The Law Offices of Kevin J. Dolley, LLC is a nationwide FLSA wage and hour law firm. Below is an analysis of a recent FLSA case from the Western District of Tennessee, Memphis Tennessee involving claims made by private security guards. Mr. Dolley can be reached directly at (314)645-4100.
INTRODUCTION
In Williams v. Hooah Sec. Services LLC, 09-02376-STA-TMP, 2011 WL 5827250 (W.D. Tenn. Nov. 18, 2011), the United States District Court for the Western District of Tennessee, located in Memphis, Tennessee, examined a case involving private security guards who were not properly paid overtime compensation for hours worked in excess of 40 hours per week.
The Defendant, Hooah Security Services, provided private security services throughout the local area of Memphis, Tennessee. Defendant provided security services for local businesses, including apartment complexes and restaurants. Some of the security services were provided by armed guards, but not in all circumstances.
Four of the Plaintiffs were paid hourly wages; four of the Plaintiffs were paid weekly salaries for at least part of the time period covered by the complaint. It was undisputed that Defendants did not pay the class of security guards for time worked in excess of 40 hours per workweek. Defendants stated to the court that they were financially unable to pay overtime compensation.
LEGAL ARGUMENTS OF THE PARTIES
Both Plaintiffs and Defendants filed competing Motions for Summary Judgment. Plaintiffs do not contend that they were individually covered under the FLSA. Instead, they claim that they should have been paid overtime wages by Defendants because Defendants were covered by the FLSA on the basis of enterprise coverage. Plaintiffs assert that because Defendants were covered by the FLSA, Defendants violated its provisions by failing to pay Plaintiffs time-and-a-half for the hours worked in addition to forty per week.
Defendants argued that they are not covered by the FLSA because they are not engaged in interstate commerce, or do not "handle, sell, or otherwise work on goods or materials that have been moved in or produced for commerce by any person." Defendants state that even if the court concludes that Plaintiffs handled items that have been moved in interstate commerce, such handling is de minimus and will not require compensation. Defendants also argue that even if they are covered by the FLSA, their four salaried Plaintiffs were not entitled to overtime once they became salaried employees.
In reply, Plaintiffs claimed that Defendants are subject to FLSA coverage because they employed two or more people who handled materials that had been moved in commerce or produced for commerce. Plaintiffs also asserted that enterprise coverage is met under the FLSA's "handling" clause "if employees merely handle tools, supplies, or equipment that originated out of state." Williams v. Hooah Sec. Services LLC, 09-02376-STA-TMP, 2011 WL 5827250 (W.D. Tenn. Nov. 18, 2011 (quoting Pls.' Resp. to Defs.' Mot. For Summ. J., D.E. #56, at 1-2)).
THE COURT'S ANALYSIS
1. Defendants were Covered Under the FLSA Because Plaintiffs Handled Materials Which Traveled Through Interstate Commerce for the Commercial Purposes of Defendant
The court analyzed "enterprise coverage" of employers under the FLSA, noting that Congress enacted the [FLSA] to compensate those who labored in excess of the statutory maximum number of hours for the wear and tear of extra work. Section 207 of the FLSA provides that:
Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.
The court further noted that enterprise coverage under the FLSA attaches to an enterprise that: 1) "has employees engaged in commerce . . . or that has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person" and 2) has annual gross sales of not less than $500,000. It was undisputed that Defendants had gross revenue in excess of $500,000 per year.
The parties contested whether or not Plaintiffs "handled, sold, or otherwise worked on goods or materials that have been moved in or produced for commerce by any person" (the so-called "handling clause" of the FLSA). Importantly, the court noted that at least two of the security guards carried handguns, and that these handguns were objects which traveled in interstate commerce. For instance, Plaintiffs presented undisputed facts that the gun used by one of the Plaintiffs was manufactured in Miami, Florida. Because these guns were "materials" and "handled" for Defendants' commercial purposes (i.e. providing security services), the court reasoned that Defendants were subject to coverage under the FLSA.
2. Plaintiffs' Handling of Handguns was not de minimus
Defendant presented the alternative argument that even if the court were to find that Plaintiffs handled materials which traveled through interstate commerce, the FLSA should not apply to Defendants because the Plaintiffs' handling of these interstate materials was de minimus and inconsequential to the operation of a fundamentally intrastate business. The court argued that in this case the handling of the materials produced in interstate commerce is not de minimus since Plaintiffs are security guards and at least two of them are required to carry weapons while they perform their essential job duties (i.e. providing armed security).
3. Salaried Plaintiffs Neither Consented to Salaried Status Nor Fell Under the Administrative or Executive Exemptions
Defendants argued that salaried Plaintiffs should be denied recovery for overtime since they consented to their salaried status regardless of the number of hours worked per week. The court held that Plaintiffs did not did not waive their rights to overtime compensation under the FLSA, citing the U.S. Supreme Court's precedent in Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 740 (1981) ("FLSA rights cannot be abdridged by contract or otherwise waived because this would 'nullify the purposes' of the statute and thwart the legislative policies it was designed to effectuate.").
The court also concluded that the salaried Plaintiffs did not meet the executive employee exemptions to overtime under 29 U.S.C. § 213(a)(1). The court reasoned that because Plaintiff Williams spent only 20% of his time performing managerial responsibilities, this was not enough to encompass a "primary duty" as required to qualify for the executive exemption under 29 C.F.R. § 541.100(a)(2).
Lastly, the court asserted that the salaried Plaintiffs did not fall under the administrative employee exemption to overtime under 29 U.S.C. § 213(a)(1). The court again reasoned that Defendants did not carry their burden of demonstrating by a preponderance of the evidence that the salaried Plaintiffs spent more than 20% of their time performing managerial functions. Since their "primary duty" was thus not related to management policies, Plaintiffs on salary could not be considered covered by the administrative exemption to overtime.
4. Damages
The court held that Plaintiffs are entitled to both their individual, undisputed unpaid overtime compensation amount and an additional equal amount as liquidated damages. The FLSA grants district courts discretion not to award liquidated damages if the employer "shows that the 'act or omission giving rise to [its violation] was in good faith and that he had reasonable grounds for believing that [its] act or omission was not a violation of the [FLSA]." Solis v. Min Fang Yang, 345 F.App'x. 35, 38-39 (6th Cir. 29 U.S.C. § 260). However, because Defendants did nothing to determine whether they were required to pay their guards time and a half for overtime hours worked, the court determined that Defendants provided no evidence that they can avoid an award of liquidated damages.
CONCLUSION
In sum, the court granted Plaintiffs' Motion for Summary Judgment and awarded Plaintiffs overtime pay on the basis that Defendants fell under the handling clause of the FLSA because Plaintiffs handled materials (handguns) which were not only central to their duties for Defendants, but also traveled through interstate commerce for the commercial purposes of Defendant. Because the court held that Defendants were subject to the FLSA requirements and the salaried Plaintiffs were neither exempt from the FLSA nor consented to their salaried status, Plaintiffs were awarded their individual, undisputed overtime pay and liquidated damages in an additional, equal amount.