Acosta v. Cathedral Buffet, Inc.

887 F.3d 761

R. Alexander ACOSTA, Secretary of Labor, Plaintiff-Appellee,

v.CATHEDRAL BUFFET, INC.; Ernest Angley, Defendants-Appellants.

No. 17-3427

United States Court of Appeals, Sixth Circuit.

Argued: December 6, 2017

Decided and Filed: April 16, 2018

ARGUED: Todd A. Mazzola, RODERICK LINTON BELFANCE, LLP, Akron, Ohio, for Appellants. Mary E. McDonald, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Appellee. ON BRIEF: Todd A. Mazzola, William G. Chris, Lawrence R. Bach, RODERICK LINTON BELFANCE, LLP, Akron, Ohio, for Appellants. Mary E. McDonald, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Appellee.

Before: SILER, KETHLEDGE, and THAPAR, Circuit Judges.

SILER, J., delivered the opinion of the court in which KETHLEDGE and THAPAR, JJ., joined. KETHLEDGE, J. (pp. 768–70), delivered a separate concurring opinion.

The Grace Cathedral church operates a restaurant on its Cuyahoga Falls, Ohio, campus called Cathedral Buffet. For many years, Cathedral Buffet was open to the public and was partially staffed by unpaid church members. Following a Department of Labor (DOL) suit and a bench trial, the district court found that the restaurant's use of unpaid labor violated the minimum wage requirement of the Fair Labor Standards Act (FLSA).

However, to be considered an employee within the meaning of the FLSA, a worker must first expect to receive compensation. Tony & Susan Alamo Found. v. Sec'y of Labor , 471 U.S. 290, 302, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985) ; Walling v. Portland Terminal Co. , 330 U.S. 148, 152, 67 S.Ct. 639, 91 L.Ed. 809 (1947). It is undisputed that the volunteers who worked at Cathedral Buffet had no such expectation. We therefore REVERSE and REMAND.

I.

Cathedral Buffet is organized as an Ohio for-profit corporation. The restaurant's sole shareholder is Grace Cathedral, Inc., a 501(c)(3) non-profit religious organization. Despite its for-profit status, Cathedral Buffet does not generate a profit, and Grace Cathedral subsidizes the restaurant.¹ Grace Cathedral's pastor, Reverend Ernest Angley, also serves as the president of Cathedral Buffet.

The DOL's Wage and Hour Division began investigating Cathedral Buffet in 2014, reviewing the restaurant's employment practices for a period stretching back two years.² During that period, the restaurant separated its workers into two classes, "employees" and "volunteers." Volunteers performed many of the same restaurant-related tasks as employees: cleaning, washing dishes, serving cake, chopping vegetables, and manning the cash register. However, there was one meaningful distinction between employees and volunteers. Employees received an hourly wage; volunteers did not.

Reverend Angley recruited volunteers from the church pulpit on Sundays. Sonya Neale, the restaurant's manager, would tell Angley when the restaurant was shorthanded, and before his sermon, Angley would announce to the congregation that more volunteers were needed. Angley said the restaurant was "the Lord's buffet," and "[e]very time you say no, you are closing the door on God." He suggested that church members who repeatedly refused to volunteer at the restaurant were at risk of "blaspheming against the Holy Ghost," which was an unforgivable sin in the church's doctrine. Ushers would pass around slips of paper, and parishioners interested in volunteering would write down their phone number and hand it in.

Church members would then receive calls from Cathedral Buffet managers, and sometimes Angley himself, asking them to volunteer. The managers would work around the volunteers' schedules, ensuring they were free during their assigned shifts. Managers were instructed to tell prospective volunteers that Angley would find out if they refused to work. According to church member Alishea Gay, on one occasion when she did not return a phone call, Angley called her directly and asked her to work. Gay agreed to work because she "feared failing God."

The DOL filed suit after concluding Cathedral Buffet violated the FLSA by using unpaid volunteers and by failing to keep records of the hours they worked. After a three-day bench trial, the district court issued its Findings of Fact and Conclusions of Law. Hugler v. Cathedral Buffet , No. 5:15-CV-1577, 2017 WL 1287422 (N.D. Ohio Mar. 29, 2017). It held that Cathedral Buffet's religious affiliation did not exempt it from FLSA coverage because the restaurant was a for-profit corporation engaged in commercial activity. Id. at *7-8 (citing Alamo , 471 U.S. at 296-99, 302, 105 S.Ct. 1953 ). Applying the economic realities test, the district court concluded that the church member volunteers were employees under the FLSA. Id. at *8-11. In the court's view, "The Buffet's constant solicitation of volunteer labor, Reverend Angley's admissions that the use of volunteer labor was intended to save money, and the volunteers' feelings of pressure and coercion to provide the labor all demonstrate that the volunteers were actually employees." Id. at *11. The court also noted that the volunteers were "clearly integral to the Buffet's operations," and that the restaurant's management exerted a "high level of supervision and control ... over the volunteers." Id. The court rejected Cathedral Buffet's argument that workers need not be paid minimum wage if they have no expectation of compensation, saying that "[s]uch a reading of the FLSA ... clearly violates the intent and purpose of the Act" and would run afoul of the Supreme Court's holding in Alamo . Id.

Because Cathedral Buffet failed to keep accurate records, the district court adopted the DOL's estimate of the volunteers' back wages, $194,253.95. Id. at *15. The district court also awarded the DOL an equal amount of liquidated damages, for a total of $388,507.90, because Cathedral Buffet failed to demonstrate a good faith effort to comply with the FLSA. Id. at *15-16. Finally, the court enjoined Cathedral Buffet and Angley from further violations of the FLSA and ordered that they "shall not solicit or coerce ... any employee—including those workers classified as ‘volunteers’—to return or to offer to return to the Defendants or to someone else on behalf of the Defendants any money" awarded to the employee by the judgment. This appeal followed.

II.

Following a bench trial, "we review a district court's factual findings for clear error and its legal conclusions de novo." Muniz-Muniz v. United States Border Patrol , 869 F.3d 442, 444 (6th Cir. 2017) (quoting Calloway v. Caraco Pharm. Labs., Ltd. , 800 F.3d 244, 251 (6th Cir. 2015) ). "A district court's factual findings are clearly erroneous if, based on the entire record," the reviewing court is "left with the definite and firm conviction that a mistake has been committed." Shelby Cty. Health Care Corp. v. Majestic Star Casino , 581 F.3d 355, 364-65 (6th Cir. 2009)(citations and internal quotation marks omitted).

III.

A.

The FLSA mandates that "[e]very employer shall pay to each of his employees who ... is employed in an enterprise engaged in commerce or in the production of goods for commerce" a minimum wage set by Congress. 29 U.S.C. § 206(a). An "[e]nterprise engaged in commerce" is one that, among other things, "has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce" or "whose annual gross volume of sales made or business done is not less than $500,000." Id. § 203(s)(1)(A)(i), (ii). The restaurant concedes that it is a covered enterprise under the FLSA. Thus, the only remaining question is whether the church member volunteers are employees within the meaning of the Act.

The FLSA defines an "employee" as "any individual employed by an employer," id. § 203(e)(1), and "employ" as "to suffer or permit to work," id. § 203(g). These are wide-ranging definitions; indeed, the Supreme Court has stated that "[a] broader or more comprehensive coverage of employees ... would be difficult to frame." United States v. Rosenwasser , 323 U.S. 360, 362, 65 S.Ct. 295, 89 L.Ed. 301 (1945). The statutory language "stretches the meaning of ‘employee’ to cover some parties who might not qualify as such under a strict application of traditional agency law principles." Mendel v. City of Gibraltar , 727 F.3d 565, 569 (6th Cir. 2013) (quoting Nationwide Mut. Ins. Co. v. Darden , 503 U.S. 318, 326, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992) ).

To determine whether a worker is an FLSA employee, we typically look to the economic realities of the business relationship in light of all the relevant factors. See, e.g. , Ellington v. City of East Cleveland , 689 F.3d 549, 555-56 (6th Cir. 2012). However, Cathedral Buffet urges us to eschew this approach based upon the Supreme Court's holding in Alamo , 471 U.S. at 302, 105 S.Ct. 1953, a case with similar facts.

There, the Tony and Susan Alamo Foundation, a non-profit religious organization, operated a number of commercial businesses to support its ministry. Id. at 292, 105 S.Ct. 1953. The Foundation staffed those businesses with persons it called "associates," who were mostly rehabilitated "drug addicts, derelicts, or criminals." Id. Associates received no wages, but the Foundation provided them with food, clothing, and shelter. Id.

The Supreme Court held that the associates were entitled to minimum wage under the FLSA. First, the Court found that the Foundation was a covered enterprise under the Act because its "businesses serve[d] the general public in competition with ordinary commercial enterprises." Id. at 299, 105 S.Ct. 1953. When the FLSA was expanded to cover "enterprises" in 1961, the Court said, "[t]here was ... broad congressional consensus that ordinary commercial businesses should not be exempted from the Act simply because they happened to be owned by religious or other nonprofit organizations." Id. at 297-98, 105 S.Ct. 1953.

The Alamo Court also concluded that the Foundation's associates were employees within the meaning of the FLSA. Id. at 301-02, 105 S.Ct. 1953. In an...