United States District Court, D. Hawaii
SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, EDWARD HUGLER Plaintiff,
KAZU CONSTRUCTION, LLC, a corporation; and VERNON LOWRY, an individual, Defendants.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT
C. KAY SR. UNITED STATES DISTRICT JUDGE.
reasons set forth below, the Court GRANTS IN PART AND DENIES
IN PART Defendants' Motion for Partial Summary Judgment,
ECF No. 43.
Kazu Construction, LLC (“Kazu Construction”) is a
limited liability company whose sole member is Defendant
Vernon Lowry (“Mr. Lowry”). Defs. Concise
Statement of Facts, ECF No. 44, ¶ 1 (“Defs.
CSF”). From 2012-2014, Kazu Construction was the
contractor for the development of the Makaha Oceanview
Estates (“MOE Project”). Id.; ECF No. 78
at 10. At issue in this case are Defendants' employment
and recordkeeping practices under the Fair Labor Standards
Act, 29 U.S.C. §§ 206, 207, 215(a) (2) and 215(a)
(5) (“FLSA”). Compl. ¶ 1, ECF No. 1. The
Secretary of Labor (“Secretary”) alleges that
Defendants failed to pay certain employees minimum wage and
overtime compensation by engaging in a practice of banking
hours in excess of 40 hours a week. Id. ¶¶
10-11. In addition, Defendants failed to make, keep, and
preserve accurate records of the hours worked by employees.
Id. ¶ 12.
Department of Labor learned about this allegedly unlawful
scheme after a former Kazu Construction employee, Dennis
Tadio, filed a complaint with the state labor agency on July
7, 2014 seeking unpaid wages. Opp. at 12; Lee Decl., Ex. 1,
ECF No. 83 (Tadio complaint). The state agency specialist
then referred Mr. Tadio to the U.S. Department of Labor, Wage
and Hour Division to investigate a possible overtime
violation. Opp. at 13; Tadio Decl. ¶ 7, ECF No. 84; Lee
Decl. ¶ 3, ECF No. 83.
Secretary filed his complaint on February 22, 2016. ECF No.
1. Defendants filed the instant Motion for Partial Summary
Judgment on November 16, 2016. ECF No. 43
(“Motion” or “MSJ”). The Secretary
filed his Opposition and accompanying Concise Statement of
Disputed Facts on February 13, 2017. ECF Nos. 77-78 (ECF No.
78, “Opp.”; ECF No. 77, “Pls. CSF”).
Defendants filed their Reply on February 20, 2017. ECF No. 88
Court held a hearing on Defendants' Motion on April 10,
judgment is proper where there is no genuine issue of
material fact and the moving party is entitled to judgment as
a matter of law. Fed.R.Civ.P. 56(a). Federal Rule of Civil
Procedure (“Rule”) 56(a) mandates summary
judgment “against a party who fails to make a showing
sufficient to establish the existence of an element essential
to the party's case, and on which that party will bear
the burden of proof at trial.” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986); see also
Broussard v. Univ. of Cal., at Berkeley, 192 F.3d 1252,
1258 (9th Cir. 1999).
party seeking summary judgment bears the initial burden of
informing the court of the basis for its motion and of
identifying those portions of the pleadings and discovery
responses that demonstrate the absence of a genuine issue of
material fact.” Soremekun v. Thrifty Payless,
Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing
Celotex, 477 U.S. at 323); see also Jespersen v.
Harrah's Operating Co., 392 F.3d 1076, 1079 (9th
Cir. 2004). “When the moving party has carried its
burden under Rule 56[(a)] its opponent must do more than
simply show that there is some metaphysical doubt as to the
material facts [and] come forward with specific facts showing
that there is a genuine issue for trial.”
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio,
475 U.S. 574, 586-87 (1986) (citation and internal quotation
marks omitted); see also Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247-48 (1986) (stating that a party
cannot “rest upon the mere allegations or denials of
his pleading” in opposing summary judgment).
issue is ‘genuine' only if there is a sufficient
evidentiary basis on which a reasonable fact finder could
find for the nonmoving party, and a dispute is
‘material' only if it could affect the outcome of
the suit under the governing law.” In re
Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing
Anderson, 477 U.S. at 248). When considering the
evidence on a motion for summary judgment, the court must
draw all reasonable inferences on behalf of the nonmoving
party. Matsushita Elec. Indus. Co., 475 U.S. at 587;
see also Posey v. Lake Pend Oreille Sch. Dist. No.
84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating that
“the evidence of [the nonmovant] is to be believed, and
all justifiable inferences are to be drawn in his
Statute of Limitations
parties first dispute whether the applicable statute of
limitations is two or three years, and regardless, whether
the Secretary is entitled to equitable tolling. The ordinary
statute of limitations for an FLSA violation is two years;
however, “a cause of action arising out of a willful
violation may be commenced within three years after the cause
of action accrued.” 29 U.S.C. § 255(a).
violation of the FLSA is willful if the employer ‘knew
or showed reckless disregard for the matter of whether its
conduct was prohibited by the [FLSA].” Chao v.
A-One Med. Servs., Inc., 346 F.3d 908, 918 (9th Cir.
2003) (quoting McLaughlin v. Richland Shoe Co., 486
U.S. 128, 133 (1988)) (alteration in original); Flores v.
City of San Gabriel, 824 F.3d 890, 906 (9th Cir. 2016)
(“A violation is willful if the employer knew or showed
reckless disregard for the matter of whether its conduct was
prohibited by the [FLSA].”) (internal quotation and
citation omitted) (alteration in original).
Ninth Circuit has found willfulness where the employer was
“on notice of its FLSA requirements, yet took no
affirmative action to assure compliance with them.”
Alvarez v. IBP, Inc., 339 F.3d 894, 909 (9th Cir.
2003). “[T]he three-year term can apply where an
employer disregarded the very possibility that it was
violating the statute.” Id. at 908-09 (finding
willfulness where the employer “could easily have
inquired into the meaning of the relevant FLSA terms and the
type of steps necessary to comply therewith” but
instead “attempt[ed] to evade compliance, or to
minimize the actions necessary to achieve compliance
therewith.”) (internal citation and quotation omitted).
seem to imply that willfulness only arises “when an
employer knows that its current position had previously been
invalidated or questioned in a prior legal proceeding.”
MSJ at 10. However, while this is one way in which
willfulness may be shown, the Court agrees with the Secretary
that courts have found willfulness in variety of
circumstances. See Opp. at 14 & n.41. A district
court in Oregon found willfulness where experienced business
people required employees to split their time between two
companies in order to evade FLSA overtime requirements, of
which they were aware. Perez v. Oak Grove Cinemas,
Inc., 68 F.Supp.3d 1234, 1245 (D. Or. 2014). A district
court in Nevada also found willfulness where the defendant
allegedly paid workers on a per job basis, regardless of the
hours worked, and that workers were not paid for training
time, among other issues. Cholette v. Installpro,
Inc., No. 2:10-CV-02153-KJD, 2012 WL 2190844, at *2 (D.
Nev. June 13, 2012). Because the pay structure disregarded
the hours worked, the court found that the defendant was
reckless in risking a violation of FLSA minimum wage and
overtime requirements. Id.
addition, several courts have found willfulness where the
employers failed to make any real effort to keep records of
the employee's hours. See, e.g., Thornton v.
Crazy Horse, Inc., No. 3:06-CV-00251-TMB, 2012
WL 2175753, at *11 (D. Alaska June 14, 2012) (“Record
keeping was atrocious, management never seemed to make any
sincere effort to determine when dancers were coming and
going or working or not working.”); Xuan
v. Joo Yeon Corp., No. 1:12-CV-00032, 2015 WL
8483300, at *5 (D. N. Mar. I. Dec. 9, 2015) (despite
employer's belief he was following the law, his failure
to track employee's hours was willful because he
“proceed[ed] as if the risk did not exist at
Mr. Lowry has declared that he “stated in the presence
of employees that [he] did not want employees working
overtime” and that it “has never been [his]
understanding or intent that Kazu employees were working
overtime.” Lowry Decl. ¶ 7, ECF No. 44-5. However,
this is insufficient to merit summary judgment. In the first
place, as a matter of law the regulations dictate that:
[i]n all such cases it is the duty of the management to
exercise its control and see that the work is not performed
if it does not want it to be performed. It cannot sit back
and accept the benefits without compensating for them. The
mere promulgation of a rule against such work is not enough.
Management has the power to enforce the rule and must make
every effort to do so.
29 C.F.R. § 785.13. Thus, merely stating that Mr. Lowry
did not want or intend for employees to work overtime is
insufficient to relieve Defendants of their burden to pay any
overtime worked. If Defendants were or should have been aware
that overtime might be accruing, they needed to “make
every effort” to prevent it from being performed.
See Forrester v. Roth's I.G.A. Foodliner, Inc.,
646 F.2d 413, 414 (9th Cir. 1981) (“[A]n employer who
knows or should have known that an employee is or was working
overtime must comply with the provisions of § 207”
and may not “stand idly by...even if the employee does
not make a claim for the overtime compensation.”). And
while an employee's failure to notify the employer
regarding overtime worked or deliberately preventing the
employer from having such knowledge may impede an FLSA
overtime claim, there does not seem to be any evidence of
such issues here. See id. (“[W]here an
employer has no knowledge that an employee is engaging in
overtime work and that employee fails to notify the employer
or deliberately prevents the employer from acquiring
knowledge of the overtime work, the employer's failure to
pay for the overtime is not a violation of §
addition, the Secretary has submitted evidence creating a
genuine dispute of material fact regarding Defendants'
willfulness. There is evidence that Defendants were aware of
their obligation to document and pay overtime. See
Caparas Decl., Ex. B, ECF No. 80 (investigation statement by
Mr. Lowry that “[i]f an employee works overtime then
overtime is documented. Employees are then paid
overtime.”); Santos Decl., Ex. B, ECF No. 79-2 (Desiree
Lowry Dep., 99:3-15, 197:5-198:9) (describing
how new employees are told that they will be paid at
time-and-a-half for overtime, and that the FLSA requires
payment for hours worked on a weekly basis and does not allow
averaging of hours over greater periods of time). Defendants
also do not appear to dispute their awareness of FLSA
importantly, the Secretary has shown evidence sufficient for
a reasonable jury to find that Defendants knew or were
reckless with respect to their duties to track and pay
overtime to Kazu Construction's employees. The
declarations of several employees suggest that Mr. Lowry knew
that his employees were or likely would be working overtime
and advised them that overtime hours would be banked rather
than paid. See, e.g., Cummings Decl. ¶ 5, ECF
No. 85 (“Mr. Vernon Lowry told me that we would be
working 70 hours per week, we would get paid for 40 hours of
work and the extra hours we would bank.”); Napierala
Decl. ¶¶ 4, 5, 7, ECF No. 81 (Napierala reported to
Mr. Lowry how long everyone worked, which was typically
around 70 hours per week, and Mr. Lowry told them hours
worked in excess of 40 would be banked); Tadio Decl. ¶
3, ECF No. 84 (“[Mr. Lowry] told me that the extra
hours we worked were being ‘banked' for our later
use when needed, and that was the reason our paychecks did
not include compensation for them.”).
sole source for the time cards that Desiree Lowry created and
then submitted for payment was the work logs that Mr. Lowry
created. D. Lowry Dep. at 153:6-154:8 (in creating time
cards, “I relied on the work log [Mr. Lowry sent]... if
the work log is incorrect, then the time card would be
incorrect.”). Employees did not enter their own time or
keep time cards. Tadio Decl. ¶ 2, ECF No. 84 (“I
did not sign-in or enter hours into a timesheet”); K.
Hendricksen interview statement, Caparas Decl., Ex. F, ECF
No. 80 (Mr. Lowry tracked hours and Hendricksen never signed
a time sheet). Rather, Mr. Lowry was aware of and kept
records of the hours that his employees were working.
Napierala Decl. ¶ 5, ECF No. 81 (stating that he
reported to Mr. Lowry each day how long the employees worked,
and “Mr. Lowry kept the records of the hours that I
worked on his phone.”). The time cards eventually
submitted were inaccurate and included time for hours not
worked. D. Lowry Dep. at 173:1-4, 175:10-25 (admitting that
time cards for Napierala, Tadio, and Cummings show hours not
in fact worked; time cards were used to track hours charged
to different jobs). Finally, there is evidence that employees
worked more hours than were recorded on their pay stubs.
See Napierala Decl. ¶¶ 4-5, ECF No. 81
(Mr. Lowry recorded time worked, and paystubs only showed 40
hours per week despite typically working 10 hours per day and
around 70 hours per week); Tadio Decl. ¶¶ 3-5, ECF
No. 84 (similar); Cummings Decl. ¶¶ 3-6, ECF No. 85
viewed in the most favorable light, the Secretary's
evidence shows that, even though Defendants were aware of the
FLSA's overtime requirements, they paid employees
according to time records that were inaccurate and
undercounted the amount of hours their employees worked. The
Court finds that there is a genuine dispute of material fact
as to Defendants' willfulness and whether the ...