hours and compensation.
The Secretary alleges that Cindy’s violated the FLSA between September 20, 2007 and
February 28, 2010, in two respects. First, she alleges that Cindy’s willfully failed to pay its
employees the statutorily-required overtime rate (one and one-half times the employee’s base
rate) for all hours worked in excess of 40 per week, and instead paid employees a daily wage rate
regardless of the total number of hours worked, in violation of regulations implementing the
FLSA. See 29 C.F.R. § 778.114. As a remedy for these violations, the Secretary seeks an award
of back wages and liquidated damages. Second, the Secretary alleges that Cindy’s failed to
maintain complete and accurate wage and hour records. The defendants—Cindy’s, its owner
Nam Saeng Sim, and her husband Byung Sook Kim—dispute these claims. They assert that
Cindy’s employees were paid an hourly wage rate, and that all overtime hours were compensated
at the required overtime rate. They further assert that Cindy’s kept compliant records as to
wages and hours.
The parties tried the case before the Court between November 29 and December 1, 2011.
Each witness’s direct testimony was received in the form of a sworn declaration; crossexamination was live. The Secretary called nine witnesses: three Department of Labor
investigators and six employees of Cindy’s. The employee witnesses, none of whom speaks
English, each testified with the assistance of a translator. Defendants called Ms. Sim and
Cindy’s accountant David Shin; Ms. Sim testified with the assistance of a translator. Mr. Kim
did not testify.
For the reasons set forth below, the Court finds that Cindy’s and Ms. Sim violated the
recordkeeping and overtime pay obligations of the FLSA and regulations promulgated
thereunder. On the basis of these violations, the Court awards back wages to 32 current and
former employees of Cindy’s, as well as statutory liquidated damages. The Court also enjoins
Cindy’s and Ms. Sim from further violating the FLSA. The Court does not, however, find Mr.
Kim liable.
[2]
FINDINGS OF FACT
I. Background
A. The Parties
1. Plaintiff Hilda Solis is the Secretary of Labor. She filed this action pursuant to the
FLSA, alleging that the defendants violated the Act from at least September 20, 2007 to
February 28, 2010 (“the relevant period”), and owe back wages and liquidated damages accruing
from that period. 1
2. The Secretary commenced this action after conducting an investigation of Cindy’s, a
nail salon business located in New York City, operating under the corporate name Cindy’s Total
Care, Inc. and doing business as Cindy’s. See Joint Pretrial Order, Stipulations of Fact ¶¶ 2–4
(“Joint Stip. of Fact”).
3. Cindy’s is operated by defendant Nam Saeng Sim (also known as Cindy). Ms. Sim is
the sole owner, sole officer, and president of Cindy’s Total Care, Inc. See Joint Stip. of Fact ¶¶
1, 6–8.
4. Ms. Sim has operated multiple nail salons. In recent years, Ms. Sim’s nail salons have
been operated under a variety of corporate names, including: Cindy’s Nail and Plus, Inc.,
SunYoung’s Nail and Plus, Inc., Amsterdam Nail Services, LLC, and Cindy’s Total Care, Inc.
See Second Amended Declaration of Debbie Lau, Pl. Ex. 2 ¶ 7 (“Lau Decl.”). The entities
1
In her Complaint, filed September 20, 2010, the Secretary initially sought backpay for FLSA
violations committed by the defendants during a longer period: July 1, 2007 through the date of
the Complaint. After trial, the Court asked the Secretary to clarify the dates covered by this
action, noting that the FLSA has a three-year statute of limitations for willful violations and that
July 1, 2007 was more than three years before the date on which the Complaint was filed. In a
letter to the Court dated December 7, 2011, the Secretary amended the time period for which she
sought damages, narrowing it to the period between September 20, 2007 and February 28, 2010.
[3]
relevant to this decision are Cindy’s Total Care, Inc., which came into existence in October
2007, and Cindy’s Nail and Plus, Inc., which existed from approximately August 2002 until
October 2007. See Defs.’ Proposed Findings of Fact ¶ 7. Unless stated otherwise, references to
Cindy’s will refer to defendant Cindy’s Total Care, Inc.
5. Cindy’s is currently located at 491 Amsterdam Avenue, New York, NY. See Joint
Stip. of Fact ¶ 4. Prior to operating in the present location, Cindy’s was located at 170 West 83rd
Street, New York, N.Y., where it maintained the same business. See Deposition of Nam Saeng
Sim 15:25–16:8. Ms. Sim owned and operated Cindy’s at 170 West 83rd Street, and she
currently owns and operates Cindy’s at 491 Amsterdam Avenue. During the relevant time
period, Cindy’s employees—nail salon technicians—have worked at both locations.
6. During the relevant period, Cindy’s Total Care, Inc. has procured some materials and
supplies used by its employees from beauty supply distributors located outside of the state of
New York. Joint Stip. of Facts ¶¶ 15–16.
7. During the relevant period, Cindy’s has been a business or enterprise engaged in
interstate commerce with annual gross sales over $500,000. See Cmpl. at 3; Defs.’ Letter, Nov.
1, 2011 (Dkt. 43). 2
2
Before trial, defendants identified as an affirmative defense that Cindy’s Total Care, Inc., which
first came into existence in October 2007, did not meet the statutory requirement of having
$500,000 gross revenue for that year. At a status conference on October 13, 2011, the Secretary
stated that she planned to file a motion in limine to preclude that defense at trial, because
defendants refused to produce relevant financial records in discovery. On November 1, 2011,
defendants wrote the Court stating that they had agreed to withdraw that defense and stipulate
that the $500,000 threshold was met. The Court endorsed that letter and advised the parties that
it would treat the $500,000 statutory threshold as established. See Defs.’ Letter, Nov. 1, 2011
(Dkt. 43). During trial, defense counsel moved to revoke that stipulation, so as to enable it to
question witnesses regarding Cindy’s total revenues for 2007. The Court denied the motion,
based on the earlier stipulation. The parties have separately stipulated that Cindy’s met the
[4]
8. During the relevant period, Ms. Sim actively controlled and managed Cindy’s. Ms.
Sim hired and fired employees, directed their work activities and work hours, and set their rates
of compensation. Joint Stip. of Fact ¶¶ 9–12.
9. Defendant Byung Sook Kim assisted Ms. Sim in some aspects of her work. Mr. Kim
occasionally wrote out paychecks to Cindy’s employees. He occasionally, at the direction of Ms.
Sim, handed checks to Cindy’s employees, and asked employees to sign a receipt indicating that
they had received their wages. On at least one occasion, Mr. Kim affixed a schedule of
employee breaks to the wall in Cindy’s. Mr. Kim on occasion sat at various locations in the nail
salon, including by the cash register. Joint Stip. of Fact ¶¶ 18–20. Mr. Kim did not receive
compensation from Cindy’s during the relevant period. Joint Stip. of Fact ¶ 6; Sim Decl. ¶ 6. 3
B. The Employees
10. The Secretary brings this action on behalf of 32 persons that were employed by
Cindy’s Total Care, Inc. between September 20, 2007 through February 28, 2010. 4
$500,000 threshold from 2008 to 2010. See Defs.’ Proposed Findings of Fact ¶ 14; Pl.’s
Proposed Findings of Fact ¶ 14.
3
The Secretary has asserted that Mr. Kim received payment for work at Cindy’s. See Pl.’s PostTrial Br. (Dkt. 49) at 11. However, the only check that the Secretary referenced in support of
that claim is dated February 7, 2007, which pre-dates the relevant period. See Def. Ex. 1 at 23.
The Court has reviewed all of the check records for Cindy’s that were admitted at trial; it found
no checks to Mr. Kim during the relevant period. See generally Def. Ex 1.
4
At trial, the Secretary introduced a chart (Pl. Ex. 2(q)) that listed, inter alia, 33 employees and
their dates of employment within the period covered by the Complaint. In her trial testimony,
Ms. Sim confirmed the accuracy of these dates. See Tr. 469:2–473:24. Following trial, the
Secretary narrowed the time period for which relief was sought, see n.1, supra, and submitted a
revised chart consistent with that narrowed time period. See Pl. Post-Trial Br. (Dkt. 49), Ex. 1.
The chart’s representations that each listed employee worked at Cindy’s during the
corresponding period are consistent with Ms. Sim’s testimony. As a result of the narrowed time
period, two employees listed in Pl. Ex. 2(q), Ok Young Ko and Jacquelin Lee, appeared no
[5]
11. Casta Rosalia Arias (also known as Katty) was employed by Cindy’s from on or
about August 11, 2008 through February 28, 2010.
12. Jia Jin Chen (also known as Jenny) was employed by Cindy’s from on or about May
18, 2009 through February 28, 2010.
13. Lili Chiu was employed by Cindy’s during the period September 20, 2007 through
March 25, 2008.
14. Vicky Doe was employed by Cindy’s from on or about February 21, 2009 through
February 28, 2010.
15. Chun Hua Fu was employed by Cindy’s during the period September 20, 2007
through December 29, 2007.
16. Yi L. Gao was employed by Cindy’s during the period September 20, 2007 through
December 8, 2007.
17. Mei Zi He (also known as Henna) was employed by Cindy’s from on or about April
14, 2008 through February 14, 2009.
18. Ambika Kayastha was employed by Cindy’s during the period September 20, 2007
through February 28, 2010.
19. Ok Young Ko was employed by Cindy’s during the period September 20, 2007
through October 5, 2007.
longer within the scope of the case, because they were employed exclusively outside the relevant
period, and therefore were omitted from the Secretary’s revised chart. However, the Court’s
review of the relevant time sheets revealed that Ms. Ko worked for the two weeks between
September 20, 2007 and October 5, 2007, which is within the narrowed time period. See Pl. Ex.
2(f) at 432–33. As a result, the 32 employees identified in the ensuing paragraphs (including Ms.
Ko) are within the scope of the Secretary’s claims, as narrowed.
[6]
20. Guo Hua Li (also known as Jessica) was employed by Cindy’s during the period
September 20, 2007 through April 10, 2009.
21. Hou P. Li (also known as Lily) was employed by Cindy’s during the period
September 20, 2007 through December 29, 2007.
22. Jin Li (also known as Michelle) was employed by Cindy’s from on or about April 14,
2009 through February 28, 2010.
23. Jin Chai Li (also known as Jennifer) was employed by Cindy’s from on or about
April 1, 2009 through February 28, 2010.
24. Xiao Ying Li (also known as Sharon) was employed by Cindy’s during the period
September 20, 2007 through February 28, 2010.
25. Yu Zhen Li (also known as Julie) was employed by Cindy’s during the period
September 20, 2007 through February 28, 2010.
26. Mei Fang Lin (also known as Jackie) was employed by Cindy’s from on or about
May 6, 2009 through February 28, 2010.
27. Ai Zhu Liu (also known as Amy) was employed by Cindy’s during the period
September 20, 2007 through February 28, 2010.
28. Hui Fang Liu (also known as Linda) was employed by Cindy’s during the period
September 20, 2007 through February 28, 2010.
29. Xiang Hua Liu (also known as Mary) was employed by Cindy’s during the period
September 20, 2007 through February 28, 2010.
30. Xiao Qing Liu (also known as Sally) was employed by Cindy’s from on or about
May 19, 2009 through February 28, 2010.
[7]
31. Xiang Mei Meng (also known as Lucy) was employed by Cindy’s during the period
September 20, 2007 through February 17, 2009. Ms. Meng testified at trial regarding her
employment at Cindy’s. See Declaration of Xiang Mei Meng, Pl. Ex. 8 (“Meng Decl.”).
32. Chun Li Peng was employed by Cindy’s during the period September 20, 2007
through December 29, 2007.
33. Ai H. Wang was employed by Cindy’s during the period September 20, 2007
through December 29, 2007.
34. Jun Wang was employed by Cindy’s from on or about October 6, 2007 through
December 29, 2007.
35. Jing Qiu Wu was employed by Cindy’s from on or about December 1, 2007 through
December 29, 2007.
36. Qi Wu (also known as Susan) was employed by Cindy’s during the period September
20, 2007 through March 19, 2009. Ms. Wu testified at trial regarding her employment at
Cindy’s. See Declaration of Qi Wu, Pl. Ex. 7 (“Wu Decl.”).
37. Feng Ying Yeng (also known as Lulu) was employed by Cindy’s during the period
September 20, 2007 through September 1, 2008. Ms. Yang testified at trial regarding her
employment at Cindy’s. See Declaration of Feng Ying Yeng, Pl. Ex. 9 (“Yeng Decl.”).
38. Hong Yang (also known as Lulu) was employed by Cindy’s during the period
September 20, 2007 through August 31, 2008.
39. Yu Feng Ye (also known as Lisa) was employed by Cindy’s during the period
September 20, 2007 through June 28, 2008.
[8]
40. Ge Zhang (also known as Angie) was employed by Cindy’s during the period
September 20, 2007 through August 31, 2009. Ms. Zhang testified at trial regarding her
employment at Cindy’s. See Declaration of Ge Zhang, Pl. Ex. 10 (“Ge Zhang Decl.”).
41. Jie Hua Zhang (also known as Judy) was employed by Cindy’s during the period
September 20, 2007 through February 1, 2009. Ms. Zhang testified at trial regarding her
employment at Cindy’s. See Declaration of Jie Hua Zhang, Pl. Ex. 6 (“Zhang Decl.”).
42. Hua Zhu (also known as Maria) was employed by Cindy’s during the period
September 20, 2007 through February 28, 2010. Ms. Zhu testified at trial regarding her
employment at Cindy’s. See Declaration of Hua Zhu, Pl. Ex. 5 (“Zhu Decl.”).
II. The Department of Labor’s Investigations
43. The Department’s Wage & Hour Division investigated Cindy’s (or its predecessor
entities) three times between 2006 and the filing of the Complaint in this case.
44. On or about September 22, 2006, Debbie Lau, Assistant District Director for the
Wage and Hour Division, was assigned to investigate Cindy’s Nail & Plus, Inc. (the “first
investigation”). The investigation was prompted by an employee complaint that, among other
things, Cindy’s failed to pay overtime wages and did not maintain complete and accurate wage
and hour records. See Lau Decl. ¶ 3.
45. On or about January 5, 2007, Ms. Lau met with Ms. Sim, Mr. Kim, and Cindy’s
then-accountant, Sung Yoon Pak. Ms. Lau explained the FLSA’s overtime wage and
recordkeeping requirements. She also explained that, based on the Department’s investigation,
Ms. Sim and Mr. Kim had failed to comply with the relevant provisions of the Act. Ms. Lau also
showed Ms. Sim, Mr. Kim, and Mr. Pak the Department’s back wage calculations for the 26
employees then employed by Cindy’s. Ms. Lau also explained the steps required to bring
[9]
Cindy’s into compliance with the FLSA’s overtime and recordkeeping requirements. See Lau
Decl. ¶ 4.
46. On or about March 2, 2007, Ms. Sim signed a Back Wage Compliance and Payment
Agreement. Ms. Sim agreed to, and did, pay $45,000 to the Department of Labor in back wages
owed to the 26 employees. The Department distributed these back wages to the 26 employees.
See Lau Decl. ¶ 5. The Back Wage Compliance and Payment Agreement contained the
following representation from Ms. Sim: “The employer represents that it is presently in full
compliance with the applicable provisions of the [FLSA], and will continue to comply therewith
in the future.” Lau Decl. ¶ 5.
47. On or about August 2008, the Department of Labor initiated a brief second
investigation of Cindy’s. This was a “directed investigation,” and was a standard follow-up
procedure to the first investigation. See Declaration of Sylvia Deng-Batista, Pl. Ex. 4 ¶ 7
(“Deng-Batista Decl.”). The Department initiates such investigations of employers that have
previously been found to have violated the FLSA, to assess whether they are in compliance. See
Deng-Batista Decl. ¶ 2.
48. On or about September 9, 2008, as part of the directed investigation, Silvia DengBatista, a technician for the Wage and Hour Division, was assigned to mail standard forms to
Cindy’s employees. Deng-Batista Decl. ¶ 8. The forms, WH-42, asked employees to supply (1)
their job title; (2) their period of employment; (3) a description of their job duties; (4) their daily
and weekly work hours; and (5) the amount and form of their wages. Deng-Batista Decl. ¶ 5.
49. Per its ordinary practice, the Department mailed these WH-42 forms to employees’
home addresses. See Deng-Batista Decl. ¶ 6. The Department of Labor received completed
WH-42 forms from eight employees of Cindy’s. Deng-Batista Decl. ¶ 9.
[10]
50. On or about November 18, 2008, Ms. Lau received two complaints from employees
of Cindy’s. They reported, inter alia, that Cindy’s continued to pay its employees a flat daily
wage rate, and did not pay extra for overtime work. See Lau Decl. ¶¶ 6, 8. Ms. Lau thereupon
initiated another investigation of Cindy’s (the “third investigation”).
51. On or about May 29, 2009, Ms. Lau and David An, an investigator with the Wage
and Hour Division, made an unannounced visit to Cindy’s salon and met with Ms. Sim. At this
meeting, Ms. Sim stated to Mr. An, among other things, that (1) all of Cindy’s employees
worked part-time, typically between five and six hours per day; (2) no employee worked more
than 40 hours per week; (3) Ms. Sim typically called employees as the start of the day to tell
them their work hours; (4) Cindy’s had not made or maintained records of the hours worked by
or the wages paid to its employees; and (5) Cindy’s did not take any deductions from employees’
wages. See Declaration of David An, Pl. Ex. 3 ¶ 5 (“An Decl.”).
52. At the May 29, 2009 meeting, Ms. Lau presented Ms. Sim with a letter from the
Department of Labor. The letter stated that the Department was investigating Cindy’s, and
requested that she provide all records and other documents setting forth wages paid to, hours
worked by, and deductions taken from the wages of, all employees. See Lau Decl. ¶ 11.
53. On or about June 15, 2009, Ms. Lau met again with Ms. Sim and Mr. Kim, who
brought with them documents that appeared to be wage and hour records. See Lau Decl. ¶ 13.
The existence of these records appeared to contradict Ms. Sim’s May 29 representation that
Cindy’s had not made or maintained such records; as Cindy’s counsel explained at trial, the
documents produced on June 15 were actually “reconstructions” of prior wage and hour
information that had been created in response to the Department of Labor’s request. See Tr.
462:6–23. These records purported to show that all employees worked only a part-time
[11]
schedule, i.e., less than 40 hours a week. Ms. Lau took custody of these records. These records
are referred to herein as the “first production of documents.”
54. At the June 15, 2009 meeting, Ms. Lau also took an oral statement from Ms. Sim,
and simultaneously recorded the statement in writing on a Department of Labor interview intake
form. See Lau Decl. ¶ 14. The form reflects that Ms. Sim stated: “There is no time record for
hours worked, but I know how many hours that the worker worked by memory”; and “[t]he
employee[s] are working part-time.” Pl. Ex. 2(h). Ms. Sim consented to the accuracy of the
recorded statement; she signified this by signing the bottom of the interview intake form.
55. At the June 15, 2009 meeting, Ms. Lau told Ms. Sim and Mr. Kim that she had
determined that they had violated the recordkeeping requirements of the FLSA. Ms. Lau
explained that she had made this determination based on Ms. Sim’s own statement that she did
not make wage and hour records, and the fact that the records produced by Ms. Sim that day
were inconsistent with the information employees had given as to their hours and pay. In
response, Ms. Sim and Mr. Kim admitted that they did not make or maintain the records required
by the FLSA. See Lau Decl. ¶ 15.
56. On or about June 26, 2009, Ms. Lau visited Cindy’s to return the original records
provided by Ms. Sim during their prior meeting. While at Cindy’s, Mr. Kim gave Ms. Lau a
copy of the current employees’ work schedule which was hanging on a wall and time sheets for
the employees that were working. Upon inspecting those documents, Ms. Lau observed that the
time sheet for that day showed that only one person was scheduled to work, whereas the posted
work schedule showed that three people were scheduled to work. Ms. Lau observed that, in fact,
nine Cindy’s employees were working at the salon during her visit. See Lau Decl. ¶ 16.
[12]
57. On or about December 1, 2009, Ms. Lau met with David Shin, Cindy’s accountant.
Cindy’s had authorized Mr. Shin to be her representative in connection with the investigation.
Mr. Shin stated that he had “actual” payroll records in his possession, and, contrary to Ms. Sim’s
earlier admissions, that Cindy’s was in compliance with the FLSA. See Lau Decl. ¶ 17.
58. On or about December 3, 2009, Mr. Shin sent a letter, by facsimile, to Ms. Lau. Mr.
Shin’s letter stated that the payroll records that Ms. Sim and Mr. Kim had presented at the June
15, 2009 meeting had not been the “real and actual payroll records.” Lau Decl. ¶ 18. The letter
attached four pages of time sheets which Mr. Shin represented were accurate.
59. On or about December 29, 2009, Ms. Lau and Mr. An met with Ms. Sim, Mr. Kim,
and Mr. Shin. Mr. Shin presented Ms. Lau and Mr. An with yet additional Cindy’s payroll
records. See Lau Decl. ¶ 19. Mr. Shin stated that these records came from the same batch as the
four time sheets he had sent Ms. Lau on December 3, 2009. These records are referred to herein
as the “second production of documents.”
III. Recordkeeping Practices at Cindy’s
60. The Court finds that, during the relevant time period, Cindy’s failed to make, keep,
and preserve complete and accurate records of the wages paid to and hours worked by their
employees. This finding is based on (1) Ms. Sim’s repeated admissions to investigators that
Cindy’s did not maintain such records; and most importantly, (2) the Court’s close analysis of
the purported wage and hour records that Cindy’s belatedly produced.
A. The First Production of Records, Submitted on June 15, 2009
61. At the conclusion of the May 29, 2009 meeting at which Ms. Sim admitted that
Cindy’s neither made nor maintained any records of the hours its employees worked or the
[13]
wages they earned, Ms. Lau gave Ms. Sim a letter requesting that Cindy’s produce any and all
wage and hour records by June 1, 2009. 5
62. At their June 15, 2009 meeting, Ms. Sim acknowledged in writing her May 29
statement to Ms. Lau that Cindy’s did not make or maintain records of employee wages or hours.
See Pl. Ex. 2(h); Lau Decl. ¶ 14. At that same meeting, on June 15, 2009, Ms. Sim presented
Ms. Lau with the first production of documents. See Pl. Ex. 2(f). Ms. Lau asked Ms. Sim why
she had denied maintaining records, but was now producing them. Ms. Sim did not explain this
obvious inconsistency; she merely shrugged her shoulders. See Tr. 345:5–14.
63. The Court finds that Cindy’s first production of records consists of hour and wage
records that are blatantly and demonstrably inaccurate and incomplete—and that were plainly
created long after the events described therein. These records almost entirely reflect that (1)
Cindy’s employees worked a part-time schedule of less than 40 hours per week, 6 and (2) Cindy’s
employees worked shifts of less than 10 hours in duration. 7 However, such assertions are flatly
contradicted by other persuasive evidence in this case. Most notably, the defendants themselves,
before trial, stipulated that Cindy’s employees each worked 10-hour shifts five or six days per
week during the relevant period. Joint Stip. of Fact ¶¶ 23–24. Further, every single employee
5
Employers are required to furnish to the Department of Labor all wage and hour records within
72 hours of the time of the request. See 29 C.F.R. § 516.7.
6
See, e.g., Pl. Ex. 2(f) at 703–18 (showing that Ambika Kayastha worked 30 hours per week for
32 weeks in 2008–2009); id. at 799–844 (showing that Ai Zhu Liu worked less than 34 hours per
week for 72 weeks in 2007–2009); id. at 928–34 (showing that Yu Feng Ye worked for exactly
39.67 hours per week for 14 weeks in 2007).
7
See, e.g., Pl. Ex. 2(f) at 719–36 (showing that Jin Chai Li worked four 5-hour shifts per week
for 36 weeks in 2008); id. at 886–900 (showing that Qi Wu worked five 5-hour shifts per week
for 30 weeks in 2008); id. at 957–61 (showing that Jie Hua Zhang worked one 7-hour shift and
three 8-hour shifts per week for 10 weeks in 2008).
[14]
witness testified at trial, credibly, that employees typically were assigned a 10-hour shift—and in
fact often worked more than 10 hours per workday—and were scheduled by Cindy’s to work
(and did work) either five or six shifts each week. 8 The Court finds that the time sheets
contained within the first set of records that indicate to the contrary—which represent the
significant majority of that set—are inaccurate.
64. The records produced on June 15, 2009 also represent that Cindy’s employees were
paid an hourly wage. But the other evidence forcefully contradicts that claim. The employee
witnesses uniformly and credibly testified that they were not paid by the hour, but instead
received a flat daily wage. 9 Several employees testified that Ms. Sim explicitly told them that
their compensation would consist of a flat daily wage. 10
65. Further, upon close examination, the purportedly-accurate time sheets produced on
June 15, 2009 in fact reveal that Cindy’s paid its workers a daily wage, not an hourly one. Many
of these time sheets represent that the employee in question worked a curious number of hours
during the week, with aggregate weekly hours expressed in fractions not consistent with ordinary
employment practices. See, e.g., Pl. Ex. 2(f) at 232–38 (showing that Jun Wang worked 25.25
hours per week for 13 weeks in 2007); id. at 240–41 (showing that Jing Qiu Wu worked 23.15
hours per week for four weeks in 2007); id. at 252–67 (showing that Xiang Mei Meng worked
26.65 hours per week for 14 weeks in 2007); id. at 651–75 (showing that Gou Hua Li worked
8
See Ge Zhang Decl. ¶¶ 12, 21; Meng Decl. ¶¶ 18, 20, 26; Wu Decl. ¶¶ 17, 19, 27, 34; Yeng
Decl. ¶¶ 19–20; Zhang Decl. ¶¶ 19, 21–22, 27; Zhu Decl. ¶¶ 23, 25.
9
See Ge Zhang ¶ 28; Meng Decl. ¶¶ 27; Wu Decl. ¶ 32; Yeng Decl. ¶ 28; Zhang Decl. ¶¶ 28–29;
Zhu Decl. ¶ 32.
10
See Ge Zhang Decl. ¶ 29; Zhu Decl. ¶ 32; Tr. 174:4–15; 259:6–9.
[15]
26.67 hours per week for 49 weeks in 2008–2009); id. at 799–801 (showing that Ai Zhu Liu
worked 34.22 hours per week for five weeks in 2009); id. at 906–13 (showing that Qi Wu
worked 14.38 hours per week for 16 weeks in 2007). id. at 944–56 (showing that Jie Hua Zhang
worked 27.59 hours per week for 26 weeks in 2008). Notably, in each instance where a time
sheet reported an odd fractional number of hours, the employee’s total weekly pay was reported
as a whole number, such as $150 or $200.
66. This pattern of data (with weekly hours measured in odd fractions and weekly
compensation given as a whole number) on a belatedly-produced purported time sheet
powerfully suggests that the time sheet was fabricated after the fact. It suggests that the number
of hours purportedly worked was derived retrospectively, by dividing the total amount of the
employee’s weekly wages by a fictitious hourly wage. The Department of Labor has described
this method of retrospectively falsifying records as the “backing-in” method. See 29 C.F.R. §
778.114. As the Department of Labor has explained, this tactic is commonly used by employers
caught paying fixed daily wage rates, to create the false appearance that past wages had been
paid hourly. See Lau Decl. ¶ 26. Ms. Lau testified, based on her experience, that Cindy’s
reporting of fractional hours in odd increments, such as 0.22 or 0.59 hours, is consistent with the
“backing-in” method. See Pl. Ex. 2(f) at 799–801, 944–56.
67. Several examples convincingly demonstrate Cindy’s improper “backing-in” of data
in the records produced on June 15, 2009. For example, Cindy’s produced records purportedly
reflecting 30 weeks of work by Xiang Mei Meng, covering the period June 30, 2008 through
February 14, 2009. See Pl. Ex. 2(f) at 252–67. These records show that in each of those 30
weeks, Ms. Meng worked a total of 26.65 hours, comprised of four work shifts—three that lasted
[16]
6.50 hours, and a fourth that lasted 7.15 hours. In each case, the 6.50 hour shift lasted from 9:00
a.m. to 3:30 p.m., and the 7.15 hour shift ran from 9:00 a.m. to 4:10 p.m.
68. For a host of reasons, these records cannot be credited as an accurate reflection of
Ms. Meng’s actual hours. The record supplies no explanation for an irregular work schedule
such as Ms. Meng’s purported schedule, including her having worked a 7.15 hour shift one day a
week each week for 30 weeks. On the contrary, the parties stipulated that each work shift at
Cindy’s is 10 hours in duration. Nor was there any testimony, including from Ms. Sim, that she
or her employees tracked hours worked to such unnatural fractions, such as twentieths or
hundredths of an hour. 11 Even Cindy’s purportedly accurate time sheets do not reflect fractions
consistent with a practice of reporting hours in increments consistent with Ms. Meng’s. Even if
one assumed that Ms. Sim simply was giving Ms. Meng credit for an extra 10 minutes worked
on a particular week (a proposition for which there is no record support), one would not expect
that pattern to recur weekly and only during the 7-hour shift. In sum, Ms. Meng’s reported
weekly hours are totally implausible.
69. It is far more likely that Ms. Sim or an agent of hers derived the number of hours
reported on Ms. Meng’s purported time sheets by using the backing-in method. The records
indicate that Ms. Meng was paid $200 per week. While it is not plausible that Ms. Meng worked
precisely 26.65 hours each week at an hourly wage rate of $7.50, including exactly one shift per
week of exactly 7 hours and 10 minutes, it is quite plausible that she received a weekly wage of
$200 regardless of the precise number of hours she worked that week. In that scenario, Ms. Sim,
or someone on her behalf, likely divided the $200 by an hourly wage rate invented after the fact,
11
Further, the fraction reported for Ms. Meng is arithmetically wrong: 10 minutes, or one-sixth
of an hour, does not equate to 0.15 of an hour, but rather 0.17 of an hour.
[17]
here $7.50, to arrive at 26.65 hours worked during the week. The Court finds that the records
related to Ms. Meng are demonstrably false insofar as they reflect an hourly wage rate. Far from
being contemporaneous and accurate records, these records were fabricated after the fact to
create a false impression of an hourly wage rate.
70. The purportedly accurate time sheets for Gou Hua Li reflect a similar pattern.
Cindy’s first production as to Ms. Li includes purported time sheets for 49 weeks of work,
spanning February 19, 2008 through January 31, 2009. See Pl. Ex. 2(f) at 651–75. The records
reflect that in each of those 49 weeks, Ms. Li worked a total of 26.67 hours, comprised of five
shifts: either four 5-hour shifts and one shift that lasted 6 hours and 40 minutes, or three 5-hour
shifts, one 5.5-hour shift, and one shift of 6 hours and 10 minutes. The combination of these
unusual fractions, and daily hours which somehow translated every week into precisely 26.67
hours worked, is persuasive evidence of fabrication using the backing-in method. See 29 C.F.R.
§ 778.114. Notably, like Ms. Meng, Ms. Li’s recorded $7.50 hourly wage resulted in a total
weekly wage of $200 for every week in the 49-week period. The Court has observed many other
similar examples of time sheets reporting aggregate weekly hours in unusual fractions, consistent
with use of the backing-in method.
71. Finally, defendants’ own witness, accountant David Shin, admitted that Cindy’s first
production was not contemporaneously created. On December 3, 2009, Mr. Shin faxed to Ms.
Lau a letter explaining that the records that had been produced on June 15, 2009 were not “real
and actual payroll records reflecting labor law.” Lau Decl. ¶ 18. And, at trial, defendants’
counsel admitted that these records were “reconstructions” of wage and hour records. Tr.
476:25–481:7. The Court finds that those records were not good-faith reconstructions, but rather
[18]
post-hoc fabrications designed to cover up Cindy’s liability for substantive violations of the
overtime pay requirements of the FLSA.
B. The Second Production of Records, Submitted on December 3 and December 29,
2009
72. On December 1, 2009, Mr. Shin first claimed that Cindy’s was in compliance with
the FLSA and that he had its “actual” payroll records at his office. He produced samples of
those records on December 3, 2009, and additional records on December 29, 2009. See Lau
Decl. ¶¶ 17–19; Pl. Ex. 1(a)–(c).
73. The Court finds that the documents (principally time sheets) belatedly provided in
Cindy’s second production are demonstrably inaccurate and incomplete. First, and most
important, the purported time sheets in this production again reflect that Cindy’s employees were
paid hourly wages, when the evidence as a whole overwhelmingly establishes that employees
were paid a flat daily wage. 12 Second, the majority of these time sheets purportedly reflect that
each employee received a daily hour-long break. In fact, the employee witnesses uniformly
testified that this was not so, that employees received short breaks of up to 20 minutes, and that
they were expected to be readily available at all times to serve customers. 13 There is an obvious
motive for Ms. Sim to falsely report that the employees receive a daily hour-long break; unlike
shorter breaks, an employer need not compensate employees for longer rest periods. See 29
C.F.R. § 785.18 (“Rest periods of short duration, running from 5 minutes to about 20 minutes . . .
12
See Section III.A, supra; Ge Zhang ¶ 28; Meng Decl. ¶ 27; Wu Decl. ¶ 32; Yeng Decl. ¶ 28;
Zhang Decl. ¶ 29; Zhu Decl. ¶ 32.
13
See Ge Zhang Decl. ¶ 21; Meng Decl. ¶ 21; Wu Decl. ¶ 22; Yeng Decl. ¶ 21; Zhang Decl. ¶
23; Zhu Decl. ¶ 26.
[19]
are customarily paid for as working time. They must be counted as hours worked.”); 29 C.F.R. §
785.19 (“Bona fide meal periods are not worktime. . . . These are rest periods. The employee
must be completely relieved from duty for the purposes of eating regular meals.”). Based on the
unambiguous employee testimony, the Court finds that time sheets that reflect an hour-long
break are inaccurate as to that break.
74. Separately, each of the employee witnesses testified to the effect that they in fact
worked in excess of 10 hours per day. See Ge Zhang Decl. ¶ 12; Meng Decl. ¶¶ 18, 20, 26; Wu
Decl. ¶¶ 17, 19, 27, 34; Yeng Decl. ¶¶ 19–20; Zhang Decl. ¶¶ 19, 21–22, 27; Zhu Decl. ¶¶ 23,
25. The Court credits this testimony, yet the second production does not reflect workdays
exceeding 10 hours. 14
75. Finally, these records are inconsistent with the first set of records, for which Cindy’s
also vouched. This blatant inconsistency alone would establish liability for maintaining and
producing false records. 15 To be sure, Cindy’s second production is more nearly accurate than
the first, in that it accords with the parties’ trial stipulation, and in that it reflects that the
14
Cindy’s counsel, at trial, established, and emphasized, that a number of the time sheets in the
second production bear the employee’s signature. The employees, however, testified that in
signing these time sheets at Ms. Sim’s request, they did not understand themselves to be
representing the precise hours that they in fact worked. Further, as noted, the employees do not
speak or read English, and consistently needed the translator’s help at trial to understand
English-language documents. The Court therefore does not find that, in signing their names, the
employees intended to represent that the hours reported on the English-language time sheets
were precisely accurate.
15
There are numerous inconsistencies between the first and second sets of records as to the hours
and wages of particular employees. Compare, e.g., Pl. Ex. 7(a) at 1148 (a time sheet submitted
in the second set of records showing that, during the week of January 20, 2008, Qi Wu worked
six shifts totaling 54 hours) with Pl. Ex. 2(f) at 905 (a time sheet submitted in the first set of
records showing that, during the week of January 20, 2008, Qi Wu worked four shifts totaling
24.63 hours).
[20]
employees almost always worked five or six shifts, each nine to 10 hours in duration, each week.
But, as noted, even these records are still in tension with aspects of the trial testimony, including
on the core proposition of whether wages were earned on an hourly or daily basis.
76. In sum, for the reasons stated, the Court finds the purported wage and hour records
produced by defendants to the Department of Labor during the course of the investigation to be
inaccurate, incomplete, and internally contradictory.
IV. Wage and Hour Practices at Cindy’s
77. During the relevant time period, Cindy’s was generally open for business from 9:30
a.m. until 9:30 p.m. Employees for the most part were assigned to one of three daily work shifts,
each scheduled to last approximately 10 hours in duration, although as noted, the employees
generally testified that they worked somewhat in excess of 10 hours each day. Ms. Sim set the
employees’ work schedule, and created a document which set forth each employee’s daily work
hours. Defendants posted the weekly work schedule of Cindy’s employees on an internal wall of
the salon. Cindy’s paid employees on a weekly basis, by check, cash, or a combination.
78. There are two findings of fact that are critical to the Secretary’s overtime claims
under the FLSA: (1) whether Cindy’s employees worked overtime hours; and (2) if so, whether,
as required by law, employees that worked overtime were compensated at one and one-half times
the base rate for all hours worked in excess of 40 each week.
A. Did Cindy’s Employees Work Overtime?
79. The Court finds that Cindy’s employees regularly worked hours in excess of 40
hours each week. This conclusion is supported by witness testimony, Cindy’s wage and hour
records, and ultimately, by defendants’ admission to this effect at trial.
[21]
80. First, all six employees who testified at trial stated that they regularly worked in
excess of 40 hours each week. They independently testified that each scheduled work shift was
approximately ten hours long, and that they worked either five or six days each week. 16 This
testimony was not at all disturbed during cross-examination. The employees also each testified
that employees commonly worked longer than their scheduled 10-hour shifts. 17 The Court
credits this testimony.
81. Second, wage and hour records produced by Cindy’s ultimately substantiated that
employees regularly worked overtime hours. Cindy’s second production reflected that in the
vast majority of weeks, all employees worked more than 40 hours. See Pl. Ex. 1(a)–(c).
Although these time records do not precisely accord with employee testimony that daily hours
tended to exceed 10 hours, the Court finds the second set accurate to the extent it reflects that
employees were generally scheduled to work 10 hours a day, and five or six days a week.
82. Third, the defendants ultimately stipulated that Cindy’s employees regularly worked
in excess of 40 hours per week. See Joint Stip. of Fact ¶ 23–34 (“During the relevant time
period, each of the daily work shifts . . . was approximately 10 hours in duration . . . [and]
employees of Cindy’s Total Care usually worked either five or six days per week”). Ms. Sim
herself set the employees’ work schedules and thereby knew what employees’ hours were. See
Joint Stip. of Fact ¶ 22 (“During the relevant time period, the employees’ work shifts were
scheduled and set by Nam Saeng Sim.”).
16
See Ge Zhang Decl. ¶¶ 16, 22; Meng Decl. ¶¶ 17, 20; Wu Decl. ¶¶ 15, 19; Yeng Decl. ¶¶ 17,
20; Zhang Decl. ¶¶ 16, 21; Zhu Decl. ¶¶ 21, 25.
17
See Ge Zhang Decl. ¶ 12; Meng Decl. ¶¶ 18, 26; Wu Decl. ¶¶ 17, 19, 27, 34; Yeng Decl. ¶ 19;
Zhang Decl. ¶¶ 19, 22, 27; Zhu Decl. ¶ 23.
[22]
B. Were Cindy’s Employees Paid for the Overtime Hours that They Worked?
83. The Court finds that Cindy’s employees who worked overtime were not compensated
at one and one-half times the base rate for all hours worked in excess of 40 each week. This
conclusion was overwhelmingly established, both by employee witness testimony, and by
inferences reasonably drawn from the records defendants produced.
84. First, Cindy’s employees uniformly testified that they were paid a flat daily wage
rate that did not include overtime wages. Each employee witness testified that she regularly
worked in excess of 40 hours per week, and was paid a flat daily wage—from approximately $60
to approximately $110—that did not vary based on the number of hours worked in any given
day, or week. 18 The Court credits this testimony.
85. Defendants claimed that they paid employees an hourly wage rate, and compensated
employees at the overtime rate for all hours worked in excess of 40 per week were. See Sim
Decl. ¶¶ 11, 23, 25. As support for this claim, defendants point to the time sheets submitted as
part of Cindy’s second production. These state that employees received an hourly wage, 19 and
18
See Tr. 53:4–5; 152:16–153:2; 160:13–16; Ge Zhang Decl. ¶ 28; Meng Decl. ¶¶ 27, 29; Wu
Decl. ¶¶ 32, 34; Yeng Decl. ¶ 28; Zhang Decl. ¶ 28; Zhu Decl. ¶ 32.
19
As purported evidence that Cindy’s employees were paid an hourly wage, defendants point to
the testimony of employee Hua Zhu, who testified on cross-examination that on two weeks she
did in fact receive the total weekly wages indicated on the corresponding time sheets. See Tr.
176:4–180:18. These were the time sheets from the week of December 7, 2008, in which Ms.
Zhu worked five days and was paid $480, and from the week of December 14, 2008, in which
Ms. Zhu worked six days and was paid $610. Pl. Ex. 5(a) at 830. Defendants argue that she
could not have been paid a daily rate of $100 because that rate would have translated into $500
and $600, respectively, for those weeks. But this is a far cry from demonstrating that Ms. Zhu
was paid an hourly wage rate. Ms. Zhu testified that she did not understand the calculations
underlying the wages paid to her by Cindy’s, but she clearly testified that the amount of her
weekly pay turned on the number of days she had worked, not on her hours. See Tr. 206:1–6.
Another employee similarly described receiving slightly more than $600 for six days’ work and
[23]
that hours over 40 were compensated at one and one-half times the base rate. See Pl. Ex. 1(a)–
(c). However, the employee witnesses consistently, and credibly, testified that the time sheets in
these records, although more closely reflecting their hours than Cindy’s first production, do not
reflect their actual hours worked. The employees further testified that they were never told of an
hourly wage; and that they never received overtime pay. 20
86. Moreover, although the second set of records—the time sheets that do reflect
overtime hours—do not appear to utilize the backing-in method characteristic of the first
production, the Court finds that these records are unreliable as to a separate issue: the amount of
the employee’s weekly pay. On their face, the time sheets produced in Cindy’s second
production report the hours worked up to 40 per week (which hours are multiplied by the
purported hourly wage rate) and then the hours in excess of 40 (which hours are multiplied by
one and one-half times that wage rate) and those totals are added together to reflect the
employee’s purported weekly wages. However, the purported weekly wages reflected in the
second document production are contradicted by Cindy’s check records. During the relevant
period, Ms. Sim testified, employees were paid by check, cash, or a combination. Where cash
was a component of the employee’s compensation, there is no documentary way to establish the
wages in fact paid to the employee in any given week. However, according to Ms. Sim’s own
testimony, several employees were paid entirely by check, including the employees known to her
slightly under $500 for five days’ work. See Tr. at 15:11–16:4 (testimony of employee Qi Wu).
But a practice by Ms. Sim of modestly adjusting upward or downward an employee’s weekly
wages on isolated occasions does not establish compliance with the duty to pay 150% of an
hourly wage rate for overtime wages.
20
See Ge Zhang Decl. ¶ 28; Meng Decl. ¶¶ 27, 29; Wu Decl. ¶¶ 32, 34; Yeng Decl. ¶ 28; Zhang
Decl. ¶ 28; Zhu Decl. ¶ 32.
[24]
as Maria, Sharon, Jenny, Amy, Julie, and Sally. See Tr. 452:19–453:8. For those employees,
one would expect that, if the time sheets in the second production were accurate, the paycheck
for any given week should match the amount of total wages indicated on the employee’s time
sheet. However, the records show no such thing.
87. For example, the time sheets for Hua Zhu (“Maria”) covering March 29, 2009
through September 12, 2009 indicate that she worked for six days per week, and either 53 or 54
hours each week during that period, without exception. See Pl. Ex. 5(a), at 817–23. On their
fact, the time sheets state that Maria was paid a $10 hourly rate, and proper overtime pay for all
hours worked in excess of 40 hours, for a total of $610 per week for each week in the period. 21
88. However, the checks paid to Maria during that period tell a different story. The
parties agree that Cindy’s employees were paid once per week, generally at week’s end. The
amount paid by Cindy’s to Maria as reflected on the checks to her is, however, frequently well
short of $610. On July 18, 2009, Maria was paid only $537.04, see Def. Ex. 1 at 517; on May
23, 2009, Maria was paid only $349.40, see id. at 496; and on June 20, 2009, Maria was again
paid only $349.40, see id. at 503. In fact, none of the checks produced by Cindy’s reflect that
Maria was paid $610 for a week’s work during that period. On the contrary, the checks reflect
that Maria was paid varying amounts for weeks in which she, according to Cindy’s second
production, worked the same number of hours. The Court has reviewed the paychecks for other
employees whom Ms. Sim testified were paid wholly by check. These paychecks, too,
consistently do not match the total wages reflected on the time sheets in Cindy’s second
production. See generally Def. Ex. 1.
21
Payment of $610 per week would reflect that overtime pay had properly been paid to a $10 per
hour employee who worked 54 hours in the week.
[25]
89. Thus, testimony at trial by Cindy’s employees, as well as the defendants’ own
records of payment by Cindy’s to its employees, overwhelmingly establishes that Cindy’s
employees were not compensated at one and one-half times the base rate for all hours worked in
excess of 40 each week.
V. Defendants’ Knowledge and Willfulness 22
90. The first issue as to knowledge is whether Ms. Sim knew that Cindy’s employees
were working more than 40 hours per week. She clearly did. As Cindy’s sole owner, Ms. Sim
set a schedule under which employees worked five or six days per week, and for at least 10 hours
per day. See Joint Stip. of Fact ¶¶ 22–24. Cindy’s, which Ms. Sim owned and operated, is
charged with this knowledge.
91. During the relevant period, Ms. Sim (and hence Cindy’s), also clearly knew the
pertinent requirements of federal law: (1) that Cindy’s pay employees at one and one-half times
their regular wage rate for all hours worked in excess of 40 hours per week, and (2) that Cindy’s
create and maintain accurate records of employees’ wages and hours. As a result of the 2006
investigation, which entailed similar allegations as to unpaid overtime and delinquent
recordkeeping (see Lau Decl. ¶¶ 3–4; Sim Decl. ¶¶ 8–10), Ms. Sim signed, on or about March 2,
2007, a Back Wage Compliance and Payment Agreement, acknowledging violations of those
FLSA requirements. This agreement put Ms. Sim fully on notice of the FLSA’s overtime wage
and recordkeeping requirements as they applied to her business. See Lau Decl. ¶ 5. Further, Ms.
Sim testified that, after the first investigation, she “was very aware that time and one-half had to
be paid to all employees for any work performed after 40 hours in one week.” Sim Decl. ¶ 10.
22
In light of the Court’s finding that Mr. Kim was not proven at trial to be an “employer,” see
infra at 35–36, the Court does not address here Mr. Kim’s knowledge and willfulness.
[26]
92. As to willfulness, the Court finds overwhelming evidence—based on Ms. Sim’s
statements and conduct—that Cindy’s violations of the FLSA’s overtime and recordkeeping
provisions during the relevant period were willful. The fabrication of time sheets via the
backing-in method is clear evidence of willfulness. So, too, is Cindy’s creation and submission
of multiple wage-and-hour records for the same employees. See, e.g., Pl. Ex. 7(a) at 1148; Pl.
Ex. 2(f) at 905. In addition, various employees testified that Ms. Sim had given them multiple
weeks’ worth of time sheets at one time to complete and sign, long after the dates reflected on
the time sheets had passed. 23 This, at minimum, reflects Ms. Sim’s willful noncompliance with
the Act’s recordkeeping requirements. Finally indicative of willfulness is the evidence that, once
alerted to the Department of Labor’s latest investigation, Cindy’s abruptly changed its
recordkeeping practices. 24
93. In sum, the assembled evidence compellingly demonstrates longstanding and
deliberate noncompliance by Cindy’s with the requirements of the FLSA, and, once aware of
regulatory scrutiny, an effort by Cindy’s to cover up and conceal its noncompliance. This
element of willfulness is therefore amply established.
23
Tr. at 130:15–24, 139:22–24, 248:4–14, Ge Zhang Decl. ¶ 12; Meng Decl. ¶ 20; Wu Decl. ¶¶
19, 31; Yeng Decl. ¶¶ 20, 24–26; Zhang Decl. ¶ 21; Zhu Decl. ¶ 25.
24
For example, the time sheets for Cindy’s employee Yu Zhen Li indicate that she worked
exactly 20 hours per week (one 6-hour shift and two 7-hour shifts) each week for 19 weeks from
May 21, 2007 through September 28, 2007, earning a weekly salary of $150 per week. See Pl.
Ex. 2(f) at 789–98. The Secretary filed the Complaint in this matter on September 20, 2011,
with service executed thereafter. Almost immediately thereafter, Cindy’s time sheets for Ms. Li
began to indicate that she was working exactly 40 hours per week each week during the 13
weeks spanning October 1, 2007 through December 29, 2007 (despite this being the time of year
that employees testified was the slower season). See Pl. Ex. 2(f) at 783–89. This abrupt change
immediately following the filing of the Complaint suggests consciousness of prior
noncompliance on Cindy’s part.
[27]
VI. Credibility Determinations
94. Although in this case the documentary and circumstantial evidence of FLSA
violations by Ms. Sim and Cindy’s was compelling, the Court also paid close attention to the
credibility of the trial witnesses. The Court’s judgment is that the employee witnesses and
Department of Labor witnesses were, in general, significantly more credible than Ms. Sim or Mr.
Shin.
95. Credibility determinations can be of great importance in cases where, as here, there
are conflicting accounts as to workplace procedures and the authenticity of documents. In this
case, credibility determinations were complicated by language barriers. Nearly all of the
witnesses (including all the employee witnesses) testified in either Mandarin or Korean; their
testimony was conveyed to the Court by a translator. Thus, the Court, as factfinder, lacked direct
access to some of the linguistic cues or nuances of expression that can bear on a witness’s
veracity. In many instances, answers to questions on cross-examination questions were nonresponsive, in a way that strongly suggested to the Court that the thrust of a question had been,
quite literally, lost in translation.
96. Despite these general difficulties, several important observations relating to
credibility could be made. First, defense counsel did succeed in eliciting testimony from
employee witnesses that, in some respects, was inconsistent with other employees’ testimony.
These inconsistencies were on subjects such as the total number of employees that generally
worked at Cindy’s on a given day, the approximate number of customers serviced by a salon
employee on a typical day, and the dates when Cindy’s corporate name changed. The Court has
given considerable thought to whether these inconsistencies call into question the employees’
veracity as to the central issues here, relating to whether wages were paid on an hourly basis and
[28]
whether overtime pay was properly compensated. The Court has concluded that they do not.
Rather, the Court attributes these testimonial weaknesses to factors including language and
translation difficulties; the witness’s unfamiliarity and discomfort in a courtroom setting,
including due to foreign birth, limited education, unfamiliarity with the U.S. legal system, and
the awkwardness of testifying against a current or former employer; and imperfections or
ambiguities in the question put to them on the witness stand. The Court is also mindful that the
employee witnesses are immigrants living within a relatively closed community and work or
worked for an employer, Ms. Sim, with whom they do not share a common language. Under
these circumstances, testimonial shortcomings that might otherwise have signified a lack of
credibility did not do so here. The Court’s assessment is that the employee testimony was, in the
main, quite credible.
97. Importantly, the testimony of the employee witnesses was strikingly consistent with
respect to the core propositions in this case. All six employee witnesses testified that they were
paid a flat daily wage rate, not an hourly rate. All six testified that although they had at various
times, at Ms. Sim’s direction, signed time sheets provided to them by Ms. Sim, the hours stated
on the time sheets understated the number of hours actually worked. All six testified that they
did not receive a daily break of one hour in duration, as reflected in many of the time sheets
prepared by Ms. Sim, and that breaks were much shorter. All six testified that Ms. Sim had
never said anything to them about an hourly wage, but had instead given each a daily wage rate.
And finally, all six testified that they were never given overtime pay for hours worked in excess
of 40 hours each week.
98. Thus, the Court’s overall determination as to the employee witnesses is that, despite
some inconsistencies largely as to secondary matters, their accounts of Cindy’s employment
[29]
procedures were generally accurate. Taken as a whole, but without endorsing every detail of
each witness’s testimony, the Court finds the testimony of the witnesses for the Secretary
credible.
99. The substance of Ms. Sim’s testimony, by contrast, was convincingly impeached.
Her direct testimony consisted largely of a written declaration—the Secretary declined to crossexamine her. Defense counsel was permitted, at trial, to supplement Ms. Sim’s direct testimony
by putting limited additional live questions to her. But there were gaping inconsistencies
between Ms. Sim’s written testimony and the other evidence adduced at trial, evidence which the
Court credits. For a variety of reasons, the Court does not credit Ms. Sim’s testimony on the
factual issues that are critical to this case.
100. First, Ms. Sim’s testimony regarding recordkeeping and wage and hour practices at
Cindy’s must be viewed with suspicion because it contradicted her prior statements to
investigators. On May 27, 2009, Ms. Sim stated clearly to the Department of Labor’s Mr. An, in
her native language, that she did not make or maintain wage and hour records for Cindy’s
employees. See An Decl. ¶ 5. On June 15, 2009, Ms. Sim again told Ms. Lau that she did not
make or maintain such records; she insisted that she knew each employee’s hours worked “by
memory.” Lau Decl. ¶ 14. The Court fully credits Mr. An and Ms. Lau’s testimony reporting
these earlier statements of Ms. Sim. At trial, Ms. Sim contradicted those statements, testifying
that she has “kept records in the ordinary course of Cindy’s business,” and despite difficulties in
achieving total accuracy, “for the most part . . . the records are accurate.” Sim Decl. ¶¶ 13, 15.
In light of Ms. Sim’s earlier statements to the contrary, her self-serving trial testimony to the
effect that she had complied with the FLSA is rejected as lacking credibility.
[30]
101. In addition, for the reasons given earlier, the time sheets that Ms. Sim produced and
vouched for as accurate in fact were demonstrably not so. Aware of the irregularities in these
employment records, the Court, at trial, invited Ms. Sim to explain why some employee hours
were reported in unusual fractions. See Pl. Ex. 2(f) (showing Qi Wu to have worked 14.38 hours
in one week); Tr. 453:9–456:22. Ms. Sim’s only explanations were that there may have been a
miscalculation, and that her old age may have impaired her ability to keep accurate records. See
Tr. 456:14–17. These explanations were totally unpersuasive. There are numerous irregular
fractions of hours throughout the time sheets that Cindy’s produced, such that Ms. Sim’s account
of an isolated miscalculation is not credible. Rather, as noted, these irregular hour totals strongly
suggest a systematic practice of “backing-in” fabricated hours. Further, Ms. Sim’s age (57) is
not a credible explanation for her failure to maintain accurate records.
102. Also undermining Ms. Sim’s credibility were her prior false statements to federal
investigators about Cindy’s wage and hour practices. As noted, Ms. Sim twice denied (on both
May 27, 2009 and June 15, 2009) that any employees worked more than 40 hours per week. See
An Decl. ¶ 5; Lau Decl. ¶ 14. At trial, however, the defense stipulated to the contrary.
103. On the decisive factual issues in this case, Ms. Sim was thus demonstrably
inconsistent, in pointed contrast to the employee witnesses. Ms. Sim’s pattern of supplying
fabricated documents, and giving dubious and shifting explanations, was inconsistent with truthtelling. Instead, Ms. Sim’s interview answers, document productions, and ultimately, trial
testimony bespoke a series of short-term attempts to parry the inquiry at hand in the hope of
avoiding enforcement action or liability, without any regard for the truth. The Court therefore
emphatically rejects her testimony.
[31]
CONCLUSIONS OF LAW
I. Jurisdiction
1. Section 17 of the FLSA states: “The district courts . . . shall have jurisdiction, for
cause shown, to restrain violations of section 215 of this title, including . . . the restraint of any
withholding of payment of minimum wages or overtime compensation found by the court to be
due to employees under this chapter.” 29 U.S.C. § 217. There is no question—and defendants
do not contest—that § 217, as well as U.S.C. §§ 1331 and 1345, provides this Court with subject
matter jurisdiction. See Joint Pretrial Order, Stipulations of Law ¶ 1 (“Joint Stip. of Law”).
II. Cindy’s is an Enterprise Engaged in Interstate Commerce under the FLSA
2. The FLSA applies to all employees employed by an enterprise engaged in interstate
commerce. See 29 U.S.C. §§ 206(a), 207(a). An entity is an enterprise when “the related
activities performed by any person or persons are for a common business purpose.” 29 U.S.C. §
203(r)(l). An enterprise is “engaged in commerce” where its employees engage in commerce or
handle, sell, or otherwise work on goods and materials that have been moved in commerce, and
where the enterprise has at least $500,000 in annual gross volume of sales made or business
done. See 29 U.S.C. § 203(s)(l).
3. Cindy’s is an enterprise. First, Cindy’s is operated for a common business purpose as
a nail salon. See Tr. 91:23–92:2, 47:24–48:5, 173:5–6; Joint Stip. of Fact ¶ 4; Sim Decl. ¶ 2. 25
25
Cindy’s has operated at multiple locations and under multiple corporate names in the relevant
period. The salon is currently located at 491 Amsterdam Avenue, New York, N.Y. Prior to
operating at the current location, it was located at 170 West 83rd Street, New York, N.Y., where
it provided the same services to customers. Cindy’s employees have worked at both nail salon
locations. See, e.g., Zhang Decl. ¶ 10; Zhu Decl. ¶¶ 10, 13.
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Second, Cindy’s nail salon has always been under the common control of defendant Ms. Sim. 26
Third, Cindy’s activities have always been “related.” 27
4. Cindy’s Total Care, Inc. is also engaged in commerce. First, Cindy’s has used goods
and materials that have been moved in commerce. See 29 U.S.C. § 203(s)(l). The parties have
stipulated that Cindy’s has purchased, and Cindy’s employees have used, material and supplies
in the salon that were procured from beauty supply distributors located outside the state of New
York. See Joint Stip. of Fact ¶¶ 15–16. Second, as discussed earlier, Cindy’s exceeded
$500,000 in gross annual sales for the years 2007–2010. See supra, at 4 n.2; see also Def. Ex. 1
(Cindy’s credit card statements, reflecting daily, weekly, and monthly credit card settlement
deposits made into Cindy’s bank account); Pl. Ex. 12(i) (Cindy’s IRS Form 1140 corporate tax
returns for 2008 and 2009).
III. Ms. Sim and Cindy’s Are Employers Subject to the Requirements of the FLSA
5. The FLSA defines “employer” broadly as “any person acting directly or indirectly in
the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). When determining
whether a person is an “employer” for purposes of the FLSA, “the overarching concern is
whether the alleged employer possessed the power to control the workers in question, . . . with an
eye to the ‘economic reality’ presented by the facts of each case.” Herman v. RSR Sec. Servs.
Ltd., 172 F.3d 132, 139 (2d Cir. 1999) (quoting Goldberg v. Whitaker House Coop., 366 U.S. 28,
26
Ms. Sim owned and operated Cindy’s at both the current and previous locations. See Zhang
Decl. ¶¶ 10–11; Zhu Decl. ¶¶ 11–13.
27
See 29 C.F.R. § 779.207 (“[w]hether on the same premises or at separate locations, the
activities involved in retail selling of goods or services, of any type, are related activities and
they will be considered one enterprise where they are performed through unified operation or
common control, for common business purpose.”).
[33]
33 (1961)). The Second Circuit has instructed that the “economic reality” test compels courts to
consider a range of factors in resolving whether a defendant qualifies as an employer under the
FLSA, including “whether the individual: ‘(1) had the power to hire and fire the employees, (2)
supervised and controlled employee work schedules or conditions of employment, (3)
determined the rate and method of payment, and (4) maintained employment records.’” Gillian
v. Starjem Restaurant Corp., No. 10-cv-6056, 2011 WL 4639842, at *4 (S.D.N.Y. Oct. 4, 2011)
(citing Carter v. Dutchess Community College, 735 F.2d 8, 12 (2d Cir. 1984)). “No one of the
four factors standing alone is dispositive. Instead the ‘economic reality’ test encompasses the
totality of circumstances, no one of which is exclusive.” Herman, 172 F.3d at 139 (internal
citation omitted).
6. An individual may simultaneously have multiple “employers” for the purposes of the
FLSA. See 29 C.F.R. § 791.2(a) (if the facts demonstrate that the employee is jointly employed
by more than one employer, then “all of the employee’s work for all of the joint employers
during the workweek is considered as one employment for purposes of [FLSA]”). Each
defendant is jointly and severally liable for all back wages and liquidated damages. Moon v.
Kwon et al., 248 F. Supp. 2d 201, 236 (S.D.N.Y. 2002).
7. Ms. Sim is clearly an employer of the employees of Cindy’s, including all those
whose rights to overtime pay the Secretary seeks to vindicate here. At all times relevant to this
action, Ms. Sim was the sole owner, sole officer, and president of Cindy’s Total Care, Inc., and
had the power to hire and fire employees, control the conditions of their employment, and
determine the rate and methods of their pay. The evidence presented at trial also showed, and
defendants did not contest, that Ms. Sim is a corporate officer of Cindy’s Total Care, Inc. who
exercised control over the operations of the nail salon and its employees.
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8. On the record before it, however, the Court cannot find that defendant Byung Sook
Kim, Ms. Sim’s husband, was an employer of the employees of Cindy’s Total Care, Inc. The
evidence presented by the Secretary, including the testimony of the six employee witnesses
whom she called, did not establish that Mr. Kim had operational control over the nail salon or its
employees. Mr. Kim was not a corporate officer of Cindy’s Total Care, Inc. at any time relevant
to this action. Nor did any witnesses testify that Mr. Kim had the power to hire and fire Cindy’s
employees. Nor did the Secretary offer any evidence that, during the relevant period, Mr. Kim
was paid by Cindy’s, let alone for any management or operational work. Apart from sitting with
Ms. Sim and providing her with occasional spot assistance, the evidence does not establish that
he was involved in the day-to-day management of the salon.
9. The Secretary appears to base the claim that Mr. Kim was an employer primarily on
the fact that Mr. Kim occasionally handed out pay to the employees, posted break schedules on
the wall at the salon, and sat at the check-out register while visiting with his wife, Ms. Sim. The
parties have stipulated that Mr. Kim “has occasionally written out paychecks to Cindy’s
employees,” and that at “at the direction of defendant Nam Saeng Sim [he] . . . has handed
checks to Cindy’s employees [and] . . . requested Cindy’s employees to sign a receipt indicating
that they received their wages.” Joint Stip. of Fact ¶¶ 18–20. But these actions establish that Mr.
Kim at times assisted Ms. Sim in her management of the salon. They are not sufficient to show
any independent managerial control by Mr. Kim over its employees. Indeed, the Secretary has
acknowledged that, to the extent Mr. Kim assisted in paying the employees, it was always “at the
direction of” Ms. Sim. Joint Stip. of Fact ¶¶ 19–20. No evidence was offered to support the
Secretary’s proposed finding that Mr. Kim himself ever determined the rates of compensation for
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Cindy’s employees. Accordingly, the Court finds that Mr. Kim was not an “employer” of
Cindy’s employees.
IV. Ms. Sim and Cindy’s Violated Federal Recordkeeping Laws
10. Under the FLSA, every employer is required to “make, keep, and preserve such
records of the persons employed by [it] and of the wages, hours, and other conditions and
practices of employment.” 29 U.S.C. § 211(c). Although the terms “wages” and “hours” each
have a clear meaning, the term “other conditions and practices of employment” is not entirely
self-defining, and therefore has been given content by regulations promulgated by the
Department of Labor. These regulations list the specific conditions and practices of employment
all employers are required to document. See 29 C.F.R. §§ 516.2, 516.5, 516.6. These include:
employees’ regular hourly rate, hours worked each workday, total hours worked each week, total
additions or deductions from wages, total wages paid each pay period, the date of payment, and
the pay period covered by each payment.
11. For the reasons set forth in detail above, during the relevant time period, Ms. Sim
and Cindy’s violated the recordkeeping provisions of the FLSA. They failed to make, keep, and
preserve adequate and accurate records of the wages and hours of their employees as required by
the relevant regulations. The records produced by Cindy’s were facially inaccurate and
inadequate, and there is no evidence that appropriate records were kept and maintained pursuant
to the requirements of the FLSA.
A. Cindy’s Records Were Facially Inadequate
12. The hour and wage records created by Cindy’s were plainly inadequate, even apart
from their falsity. The records produced to the Department of Labor in the course of the
investigation, and to the Court during this litigation, simply do not provide employment
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information for all employees for all weeks worked. Rather, the Court has noted numerous gaps
in the submitted time sheets. See 29 C.F.R. §§ 516.2, 516.5. That is particularly true of Cindy’s
first production, but it is true as well of the second. The records produced by Cindy’s failed to
cover all dates in the relevant time period, and they failed to cover all employees employed by
Cindy’s during that time.
B. Wage and Hour Information in the Records Have Been Shown to be False
13. More fundamentally, as detailed above, much of the wage and hour information
provided in the records produced by Cindy’s is demonstrably inaccurate. The time sheets in
Cindy’s first production misrepresent the total hours worked by employees, with numerous time
sheets describing work shifts that last five or six hours in duration, contrary to the uniform
testimony of the employee witnesses (and the parties’ stipulation) that a standard shift at Cindy’s
was approximately 10 hours in duration. And, as described earlier, the Court finds that the total
hours and wages rates on time sheets were fabricated—through the “backing in” method—to
create the illusion of compliance with the FLSA. See Joint Stip. of Fact ¶¶ 23–24.
14. As to the time sheets in Cindy’s second production, although less glaringly
inaccurate, they are far short of compliant. As described earlier, the aggregate weekly wages
reported for various (and possibly all) employees are incorrect, again, to create the false
impression that overtime wages had been paid. The time sheets are also incorrect insofar as they
represent that each employee received a daily one-hour lunch break; and insofar as they represent
that each employee started and ended work at the same time each day. The employee witnesses
testified, credibly, that they frequently arrived at (and began) work early, and continued to work
after the official ending time of their shift, without receiving credit for the additional time. Most
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important, as noted, the records are false to the extent that they indicate that the employees were
paid an hourly wage rate, and were paid overtime rates for overtime work.
C. Records Were Not Maintained in a Central Location
15. During the relevant time period, Ms. Sim and Cindy’s failed to maintain a complete
and accurate set of records at the place of employment or at an established central recordkeeping
office. See 29 C.F.R. § 516.7. Apart from the fact that Ms. Sim initially denied keeping any
such records at all, at trial, Ms. Sim herself admitted that she had been unable to provide records
to the Department of Labor during the third investigation because some of the records were kept
at her home, some were kept at Cindy’s nail salon, and some were kept at the office of the
accountant, Mr. Shin. See Sim Decl. ¶ 16.
V. Ms. Sim and Cindy’s Violated Federal Overtime Pay Laws
16. The FLSA requires employers to pay employees an overtime rate of at least one and
one-half times their regular rate for hours worked in excess of 40 hours per week. See 29 U.S.C.
§ 207(a)(1); 29 C.F.R. § 778.107; Tran v. Alphonse Hotel Corp., 281 F.3d 23, 31 (2d Cir. 2002).
The Court has found that no such overtime wages were paid here. Nor may Cindy’s claim that
overtime wages were somehow tacitly embedded in employees’ daily wages. As a matter of law,
a daily or a weekly salary does not include an overtime premium for the hours worked in excess
of forty hours per week, unless there is evidence that the parties intended such an arrangement
and that an explicit agreement was made. Chan v. Sung Yue Tung Corp., 2007 WL 313483, at
*23 (S.D.N.Y. Feb. 1, 2007). Thus, “[t]here is a rebuttable presumption that a weekly salary
covers 40 hours; the employer can rebut the presumption by showing an employer-employee
agreement that the salary cover a different number of hours.” Giles v. City of New York, 41 F.
Supp. 2d 308, 317 (S.D.N.Y. 1999). There was no evidence of such an agreement with respect
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to the fixed daily wage rates paid here. On the contrary, Ms. Sim denied paying such rates,
falsely claiming that employees were paid hourly.
17. In calculating the amount of overtime due under the FLSA, it is axiomatic that
employees must be compensated for all hours worked. This includes periods of down-time while
waiting for customers. See 29 C.F.R. § 778.223 (“working time is not limited to the hours spent
in active productive labor, but includes time given by the employee to the employer even though
part of the time may be spent in idleness”); 29 C.F.R. § 785.11; Grochowski v. Phoenix Const.,
318 F.3d 80, 87 (2d Cir. 2004); Reich v. N.Y.C. Transit Auth., 45 F.3d 646, 651 (2d Cir. 1995);
Yu G. Ke v. Saigon Grill, Inc., 595 F. Supp. 2d 240, 255–56 (S.D.N.Y. 2008). It also includes
work breaks approximately of 20 minutes or less in duration. See 29 C.F.R. § 785.18. Because
the Court finds that breaks above 20 minutes were not regularly taken at Cindy’s, it follows that
employees’ compensable hours extend from the start time of the employee’s workday to the end
time, with no time excluded.
18. The Court finds that Cindy’s and Ms. Sim failed to pay overtime compensation
during the period covered by this action, which, as narrowed during the litigation, spanned
September 20, 2007 through February 28, 2010. The employees in question were entitled to be
paid but did not receive overtime pay at a rate of not less than one and one-half times the
minimum wage for any hour worked in excess of 40 hours per week. See 29 U.S.C. §§
207(a)(1), 216; see also Chao v. Gotham Registry, Inc., 514 F.3d 280, 285 (2d Cir. 2008). The
defendants thus violated Section 7 and Section 15(a)(2) of the FLSA by paying their employees a
fixed daily wage, without any provision for overtime.
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19. Accordingly, the Secretary is entitled to recover, as damages for the affected
employees, the difference between the amount that these employees were paid and the amount
that they would have received had overtime been properly paid.
VI. Damages
A. Statute of Limitations
20. Cindy’s and Ms. Sim can be liable for only those damages that accrued under the
FLSA on or after September 20, 2007. See 29 U.S.C. §255(a) (where violation is willful, threeyear statute of limitations, running from the date the cause of action accrued, applies). The
narrowed period of time for which the Secretary seeks relief (September 20, 2007 through
February 28, 2010) accords with this standard.
B. Employees’ Entitlement to Compensatory Damages
21. An employee seeking to recover unpaid overtime wages under the FLSA “has the
burden of proving that he performed work for which he was not properly compensated.”
Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946). However, where an employer
fails to maintain adequate records of the employee’s hours worked, wages earned, and other
terms and conditions of employment as required by the FLSA, the employee is found to satisfy
this burden if he or she can prove that the employee “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.” Id.; see also Moon v. Kwon et al., 248 F.
Supp. 2d 201, 219 (S.D.N.Y. 2002) (citing Reich v. Southern New England Telecomms. Corp.,
121 F.3d 58, 66 (2d Cir. 1997)). Here, the record establishes, and the Court has found, that
Cindy’s did not maintain adequate records. The question thus is whether the Secretary has met
her burden, including by “just and reasonable inference,” of proving the overtime hours worked
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(but not properly compensated) as to the 32 individuals employed by Cindy’s during the relevant
time period.
22. Here, the Court finds that the Secretary has met her burden. First, she has presented
the reliable testimony of a representative sample of employees, establishing a pattern and
practice of FLSA violations by Cindy’s and Ms. Sim. This evidence supplies a reasonable, and
indeed a compelling, basis to extrapolate that all other employees were similarly denied overtime
pay during the relevant period. Cindy’s at no point has claimed that differing mechanisms were
used to calculate the pay of those employees who testified as opposed to those who did not.
23. Second, as to all 32 employees, the Secretary has presented evidence that, in totality,
supplies a reasonable basis on which the Court can determine which employees worked overtime
at Cindy’s during the relevant period, how many overtime hours each employee worked, and
what each employee’s wages were (converted to hourly wages) so as to permit a calculation of
the amount of unpaid overtime wages due to them. These are the ingredients necessary to
compute damages.
24. As to the period of time that each particular employee worked, Ms. Sim confirmed
during her testimony at trial that the 32 employees each worked during the period as to which the
Department of Labor is seeking overtime compensation for them. See Tr. 469:2–473:24; see
also Pl. Ex. 2(q) (chart setting out period of employment for each employee for which Secretary
sought recovery as of date of trial); Pl.’s Post-Trial Br., Ex. 1 (chart prepared post-trial, in
response to inquiry from Court, in which the Secretary set out narrowed periods of employment
for these employee). Thus, the period of employment for each employee, within the relevant
period, is not in dispute.
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25. As to the length of each workday, the parties stipulated that employees’ assigned
shifts were 10 hours long. See Joint Stip. of Fact ¶ 23. Although there was ample testimony
from employees that the workday in fact frequently exceeded 10 hours, the Court, in calculating
damages, will make the conservative assumption of a 10-hour workday.
26. As to the number of days employees worked each week, the parties stipulated at trial
that each employee worked five or six days a week. See Joint Stip. of Fact ¶¶ 23–24. The
employee testimony was that six-day weeks were worked during the busier months (which
employees testified were March through September) whereas five-day weeks were worked
during the other five months of the year. See Ge Zhang Decl. ¶ 22; Meng Decl. ¶ 20; Wu Decl. ¶
19; Yeng Decl. ¶ 20; Zhang Decl. ¶ 21; Zhu Decl. ¶ 25. The Court will calculate damages based
on a 60-hour workweek for seven months of each year (March through September) and a 50hour workweek for five months of each year (October through February), consistent with that
testimony.
27. Finally, as to the imputed wage rate to be used for determining damages attributable
to unpaid overtime, the six employee witnesses identified in their direct testimony the daily wage
rate that Ms. Sim had assigned to them. In calculating damages, the Secretary proposes, and the
Court agrees, that it is appropriate to calculate an imputed hourly rate for each of these
employees by dividing each employee’s daily wage rate by 10 hours (the length of the workday
to which the parties have stipulated). That imputed hourly rate may then be used as the basis for
calculating unpaid overtime for the hours the employee worked in excess of 40 in a given week.
As to the other 26 employees, there is, of necessity, no testimony regarding the daily rate that
Ms. Sim assigned to each of them. However, Cindy’s second document production does supply,
on the time sheets for each employee, a purported hourly rate—the rate that Cindy’s claimed was
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in place for that employee during the relevant period. Although the Court has found that rate to
be a post-hoc construction, the Secretary proposes, and the Court agrees, that, for damages
purposes, that rate to be a fair proxy for an hourly rate for damages purposes. See Anderson, 328
U.S. at 687 (“an employee has carried out his burden if he proves . . . the amount and extent of
that work as a matter of just and reasonable inference”); Kuebel v. Black & Decker Inc., 643 F.3d
353, 362 (2d Cir. 2011) (“[i]t is well settled among the district courts of this Circuit” that an
employee can meet this low burden even “through estimates based on his own recollection”).
The Court notes that the rates that appear on the time sheets in the second document production
are consistent with the range of wage rates to which the six employee witnesses testified. 28
28. Because the Secretary has presented sufficient evidence of the pattern and extent of
overtime pay violations, “[t]he 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 [plaintiff’s] evidence.” Anderson, 328 U.S. at 687–88. Cindy’s
and Ms. Sim have not met this burden. Indeed, they do not dispute that any of the 32 employees
worked on the days, and hours, on which the Secretary’s damage calculation is based. Nor, in
fact, do they dispute the Secretary’s damages calculation at all.
C. Compensatory Damages Calculation
29. The Secretary’s damages calculations (defendants offer none), were arrived at as
follows. First, Ms. Lau determined the total number of hours worked by each employee each
28
As a further assurance of fairness to Cindy’s in the damage-calculation process, to the extent
the time sheets she produced recite multiple hourly wage rates for a particular employee, the
Court believes it appropriate to use the lowest of these wage rates as the basis for calculating
unpaid-overtime damages. However, to the extent, if any, that the wage rates given on these
time sheets fall below the then-applicable minimum wage required by law, the Court’s view is
that the minimum wage should be used as the basis for calculating such damages.
[43]
week, as reflected in the time sheets provided by Cindy’s in the second production. Second, she
multiplied the total hours worked by a standard coefficient obtained from the chart contained in a
form, Form WH-135 (“Coefficient Table for Computing Extra Half-Time for Overtime”) used
by the Department of Labor’s Wage and Hour Division for such purposes. See Pl. Ex. 2(o). For
each week’s hours for a given employee, exceeding 40 and up to 85, the chart on Form WH-135
supplies a coefficient rounded to three decimal numerals, which assists in computing the total
overtime owed for the week.
30. The Court is convinced that, on the facts at hand, this is not the best method to
calculate compensatory damages in this case. First, no explanation is provided in any of the
Secretary’s testimony as to the method by which the Department of Labor produced the guidance
document, nor how each coefficient is calculated by the Department of Labor in the first
instance. Second, the rounding of the standard coefficients in Form WH-135 to three decimal
numerals creates unnecessary errors in the computation of owed overtime wages. Such errors
are demonstrated in the Secretary’s own submissions. In Ms. Lau’s explanation of back wage
computations, she describes an example for calculations made to determine the overtime wages
owed to Hua Zhu, also known as Maria. See Pl. Ex. 2(r). Ms. Lau multiplied the weekly wage
rate ($600) by the coefficient value in the guidance document associated with a 60-hour week
(0.167), which garnered a result of $100.20 of additional weekly half-wages owed to Maria. See
id. at 3. However, when Ms. Lau detailed the alternative long-hand calculation in the same
situation, she obtained a result of $100.00 of additional weekly half-wages owed. See id. at 3
n.3. While the difference is small in the example provided by Ms. Lau – just twenty cents for
one week’s work – when compounded by 32 employees over a time period of multiple years, the
error may well be consequential, from the perspective of the under-compensated employee.
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31. In lieu of Ms. Lau’s approach of relying on the coefficients in the Department’s
guidance materials, the Court’s view is that overtime wages (and hence compensatory damages)
for the 32 disadvantaged employees in this case are properly calculated by longhand, based on
the factual parameters discussed in paragraphs 22–27 above. The Court directs the Secretary to
calculate those damages and to file with the Court, by January 20, 2012, (1) a memorandum
setting forth, for each employee, concretely how those damages were calculated, so as to permit
the defense and the Court to determine expeditiously if any arithmetic error was made; and (2) a
proposed judgment embodying the aggregate damages due to each of the employees. Thus, in
calculating total overtime wages with respect to the six employee witnesses, the Secretary is
instructed to use the daily wage rate to which that employee testified in her direct testimony. In
calculating total overtime wages owed to the other 26 employees, the Secretary shall use the
lowest hourly wage attributed to that employee in the time sheets supplied by Cindy’s in her
second production of documents, provided that that wage rate is not below the then-applicable
minimum wage rate to which that employee was entitled. 29
32. Defendants may submit to the Court, also by means of a memorandum, due by
January 27, 2012, any objections to the Secretary’s proposed overtime wage calculations.
29
Put in equation form, the longhand calculation that the Secretary shall utilize (for a
hypothetical employee with a consistent wage rate during the relevant period) is as follows:
Step 1: [daily wage] x [days worked in one week] ÷ [hours worked in one week] =
[reconstructed hourly rate of pay]
Step 2: [hourly pay] x 0.5 = [half-time overtime wage rate for all hours over 40]
Step 3: [half time hourly rate] x [number of hours worked over 40] = [half-time
overtime wages owed for the week]
Step 4: [half-time wages owed for the week] x [number of weeks for which the
employee worked the same number of hours and received the same
weekly rate] = [total half-time overtime wages owed for the period].
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D. Employees’ Entitlement to Liquidated Damages
33. The defendants are liable for liquidated damages under the FLSA. An employer who
violates the overtime provisions of the FLSA “shall be liable to the employee or employees who
are affected in the amount of their . . . unpaid overtime compensation, . . . and in an additional
equal amount at liquidated damages.” 29 U.S.C. § 216(b). These statutory damages are not a
sum certain, but rather are derivative of compensatory damages.
34. Though “[d]ouble damages are the norm,” Southern New England Telecommc’ns,
121 F.3d at 71, an employer may avoid liquidated damages if it establishes “by ‘plain and
substantial’ evidence, its subjective good faith and objective reasonableness.’” Moon v. Kwon et
al., 248 F. Supp. 2d 201, 234 (S.D.N.Y. 2002). Courts may exercise discretion and deny an
award of liquidated damages where the employer shows that even in violating statutory and
regulatory wage, hour, and recordkeeping requirements, the employer acted in subjective “good
faith” and had objectively “reasonable grounds” for believing that the unlawful acts did not
violate the FLSA. 29 U.S.C. § 260.
35. Defendants have not established that they acted in good faith in violating the FLSA.
Quite the contrary: The defendants knew of the overtime pay and recordkeeping requirements of
the FLSA following the Department of Labor’s initial investigation, evidenced by the Back
Wage Compliance and Payment Agreement and the ensuing payment of back wages to the
Department. As such, defendants have shown neither a subjective belief in the lawfulness of
their hour and wage practices, nor that these practices were objectively reasonable. The Court
also notes that, by virtue of the outcome of the first investigation, Ms. Sim is a recidivist as to
FLSA violations, which is also inconsistent with a finding of good faith.
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36. Accordingly, Cindy’s Total Care, Inc. and Ms. Sim are liable for the full amount of
liquidated damages under the FLSA. As liquidated damages, the Secretary is entitled to recover
on behalf of each Cindy’s 32 disadvantaged employees the equivalent to 100 percent of the
compensatory damages due to that employee for unpaid overtime, as calculated pursuant to the
discussion above.
37. The Secretary shall include an appropriate entry for liquidated damages due to the 32
employees in the proposed judgment due to the Court by January 20, 2012.
VII.
Joint and Several Liability
38. Cindy’s Total Care, Inc. and Nam Saeng Sim are jointly and severally liable for the
judgment. Each defendant (with the exception of Byung Sook Kim, for the reasons discussed
above) acted as the employees’ joint employer and is responsible both individually and jointly
for defendants’ violations of the FLSA and regulations promulgated thereunder. See 29 C.F.R. §
791.2.
CONCLUSION
In consideration of the foregoing findings of fact and conclusions of law, the Court finds
that the plaintiff Secretary of Labor has proven, by a preponderance of the evidence, that
defendants Cindy’s Total Care, Inc. and Nam Saeng Sim violated the Fair Labor Standards Act,
both in failing to pay overtime wages for weekly hours in excess of 40, and for failing to make
and maintain appropriate records as to employees’ hours and wages. The Court does not find
defendant Byung Sook Kim liable.
For the violation of the overtime-wage provisions of the FLSA, the Court awards plaintiff
compensatory and liquidated damages, to be distributed to the 32 employees whom the Court has
found to have been denied overtime pay. Cindy’s Total Care, Inc. and Nam Saeng Sim are
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jointly and severally liable for paying these damages. Plaintiff shall submit proposed damages
calculations for each of the 32 employees to the Court, consistent with the discussion in this
opinion, by January 20, 2012; defendants may object to such calculations by January 27, 2012.
The Court further enjoins Cindy's Total Care, Inc. and Nam Saeng Sim, their officers,
agents, employees and those persons in active concert or participation with defendants, from
violating the provisions of the Act contained in 29 U.S.C. §§ 207, 211(c), 215(a)(2), 215(a)(5).
It is hereby ORDERED that judgment is entered in favor of plaintiff, Secretary of Labor,
and against defendants, Cindy's Total Care, Inc. and Nam Saeng Sim. Judgment is entered in
favor of defendant Byung Sook Kim, whom the Court finds is not liable for violating the FLSA.
Plaintiff shall submit an application for the amount of their fees and costs, a request for
prejudgment interest, and an appropriate form of a judgment no later than January 20,2012. The
defendants shall submit any opposition to this submission no later than January 27, 2012.
SO ORDERED.
P~A.~
Paul A. Engelmayer
United States District Judge
Dated: January 5,2012
New York, New York
[48]
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