JUSTIN NOVICK; CHRIS KEHN; JAMES ABRAHAM; CHARLES BETHAS, Plaintiffs - Appellees
SHIPCOM WIRELESS, INCORPORATED, Defendant-Appellant
from the United States District Court for the Southern
District of Texas.
JOLLY, SMITH, and COSTA, Circuit Judges.
Grady Jolly, Circuit Judge.
appeal is from a judgment after a jury trial in which Shipcom
Wireless was found to have misclassified the Plaintiffs, its
former employees, as exempt from the overtime requirements of
the Federal Labor Standards Act (FLSA), 29 U.S.C. § 201
et seq. The Plaintiffs were awarded both actual and
liquidated damages for unpaid overtime. On appeal, Shipcom
argues that the trial court abused its discretion in two
respects. First, Shipcom argues that the court erroneously
denied its motion to present opening and closing arguments.
Second, Shipcom argues that the court erred in admitting
evidence of an internal audit that led Shipcom to reclassify
some of the Plaintiffs as nonexempt. We affirm.
Wireless, Inc. is a supply-chain management and technology
company, which developed an inventory-management software
system called "Catamaran." In 2013, the Department
of Veterans Affairs awarded Shipcom a contract to implement
Catamaran at VA hospitals around the United States. With that
new contract came substantial growth; to meet the needs of
the contract Shipcom grew from a size of 20-30 employees to
over 200 employees.
those hired during this period of growth were the four
Plaintiff-Appellees in this case: Justin Novick, Chris Kehn,
Charles Bethas, and James Abraham. Novick, Kehn, and Bethas
were hired as "Trainers." They traveled to various
VA hospitals where the Catamaran system had been installed
and trained the hospital staff in how to use the system.
Abraham was hired as a "Technical Support
Engineer." He traveled to various VA hospitals, helped
install the Catamaran system, and trained hospital staff on
four Plaintiffs were hired at an annual salary, rather than
an hourly wage. Thus, Shipcom treated them as exempt from the
overtime requirements of the FLSA, which requires that
covered and nonexempt employees be paid at an hourly rate and
compensated at least one-and-one-half times the regular
hourly rate for hours worked in excess of forty hours per
week. 29 U.S.C. § 207(a)(1).
in 2015, Shipcom engaged in an audit to reevaluate whether
positions in the company were properly classified as exempt
or nonexempt from FLSA overtime rules. Shipcom ultimately
decided to reclassify the Trainer position as nonexempt going
forward and to pay its Trainers at an hourly rate. Using past
hours that had been logged by the Trainers for the purpose of
billing the VA, Shipcom calculated the hours that the
Trainers had worked over forty in each workweek prior to the
reclassification. Bethas and Kehn, who were still working at
Shipcom at the time, were given backpay equal to their
calculated overtime due, increased by five percent. Novick,
who was no longer employed by Shipcom at the time the audit
was completed, was not given backpay for overtime worked.
Abraham's position was not reclassified, and he continued
to be paid as an exempt employee.
four Plaintiffs later sued Shipcom, alleging that they had
been misclassified as exempt employees. Novick and Abraham
sought backpay for unpaid overtime. And all four Plaintiffs
sought liquidated damages under 29 U.S.C. § 260,
contending that their original classification was not made in
time the case reached trial, only two disputed merits issues
remained. The first was whether the Plaintiffs' job
duties meant that they fell within the
"administrative" exemption from the FLSA's
overtime requirements. The second was whether Shipcom acted
in good faith in its original classification of the
Plaintiffs as exempt.
trial, Shipcom moved to present opening and closing
arguments, arguing that this order was appropriate because it
bore the burden of proof on both remaining issues. That
motion was denied. Shipcom also moved to exclude from the
jury evidence related to the audit and reclassification.
Shipcom argued that this evidence was inadmissible under
Federal Rule of Evidence 407 because it was a
"subsequent remedial measure." Shipcom also argued
that evidence of the audit was inadmissible under Rules 401
and 402 because it was not relevant to whether Plaintiffs
were exempt, or alternatively, under Rule 403, because its
prejudicial effect substantially outweighed its probative
value. These motions were also denied.
jury found that the four Plaintiffs were in fact nonexempt
under the FLSA and had therefore been misclassified. The jury
also issued an advisory finding that Shipcom had not acted in
good faith in classifying Plaintiffs as exempt. The trial
court adopted the jury's advisory finding and awarded
liquidated damages. The trial court then issued a final
judgment awarding each of the Plaintiffs actual damages plus
liquidated damages. Shipcom timely appealed, contesting ...