Amicus Curiae Brief — Auer v. Robbins

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eS oreme Court’ U.S.

rFiLgéE Pp

AUG 49 1996

No. 95-897

CLERK

—=—"° =

In THE

Supreme Court of the United States

OCTOBER TERM, 1996

FRANCIS BERNARD AUER, et al.,

. Petitioners,

Davip A. RosBins, et al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Eighth Circuit

BRIEF OF

THE AMERICAN FEDERATION OF LABOR AND

CONGRESS OF INDUSTRIAL ORGANIZATIONS

AS AMICUS CURIAE

IN SUPPORT OF PETITIONERS

JONATHAN P. HIATT *

General Counsel, AFL-CIO

815 16th Street, N.W.

Washington, D.C. 20006

(202) 637-5053

CRAIG BECKER

14 W. Erie Street

Chicago, IL 60610

* Counsel of Record

WILSON - Eras Printing Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001

D Pn 00

TABLE OF CONTENTS

ee Pen

INTEREST OF THE AMICUS CURIAE .......0.00.........

SUMMARY OF THE ARGUMENT ..................

SO 6 dibsititaicthintaninitdagedlegitoeniiticindaeesaineitivtiain

Il,

ITT.

IV.

THE SALARY BASIS TEST REGULATES

THE SCOPE OF THE NATIONAL HOURS

STANDARD, THE MAINTENANCE OF

WHICH IS A CENTRAL AND INDEPEND-

ENT OBJECTIVE OF THE FLSA |...

THE SALARY BASIS TEST IS A REASON-

ABLE TEST FOR EXCLUSION FROM THE

PROTECTION OF THE FLSA’S MAXIMUM

TI caiscentnentictianpiaptieatilesigssnntbinasiatinoariat

THE EMPLOYER DID NOT CARRY ITS

BURDEN OF PROVING PLAINTIFFS WERE

PAID ON A SALARY BASIS ...............0..............

A. The Employer’s Express Policy Rendered

Plaintiffs “Subject to” Disciplinary Suspen-

| EET EN SE en a Ere i et

B. The Plaintiffs Were “Subject to” Disciplinary

Suspension “as a Practical Matter”...

THE EMPLOYER CANNOT GO THROUGH

THE WINDOW OF CORRECTION |...

IT scicticistnirtinitcinnpinwepsigpnicteheipaite niaaeidiepdiciduisbinaliaiaaltads

TABLE OF AUTHORITIES

CASES Page

Abshire v. County of Kern, 908 F.2d 483 (9th Cir.

1990), cert. denied, 498 U.S. 1068 (1991) _...14, 19, 24,

25, 26

Atlanta Professional Firefighters Union v. Atlanta,

920 F.2d 800 (11th Cir. 1991) ...............000---.. 21

Avery v. Talladega, 24 F.3d 1337 (11th Cir. 1994).. 19, 24

Balgowan v. Department of Transportation, 84

F.3d 656 (3rd Cir. 1996), reh’g granted, vacated

on other grounds, 3 W.H. Cases 2d (BNA) 672

CRN Gi Te eceeesnnssisdderbiansinninanineitedinhemacions 14, 18, 19

Bankston v. Illinois, 60 F.3d 1249 (7th Cir. 1995) .. 19

Barrentine v. Arkansas-Best Freight System, Inc.,

RS | Ee Be ot SRL 6

Brock v. Claridge Hotel and Casino, 846 F.2d 180

COE GR. SI nicki cet 25

Carpenters v. Denver, 82 F.3d 3538 (10th Cir.

BID cereuecsevedenness ittiinelsticncensnsaiucgiahth sn 19

Corning Glass Works v. Brennan, 417 U.S. 188

CTD ccncunctsintitsinetinnisans intiostidenns indians iehiaa eaten 18

Garcia v. San Antonio Metro. Transit Auth., 469

35 8, | RR ete Ee Le 16

Kinney v. District of Columbia, 994 F.2d 6 (D.C.

> ee Tee a ES 14, 19

Klein v. Rush-Presbyterian-St. Luke’s Medical

Center, 990 F.2d 279 (7th Cir. 1998) .............. 18, 19, 26

Martin v. Malcolm Pirnie, Inc., 949 F.2d 611 (2nd

Cir. 1991), cert. denied, 506 U.S. 905 (1992)... 19, 26

McDonnell v. Omaha, 999 F.2d 298 (8th Cir. 19938),

cert. denied, 510 U.S. 1168 (1994) 21

Michael v. Kentucky Finance Co., 359 U.S. 290

EEE NEL AROSE RON 8,18

Michigan Ass’n of Gov’t Employees v. Department

of Corrections, 992 F.2d 82 (6th Cir. 1998)... 19, 20

Mitchell v. Lublin, McGaughy & Ass., 358 U.S. 207

(1959) . : ae 18

Mueller v. Reich, 54 F.3d 438, (7th Cir. 1995) .. whale) 14

NLRB »v. Aerospace Co., Div. of Textron, 416 U.S.

Se CID ctcictectaxittiictimaineieiieie ene 16

North Haven Bd. of Ed. v. Bell, 456 U.S. 512

IEE <<. 20r<2<essssessesnnasnehsoninasiiasantagnntamaiaaaiti 16

iii

TABLE OF AUTHORITIES—Continued

Page

Powell v. United States Cartridge Co., 339 U.S. 497

EEE Sate See SRC ee eae ee Oe 17

Yourman v. Dinkins, 84 F.3d 655 (2nd Cir. 1996) . 18

STATUTES AND REGULATIONS

SIS SA 1

| | 8 eas | lO Coe 17

EES a eer I ae 16

hi TE EE eS Saf: es 3

29 U.S.C. § 216 .. , one 5

Pub.L. 99-150, 99 Stat. 787 (Nov. 11, 1985) ; 16

Pub.L.No. 101-583, § 2, 104 Stat. 2871 (Nov. 15,

a ES SE EE cd ea a 16

Pub.L.No. 103-3, cement 107 Stat. 6 (Feb. 5,

1993) ... oer SE EARS © 16

29 C.F.R. § 118 | ae EE NT is aes 3, 25

EE TE ditties etnias

29 C.F.R. § 553 ... CURR! 2 ae See ee 16

5 Fed.Reg. 4077 (1940) . i a 3

14 Fed.Reg. 7730 (1949) | SE SE ee 3

19 Fed.Reg. 4405 (1954) ................. 3

46 Fed.Reg. 3013 (1981) . LT 5

46 Fed. Reg. 11972 (1981) . i 5

50 Fed. Reg. 47696 (Nov. 19, 1985) . . 9

56 Fed.Reg. 45828 (Sept. 6, 1991) | 9

57 Fed. Reg. 37670 (Aug. 19, 1992) .......................9, 10, 24

61 Fed. Reg. 23238 (1996) ................. eRe 22

OTHER

Bureau of Labor Statistics, U.S. Dept. of Labor,

41 Employment and Earnings 67 (1994) .......... 7

Mary Coleman & John Pencavel, Changes in Work

Hours of Male Employees, 1940-1988, 46 Ind. &

Lab.Rel.Rev. 262 (1993) - 7

Mary Coleman & John Pencavel, Trends in Market

Work Behavior of Women Since 1940, 46 Ind. &

Lab.Rel.Rev. 658 (19BB) 2... .ccccccccccccececcecececeeceeeee 7

TABLE OF AUTHORITIES—Continued

Page

DOL, “Executive, Administrative, Professional . . .

Outside Salesman” Redefined—Report and Rec-

ommendations of the Presiding Officer at Hear-

ings Preliminary to Redefinition 5 (Oct. 24,

RRR Bais Ss Re 5, 6, 8, 9, 13, 15

DOL, Report and Recommendations on Proposed

Revisions of Regulations, Part 541 Defining the

Terms “Executive” “Administrative” “Profes-

sional” Local Retailing Capacity” “Outside Sales-

man” (June 1949) sintigipiaiiisadlaaiima sll 8,9, 11, 12,13

DOL, Report and Recommendations on Proposed

Revisions of Regulations, Part 541 Defining the

Terms “Executive” “Administrative” “Profes-

sional” “Local Retailing Capacity” “Outside

ge i FT 8, 9,12

DOL, Wage and Hour Release No. A-9 (Aug. 24,

1944), reprinted in Wage and Hour Manual

(BNA) 719 (Cum.Ed. 1944-45) 00... 14

House Rep. No. 331, 99th Cong., Ist Sess. 17 (85). 16

Larry Hugick & Jennifer Leonard, Gallup Poll,

Mirror of America—Role of Work; Job Dissatis-

faction Grows; ‘Moonlighting’ on the Rise, 56

Gallup Poll News Service (Sept. 2,1991) —......... 7,8

Labor Letter, The Wall Street Journal, Jan. 21,

. a ee a a ee 6

Laura Leete & Juliet B. Schor, Assessing the Time-

Squeeze Hypothesis: Hours Worked in the

United States, 1969-1989, 33 Indus.Rel.L.J. 25

SERN CAN RE ss 2S At ne 6,7

Juliet B. Schor, Worktime in Contemporary Con-

text: Amending the Fair Labor Standards Act,

70 Chi.Kent.L.Rev. 157 (1994) 00. 7

Juliet Schor, Decline of Leisure Time in America,

55 Vital Speeches of the Day 748 (1994)... 7

Humphrey Taylor, The Harris Poll 1995 #68

eae Sa ee 6

In THE

Supreme Court of the United States

OcToBEeR TeRM, 1996

No 95-897

FRANCIS BERNARD AUER, ef al.,

‘ Petitioners,

Davin A. RosBIns, et al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Eighth Circuit

BRIEF OF

THE AMERICAN FEDERATION OF LABOR AND

CONGRESS OF INDUSTRIAL ORGANIZATIONS

AS AMICUS CURIAE

IN SUPPORT OF PETITIONERS

INTEREST OF THE AMICUS CURIAE

The American Federation of Labor and Congress of In-

dustrial Organization (hereinafter AFL-CIO), a federation

composed of 75 national and international unions repre-

senting over 13 million workers, files this brief amicus

curiae with the consent of the parties as provided for in

this Court's rules.

The AFL-CIO has a vital interest in the construction

of one of the fundamental labor laws of our country, the

Fair Labor Standards Act (hereinafter the FLSA), 29

U.S.C. § 201 et seg. The decisions below substantially

expand the categories of workers who are excluded from

the protections of the Act in both the public and private

sectors. The decisions also substantially increase the diffi-

culty of enforcing the Act. The decisions therefore

threaten the viability of the national maximum hour

standard Congress created in the FLSA. It is for these

reasons that the AFL-CIO seeks to state its views on the

question before the Court.

SUMMARY OF THE ARGUMENT

For over 50 years, the salary basis test has been inte-

gral to determining whether employees are employed in a

“bona fide executive, administrative, or professional ca-

pacity” and are thus exempt from the protection of the

FLSA. In practice, the salary basis test regulates the

scope of the Act’s hours standard. The salary basis test

is a reasonable test for exclusion from the maximum hours

provisions because being paid on a salary basis is a read-

ily identifiable proxy for performing the duties of an

exempt employee, because employees who are paid on a

salary basis control their own time and are thus not sub-

ject to the harms Congress aimed to remedy by discour-

aging long hours, and because being paid on a salary

basis constitutes an adequate trade-off for the absence of

statutory protection.

The Court of Appeals erred when it held that the em-

ployer in this case carried its burden of proving that the

plaintiff-employees were paid on a salary basis because

the employer maintained a written policy that rendered

the employees “subject to” disciplinary suspension without

pay for less than one week for reasons other than viola-

tion of safety rules of major significance and because

plaintiff employees were “subject to” such suspensions as

a practical matter.

The Court of Appeals also erred when it held that the

employer could pass through the “window of correction”

and thus maintain the exemption for an employee who had

actually been suspended because the employer did not

reimburse the employee, did not promise to comply in

the future, did not take either of these actions prior to the

initiation of litigation, and did not act inadvertently.

ARGUMENT

In this case, the courts below substantially—and, we

submit, erroneously—broadened the scope of the princi-

pal limitation on the protective sweep of the FLSA. The

FLSA does not protect “any employee employed in a

bona fide executive, administrative, or professional

capacity . . . (as such terms are defined and delimited

from time to time by regulations of the Secretary).” 29

U.S.C. § 213(a)(1). Since 1940, two years after the

FLSA became law, the Department of Labor (hereinafter

“DOL”) has “defined and delimited” these statutory terms

two tests: a “salary test” and a “duties test.” See

5 Fed. Reg. 4077 (1940) (sections 541.1(e), .2(a),

.3(b)); 29 C.F.R. § 541.1(f), .2(e) (1), .3(e).’

To be exempt under these tests, an employee must (1 )

be paid a minimum salary* and (2) perform the duties

of a bona fide executive, administrative, or professional em-

ployee. In turn, the “salary test” itself has two elements.

To be exempt, employees must (1) receive a minimum

amount of compensation each week and (2) receive this

compensation on a “salary basis” rather than an hourly

basis. See, e.g., 29 C.F.R. § 541.1(f). It is the salary

1In 1949, the DOL amended the regulation to specify, in a man-

ner similar to the present 29 C.F.R. § 541.118(a), precisely what

it means to be paid on a “salary basis.” See 14 Fed. Reg. 7730, 7735

(1949). Finally, in 1954, the DOL adopted the test in the form

at issue here. See 19 Fed.Reg. 4405 (1954).

2 The only exceptions to this requirement are employees who hold

a license or certificate to practice law or medicine and who are

actually engaged in the practice of those professions, medical

interns and residents, and teachers who need not be paid a mini-

mum salary in order to qualify as exempt professionals. See 29

C.F.R. § 541.8(e).

basis element of the salary test that is at issue in this

case.*

I. THE SALARY BASIS TEST REGULATES THE

SCOPE OF THE NATIONAL HOURS STANDARD,

THE MAINTENANCE OF WHICH IS A CENTRAL

AND INDEPENDENT OBJECTIVE OF THE FLSA.

We begin our analysis by outlining the role of the

salary basis test in effectuating the FLSA’s statutory

scheme.

5 The relevant parts of the regulation at issue provide:

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. Subject to the exceptions provided

below, the employee must receive his full salary for any week

in which he performs any work without regard to the number

of days or hours worked. This policy is also subject to the

general rule that an employee need not be paid for any work-

week in which he performs no work.

(1) An employee will not be considered to be “on a salary

basis” if deductions from his predetermined compensation are

made for absences occasioned by the employer or by the

operating requirements of the business. Accordingly, if the

employee is ready, willing, and able to work, deductions may

not he made for time when work is not available.

(2) Deductions may be made, however, when the employee

absents himself from work for a day or more for personal

reasons, other than sickness or accident. Thus, if an employee

is absent for a day or longer to handle personal affairs, his

salaried status will not be affected if deductions are made from

his salary for such absences.

(5) Penalties imposed in good faith for infractions of safety

rules of major significance will not affect the employee's

salaried status. Safety rules of major significance include only

those relating to the prevention of serious danger to the plant,

or other employees, such as rules prohibiting smoking in

explosive plants, oil refineries, and coal mines.

29 C.F.R. §541.118(a).

First, the salary basis test is, in practice, not rele-

vant to the Act’s minimum wage provision, but only to

the coverage of the Act’s maximum hour provision. This

is because to pass the salary test, an employer must pay

the employee in question a minimum amount that is

intended to be well in excess of the minimum wage and

pay the amount on a salary basis. In adopting the salary

test, the DOL explained the basis of the minimum pay

requirement: “the terminology of § 13(a)(1) implies

a status which cannot be attained by those whose pay is

close to or below the universal minimum envisaged in the

act.” DOL, “Executive, Administrative, Professional . . .

Outside Salesman” Redefined—Report and Recommenda-

tions of the Presiding Officer at Hearings Preliminary to

Redefinition 5 (Oct. 24, 1940) (hereinafter the “Stein

Report”), JA 26.* Because a minimum weekly payment

is a prerequisite to exemption, the requirement that the

minimum be paid on a salary basis is ordinarily relevant

only in overtime cases.

Second, the FLSA’s hours standard is not intended

to increase workers’ compensation, but rather to create

a financial incentive for employers to spread available

work and reduce the dangers of overwork. Thus the

suggestion made by many employers that the salary basis

test is defective because it operates to bring workers who

earn well in excess of the minimum wage within the pro-

tection of the FLSA is misplaced. Payment in excess of

the minimum wage by itself does not suggest that a

4 When the salary test was first articulated, the minimum salary

was $30 per week. Stein Report at 6. At that time, the minimum

wage was 40 cents per hour. Stein Report at 19. An employee

earning less than the minimum wage would have had to have

worked over 75 hours in a week to pass the minimum payment

element of the salary test and thus reach the salary basis element.

A lack of administrative action has recently caused the minimum

salaries to fall in relation to the minimum wage. The DOL at-

tempted to correct this by increasing the minimum salaries to

amounts in excess of 40 times the minimum wage, but the proposed

regulation was deferred by presidential action. See 46 Fed.Reg.

8,013 (1981); 46 Fed.Reg. 11,972 (1981).

worker should be exempt from the FLSA’s maximum

hours provision. Congress intended to protect a wide

range of workers—not only low wage workers—from the

harms accompanying long hours. As the DOL explained

when it first adopted the salary test in 1940: “‘A ceilng

for hours’ is just as much an independent objective of the

Act as a ‘floor for wages,’ and surely it is a serious mis-

reading of the Act to assume that Congress meant to

discourage long hours of work only where the wages paid

were close to the statutory minimum. Living conditions

can be improved and work spread even where wages are

comparatively high.” Stein Report at 8, JA at 32. This

Court has thus recognized the dual and independent ob-

jectives of the FLSA: “the FLSA was designed . . . to

ensure that each employee covered by the Act would re-

ceive “ ‘[a] fair day’s pay for a fair day’s work’ and would

be protected from ‘the evil of ‘overwork’ as we'l as ‘un-

derpay.’” Barrentine v. Arkansas-Best Freight System,

Inc., 450 U.S. 728, 739 (1981) (emphasis added).

Finally, workers at all earning levels continue to

need the protection of the national hours standard. In

fact, American workers have experienced a dramatic in-

crease in the number of hours they work since the 1960s.

The country’s leading scholar of work time, Juliet B.

Schor of Harvard University, and her colleague Laura

Leete report that between 1969 and 1989, average annual

hours of paid work by the fully employed increased by

138. See Laura Leete & Juliet B. Schor, Assessing the

Time-Squeeze Hypothesis: Hours Worked in the United

States, 1969-1989, 33 Indus.Rel.L.J. 25, 31 (1994).

According to Louis Harris and Associates, the average

American worked just over 50 hours per week in 1995

compared to just over 40 in 1973. See Humphrey Taylor,

The Harris Poll 1995 #68, Table 2 (Nov. 6, 1995). A

Joint Economic Committee staff study found that 80%

of two-parent families with children worked more hours

in 1989 than in 1979. See Labor Letter, The Wall Street

Journal, Jan. 21, 1992, at Al. In April of 1994, average

manufacturing overtime hours were 4.8 per week, higher

than they have been at any time since the BLS began

collecting the statisti.s. See Juliet B. Schor, Worktime

in Contemporary Context: Amending the Fair Labor

Standards Act, 70 Chi.Kent.L.Rev. 157, 159 (1994)

(citing Bureau of Labor Statistics, U.S. Dept. of Labor 41

Employment and Earnings 67 (1994)). According to

Schor, 45% of American workers now work more than

45 hours a week. Juliet Schor, Decline of Leisure Time

in America, 55 Vital Speeches of the Day 748, 749

(1994). And, while there is debate on other points, there

is the broadest agreement that the increased work week

is a pervasive reality for the well-educated, white-collar

workers employers are most likely to misclassify as exempt

executive, professional or administrative employees. See

Mary Coleman & John Pencavel, Changes in Work Hours

of Male Employees, 1940-1988, 46 Ind. & Lab.Rel.Rev.

262, 262 (1993); Coleman & Pencavel, Trends in Market

Work Behavior of Women Since 1940, 46 Ind. & Lab.

Rel.Rev. 653, 657 (1993).

The effects of the increase in work hours is exacerbated

by the fact that household work has not declined to com-

pensate for the increase of paid labor. While the average

number of hours of household work done by women did

decrease between 1969 and 1987, the decrease was more

than offset by an increase in women’s paid labor and

men’s household and paid work. Leete & Schor, Time-

Squeeze at 33. The result is that total hours worked per

year rose by 161 for women and 139 for men between

1969 and 1987. Id.

The increase in work hours has led to precisely the

types of harms Congress aimed to eradicate through the

creation of a national hours -standard. A 1991 Gallup

poll found that nearly two-thirds of working parents felt

they spent too little time with their children. Larry

Hugick & Jennifer Leonard, Gallup Poll, Mirror of

America—Role of Work: Job Dissatisfaction Grows;

‘Moonlighting’ on the Rise, 56 Gallup Poll News Service

(Sept. 2, 1991). More than one-third reported “a great

deal” or “quite a lot” of conflict between the demands of

work and family or personal relationships. Jd. at 6.

When asked which realm “suffers more” from such con-

flict, 77% responded that family and relationships suffer

more. Id.

Increased work hours has thus caused a decline in the

“general well-being of workers,” particularly those on the

border of the statutory exemptions. 29 U.S.C. § 202(a).

The exemptions to the FLSA, and particularly the salary

basis test for exemption, should be “narrowly construed”

in order to further the objective embodied in the national

hours standard. Michael v. Kentucky Finance Co., 359

U.S 290, 295 (1959).

Il. THE SALARY BASIS TEST IS A REASONABLE

TEST FOR EXCLUSION FROM THE PROTECTION

OF THE FLSA’S MAXIMUM HOUR STANDARD.

During the past 50 years, the DOL has taken extensive

testimony and reviewed voluminous comments concern-

ing the salary test and on five occasions has expressly

affirmed the test’s utility as a means of distinguishing be-

tween exempt and nonexempt employees.

The DOL has held three sets of hearings, in 1940,

1949, and 1958, to consider the definitions of the exemp-

tions, and has solicited comments on the definitions, in

1954. See Stein Report; DOL, Report and Recommenda-

tions on Proposed Revisions of Regulations, Part 541

Defining the Terms “Executive” “Administrative” “Pro-

fessional” “Local Retailing Capacity” “Outside Salesman”

(June 1949) (hereinafter the “Weiss Report”); DOL,

Report and Recommendations on Proposed Revisions of

Regulations, Part 541 Defining the Terms “Executive”

“Administrative” “Professional” “Local Retailing Capac-

ity” “Outside Salesman” (March 1958) (hereinafter the

“Kantor Report”) (excerpts from these reports appear in

the JA at 20-42); 19 C.F.R. § 1321 (1954). Extensive

testimony was taken at each set of hearings, including

testimony concerning the salary test.° The reports of all

three Presiding Officers discuss the salary test and affirm

that test as an element of the definition of the exempt

categories of employees.

Beginning in 1985, after the FLSA was extended to

protect public employees, the DOL again solicited com-

ments on the exemptions. See 50 Fed. Reg. 47696

(1985). In 1991, the Department published a notice of

proposed rulemaking revising the application of the salary

basis test in the public sector. See 56 Fed. Reg. 45828

(1991). The Department received 398 comments on the

proposal. 57 Fed. Reg. 37670 (1992). After due con-

sideration, the DOL reaffirmed the application of the

salary test in the public sector, but relieved some public

employers of the obligation to comply with one element

of the test. Public employers that have “pay systems es-

tablished by statute, ordinance, or regulation, or by a

policy or practice established pursuant to principles of

public accountability” which require that employees’ accu-

mulated leave be docked for absences of less than one

day or that employees’ pay be docked if they lack suffi-

cient leave, are not, aS a consequence, precluded from

treating their employees as exempt. 29 U.S.C. § 541.5d.

At the same time, however, the DOL emphasized that

“{ajll other aspects of the salary test were left unchanged

for the public sector.” 57 Fed. Reg. 37671 (1992). The

DOL explained, “Sufficient justification has not been

shown in the comments to warrant eliminating altogether

the ‘salary basis’ requirement or making it inapplicable to

public sector employees paid above some minimum ‘upset’

salary level.” 57 Fed. Reg. 37671 (1992). One element

of the definition of payment on a salary basis that the

DOL expressly left in effect in the public sector is the

5In 1940, 165 witnesses testified; 295 in 1949; and an unre-

ported number of “[r]jepresentatives of industry and labor organi-

zations and other interested persons” in 1958. See Stein Report

at 2 n.4; Weiss Report at 97-100; Kantor Report at 2.

requirement that salaried employees not be subject to

suspension for less than a week for reasons other then

violations of safety rules of major significance. See 29

C.F.R. § 541.118(a)(5).*

In sum, on five occasions over the course of over SO

years, after the most thorough deliberation, the DOL has

affirmed the application of the salary basis test, including

the disciplinary suspension element of the test, to deter-

mine if employees in both the private and public sectors

should be excluded from the protections of the FLSA.

Not surprisingly, then, the salary basis test is well

suited to its statutory function of differentiating exempt

from nonexempt workers. This is true for three distinct

reasons.

1. The other basic test for “executive, administrative,

or professional” employees—the duties test—is, in many

instances, a complex one to apply to the myriad of fac-

tual situations presented by the real world of work. The

DOL has found, however, that there is almost a one-to-one

correspondence between the employees who are deter-

mined, after complex fact finding, to be performing exe-

cutive, professional or administrative duties and employ-

ees who are paid on a salary basis. To put this another

way, only in the rarest case is a duties test exempt em-

ployee paid on a non-salary basis. After the second set of

hearings concerning the exemption regulations, the Presid-

*The DOL considered and rejected comments critical of this

element of the salary basis test on the ground that

the comments failed to demonstrate that public employers are

significantly more restricted in the availability of options with

respect to employee discipline than private employers. Although

public employee terminations may require compliance with pro-

cedures designed to protect employee rights, termination for

disciplinary reasons is not generally unavailable. In addition,

other remedies for disciplinary infractions, such as official

reprimands, demotions, and reassignments or restriction of

duties, are generally available and used in the public sector.

57 Fed.Reg. 37674 (1992), PA 210a.

ing Officer explained, “The evidence at the hearing showed

clearly that bona fide executive, administrative, and pro-

fessional employees are almost universally paid on a salary

or fee basis... . [AJn hourly rate . . . may therefore be

rejected as inconsistent with true executive, administrative

or professional status.” Weiss Report at 24, JA at 36-37.

By the same token, the DOL has found that employees

who perform the duties of administrative, professional and

executive employees are rarely subject to disciplinary

suspension. The Presiding Officer at the 1949 hearings

considered “[{t}he practice of disciplining bona fide exe-

cutive, administrative, and professional employees by

making deductions from their salaries,” and found that

“{sJuch deductions are rarely made today. The disciplin-

ing of such employees in the rare instances where it is

needed is usually accomplished in other ways than by

deductions from salary.” Weiss Report at 25, JA at 39.

Since salary status is thus a proxy for performing execu-

tive, professional or administrative duties and since the

salary test is simple and straightforward in application, it

functions as a valuable screen to sort out nonexempt

employees without requiring application of the duties test.

The salary test makes it easier for employers to classify

their employees and for employees to understand their

rights. The salary test also makes enforcement of the Act

less burdensome. After the 1949 hearings, the DOL’s

Presiding Officer clearly set forth the value of the salary

test as a screening device:

The experience of the Divisions since 1940 supports

the soundness of the inclusion of the salary criteria

in the regulations. The testimony at the hearing of

many witnesses representing both employers and em-

ployees supported the experience of the Divisions

with respect to the usefulness and propriety of a sal-

ary test for exemption. In this long experience, the

salary tests .. . have amply proved their effectiveness

in preventing the misclassification by employers of

obviously nonexempt employees, thus tending to re-

duce litigation. They have simplified enforcement by

providing a ready method of screening out the obvi-

ously nonexempt employees, making an analysis of

duties in such cases unnecessary. The salary require-

ments also have furnished a practical guide to the

inspector as well as to employers and employees in

borderline cases. In an overwhelming majority of

cases, it has been found by careful inspection that

personnel who did not meet the salary requirements

would also not qualify under other sections of the

regulations. ... In the years of experience in admin-

istering the regulations, the Divisions have found no

satisfactory substitute for the salary test.

Weiss Report at 8. The finol of the DOL reports on the

exemptions issued in 1958 similarly found:

Essentially, the salary tests are guides to assist in

distinguishing bona fide executive, administrative, and

professional employees from those who were not in-

tended by the Congress to come within these cate-

gories. They furnish a practical guide to the investi-

gator as well as to employers and employees . . . and

simplify enforcement by providing a ready method

of screening out the obviously nonexempt employees.

Employees who do not meet the salary test are gen-

erally also found not to meet the other requirements

of the regulations.

Kantor Report at 3, JA at 42.

The salary test creates a bright line between exempt and

nonexempt employees. Its outcome rests on a set of

objective facts. The investigator need only ask whether

an employee is paid more than the minimum and whether

the employee’s pay is subject to reduction for imper-

missible reasons. In contrast, the outcome of the duties

test rests on a review of all the tasks actually performed

by the employee and the percentage of time spent on each

task. See, e.g., 29 C.F.R. § 541.2 (defining duties of

administrative employees). Predicting the outcome of the

duties test and litigating under the duties test are both

significantly more difficult than application of the salary

test. Thus the salary test is of substantial benefit to em-

ployers, employees, litigants, the DOL, and the courts.

As the Presiding Officer concluded after the 1949 hear-

ings, “Application of the regulations without a salary test

would prove difficult for both management and labor and

would increase enormously the difficulties of administra-

tion.” Weiss Report at 9.

2. This correspondence between salaried status and ex-

empt duties is not a mere happenstance. Rather, the defi-

nitions of the duties of all three categories of exempt

employees include the consistent exercise of discretion.

the

the FLSA. Congress did not exclude these categories

employees simply because they tend to be relatively

paid. This could easily have been done by basing

tion on pay rates. Nor did Congress ex

manual workers. This could also readily have

directly." Instead of excluding highly paid

all nonmanual workers, Congress exempted three disti

categories of employees. What do these three types

employees have in common? The answer is they gen-

erally control their own work time. They are compensated

228

opinion the specific statutory exemptions for named groups . . .

would not be needed. . . . Surely if Congress had meant to exempt

all white collar workers, it would have adopted far more general

rey ao those actually found in section 18(a)(1) of the

with regard to the time spent at work.” DOL, Wage and

Hour Release No. A-9 (Aug. 24, 1944), reprinted in

Wage and Hour Manual (BNA) 719 (Cum.Ed. 1944-45).

Being paid on a salary basis is thus more than simply

a proxy for performing administrative, professional, or

executive duties. It is the essence of why these three cate-

gories of employees are excluded from coverage. It makes

sense to exclude employees who are paid on a salary basis

from the overtime provisions of the Act because they

control their own time and are, therefore, not subject to

the harms Congress aimed to remedy by discouraging long

hours.

The disciplinary suspensions at issue here clearly mark

employees who do not control their own work time. If

employees may be suspended without pay for one or two

days, it is clear that they are compensated for the number

of hours they work and not for the “general value of the-

service performed.” As the Seventh Circuit recognized,

“If an employer measures out discipline in the form of

fractions of a weekly salary, the implication is that the

employee is really being paid on an hourly basis.” Mueller

v. Reich, 54 F.3d 438, 443 (7th Cir. 1995).

A comparison of young accountants and skilled steel-

workers is illustrative. Accountants may work over 40

hours per week, but they choose when to come to work

and can take a break during the afternoon to attend to

Personal business. Steelworkers may work no more hours

in the week and may even be paid more than the young

accountants, but because steelworkers do not control their

own time (they cannot come and go as they choose), their

long hours are more oppressive and were the target of the

FLSA’s overtime provisions. The salary basis element of

the salary test is thus a sensible means of determining

whether employees are excluded from the protection of

the Act’s overtime provision.

3. Finally, the salary test serves to determine whether

employees are in a sufficiently strong position to be able

to protect their interests in the absence of statutory

protection. According to the Presiding Officer at the

1940 hearings, the terms used to define the exemptions

“impi{y] a certain prestige, status and importance.”

Stein Report at 19. Because employees who qualify for

exemptions are denied the protections of the Act, “{iJt

must be assumed that they enjoy compensatory privileges

and this assumption will clearly fail if they are not paid

a [substantial ] salary.” Id. “[{Tyjhe salary test” he con-

cluded, is “of major importance in retaining the benefits

of the act for a group of employees . . . who frequently

have enjoyed no compensatory advantages.” Jd., at 42.

except violation of safety rules of major significance.

The salary basis test thus not only serves to distinguish

between employees who perform the duties of administra-

tive, professional or executive employees and those who

do not, but also between those who need the protections

of the overtime provisions and those who do not.

Since the DOL promulgated the salary test in 1940,

Congress has extended the coverage of the Act numerous

times, including into the public sector in 1966, 1974, and

1985. See Garcia v. San Antonio Metro. Transit Auth.,

469 U.S. 528, 533 (1985); Pub.L. 99-150, 99 Stat. 787

(Nov. 11, 1985).* When an agency has a “longstanding

interpretation” of a statute and Congress extends or re-

enacts the statute “without pertinent change,” Congress’

failure to revise or repeal the agency's interpretation is

“persuasive evidence that the interpretation is the one

intended by Congress.” NLRB v. Aerospace Co., Div.

of Textron, 416 U.S. 267, 275 (1974). Indeed, in this in-

stance, Congress has twice revised the salary test in minor

since the FLSA was extended to the public sector.

See Pub.L.No. 101-583, § 2, 104 Stat. 2871 (Nov. 15,

1990) (amending test as applied to computer program-

mers); Pub.L.No. 103-3, § 102(c), 107 Stat. 6 (Feb. 5,

1993) (amending test as it relates to leave taken under

the Family and Medical Leave Act). And,

Where an agency’s statutory construction has been

“fully brought to the attention of the public and the

Congress,” and the latter has not sought to alter that

interpretation although it has amended the statute

in other respects, then presumably the legislative in-

tent has been correctly discerned.

North Haven Bd. of Ed. v. Bell, 456 US. 512, 535

(1982).

* The “particular needs and circumstances” of public employers

were “carefully weighed and fzirly accommodated” in the 1985

amendments to the Act. House Rep. No. 331, 99th Cong., Ist Sess.

17 (1985). The amendments tailored the law to the public sector,

but did not in any way alter the definitions of the exemptions in

the public sector. See Public Law 99-150, 99 Stat. 787 (1985).

Public employers, like the respondent, were accommodated by allow-

ing them (1) to require that law enforcement personnel work up

to 171 hours over a period of 28 days without being obligated to

pay premium overtime compensation, see 29 U.S.C. § 207(k); 29

C.F.R. § 553.201; and (2) to substitute compensatory time off for

cash overtime compensation of their employees, see 29 U.S.C.

§ 207 (0).

The salary basis test thus rests on the strongest statu-

tory footing.

Ill, THE EMPLOYER DID NOT CARRY ITS BURDEN

OF PROVING PLAINTIFFS WERE PAID ON A

SALARY BASIS. —

On the undisputed facts, as a matter of law, the plaintiff-

employees here were not paid on a salary basis—and that

is true whether the governing DOL regulation is, in ac-

cord with the dominant view, read literally or whether it

is read under the gloss suggested by the United States in

its brief in opposition in this case.*

In evaluating whether the employer carried its burden

of proof, this Court can be guided by its own clear juris-

prudence affirming the weight of that burden. When Con-

gress enacted the Fair Labor Standards Act in 1938, it

intended to create “minimum standards of living neces-

sary for health, efficiency, and general well-being of work-

ers.” 29 U.S.C. § 202(a). In a competitive economy,

such minimum standards can only be effectively enforced

if they are not subject to broad exceptions that create

constant pressure on employers to evade the minimum

standards. That is why this Court recognized that

“breadth of coverage” is “vital to [the Act’s] mission.”

Powell v. United States Cartridge Co., 339 U.S. 497, 516

(1950). The Act’s “scope was stated in terms of sub-

stantial universality.” Jd. “[{W)ithin the tests of coverage

fashioned by Congress, the Act has been construed lib-

* While not in dispute, some of the relevant facts must be found

in the record, because the district court made no findings with

regard to the disciplinary suspension issue. That court discussed

the salary basis test only in its denial of plaintiff's motion for

judgment. PA 7la-73a. But the trial court did not discuss

the disciplinary suspension element of the test. Moreover, at the

time the motion for summary judgment was denied, there were

only 15 plaintiffs. Before trial, an additional 274 plaintiffs opted

into the action pursuant to 29 U.S.C. §216(b). After trial, the

district court entered judgment in favor of the employer, but wholly

failed to discuss the salary basis test in its opinion. PA 36a-68a.

erally to apply to the furthest reaches consistent with

congressional direction.” Mitchell v. Lublin, McGaughy

& Ass., 358 U.S. 207, 211 (1959). Correspondingly,

this Court has repeatedly held that the statutory exemp-

tions in the FLSA should be “narrowly construed.”

Michael v. Kentucky Finance Co., 359 U.S. 290, 295

(1959). Employers bear a heavy burden of proving that

employees fall “plainly and unmistakably within the [ex-

emptions’] terms and spirit.” Corning Glass Works v.

Brennan, 417 U.S. 188, 196-97 (1974).

The employer failed to carry its burden of proving that

it satisfied all elements of the salary basis test because the

plaintiffs were “subject to” disciplinary suspensions not

consistent with 29 C.F.R. § 541.118(a)(5).

A. The Employer's Express Policy Rendered Plaintiffs

“Subject to” Disciplinary Suspension.

The employer’s express policy clearly stated that plain-

tiff-employees were “subject to” suspension without pay

for short periods for a variety of offenses not limited to

violations of safety rules of major significance. PA 107a-

113a, 143a-149a. And, the plain language of the govern-

ing DOL salary basis regulation makes clear that em-

ployees are not paid on a salary basis if their weekly

salaries are “subject to reduction because of variations in

the quality or quantity of the work performed.” 29 C.F.R.

§ 118(a).

As the Seventh Circuit has recognized, “ ‘[s]ubject to

reduction’ does not mean that a reduction was actually

made. The plain meaning of the language suggests that

it is enough that a reduction could have been made for

an impermissible reason.” Klein v. Rush-Presbyterian-

St. Luke’s Medical Center, 990 F.2d 279, 286 (7th Cir.

1993). This is the construction of a majority of the

courts of appeals that have addressed the issue. See Your-

man vy. Dinkins, 84 F.3d 655 (2nd Cir. 1996); Balgowan,

84 F.3d at 662; Carpenters v. Denver, 82 F.3d 353, 359

(10th Cir. 1996); Bankston v. Illinois, 60 F.3d 1249,

1253 (7th Cir. 1995); Hurley v. Oregon, 27 F.3d 392,

395 n.7 (9th Cir. 1994); Michigan Ass’n of Gov't Em-

ployees v. Department of Corrections, 992 F.2d 82, 86

(6th Cir. 1993); Klein, 990 F.2d at 286; Martin v.

Malcolm Pirnie, Inc., 949 F.2d 611, 615, 617 (2nd Cir.

1991), cert. denied, 506 U.S. 905 (1992); Abshire v.

County of Kern, 908 F.2d at 487.

In this instance, the literal reading of the regulation is

also the most rational reading for three reasons. First, if,

as in this case, the employer has made clear that employ-

ees are subject to short suspensions for misconduct other

than violation of safety rules of major significance, then

the employer has classified the employees in a manner

that is inconsistent with the status of administrative, pro-

fessional and executive employees. That is true whether

or not deductions have actually been made. For such de-

ductions will actually occur only if there is misconduct by

the employee. Whether an employee or his or her co-

worker has engaged in misconduct surely is not relevant

to the questions of whether they should be covered by the

FLSA. The Third Circuit aptly observed that “it would

be rather arbitrary to hold that whether an employer

qualifies for . . . exemption shall be determined by the

employees’ collective good behavior.” Balgowan, 84 F.3d

at 663. As the Eleventh Circuit has added, “Such an

interpretation of the regulations would lead to an irra-

tional result, because it would favor employees who are

disciplined for breaking the rules—and thus become eli-

gible for overtime—over employees who respect those

same rules.” Avery v. Talladega, 24 F.3d 1337, 1342

(11th Cir. 1994). It is the act of classification that speaks

to the status of the employees, not the use of the sanctions

that the classification permits.”°

” The D.C. Circuit recognized this point when it stated, “The

regulation is intended, after all, to divide employees into classes

based on their status, not to identify employees deserving compen-

sation for individual losses.” Kinney, 994 F.2d at 11.

Second, it is important to recognize that the “subject

to” language prefaces the entire section defining what it

means to be paid on a salary basis not just the disciplinary

docking subsection. Employees must receive a predeter-

mined amount that is not “subject to reduction because of

variations in the . . . quantity of work performed.” 29

C.F.R. § 541.118(a). While the DOL has created a lim-

ited exception to the salary basis test for public employers

who dock employees pay for short absences because they

are required to do so by principles of public accountabil-

ity, 29 CF.R. § 541.5d, the entire salary basis test still

applies in the private sector. Because the “subject to”

language appears in the statement of the rule in subsection

(a), it cannot be construed to mean one thing with re-

spect to deductions for short absences and another thing

with respect to disciplinary suspensions.

Employees do not control their own time, and thus

should be protected by the Act’s overtime provisions, if

they are subject to being docked for short absences

whether or not they are ever actually docked. If em-

ployees are subject to being docked for short absences,

they will not leave work to take a child to the doctor or to

attend to other personal business.“ They cannot come

and go as they choose and thus are likely to find long

hours more oppressive than employees who are not sub-

ject to being docked for short absences. Thus, employees

who are subject to being docked, not merely those who

are actually docked, need the protection of the FLSA’s

overtime provisions.

Finally, there is no coherent alternative to a rule that

renders employees nonexempt if they are subject to reduc-

11 The Sixth Circuit, recognized this in Michigan Ass’n of Gov.

Linp., “Employees subject to reduction in pay will, of course, at-

tempt to avoid those reductions by juggling schedules and sacrific-

ing non-work opportunities. Simply because a reduction in pay

has never been applied does not mean that the employee has not

been affected by the policy subjecting the employee to pay reduc-

tions.” 992 F.2d at 86.

tions in their salary. Neither the statute nor the regulation

gives this Court any guidance concerning what amount of

actual reduction would render an employee “subject to

reduction” and thus nonexempt. A host of questions

would be raised by the rejection of the literal terms of

the regulation: would an employee gain the protection of

the FLSA only for those weeks in which he or she was

actualiy docked; would other employees occupying the

same classification also gain protection even if they were

not actually docked? There is no coherent answer to

— gre because it does not make sense to require

actual docking as a uisite to extendi -

tion of the Act. saa ~ h sope

While several lower courts, including the lower courts

in this case, have held that employers can avail them-

selves of the exemptions even if their employees’ salaries

are subject to docking, so long as there has been no actual

docking, none of these courts has even proposed a stand-

ard that can be used to determine what degree of docking

will deprive employers of the exemptions, for what time

periods, and as to which employees. See PA at 9a-10a;

McDonnell v. Omaha, 999 F.2d 293, 297 (8th Cir.

1993), cert. denied, 510 U.S. 1163 (1994): Atlanta Pro-

fessional Firefighters Union y. Atlanta, 920 F.2d 800, 805

(11th Cir. 1991).

The express policy rendering plaintiffs “subject to” dis-

ciplinary suspension prevented the employer from carry-

ne 4 burden of proving plaintiffs were paid on a salary

sis.

#2 The prevailing construction of the salary basis lation su

ported here imposes little burden on employers. If te ee ten

if ever, resort to docking the pay of otherwise exempt employees,

they can readily amend their personnel policies to square them

with their practices. An array of disciplinary measures can be

substituted for short suspensions. Employers that wish to avail

themselves of the exemptions will neither be denied the means of

disciplining employees nor prevented from engaging in progressive

discipline as a result.

B. The Plaintiffs Were “Subject to” Disciplinary Sus-

pension “as a Practical Matter.”

The United States in its brief amicus curiae on the cer-

tiorari petition, proposes a novel construction of the salary

basis regulation pursuant to which “salary status is lost...

only when employees are ‘subject to’ such a disciplin-

ary suspeusion as a practical matter.” US. Br. at 10. The

govermnent explains, “the employer has the burden of

proving that the employees are paid on a salary basis,

e.g., by showing that there have been only isolated in-

stances in which disciplinary suspensions have occurred,

or that suspensions have occurred only in unusual circum-

stances.” Jd. Because the employer in this case did not

carry even this burden, this Court need not and should not

choose between the literal constrution of the regulation

and the government's proposed construction. Such a choice

is not only unnecessary to decide this case, but premature

before the DOL adopts the proposed construction through

appropriate administrative procedures.”*

The employer in this case failed to prove that plaintiffs

were not subject to disciplinary suspension as a practical

matter. There is no dispute that the employer had a

written policy providing for such suspension. The em-

ployer presented no evidence that it has revised its policy

to make clear that plaintiff-employees could not be

suspended for less than a pay period for reasons other

than safety violations of major significance. In fact, while

the litigation was pending, the employer revised its policy

to make termination the sole penalty for violation of its

residency requirement, while leaving plaintiff-employees

subject to suspension for. less than a pay period for all

other types of infractions. JA 87; PA 218a."* Equally to

18 The DOL has recently published a notice of its intention to

review the regulation at issue. See 61 Fed.Reg. 23238 (1996),

JA 48.

14 This revision was obviously motivated by the inconsistency of

merely suspending an employee for an ongoing violation of the

the point, in the face of its clear policy and the limi

reason of that policy, the employer presented no fae

to testify that it would not in the future suspend plaintiff-

employees for less than a pay period. of reasons other

than violation of safety rules of major significance.

The employer, with full access to the l files of

wth employees, presented no lineds' to tanith testify that it

not suspended any plaintiff for less than a pay period

or reasons other than violation of safety rules of major

significance. In fact, the employer’s Chief of Police, who

was designated by the employer pursuant to Fed. R. Civ.

P. 30(b)(6) to testify about its personnel policies, testi-

fied that a sergeant “could be—he could be suspended

- - +» Say, Maybe one day suspension, two day suspension.”

JA 60 (testimony of Chief of Police Robert Scheetz)

See also JA 53. Several other management and super-

visory witnesses testified that plaintiffs could be suspended

for less than a pay period for reasons other than violation

of safety rules of major significance. See JA 53 (testi-

mony of Rosalie Corelyou, defendant’s 30(b) (6) designee

on compensation administration, that “they may say your

yy ere is two days plus the day you were not here”);

3 (testimony of Larry Pattison, defendant’s 30(b)(6)

designee on FLSA exemptions, that “the discipline could

include suspension for a particular number of days, which

— be loss of pay for that day”); 76 (testimony of

t. James Scago that “[s]ure, but it could be longer than

a day or two or it could be less”). Several plaintiffs testi-

fied that they could be suspended for less than a pay

period for reasons other than violation of safety rules of

major significance. See, e.g., JA 85, 86: PA 217a.

One of the 16 plaintiffs who testified was

suspended f

less than a pay period for violation of the anions -.

quirement. JA 87; PA 217a.” While the suspension re-

residency requirement rather than a desi

ees were paid on a salary basis. @ Gomre S Sisube thet empley-

or Because the case was bifurcated and the liability phase involved

e testimony of only 16 representative plaintiffs, jointly chosen

sulted from the reduction of an initial proposal to remove

the plaintiff, this is not an unusual circumstance, but

rather a common occurrence resulting from both formal

grievance procedures and informal protests and com-

promises between employers and employees. In addition,

another plaintiff testified that he knew of other sergeants

who had been suspended. JA 86.

Even courts, such as the Eleventh Circuit, that have

held that actual deductions are necessary to deprive an

employer of the benefit of the exemptions, hold that the

suspension of one employee prevents the employer from

claiming the exemptions for all employees in the same

classification. See Avery, 24 F.3d at 1342. The DOL

has endorsed this conclusion.”

Finally, there is other evidence in the record suggesting

that plaintiffs were not paid on a salary basis. Plaintiffs

time and attendance records were kept on an hourly basis

and they were subject to strict reporting and attendance

requirements. JA 60, 65." Some plaintiffs earned addi-

tional cash compensation or compensatory time off for

extra hours worked and some received a shift differential

on an hourly basis. JA 48, 73, 76, 79, 81, 82, 15-17, 47,

51.”

i .R.Civ.P. b) (6)

by the parties, their supervisors, and Fed.R.Civ.P. 30(

designees, the testimony of the 16 plaintiffs should be understood

to be representative of the experience of all 289 plaintiffs.

16 In 1992, the DOL was asked to “[c]larify that all improper

deductions result in loss of the exemption only for the particular

employee docked and only in the workweek of the improper deduc-

tions,” 57 Fed. Reg. 37666 (1992), PA 2lla. The DOL classified

the “suggested change” as “a significant departure from long-

standing policy that is not substantiated by comment.” /d.

17 Several lower courts have held that rigid, hourly attendance

requirements are inconsistent with salaried status. See, ¢e.g.,

Abshire, 908 F.2d at 486 (exempt employees “are thought not to

punch a time clock”).

ion

18 Several lower courts have held that additional compensat

for extra hours worked is inconsistent with salaried status. See

Under any plausible construction of the salary basis

test, the employer did not carry its burden of proof in this

case.

IV. THE EMPLOYER CANNOT GO THROUGH THE

WINDOW OF CORRECTION.

There is a narrow “window of correction” available to

employers who have inadvertently and in isolated in-

stances acted inconsistently with the salary basis test. 29

C.F.R. § 118(a)(6) provides that “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.” ”

It is obvious that the employer here cannot pass through

the window of correction because it has not complied with

the express terms of the regulation. The employer has not

Abshire, 908 F.2d at 486; Brock v. Claridge Hotel and Casino, 846

F.2d 180, 184-85 (8d Cir. 1988). 29 C.F.R. § 541.118(b) provides

that additional compensation over a minimum salary is not incon-

sistent with payment on a salary basis, but the examples given in

the subsection are commissions on sales, a percentage of sales, and

payment for extra days or shifts worked. The subsection thus

implies that extra compensation for extra hours worked is incon-

sistent with payment on a salary basis.

1° The entire subsection provides:

The effect of making a deduction which is not permitted under

these interpretations will depend upon the facts in the par-

ticular 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.

reimbursed even the one employee who was shown to

have been docked. Moreover, the employer has not re-

vised its discipline policy to exclude allegedly exempt

classifications or in any other way promised not to dock

such employees in the future.

Even if the employer were to now reimburse all em-

ployees who have been suspended and promise not to

suspend allegedly exempt employees in the future, the

window of correction should be deemed closed once litiga-

tion is initiated. A contrary rule would encourage em-

ployers to ignore the salary test, deny overtime compen-

sation to hourly employees, wait to be sued, and then

merely reimburse those employees who sue for any reduc-

tions they suffered. Such a result would deprive em-

ployees who have been treated as hourly employees of

the remedies specifically provided for in the Act: recov-

ery of “unpaid overtime compensation... and... an

additional equal amount as liquidated damages.” 29

U.S.C. § 216(b).

Finally, the window of correction should not be opened

for employers who have made deliberate rather than in-

advertent deductions. While the literal terms of the sub-

section appear to allow employers to utilize the window

of correction where deductions are inadvertent or made

for reasons other than lack of work, the majority of courts

of appeal have held that the subsection should be read

in the conjunctive rather than the disjunctive. See Klein,

990 F.2d at 287; Martin, 949 F.2d at 616-17; Abshire,

908 F.2d at 489.” To allow an employer to expressly and

2° In this case, the Court of Appeals makes contradictory state-

ments on this issue. On the one hand, the court below states that

“Cblecause the regulation is written in the disjunctive, it is not

material that the deduction from Sergeant Guzy’s pay was not

inadvertent so long as it was made for reasons other than lack

of work,” PA 9a-10a n.7, but, on the other hand, that court states,

that “[t]he ‘window of correction’ is not available if the employer

has a settled policy of making improper deductions from compensa-

tion.” PA 10a.

deliberately treat employees as hourly employees, to re-

quire that those employees work overtime, to deny those

employees overtime compensation required by the FLSA

and then allow the employer to avoid any obligation to

pay Overtime compensation if it merely reimburses

employees for any reductions in their salaries, would

to gut the effectiveness of the salary basis test. Such

outcome would undermine the statutory objective of dis-

couraging long hours among hourly employees and deny

employees who have been treated as hourly and not paid

in accordance with the Act an adequate remedy.

Because the employer in this case has not reimbursed

employees for reductions, has not promised to comply in

the future, did not correct its practice prior to initiation

of litigation, and made reductions pursuant to an express

policy, the employer cannot pass through the window

of correction.

CONCLUSION

For the above-stated reasons, this Court should reverse

the decision below with directions to enter judgment in

favor of the plaintiffs.

Respectfully submitted,

JONATHAN P. Hiatt *