Case: 19-51119 Document: 00515738778 Page: 1 Date Filed: 02/09/2021
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
February 9, 2021
No. 19-51119 Lyle W. Cayce
Clerk
United States Department of Labor,
Plaintiff—Appellee,
versus
Five Star Automatic Fire Protection, L.L.C.,
Defendant—Appellant.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 3:16-CV-282
Before Dennis, Higginson, and Willett, Circuit Judges.
Don R. Willett, Circuit Judge:
Seventy-five years ago in Anderson v. Mt. Clemens Pottery Company, the
Supreme Court fashioned a burden-shifting framework for federal wage
claims where an employer fails to maintain proper records. 1 Under Mt. Clemens, if “the employer’s records are inaccurate or inadequate,” a plaintiff need
only show by “just and reasonable inference” that she was an employee,
1
328 U.S. 680, 687 (1946), superseded by statute on other grounds,
29 U.S.C. §
254(a)).
Case: 19-51119 Document: 00515738778 Page: 2 Date Filed: 02/09/2021
No. 19-51119
worked the hours, and wasn’t paid. 2 It’s a lenient standard rooted in the view
that an employer shouldn’t benefit from its failure to keep required payroll
records, thereby making the best evidence of damages unavailable. In this unpaid-overtime case, the district court applied Mt. Clemens because Five Star’s
bare-bones timesheets left numerous evidentiary gaps. The Department of
Labor filled those gaps with consistent testimony that Five Star urged employees not to record their pre- and post-shift work hours. DOL used this
testimony to estimate unpaid hours and calculate back wages. Five Star’s
only rebuttal evidence was a summary chart based on the company president’s memory. As this chart failed to negate any raised inferences of unpaid
work, we affirm the district court’s judgment.
I
Five Star Automatic Fire Protection, LLC is a fire-sprinkler
installation and service company based in El Paso. Luis Palacios and his wife,
Veronica, run the company as President and Vice President, respectively.
Five Star has five separate departments—this lawsuit implicates only the
construction department. During the relevant timeframe, Five Star had 53
construction employees. Construction employees typically work in two-man
crews with one foreman (sprinkler fitter) and one helper (laborer).
Most of the time, the crews work at client jobsites, not at Five Star’s
facility where pipe is cut and welded (the “shop”). But occasionally, the construction employees work in the shop or at Palacio’s personal ranch. Most of
the jobsites are close to Five Star’s shop, but others are up to an hour away.
Several jobsites are out of state and require crews to stay out of town during
the workweek.
2
Id.
2
Case: 19-51119 Document: 00515738778 Page: 3 Date Filed: 02/09/2021
No. 19-51119
During typical day shifts at jobsites, construction employees work
from 7 am to 3:30 pm. 3 The crews must first report to the shop and load the
materials needed for the workday. The crews then drive a company truck to
the jobsite. When the day’s work is completed, the crew drives back to the
shop to drop off the company vehicle. The foreman usually drives the truck
to and from the jobsite.
Five Star pays its construction employees by the hour. Employees
must record their own time, by handwriting on the company timesheets how
many hours they worked each day. Employees only include the total number
of hours worked at a jobsite, the shop, or the ranch. So when an employee has
worked at two or more locations in one day, he does not record his start and
stop time for each location nor does he indicate the order in which he worked
at those places.
In September 2015, DOL’s Wage-and-Hour Investigator Sandra Alba
initiated an inquiry into Five Star’s compensation practices. Alba
interviewed nine employees as well as Mr. and Mrs. Palacios. And she
analyzed all timesheets spanning the two-year investigative period, except for
two weeks for which time records were missing.
Alba presented her findings to Mr. and Mrs. Palacios. She told them
that construction employees were working, without compensation, before
and after their recorded shifts. Alba told Mr. and Mrs. Palacios that they
owed back wages for this uncompensated time. Mr. Palacios disagreed, stating that employees needed to record their hours, and if they were working
before and after the regular shift hours, they should have recorded that time.
He declined to pay the back wages or consider Alba’s calculations.
3
Some jobsites are only accessible at night, so construction employees also work
nightshifts.
3
Case: 19-51119 Document: 00515738778 Page: 4 Date Filed: 02/09/2021
No. 19-51119
DOL then filed a complaint against Five Star in federal court, alleging
overtime and recordkeeping violations of the FLSA and seeking back wages
and liquidated damages for the affected employees. The case was tried by
consent before a magistrate judge. 4 DOL called six former employees to testify.
The district court first made preliminary factual findings about Five
Star’s liability, without calculating damages. After recounting the evidence
presented at trial, the court found that Five Star failed to keep accurate
records of off-the-clock time for the investigative period. The court then
found that while the typical construction shift was 7 am to 3:30 pm, Five Star
required employees to arrive at the shop no later than 6:45 am and didn’t
compensate its employees for the 15-minute gap. The court further found
that, while the typical workday ended at 3:30 pm, that was the time
employees left the jobsite. And Five Star didn’t compensate employees for
the required travel time back to the shop. Finally, the court found that Five
Star had some face-of-the-record violations concerning errors on the payroll
records; the parties do not dispute this finding.
Following these preliminary conclusions on liability, the court granted
the parties’ request to submit additional briefing on damages. In its final order, the court adopted the preliminary findings concerning liability and proceeded to evaluate damages. The court agreed with DOL’s calculations and
held that Five Star was liable to 53 construction employees for $121,687.37 in
back wages, $121,687.37 in liquidated damages, and $2,604.35 for face-ofthe-record violations. Five Star appeals the court’s findings as to liability for
the 47 non-testifying employees and the back-wages calculation for all 53 employees.
4
See 28 U.S.C. § 636(c).
4
Case: 19-51119 Document: 00515738778 Page: 5 Date Filed: 02/09/2021
No. 19-51119
II
After a bench trial, we review findings of fact for clear error and legal
conclusions de novo. 5 The calculation of unpaid overtime is a mixed question
of law and fact—the number of overtime hours is a finding of fact, but the
methodology used to calculate back wages based on that number is a question
of law. 6 “When reviewing mixed questions of law and fact, this court reverses
only if the findings are based on a clearly erroneous view of the facts or a
misunderstanding of the law.” 7
III
Five Star argues that the district court erred in relying on the
testimony of six former employees to (1) find Five Star liable to 53 employees
and (2) calculate the damages resulting from that liability. The court
permitted this representative evidence under the Mt. Clemens burden-shifting framework.
In Mt. Clemens, the Supreme Court noted that, typically, a plaintiff
who brings an unpaid-wages claim under the FLSA “has the burden of
proving that he performed work for which he was not properly
compensated.” 8 But “where the employer’s records are inaccurate or
inadequate and the employee cannot offer convincing substitutes,” an
employee can attempt to fill the evidentiary gap. 9 “[A]n employee has carried
5
Ransom v. M. Patel Enters., Inc., 734 F.3d 377, 381 (5th Cir. 2013).
6
Id.
7
Id.
8
328 U.S. at 686–87. The FLSA states that an employer who violates the overtime
provisions is liable for the unpaid overtime and “an additional equal amount as liquidated
damages.” 29 U.S.C. § 216(b).
9
Mt. Clemens, 328 U.S. at 687.
5
Case: 19-51119 Document: 00515738778 Page: 6 Date Filed: 02/09/2021
No. 19-51119
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.” 10
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.” 11 When an action involves a
group of employees, a “representative sample,” if reliable, can shift the
burden to the employer. 12 The representative proof is reliable “if the sample
could have sustained a reasonable jury finding . . . in each employee’s
individual action.” 13 If the employer fails to negate the inferences raised by
the representative evidence, “the court may then award damages to the
employee[s], even though the result be only approximate.” 14
As a preliminary matter, Five Star argues that its records were
adequate because nobody, including DOL, has explained what adequate
records should look like. Five Star misses the point. The adequacy of the
records has to do with the evidence available to establish liability and
damages, not the employer’s failure to conform to a certain recordkeeping
standard. As the Court noted in Mt. Clemens, “[w]hen the employer has kept
proper and accurate records,” then “the employee may easily” satisfy his
10
Id.
11
Id. at 687–88.
12
Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1047 (2016) (referring generally
to Mt. Clemens).
13
Id. at 1046–47.
14
Mt. Clemens, 328 U.S. at 688.
6
Case: 19-51119 Document: 00515738778 Page: 7 Date Filed: 02/09/2021
No. 19-51119
burden to show he worked overtime without overtime compensation. 15 But
where, as here, the records do not allow employees to show the
uncompensated overtime work they completed, the burden-shifting
framework applies.
Five Star next argues that, even if Mt. Clemens applies, the district
court erred because the representative evidence offered at trial failed to raise
“just and reasonable” inferences of liability. Alternatively, Five Star argues
that if DOL did raise such inferences, Five Star negated them. Finally, Five
Star contends that the damages calculation failed to account for the variances
among employees’ schedules and work assignments. We first address Five
Star’s liability then turn to the damages calculations.
A
To raise just and reasonable inferences as to Five Star’s liability, DOL
called six former employees (representing both foremen and helpers) at trial.
Those employees consistently testified that:
• Jorge Cobian, Five Star’s lead supervisor, required them (at
the risk of discipline) to report to Five Star as early as 6:30
am and no later than 6:45 am, even though the official shift
(and compensation clock) began at 7 am.
• Before 7 am, the employees engaged in compensable activities, such as loading material onto company trucks.
• Employees didn’t leave the jobsites until 3:30 pm, and the
amount of time to drive the company truck back to Five
Star’s headquarters (to return the truck) varied depending
on the location of the jobsite. The average drive time was
30 minutes.
• Cobian either instructed employees not to record time before 7 am and after 3:30 pm or told them that, if they did
15
328 U.S. at 687.
7
Case: 19-51119 Document: 00515738778 Page: 8 Date Filed: 02/09/2021
No. 19-51119
record the time, Five Star wouldn’t compensate them for
it.
DOL acknowledges that employees performed work at different jobsites but
argues that all employees “typically started and ended their workday at Five
Star’s premises and witnessed one another performing uncompensated
work.”
Five Star offers three main arguments to undermine or negate these
inferences. None is persuasive.
First, Five Star argues that the former employees’ testimony was
unreliable. Five Star points to inconsistent statements regarding whether
Cobian (or anyone at the company) actually told employees they couldn’t
record, or wouldn’t receive compensation for, time before 7 am and after 3:30
pm. For example, one former employee testified that no one instructed him
to write down his time before 7 am, although he never asked about it. Another
stated that he just thought he would only be paid from 7 am to 3:30 pm.
Others claimed that Cobian specifically told them that they would only be
paid for eight hours per day. Despite these slight variations, all of this
testimony supports the inference that the employees believed they could not,
or should not, record their pre- and post-shift time, and that the company
failed to compensate for this time.
Relatedly, Five Star argues that the employee testimony varied when
it came to what loading work employees did before 7 am. Five Star notes that
it has two types of crews—underground and overhead. For the underground
crews, a third party delivers most materials directly to the jobsite. On the
other hand, the overhead crews have to load their own materials for each
workday before heading to the jobsite. But as DOL points out, most
employees work on overhead crews, and those who worked on underground
crews still had to load some materials for most of their jobsites.
8
Case: 19-51119 Document: 00515738778 Page: 9 Date Filed: 02/09/2021
No. 19-51119
Second, Five Star contends that the testifying employees lacked
“personal knowledge” of the work performed by those who didn’t testify. 16
Five Star claims that because some crew members worked out of town or
performed different activities during the day, the testifying employees
couldn’t know what the non-testifying employees were doing. But the
employees who testified stated that they personally saw other employees
completing similar pre- and post-shift work.
Finally, Five Star offers a string of arguments concerning its general
efforts to correct timesheet errors and its openness to addressing employee
concerns. 17 But these general efforts do not undermine the specific testimony
that employees worked, per company instruction, before and after their
recorded hours.
Our decision in Brennan v. General Motors Acceptance Corporation
confirms the district court’s liability determination. 18 In Brennan, employees
had three different job titles, all of which involved collecting on overdue
accounts and repossessing vehicles. 19 The employees had long, irregular
hours so the employer depended on the employees to report their own time
on company timesheets. 20 Even though upper management encouraged
employees to record their overtime accurately, the employees’ immediate
16
See Olibas v. Barclay, 838 F.3d 442, 450 (5th Cir. 2016).
17
To the extent Five Star argues that it was improper to award liquidated damages
because these facts demonstrate good will, the argument fails. “Even if [Five Star] acted in
good faith based upon a reasonable belief that it did not violate the FLSA, the district court
still had discretion to award liquidated damages.” Bernard v. IBP, Inc. of Nebraska, 154 F.3d
259, 267 (5th Cir. 1998).
18
482 F.2d 825 (5th Cir. 1973).
19
Id. at 827.
20
See id.
9
Case: 19-51119 Document: 00515738778 Page: 10 Date Filed: 02/09/2021
No. 19-51119
supervisor pressured them not to report overtime hours. 21 Fifteen of the
company’s twenty-six employees testified, and the district court found that
the company violated the FLSA as to all twenty-six employees. 22 The
company argued on appeal that it was unaware that employees were not
recording overtime hours. 23 We rejected that argument, holding that the
record showed that the supervisor had actual knowledge or, at a minimum,
constructive knowledge that the employees were working, but not reporting,
overtime hours. 24 We further stated that “[t]he company cannot disclaim
knowledge when certain segments of its management squelched truthful
responses.” 25 Thus, based on the representative testimony of a de facto
policy of underreporting time, we affirmed the district court’s finding that
the employer violated the FLSA’s overtime requirements. 26
So too here. All testifying employees stated that their lead supervisor,
Cobian, either said or implied that they shouldn’t record pre- and post-shift
time. So even though Five Star’s manual instructed employees to record all
of their time, the record shows that the de facto policy was that they
shouldn’t. Although the sample size here was arguably small (6 of 53
employees—11% of the relevant employees), Five Star points to no authority
saying 11% is insufficient for extrapolation purposes. And more importantly,
Five Star failed to negate the inferences raised by the 11% of employees who
21
Id.
22
Id.
23
Id.
24
Id. at 827–28.
25
Id. at 828.
26
Id. at 829.
10
Case: 19-51119 Document: 00515738778 Page: 11 Date Filed: 02/09/2021
No. 19-51119
testified. We find no error in the magistrate judge’s holding that Five Star is
liable for unpaid overtime for all 53 construction employees.
B
Five Star also disputes the district court’s damages award of
$121,687.37 in back wages. All of Five Star’s arguments concern the
variations in the employees’ schedules and alleged overgeneralizations by
Alba, the DOL investigator.
This is how Alba arrived at the number the district court adopted:
Alba made initial calculations based on employee interviews, as Five Star
didn’t provide her with any time sheets until almost two years into the
investigation. Once she had the timesheets, Alba reviewed all of them for the
two-year investigative period. 27
Because the time records were incomplete, Alba relied on her
employee interviews and the testimony at trial to calculate the amount of
unpaid time employees worked. During regular day shifts, employees had to
arrive sometime between 6:30 am and 6:45 am to get ready for the day’s work.
Alba took a “conservative approach” and estimated that, on average, all
construction employees worked for 15 uncompensated minutes before their
shifts officially started. For post-shift work, which only applied to foremen
who had to drive the company truck back to Five Star at 3:30 pm, Alba
calculated an average of 30 minutes per day. Alba explained that this was also
a conservative estimate because some employees told her that the post-shift
drive time could take up to an hour. So in total, she added 15 minutes a day
for laborers and 45 minutes a day for foremen.
27
Five Star provided no timesheets for two of the weeks in that period—a week in
September 2013 and the week of Christmas that same year.
11
Case: 19-51119 Document: 00515738778 Page: 12 Date Filed: 02/09/2021
No. 19-51119
Alba added these averages to each employee’s weekly timesheets.
Following the FLSA’s overtime requirement, Alba calculated damages for
the weeks when employees exceeded 40 hours before or after she added the
average pre- and post-shift time. 28 Alba didn’t calculate damages for four
weeks of the year to account for vacations and holidays.
Alba made other adjustments. If the timesheets showed that an
employee worked only at the ranch or the shop for the day, Alba did not add
uncompensated time since there would be no pre-7 am loading or post-3:30
pm driving. But when the timesheets showed that the employee worked at
the ranch or shop for only part of the day, Alba added the pre- and post-shift
averages because it was impossible to tell from the timesheets whether the
employee started or ended the day at the ranch, the shop, or the jobsite.
Overall, Alba’s final calculations were higher than what she initially
estimated, but she presented the lesser amount in an effort to settle the case.
After excluding four employees who were owed less than $20 for the entire
timeframe, Alba offered the amount that the district court adopted:
$120,417.62.
Five Star contends that these calculations failed to account for
variations in the employees’ schedules. For example, Five Star states that
when employees were working the night shift, at the ranch, or in the shop,
they wouldn’t have the pre-work loading time and post-work driving time.
The employees that testified at trial said they spent anywhere from 2.5% to
30% of their time on the night shift. Five Star also argues that Alba didn’t
account for all of the employees’ vacation time, as crews had at least one full
28
See 29 U.S.C. § 207.
12
Case: 19-51119 Document: 00515738778 Page: 13 Date Filed: 02/09/2021
No. 19-51119
day off for six different weeks in the year, which doesn’t include days off for
personal reasons.
To substantiate these schedule variations, Five Star provided the
district court with a summary chart showing, among other things, which
employees worked night shifts, out of town, or at the shop or ranch. Mr.
Palacios created the chart based off his memory of different work projects.
The district court found this chart unreliable because “Five Star’s
timesheets simply do not allow for the retrospective analysis its president
proffers.” We agree.
In short, Five Star mainly contests that the damages award was an
approximated number. But that’s what Mt. Clemens allows when, as here,
FLSA-required time records are incomplete.
IV
Five Star fails to show that the district court committed any error
concerning its finding of FLSA liability or calculation of damages. We thus
AFFIRM.
13
