## Facts

- The Secretary of Labor sued an automobile dealership and its officers to stop alleged Fair Labor Standards Act (FLSA) minimum-wage and recordkeeping violations and to recover unpaid minimum wages for many car salespersons.
- Salespersons were generally paid a $56 weekly base salary plus commissions and bonuses.
- The dealership’s time records reflected 36-hour workweeks, but the court found sales staff typically worked about 55 hours per week before January 1, 1976 (with limited exceptions).
- Employees were required to sign time slips reflecting the understated hours.
- Many salespersons received use of demonstrator vehicles; the benefit was primarily connected to sales duties and was not consistently valued or treated as wages in the employer’s records.
- The employer deducted a fixed $2.50 per week for insurance from employees who used demonstrator vehicles.
- The applicable statutory minimum wage during the relevant period ranged from $1.60 to $2.65 per hour; some weeks salespersons earned only the $56 base pay, which fell below minimum wage when measured against hours actually worked.

## Issues

1. Whether the FLSA’s two-year or three-year statute of limitations applied (i.e., whether the violations were willful).
2. How to determine hours worked and wages due when the employer’s records were inaccurate and understated.
3. Whether minimum-wage compliance could be assessed by averaging compensation across pay periods, and whether demonstrator-vehicle use could be credited as “wages” to cure weekly shortfalls.
4. What injunctive and back-pay relief was appropriate.

## Decision

- The court applied the three-year statute of limitations.
- The court found that, with limited exceptions, affected salespersons worked 55 hours per week prior to January 1, 1976.
- The court held defendants violated FLSA minimum-wage provisions and recordkeeping requirements.
- The court enjoined future violations and awarded unpaid minimum wages for the three-year period preceding the complaint, calculated on a workweek-by-workweek basis.

## Legal Principles

- The FLSA limitations period is three years when violations are willful; systematic under-recording of hours and persistent sub-minimum weekly pay can support willfulness.
- When an employer fails to keep accurate records, the Secretary may prove hours worked and damages by evidence permitting a just and reasonable inference; the employer then must rebut that inference.
- Minimum-wage compliance is determined by the workweek; employers may not offset sub-minimum weeks with higher-earning weeks through averaging.
- Non-cash benefits count toward wages only if they are bona fide, part of the compensation arrangement, and properly valued and recorded; business-oriented benefits not consistently treated as wages cannot be retroactively valued to satisfy minimum-wage obligations.
- Employers must make and preserve accurate records of hours worked and wages paid; maintaining knowingly understated time records violates the FLSA recordkeeping provisions.

## Conclusion

The court held that the dealership’s pay and timekeeping practices produced willful, workweek-level minimum-wage and recordkeeping violations, warranted a three-year recovery period, required back-wage payments based on reasonably inferred hours worked, and justified injunctive relief to prevent recurrence.


Marshall v. Sam Dell's Dodge Corp., 451 F. Supp. 294 (N.D.N.Y. 1978)