# Amicus Curiae Brief — Auer v. Robbins

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0676%3A24

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1997
- **Citation:** 519 U.S. 452

## Text

» Supreme Court, U,

;
220 / FILE
Ste ies OCT 11 1996
FICE Of THE CLERK
SUPREME COURT OF THE UNITES SEARS

October Term, 1996

FRANCES BERNARD AUER, et al.,
Petiti
- against -
DAVID A. ROBBINS, et al., etc.,

Respondents.

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT

BRIEF OF AMICUS CURIAE CITY OF NEW YORK
ON BEHALF OF RESPONDENTS

PAUL A. CROTTY

Corporation Counsel of the
City of New York,

Attorney for Amicus Curiae,

100 Church Street,

New York, New York 10007.

(212) 788-1035

LEONARD J. KOERNER,*
TIMOTHY J. O’SHAUGHNESSY,
of Counsel.

* Attorney of Record.

TABLE OF CONTENTS

THE SALARY BASIS TEST SHOULD RECEIVE
ON JUDICIAL REVIEW ONLY SUCH
DEFERENCE AS ITS PERSUASIVENESS
re ee ree ey

NEITHER PETITIONERS NOR EVEN THE
DEPARTMENT OF LABOR ARGUES FOR A
STRICT READING OF THE SALARY BASIS

WES Gye wwe sce keene Ga ebits

THIS COURT SHOULD HOLD THAT WHERE A
DEDUCTION NOT PERMITTED BY THE
SALARY BASIS TEST OCCURS, THE
EXEMPTION IS LOST ONLY FOR THAT
EMPLOYEE AND ONLY FOR THE WORKWEEK
IN WHICH THE DEDUCTION IS MADE. .......

THIS COURT MUST BE AWARE THAT ITS
HOLDING ON THE MEANING OF THE PHRASE
“SUBJECT TO” MAY WELL BE APPLIED BY
THE LOWER COURTS TO DEDUCTIONS FOR
COURT APPEARANCES AND TEMPORARY
MILITARY LEAVE AS WELL AS DEDUCTIONS
AS DISCIPLINARY SANCTIONS. ...........

TABLE OF AUTHORITIES

Cases

Abshire v. County of Kern,
908 F2d 483 (9th Cir, 1990),
cert. denied, 498 US 1068 (1991) ............. 4

Chevron U.S.A., Inc. v. Natural Resources
Defense Council, 467 US 837 (1984) ........... 7

Vv -

S13 Fad 286 (Sth Cir, 1975) ............... 10

Marti Malcolm Pirnie Inc.
949 F2d 611 (2d Cir, 1991),
cer. denied. 506 US 905 (1992) ............. 1]

Skidmore v. Swift & Co., 323 US 134 (1944) ...... 3

Yourman v. Dinkins, 826 F Supp 736
(SDNY, 1993), aff'd, 84 F3d 655 (2d Cir),

petition for cert. filed sub nom.

Giuliani v. Dinkins, No. 96-152 ............ 112
Statutes
Ee 12
eG ET 12
ES ee 12

et od 136

i le as all ane so 10
oi nha b's g's o be ei wow 12
NY Military Law section 242[5}) ............. 12
Regulations

29 CFR Sections 500 through 899 ............. 3
i ck i Gh cede e606 ee es 8 x eu'b wa 3
ES SE ee ee ee 3
I + o's hie ghee 9 'aieh @ 0 wialeres 3
ee ee 356
Ce cxcccessececceses 4
29 CFR section 541.118(a)(4) ............... 1]
29 CFR section 541.118(a)(6) ............... 48
Other

ER oe a Se eee ee 10
as a Si ad a olay 90.0 whe. Ook o O's 6 a 8

- ill -

INTEREST OF AMICUS CURIAE

The City of New York and related entities (“City”)
have over 8,000 managerial employees, and thousands more
Supervisory employees, whom the City always has considered
within the exemption for the Fair Labor Standards Act
(“FLSA”) for persons “employed in a bona fide executive,
administrative or professional capacity.” 29 USC section
213(a)(1). Over 5,000 of these employees have sued the City
for back overtime and liquidated damages on the theory that
under the salary basis test they actually are hourly
employees. One of those cases went to a judgment that was
adverse to the City on tle principal legal issues and the Court
of Appeals for the Second Circuit affirmed. Yourman v.
Dinkins, 826 F Supp 736 (SDNY, 1993), aff'd, 84 F2d 655
(2d Cir, 1996). The Ciy’s patiion for o wk of cartioeadl i
pending. Giuliani v. Yourman, No. 96-152.

The judgment in Yourman, with interest and
attorneys’ fees, is now certainly over 14 million dollars for
back overtime and liquidated damages and a very rough
guess is that the City’s exposure in the five other lawsuits
may be as much as 20 to 25 million dollars.

The salary basis test, as applied in Yourman, leaves
the City between the Scylla and Charbdis of making virtually
all of its previously-exempt employees hourly employees and
of revising its policies to mirror the salary basis test.
Making all of its managers hourly employees would be
costly; the City estimated, in the record in Yourman, that if
it were to make all of its managers hourly employees and if
each manager were to work two hours of overtime each
week, the annual cost to the City would be 60 million
dollars. This is a lot of money, even to the Nation’s largest
city, especially in these times of flat tax revenue and
plummeting State and federal financial assistance, and
especially when it would be paid for work already performed

afte

and work performed by employees who always understood
that they were to work as many hours each week as
necessary to discharge their responsibilities and whose
Salaries were set with the understanding that they would not
be paid overtime.

The alternative of revising policies to satisfy the
salary basis test is no better. The City revised its policies
after the District Court ruled on liability in Yourman in
1993. The policies now provide that under no circumstances
may a manager be docked salary because of a court
appearance or temporary military leave, even if all relevant
leave balances have been exhausted. This obviously creates
the potential for abuse by unscrupulous employees and at
least arguably causes petitioners to violate the public
accountability principle (see Petition for a Writ of Certiorari
in Giuliani v. Yourman, No. 96-152 [“Yourman Pet.”], at
10).

The revised policies also provide that disciplinary
sanctions that would involve a loss of salary, such as a fine
or suspension, may not be imposed. Termination and
demotion, the only remaining meaningful penalties, are very
serious penalties and the City is loath to impose them unless
it believes that the infraction is equally serious and the
Courts will not overturn them under the progressive
discipline principle (see Yourman Pet. at 14). Because this
leaves the City with no potential monetary penalties for less
than very serious infractions, the City’s ability to deter less
than very serious infractions is greatly hampered.

In Yourman the City argues that the salary basis test,
when applied to the public sector, is irrational and contrary
to the intent of Congress and therefore should be struck down
in its entirety as arbitrary and capricious under the
Administrative Procedure Act. It is unclear to us at this time
whether this argument will be made in the present case. If

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it is, we respectfully refer the Court to the Yourman Petition
(at 19-26) and Reply Brief in Support of Petition (“Yourman
Pet. Reply”) (at 1-4). If it is not, we respectfully submit that
that would be a reason why the petition in Yourman should
be granted.

THE SALARY BASIS TEST SHOULD
RECEIVE ON JUDICIAL REVIEW ONLY
SUCH DEFERENCE AS ITS
PERSUASIVENESS PERMITS.

As a general rule, federal regulations are overturned
by the Courts only if they are arbitrary and capricious.
Chevron U.S.A. Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837, 843-44 (1984). However, agency

“interpretations,” as opposed to true “regulations,” are
entitled to deference only to the extent that they are
persuasive. Skidmore v. Swift & Co., 323 US 134, 139-40
(1944) Here, the salary basis test of 29 CFR section
541.118(a) is found within Subpart B of 29 CFR Part 541,
which is entitled “Interpretations.” (Sections 541.1, 541.2
and 541.5d of 29 CFR are found in Subpart A of 29 CFR
Part 541, which is entitled “General Regulations.”) See 29
CFR Sections 500 through 899, revised as of July 1, 1996,
at section 541.1. Congress did not instruct the Department
of Labor (“DOL”) to set the minimum wage, determine how
many hours could be worked per week before overtime pay
would be required, set the rate of overtime, or determine
who would be exempt from the FLSA, but merely to
“define[] and delimit[]” the managerial exemption. 29 USC
section 213(a)(1).

Thus, the salary basis test is an “interpretation,” not
a “regulation” entitled to Chevron deference, and in
reviewing it this Court should defer to the agency's expertise
and interpretation of the managerial exemption only to the
extent that the salary basis test is persuasive.

~ -

NEITHER PETITIONERS NOR EVEN
THE DEPARTMENT OF LABOR
ARGUES FOR A STRICT READING OF
THE SALARY BASIS TEST.

The salary basis test provides that an employee is not
within the managerial exemption if his or her salary is
“subject to” reduction for any of several specified reasons.
29 CFR section 541.118(a). Strictly read, this provision
means that the salary basis test is not met, and the employee
is not within the managerial exemption, if there is any policy
of the employer covering the employee under which a
reduction in salary theoretically could occur for any one of
the reasons set forth in the salary basis test.

Forgive us if we are stating the obvious, but neither
petitioners nor even DOL argues that the salary basis test
should be applied as it is written. Nor could they credibly
do so.

First of all, the salary basis test undermines a strict
reading of itself in two ways. It provides that employees
need not be paid anything in workweeks in which they
perform no work and it contains the “window of correction.”
29 CFR section 541.118(a) & (a)(6). Both of these
provisions undermine the notion that “[eJither pay is fixed
and immutable, ... or it is contingent,” Abshire v. County of
Kern, 908 F2d 483, 487 (9th Cir, 1990), cert. denied, 498
US 1068 (1991), upon which the salary basis test is based.

In addition, in response to this Court’s invitation
while the petition for a writ of certiorari was pending herein,
the Solicitor General submitted a brief on behalf of DOL in
which he stated that DOL’s new view is that the salary basis
test is not met only if the employee in question is subject to
impermissible deductions as a practical matter. However,
this was only the most recent and most hasty of the many

se

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retreats DOL has made from the plain language of the salary
basis test when applied to the public sector. Before the
adoption of 29 CFR section 541.5d, DOL first ruled that
where a partial-day deduction is made because of illness, the
exemption would be lost only for that employee and only for
the workweek in which the deduction was made (Yourman
Pet. at 11). Then DOL announced a non-enforcement rule
with respect to partial-day docking (id.). DOL finally
effectively repealed the prohibition on partial-day docking
(id. at 11-13).

In a December 1993 letter ruling, DOL stated, inter
alia, that disciplinary suspensions of a workweek for reasons
not constituting infractions of safety rules of major
significance would be permissible and that absences from
work for court appearances where the employee is under no
legal compulsion to be present in court are absences for
personal reasons and thus deductions may be made for such
absences (Yourman Pet. at A 50-53). Finally, beginning in
November of 1994 DOL began a semi-annual ritual of
publishing, in its regulatory agenda in the Federal Register,
both an acknowledgement that the salary basis test needs
comprehensive revision and an adjournment of that
comprehensive revision (Yourman Pet. at 30-32). Despite
stating in November 1994 that the regulations are “sorely
out-of-date,” in May 1996 DOL gave the date of “01/00/97”
for the date on which it would issue a notice of proposed

rulemaking (Yourman Pet. at 32).

It is thus plain that for years not even DOL has
believed in the salary basis test as written.

THIS COURT SHOULD HOLD THAT
WHERE A DEDUCTION NOT
PERMITTED BY THE SALARY BASIS
TEST OCCURS, THE EXEMPTION IS
LOST ONLY FOR THAT EMPLOYEE
AND ONLY FOR THE WORKWEEK IN
WHICH THE DEDUCTION IS MADE.

(1)

On January 15, 1986, DOL issued a letter ruling
stating that where an occasional impermissible deduction
occurs for a partial-day absence, the managerial exemption
would be lost for that employee but only for the workweek
in which the deduction took place (Yourman Pet. at A 40).
DOL cautioned, however, that if such deductions were to
become “regular and recurring,” DOL “would question”
whether the employee is in fact paid “on a salary basis”

(id.).

We believe that if this Court does not invalidate the
salary basis test as a whole, the foregoing formulation of
how that test should be applied is the formulation that should
be adopted by this Court. Although it originally was set
forth only on the partial-day docking issue, which issue later
was fully resolved by the promulgation of 29 CFR section
541.5d, that formulation works equally well (or equally
unsatisfactorily) for the other types of deductions prohibited
by the salary basis test.

There are, to be sure, shortcomings with this
formulation. It focuses on the employee rather than the
“capacity” in which the employee serves, which is the focus
of the exemption in the statute. 29 USC section 213(a)(1)
(“bona fide executive, administrative or professional
capacity”). In close cases this formulation will beg the

question of whether the deductions are “regular and
recurring.”

Petitioners might argue that this formulation makes no
sense ng oe context because it rewards the
miscreant, 1.€., the person found guilty of discizlina
charges, in that only the miscreant who received nd
impermissible deduction is “rewarded” by being paid
overtime. The answer, however, is that the salary basis test,
and particularly the disciplinary component, make no sense
in the public sector and thus if you start with it, wherever
you come out is less than entirely satisfactory. (It is for this
reason that we argue in Yourman that the entire Salary basis
test should be thrown out.) This argument would be made
on behalf of people found guilty of disciplinary charges who
would be seeking a windfall as the result of the fact that they
committed infractions and their employers imposed a penalty
other than termination or a suspension of some whole number
of workweeks. How this is related to the goals of the FLSA
is impossible to fathom (see Yourman Pet. Reply at 9-10).

Furthermore, if the alternative is that when an
“impermissible” disciplinary sanction is imposed, the entire
class of which the miscreant is a member is then considered
hourly, the ridiculous result is that the entire class is
rewarded with back overtime because of a single act of
misfeasance (coupled with the impermissible penalty)
(see Yourman Pet. at 35-36).

Petitioners and the Solicitor General i

, Speaking on
behalf of DOL, argue that this Court should pull out of the
air the words “aS a practical matter” and insert them after the
words subject to reduction.” Courts do not do this; it is for
agencies to write regulations.

Moreover, this standard is meaningless. It does not
instruct a Court what to look at or what conclusion to reach.

a -

The standard suggested above, that the Court look at whether
the employee in question has been subjected to “regular and
recurring” deductions, is far more instructive. The “as a
practical matter” formulation adds next to nothing to the
attempt to make sense of the phrase “subject to” in the salary
basis test and its adoption by this Court would leave the
lower Courts with little more guidance than they now have
from DOL, which is to say, none (see Yourman Pet. at 31)
(quoting 59 FR at 57130) (DOL complaining that judicial
decisions “are creating law without considering a
comprehensive analytical approach to current compensation
concepts and workplace practices” [which is what we thought
DOL is supposed to be doing)).

(2)

This Court also could take a broad interpretation of
the word “inadvertent” in the “window of correction”
provision of the salary basis test, which reads as follows, 29
CFR section 541.118(a)(6):

The effect of making a deduction which is not
permitted under these interpretations will depend upon
the facts in the particular case. Where deductions are
generally made when there is no work available, it
indicates that there was no intention to pay the
employee on a salary basis. In such a case the
exemption would not be applicable to him during the
entire period when such deductions were being made.
On the other hand, where a deduction not permitted
by these interpretations is inadvertent, or is made for
reasons other than lack of work, the exemption will
not be considered to have been lost if the employer
reimburses the employee for such deductions and
promises to comply in the future.

No deduction ever could be truly “inadvertent,” as every
deduction requires the in.entional act of writing a paycheck
for an amount different from the amount the employee
usually receives. Thus, when DOL drafted the window of
correction, it could not have intended a strict interpretation
of the word “inadvertent.”

Instead, giving meaning to the word “inadvertent”
should focus on the emplover’s policy and whether the
person who actually ordered the deduction was, and knew
that he or she was, acting pursuant to and in compliance with
the employer’s policy toward those employees the employer
considers exempt.

Such an interpretation of the word “inadvertent”
would perhaps be the best result because it would protect
both small and large State and local governments from simple
errors that, in the view of the plaintiffs in these cases,
allegedly should result in large payments of back overtime.
Small governments may well have managers who do not
know the salary basis test and who do not have access to
lawyers who do. Large governments, such as the City with
well over 8,000 exempt employees, face the possibility of
erroneous deductions simply because of the large number of
individuals who are involved in the process of implementing
policies, issuing paychecks and imposing disciplinary
sanctions.

(3)

Whatever result this Court reaches, the reasoning
should encompass the “impermissible” deductions in the
Yourman case so that those deductions do not render the
plaintiffs in Yourman non-exempt. We say this in part
because of course we want to win that case but also because
it would be bad policy, and certainly could not have been the
intent of Congress in enacting the FLSA, for all 8,000 City

x ye

managers to become non-exempt because discovery in
Yourman revealed only the following arguably
“impermissible deductions” in a span of over four years:

1. Plaintiff Harold Yourman was docked $6.25
for overstaying his lunch hour but the $6.25 was reimbursed
in his next paycheck.

2. Plaintiff Vito LaBella was demoted for two
weeks, which caused him to lose $258 in salary, for putting
an obscene message, apparently about a female co-worker,
on the Emergency Medical Services computer system. We
note that DOL has said in the Federal Register that
demotions are permissible penalties. 57 FR 37674.

3. Plaintiff Theodore DiGilio was suspended for
nine days but then, pursuant to a settlement, was reimbursed
for the nine days that he did not work and agreed to forfeit

four vacation days.

4, Disciplinary sanctions imposed on managers
who are not parties to the lawsuit are irrelevant because a
Rule 23 class action is not available under the FLSA;
employees must “opt in” or they will not benefit from the
judgment. 29 USC section 216(a); LaChappelle v. Owens-
Illinois, Inc., 513 F2d 286, 288 (Sth Cir, 1975). In any
event, even considering managers who were not parties to
Yourman, cryptic documents in the record, about which there
was no testimony, seem to indicate that three managers at the
Fire Department, who are not plaintiffs in Yourman, each
were fined five or ten days’ pay on one occasion.

5. In addition, one employee of the Department
of Housing Preservation and Development, Marvin
Wilkinson, who also is not a plaintiff in Yourman, was fined
twice for failing to file a financial disclosure form.

«86 <

In short, all of the above arguably “impermissible
deductions” should fall within the window of correction.
Although only Mr. Yourman has been reimbursed to date,
the window of correction was very narrowly interpreted by
the Second Circuit Court of Appeals in Martin v. Malcolm
Pirie, Inc., 949 F2d 611 (2d Cir, 1991), cert. denied, 506
US 905 (1992), and under that ruling reimbursement by the
City would not be sufficient to restore an employee to
exempt status. We also must note that none of the other
individuals have asked to be reimbursed; the plaintiffs in
Yourman would prefer to leverage these “impermissible
deductions” into windfall payments of back overtime rather
than see these individuals reimbursed.

THIS COURT MUST BE AWARE THAT
ITS HOLDING ON THE MEANING OF
THE PHRASE “SUBJECT TO” MAY
WELL BE APPLIED BY THE LOWER
COURTS TO DEDUCTIONS FOR COURT
APPEARANCES AND TEMPORARY
MILITARY LEAVE AS WELL AS
DEDUCTIONS AS_ DISCIPLINARY
SANCTIONS.

Although the present case, to our knowledge, involves
only deductions as disciplinary sanctions, the phrase “subject
to” in the salary basis test applies to, and the “actual
deduction/theoretical possibility” question arises as to, the
other types of deductions rendered “impermissible” by that
test as well (see Yourman Pet. at 16, 34-35; Yourman Pet.
Reply at 2-3). Those are deductions for time missed for jury
duty, appearance as a witness, and temporary military leave.
29 CFR section 541.118(a)(4). Thus, the lower courts
probably will believe that whatever this Court says in this
case about the phrase “subject to” and the “actual
deduction/theoretical possibility” issue must be applied to
issues concerning deductions for these other purposes.

-]]-

We call this to the Court’s attention, naturally
enough, because issues concerning deductions for these other
purposes arise in Yourman. The City’s policy concerning
court appearances was that paid leave would be granted only
where the employee was under subpoena or court order and
neither the employee nor a relative had a personal interest in
the case, which is inconsistent with the salary basis test's
requirement that employees be granted paid leave for
“appearance as a witness” (although DOL held, in a letter
ruling issued after the liability ruling by the District Court in
Yourman, that an appearance as a witness where the
employee is not under legal compulsion to be present could
be considered a personal absence and thus paid leave would
not be required [Yourman Pet. at A 52]). The City’s policy
concerning temporary military leave was that employees
could receive up to 30 calendar or 22 working days of paid
military leave each year, figures taken from federal and state
statutes that should be sufficient to cover the absences usually
incurred by members of the Reserves and National Guard.
5 USC sections 2105(a) & (d) and 6323(a)(1) & (b); 10 USC
section 270; 32 USC section 502; NY Military Law section
242(5].

There was no proof in Yourman that any manager
ever had one penny deducted from salary as a result of an
appearance as a witness or “temporary military leave.”
Nevertheless, the District Court ruled that because the City’s
policy on appearances as a witness differed from the salary
basis test, and because the “limitation on paid military leave
presents the potential for employees on temporary military
leave to take leave without pay,” every plaintiff in Yourman
was non-exempt. 826 F Supp at 742 (Yourman Pet. at A 18-
19). The Court of Appeals affirmed on the opinion of the
District Court. 84 F2d at 656 (Yourman Pet. at A 7).

Again, we respectfully submit that this is a ridiculous
result, especially when the record contains no proof of a

Se

deduction for a court appearance or “temporary” military
leave, when the vast majority of the plaintiffs will never
testify as a witness, and the vast majority of the plaintiffs are
not even members of the Reserves or National Guard.
Again, then, whatever this Court writes in the present case,
the opinion should make clear that in the circumstances in
Yourman the City’s policies concerning appearances as a
witness and “temporary” military leave do not render every
plaintiff in Yourman non-exempt.

Respectfully submitted,
PAUL A. CROTTY
Corporation Counsel of the

City of New York,
Attorney for Petitioners.

LEONARD J. KOERNER,*
TIMOTHY J. O’SHAUGHNESSY,
of Counsel.

October 11, 1996

* Attorney of Record.

eth

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0676%3A24. Public record. Not legal advice.