What gets a lot of employers into trouble is the failure to keep accurate records. Or worse, the actual falsification of records or knowingly keeping and maintaining inaccurate records. Nothing will cause the DOL to come down harder on an employer and for the courts to back up the agency. A recent example of this is a case where the employer tried to put all of the blame on an allegedly low level employee and avoid liability for this fairly egregious lapse. The case is entitled Scalia v. ESSG LLC et al. and issued from the Ninth Circuit Court of Appeals.

The appellate panel affirmed the district court’s decision that the Company was perfectly aware that its employees, grocery workers, were working more than forty hours per week and not getting paid proper overtime. As the Court aptly put it, “ESSG chose Haluptzok as its agent for payroll processing, so it cannot disavow her actions merely because she lacked a specific job title or a certain level of seniority in the company.”

The Company had contended it should not be liable for the actions of this agent or, in the alternative that it should be allowed to go after that entity for indemnification or contribution. The appellate court did not agree with the argument about indemnification. The Court found that this was not contemplated by the FLSA. The Court noted that it saw “no indication that Congress intended to create a right to contribution or indemnification for employers under the FLSA.” The Court refused to “make new federal common law that recognizes those rights.”

The dispute began when ESSG contracted with Sync Staffing. That company placed the workers at their work location, an Albertsons grocery store in Arizona. The defendant often took care of administrative matters at these sites and brought in Haluptzok to do the payroll. However, at the end of the very first pay period, a Sync Staffing employee directed Haluptzok to treat and record the overtime hours as straight time. After that, all payroll and time records were processed and prepared in the same way. It aggregated to more than 1000 FLSA violations! That totaled almost $80,000 in wages, which was then doubled for liquidated damages.

The Takeaway

This was clearly more than a record keeping “problem.” This was a deliberate effort by the employer to pay straight time instead of overtime and the vehicle by which that attempt was carried out was through the vehicle of directing the payroll company to cook the books. Now, that effort becomes a rather difficult and expensive pill to swallow.

Hearty appetite…