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D.Kan.: “A & P Mechanic” Was Non-Exempt; Learned Professional Exemption Was Inapplicable, Because Plaintiff’s Work Was Routine Mechanical Work

Dressler v. Kansas Copters and Wings, Inc.

This decision was rendered following a bench trial.  Plaintiff an “A&P Mechanic” sought unpaid overtime pursuant to the Fair Labor Standards Act (“FLSA”).  The Defendant asserted that Plaintiff was exempt from overtime under the professional exemption.  Rejecting Defendant’s assertions, the Court ruled that Plaintiff was not professionally exempt, because his job duties did not meet any of the duties requirements for the application for such exemption.

Reciting its findings of fact, the Court stated:

“Plaintiff David Dressler is a certified A & P mechanic. After graduating from high school, plaintiff joined the United States Marine Corps. For five years, plaintiff worked as an aviation hydraulics mechanic in the Marines. Plaintiff then worked several years as a dental assistant. In January 2005, plaintiff enrolled in the Aviation Institute of Maintenance. Plaintiff obtained his A & P certification in August 2006. Plaintiff was then employed by Midwest Corporate Aviation and Wells Aircraft. On March 15, 2008, plaintiff applied for a position with Kansas Copters & Wings, Inc.

Kansas Copters is a factory authorized dealer and service center for the Robinson R22 helicopter. The president of the company, defendant Earl Schreiber, decided to offer plaintiff a position because of plaintiff’s experience with helicopters in the military and his education. On March 21, plaintiff signed an employment agreement with Kansas Copters. Plaintiff additionally signed a non-compete agreement in which he agreed to not accept employment for any company that offers the same services as defendants.

The employment agreement states in pertinent part:

Your primary function would be to work as an A & P mechanic. All of our employees are responsible for facility maintenance and janitorial duties…. You may be required to work on your days off and/or holidays from time to time. You will be required to travel and attend courses as needed by the company.

Should you terminate your employment we require a thirty (30) day advance notice. Any notice of less than thirty (30) days and/or employment of less than three years would require for you to reimburse the company(s) any funds spent on your training, attending courses, and any other expenses …

As such, the starting salary for this overtime exempt position considering your qualifications is $600.00 per week … Compensatory time is earned hour for hour for every hour in excess of Sixty (60) hours per work week…. The company(s) reserve the right to withhold compensatory time and/or regular pay, and/or vacation time and/or holiday pay in the amount equal to what the company(s) have paid for aforementioned training and expenses, etc., until you have served at least three (3) years continued employment.

Earl Schreiber drafted the employment agreement after consulting with his attorney. Schreiber determined that an A & P mechanic at his company would be exempt from the overtime provisions in the FLSA due to the specialized training and unique services offered by defendants. In making his determination, Schreiber researched the issue of overtime by reviewing brochures from the federal government and browsing the internet. Schreiber also contacted other businesses which contracted with Robinson aircraft. Schreiber learned that these businesses also paid their mechanics a weekly rate. Schreiber therefore determined that the position of an A & P mechanic would be exempt from overtime.

Plaintiff’s work at Kansas Copters was supervised by Laurence Schreiber, who was also an A & P mechanic. Plaintiff was required to perform routine maintenance on Robinson helicopters. Plaintiff was also required to diagnose issues that arose with Kansas Copters’ customers’ aircraft for non-scheduled maintenance. Plaintiff would adjust flight control surfaces, make repairs and adjustments to the engine, and replace parts. Plaintiff would then certify whether the aircraft was safe for flight. In addressing and diagnosing problems, plaintiff would review the flight history and utilize the manuals that were specific to the aircraft. Plaintiff did not deviate from the manuals. Plaintiff did not modify the flight systems and he was not hired to design modifications to the aircraft.

In addition to making repairs at the airport in Augusta, plaintiff was also expected to service Robinson helicopters at other locations. On one occasion during his employment, plaintiff traveled to Nebraska to make repairs on a Robinson helicopter. Plaintiff was also required to perform maintenance on the facility. Plaintiff would clean the floors, paint the hangar and pull weeds. All employees at Kansas Copters were required to assist in the upkeep of the facility. Plaintiff was required to do this type of work when he was not working on a helicopter.

Plaintiff’s work schedule initially required him to work from 8 a .m. to 5 p.m., Monday through Friday. Plaintiff then attended the Robinson Training Course in California during the week of May 11. After returning from the course, plaintiff was certified to work on Robinson helicopters. Plaintiff then began working on Saturdays for eight hours in addition to his regular forty-hour work week. Plaintiff’s compensation rose to $625 a week due after successful completion of the training course.

Plaintiff’s last day of employment with Kansas Copters was August 20, 2008. Instead of issuing plaintiff his final check in the amount of $625, Kansas Copters withheld plaintiff’s pay for reimbursement for the Robinson course.”

Determining that Plaintiff was not professional exempt, the Court reasoned:

“To qualify for the learned professional exemption, an employee’s primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. This primary duty test includes three elements:

(1) The employee must perform work requiring advanced knowledge;

(2) The advanced knowledge must be in a field of science or learning; and

(3) The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

29 C.F.R. § 541.301(a).

First, in determining whether the initial element is met, the court is guided by the definition set forth in the regulations:

The phrase “work requiring advanced knowledge” means work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment, as distinguished from performance of routine mental, manual, mechanical or physical work. An employee who performs work requiring advanced knowledge generally uses the advanced knowledge to analyze, interpret or make deductions from varying facts or circumstances. Advanced knowledge cannot be attained at the high school level.  29 C.F.R. § 541.301(b).

The testimony in this case established that plaintiff performed his position as an A & P mechanic in strict compliance with guidelines set forth by the manufacturer. Plaintiff could not deviate from the design of the helicopter or make any modifications without specific input from the manufacturer. Plaintiff’s work was routine and he worked on the same type of aircraft. The court finds that plaintiff’s work was not predominantly intellectual in character. Plaintiff’s work was routine mechanical work and therefore does not qualify for the learned professional exemption.

Even if the court were to find that the first element was met, the final two elements have not been proven. The second element is as follows:

The phrase “field of science or learning” includes the traditional professions of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical and biological sciences, pharmacy and other similar occupations that have a recognized professional status as distinguished from the mechanical arts or skilled trades where in some instances the knowledge is of a fairly advanced type, but is not in a field of science or learning.  29 C.F.R. § 541.301(c).

Clearly, an aircraft mechanic does not fall into the traditional professions listed in the regulation. Defendants cite Paul v. Petroleum Equip. Tools Co., 708 F.2d 168 (5th Cir.1983) to support the position that pilots have been found to qualify for the professional employee exemption. In Paul, the court determined that flying is a field of science or learning because the pilot “must acquire extensive knowledge of aerodynamics, airplane regulations, airplane operations, instrument procedures, aeronautical charts, and weather forecasting.” 708 F.2d at 173. Plaintiff, however, is not a pilot. Plaintiff’s knowledge is not similar to what is required of a pilot. Plaintiff’s learning is of a mechanical nature and that is excluded by the regulation.

The final element has also not been met. The regulations explain the element as follows:

The phrase “customarily acquired by a prolonged course of specialized intellectual instruction” restricts the exemption to professions where specialized academic training is a standard prerequisite for entrance into the profession. The best prima facie evidence that an employee meets this requirement is possession of the appropriate academic degree. However, the word “customarily” means that the exemption is also available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction. Thus, for example, the learned professional exemption is available to the occasional lawyer who has not gone to law school, or the occasional chemist who is not the possessor of a degree in chemistry. However, the learned professional exemption is not available for occupations that customarily may be performed with only the general knowledge acquired by an academic degree in any field, with knowledge acquired through an apprenticeship, or with training in the performance of routine mental, manual, mechanical or physical processes. The learned professional exemption also does not apply to occupations in which most employees have acquired their skill by experience rather than by advanced specialized intellectual instruction. 29 C.F.R. § 541.301(d).

While plaintiff clearly gained his education from technical school and Marine Corps experience, advanced education is not required in order to gain FAA certification. Plaintiff’s short course of training with the manufacturer of Robinson helicopters does not amount to a prolonged course of specialized intellectual instruction. Defendants have again cited cases which deal only with pilots. Plaintiff is not a pilot. The language in the regulation contemplates that some individuals may qualify for the exemption without formal education but then cites rare examples of occupations which routinely required advanced education. The examples cited are clearly those professions which are highly intellectual in nature and not mechanical, like that of an A & P mechanic.

The court finds that plaintiff’s position as an A & P mechanic is not exempt under § 213(a)(1) because he does not qualify as a professional.”

To read the entire decision, click here.

W.D.Tenn.: “Maintenance Director” Not Executive Exempt; Management Not Primary Duty; Defendant Failed To Establish Plaintiff Supervised 2 Or More Co-Employees

Jones v. FMSC Leasehold, LLC

Before the Court was Plaintiff’s Motion for Partial Summary Judgment seeking a finding that he was not executive exempt as a matter if law, because management was not his primary duty, and because he did not supervise 2 or more employees. The Court granted Plaintiff’s Motion, agreeing that neither of these required elements of the executive exemption were present here.

Plaintiff was employed at High Pointe Health and Rehabilitation Center (“the facility”) from June 19, 2005 to February 5, 2008. Starting in November 2005 and continuing until his employment ended, Plaintiff served as Maintenance Director at the facility. Plaintiff averred that he had only one assistant reporting to him during that time, and Sanford Mann, the administrator of the facility, verified that Plaintiff had only one assistant during the time Mann worked at the facility from June 2007 to January 2008. Plaintiff contended that his primary job duty as Maintenance Director was manual labor performing general maintenance tasks at the facility. Plaintiff received a salary and was not compensated by the hour. During weeks in which he worked more than forty (40) hours, Plaintiff was not paid one and one-half (1.5) times his regular rate of pay. Plaintiff argued that Defendant could demonstrate that Plaintiff was an exempt employee for purposes of overtime pay as defined under the FLSA and its regulations.

First, the Court discussed Defendant’s failure to raise an issue of triable fact regarding Plaintiff’s primary duty, stating, “[t]he Court holds that Defendant has failed to carry its burden as to the second element, whether Plaintiff’s primary duty was management. Defendant argues that Plaintiff held the title “Maintenance Director” at the facility and his primary duty was to manage the maintenance department and the assistants who reported to him. According to Defendant, Plaintiff had input on the hiring, firing, promotion and assignment of his assistants and was able to set his own work schedule. Plaintiff disputes that he ever had actual managerial duties and argues that his duties were limited to only maintenance tasks.

Rather than rely on a job description or an employee’s job title, the Court must analyze an employee’s “actual duties” in light of the factors set forth and defined in the Department of Labor regulations. With respect to this second element of the exemption, Defendant must prove that Plaintiff’s primary duty was “management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof.”The regulations implementing the FLSA define “management” to include activities such as interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures.

The phrase “a customarily recognized department or subdivision” indicates “a unit with permanent status and … a continuing function.” Furthermore, “[c]ontinuity of the same subordinate personnel is not essential to the existence of a recognized unit with a continuing function.”

Perhaps most importantly, the Court must determine that management was the employee’s primary duty in order for the exemption to apply. A “primary duty” means “the principal, main, major or most important duty that the employee performs.”

Based on the record before the Court, Defendant has failed to adduce evidence from which a reasonable juror could conclude that Plaintiff’s primary duty was management. In his affidavit Plaintiff has stated that his primary job duties were as follows: manual labor such as replacing lights, replacing receptacles, cutting the lawn, law (sic) maintenance, cleaning and servicing heating and air units, minor plumbing, painting, carpeting, tiling floors, minor pipe replacement, some small motor repair, and other preventive maintenance including record keeping and documentation….

Defendant has not demonstrated the amount of time Plaintiff spent performing exempt work or the scope of discretion Plaintiff was granted in performing that work. Defendant has presented no evidence concerning Plaintiff’s relative freedom from direct supervision other than to state Defendant could set his own schedule. Defendant has failed to provide evidence about wages paid to other employees including employees Plaintiff allegedly supervised for the same kind of nonexempt work performed by Plaintiff. As a result, Defendant has provided very little from which a reasonable juror could find that this element is satisfied.

Defendant has proffered a job description for Plaintiff’s position. However, there is no corroborating evidence that the duties listed in the five-page job description were the actual duties carried out by Plaintiff….

Having failed to meet its burden as to this element, the Court concludes that Defendant is not entitled to the affirmative defense that Plaintiff was an exempt employee.”

The Court further held that Defendant could not satisfy the so-called 2 or more element either.

Therefore, the Court held that, as a matter of law, Plaintiff was not subject to the FLSA’s executive exemption.

D.Mass.: Motor Carrier Act (MCA) Exemption Not Fleet-wide For Drivers Of Vehicles Less Than 10,000 Pounds, Where Defendant Not Overwhelmingly Commercial Carrier

Brooks v. Halsted Communications, Ltd.

This case was before the Court on cross motions for partial summary judgment filed by the parties with respect to the fleet-wide applicability of the Motor Carrier Act (MCA), to the entire putative class, Defendants’ employees who drove vehicles weighing less than 10,000 pounds, prior to August. The Court framed the issue as “whether, for the period following SAFETEA-LU but prior to the enactment of the TCA, Defendants have carried their burden of showing that the MCA exemption applied to employees who exclusively operated light vehicles.” Whereas Defendants asserted, as a “commercial carrier” all of its drivers were/are exempt, Plaintiffs cited to well-established law that only those individual drivers coming within the MCA’s definition could be potentially exempt. The Court agreed with Plaintiffs entering a detailed Order discussing the issue, and denying Defendants’ motion for summary judgment:

“Plaintiffs are technicians employed by Defendant Halsted Communications, Ltd. (“Halsted, Ltd.”). Defendants are Halsted Ltd.; Halsted Communications, LLC; and Kirk Halsted. The heart of the issue is whether, for a certain period of time, Defendants were obliged to pay Plaintiffs time and a half for overtime as required by the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et seq., and Mass. Gen. Laws ch. 151, §§ 1A and 1B, or were freed from any such obligation by virtue of an exemption set forth in the Motor Carrier Act (“MCA”), 29 U.S.C. § 213(b)(1) and adopted by Massachusetts, Mass. Gen. Laws ch. 151, § 1A(8). The maze-like weave between the FLSA requirement and the MCA exemption has evolved through three different federal statutory enactments and has generated a modest burst of conflicting decisional law. The parties’ cross motions seek contrasting interpretations of the law.”

Reciting the relevant facts the Court said, “[e]ach Plaintiff was employed as a technician by Halsted Ltd. at some point between August 10, 2005 and the present. A technician’s job responsibilities included driving vehicles between work sites in connection with the activation, installation and service of satellite television equipment. Not a single plaintiff ever drove a vehicle that weighed more than 10,000 pounds. Indeed, at the relevant time, less than one percent of Halsted Ltd.’s entire fleet comprised vehicles weighing over 10,000 pounds. Since March 13, 2007, Defendant Halsted Ltd. has been a motor carrier registered with the United State Department of Transportation (“USDOT”) based on its operation of one or more vehicles weighing over 10,000 pounds.”

The Court discussed the differing case law at length, “As noted, the question of whether a “hybrid” motor carrier-i .e., one with drivers operating vehicles weighing both above and below 10,000 pounds-was obliged to pay FLSA overtime to its drivers of lighter vehicles before June 6, 2008 has produced conflicting answers. The weight of district court authority (no appellate decision has as yet appeared), however, strongly favors Plaintiffs. Cases supporting Plaintiffs’ position include Hernandez v. Brink’s, Inc., No. 08-20717-CIV, 2009 U.S. Dist. LEXIS 2726 (S.D.Fla. Jan. 15, 2009) (ruling that mixed fleets containing both commercial and non-commercial vehicles should be treated for FLSA purposes as two separate sub-fleets); Tews v. Renzenberger, Inc., 592 F.Supp.2d 1331, 1346 (D.Kan.2009) (rejecting argument that “the mere presence of commercial motor vehicles in [a] fleet renders all employee-drivers exempt under the MCA exemption”); Vidinliev v. Carey International Inc., 581 F.Supp.2d 1281 (N.D .Ga.2008) (denying summary judgment regarding the applicability of the MCA exemption for claims arising after August 10, 2005 where the defendant operated a mixed fleet of commercial and noncommercial motor vehicles); Kautsch v. Premier Communications, 502 F.Supp.2d 1007 (W.D.Mo.2007) (ruling that the MCA exemption did not apply to the plaintiffs’ claims after August 10, 2005 because they did not operate commercial motor vehicles). Cases supporting Defendants include Collins v. Heritage Wine Cellars, Ltd., No. 07-CV1246, 2008 U.S. Dist. LEXIS 104555 (N.D.Ill.Dec. 29, 2008) and Tidd v. Adecco USA, Inc., No. 07-11214-GAO, 2008 U.S. Dist. LEXIS 69825 (D .Mass. Sept. 17, 2008).”

With its detailed analysis of the issue the Court concluded, “the court will side with Plaintiffs here and will hold that Defendants did not enjoy the exemption and Plaintiffs were entitled to overtime pay during the pertinent time period… a contrary ruling would lead to the absurd result that an employer with 1,000 employees all driving vehicles weighing less than 10,000 pounds would be able rid itself of any obligation to pay FLSA overtime to these otherwise covered employees simply by buying one vehicle weighing over 10,000 pounds and assigning one employee to drive it occasionally across state lines. It is a crazy world, but we can hope that it is not yet that crazy.”

W.D.Va.: “Assistant Manager” At Auto Parts Store Not Administrative Exempt; Damages To Be Calculated At Time And A Half Not Half-time

Brown v. Nipper Auto Parts and Supplies, Inc.

The case was before the Court on cross motions for summary judgment pertaining to whether Plaintiff was exempt from the FLSA’s overtime provisions under the FLSA. Additionally, Plaintiff moved for summary judgment on the issues of willfulness (3 year statute, as well as liquidated damages), and for a finding that the method under which his overtime should be calculated was the default time and a half method. As discussed below, the Court found Plaintiff nonexempt and further held that his damages were due to be calculated based on time and a half and not the fluctuating workweek’s half-time formula.

Addressing the exemption issue first, the Court noted, “Brown’s primary duties were sales and other non-exempt work, not running or servicing; the business. Nipper Auto attempts to characterize Brown’s duties as procurement and quality control, exempt activities; but since his activities generally concerned ordering auto parts based on customers’ requests, these duties are more aptly described as sales, a non-exempt activity. Roger Nipper has indicated no significant managerial decisions or changes that he has made during Brown’s tenure at Nipper Auto in which Brown had input. Indeed, Nipper Auto’s music section, where Brown is purported to have had primary authority, existed before Brown’s hiring and has continued to exist after his termination. Finally, Brown’s intermittent supervision of Shultz fails to show that his primary duty was an exempt activity.” Therefore, the Court found Brown nonexempt.

Later in the decision, the Court addressed the issue of calculating Plaintiff’s damages: “Nipper Auto argues that if Brown is entitled to overtime compensation, it should be calculated using the fluctuating workweek method of payment (the “FWW”), under which an employee’s overtime pay rate is half his regular pay rate. Brown argues that the FWW should not apply and that his overtime compensation rate should be one and one-half times his regular rate. The court agrees with Brown.

Generally, the rate for overtime compensation is one and one-half times the regular rate of pay, 29 U.S.C. § 207(a)(1), but when the FWW method applies, the rate for overtime compensation is one-half the regular pay. 29 C.F.R. § 778.114(a) (2003); Knight v. Morris, 693 F.Supp. 439, 445 (W.D.Va.1988). The FWW method is not an exception to the normal method of computing overtime compensation under the FLSA, “[i]t merely provides an alternative means by which an employer can determine its employees’ regular and overtime rate of pay.” Flood v. New Hanover County, 125 F.3d 249, 252 (4th Cir.1997). The employer must satisfy five conditions in order to take advantage of the FWW calculation: (1) the employee’s hours must fluctuate from week to week, (2) the employee must receive a fixed salary, (3) the salary must meet the minimum wage standards, (4) the employee and the employer must have a clear mutual understanding that the salary (not including overtime premiums) is fixed regardless of the number of hours the employee works, and (5) the employee must receive overtime compensation for hours worked in excess of forty hours, not less than the one-half rate of pay. Id.; 29 C.F.R. § 778.114(a). Though the first three FWW requirements are established, the court finds that the FWW method does not apply because Nipper Auto cannot fulfill the fourth and fifth requirements.

Under the fourth requirement, the parties must have a clear mutual understanding that “the fixed salary is to be compensation for all straight time hours worked, whether few or many.” Mayhew, 125 F.3d at 219. The burden is on the employer to show the existence of a clear mutual understanding. Monahan v. County of Chesterfield, 95 F.3d 1263, 1275 n. 12 (4th Cir.1996). If the employer believed the employee was exempt from overtime compensation, “then it was not possible … to have had a clear mutual understanding … that [the employee] was subject to [a] calculation method applicable only to non-exempt employees who are entitled to overtime compensation.” Cowan v. Treetop Enter., 163 F.Supp.2d 930, 942 (M.D.Tenn.2001); (quoting Rainey v. Am. Forest & Paper Ass’n Inc., 26 F.Supp.2d 82, 102 (D.D.C.1998)).

Nipper Auto cannot establish the fourth requirement because its principal argument is that Brown is an FLSA-exempt employee not entitled to any overtime compensation; in the alternative, Nipper Auto argues that the parties had an implied understanding with Brown regarding his salary and overtime compensation. If Nipper Auto believed Brown was exempt, the requisite clear mutual understanding for the application of the FWW method could not have existed. Rainey, 26 F.Supp.2d at 102. Both parties understood that Brown would receive no additional salary no matter how many hours he worked in a given week, but § 778.114(a) specifies that the fixed salary does not include overtime premiums. The court finds that, because Nipper Auto believed Brown was an FLSA-exempt employee, it has failed to create a material issue of fact as to the clear mutual understanding required to apply the FWW method.

In addition to this clear mutual understanding, under the fifth FWW requirement, the employer must also demonstrate that the employee has actually received some form of overtime compensation. See Cowan, 163 F.Supp.2d at 941 (“Moreover, to comply 29 C.F.R. Section 778.114 requires a contemporaneous payment of the half-time premium for an employer to avail itself of the fluctuating workweek provision.”). Indeed, the Fourth Circuit has applied the FWW method only when the employee has received contemporaneous payment for overtime. See generally Flood, 125 F.3d at 252 (applying the FWW where the employer contemporaneously provided some form of overtime compensation); Griffin, 142 F.3d at 715 (same); Mayhew, 125 F.3d at 218 (same). It is undisputed that Nipper Auto did not pay Brown any overtime compensation during his employment. Because no form of overtime compensation was provided, Nipper Auto cannot apply the FWW method retroactively. Flood, 125 F.3d at 249; Griffin, 142 F.3d at 716. The court finds that Nipper Auto’s evidence is insufficient to allow a reasonable jury to conclude that Brown is subject to the FWW method of compensation; therefore, Brown’s overtime pay rate is one and one-half times his regular rate of pay. The court grants Brown’s motion for summary judgment on this matter.”

M.D.Fla.: “Field Supervisor” For Company Performing Finishing Services For Residential Builders Not Subject To Administrative Exemption

Cotten v. HFS-USA, Inc.

This case was before the Court on Defendant’s motion for summary judgment, alleging that Plaintiff, a “Field Supervisor,” for a construction “finishing” company, was exempt from the overtime provisions of FLSA under the “administrative exemption.” After reviewing the elements of the Administrative Exemption, the Court found that Plaintiff was not Administratively Exempt, because his primary duty was not directly related to the management of general business operations of Defendant, and because he did not exercise the requisite independent judgment or discretion with regard to matters of significance.

Addressing the “related to management of general business operations” prong first, the Court stated, “[b]ased on the undisputed evidence before the Court, it cannot be said that Cotten’s primary duties as a field supervisor were directly related to the management or general business operations of HFS. Although it can be said that Cotten “managed” certain assigned installation sites, his duties were concerned with ensuring that the installers received their work orders, retrieved the correct materials from the warehouse, and completed the installation job as specified in the contract and the work order and in compliance with specified standards. Cotten was not responsible for negotiating or executing contracts, creating work orders, or developing the applicable standards….

Cotten’s job duties are precisely the type that have been found to be consistent with production rather than administration. For example, in Sack v. Miami Helicopter Service, Inc., a court in the Southern District of Florida determined that an employee’s duties of opening work orders, planning repair work, ordering required materials, directing mechanics as to what work to perform, determining whether certain parts complied with F.A.A. standards, and directing repair or replacement of parts that failed inspection did not qualify as administrative tasks related to operation of the business. 986 F.Supp. 1456, 1470-71 (S.D.Fla.1997). The court found that these activities were an integral part of the production of the business and therefore did not directly relate to management policies or general business operations. Id.”

Next, the Court analyzed the “discretion or independent judgment” prong of the Administrative Exemption, stating, “Cotten spent much of his time performing inspections, which took place at all phases of the installation process. These inspections were conducted according to pre-established industry standards or the terms of the particular contract. (Id. at 5). Cotten had no specialized training and simply compared what he saw at the job site with the standards he had previously been directed to conform with. (Id.). He filled out forms documenting the inspection results, and spoke with builders or his supervisors when defects were noted.(Id.). These routine inspection duties did not require the exercise of significant discretion or independent judgment…

Of course, Cotten’s duties were not limited to inspections. If an installation was not completed properly or on time, Cotten was responsible for bringing the job into compliance, either by directing the original installer to make the necessary repairs or, on rare occasions, by retaining a second installer to do the necessary work. Although Crowder has attested that field supervisors were free to assign “the installers of their choice” to a particular job, this is not entirely true. HFS maintained a list of qualified installers that field supervisors were required to use. (Id.). Cotten has sworn that he never used an installer that was not on the approved list.”

Therefore, the Court concluded, “[u]pon due consideration of the record evidence regarding Cotten’s work activities, the Court concludes that Cotten’s primary duties at HFS did not involve the exercise of discretion and independent judgment with respect to matters of significance. As previously discussed, cases considering employees with very similar duties to Cotten have declined to apply the administrative exemption.”

The Plaintiff in this case is represented by Andrew Frisch. If you believe that you have been similarly misclassified as exempt under the FLSA, and wrongly denied overtime, call 1-888-OVERTIME or go to EMAIL CONSULTATION for a free consultation with Andrew Frisch today.

6th Cir.: Effect Of Impermissible Deductions On Exempt Status; Under Old Regs “Significant Likelihood” Standard All Weeks Rendered Non-Exempt; Under New Regs Only Weeks Where Impermissible Deductions Actually Occurred

Baden-Winterwood v. Life Time Fitness, Inc.

In this case, the 6th Circuit addressed a common issue raised in mis-classification cases: the effect of a compensation plan which makes impermissible deductions to otherwise exempt employees, whose exemptions require they be paid on a “salary basis.”

On July 10, 2007, the district court granted in part Plaintiffs’ motion for summary judgment, finding “that the deductions from the salaries of eight Plaintiffs were deductions resulting from ‘variations in the quality or quantity of the work performed,’ in violation of the salary-basis test.”Baden-Winterwood v. Life Time Fitness, No. 2:06-CV-99, 2007 U.S. Dist. LEXIS 49777, at *42 (S.D.Ohio July 10, 2007) (quoting 29 C.F.R. § 541.602(a)). However, the district court limited Plaintiffs’ recovery to overtime pay for the three pay periods in 2005-the periods ending November 9, November 23, and December 9-during which Life Time Fitness took actual deductions from Plaintiffs’ salaries. Id. The court dismissed all other claims for overtime pay, including, in their entirety, the claims of the ten Plaintiffs who appealed.

The issue before the Court was whether Plaintiffs’ compensation plans satisfy the salary-basis test. Prior to August 23, 2004, the salary-basis test, as defined by regulation, provided:

“An employee will be considered to be paid “on a salary basis” within the meaning of the regulations if under his employment agreement he regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of his compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. 29 C.F.R. § 541.118(a) (1973). In August 2004, the DOL updated the regulations defining the salary-basis test. The new regulation states: An employee will be considered to be paid on a “salary basis” within the meaning of these regulations if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. 29 C.F.R. § 541.602(a) (effective August 23, 2004). Under both versions, Life Time Fitness bears the burden of proving that Plaintiffs were paid: (1) a predetermined amount, which (2) was not subject to reduction (3) based on quality or quantity of work performed. Notably, however, rather than include the term “employment agreement,” the updated regulations focus on pay received. Compare29 C.F.R. §§ 541.118(a), 541.602(a).”

Significantly, the Court explained, “[f]or our purposes, the salary-basis test has two interpretations of the phrase ‘subject to,’ both of which are relevant here. In 1997, in Auer v. Robbins, 519 U.S. 452 (1997), the Supreme Court adopted the interpretation offered by the Secretary of Labor that the salary-basis test denies exempt status “if there is either an actual practice of making … deductions [based on variations in quality or quantity of work performed] or an employment policy that creates a ‘significant likelihood’ of such deductions.” Id. at 461. Specifically, the Auer Court held

‘The Secretary’s approach rejects a wooden requirement of actual deductions, but in their absence it requires a clear and particularized policy-one which “effectively communicates” that deductions will be made in specified circumstances. This avoids the imposition of massive and unanticipated overtime liability … in situations in which a vague or broadly worded policy is nominally applicable to a whole range of personnel but is not “significantly likely” to be invoked against salaried employees.’

Thus, under Auer, an employee is not paid on a salary basis if (1) there is an actual practice of salary deductions or if (2) an employee is compensated under a policy that clearly communicates a significant likelihood of deductions. Id.

Following Auer, on March 31, 2003, the DOL provided published notice on a proposed set of new FLSA regulations. See Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 68 Fed.Reg. 15,560 (Mar. 31, 2003). After a 90-day comment period, the DOL revised and released its final regulations, defining the exemptions under the FLSA. See Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 69 Fed.Reg. 22,122 (Apr. 23, 2004). The new regulations became effective on August 23, 2004. Id.

Under the new regulations, the Secretary of Labor reinterpreted the salary-basis test. Life Time Fitness argues that the DOL specifically eliminated the “policy” part of the Auer test, whereby a “significant likelihood” of improper deductions was sufficient to cause an employee to lose his or her FLSA exemption. The new regulations (” § 541.603“) provide that “[a]n actual practice of making improper deductions demonstrates that the employer did not intend to pay employees on a salary basis.” 29 C.F.R. § 541.603(a). Moreover, Life Time Fitness argues that the new regulations limit the scope of recovery by providing that “[i]f the facts demonstrate that the employer has an actual practice of making improper deductions, the exemption is lost during the time period in which the improper deductions were made for the employees in the same job classification working for the same managers responsible for the actual improper deductions.” 29 C.F.R. § 541.603(b).

In its comments, the DOL explains that while the new rule represents a departure from the Secretary’s position in Auer,”[t]he ‘significant likelihood’ test is not found in the FLSA itself or anywhere in the existing Part 541 regulations. Moreover, nothing in Auer prohibits the [DOL] from making changes to the salary[-]basis regulations after appropriate notice and comment rulemaking.” Defining and Delimiting the Exemptions, 69 Fed.Reg. at 22,180. The DOL stated its reasoning behind the changes:

Any other approach, on the one hand, would provide a windfall to employees who have not even arguably been harmed by a “policy” that a manager has never applied and may never intend to apply, but on the other hand, would fail to recognize that some employees may reasonably believe that they would be subject to the same types of impermissible deductions made from the pay of similarly situated employees.

Under the Auer test, the Court, found that Defendants’ policy whereby deductions would be made (although they were not in practice violated the salary basis requirements) violated the salary basis test, explaining:

The district court erred in concluding that there was not enough evidence to suggest Life Time Fitness intended to enforce its permissive policy. The Auer subject-to-reduction test requires only a “clear and particularized policy-one which ‘effectively communicates’ that deductions will be made in specified circumstances.” 519 U.S. at 461. The test does not require a formulaic set of “magic words” indicating that the test is mandatory. If employers can avoid overtime liability by crafting payment policies with permissive (may ) language instead of mandatory (will ) language, then the purposes of the FLSA would clearly be frustrated. Rather, as set out by this Court in Takacs and Whisman, Auer’s test is better satisfied by a policy that demonstrates that deductions are “more than a mere theoretical possibility” and that “permit[s] disciplinary or other deductions in pay ‘as a practical matter.’ ” 246 F.3d at 781

Here, Life Time Fitness’s pre-August 23, 2004 compensation plan subjected employees’ pay to reductions under the Auer test.  The compensation plan at issue does more than create a theoretical possibility of deduction; instead it plainly lays out a policy under which Life Time Fitness would make future deductions.  Therefore, under the old regs, the Court found the Plaintiffs were non-exempt for all weeks within the relevant statute of limitations period.

However, since the current regulations require an actual violation, the Court held that the otherwise exempt employees were only stripped of their exempt status, and thus entitled to overtime for the 3 weeks when the pay practice was actually used to reduce their “salary.” In all other weeks, the Court found the salary basis test met, and thus found that, aside from three weeks where actual reduction were made, the Plaintiffs remained exempt, notwithstanding the three weeks where deductions were actually made.”