Rosales, et al v. Lore

* Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
United States Court of Appeals
Fifth Circuit
F I L E D
August 19, 2005
Charles R. Fulbruge III
Clerk
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 04-50311
Summary Calendar
JOSE ROSALES; ESTHER ROSALES,
Plaintiffs-Appellants,
versus
DONA LORE,
Defendant-Appellee.
--------------------
Appeal from the United States District Court
for the Western District of Texas
USDC No. SA-02-CV-968-PM
--------------------
Before JOLLY, DAVIS, and OWEN, Circuit Judges.
PER CURIAM:*
Following the termination of their employment, Jose and
Esther Rosales filed suit against their employer, Dona Lore,
raising claims for unpaid wages under the Fair Labor Standards
Act (“FLSA”) and for breach of contract under Texas state law.
The parties agreed to a bench trial before a magistrate judge.
After a bench trial, the magistrate judge entered judgment in
favor of Lore on all claims. The Rosaleses filed the instant
appeal.

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The Rosaleses first challenge the magistrate judge’s
decision to credit Lore’s records of their work hours instead of
their own records. An employee bringing suit for unpaid wages
under the FLSA bears the burden of proving that he performed work
for which he was not properly compensated. Anderson v. Mt.
Clemens Pottery Co., 328 U.S. 680, 686-87 (1946). If the
employer’s records are “proper and accurate,” the employee may
rely on these records; if the employer’s records are “inaccurate
or inadequate,” the employee may produce “sufficient evidence to
show the amount and extent of that work as a matter of just and
reasonable inference.” Id. at 687. If the employee does so, the
employer must “come forward with evidence of the precise amount
of work performed or with evidence to negative the reasonableness
of the inference to be drawn from the employee’s evidence.” Id.
at 687-88. Factual findings regarding hours worked are reviewed
for clear error. See Anderson, 328 U.S. at 689.
Although Lore’s records are not as clear or complete as they
could have been, the Rosaleses’ records were insufficient to
allow a “just and reasonable inference” of the hours they worked.
The Rosaleses admitted that their records were a reconstruction
prepared after the termination of their employment. Jose Rosales
also claimed that he had worked 12 or more hours per day, seven
days a week, for several months. Such claims strain credibility,
especially when considered in light of the testimony of Lore’s
witnesses that the tasks the Rosaleses were hired to perform took

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less than two hours per day to complete. The magistrate judge
did not clearly err by accepting Lore’s records.
The Rosaleses also challenge the magistrate judge’s
conclusion that the mobile home that Lore provided them, rent-
free, was sufficient to compensate them for their work. The
magistrate judge accepted Lore’s assertion that this trailer
could be rented for $650 per month.
An employer generally may deduct the “reasonable cost” of
board, lodging, or other facilities provided to employees. See
29 U.S.C. § 203(m). There are three methods an employer can use
to ascertain whether any furnished facilities are part of “wages”
within the meaning of 29 U.S.C. § 203(m); because Lore did not
request a determination from either the Administrator of the Hour
and Wage Division or the Secretary of Labor under the second or
third methods, only the method described in 29 C.F.R. § 531.3 is
relevant here. See id.; 29 C.F.R. § 531.33. The formula in 29
C.F.R. § 531.3 provides that the reasonable cost to the employer
of furnishing his employees with lodging or other facilities is
no more than the cost of operation and maintenance, including
adequate depreciation, plus a reasonable allowance (not more than
5 1/2 percent) for interest on the depreciated amount of capital
investment by the employer. 29 C.F.R. § 531.3(c). In order to
substantiate “actual cost,” an employer must “maintain and
preserve” records of “itemized accounts showing the nature and

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amount of any expenditures entering into the computation of the
reasonable cost.” 29 C.F.R. § 516.27(a)(1).
In the instant case, Lore failed to comply with the
applicable regulations for determining the “reasonable cost”
of the trailer. Lore provided only her own unsubstantiated
assertions that she could have rented the trailer for $650 per
month. We conclude that the magistrate judge clearly erred by
accepting Lore’s estimate of the fair rental value of the trailer
and in deducting this amount from any wages owed to the
Rosaleses.
The Rosaleses also challenge the magistrate judge’s
rejection of their supplemental state-law claim for breach of
contract. The magistrate judge found that, even if it was
assumed that Lore had signed the letter/contract presented by the
Rosaleses, there was no evidence that she had read or understood
the import of the letter before signing. The magistrate judge
failed to address relevant Texas law that provides that a party
to a contract is presumed to have read and understood its terms.
See Estes v. Republic Nat’l Bank of Dallas, 462 S.W.2d 273, 276
(Tex. 1970) (absent a showing of “fraud or imposition,” failure
to read a contract before signing is not ground for avoidance);
Castroville Airport, Inc. v. City of Castroville, 974 S.W.2d 207,
211 (Tex. App. 1998) (“Contracting parties are obligated to
protect themselves by reading what they sign and are presumed, as
a matter of law, to know the contract’s terms.”). We conclude

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that the magistrate judge erred in rejecting the Rosaleses
breach-of-contract claim on this basis.
For the reasons stated above, we VACATE the magistrate
judge’s judgment and REMAND this case for further proceedings
consistent with this opinion.

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