A federal district court in Pittsburgh, Pennsylvania recently ruled in favor of Stember Cohn & Davidson-Welling clients Nirmal and Surinder Vashisht in their overtime case under the Fair Labor Standards Act (“FLSA”). The decision shows that an employee can win an overtime case even when (1) they lack detailed time records to support their claims, and (2) their employer claims their business is too small to be covered under the FLSA.
The Vashishts are a married couple who worked for two Subway Restaurant franchises, which were owned by Defendants Aman Tulshar, Inc. (“Tulshar”) and Sidhu Subs, LLC (“Sidhu”), respectively. The Vashishts alleged that they each worked 10-12 hour shifts, six days per week (about 60-65 hours of work per week), but were paid for only 40 hours per week. Tulshar and Sidhu denied these allegations and asserted that the FLSA’s overtime provision did not apply because they each had an annual gross volume of sales less than $500,000.
There are two ways an employee may be covered under the FLSA: “individual coverage” and “enterprise coverage.” Individual coverage applies to individual workers who are engaged in the production of goods for interstate commerce. Enterprise coverage applies to the employees of any “enterprise” with at least $500,000 in annual revenue. The FLSA defines an “enterprise” to include “the related activities performed (either through unified operation or common control) by any person or persons for a common business purpose, and includes all such activities whether performed in one or more establishments.” The Vashishts asserted that Tulshar and Sidhu were part of an “enterprise” under the FLSA, and that when considered together, the two Subway franchises annual revenue exceeded the $500,000 threshold.
The court agreed with the Vashishts. Noting the absence of any evidence countering the Vashists’ factual allegations, the court concluded that Tulshar and Sidhu were engaged in “related activities” for a “common business purpose,” and that the two entities shared common ownership, management, and control. Taking into account both Sidhu and Tulshar’s revenue over the relevant time period, the court found that sales exceeded $500,000.00 per year.
The court also held that Sidhu and Tulshar violated FLSA’s overtime provisions. Under the FLSA, employers must either (1) limit their employees’ workweek to 40 hours or (2) pay their employees an overtime premium—calculated at 1.5 times the employees’ standard rate of pay—for hours over 40 in a workweek. In a FLSA case, it’s the employee’s burden to prove that they were not properly compensated for overtime work. However, when an employer does not maintain adequate records (e.g., time cards, attendance records), the employee’s sworn testimony is enough for a court to make a “fair and reasonable inference” that they were not paid for their overtime.
Here, the Vashishts testified that they regularly worked over 40 hours per week, but never received any overtime pay. The court found that Tulshar and Sidhu did not produce the accurate and detailed records necessary to defeat the inference in favor of the Vashists, and relied instead on “self-serving contradictory testimony.” Accordingly, the court entered judgment against Tulshar and Sidhu for violations of FLSA’s overtime provisions.