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. ( '
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Justice : J .
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Chief Justice