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Acosta v. TBG Logistics LLC

United States District Court, D. Arizona

June 27, 2018

R. Alexander Acosta, [1] Plaintiff,
TBG Logistics LLC, et al., Defendants.


          Honorable Roslyn O. Silver Senior United States District Judge

         Defendant ESSG's payroll processing employee knew that, from August 2013 to July 2014, other ESSG employees were working more than 40 hours per week but not receiving overtime pay. The Secretary of Labor (“Plaintiff”) now moves for summary judgment, arguing ESSG engaged in repeated “willful violation[s]” of the Fair Labor Standards Act (“FLSA”). ESSG contends its undisputed violations of the FLSA cannot qualify as “willful” because it is a very large company that cannot be expected to always comply with the FLSA. Moreover, the relevant violations allegedly were the result of negligence by an “entry level employee.” Neither ESSG's size nor the position of the payroll employee preclude a finding of willfulness. And given that there are no disputed facts regarding what happened, Plaintiff's motion will be granted.


         The relevant facts are undisputed. Defendant ESSG[2] is a “staffing company” that “recruit[s], place[s], and assign[s]” people to work at various jobsites. ESSG often enters into contracts with other companies requiring those other companies “do the recruiting, placing, and assigning” of employees while ESSG will handle administrative matters, such as payroll processing. As relevant here, ESSG entered into a contract with an entity known as Sync Staffing whereby Sync Staffing located individuals to work at a jobsite run by yet another company named TBG Logistics. At that jobsite, employees worked under the direction of TBG Logistics in unloading tractor trailers delivering grocery store products. Despite not having direct contact with the employees performing the work, ESSG concedes it was an “employer” under the FLSA.

         TBG Logistics, Sync Staffing, and ESSG worked together to track the hours each employee worked and the amount of pay each employee would receive. TBG Logistics kept a spreadsheet showing the number of hours each employee worked and how those hours should be paid, i.e. at the regular rate or at the increased rate for overtime. Each pay period, TBG Logistics sent that spreadsheet to Sync Staffing. Sync Staffing then forwarded the spreadsheet to ESSG. Once ESSG received the spreadsheet, an ESSG employee named Michaela Haluptzok (“Haluptzok”) processed the payroll and issued the paychecks.

         In early November 2012, TBG Logistics sent the first payroll spreadsheet to Sync Staffing. That spreadsheet reflected many employees worked more than 40 hours in a week but it stated all the hours should be paid at the regular rate. Sync Staffing then sent the spreadsheet to Haluptzok. Once she received the information, Haluptzok prepared a preliminary draft indicating how each employee would be paid. Because many employees had worked more than 40 hours per week, the preliminary draft reflected those employees receiving 1.5 times their regular hourly wage for all hours worked in excess of 40. Haluptzok sent the draft to Sync Staffing but a Sync Staffing employee called and told Haluptzok to process the payroll exactly as specified by TBG Logistics. That is, all hours should be paid “as straight time regular hours, ” i.e. no overtime. (Doc. 103-2 at 3). Haluptzok “did not receive details” from Sync Staffing why processing the payroll in that manner would be appropriate. (Doc. 103-2 at 3). In fact, Haluptzok had no “understanding of what type of work ESSG employees were . . . performing at TBG Logistics” and she did not ask her superiors for guidance. (Doc. 103 at 13). Instead of questioning the legality of Sync Staffing's instructions, Haluptzok processed the payroll without paying any overtime.

         When processing the payroll as Sync Staffing instructed, Haluptzok had to dismiss error messages generated by ESSG's software program. Those error messages indicated the employees who worked more than 40 hours per week might not be receiving “compensat[ion] at the proper rate.” (Doc. 98 at 4). Having dismissed the error messages, the employees were paid without any overtime premium.

         Haluptzok processed the payroll for the employees in the same manner during the following months. Between August 30, 2013, and July 27, 2014, there were “1103 instances where employees were not paid overtime for hours over 40 in a week, an average of 22 violations per week.” (Doc. 98 at 5). In processing the payroll for those workweeks, Haluptzok had to repeatedly dismiss the error messages generated by the software indicating the pay might not be correct. The total amount of unpaid overtime during that period was $78, 518.28. (Doc. 98 at 5). ESSG's relationship with Sync Staffing and TBG Logistics ended on July 27, 2014.

         Plaintiff filed the present suit on August 30, 2016. The suit originally named as defendants ESSG, TBG Logistics, Sync Staffing, and a few individuals. The complaint alleged all the defendants had violated the FLSA by failing to pay overtime. The only defendant still contesting liability is ESSG. Plaintiff now seeks summary judgment on its claim that ESSG's behavior constituted “willful” violations of the FLSA. ESSG opposes that motion, claiming it is a large company that usually complies with the FLSA. ESSG's size, together with the fact that Haluptzok was a low-level employee, allegedly means there is at least a dispute of fact whether its behavior was “willful.”


         The FLSA provides for a two-year statute of limitations “except that 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). ESSG's relationship with TBG Logistics and Sync Staffing ended on July 27, 2014, and this suit was not filed until August 30, 2016. Thus, ESSG's liability turns entirely on whether its violations of the FLSA were “willful” such that the three-year limitations period applies.

         In 1988, the Supreme Court held “willful” in the context of the FLSA refers “to conduct that is not merely negligent.” McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988). In the Supreme Court's view, an employer does not act “willfully” if it merely knew “the FLSA was in the picture.” Id. Rather, an employer acts “willfully” if it “knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute.” Id. After that decision, the Ninth Circuit has repeatedly addressed the type of behavior that can qualify as “willful.” Those decisions have adopted a relatively broad view of what will qualify as an employer engaging in “reckless disregard” of its obligations.

         As outlined by the Ninth Circuit, “willful” behavior does not require “an employer . . . knowingly have violated the FLSA.” Alvarez v. IBP, Inc., 339 F.3d 894, 908 (9th Cir. 2003). Instead, an employer acts willfully when it “disregard[s] the very possibility that it [is] violating the statute.” Id. at 908-09. Thus, an employer may act with reckless disregard if the employer was “on notice of its FLSA requirements, yet [took] no affirmative action to assure compliance with them.” Flores v. City of San Gabriel, 824 F.3d 890, 906 (9th Cir. 2016). The underlying facts in Flores are herlpful for determining whether ESSG's behavior should be deemed willful.

         In Flores, the employer “was aware of its obligations under the FLSA” but the record contained “no evidence of affirmative action taken by the [employer] to ensure that its [compensation practices] complied with the FLSA.” Id. It was “undisputed” the employer had “failed to investigate whether its [compensation scheme] complied with the FLSA at any time following” the initial adoption of that scheme. Id. In fact, the employer “put forth no evidence of any actions it took to determine whether its [compensation scheme] complied with the FLSA, ...

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