# Amicus Curiae Brief — Auer v. Robbins

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## Record

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

## Text

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

I.

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

ii

17

ii

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

iv

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

2

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

3

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).

4

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).

a

5

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).

6

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

7

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

9

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.

10

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.

11

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-

12

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

a)

13
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.

22

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

i

5
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).

15

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.

16

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).

17

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.

|

18

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

19

(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.

20

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.

21

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.

22

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

23

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

24

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

25

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.

26

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.

27

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 *
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0676%3A26. Public record. Not legal advice.