Garsjo v. Department of Labor & Industry

No. 13425 IN THE SUPREME COURT OF THE STATE OF MONTANA 1977 CARLYLE M. GARSJO, Petitioner and Appellant, THE DEPARTMENT OF LABOR AND INDUSTRY OF THE STATE OF MONTANA, a Municipal Organization, and LORAINE HORNER, Defendants and Respondents. Appeal from: District Court of the Seventeenth Judicial District Honorable M. James Sorte, Judge presiding. Counsel of Record: For Appellant: Robert Hurly argued, Glasgow, Montana For Respondents: Garden and McCann, Wolf Point, Montana Jerry M. Schuster argued, Wolf Point, Montana J. Mayo Ashley argued, Helena, Montana Submitted: January 13, 1977 Decided : MAR I 7 5971~ Filed: A 1 ( $7/ M r . J u s t i c e John Conway Harrison d e l i v e r e d t h e Opinion of t h e Court. T h i s i s an a p p e a l from t h e d i s t r i c t c o u r t , Valley County, which a f f i r m e d a wage d e c i s i o n by a h e a r i n g s examiner i n f a v o r o f Loraine Horner. C a r l y l e M. G a r s j o , employer, i s t h e owner of t h e Rainbow Motel i n Glasgow, Montana. I n mid-summer 1974, he h i r e d Loraine Horner, employee, t o o p e r a t e t h e motel. The f i r s t month she was employed on a t r i a l b a s i s and paid by t h e hour. During t h i s month she worked and was p a i d f o r 14 hours p e r day. A t t h e end of t h e t r i a l p e r i o d , she was h i r e d f u l l - t i m e a t $275 p e r month s a l a r y and a n apartment a t t h e motel valued a t $125 p e r month which she was r e q u i r e d t o l i v e i n . During t h e term of t h e employment, employee's d u t i e s c o n s i s t e d of checking people i n and o u t of t h e motel; a t t e n d i n g t h e motel switchboard; keeping a l l of t h e motel r e c o r d s ; doing a l a r g e p a r t of t h e d a i l y cleanup which included changing s h e e t s , c l e a n i n g t h e rooms, doing t h e l a u n d r y i and o t h e r maintenance work. She was a s s i s t e d i n t h e cleanup by a s e r i e s of p a r t - t i m e maids. The employer came by every few days t o p i c k up t h e proceeds f o r d e p o s i t i n t h e bank. Employee k e p t t h e r e c o r d s a t t h e motel and t h e only hours she k e p t , a f t e r she became a s a l a r i e d employee, were t h o s e hours she worked on h e r day o f f and f o r which she was p a i d overtime. I n t h e f a l l 1974, employee asked f o r a r a i s e and f a i l i n g t o g e t one f i l e d a wage c l a i m w i t h t h e Montana Department of Labor and I n d u s t r y . A h e a r i n g was h e l d b e f o r e a Department of Labor and I n d u s t r y h e a r i n g s examiner who found t h a t employee (1) was n o t employed i n a "bona f i d e e x e c u t i v e ** JC capacity", ( 2 ) was covered by the Montana Minimum Wage and Hours Act; (3) was not paid the proper wage; and ( ) was due $2,267 in back wages. 4 Employer appealed the ruling pursuant to section 82-4216, R.C.M.194?, the judicial review section of the Montana Administra- tive Procedure Act. In his appeal to the district court employer raised the same issues he raises here: 1) Whether the Department of Labor's administrative regu- lations exceed the statutory authorization and are arbitrary and capricious. 2) Whether the live-in agreement is authorized by specific regulations promulgated by the Department. 3) Whether there was a failure of proof. 4) Whether there were inadequate findings of fact. The district court ordered the employer to pay a 100% penalty and the employee's attorney fee. Employer also appeals from those orders. Issue 1. Employer argues the regulations as promulgated absolutely prohibit the employee from being an executive because she did not receive $150 per week and she did not direct the work of two or more employees,and are therefore unreasonable. The Montana Minimum Wage and Hours Act provides at section "The provisions of section 41-2303 of this act shall not apply to: " j Any individual employed in a bona fide () executive, administrative, or professional capacity as these terms are defined and de- limited by regulations of the commissioner." The commissioner of labor has promulgated r e g u l a t i o n s which cover over 40 pages i n t h e Montana Administrative Code i n t e r p r e t i n g t h i s s e c t i o n of t h e Act. For t h e most p a r t t h e s e r u l e s a r e a verbatim copy of t h e f e d e r a l r e g u l a t i o n s (29 C.F.R. P a r t 541) promulgated t o i n t e r p r e t t h e equivalent s e c t i o n of t h e F a i r Labor Standards Act, modified t o make them compatible with t h e Montana statute. The r e g u l a t i o n s involved here a r e MAC 24-3.14BII (2) - S1420 and MAC 24-3.14BII (2) -S1450 (13). The f i r s t r u l e d e f i n e s "Executive" and reads a s a p l i e s here: "(1) The term 'employee employed i n a bona f i d e executive *** c a p a c i t y ' i n s e c t i o n 41-2304(j) of t h e Montana Minimum Wage Law s h a l l mean any employee : " ( a ) Whose primary duty c o n s i s t s of t h e manage- ment of t h e e n t e r p r i s e i n which he i s employed o r of a customarily recognized department o r subdivision t h e r e o f ; and "(b) W o customarily and r e g u l a r l y d i r e c t s t h e work h of two o r more o t h e r employees t h e r e i n ; and " ( c ) W o has t h e a u t h o r i t y t o h i r e o r f i r e o t h e r h employees o r whose suggestions and recommendations a s t o t h e h i r i n g o r f i r i n g and a s t o t h e advancement and promotion o r any o t h e r change of s t a t u s of o t h e r employees w i l l be given p a r t i c u l a r weight; and "(d) \ h a customarily and r e g u l a r l y e x e r c i s e s d i s - c r e t i o n a r y powers; and " ( e ) W o does n o t devote more than 20 percent o r h i n t h e case of an employee of a r e t a i l o r s e r v i c e e s t a b - lishment who does n o t devote a s much a s 40 p e r c e n t , of h i s hours of work i n t h e workweek t o a c t i v i t i e s which a r e not d i r e c t l y and c l o s e l y r e l a t e d t o t h e performance of t h e work described i n subsections (a) through (d) of t h i s s e c t i o n : "Provided, That t h i s paragraph s h a l l not apply i n t h e case of an employee who i s i n s o l e charge of an independent establishment o r a p h y s i c a l l y separated branch e s t a b l i s h - ment, o r who owns a t l e a s t a 20 percent i n t e r e s t i n t h e e n t e r p r i s e i n which he i s employed; and " ( f ) W o i s compensated f o r h i s s e r v i c e s on a s a l a r y h b a s i s a t a r a t e of not l e s s than $150 per week, exclusive of board, lodging, o r o t h e r f a c i l i t i e s ** *.I1 MAC 24-3.14BII (2)-S1450 (13) deals with the 'sole-charge excep- tion' and states in pertinent part: ( ) An exception from the percentage limitations "a on nonexempt work is provided in MAC 24-3.14BII (2)- S1420 subsection (e) for 'an employee who is in sole charge of an independent establishment or a physically separated branch establishment * * *'. Such an em- ployee is considered to be employed in a bona fide executive capacity even though he exceeds the applicable percentage limitation on nonexempt work." This Court had held the Montana Wage and Hours Act consti- tutional and the specific section in question here was held not to constitute an unlawful delegation in City of Billings v. Smith, 158 Mont. 197, 207, 490 P.2d 221, which sets out the test of the validity of regulations promulgated under the authority of section 41-2304(j), R.C.M. 1947: It* **such power is constitutionally exercised where the definition formulated by the administrator is within the limits laid down by the Congress which * ** are marked out by the fair and natural meaning of the words 'bona fide executive * * * capacity.' (Emphasis added.) --- - his indicates that to find the power to have been un- constitutionally exercised, this Court will have to find the definitions of the Commissioner of Labor to be outside the fair and natural meaning of the words. See Walling v. Yeakley, * ** 140 F.2d 830." The regulations attempt to set out specific objective and subjective criteria which are generally characteristic of an executive's job. Certainly an executive must manage as his primary duty, and it would be rare indeed to find an executive who did not direct two or more employees--employees he has the authority to hire and fire. The typical executive's job requires the exercise of discretion and he does executive type work as a sub- stantial, if not exclusive, part of his job. Therefore, these regulations are logical and well within the boundaries of the fair and natural meaning of the word "executive". Here, employee does not fall within the requirements of subparts (a) through (e) , MAC 24-3.14BII (2) -S1420, because she exercises little discretion and spends a substantial amount of her time doing nonexecutive work. In Williams v. Corbett, 205 Ore. 69, 286 P.2d 115, 117, the Oregon court said: "Plaintiff's job was to clean the rooms, change bed linens, turn the mattresses from time to time, clean the windows, the hall and the lobby, take care of the lavatories and showers, and attend to the registering of guests. She kept the money paid by the guests until the defendant called for it, but she did not order supplies nor pay the bills. * * * * "We do not think that the words 'administrative' and I executive', as they are commonly understood, may fairly be said to comprehend the duties of the plaintiff. Those words suggest something higher in the scale of employment than the calling of a maid-of-all work, with the few additional responsibilities which we have described thrown in. * * *" The effect of the regulations set out above is that an employee who meets the requirements of MAC 24-3.14BII (2) -S1420, subparts (a) through (e), is a bona fide executive and is excepted from the minimum wage and overtime provisions of the statute. If the employee ( ) spends over 40% of her time doing nonmanagement 1 work, but is in sole charge of an independent enterprise, (2) meets the requirements of subparts (a) through (d), and (3) is paid more than $150 per week, then there is also an exception to the general applicability of the wage and hour provisions of the statute. The logic of these regulations is clear. A real full-time executive doing executive work is given an exemption from the minimum wage and overtime provisions no matter what he is paid, but an executive who does a substantial amount of nonexecutive work for which the minimum wsge would have to be paid if done by another person, may avoid the provisions of the Act only if the pay is high enough assure that the minimum wage law is not being circumvented. In this case, assuming the hearings examiner's findings are correct and the employee worked a 14 hour day, six days a week, then the $150 per week requirement works out to approximately $1.80 per hour. This is certainly not an outrageous rate of pay for an executive. If the employee had been paid the $150 per week set by the rule to avoid "subterfuge executives" and the only difficulty would be the two employee requirement, then the employer's argument that as applies to this employee the regulation is un- reasonable might carry some weight. But where, as here, the employee does not do a substantial amount of executive work, it does not. The regulations are reasonable. Issue 2. The employer argues that MAC 24-3.14BII (14)- S14090, which speaks in terms of allowing reasonable agreements applies here. That regulation interprets the term "hours worked'' and speaks of reasonable agreements as to computation of overtime where the employee is required to reside at the place of work. The cases interpreting the equivalent federal rule indicate that the regulation concerns agreements for computing compensation for overtime actually worked, or in excess of those hours actually worked. Case law holds that an employee may not enter into an agreement which operates to waive compensation for overtime actually worked. Skelly Oil Co. v. Jackson, 194 Okl. 183, 148 P.2d 182, Travis v. Ray, 41 F. Supp. 6. That regulation does not apply here. Issue 3. The employer argues there was a failure of proof. The section under which appeal to the district court was taken, section 82-4216(7), R.C.M. 1947, sets out the standard of review of the evidence: "The c o u r t s h a l l n o t s u b s t i t u t e i t s judgment f o r t h a t of t h e agency a s t o t h e weight of t h e evidence on q u e s t i o n s of f a c t . *** The c o u r t may r e v e r s e o r modify t h e d e c i s i o n i f s u b s t a n t i a l r i g h t s of t h e a p p e l l a n t have been p r e j u d i c e d because t h e a d m i n i s t r a t i v e f i n d i n g s , i n f e r e n c e s , conclusions o r d e c i s i o n s a r e : "(e) c l e a r l y erroneous i n view of t h e r e l i a b l e , p r o b a t i v e and s u b s t a n t i a l evidence on t h e whole record." Here, employer d i d n o t keep r e c o r d s r e q u i r e d by law and which could have e a s i l y s u p p l i e d t h e needed information. I n Anderson v. M t . Clemens P o t t e r y Co., 328 U.S. 680, 66 S.Ct. 1187, 90 L ed 1515, 1523, t h e United S t a t e s Supreme Court i n a F a i r Labor Standards Act case d i s c u s s e d t h i s d i f f i c u l t y : 'I* * * where t h e employer's r e c o r d s a r e i n a c c u r a t e o r inadequate and t h e employee cannot o f f e r convincing s u b s t i t u t e s , a more d i f f i c u l t problem a r i s e s . The s o l u - t i o n , however, i s n o t t o p e n a l i z e t h e employee by denying him any recovery on t h e ground t h a t he i s unable t o prove t h e p r e c i s e e x t e n t of uncompensated work. Such a r e s u l t would p l a c e a premium on an employer's f a i l u r e t o keep proper r e c o r d s i n conformity w i t h h i s s t a t u t o r y d u t y ; i t would allow t h e employer t o keep t h e b e n e f i t s of an employee's l a b o r s without paying due compensation a s con- templated by t h e F a i r Labor Standards Act. I n such a s i t u a t i o n we hold t h a t a n employee h a s c a r r i e d o u t h i s burden i f he proves t h a t he h a s i n f a c t performed work f o r which he was improperly compensated and i f h e x p r o d u c e s s u f f i c i e n t evidence t o show t h e amount and e x t e n t of t h a t work a s a m a t t e r of j u s t and reasonable i n f e r e n c e . ***I1 In P u r c e l l v. Keegan, 359 Mich. 571, 103 N.W.2d 494, 497, t h e Michigan Supreme Court d i s c u s s e d t h i s problem and s e t o u t e x a c t procedure: "* * * When t h e employee shows, a s he d i d h e r e , ' t h a t he d i d i n f a c t .perform overtime work f o r which he was n o t p r o p e r l y compensated and produces s u f f i c i e n t evidence t o show t h e e x t e n t and amount of such work a s a m a t t e r of j u s t and reasonable i n f e r e n c e , t h e burden s h i f t s t o t h e employer t o come forward w i t h evidence of t h e p r e c i s e amount of t h e work performed o r w i t h evidence t o n e g a t e t h e reasonableness of t h e i n f e r e n c e t o be drawn from t h e evidence of t h e employee. And i f t h e employer f a i l s t o produce such evidence, i t i s t h e duty of t h e c o u r t t o e n t e r judgment f o r t h e employee, even though t h e amount be only a reasonable approximation.' +." ** I n t h e i n s t a n t c a s e Loraine Horner t e s t i f i e d she worked 16 hours each day b u t conceded t h a t she l e f t t o t a k e h e r c h i l d t o school and do shopping. The time s h e e t f o r J u l y i n d i c a t e s t h a t while she was employed on an hourly b a s i s , she was p a i d f o r 14 hours per day. N evidence a s t o t h e p r e c i s e amount of work done was o o f f e r e d by t h e employer and t h e i n f e r e n c e o f t h e h e a r i n g s examiner i s a reasonable one. It i s n o t c l e a r l y erroneous i n view of t h e r e l i a b l e , p r o b a t i v e , and s u b s t a n t i a l evidence on t h e r e c o r d a s a whole. There i s no f a i l u r e of proof. I s s u e 4. Employer a l l e g e s t h e f i n d i n g s o f f a c t a r e inadequate. Under t h e review p r o v i s i o n s of t h e Montana A d m i n i s t r a t i v e Procedure Act, s e c t i o n 82-4216(7), quoted h e r e t o f o r e and under which the employer appealed, s u b s e c t i o n (g) t h e r e o f allows t h e d i s t r i c t court t o reverse: "(g2 because f i n d i n g s of f a c t , upon i s s u e s e s s e n t i a l t o t h e d e c i s i o n , were n o t made although requested." N r e q u e s t f o r t h e missing f i n d i n g was made. o The f i n d i n g claimed t o be missing f i n d i n g s e t t i n g o u t t h e number of hours f o r which payment i s due. W n o t e t h a t t h e h e a r i n g s examiner a t t a c h e d t o h i s e f i n d i n g s t h e worksheets he used t o c a l c u l a t e t h e amount due. These worksheets adequately provided t h e n e c e s s a r y information. There i s no e r r o r . Employer n e x t argues t h e assessment of p e n a l t i e s by t h e d i s t r i c t c o u r t was e r r o r p a r t i c u l a r l y i n view of t h e f a c t they were not a s s e s s e d by t h e h e a r i n g s examiner. He c i t e s and r e l i e s on S t a t e ex r e l . Neiss v. D i s t r i c t Court, 162 Mont. 3 2 4 , 511 P.2d 979. That c a s e i s n o t a p p l i c a b l e t o t h e f a c t s h e r e f o r i n Neiss t h e Court d e a l t w i t h t h r e e c a t e g o r i e s of wage claims: 1. I n t h e f i r s t group a d e p o s i t had been made by employer i n t o t h e d i s t r i c t c o u r t f o r wages due t o a group of u n i d e n t i f i e d employees. We noted there the employer having complied, there was no penalty due. Here, employer Garsjo made no deposit. 2. The second group, consisted of employees who had settled their claims. The Court held: "These employees having been represented by the county attorney *** liquidated damages are not applicable." In the instant case, the employee had a private attorney. 3. The third group of employees brought the action either through the labor commissioner or the county attorney, and this Court noted the penalty was to be disposed of by the district court. Under the provisions of section 41-1302, R.C.M. 1947, the commissioner of labor is charged in cases where he institutes an action for the collection of wages due, to collect the penalty. The wording of the statute is "A penalty shall * * * be assessed." We find here no error in assessing the penalty. The question of attorney fees is raised where not only the commissioner of labor presecutes the claim, but where in addition the employee has hired her own counsel. Employer here relies on Neiss but as noted heretofore, that case is distinguishable on the facts. There the employees were represented by the county attorney, who was carrying out his official duties. Here, private counsel was hired, even though the claim was assigned to the commissioner. Employee is entitled to an award of attorney fees. Section 41-1314.2, R.C.M. 1947, provides that the judgment should include all costs reasonably incurred in connection with the pro- ceedings, including reasonable attorneys' fees. Here, the trial court set the attorney fees in the amount of $880 and no issue is raised as to the reasonableness of the fee. .'s The judgment is affirmed. ( ' \ , . 7 /' '\ \\. 2 -4-5 < - i~ ' 5 - z 9 P + . f$ , 3 Justice : J . I W Concur: e Chief Justice