Hugler v. Evolution Quality Guard Inc. et al
Filing
74
OPINION AND ORDER granting 70 Motion for Default Judgment. The Court awards the U.S. Secretary of Labor damages against Evolution Quality Guard, Inc.; E.Q.G. Protection Agency & Order Corp., Excellent Quality Guard Corp.; Excellent Quality Guard Services, Inc.; Orlando Merced-Morales, and Joel Velazquez-Cruz. Judgment shall be entered accordingly. Signed by Judge Raul M. Arias-Marxuach on 3/27/2020. (mrr)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
EUGENE SCALIA, Secretary of Labor,
United States Department of Labor
Plaintiff
CIVIL NO. 17-1210 (RAM)
v.
EVOLUTION
QUALITY
GUARD,
INC.,
E.Q.G. PROTECTION AGENCY & ORDER
CORP.;
EXCELLENT
QUALITY
GUARD
CORP.;
EXCELLENT
QUALITY
GUARD
SERVICES,
INC.;
ORLANDO
MERCED
MORALES, Individually; and JOEL
VELAZQUEZ CRUZ, Individually,
Defendants
OPINION AND ORDER
RAÚL M. ARIAS-MARXUACH, United States District Judge.
This matter comes before the Court on the Secretary of Labor’s
unopposed Motion for Default Judgment (Docket No. 70).
Based on
the following findings of fact and conclusions of law, the Court
GRANTS the Secretary of Labor’s Motion.
I. BACKGROUND
On February 10, 2017, the
U.S.
Secretary of Labor
(the
“Secretary”) brought the present action against Evolution Quality
Guard, Inc.; E.Q.G. Protection Agency & Order. Corp., Excellent
Quality Guard Corp.; Excellent Quality Guard Services, Inc.; (the
“Corporate
Defendants”);
Orlando
Merced-Morales,
and
Joel
Velazquez-Cruz (collectively, the “Defendants”). (Docket No. 1).
Civil No. 17-1210 (RAM)
2
The Secretary amended his Complaint on April 25, 2017. (Docket No.
13). Defendants were engaged in the business of employing and
providing private security guards to commercial and residential
clients in the Commonwealth of Puerto Rico. Id. ¶¶ 4-14. On behalf
of Defendants’ employees, the Secretary seeks to recover unpaid
back wages, liquidated damages, civil money penalties, and to
enjoin acts and practices that violate the provisions of the Fair
Labor Standards Act, 29 U.S.C. §§ 201 et seq., (“FLSA”), and to
obtain other appropriate relief. Id. at 11-12.
The case was transferred to the undersigned on June 13, 2019.
(Docket No. 55). The proceedings were stayed as to co-defendant
Evolution Quality Guard Services, Inc. from October 3, 2018 through
July 30, 2019. (Docket Nos. 49 and 56). Upon the Secretary’s
motion, default was entered upon Evolution Quality Guard, Inc.,
E.Q.G. Protection Agency & Order. Corp., Excellent Quality Guard
Corp., Excellent Quality Guard Services, Inc. for failing to inform
the Court of their legal representation and defend their action on
July 31, 2019 and as amended on September 19, 2019. (Docket Nos.
47, 56, 58 & 63). Default was also subsequently entered as a
discovery sanction against Messrs. Merced-Morales and VelazquezCruz on November 6, 2019 (Docket Nos. 64, 68-69).
The Secretary moved for entry of default judgment on December
20, 2019. (Docket No. 70). Defendants did not oppose despite being
served with the Secretary’s Motion. (Docket Nos. 72-73).
Civil No. 17-1210 (RAM)
3
II. FINDINGS OF FACT
To make findings of fact, the Court has taken as true the
well-plead
allegations
of
the
First
Amended
Complaint
and
considered the declaration under penalty of perjury of Ms. Ivonne
Reyes and the documents attached to both the Complaint and Ms.
Reyes’ declaration. (Dockets Nos. 1, 13 and 70-1 to 70-17). Having
reviewed said allegations and documents, the Court enters the
following findings of fact:1
1. The
Secretary
violations
of
of
Labor
the
FLSA
brought
and
this
recover
suit
back
to
restrain
wages
and
liquidated damages. (Docket No. 13 ¶ 3).
2. Defendant Evolution Quality Guard Inc. (“Evolution Quality
Guard”) is a corporation organized under the laws of the
Commonwealth
of
Puerto
Rico,
having
its
last
known
principal office and place of business at Calle Verona
#1162, Urb. Villa Capri, San Juan, P.R. 00924, where it
engaged in the business of providing security services.
Id. ¶ 4.
3. Defendant E.Q.G. Protection Agency & Order Corp. (“E.Q.G.
Protection Agency”) is a corporation organized under the
laws of the Commonwealth of Puerto Rico, having its last
known principal office and place of business at Carr. 860,
References to a specific finding of fact shall be cited in the following
manner: (Fact ¶ _).
1
Civil No. 17-1210 (RAM)
Km
0.6
4
Metropolis,
jurisdiction
of
Carolina
this
Court,
P.R.
where
00983,
it
within
engaged
in
the
the
business of providing security services. Id. ¶ 5.
4. Defendant
Excellent
Quality
Guard
Corp.
(“Excellent
Quality Guard Corp.”) is a corporation duly organized under
the laws of the Commonwealth of Puerto Rico, having its
principal office and place of business at Carr 848 Km 1.4
Bo
Saint
Just,
Trujillo
Alto,
P.R.
00976,
within
the
jurisdiction of this Court, where it is engaged in the
business of providing security services. Id. ¶ 6.
5. Defendant
Excellent
Quality
Guard
Services,
Inc.
(“Excellent Quality Guard Services”) is a corporation duly
organized under the laws of the Commonwealth of Puerto
Rico, having its principal office and place of business at
Plaza Iturregui, 1135 Ave 65 Infanteria, San Juan, P.R.
00924, where it is engaged in the business of providing
security services. Id. ¶ 7.
6. Evolution
Quality
Guard,
E.Q.G.
Protection
Agency,
Excellent Quality Guard Corp., and Excellent Quality Guard
Services (the “corporate defendants”) have regulated the
employment of all persons employed by them, acted directly
and indirectly in the entities’ interest in relation to
the employees. Id. ¶ 8.
Civil No. 17-1210 (RAM)
5
7. Defendant Orlando Merced-Morales (“Merced-Morales”) was in
active
control
defendants.
and
management
Defendant
of
all
Merced-Morales
the
corporate
regulated
the
employment of all persons employed by him. He had the
authority to hire, fire, and supervise employees, control
their hours worked, determine employee compensation, and
otherwise act directly and indirectly in the interest of
all the corporate defendants in relation to the employees
during the relevant time. Id. ¶ 9.
8. Defendant Joel Velazquez-Cruz (“Velazquez-Cruz”) is the
president of E.Q.G. Protection Agency. Id. ¶ 12.
9. Defendant
management
Velazquez-Cruz
of
E.Q.G.
was
in
Protection
active
Agency
control
and
and
Excellent
Quality Guard Corp. Defendant Velazquez-Cruz regulated the
employment of all persons employed by him. He had the
authority to hire, fire, and supervise employees, control
their hours worked, determine employee compensation, and
otherwise act directly and indirectly in the interest of
E.Q.G. Protection and Excellent Quality Guard Corp. in
relation to the employees during the relevant time.
10. Co-defendants
Merced-Morales
and
Velazquez-Cruz
were
residents of the Commonwealth of Puerto Rico at the time
of the Complaint. Id. ¶¶ 10 and 14.
Civil No. 17-1210 (RAM)
6
11. Defendants’ employees are identified in Exhibit A to the
Complaint. Id. at 14-23.
12. The corporate defendants were engaged in the business of
providing security services doing business with the same
initials “E.Q.G.” and interchangeably as Evolution Quality
Guard, E.Q.G. Protection Agency, Excellent Quality Guard
Corp., and Excellent Quality Guard Services, Inc. For
example, E.Q.G. Protection Agency has deposited checks made
payable to Evolution Quality Guard in E.Q.G. Protection
Agency’s bank account, and vice versa. Id. ¶ 16.
13. The corporate defendants also shared or had overlapping
clientele
and
employees.
Evolution
Quality
Guard,
Whether
E.Q.G.
doing
business
Protection
as
Agency,
Excellent Quality Guard Corp., or Excellent Quality Guard
Services, defendants assigned their employees to provide
security
at
Cupey
Professional
Mall,
Urbanización
Los
Arboles, and 650 Plaza, among other locations. Id. ¶ 17.
14. The
corporate
individuals,
defendants
including
were
managed
defendants
by
the
same
Merced-Morales
and
Velazquez-Cruz and a manager of human resources, Michelle
Velez.
Milikza
defendant
Santiago-Huertas,
Excellent
Quality
who
Guard
is
identified
Services,
as
Inc.’s
president on its corporate documents, was also involved in
Civil No. 17-1210 (RAM)
the
operations
7
of
Evolution
Quality
Guard,
including
developing and managing client relationships. Id. ¶ 18.
15. The enterprise (and each corporate defendant) had an annual
gross volume of sales made or business done in an amount
not less than $500,000.00 for the period covered by the
First Amended Complaint. Id. ¶ 19.
16. The enterprise had employees handling and using goods or
materials that have been moved in or produced for commerce,
such as radios, weapons, uniforms, or vehicles. Id. ¶ 20.
17. From November of 2013 through the filing of the Complaint,
Defendants employed armed and unarmed security guards to
provide security to commercial and residential entities in
the Commonwealth of Puerto Rico. Id. ¶ 22.
18. At all relevant times, Defendants required their employees
employed as security guards to wear uniforms. Id. ¶ 23.
19. At
all
relevant
times,
Defendants
prohibited
their
employees from working for other security guard companies
or similar competitor entities. Id. ¶ 24.
20. At all relevant times, Defendants entered into contracts
with their clients to provide guard services and to supply
the necessary security guards at specific client locations.
Id. ¶ 25.
Civil No. 17-1210 (RAM)
8
21. At all relevant times, defendants assigned their employees
to provide these services at specific client locations.
Id. ¶ 26.
22. Defendants set their employees’ work schedules and required
them to sign-in and sign-out on daily attendance records.
Id. ¶ 27.
23. Defendants set their employees’ rate of pay. Id. at 28.
24. Defendants typically paid their employees a regular rate
of pay of $7.25 per hour. Id. ¶ 29.
25. Defendants’ employees employed as security guards have no
opportunity for profit or loss. Id. ¶ 30.
26. Despite
the
U.S.
Department
of
Labor’s
Wage
and
Hour
Division (“Wage and Hour Division”) having previously found
that Evolution Quality Guard violated the FLSA from April
2012 to April 2013, Defendants continued to misclassify
their security guard employees as “professional services,”
or independent contractors, and not as employees. Id. ¶
31.
27. Defendants’ employees employed as security guards were an
integral
part
of
their
business
and
without
them,
Defendants would not be able to provide security guard
services. Id. ¶ 32.
28. Between
November
2013
and
the
present,
Defendants’
employees typically worked in excess of 40 hours, ranging
Civil No. 17-1210 (RAM)
9
from approximately 42 to 84 hours in a workweek. They
typically worked 8-hour or 12-hour shifts, four to seven
days per week. Id. ¶ 33.
29. For the workweeks that exceeded 40 hours, defendants failed
to pay their employees time and one half of their regular
rate of pay for the hours that exceeded 40. Instead,
defendants paid their employees at their regular rates of
pay (“straight time”). Id. ¶ 34.
30. For the workweeks ending August 16, 2015 and August 30,
2015, employees who worked a total of 56 hours at their
assigned security posts were only paid at their regular
rate despite working 16 overtime hours in that week. Id. ¶
35.
31. For the workweek ending November 15, 2015, employees who
worked a total of 44 hours at their assigned security posts
were only paid at their regular rate despite working 4
overtime hours in that week. Id. ¶ 36.
32. In 2017, employees who worked a total of at least 42 hours
in a workweek at their assigned security posts were only
paid at their regular rate despite working at least 2
overtime hours in that week. Id. ¶ 37.
33. Defendants’ practice of paying straight time for hours in
excess of 40 hours continued even after they were advised
by the Wage and Hour Division that they were required to
Civil No. 17-1210 (RAM)
10
pay their employees overtime. These violations were ongoing
at the time of the filing of the Complaint. Id. ¶ 38.
34. From
November
2015
through
at
least
October
2016,
Defendants failed to pay any wages to approximately 52
employees for at least one and as many as 12 workweeks.
For example, for the workweeks ending April 17, 2016 and
April 24, 2016, defendants failed to pay at least 21
employees any wages, despite working between 32 to 70 hours
in a workweek. Id. ¶ 39.
35. At all relevant times beginning on or before November 2013,
Defendants did not maintain accurate and complete records,
including
employee
addresses,
total
hours
worked
each
workweek, and total earnings. Id. ¶ 40.
36. Despite requiring their employees to sign-in and sign-out
on daily attendance sheets and in attendance notebooks,
defendants created false time records that inaccurately
listed the total weekly hours worked by employees. Id. ¶
41.
37. Defendants provided the falsified time records to the Wage
and Hour Division. Id. ¶ 42.
38. The
Wage
and
Hour
Division
previously
investigated
defendant Evolution Quality Guard from April 2012 to April
2013. In June 2013, codefendants Evolution Quality Guard
and Orlando Merced-Morales agreed to and did pay a total
Civil No. 17-1210 (RAM)
11
of $24,250.79 in back wages to 119 employees for their
failure
to
comply
with
the
minimum
wage
and
overtime
provisions of the FLSA. Id. ¶ 43.
39. Thus, Defendants knew of their obligations to pay their
employees in compliance with the FLSA and to keep accurate
records. Id. ¶ 44.
40. Accordingly, Defendants’ failure to pay minimum wage and
overtime and falsification of time records that has led to
the filing of this Complaint are willful and repeated. Id.
¶ 45.
41. On September 15, 2016, the Wage and Hour Division issued a
civil
money
penalty
assessment
to
defendants
E.Q.G.
Protection Agency, Joel Velazquez-Cruz, Orlando MercedMorales and non-defendant Michelle-Velez in the amount of
$226,442.00 pursuant to section 16(e)(2) of the Act, 29
U.S.C. § 216(e)(2). Id. ¶ 46.
42. Assistant District Director David G. Marin of the Wage and
Hour Division personally served defendant Velazquez-Cruz,
individually and as owner or officer of defendant E.Q.G.
Protection Agency, a notice of determination assessing the
$226,442.00 in civil money penalties for a total of 401
employees on September 15, 2016. Id. ¶ 47.
43. Defendants
Velazquez-Cruz
and
E.Q.G.
Protection
Agency
failed to file an exception within 15 days of the notice
Civil No. 17-1210 (RAM)
12
of determination of civil money penalties in accordance
with the requirements set forth in 29 U.S.C. § 216(e)(4)
and 29 C.F.R. § 580.6. Id. ¶ 48.
44. Pursuant to a “Statute of Limitations Tolling Agreement,”
any legal proceeding “brought by the Secretary or affected
employees following November 22, 2015 shall be deemed to
have been filed 727 days prior to the actual filing date.”
Id. ¶ 49.
45. The Complaint filed on February 10, 2017 is deemed to have
been filed 727 days prior to the actual filing date. Id. ¶
50.
46. The Wage and Hour Division calculated the back wages owed
because
of
Defendants’
minimum
wage
and
overtime
calculations the period from November 25, 2013 to August
14, 2016. (Docket No. 70-1 ¶ 14).
47. The
Wage
and
Defendants’
Hour
owe
Division’s
their
computations
employees
$74,872.57
show
in
that
unpaid
minimum wage compensation for the period between November
25, 2013 and August 14, 2016. (Docket Nos. 70-1 ¶¶ 14-20;
70-2 at 10).
48. The
Wage
and
Defendants’
owe
Hour
Division’s
their
employees
computations
$282,970.20
show
in
that
unpaid
overtime back wages for the period between November 25,
2013 and August 14, 2016. Id.
Civil No. 17-1210 (RAM)
49. The
Wage
13
and
Hour
Division
Computations
show
that
Defendants owe their employees $357,842.77 in liquidated
damages. (Docket Nos. 70-1 ¶ 20; 70-2 at 10).
50. On September 15, 2016, the Wage and Hour Division issued a
civil
penalty
assessment
of
$226,442.00
to
Defendants
E.Q.G. Protection Agency & Order Corp., Joel VelazquezCruz and Orlando Merced-Morales. (Docket No. 70-1 ¶ 21).
51. On
that
same
date,
the
notice
of
the
civil
penalty
determination was personally served upon Defendant Joel
Velazquez-Cruz individually as an owner or officer of
E.Q.G. Protection Agency & Order Corp.
Defendants did not
respond to the notice of determination. (Docket Nos. 70-1
¶ 21; 70-17).
III. LEGAL STANDARD
A. Default Judgment under Fed. R. Civ. P. 55.
“After an entry of default, a court may examine a plaintiff’s
complaint to determine whether it alleges a cause of action. In
making that determination it must assume that all well pleaded
factual
allegations
are
true.”
Quirindongo
Pacheco
v.
Rolon
Morales, 953 F.2d 15, 16 (1st Cir. 1992) (citations omitted). See
also Franco v. Selective Ins. Co., 184 F.3d 4, 9 n. 3 (1st Cir.
1999) (“A party who defaults is taken to have conceded the truth
of the factual allegations in the complaint as establishing the
grounds for liability[.]”). However, entry of default does not
Civil No. 17-1210 (RAM)
14
mean that a plaintiff is automatically entitled to damages. See
Boland v. Elite Terrazo Flooring, Inc., 763 F. Supp. 2d 64, 67
(D.D.C. 2011) (“Default does not, however, establish liability for
the amount of damage that the plaintiff claims.”)
Fed. R. Civ. P. 55(b) provides that when entering a default
judgment,
The court may conduct hearings or make
referrals
—preserving
any
federal
statutory right to a jury trial— when, to
enter or effectuate judgment, it needs
to:
(A) conduct an accounting;
(B) determine the amount of damages;
(C) establish the truth of any allegation
by evidence; or
(D) investigate any other matter.
As evinced by the text of the rule, while the Court can hold
a hearing, it is not obligated to do so if there is basis for the
damages awarded in the default judgment. See In re The Home
Restaurants, Inc., 285 F. 3d 111, 114 (1st Cir. 2002) (holding
that a court with jurisdiction has discretion to order a default
judgment without a hearing of any kind if “the allegations in the
complaint state a specific, cognizable claim for relief, and the
defaulted party had fair notice of its opportunity to object”);
Fustok v. ContiCommodity Services, Inc., 873 F.2d 38, 40 (2d Cir.
1989) (“[I]t was not necessary for the District Court to hold a
hearing, as long as it ensured that there was a basis for the
damages specified in a default judgment.”)
Civil No. 17-1210 (RAM)
15
Therefore, no hearing is necessary when “arriving at the
judgment amount involves nothing more than arithmetic — the making
of computations which may be figured from the record.” See HMG
Property Investors, Inc. v. Parque Indus. Rio Canas, Inc., 847
F.2d 908, 919 (1st Cir. 1988) (finding no abuse of discretion where
the amount of damages was calculated from mortgage and loan
agreements, certifications, and other documents). “[E]ven in the
face of apparently unliquidated claims,” a district court can
forego a Rule 55(b)(2) hearing. KPS & Assocs., Inc. v. Designs By
FMC, Inc., 318 F.3d 1, 21 (1st Cir. 2003). Instead of holding a
hearing, the court “may rely on detailed affidavits or documentary
evidence” to determine the amount of plaintiff’s damages. See
Boland v. Elite Terrazo Flooring, 763 F. Supp. 2d 64, 68 (D.D.C.
2011); see also Dundee Cement Company v. Howard Pipe & Concrete
Prods., Inc., 722 F.2d 1319, 1323 (7th Cir. 1983) (holding that
the district court did not abuse discretion by failing to hold
hearing when amount claimed was “capable of ascertainment from
definite figures contained in the documentary evidence or in
detailed affidavits”); Formatech, Inc., 2019 WL 7165930, at *8
(B.A.P. 1st Cir. 2019); Hasbro, Inc. v. Chang, 2006 WL 1549052, at
*3 (D.R.I. 2006).
B. Fair Labor Standards Act (FLSA).
The Fair Labor
Standards Act (“FLSA”
or “the Act”), 29
U.S.C.A. § 201 et seq., seeks to “protect all covered workers from
Civil No. 17-1210 (RAM)
16
substandard wages and oppressive working hours.” Encino Motorcars,
LLC v. Navarro, 136 S. Ct. 2117, 2121 (2016) (quoting Barrentine
v. Arkansas–Best Freight System, Inc., 450 U.S. 728, 739, (1981)).
To do so, the FLSA establishes “federal minimum-wage, maximumhour, and overtime guarantees.” Giguere v. Port Res. Inc., 927
F.3d 43, 45 (1st Cir. 2019).
With
regards
to
overtime
guarantees,
the
Act
requires
employers to pay overtime compensation to covered employees who
surpass a 40-hour work week, or the work week established by the
employer (in this case, 35 hours per week). See 29 U.S.C.A. § 207.
Furthermore, the “rate of overtime pay must be ‘not be less than
one and one-half times the regular rate’ of the employee’s pay.”
Encino Motorcars, LLC, 136 S. Ct. at 2121 (quoting 29 U.S.C. §
207(a)). However, for said requirements to apply, the employees
must be employed by “an enterprise engaged in commerce or in the
production of goods for commerce.” 29 U.S.C.A. § 207(a).
Thus, the most important elements of an FLSA claim are that:
“(1) plaintiffs must be employed by the defendants; (2) the work
involved interstate activity; and […] (3) plaintiffs ‘performed
work for which they were under-compensated.’” Santos Cordova v.
Municipality of San Juan, 2017 WL 6542255, at *9 (D.P.R. 2017)
(quoting Manning v. Boston Med. Ctr. Corp., 725 F.3d 34, 43 (1st
Cir.
2013)).
Under-compensated
employees
are
not
the
only
individuals with standing to bring such claims under the Act. “The
Civil No. 17-1210 (RAM)
17
FLSA authorizes the Secretary of Labor to recover on behalf of
employees’ unpaid wages and overtime compensation plus an equal
amount in liquidated damages.” Chao v. Hotel Oasis, Inc., 493 F.3d
26, 35 (1st Cir. 2007) (citing 29 U.S.C. § 216(b), (c)). Thus, to
prevail under the FLSA’s provisions, the plaintiff (i.e. the
employee or the Secretary of Labor) alleging unpaid overtime wages
must prove that the employee worked longer than their assigned
hours and that they were not compensated accordingly by their
employer.
Lastly, it is worth noting that Section 203(d) of the FLSA
defines an employer as “any person acting directly or indirectly
in the interest of an employee in relation to an employee.” 29
U.S.C.A. § 203(d). “Accordingly, there may be multiple ‘employers’
who are simultaneously liable for compliance with the FLSA.” Chao,
493 F.3d at 34 (citing Donovan v. Agnew, 712 F.2d 1509, 1510 (1st
Cir. 1983) and Baystate Alternative Staffing, Inc. v. Herman, 163
F.3d 668, 675 (1st Cir.1998)). See also Pena-Vega v. MVM, Inc.,
2008 WL 11357900, at *5 (D.P.R. 2008).
IV. CONCLUSIONS OF LAW
Based on the well-pled and uncontroverted allegations of the
First Amended Complaint and the above findings of fact, the Court
concludes that Evolution Quality Guard Inc., E.Q.G. Protection
Agency & Order Corp., Excellent Quality Guard Corp., Excellent
Quality Guard Services Inc., Mr. Orlando Merced-Morales and Mr.
Civil No. 17-1210 (RAM)
18
Joel Velazquez-Cruz have regulated the employment of all persons
employed by them, acting directly and indirectly in the entities’
interest in relation to the employees. (Facts ¶¶ 6, 7, 9, 18-19,
22,
23-25).
Thus,
the
aforementioned
Defendants
are
joint
employers of the employees listed in Exhibit A of the Complaint
within the meaning of section 203(d) of the FLSA. Id. The Court
also
concludes
that
Defendants
are
an
enterprise
engaged
in
commerce for purposes of the FLSA and their employees are covered
by the FLSA. (Facts ¶¶ 2-5, 12-13, 15-17, 20-21).
Pursuant to the FLSA, employers must pay each employee a
minimum hourly wage of $7.25 an hour for all hours worked in any
workweek. See 29 U.S.C.A. § 206 (a)(1)(C). The FLSA also requires
employers to pay each employee overtime at one and one-half times
their regular rate of pay for all hours worked over 40 in a
workweek. See 29 U.S.C.A. § 207(a). An employee’s “regular rate”
of pay, as used in the FLSA, cannot be lower than any applicable
state or local minimum hourly wage, and the term is construed to
mean the regular rate at which an employee is lawfully employed.
See 29 C.F.R. § 778.5. Based on the above findings of fact, the
Court finds that Defendants did not comply with the overtime
provisions of the FLSA. (Facts ¶¶ 28-34). See also Docket No. 701 ¶ 12.
Additionally, the FLSA mandates that employers make, keep,
and preserve records of the persons employed as well as their
Civil No. 17-1210 (RAM)
19
wages, hours, and other information relating to their employment.
See 29 U.S.C. § 211(c); 29 C.F.R. §§ 516.2, 516.5. Thus, an
employer
is
discourages
also
held
accurate
liable
if
“the
employer
reporting
in
practice.”
prevents
Garcia
v.
or
Draw
Enterprises III, LLC., 2018 WL 6045206, at *5 (N.D. Ill. Nov. 19,
2018) (quotation omitted). Consequently, knowledge of overtime
work can still be imputed to the employer when its “supervisors
encourage artificially low reporting or squelch truthful reports
of overtime worked.”
Holt v. Jefferson Cty. Comm. for Econ.
Opportunity, 2019 WL 1239855, at *13 (N.D. Ala. 2019 (citing Bailey
v. TitleMax of Georgia, Inc., 776 F.3d 797, 801 (11th Cir. 2015)).
Based on the above findings of fact, the Court concludes that
Defendants did not comply with the record keeping provisions of
the FLSA. (Facts ¶¶ 35-40).
A violation of the FLSA is considered willful if the “employer
either knew or showed reckless disregard for the matter of whether
its conduct was prohibited by the statute.” McLaughlin v. Richland
Shoe Co., 486 U.S. 128, 133 (1988). See also Herman v. Hector I.
Nieves Transport, Inc., 91 F. Supp. 2d 435, 445 (D.P.R. 2000),
aff’d, 244 F. 3d 32 (1st Cir. 2001). The Secretary’s First Amended
Complaint alleges that Defendants created false time records—and
then provided them to the Department of Labor—in an effort to mimic
compliance with the FLSA. (Facts ¶¶ 35-37); See also Hotel Oasis,
493 F. 3d at 35 (affirming willfulness finding where employers
Civil No. 17-1210 (RAM)
20
intentionally manipulated records). Based on the above findings of
fact, the Court concludes that Defendants willfully violated the
FLSA. (Facts ¶¶ 36-40).
Turning to the issue of damages, the Secretary produced the
Declaration under Penalty of Perjury of Ivonne Rivera, a Wage Hour
Investigator for the Caribbean District Office of the United States
Department of Labor. (Docket No. 70-1). Ms. Rivera was the Wage
and Hour Division’s lead investigator assigned to investigate
Defendants’ compliance with the FLSA and perform the calculations
sustaining the Secretary’s request for default judgment. Id. ¶¶ 1
and 3. Ms. Rivera’s Declaration Under Penalty of Perjury explains
the methodology underpinning her calculations in detail and is
accompanied by exhibits reflecting the results of the same for
each of Defendants’ employees during the relevant time-period and
other supporting documents. (Docket Nos. 70-1 ¶¶ 14-20; 70-2 – 7016). Considering this sworn statement and the detailed documentary
evidence accompanying it, the Court concludes that the Secretary
has adequately established the amount of damages sought for back
pay of minimum wages ($74,872.57) and back pay of overtime wages
($282,970.20). (Facts ¶¶ 47-48).
Given that Plaintiff proved that Defendants violated Section
207 of the FLSA, the Court must grant liquidated damages. See 29
U.S.C. § 216(b). Liquidated damages are mandatory unless the
Defendants establish both that: (1) the acts or omissions committed
Civil No. 17-1210 (RAM)
21
were in good faith; and (2) they had reasonable grounds for
believing that the acts or omissions were not in violation. See
Hector I. Nieves Transp., Inc., 91 F. Supp. 2d at. “Double damages
will be the norm, and single damages will be the exception.” Herman
v. Hogar Praderas de Amor, Inc., 130 F. Supp. 2d 257, 267 (D.P.R.
2001). Pursuant to the Act, these damages are “meant to compensate
employees for the losses that the employees have suffered by reason
of not receiving money due them at the time that it was due.”
Hector I. Nieves Transport, 91 F. Supp. 2d at 449. Based on the
above findings of fact, the Court concludes that the Secretary is
entitled to liquidated damages in the amount of $357,842.77, which
twice the amounts
owed by Defendants to their employees
for
overtime pay and minimum wage. (Facts ¶¶ 36-40 & 49).
Defendants Velazquez-Cruz and E.Q.G. Protection Agency were
personally served on September 15, 2016 with a notice of civil
money penalty assessment. (Fact ¶ 51). They failed to file an
exception within 15 days of receiving the notice or voluntarily
remit payment. Id. See also 29 U.S.C. § 216(e)(4). Accordingly,
pursuant
to
section
16(e)(4)
of
the
FLSA,
the
Secretary’s
determination of $226,442.00 in civil money penalties became final
and not subject to administrative or judicial review. See 29 U.S.C.
§ 216(e)(4), 29 C.F.R. § 580.5. The Court also concludes that the
Secretary has shown entitlement to the amount claimed in civil
penalties ($226,442.00). (Facts ¶ 50-51). See also Docket Nos. 70-
Civil No. 17-1210 (RAM)
1
¶
21;
70-17.
Protection
Agency
Thus,
are
22
Defendants
liable
for
Velazquez-Cruz
$226,442.00
in
and
E.Q.G.
civil
money
penalties. Id. See also 29 C.F.R. § 580.18(2).
Lastly, the Secretary’s First Amended Complaint and Motion
for Default Judgment included a petition for injunctive relief
against future violations by Defendants pursuant to Section 217 of
the FLSA. (Docket Nos. 13 at 11-12; 70 ¶ 30). The record shows
that the Corporate Defendants are no longer operating. (Docket No.
61). However, “[t]he fact that defendants are inoperative does not
ipso facto render this cause moot.” Wirtz v. Flame Coal Co., 321
F.2d 558, 561 (6th Cir. 1963). Future violations of the FLSA can
still occur because “there is nothing to prevent [D]efendants from
resuming their operations or beginning anew.” Chao v. BDK Indus.,
L.L.C., 296 B.R. 165, 169 (C.D. Ill. 2003) (citations omitted).
Furthermore, there is “no affirmative indication” on the record
that Defendants will refrain from operating once again. Id.
When determining whether a prospective injunction pursuant to
Section 217 of the FLSA is appropriate, courts must consider the
following factors:
(1) the employer's prior and present conduct;
(2) any pattern of repetitive violations; (3)
an employer's intent to violate the FLSA; (4)
the employer's good faith attempt to comply
with the FLSA; (5) whether the employer
complied
once
it
became
aware
of
the FLSA's requirements;
(6)
efforts
to
prevent
recurrence;
(7)
the
threat
of
Civil No. 17-1210 (RAM)
23
violations in the future; and (8) absence of
bad faith.
Acosta v. Special Police Force Corp., 295 F. Supp. 3d 47, 65
(D.P.R. 2018) (quoting Hogar Praderas de Amor, Inc., 130 F.Supp.2d
at 269). The Secretary has shown that Defendants have willfully
and repeatedly violated multiple provisions of the FLSA, even after
being investigated by the Wage and Hour Division and notified that
they were not in compliance with those provisions. (Facts ¶¶ 3640). Defendants’ continued violations, despite their knowledge of
the Act’s requirements, indicates both bad faith and that the
threat of future violations is high. Thus, should Defendants resume
operations, they are hereby enjoined from future FLSA violations.
V. ORDER
For the foregoing reasons, the Secretary’s Motion for Default
Judgment is GRANTED. The Court awards the Secretary damages against
Evolution Quality Guard, Inc.; E.Q.G. Protection Agency & Order
Corp., Excellent Quality Guard Corp.; Excellent Quality Guard
Services, Inc.; Orlando Merced-Morales, and Joel Velazquez-Cruz
as follows:
A. $74,872.57 in unpaid minimum wage compensation owed to
Defendants’ employees for the period between November 25,
2013 and August 14, 2016;
Civil No. 17-1210 (RAM)
B. $282,970.20
24
in
unpaid
overtime
back
wages
owed
to
Defendants’ employees for the period between November 25,
2013 and August 14, 2016;
C. $357,842.77
in
liquidated
damages
owed
to
Defendants’
employees.
The Court also awards to the Secretary against Defendants
E.Q.G. Protection Agency & Order Corp., Joel Velazquez-Cruz and
Orlando Merced-Morales the sum of $226,442.00 due to the unpaid
civil penalty assessment.
Lastly, and pursuant to Section 217 of the FLSA, the Court
issues a permanent injunction restraining Evolution Quality Guard,
Inc., E.Q.G. Protection Agency & Order Corp., Excellent Quality
Guard Corp., Excellent Quality Guard Services, Inc., Mr. Orlando
Merced-Morales, Mr. Joel Velazquez-Cruz, their officers, agents,
servants,
employees,
and
those
persons
in
active
concert
or
participation with defendants, from violating the provisions of
sections 206, 207, 211(c), 215(a)(2), and 215(a)(5) of the Fair
Labor Standards Act.
Judgment shall be entered accordingly.
IT IS SO ORDERED.
In San Juan, Puerto Rico this 27th day of March 2020.
S/ RAÚL M. ARIAS-MARXUACH
United States District Judge
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