The Employer's Legal Resource: Lying to the DOL is a Recipe for Disaster
What happened to cause Judge Dowdell to declare a jury's verdict so unreasonable it had to be thrown out (a decision which, by the way, the Tenth Circuit Court of Appeals has just upheld)? It's an interesting story.
If you are from the Tulsa area, you are undoubtedly familiar with the El Tequila restaurants. In December 2010, an employee lodged a complaint with the Department of Labor's Wage and Hour Division (DOL) which prompted an investigation into El Tequila's Harvard location. As is often the case, a time was set for the DOL investigator to report, review records, and interview certain employees. As a result of this initial investigation, all seemed fine but for some recordkeeping violations. The investigation was closed.
In the following months, more employees complained. The DOL opened a second investigation. This round, the DOL decided a surprise visit was warranted. Lo and behold, the DOL discovered a different set of records revealing violations of the Fair Labor Standards Act (FLSA). Employees were not being paid minimum wage or overtime for the hours they were working. The records the DOL had reviewed previously had been doctored.
The employee interviews were different as well. The employees not only said they worked hours for which they were not properly compensated, they told the DOL investigator they had been instructed by the restaurant's owner to lie during the first investigation.
As a result of the second investigation into the Harvard Avenue location, the DOL facilitated a settlement for just that location, although it was later discovered that some of the employees who received back pay checks actually cashed those checks but then returned the money to El Tequila's owner.
The DOL widened its net to all four of the El Tequila locations and discovered similar pay and recordkeeping practices. The situation continued to deteriorate and, in October 2012, the DOL filed suit in federal court in Tulsa.
Judge Dowdell granted summary judgment against El Tequila, finding it violated the FLSA's overtime, minimum wage, and recordkeeping requirements. He also found El Tequila was liable for liquidated damages (thus doubling the amount of back wages owed).
Judge Dowdell determined the issue of "willfulness" should go to a jury trial. Under the FLSA, damages (the amount of back wages due) go back two years from the date of the lawsuit unless the FLSA violations are "willful" in which case damages go back three years from the date of the lawsuit. A jury trial was held to address this issue.
While the jury heard from multiple witnesses, the jury heard testimony just from the restaurant's owner that
- The employees were paid a flat weekly salary instead of minimum wage plus overtime pay
- He kept two sets of records: one accurate set he kept hidden and one falsified set to demonstrate the employees were paid properly
- He sent the falsified records to his accountant so that payroll documents could be generated
- He knew the payroll summary sheets generated by his accountant showed the employees as being paid minimum wage and an overtime rate of time and one-half, showing he understood the requirements of minimum wage and overtime pay
- He showed the DOL investigator the falsified records when she showed up for the investigation
- He lied to the DOL investigator about the records and his pay practices
- He instructed his employees to lie to the DOL investigator
At the conclusion of the five-day jury trial, Judge Dowdell sent one question to the jury to answer:
"During the [applicable time period], was Defendants El Tequila, LLC and Carlos Aguirre's failure to comply with the requirements of the Fair Labor Standards Act 'willful'?"
The jury entered its verdict: El Tequila did not willfully violate the FLSA.
Here's where it gets interesting. Ordinarily, everyone goes home. Not so fast. The DOL filed a motion with the trial court asking it to throw out the jury verdict and, instead, enter judgment in its favor and hold that El Tequila had, in fact, willfully violated the FLSA. And, that's just what Judge Dowdell did.
In December 2015, judgment was entered in favor of the DOL on all issues including willfulness. In his opinion, Judge Dowdell wrote,
"One cannot know with certainty what led to the jury's decision. What is clear, however, is that as deliberations drifted into Friday evening, the jury reached a verdict wholly unsupported by the evidence before it. No reasonable jury could have decided as it did."
This meant that El Tequila was on the hook for an additional year of back wages for its employees.
El Tequila's attorney announced immediately he would appeal, and appeal he did. In February 2017, the Tenth Circuit Court of Appeals issued its order, affirming Judge Dowdell's decision.
On appeal, the Tenth Circuit went through various arguments, noting the DOL's evidence that El Tequila willfully violated the FLSA by "(1) falsifying payroll records, (2) withholding records requested by the [DOL] investigator, (3) lying to the [DOL] investigator and instructing his employees to lie, (4) recklessly disregarding his duty to determine whether it was violating the FLSA, (5) recklessly disregarding FLSA requirements, (6) and recklessly disregarding his duty to keep accurate records." Perez v. El Tequila, LLC, ___ F.3d ___ (10th Cir. 2017). In the end, the court found the DOL's evidence pointed to the only reasonable conclusion that El Tequila willfully violated the FLSA. The Tenth Circuit affirmed the approximately $2.1 million judgment.
El Tequila violated the law; this is clear. Thought-provoking is the lengths to which this employer went during the DOL investigation to further cover up the violation. Like Judge Dowdell's decision notes about the jury, we cannot know with certainty what led Judge Dowdell to throw out the jury's verdict, but the level of deception during the investigation had to have played a large part.
When the DOL – or any governmental agency – comes knocking on your door, a few pieces of advice:
First, consider retaining legal counsel familiar with the matters at hand. Some good advice and guidance up front might save you significant dollars down the road.
Second, do not lie. Lying is never a good idea. Your parents probably mentioned that to you as a child; it still holds true.
Third, if you have a problem, it is better to find a solution now than to hide from it. It generally won't go away.
By Kristen L. Brightmire, firstname.lastname@example.org