Hodges et al v. Salvanalle, Inc. et al

Filing 67

Memorandum Opinion and Order: Plaintiffs' Motion for Partial Summary Judgment is GRANTED, plaintiffs' Motion to Strike the Testimony of Vern Waldow Including his Affidavit and all Attachments thereto is GRANTED, and plaintiffs' Motion for Sanctions is DENIED. Judge Patricia A. Gaughan on 2/12/14. (LC,S) re 54 , 64

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

Rebecca Hodges, et al.,
Plaintiffs,
vs.
Salvanalle, Inc., et al.,
Defendants.

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CASE NO. 1:12 CV 2851
JUDGE PATRICIA A. GAUGHAN

Memorandum of Opinion and Order

Introduction
This matter is before the Court upon plaintiffs’ Motion for Partial Summary Judgment
(Doc. 54) and plaintiffs’ Motion to Strike the Testimony of Vern Waldow Including his Affidavit
and all Attachments thereto/ Motion for Sanctions (Doc. 64). This case arises under the Fair
Labor Standards Act. For the following reasons, plaintiffs’ Motion for Partial Summary
Judgment is GRANTED, plaintiffs’ Motion to Strike the Testimony of Vern Waldow Including
his Affidavit and all Attachments thereto is GRANTED, and plaintiffs’ Motion for Sanctions is
DENIED.
Facts

1

Plaintiffs Rebecca Hodges, Gladys Brown, Loney Ray Murphy, and Tyler Kithcart on
behalf of themselves and all others similarly situated1 filed this Complaint against defendants
Salvanalle, Inc. dba Everdry Waterproofing of Central Ohio and Cheryl B. Nalle. The
Complaint states that it is a collective action lawsuit brought under the Fair Labor Standards Act
(FLSA) and the Ohio Minimum Fair Wage Standards Act (OMFWSA) as a result of defendants’
failure to pay non-exempt employees overtime compensation for hours worked in excess of 40
per week and/or minimum wages. The Complaint sets forth four claims. Count One alleges a
FLSA overtime violation. Count Two alleges FLSA minimum wage violations. Count Three
alleges OMFWA overtime violations. Count Four alleges OMFWA minimum wage violations.
As defendants do not present their own version of the facts, the facts as presented by
plaintiffs, and supported by evidence, are hereby set forth by the Court.
Salvanalle, Inc. is an Ohio corporation that owns and operates a basement
waterproofing franchise known as Everdry Waterproofing of Central Ohio. Cheryl Nalle is its
sole shareholder and only officer. There are no corporate directors and Nalle oversees the daily
general management of the business.
The Complaint herein was filed on November 16, 2012. Thereafter, the parties stipulated
to a tolling of the statute of limitations for all potential opt-in plaintiffs as of February 1, 2013,
and to the issuance of notice to all potential plaintiffs defined as “Current and Former Employees
of Salvanalle, Inc. (doing business as “Everdry of Central Ohio”) any time on or after February

1

As of the date of the filing of the Motion for Partial Summary Judgment, 33
additional plaintiffs joined the action.
2

1, 2008.” Both stipulations were so ordered by this Court.2
As a result of discovery, the parties identified all of the available time records,
payroll records, and employee personnel files for each of the plaintiffs. (Doc. 55 Vol. I-III)3
Defendants acknowledged, through responses to requests for admission, that no other time
records, payroll records, or personnel records exist.
Defendants compensated each of the plaintiffs on the basis of a day rate. In addition to
the day rate, each of the plaintiffs was eligible for bonus compensation based upon attendance
and sales. Defendants failed to maintain records of the bonus compensation earned by each
employee and further failed to include bonus compensation in employees’ regular pay but,
instead, paid it out in either cash or by check. Nalle admitted that she did not know if
commissions were factored in the determination for premium pay or overtime. David Pesec, who
wrote the computer program for employee compensation, testified that when such bonus
compensation was added, it was added to the total pay value and not the employee’s regular rate.
None of the plaintiffs was paid a salary or was an exempt employee under the FLSA.
Each of the plaintiffs was treated as a day rate employee subject to a reduction in compensation
for any hours not worked. Each of the plaintiffs was also eligible for “premium pay” or “drive
time” pay which was expressly excluded by defendants for overtime compensation.

2

Defendants argue at great length in their brief in opposition that they are “not
bound” by the stipulations. However, the Court noted at the July 9, 2013 Status
Conference that the stipulations entered into prior to defendants’ counsel’s
appearance would remain in place. Moreover, as plaintiffs point out, the
equitable tolling agreement between the parties is relevant to damages and not
liability which is the only issue before this Court.

3

These three volumes were compiled by plaintiffs and consist of 1574 documents.
3

Defendants typically recorded employee hours with a time clock system with employees
clocking in and out for each work day. The time cards were collected by Pesec who prepared the
payroll records. Defendants failed to properly maintain records of all hours worked by each of
their employees. For instance, defendants admit that they have produced no time cards for
plaintiffs Dave Kelly, Olivia Augustine, Jordan Engler, Louis Elbert, Richard Hicks, Anthony
Baum, Michael Branham, and Charles Alexander. Defendants only produced partial time cards
for all the remaining plaintiffs.
Defendants admit that they only maintained payroll worksheets for the years 2009 and
2010 for employees in the production department. Defendants did not maintain similar records
for any employee other than production department installers. Defendants did not attempt to
record hours worked by some employees. To the limited extent that defendants maintained
records, those records are incomplete as evidenced by missing 2009 and 2010 payroll
worksheets.
Plaintiffs worked in different capacities for defendants. They typically worked in excess
of 40 hours each week but were not paid overtime at the rate of one and one-half times their
regular rate of pay, their compensation frequently fell below the Ohio minimum wage
requirements, and they were not paid for all hours worked.
Pesec assumed payroll responsibilities in October 2010. He did not receive any formal
training on performing the payroll duties. His educational background is in information
technology management, not accounting. Pesec testified that he received no training on how to
calculate employee compensation as required by the Department of Labor, and never asked
anyone outside Salvanalle, Inc. to review his program to insure its compliance.

4

This matter is now before the Court upon plaintiffs’ Motion for Partial Summary
Judgment and Motion to Strike the Testimony of Vern Waldow Including his Affidavit and all
Attachments thereto/ Motion for Sanctions.
Standard of Review
Summary Judgment is appropriate when no genuine issues of material fact exist and the
moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986) (citing Fed. R. Civ. P. 56(c)); see also LaPointe v. UAW, Local 600, 8 F.3d 376,
378 (6th Cir. 1993). The burden of showing the absence of any such genuine issues of material
facts rests with the moving party:
[A] party seeking summary judgment always bears the initial
responsibility of informing the district court of the basis for its
motion, and identifying those portions of “the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with affidavits,” if any, which it believes demonstrates the
absence of a genuine issue of material fact.
Celotex, 477 U.S. at 323 (citing Fed. R. Civ. P. 56(c)). A fact is “material only if its resolution
will affect the outcome of the lawsuit.” Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986).
Accordingly, the nonmoving party must present “significant probative evidence” to demonstrate
that “there is [more than] some metaphysical doubt as to the material facts.” Moore v. Philip
Morris Cos., Inc., 8 F.3d 335, 340 (6th Cir.1993). The nonmoving party may not simply rely on
its pleading, but must “produce evidence that results in a conflict of material fact to be solved by
a jury.” Cox v. Kentucky Dep’t. of Transp., 53 F.3d 146, 150 (6th Cir. 1995).
The evidence, all facts, and any inferences that may permissibly be drawn from the facts
must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Eastman Kodak Co. v. Image Technical Servs.,
5

Inc., 504 U.S. 451, 456 (1992). However, “[t]he mere existence of a scintilla of evidence in
support of the plaintiff's position will be insufficient; there must be evidence on which the jury
could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252.
Summary judgment should be granted if a party who bears the burden of proof at trial
does not establish an essential element of his case. Tolton v. American Biodyne, Inc., 48 F.3d
937, 941 (6th Cir. 1995) (citing Celotex, 477 U.S. at 322). Moreover, if the evidence is “merely
colorable” and not “significantly probative,” the court may decide the legal issue and grant
summary judgment. Anderson, 477 U.S. at 249-50 (citation omitted).
Discussion
(1) Motion to Strike
Defendants responded to plaintiffs’ Motion for Partial Summary Judgment by submitting
the affidavit of Verne Waldow who states that he had “recently been retained” by defendants’
attorney to serve as an expert witness and had prepared his expert report “within the last week.”
He avers that his “audit of Salvanalle’s records shows that it fully complied with the requirement
of maintaining payroll records for the required period.” Waldow’s expert report, dated
December 15, 2013, states that “most of [his] remarks... are directed against statements
contained in Plaintiffs’ Motion for Partial Summary Judgment.”
Plaintiffs seek to strike the testimony of Vern Waldow including his affidavit and its
attachments. Plaintiffs also move for sanctions. For the following reasons, the Court agrees that
Waldow’s affidavit and report must be stricken. Sanctions will not be issued at this time.4

4

However, this Court did issue the following Minutes/Order on June 24, 2013:
“In-person Status Conference was set. Mr. Scott and Mr. Winters appeared on
behalf of the Plaintiffs. Mr. Halligan failed to appear. Ms. Lang, who is not an
6

Plaintiffs move to strike on the following bases, all of which are sound.
This Court’s May 8, 2013 Case Management Order provided that expert reports were to
be exchanged on or before October 31, 2013 for the party with the burden of proof and
November 29, 2013 for rebuttal reports. Although plaintiffs produced their expert report to
defendants on October 31, 2013, defendants did not comply with either date and did not produce
an expert report on issues for which they have the burden of proof or a rebuttal report. For the
first time, defendants have submitted Waldow’s affidavit and expert report as an exhibit to their
brief in opposition to plaintiffs’ Motion for Partial Summary Judgment.5 Defendants have not
sought leave for, or even acknowledged, their untimely disclosure. Plaintiffs contend that they
would be prejudiced by this late submission given that they will not have a meaningful
opportunity to engage in expert discovery by submitting written discovery requests regarding the
report or have an opportunity to depose the expert.
Defendants present the following arguments in opposition to the Motion to Strike, none
of which are persuasive. Plaintiffs should not be surprised by the affidavit of the expert given
that defendants’ counsel identified him in this Court’s chambers on three different occasions and
he was mentioned during Nalle’s and Pesec’s depositions. Yet plaintiffs did not request to take
his deposition. Defendants “disagree” that Waldow’s report should have been filed by
November 29, 2013 given that it “does not directly respond to the report of plaintiffs’ expert, but

attorney of record, appeared via telephone for the Defendants. Defendants are to
provide discovery by 6/27/13 or sanctions will be issued. Status Conference is set
7/9/13 at 10:00 a.m. Counsel of record and clients must appear.”
5

Plaintiffs point out that they have filed two notices of discovery disputes which
resulted in the Court directing defendants to provide discovery. Nor did
defendants make initial disclosures or supplements thereto.
7

instead is expressly geared to refute arguments made in the pending Motion for Summary
Judgment.” (Doc. 65 at 2) There is no surprise given that Waldow only reviewed the evidence
before the Court and opined on the issues raised in the Complaint. Additionally, plaintiffs’ own
expert, who previously knew Waldow at the Department of Labor, knew in October 2013 that
Waldow was working as an expert for defendants.
These arguments are not convincing. The Court agrees with plaintiffs that defendants’
mention of Waldow does not meet the requirements of Rule 26 or this Court’s Case Management
Order. Plaintiffs had a right to rely on defendants’ failure to timely produce an expert report as
an indication that defendants did not intend to rely on expert testimony, making expert discovery
unnecessary. Waldow’s statement, and defendants’ argument, that the report was prepared only
to oppose the summary judgment motion does not excuse its untimeliness or exempt defendants
from the Civil Rules or this Court’s discovery order.
Aside from its untimeliness, plaintiffs challenge the affidavit and report on other bases.
Plaintiffs point out that the report states, “Although defendants’ flawed computer template did
cause some violations, it also caused the company to overcompensate many workers by paying
them more than was required by minimum wage and overtime.” (Waldow rept. at 1) But,
Waldow does not state that any plaintiffs were included in overcompensated employees.
Plaintiffs additionally point out that Waldow references electronically stored data and
other evidence that was not produced in discovery. This cannot be permitted. Plaintiffs filed two
notices of discovery disputes to obtain basic discovery and then had defendants admit, through
requests for admission, that all available information for each of the plaintiffs had been
produced. None of the information was in electronic format. Pesec confirmed at deposition that

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he had not been able to locate any electronic data. Defendants do not claim that they have
provided electronically stored information to plaintiffs, but only counter that Waldow avers that
he reviewed all documents which defendants produced to plaintiffs during discovery. Aside
from the fact that Waldow would have no knowledge of what documents were provided to
plaintiffs other than what defendants represented as being provided, Waldow also avers, “I
reviewed numerous documents maintained by Salvanalle, Inc., including all those documents
which it produced to plaintiffs’ counsel during discovery in this lawsuit.” (Waldow aff. ¶ 6)
Thus, the affidavit indicates that other records were reviewed other than those disclosed in
discovery.
Plaintiffs point out that defendants admitted, through requests for admission, that they
only maintained limited records for some of the plaintiffs and no records for other plaintiffs.
Waldow’s affidavit and report seek to contradict defendants’ admissions by suggesting that
defendants did keep and maintain records as required by the FLSA. (“My audit of the firm’s
records shows that the firm did keep and maintain records as required by the FLSA. There is a
record of starting and quitting time, a weekly total of hours worked, and a record of payments
made and how they were calculated. These records are readily available for all in electronic
format.”) Defendants admitted that no other time records outside of the time cards existed.
Waldow’s statements contradict defendants’ admissions. In their brief, defendants do not
respond to this argument. Rather, the admissions establish that defendants did not maintain all
required records.
Nor did defendants respond to plaintiffs’ assertion that Waldow improperly opines that
he “disagrees” with plaintiffs’ statement that defendants habitually failed to pay overtime.

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Waldow stated,
I disagree with this characterization. I do not believe that the company was trying to
cheat employees out of the overtime that was due them. I would characterize it as an
administrative programming error. The payment of the half-time by using the regular rate
principle is not easily comprehended. Due to this programming error the half-time was
miscalculated. And some employees were underpaid their overtime premium pay.
Obviously there is a back wage liability. My audit calculated a total of $13,495.41 for
the years 2010 through 2013.
(Waldow report at 4) Defendants did not respond to plaintiffs’ contention that Waldow is
improperly testifying as to defendants’ intent or state of mind.
Plaintiffs made other arguments for exclusion under Daubert v. Merrell Dow
Pharmaceuticals, Inc., 43 F.3d 1311 (9th Cir. 1995), to which defendants did not respond
including Waldow’s failure to base his opinions on reliable evidence concerning defendants’
compliance with the record keeping requirements of the statutes since he relied only on a small
smattering of records including isolated pay periods for a few of the plaintiffs. Nor is Waldow’s
opinion that the back wage liability is $13,495.41 supported by a calculation or supporting
documentation detailing a reliable methodology for this conclusion.
For these reasons, Waldow’s affidavit and report are stricken. The report is untimely and
is insufficient on the bases stated above.
(2) Motion for Partial Summary Judgment
The motion seeks partial summary judgment establishing defendants’ liability for
violations of the FLSA and OMWFA.6 Plaintiffs move for summary judgment on six issues

6

Plaintiffs state that the motion focuses on violations as to the named plaintiffs, but
also provides evidence of a practice generally applicable to some, many, or all
opt-in plaintiffs and that after liability is established, a trial as to damages will
allow the named and opt-in plaintiffs the ability to present individualized
evidence showing the extent to which they have been damaged under one or more
10

(a) Cheryl Nalle is an employer as defined by the FLSA
Relying on the broad definition of the term “employer” contained in the FLSA, “any
person acting directly or indirectly in the interest of an employer in relation to an employee,” and
Sixth Circuit authority addressing when individual owners are employers to be held personally
liable for damages, plaintiffs move for summary judgment as to Nalle’s status. Plaintiffs point to
evidence showing Nalle’s operational control over Salvanalle, her sole ownership of the
company, and her ultimate control over the employment decisions made by the company.
Defendants do not address this issue and, therefore, do not contest the applicable law or the
evidence.
The Court finds the unopposed argument and evidence support that Nalle is an employer
under the FLSA to be held individually liable for violations under the act. In particular, the Court
determines that the evidence shows that Nalle had operational control over Salvanalle, Inc. so
that she is legally an “employer” responsible for the company’s FLSA obligations. Cook v.
Carestar, Inc., 2013 WL 5477148 (S.D.Ohio Sept. 16, 2013) (citing U.S. Department of Labor v.
Cole Enterprises, Inc., 62 F.3d 775 (6th Cir. 1995) and Dole v. Elliott Travel & Tours, Inc., 942
F.2d 962 (6th Cir. 1991)).
(b) Defendants have a practice or policy of failing to keep and maintain wage
records as required under the FLSA and OMFWSA
The FLSA requires that
Every employer ... shall make, keep, and preserve such records of the persons employed
by him and of the wages, hours, and other conditions and practices of employment
maintained by him, and shall preserve such records for such periods of time...

of the FLSA violative practices or policies.
11

29 U.S.C. § 211(c). Employers must keep payroll records for a period of three years, and
preserve time sheets for two years. 29 C.F.R. §§ 516.5(a) and 516.6(a)(1). State law requires
substantially the same. O.R.C. § 4111.14(F).
The Sixth Circuit has recognized,
where the employer's records are inaccurate or inadequate ... an employee has carried out
his burden if he proves that he has in fact performed work for which he was improperly
compensated and if he produces sufficient evidence to show the amount and extent of
that work as a matter of just and reasonable inference. The burden then shifts to the
employer to come forward with evidence of the precise amount of work performed or
with evidence to negative the reasonableness of the inference to be drawn from the
employee's evidence. If the employer fails to produce such evidence, the court may then
award damages to the employee, even though the result be only approximate.
Herman v. Palo Group Foster Home, Inc., 183 F.3d 468 (6th Cir. 1999) (citing Anderson v. Mt.
Clemens Pottery Co., 328 U.S. 680 (1946)) (other citations omitted).
Plaintiffs maintain:
First, Defendants failed to maintain time cards and other records for most or all
employees. Second, the fragmentary wage records that do exist show that for certain
employees Defendants did not create records of time worked, but simply noted when
non-exempt employees had worked a day or a shift. For these records, Defendants did not
make records complaint [sic] with the ... FLSA and OMFWSA record keeping
provisions, though they did maintain non-complaint [sic] records...
(Doc. 54 at 11-12) Relying on defendants’ answers to Requests for Admission and evidence
submitted, plaintiffs further assert:
There is no genuine dispute in this case regarding Defendants’ failure to maintain the
wage and hour records required by the FLSA and Ohio revised code. Defendants admit
that they have failed to maintain any time records for Plaintiffs Dave Kelly, Olivia
Augustine, Jordan Engler, Louis Elbert, Richard Hicks, Anthony Baum, Michael
Branham, and/or Charles Alexander. (See, Defendants’ Responses to Plaintiffs’ First Set
of Requests For Admissions, No. 87.) There is not a single wage record in Defendants’
records for these employees. Further, Defendants admit that they have provided
incomplete records for each of the other Plaintiffs. The regulations specifically require a
record of the “hours worked each day” by each employee. See e.g. O.R.C. § 4111.08.
12

Only a small portion of time cards exist for the named and opt-in plaintiffs which meet
these requirements. Further, some of Defendants’ wage records which might show the
daily or weekly hours worked tally only the number of days or shifts worked, not the
hours worked, including clock-in and clock-out times. The records for Christopher Scott
(Bates 68-72) and Abby Stake (Bates 58-59) are examples of time cards lacking this
basic information.
(Id. at 13-14)
In response, defendants rely on Waldow’s report which this Court may not consider as it
has been stricken. Even if the Court considered it, the report does not preclude summary
judgment on this issue. Waldow states that although plaintiffs assert that defendants admit that
they have produced no time cards for the plaintiffs named above, he “found payroll records
which show hours work [sic] and pay for both Anthony Baum and Charles Alexander.” Waldow
also states that he “strongly objects” to plaintiffs’ statement that the undisputed evidence shows
defendants’ failure to maintain records. Waldow states:
My audit of the firm’s records shows that the firm did keep and maintain records as
required by the FLSA. There is a record of starting and quitting time, a weekly total of
hours worked, and a record of payments made and how they were calculated. These
records are readily available for all in electronic format.
(Waldow report at 3, 4)
Plaintiffs point out, however, that defendants previously admitted that they only
maintained limited records for some of the plaintiffs and no records for the remaining plaintiffs.
(see Doc. 63 at 12 identifying the specific Requests for Admission). As previously stated,
Waldow’s report seeks to contradict the admissions that no other time records outside of the time
cards existed although defendants have not sought to withdraw or amend their responses to the
Requests for Admission. Moreover, the Court agrees with plaintiffs’ undisputed argument that
Waldow’s own report reveals that he does not have a sufficient basis for concluding
Defendants’ [sic] complied with the FLSA’s record keeping requirements. Waldow’s
13

report and the attached exhibits identify records for isolated pay periods for a few of the
Plaintiffs. For instance, in suggesting Defendants’ properly maintained records for
Anthony Baum and Charles Alexander, Waldow references exhibits documenting only 2
pay periods for each of them. Waldow’s 2010 “audit” report only references 7 of the
Plaintiffs and for only 1 pay period—August 13, 2010. His 2012 “audit” report only
references 2 of the Plaintiffs (Loney Ray Murphy and Gladys Brown) for a total of 2 pay
periods. Loney Murphy worked at Everdry from September, 2011 through February,
2012. (Depo. of Loney Ray Murphy at 7) Gladys Brown was employed by Everdry from
September 21, 2011 through February 21, 2012. (Depo. of Gladys Brown at 7)
Obviously, Defendants were obligated to maintain complete wage and hour records.
Waldow’s “audit” does not reveal any other records and does not reveal facts that would
support his conclusion that Defendants complied with the records keeping requirements
of the FLSA. Waldow’s audits further do not specifically identify any payroll records for
many of the remaining Plaintiffs.
(Doc. 63 at 14)
For these reasons, summary judgment is warranted on defendants’ failure to keep and
maintain wage records as required under the FLSA and OMFWSA.
(c) defendants have a practice or policy of failing to pay overtime at a rate of 1.5x
the regular rate as required under the FLSA and OMFWSA
Plaintiffs argued at length in their motion, supported by evidence and their expert report,
that defendants failed to pay overtime at a rate of 1.5x their regular rate of pay. Plaintiffs argued
the following. The FLSA requires that the employer pay minimum wage for all hours worked
and over premium pay at a rate of 1.5x the employee’s regular rate of pay for hours worked over
40 in a single workweek. Plaintiffs were paid three types of wage payments: day rate wages,
drive time premium pay, and bonus payments. From approximately 2011 through 2012,
defendants used an elaborate yet flawed formula to automatically calculate pay for production
department employees. Handwritten spreadsheets were produced from 2009 and 2010 showing

14

the same calculations. Plaintiffs’ expert report is presented to show, as to one employee7, how
defendants’ formula incorrectly calculated drive time pay and did not include overtime pay. As
a result, the employee’s day rate plus drive time premium pay comes to less than minimum
wage.
In response to the motion, defendants generally concede that they had a practice or policy
of failing to pay overtime at a rate of 1.5x the regular rate of pay by stating, “[I]t is agreed that
defendant Salvanalle had a computer template that was somewhat flawed which did result in
some violations of the FLSA and Minimum Wage Act...” (Doc. 62 at 10) Defendants argue that
while their system resulted in “some violations,” they actually overcompensated some
employees by paying them more than was actually required.
These assertions are based on the stricken testimony of Waldow. But aside from these
assertions, defendants do not dispute plaintiffs’ evidence regarding the failure to pay overtime at
a rate of 1.5x the regular rate.
Moreover, even if the Court considered Waldow’s testimony that some employees were
overpaid, this is not a defense to defendants’ underlying liability for the weeks they did not
comply with the act.8 Herman v. Fabri-Centers of America, Inc., 308 F.3d 580 (6th Cir. 2002)

7

Plaintiffs assert that at the damages stage, they will show, by ministerial
calculation, how the other plaintiffs were damaged by the practice.

8

Nor would Waldow’s testimony help defendants on the overtime issue where he
acknowledges, “I would characterize [unpaid overtime] as an administrative
programming error. The payment of the half-time by using the regular rate
principle is not easily comprehended. Due to this programming error the halftime was miscalculated. And some employees were underpaid their overtime
premium pay. Obviously there is a back wage liability.” (Waldow report at 4)
15

(The court held that the “employer could use its contract premiums to offset overtime owed to its
employees only within the same workweek as the missed overtime, not against total amount of
overtime owed.”) Therefore, the Court agrees with plaintiffs that a dispute over “surplus”
payments or “overcompensation” from other weeks is not a material fact to defeat summary
judgment.
Plaintiffs are entitled to summary judgment on this issue.
(d) failure to pay overtime is not reasonable or in good faith
Plaintiffs assert that defendants’ payment of “only straight time for all overtime hours
worked is the paradigmatic violation of the FLSA” and point out that the FLSA provides for
liquidated damages for such a violation.9 The violation was not reasonable given the evidence
showing that defendants failed to properly train Pesec on performing payroll duties.
One district court has explained the Sixth Circuit law regarding the employer’s heavy
burden of demonstrating good faith and reasonableness:
A district court, however, has the discretion not to award liquidated damages to a
prevailing plaintiff if ‘the employer shows to the satisfaction of the court that the act or
omission giving rise to such action was in good faith and that he had reasonable grounds
for believing that his act or omission was not a violation of the Fair Labor Standards Act
of 1938.’ “ Elwell v. Univ. Hosps. Home Care Servs., 276 F.3d 832, 840 (6th Cir.2002)
(quoting 29 U.S.C. § 260); see also Herman v. Palo Grp. Foster Home, 183 F.3d 468,
474 (6th Cir.1999). The burden on the employer is substantial and requires “proof that
[the employer's] failure to obey the statute was both in good faith and predicated upon
such reasonable grounds that it would be unfair to impose upon [it] more than a
compensatory verdict.” Elwell, 276 F.3d at 840 (quoting McClanahan, 440 F.2d at 322)
(internal quotations omitted). “In the absence of such proof [, however,] a district court

9

The act provides that an employer who violates the minimum wage or overtime
provisions “shall be liable to the employee or employees affected in the amount of
their unpaid minimum wages, or their unpaid overtime compensation, as the case
may be, and in an additional equal amount as liquidated damages.” 29 U.S.C. §
216(b).
16

has no power or discretion to reduce an employer's liability for the equivalent of double
unpaid wages.” Id.
Defendants do not address this issue or dispute the evidence regarding Pesec’s training.10
Moreover, even if the Court were to consider Waldow’s testimony, he concedes that Salvanalle
had a flawed computer template which resulted in some violations of the act. Nor would
Waldow’s testimony regarding his belief that the company was not trying to cheat employees out
of overtime be sufficient to meet the “heavy burden” on defendants of proving good faith and
reasonableness. Therefore, an award of liquidated damages equal to the amount of back wages is
appropriate.

10

Defendants submit Pesec’s affidavit with their brief, but it largely addresses the
execution of the stipulations. Pesec’s brief assertions regarding the merits of the
claim do not dispute plaintiffs’ assertion that defendant did not ensure that he was
trained as to FLSA compliance:
(27) The plaintiffs have mischaracterized my deposition testimony in their brief. I
was asked on page 8 of my deposition, what my understanding was regarding my
preparation of the payroll as to how compensation was to be determined. My
response was: "It was -- I was always told it was compensated according to FLSA
standards." This is what we did.
(28) Plaintiffs also claimed that I could not articulate the spread sheet
calculations which resulted from the computer program which I wrote. Not true. I
was handed a spread sheet as an exhibit during my deposition (page 83), and I
then answered the questions explaining what each column and variable meant.
This occurred on pages 83-90 of my deposition.
(29) All employees except for management/supervisors and the
commissioned salesmen were to maintain their own time cards from which their
pay would be based. I ensured that the employees were fully paid based upon the
hours set forth in their individual time cards. I know of no instance where an
employee was not paid according to his or her time card.
(Pesec aff.)
17

Summary judgment is appropriate on this issue.
(e) “drive time” pay
According to defendants’ documents, plaintiffs were eligible for “premium pay” or
“drive time” pay when they worked over 40 hours per week. Defendants’ personnel documents
expressly state, “Drive time is not over time!” Plaintiffs move for summary judgment on the
basis that defendants offer no evidence justifying the exclusion of drive time premium pay from
the regular rate. Again, defendants offer no argument or evidence in opposition and, therefore,
concede that drive time premium pay is not overtime pay. Therefore, it cannot be used to offset
overtime liability under the FLSA.
Summary judgment is warranted on this issue.
(f) non-exempt status of plaintiffs Gladys Brown and Rebecca Hodges
Plaintiffs move for summary judgment on the basis that representative plaintiffs Gladys
Brown and Rebecca Hodges were not paid on a salary or fee basis and so are not
administratively or managerially exempt employees within the meaning of either the federal or
state act. Defendants did not respond to this argument and the Court finds the motion to be
unopposed and summary judgment appropriate on this ground.
The FLSA requires overtime pay for each hour worked in excess of 40 hours per week
unless the plaintiff is an exempt employee defined under the act’s regulations. Plaintiffs
demonstrate, through evidence presented, that Brown and Hodges were not exempt employees
and were not compensated for all hours worked. The law and evidence is not disputed.11 In fact,

11

Again, if the Court were to consider Waldow’s report, he seems to be suggesting
that damages owed these plaintiffs for violations be reduced, but he does not
contest that a violation exists: Brown and Hodges “may be due back wages for
18

it is the employer’s burden to establish that a plaintiff is an exempt employee under the FLSA.
Orton v. Johnny’s Lunch Franchise, LLC, 668 F.3d 843 (6th Cir. 2012). As defendants present no
evidence establishing their burden, summary judgment is granted as to the non-exempt status of
Brown and Hodges for the reasons stated by plaintiffs.
Conclusion
For the foregoing reasons, plaintiffs’ Motion for Partial Summary Judgment is granted,
plaintiffs’ Motion to Strike the Testimony of Vern Waldow Including his Affidavit and all
Attachments thereto is granted, and plaintiffs’ Motion for Sanctions is denied.
IT IS SO ORDERED.

/s/ Patricia A. Gaughan
PATRICIA A. GAUGHAN
United States District Judge
Dated: 2/12/14

unpaid premium pay (½ the regular rate), but no additional straight time would be
due.” (Waldow report at 4)
19