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Swartz v. DJ Engineering, Inc.

United States District Court, D. Kansas

July 9, 2015

JONATHAN SWARTZ, et al., Plaintiff,
v.
DJ ENGINEERING, INC., and REZAUL CHOWDHURY, Defendants.

MEMORANDUM AND ORDER

DANIEL D. CRABTREE, District Judge.

Plaintiffs bring this lawsuit under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., against defendants DJ Engineering ("DJE") and its Chief Executive Officer, Rezaul Chowdhury (Doc. 1). Plaintiffs, who are former employees of DJE, have alleged that defendants improperly classified them as salaried employees exempt from the FLSA's overtime-pay requirements. This case comes before the Court on defendants' Motion for Summary Judgment (Doc. 82) and Motion to Decertify Collective Action (Doc. 84). Plaintiffs have filed responses to both motions (Docs. 102, 105), and defendants have filed replies (Docs. 117, 120) and a supplement to their summary judgment reply (Doc. 121). For the reasons explained below, the Court grants in part and denies in part defendants' Motion to Decertify Collective Action and grants in part and denies in part defendants' Motion for Summary Judgment.

I. Procedural Background

Jonathan Swartz, the original named plaintiff in this lawsuit, filed a Complaint on January 17, 2012 (Doc. 1). He sought to represent himself and "all similarly situated current and former employees." Doc. 1 at ¶ 2. On September 24, 2014, the Court granted Mr. Swartz' motion to certify this lawsuit as a collective action conditionally under 29 U.S.C. § 216(b) (Doc. 45). Specifically, the Court conditionally certified the following classes of employees: (1) all employees whom defendants deemed exempt as administrative, executive or professional employees, who worked more than forty hours in any workweek and who worked at DJE at any time from January 19, 2010, through January 21, 2013 (the "Deduction Class"); and (2) all engineers who worked in the Engineering Department whom the defendants deemed to be exempt professional employees, who worked more than forty hours in any workweek between January 19, 2010, and January 21, 2013 (the "Engineer Class"). Id. Under the Court's Order, the parties met and agreed upon a "Notice and Consent" form to send to the putative class (Doc. 48). Seven employees have since opted into this lawsuit. The parties represent that they have now completed "significant discovery" in this case.

II. Facts

The facts material to defendants' motion for summary judgment are set forth below. The Court did not need to resolve any controverted facts to rule defendants' motion to decertify.[1] Where controverted facts mattered to the outcome of defendants' motion for summary judgment, the Court resolved them in the light most favorable to plaintiff, the non-moving party.

A. Defendants

DJE is a manufacturing company located in Augusta, Kansas. The company manufactures parts for commercial, military, and general aviation aircrafts, including: flight-critical sheet metal assemblies; advanced composite and metallic bonded assemblies; hydraulic components; mechanical actuators; gearboxes; landing gear; and propellers. DJE serves customers located around the world. Because it needs its employees to be available and responsive to customer needs, DJE requires its salaried employees to work 50-hour workweeks. As of November 1, 2012, DJE employed approximately 235 employees at the Augusta, Kansas facility.

B. Plaintiffs

There are eight plaintiffs in this lawsuit. Mr. Swartz is the class representative for both conditionally-certified classes. The remaining plaintiffs opted into this case following the Court's Order granting conditional certification.

1. Jonathan Swartz

Mr. Swartz worked at DJE as a Project Engineer from August 2008 to December 2011. He earned a degree in mechanical engineering and worked in the aircraft industry before and after his term of employment at DJE. He is proficient in the use of ENOVIA, a software program that DJE uses to design complex engineering processes. While working at DJE, he devoted most of his time to engineering tasks associated with coordinating production resources during the manufacturing process. Specifically, his job required him to review specifications for parts that a customer wanted to purchase, procure all materials necessary for the job, and formulate a production plan. Sometimes, a project required Mr. Swartz to use a software program called CATIA[2] to create a model of the requested part. If the job required DJE to build a specific tool for the manufacturing process, Mr. Swartz normally would design that tool.

Early in his employment, Mr. Swartz claims he formed the belief that an hourly employee with no engineering training could perform his job, so DJE misclassified him as an FLSA exempt professional employee. He also contends that DJE improperly reduced his salary due to absence that lasted less than a full workday, rendering him an hourly-compensated employee.

2. Ramin Ranjbar

Opt-in plaintiff Ramin Ranjbar worked at DJE from June 14, 2010, to July 6, 2012. A degreed engineer, Mr. Ranjbar is proficient at using CATIA and AutoCAD, another software systems used by DJE's engineers. He also has received training to use PATRAN, a program for analyzing structural design, and PAM-RTM, software that simulates resin movement in composite structures. When he began his employment at DJE, Mr. Ranjbar was classified as a Quality Engineer, and DJE paid him a starting salary of $60, 000 per year. Initially, his primary job duty consisted of checking manufactured products to ensure that they complied with customer specifications.

In 2011, Mr. Ranjbar went to his supervisor, Ryan Hernandez, and informed him that he was unsatisfied with his current work assignments. Mr. Hernandez asked the Engineering Department to take on Mr. Ranjbar. Within a few weeks, DJE reclassified Mr. Ranjbar as a Project Engineer. In addition to the inspection duties he had performed previously, Mr. Ranjbar participated in project management and manufacturing engineering. DJE management requested that Mr. Ranjbar continue to assist with inspection duties while the company searched for a new hire to take over Mr. Ranjbar's previous job. Frustrated with his continued inspection duties, Mr. Ranjbar informed the Engineering Manager, Mike Lydon, that he wanted more engineering projects. Mr. Lydon advised him that he intended to give him more engineering projects when the shop's workload increased. Mr. Ranjbar voluntarily ended his employment with DJE on July 6, 2012, to take a job in California.

Mr. Ranjbar has joined both of the conditionally-certified classes. He contends that DJE, on occasion, unlawfully reduced his salary. He also asserts that, during the last twelve months of his employment, he spent forty percent of his time on project management and sixty percent on inspection duties. He thus believes that DJE misclassified him as an FLSA exempt professional employee and should have paid him overtime wages.

3. Vien Nguyen

Opt-in plaintiff Vien Nguyen is also a degreed engineer. He worked at DJE as a Project Engineer from June 2011 to August 2012 under the supervision of Mike Lydon. Mr. Nguyen is certified in CATIA V4 and V5. Mr. Nguyen's job required him to review customer submissions. The customer-typically an aircraft manufacturer-would provide specifications for a part or component that it wanted DJE to manufacture. Mr. Nguyen then would scale the customer's specifications in CATIA and pass that information to the shop for manufacturing. Mr. Nguyen also was responsible for determining when the manufacturing process would require the materials, whether the materials were available, and whether the process could utilize a different material while still conforming to the customer's specifications. Mr. Nguyen has joined the Deduction Class. He alleges that DJE, on occasion, improperly reduced his salary for partial day absences.

4. David McDonald

Opt-in plaintiff David McDonald was employed by DJE as the Accountable Manager of a Repair Station that DJE acquired in the Spring of 2009. The Federal Aviation Administration ("FAA") defines an Accountable Manager as the individual designated by the certified repair station as responsible for all Repair Station operations, including ensuring that Repair Station personnel follow all applicable regulations. See 14 C.F.R. § 145.3. The Accountable Manager also serves as a company's primary contact with the FAA. Id. Mr. McDonald prepared the forms necessary to obtain FAA approval of the Repair Station, authored the operations manuals used in the Repair Station, designed its layout, and marketed the services of the new Repair Station to customers and prospective customers.

Once the Repair Station was operational, Mr. McDonald's duties included: coordinating repairs to aircraft components with the FAA; approving work completed by the Repair Station; handling FAA information requests; determining the Repair Station's capabilities for work on various aircraft components; updating the capabilities list for the Repair Station; updating the operations manuals; and supervising the Repair Station's employees. Although Mr. McDonald lacked the ultimate authority to hire or fire Repair Station employees, Mr. McDonald evaluated their performance, assigned their daily work, and trained them. He also advised Mr. Chowdhury about staffing needs at the Repair Station and participated in the interviewing and hiring processes for new employees. In 2013, DJE purchased a composites shop located in Canada. DJE put Mr. McDonald in charge of the repair station at the Canadian composites shop. Mr. McDonald has opted into the Deduction Class. He contends that DJE, on occasion, improperly reduced his salary for certain absences.

5. Claude Riggins

Opt-in plaintiff Claude Riggins began his employment with DJE in January of 2008. DJE classified him as the Marketing Manager. Throughout his employment at DJE, he was the highest-ranking employee in the Sales and Marketing Department. His job required him to make sales calls to customers and prospective customers, manage the quote submission process, and supervise several subordinate employees. On about half of his customer visits, Mr. Riggins would take along other employees, including David Hall and David McDonald. If a customer hired DJE for the work, Mr. Riggins was responsible for resolving any problems that arose during the course of the business relationship. Mr. Riggins has joined the Deduction Class. Although he has not identified any occasions that DJE improperly reduced his salary for partial day absences, he nevertheless asserts that he was subject to a policy permitting such reductions.

6. David Hall

Opt-in plaintiff David Hall worked at DJE from May 2009 to November 2010. He holds a degree in industrial engineering. By the time he applied for a position at DJE, Mr. Hall had accumulated twenty-six years of experience as an aircraft structural design engineer. He is proficient in CATIA El Fini, a software program DJE used to analyze loads on different aeronautical structures. To execute his sales and marketing duties, Mr. Hall would contact the procurement personnel he knew from his prior attempts to sell DJE services. DJE gave Mr. Hall, along with Mr. Riggins, discretion to plan and execute their marketing and sales strategies. They picked potential customers, identified customers' needs, planned sales pitches, and made customer visits. Mr. Hall has joined the Deduction Class. He contends that DJE, on occasion, improperly reduced his salary for certain absences.

7. Mike Clift

Opt-in plaintiff Mike Clift began working at DJE in 2009. Before joining DJE, Mr. Clift was a general manager at Boeing, where he had acquired expertize in "lean" manufacturing techniques. Mr. Clift worked under the supervision of Mr. Lydon in the Engineering Department. DJE assigned Mr. Clift the task of resolving issues that DJE experienced while manufacturing doors for Air Force planes. Mr. Lydon also assigned Mr. Clift responsibility for reviewing manufacturing processes, adjusting staffing, and improving tool design. DJE was impressed with Mr. Clift's work revamping the door manufacturing process, and the company asked him to work with Ray Tuschhoff, DJE's vice president, to implement lean manufacturing processes across the company. Mr. Clift continued to work in this capacity until his employment with DJE ended in December 2010. Mr. Clift has opted into the Deduction Class. He also asserts that DJE improperly reduced his salary payments for absences of less than a full day.

8. Saeed Mansouri

Opt-in plaintiff Saeed Mansouri has an engineering degree and has worked at DJE three separate times since 1994. In 2009, DJE hired him as its Composites Manager to help the company develop a composites shop. After the company's efforts to develop a composites shop proved unsuccessful, DJE purchased a Canadian composites shop and put Mr. Mansouri in charge of it. In that role, he traveled to and from Canada several times over a sixth-month period. He ensured that the shop employed adequate staff and that the products it made met all applicable standards. DJE also assigned him miscellaneous special projects as needed, including a four-month assignment as interim Quality Manager. In this role, he supervised about fifteen employees. He also was involved in sales activities, including responding to customer requests for quotes. Mr. Mansouri has joined the Deduction Class. He admits that DJE never improperly deducted salary payments but contends that he was subject to a policy permitting such deductions.

C. DJE's Compensation Practices

Plaintiffs assert the following facts in support of their allegation that DJE treated its purportedly salaried employees as hourly-compensated employees. The company maintained two shifts for its salaried employees. The first shift began at 6:00 a.m. and ended at 4:30 p.m.; the second began at 7:00 a.m. and ended at 5:30 p.m. DJE required its salaried employees to work 50 hours per week and 100 hours during each two-week pay period. It also required them to work a full 10-hour shift unless the employee took paid or unpaid leave. Thus, employees routinely came to work before their shift began if they were going to miss time later in the day or stayed after their shift ended if they missed time earlier in the day. When it was not possible to make up lost time during one day, the employee would make up the time during other days in the workweek.

DJE also required its salaried employees to clock in when they arrived for work and clock out when they left. This policy required salaried employees to clock out if they left the company's premises for their lunch break. DJE did not punish employees who failed to clock in or out, but human resources would make a notation on their time records. This rule applied when an employee left company's premises for non-company business but not if the employee left for company-related business. If, for example, a salaried employee left the premises to see a customer, DJE would not require the employee to account for the time the employee spent away from the facility. The time sheets did not record as time worked any period when the employee was absent, whether for lunch, a doctor's appointment, or any other short absence. According to Mr. Chowdhury, the time-keeping requirement exists both to help the company determine whether employees are on company premises in the event of an emergency and to create records of project costs.

In their response to defendants' motion, plaintiffs have submitted what they characterize as "representative" time sheets. See Pl.'s Ex. 14 (Doc. 102-16). These time sheets show a record of when a salaried employee clocked in or out, their automatic 30-minute lunchtime deductions (and any additional time taken for lunch), and their total hours worked (for each day and for the two-week pay period). Until sometime in mid-to-late 2012, the time reports included a notation showing the total hours that DJE paid a salaried employee for that particular pay period. The time sheets also contain notations showing when an employee received vacation or holiday pay. Often, the notation in the upper right corner of the time sheet also showed the percentage of salaried pay that the employee received ( e.g., 90% or 70%) based upon the amount of unpaid leave the employee took during the pay period.

In most cases, DJE did not impose a deduction even though the employee had taken unpaid leave because the employee would make up the missed time, doing so on the same day or at some other time during the pay period. DJE did not have an employee handbook, a supervisor or manager's manual, a written pay plan, or any statement about when DJE would deduct money from an employee's salary. Mr. Chowdhury and Vice President Raymond Tuschhoff believed that it was lawful to make salary deductions for absences of less than a day until their counsel corrected them sometime around September 2012.

After Mr. Swartz filed this lawsuit, DJE conducted a payroll review to determine whether it had reduced the salary of any salaried employee for an absence of less than a full day. DJE determined that they had made improper deductions from the salaries of 13 exempt employees. The company issued reimbursement checks to 12 of the employees, in an amount totaling $2, 440.10. On the advice of counsel, however, the company did not issue a check to Mr. Swartz.

In November 2012, the DJE revised its Paid Time Off ("PTO") policy as applied to salaried employees. This revision provides, "PTO will NOT be used in hourly increments due to the fact that salary employees do not track hours. PTO will be used in full day increments only." Pl.'s Ex. 17 (Doc. 102-19). In the notice of the revision that DJE sent to salaried employees, management advised that "[w]e have reviewed the PTO used by salary employees during the past year and there have been some instances when PTO was used incorrectly." Id. This notice also indicated that DJE would review its compensation records and reimburse employees from whom it improperly had deducted salary payments. But even after November 2012, DJE continued keeping track of salaried employees' work hours, ...


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