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Friday, February 24, 2017

What Not To Do During a Wage Hour Investigation


By Thomas Eden

El Tequila, LLC owned by Carlos Aguirre, is a restaurant with four locations in the State of Oklahoma, which was subject to a series of investigations by the Department of Labor (DOL) Wage and Hour Division in response to employee wage complaints. The Tenth Circuit Court of Appeals issued an opinion in early February 2017 detailing misconduct by Aguirre as he instructed employees to lie during interviews, provided falsified “white-out” and “edited” employee time records to the DOL investigators. By the government’s calculations, Aguirre owed the employees over $600,000 in back wages.

More specifically, the Court found that “the records Mr. Aguirre provided during the … Investigation, known as middle sheets, were based on his false summaries of how many hours employees worked, rather than actual clock-in and clock-out times…. Mr. Aguirre withheld [the actual] time sheets during the … Investigation, and many time entries had been “white-out” and edited to conform with the Federal Labor Standards Act (FLSA).”

At trial “employees revealed that Mr. Aguirre instructed them to lie in their interviews during the … Investigation.” Subsequently, “employees told the WHD investigator that they had been working from 60 to 70 hours per week and were paid a salary…. They said the time sheets were not accurate, and ‘that they were forced to sign’ them.” During the litigation, Mr. Aguirre admitted that the time sheets and middle sheets were not correct, and that he “told his employees what to say in their interviews.”

Under the FLSA, employees are also entitled to liquidated damages as a multiplier of their back pay wage claim; an additional two years or three years for a willful violation. The government argued that Aguirre willfully violated the FLSA by: (1) falsifying payroll records, (2) withholding records requested by the WHD investigator, (3) lying to the WHD 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.

The Tenth Circuit concluded that the “evidence indicates that Mr. Aguirre took affirmative steps to create the appearance that El Tequila complied with the FLSA, including adjusting records to suggest that workers were properly paid, withholding documents, misrepresenting how employees were paid, and instructing employees to do the same. A reasonable jury could not conclude El Tequila’s violations were negligent” but willful. The Tenth Circuit affirmed a $2 Million Dollar Willful judgment against Aguirre and his restaurant. The FLSA allows for personal liability of the owner. 

Common Sense Counsel: Don’t lie during a FLSA Investigation interview and don’t use white-out to edit time records. Having a sit down wage and hour audit is the only way to make sure you are in compliance with the multitude of wage and hour regulations. 

Tommy Eden is a partner working out of the Constangy, Brooks, Smith & Prophete, LLP offices in Opelika, AL and West Point, GA and a Contributor to the ABA 2016 FLSA Supplement published by Bloomberg BNA. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com