Seyfarth Synopsis: Employer is caught by WHD investigator instructing its employees to lie during interviews, and provides falsified records, containing whited-out and edited time records, in order to conform to the Federal Labor Standards Act standards.

In a recent opinion, the Tenth Circuit ruled that a restaurant chain instructed its employees to lie during interviews, and provided falsified “whited-out” and “edited” employee time records, impeding a Department of Labor investigation, and found that the violation was willful (Perez v. El Tequila, LLC, No. 16-5002 (10th Cir., February 7, 2017).

This case provides a rather stunning look at what, as an employer, you don’t want to do during an official government workplace investigation. In this case the employer edited and changed time records, and then he lied about it, and then directed his employees to lie about it. 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 “whited-out” and edited to conform with the Federal Labor Standards Act (FLSA).”

In addition, “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.”

In its post-trial motion, the government argued that the owner 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 Court 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.

In light of this Circuit Court opinion, employers may wish to consider the ramifications of this case as they analyze their management systems, policies, procedures, and training systems. While this is an extreme case, to the extent that FLSA rules apply to your operations, make sure that all employees understand the requirements, and are following company policies and procedures to ensure FLSA compliance. (And don’t lie during a government agency’s interview – they really, really, don’t like that!)