Usery v. Godwin Hardware, Inc. (426 F. Supp. 1243, 1976)

FINDINGS OF FACT and CONCLUSIONS OF LAW

MILES, District Judge.

This action is before this court on plaintiff’s motion for summary judgment. This court has determined that said motion should be granted; now therefore this court hereby makes the following findings of fact and conclusions of law:

Findings of Fact

1. There is no genuine issue as to any of the facts found herein or any fact material to the theory of the case advanced by the plaintiff’s motion and upheld herein by this court.

2. This is an action filed on March 1, 1973, under section 17 of the Fair Labor Standards Act of 1938, as amended (29 U.S.C. § 201, et seq.), hereinafter called the Act, to enjoin and restrain the defendants from violating the minimum wage, overtime pay, and recordkeeping requirements contained in sections 6 and 15(a)(2), sections 7 and 15(a)(2), and sections 11(c) and 15(a)(5) of the Act, respectively, including the restraint of the continued withholding of back wages due as a result of such violations since March 1, 1970. The plaintiff is the duly authorized Secretary of Labor, United States Department of Labor. The defendants are (a) Godwin Hardware, Inc., a Michigan Corporation, hereinafter called “Godwin Hardware”; (b) Godwin Plumbing, Inc., a Michigan Corporation, hereinafter called “Godwin Plumbing”; and (c) Marvin (Red) R. Brummel, hereafter called “Brummel”, as follows: i) individually, ii) doing business as “Godwin Plumbing Company” prior to the incorporation of Godwin Plumbing, and as “Godwin Hardware & Plumbing Company” prior to the incorporation of Godwin Plumbing and Godwin Hardware, iii) as an officer of Godwin Hardware, and iv) as an officer of Godwin Plumbing.

3. Beginning in about 1955 and continuing thereafter, Brummel owned (as sole proprietor) and operated a hardware business engaged in the purchase and resale of nails, paint, tools, pipe, plumbing supplies, hardware generally, and other goods and a plumbing business engaged in the construction, reconstruction, installation, repair, and maintenance of plumbing and plumbing systems, all under the name “Godwin Hardware & Plumbing Company.” This continued until on or about September 29, 1967, when the hardware business was incorporated as Godwin Hardware, Inc., which assumed the assets and liabilities of the hardware business and continued said business, with Brummel continuing the plumbing business as a sole proprietorship under the name “Godwin Plumbing Company.” These continued until on or about June 30, 1970, when the plumbing business was incorporated as Godwin Plumbing, Inc., which assumed the assets and liabilities of the plumbing business and continued said business. During the period September 29, 1967, to June 30,1970, in respects not pertinent to the violation aspects of the application of the Act in this case, portions of the plumbing business were carried on by employees of Godwin Hardware with reimbursement from the Godwin Plumbing Company sole proprietorship. Hereinafter, the hardware business, as owned and operated either by the sole proprietorship or by Godwin Hardware, will be sometimes referred to as the “hardware business”; and the plumbing business as operated either by the sole proprietorship or by Godwin Plumbing, will be sometimes referred to as the “plumbing business”. Bearing in mind their respective periods of existence and which of the businesses they owned, the defendants listed in subparagraphs 2(a), 2(b), and 2(c)(ii) above are sometimes hereinafter collectively called “Godwin.”

4. From the incorporation of Godwin Hardware to date, Brummel has continued his full ownership status in the hardware business by owning 100 percent of the stock of Godwin Hardware; and from the incorporation of Godwin Plumbing until on or about May 23,1972, Brummel continued his full ownership status in the plumbing business by owning 100 percent of the stock of Godwin Plumbing. On or about May 23, 1972, 15 percent of the stock of Godwin Plumbing was sold to each of four employees of the plumbing business, with Brummel retaining the remaining 40 percent; and the ownership situation of Godwin Plumbing has remained unchanged since said sale. One of the four employees is Mr. Edward Vanderwal, hereinafter called Mr. Vanderwal, who was Godwin’s office manager-bookkeeper at all times material hereto and was an officer of and a director of Godwin Plumbing at all times material hereto.

5. Since their respective incorporations, Brummel has been both president and a director of both Godwin Hardware and Godwin Plumbing. At all times material hereto, he has been the person in charge and has been actively engaged in directing the affairs of the hardware business and the plumbing business, including actively setting, and participating in the implementation of, the policies as to wages, hours, and conditions and practices of employment in the hardware business and the plumbing business.

6. At all times material hereto Godwin employed all the employees employed in the hardware business and all the employees employed in the plumbing business. The employees employed in the hardware business were employed by Godwin Hardware as principal employer; and the employees employed in the plumbing business were employed by Brummel’s sole proprietorship Godwin Plumbing Company as principal employer until the incorporation of Godwin Plumbing and were employed by Godwin Plumbing as principal employer after the incorporation of Godwin Plumbing.

7. A special pay system (hereinafter called the 2-rate system) was used by God-win for paying some of its employees. The 2-rate system and the nature and scope of its use in the plumbing business through July 19, 1972, is explained in paragraph 7 through 38 hereof and the nature and scope of its use in the hardware business through June 28, 1972, is explained in paragraph 40 hereof.

8. ' In the plumbing business, the 2-rate system was used during the period from workweek ending September 14, 1965 through workweek ending July 19, 1972, and during that period was used for all hourly-rated employees, with 3 types of limited exceptions. The 2-rate system began under Brummel’s sole proprietorship of the plumbing business and continued, under the direction and control of Brummel, after the incorporation of the plumbing business.

9. Each employee employed under the 2-rate system had, during any given workweek, 2 hourly rates which are hereinafter called the “lower rate” and the “higher rate”, respectively.

10. At the end of any given workweek, the employee was paid compensation which was the sum of: (1) an amount equal to the lower rate times the number of hours worked in the workweek up to and including 40 hours, and (2) if the employee worked in excess of 40 hours in the workweek, an amount equal to (or less than) one and one-half times the lower rate times the number of hours worked in the workweek in excess of 40 hours. These two amounts were recorded at the end of the workweek in two separate unlabelled columns (i.e., in the first two earnings columns, which are columns 6 and 7) in the payroll records of the plumbing business, and the sum of them (after adding in any other payment in column 8 paid that week) was recorded at the end of the workweek is still another unlabelled column (i.e., in the last earnings column, which is column 9) in said records and paid to the employee at the end of the workwéek.

11. Shortly after the end of each calendar quarter, or sooner sometimes if the employee had left the employ of Godwin before the end of the quarter, two special amounts were determined: (1) the first special amount was equal to the higher rate times the sum of all hours worked by the employee in the workweeks ending in the quarter, and (2) the second special amount was equal to the sum of all the weekly payments in the first unlabelled column (column 6) referred to in the preceding paragraph for all the workweeks ending in the quarter and in the second unlabelled (column 7) referred to in the preceding paragraph for all workweeks ending in the quarter. Then the first such special amount was compared to the second, the difference, hereinafter called the “make-up accrual,” was generally entered in the payroll records of the plumbing business, as follows: if the first was higher, the difference was entered in an unlabelled marginal space (generally in or about column 1) in said records to show the amount due to the employee from Godwin for the quarter; and if the second amount was higher, the difference was entered in an unlabelled marginal space (generally in or about column 1) in said records as the make-up accrual due from the employee to Godwin for the quarter. Godwin also then gave the employee a written statement of the amount of the make-up accrual due to or from him and of the computation by which it was arrived at.

12. The payment of the make-up accrual due to or from the employee results in the hourly compensation received by the employee being equal to only straight time compensation at the higher rate for all hours worked in the quarter, including hours worked in excess of 40 in any given workweek. Such payment of the make-up accrual and this result thereof was contemplated by and agreed to by Godwin before the work was performed by the employee.

13. No employee ever failed to receive from Godwin the payment of all make-up accruals due to him under the 2-rate system, even if he left the employ of Godwin before the end of the quarter during which they accrued or before the make-up accrual for the quarter had been actually computed; nor was an employee permitted to leave the employ of Godwin without any make-up accrual due from him being paid to God-win, at least generally by a subtraction from his pay.

14. Each employee paid under the 2-rate system fully understood, and understood before the performance of any work under the 2-rate system, how the 2-rate system worked and that the policy of using it applied to him.

15. When the 2-rate system was initiated in September of 1965, Brummel sent a letter to all the hourly-rated employees employed at that time in the plumbing business explaining the 2-rate system and announcing the policy of applying the 2-rate system to all such employees. The letter read in part as follows:

all hourly rated employees will be reduced fifty cents (50