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District court affirms damages award in wage disability case

SHERRY KARABIN
Legal News Reporter

Published: March 22, 2024

Can an employer rely on a Fair Labor Standards Act (FLSA) provision that allows individuals with disabilities to be paid less than minimum wage if the specific condition does not directly impact their capacity to perform their job tasks?
Not according to a recent U.S. District Court for the Northern District of Ohio opinion in Seneca Re-Ad Industries, Inc. v. Secretary of the Department of Labor et al., 3:20-cv-02325-JJH, which makes it clear the employer must demonstrate a direct connection between the disability and its impact on the worker’s productivity in order to pay subminimum wages.
The case involves three disabled individuals, represented by Disability Rights Ohio (DRO) and Brown, Goldstein & Levy, who worked for Seneca Re-Ad Industries Inc., which operates a sheltered workshop in Fostoria, Ohio.
The workshop is overseen by the Seneca County Board of Developmental Disabilities and performs work for the international flooring company Roppe Corporation.
The three employees—Ralph “Joe” Magers, Pamela Steward and Mark Felton—did finishing and packaging work at the facility.
The Jan. 4, 2024 ruling issued by U.S. District Judge Jeffrey J. Helmick affirmed 2017 and 2020 decisions from the U.S. Department of Labor that awarded the workers back pay and liquidated damages, finding that the Department of Labor’s determination that Seneca failed to show a connection between the employees’ disabilities and their productivity was neither “plainly unreasonable” nor “arbitrary and capricious.”
Judge Helmick also rejected Seneca’s argument that the administrative law judge who initially ruled on the matter was not properly appointed in accordance with the Constitution because it failed to raise the issue in a timely fashion.
Disability Rights Ohio Executive Director Kerstin Sjoberg said the court’s action “affirms our belief that having a disability does not make one unworthy of fair pay.”
Attorneys from Brown, Goldstein & Levy also applauded Judge Helmick’s decision.
“The court’s ruling upholding the Department of Labor’s landmark decision is an important step forward in the fight to curtail payment of subminimum wages to individuals with disabilities,” said Brown, Goldstein & Levy partner Kevin Docherty.
Stephen P. Postalakis, a shareholder at Haynes Kessler Myers & Postalakis, which represented Seneca Re-Ad Industries, declined to comment on the case.
It was back in November 2015 that DRO, with the support of the National Federation of the Blind, filed the original complaint with the Wage and Hour Division of the Department of Labor challenging the workers’ receipt of subminimum wages.
Seneca Re-Ad Industries utilized Section 14(c) of the Fair Labor Standards Act, which authorizes employers who have received a certificate from the Wage and Hour Division to pay subminimum wages (less than federal minimum wage) to workers who have disabilities for the work being performed.
The three employees in the case had varying disabilities. Magers was diagnosed with optic atrophy and is legally blind, Steward is blind in her right eye and has an intellectual disability, asthma, and colitis, and Felton is autistic.
In February 2016, U.S. Department of Labor Administrative Law Judge Steven D. Bell ruled in favor of the workers, writing that the use of this provision was not “justifiable given the nature and extent” of the individuals’ “respective disabilities,” determining that the respondent (Seneca Re-Ad Industries) “failed to demonstrate that the Petitioners are ‘impaired by a physical or mental disability . . . for the work to be performed’ by each Petitioner at the Respondent's Fostoria, Ohio manufacturing facility.”
He concluded that by failing to pay minimum wages to the individuals, Seneca Re-Ad Industries violated §206 of the Act.
Judge Bell awarded back pay and liquidated damages to Magers, Steward and Felton based on evidence submitted by DRO of the employees’ wages from Dec. 28, 2012 through Dec. 25, 2015.
Seneca Re-Ad Industries asked the Administrative Review Board to overturn the decision, arguing that the employees’ disabilities impaired their productivity and that the employees were not entitled to liquidated damages.
The Administrative Review Board upheld Judge Bell’s ruling but found that he erred in utilizing the state minimum wage to calculate the damages instead of federal minimum wage law.
The board then sent the matter back to Judge Bell to recalculate the damages based on the federal minimum wage rate.
“In a follow-up hearing in June 2018, Judge Bell ordered back pay for the entire time our clients worked at Seneca Re-Ad,” said Sjoberg.
Seneca appealed the new decision to the Administrative Review Board challenging the calculation and, for the first time, arguing that Judge Bell was improperly appointed under the Appointments Clause of the U.S. Constitution.
After the ARB rejected these arguments and affirmed the administrative law judge’s decision on Sept. 14, 2020, attorneys for Seneca filed a complaint with the U.S. District Court, asking for a declaratory judgment that the Administrative Review Board erred in adopting Judge Bell’s decisions.
DRO and Brown, Goldstein & Levy filed a motion on behalf of the employees to intervene in the district court case, which was granted.
In its challenge to the Administrative Review Board ruling, attorneys for Seneca Re-Ad Industries argued that the decision constituted “improper rule making” by creating “a new evidentiary standard that did not previously exist,” calling the decision arbitrary and capricious because Judge Bell and the Administrative Review Board “ignored the clear evidence as to the [Employees’] poor productivity,” including evidence that the employees failed to match the production standard “almost all of the time.”
Judge Helmick determined that the Administrative Review Board did not ignore the evidence, writing in his opinion that, “The ARB instead noted that it was Plaintiff’s ‘burden to show the connection’ between the Employees’ lower productivity and their disabilities and concluded ‘it failed to meet that burden.’”
He noted that the Administrative Review Board said there was “nothing inherent” in the jobs the employees performed “that would make someone with blindness, an intellectual disability, or Asperger’s Syndrome necessarily less productive” at the tasks they were assigned.
Judge Helmick also determined that Judge Bell was properly appointed and rejected Seneca’s argument that the FLSA did not allow liquidated damages to be awarded.
The court ordered the three employees to be paid a total of $87,026.64.
“The judge made it clear that a business cannot just claim that an employee’s disability reduces their productivity, they have to show a clear connection between the two in order to pay them subminimum wages,” said Sjoberg. “In doing so, there needs to be some type of evaluation and the evidence can’t be based on observations or anecdotal in nature.”



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