97-120
No. 97-120
IN THE SUPREME COURT OF THE STATE OF MONTANA
1998 MT 17
MONTANA PUBLIC EMPLOYEE'S ASSOCIATION,
a Montana non-profit Corporation; on behalf of, as their
union, Tim Fellows, Jerry Brown, and all other employees
of the Montana Department of Transportation similarly
situated,
Plaintiffs and Appellants,
v.
MONTANA DEPARTMENT OF TRANSPORTATION,
Defendant and Respondent.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Jeffrey M. Sherlock, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Carter N. Picotte, Helena, Montana
For Respondent:
Mike Pickard, Human Resources Attorney, Montana Department of
Transportation, Helena, Montana
Submitted on Briefs: May 15, 1997
Decided: January 30, 1998
Filed:
__________________________________________
Clerk
Justice James C. Nelson delivered the Opinion of the Court.
¶1 The Montana Public Employee's Association (MPEA) appeals an order of the
District Court for the First Judicial District, Lewis and Clark County, granting summary
judgment in favor of the Montana Department of Transportation (MDT) in a controversy
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between the parties over the status of the "District Construction Allowance" (DCA) paid
to certain MDT employees. We reverse and remand.
¶2 The sole issue raised on appeal is whether the District Court erred in determining
that the DCA may not be included in the base pay of MDT employees for the purpose
of calculating overtime.
Factual and Procedural Background
¶3 MDT employs a limited number of individuals in its construction bureau whose
job sites change from time to time. For that reason, reporting stations have been
established in various locations so that employees can report to work at a location closer
to their homes. MDT then provides transportation from the reporting station to the actual
work site during work hours.
¶4 MPEA acts as a labor union on behalf of public employees. MPEA and MDT
negotiated a collective bargaining agreement on September 27, 1991, wherein they agreed
that an allowance, the DCA, would be paid to certain construction bureau employees
based upon the distance they travel from their home to the reporting station. This
agreement was reaffirmed by the parties on several occasions, the last, prior to the filing
of the complaint, being May 10, 1994. Eligibility for the DCA is based on the
relationship of the reporting station to the central post office of the employee's home
town. Employees who reside in reasonable proximity to a reporting station or work site
do not receive the DCA.
¶5 The DCA is found in a supplement to the collective bargaining agreement between
the parties. It provides, in part:
1. Purpose and Application
a. Purpose: The purpose of this policy is to provide an
allowance for District Construction personnel who are
assigned to a project by the appropriate authority. This
allowance is intended to accommodate special circumstances
of employees in the District Construction offices who must
report to different reporting stations. It is not provided as per
diem, and employees are not considered to be in a travel
status anytime they are covered under this policy.
b. Application: This policy will apply only to District
Construction personnel who are subject to assignment to
projects which require them to report to a designated
reporting station in excess of twenty (20) miles one way from
the central post office in the community in which he/she
resides, or if the employee prefers a rural location, he/she
will be considered to be residing at the central post office in
the nearest city, town or community for mileage calculations
only.
c. "Designated Reporting Station" means a collecting point for
state vehicles, an office located in a town, the field office, the
district office or other location serving the best interest of the
Department. Reporting stations will be established where
reasonable accommodations are available. Management will
be the sole determiner of þreasonable accommodations.þ
d. "Designated Shift" means a shift in which the employee
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actually works two (2) or more hours with the remainder of
the regular shift in a pay status.
Supplemental to Master Con
tract for Department of Transportation Non-Maintenance Unit
(May 10, 1994), pp. 8-9.
¶6 On May 9, 1995, MPEA filed a complaint against MDT seeking a Declaratory
Judgment and alleging that the DCA should be treated as an element of an employeeþs
base pay for purposes of calculating overtime compensation. On January 17, 1996,
MPEA filed an amended complaint basing its claim, in part, on the provisions of the Fair
Labor Standards Act (FLSA), 29 U.S.C. §§ 201 through 219.
¶7 MPEA and MDT stipulated to the facts and agreed that the FLSA controls. The
parties filed cross motions for summary judgment. On December 10, 1996, the District
Court entered its Order on Motions for Summary Judgment wherein the court concluded
that since the DCA was reimbursement for travel expenses, it could not be included in
an employeeþs base pay for purposes of calculating overtime compensation. MPEA
appealed.
Standard of Review
¶8 Our standard of review in appeals from summary judgment rulings is de novo.
Motarie v. N. Mont. Joint Refuse Disposal (1995), 274 Mont. 239, 242, 907 P.2d 154,
156 (citing Mead v. M.S.B., Inc. (1994), 264 Mont. 465, 470, 872 P.2d 782, 785).
When we review a district courtþs grant of summary judgment, we apply the same
evaluation as the district court based on Rule 56, M.R.Civ.P. Bruner v. Yellowstone
County (1995), 272 Mont. 261, 264, 900 P.2d 901, 903. In Bruner, we set forth our
inquiry:
The movant must demonstrate that no genuine issues of material fact exist.
Once this has been accomplished, the burden then shifts to the non-moving
party to prove, by more than mere denial and speculation, that a genuine
issue does exist. Having determined that genuine issues of fact do not
exist, the court must then determine whether the moving party is entitled to
judgment as a matter of law. We review the legal determinations made by
a district court as to whether the court erred.
Bruner, 900 P.2d at 903 (citations omitted).
Discussion
¶9 Whether the District Court erred in determining that the DCA may not be
included in the base pay of MDT employees for the purpose of calculating overtime.
¶10 The parties agree that there are no factual disputes in this case and that the FLSA
is controlling. The FLSA is a federal statute establishing minimum wage, overtime pay,
child labor, and equal pay requirements. 29 C.F.R. § 778.0 (1997). The Department
of Labor (DOL) is responsible for determining the operative definitions of the terms used
in the FLSA through interpretive regulations and as a general rule, DOL regulations are
entitled to judicial deference and are the primary source of guidance for determining the
scope and extent of exemptions to the FLSA. Spradling v. City of Tulsa, Okl. (10th Cir.
1996), 95 F.3d 1492, 1495 (citing Udall v. Tallman (1965), 380 U.S. 1, 16, 85 S.Ct.
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792, 801, 13 L.Ed.2d 616).
¶11 Exemptions from or exceptions to the FLSA's requirements are to be narrowly
construed against the employer asserting them. Donovan v. Brown Equipment & Service
Tools, Inc. (5th Cir. 1982), 666 F.2d 148, 153 (citing Arnold v. Ben Kanowsky, Inc.
(1960), 361 U.S. 388, 392, 80 S.Ct. 453, 456, 4 L.Ed.2d 393). Furthermore, the
employer bears the burden of showing that the employee fits "plainly and unmistakenly
within the exemption's terms.þ Spradling, 95 F.3d at 1495 (citing Aaron v. City of
Wichita (10th Cir. 1995), 54 F.3d 652, 657 cert denied ___ U.S. ___, 116 S.Ct. 419,
133 L.Ed.2d 336; Reich v. State of Wyoming (10th Cir. 1993), 993 F.2d 739, 741).
¶12 Under the FLSA,
no employer shall employ any of his employees who in any workweek is
engaged in commerce or in the production of goods for commerce, or is
employed in an enterprise engaged in commerce or in the production of
goods for commerce, for a workweek longer than forty hours unless such
employee receives compensation for his employment in excess of the hours
above specified at a rate not less than one and one-half times the regular
rate at which he is employed.
29 U.S.C. § 207(a)(1) (1997) (emphasis added). An enterprise þengaged in commerce
or in the production of goods for commerceþ includes an enterprise that "is an activity
of a public agency," 29 U.S.C. § 203(s)(1)(C) (1997), and a "public agency" includes
the government or any agency of a state or a political subdivision of a state, 29 U.S.C.
§ 203(x) (1997).
¶13 Additionally, "regular rate" is defined in the FLSA as follows:
As used in this section the "regular rate" at which an employee is employed
shall be deemed to include all remuneration for employment paid to, or on
behalf of, the employee, but shall not be deemed to include--
. . .
(2) payments made for occasional periods when no work is
performed due to vacation, holiday, illness, failure of the employer to
provide sufficient work, or other similar cause; reasonable payments for
traveling expenses, or other expenses, incurred by an employee in the
furtherance of his employer's interests and properly reimbursable by the
employer; and other similar payments to an employee which are not made
as compensation for his hours of employment; . . .
29 U.S.C. § 207(e) (1997). Although the "regular rate" is a rate per hour, the FLSA
does not require employers to compensate employees on an hourly rate basis; their
earnings may be determined on a piece-rate, salary, commission, or other basis. 29
C.F.R. § 778.109 (1997). The regular hourly rate of pay of an employee is determined
by dividing his total remuneration for employment (except statutory exclusions) in any
workweek by the total number of hours actually worked by him in that workweek for
which such compensation was paid. 29 C.F.R. § 778.109 (1997).
¶14 In granting summary judgment in favor of MDT, the District Court concluded that
the DCA is not made as compensation for hours of employment or hours worked because
employees receive the DCA regardless of the number of hours worked, so long as they
work more than two hours in a shift. The court also concluded that the DCA appeared
to be a form of reimbursement for travel expenses to employees and, because the FLSA
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provides that reimbursement for travel expenses is not to be included in an employeeþs
regular rate of pay for purposes of calculating overtime, the DCA may not be included
in the base pay of MDT employees. The District Court based its conclusions on a review
of numerous time sheets of employees, submitted by MPEA as exhibits, wherein the
DCA funds were recorded under a section entitled þTravel Expense Claim.þ Moreover,
the court determined that the employees do not claim other statutorily created travel
reimbursement for mileage and that the DCA was directly linked with the distance the
employee had to travel to the reporting station.
¶15 MPEA maintains that the District Court erred in concluding that the DCA falls
within the statutory exception for travel expenses contained in 29 U.S.C. § 207(e)(2).
MPEA contends that the DCA is not an expense reimbursement under the FLSA because
the travel expense is not incurred on the employerþs behalf or for the employerþs benefit
or convenience. Hence, MPEA argues, since the regular rate includes all remuneration
paid to an employee unless a specific exception is provided for in the FLSA and since the
DCA does not fall within one of the statutory exceptions, the DCA may not be excluded
from the þregular rateþ for the purpose of calculating overtime compensation.
¶16 MDT contends, on the other hand, that not only does the DCA fall within the
statutory exception for travel expenses found at 29 U.S.C. § 207(e)(2), but it also falls
within the exception for "other similar payments to an employee which are not made as
compensation for his hours of employment" also found at 29 U.S.C. § 207(e)(2). The
MDT bases its contention on the fact that the DCA is not compensation for hours worked
since qualified employees are paid the DCA whether they work two hours in a shift or
eight hours.
¶17 "It is important to determine the scope of [the exclusions under the FLSA] since
all remuneration for employment paid to employees which does not fall within one of
these seven exclusionary clauses must be added into the total compensation received by
the employee before his regular hourly rate of pay is determined." 29 C.F.R. §
778.200(c) (1997). See also Brock v. Two R Drilling Co., Inc. (5th Cir. 1985), 772
F.2d 1199, 1200.
¶18 The DOL interprets the exception for travel expenses found in 29 U.S.C. §
207(e)(2) as follows:
Where an employee incurs expenses on his employer's behalf or where he
is required to expend sums solely by reason of action taken for the
convenience of his employer, section 7(e)(2) is applicable to reimbursement
for such expenses. Payments made by the employer to cover such expenses
are not included in the employeeþs regular rate (if the amount of the
reimbursement reasonably approximates the expenses incurred). Such
payment is not compensation for services rendered by the employees during
any hours worked in the workweek.
29 C.F.R. § 778.217(a) (1997). However,
[t]he expenses for which reimbursement is made must in order to merit
exclusion from the regular rate under this section, be expenses incurred by
the employee on the employerþs behalf or for his benefit or convenience.
If the employer reimburses the employee for expenses normally incurred by
the employee for his own benefit, he is, of course, increasing the
employee's regular rate thereby. An employee normally incurs expenses
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in traveling to and from work, buying lunch, paying rent, and the like. If
the employer reimburses him for these normal everyday expenses, the
payment is not excluded from the regular rate as þreimbursement for
expenses.
29 C.F.R. § 778.217(d) (1997) (emphasis added).
¶19 In the case before us, the expenses were not incurred on MDT's behalf or for
MDT's benefit or convenience. The DCA is reimbursement for normal everyday
expenses incurred by the employee for his own benefit, namely traveling to and from
work. Thus, the DCA may not be excluded from the regular rate as reimbursement for
travel expenses under that provision of 29 U.S.C. § 207(e)(2).
¶20 Nor may MDT be relieved of liability under the Portal to Portal Act, 29 U.S.C.
§§ 251 through 262. As a general rule, the Portal to Portal Act relieves an employer
from liability or punishment under the FLSA for failing to pay an employee minimum
wages or overtime compensation for "walking, riding, or traveling to and from the actual
place of performance of the principal activity or activities which such employee is
employed to perform. . . ." 29 U.S.C. § 254(a) (1997). "The effect on the Fair Labor
Standards Act of the various provisions of the Portal Act must necessarily be determined
by viewing the two acts as interelated parts of the entire statutory scheme for the
establishment of basic fair labor standards." 29 C.F.R. § 790.2(a) (1997). Under the
Portal to Portal Act, an employer is not relieved of liability or punishment if the activity
is compensable by either "an express provision of a written or nonwritten contract in
effect, at the time of such activity, between such employee, his agent, or collective-
bargaining representative and his employer," 29 U.S.C. § 254(b)(1) (1997), as is the
case here.
¶21 MDT argues that the parties had not intended, under the collective bargaining
agreement, to include the DCA in the calculations for overtime compensation. However,
"[t]here is no collective-bargaining exemption from the FLSA." Reich v. Interstate
Brands Corp. (7th Cir. 1995), 57 F.3d 574, 578; Featsent v. City of Youngstown (6th
Cir. 1995), 70 F.3d 900, 905.
¶22 MDT also argues that, even if the DCA does not qualify for exclusion under the
travel expense exception to the FLSA found in 29 U.S.C. § 207(e)(2), it may still be
excluded from the regular rate for the purpose of calculating overtime because it falls
within the exclusion, also found in 29 U.S.C. § 207(e)(2), for "other similar payments
to an employee which are not made as compensation for his hours of employment." We
reject MDT's argument.
¶23 To qualify for exclusion under this third and last clause of 29 U.S.C. § 207(e)(2),
the DCA must "be 'similar' in character to the payments specifically described in section
7(e)(2)." 29 C.F.R. § 778.224(a) (1997). MDT has not contended that the DCA is
similar to the payments excluded under the first clause of 29 U.S.C. § 207(e)(2) "for
occasional periods when no work is performed due to vacation, holiday, illness, failure
of the employer to provide sufficient work, or other similar cause," and we have already
shown that the DCA is not reimbursement for travel or other expenses under the second
clause of 29 U.S.C. § 207(e)(2).
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¶24 Instead, MDT contends that the DCA falls within the exceptions under 29 U.S.C.
§ 207(e)(2) because of the phrase therein that the excepted payments are "not made as
compensation for [an employees] hours of employment." MPEA argues that the DCA
is similar because it is not compensation for hours worked since qualified employees are
paid the DCA whether they work two hours in a shift or eight hours. We find this
argument unpersuasive. "Section 7(e)(2) does not exclude every payment not measured
by hours of employment from the regular rate." Featsent, 70 F.3d at 904 (citing Reich,
57 F.3d at 577).
It is clear that the ["other similar payments"] clause was not intended to
permit the exclusion from the regular rate of payments such as bonuses or
the furnishing of facilities like board and lodging which, though not directly
attributable to any particular hours of work are, nevertheless, clearly
understood to be compensation for services.
29 C.F.R. õ§ 778.224(a) (1997).
¶25 Therefore, we hold that the MDT has not met its burden of showing that the DCA
fits "plainly and unmistakenly" within one of the statutory exceptions to the FLSA's
requirements. Spradling, 95 F.3d at 1495. Consequently, the DCA must be included in
the regular rate for the purpose of calculating overtime. This does not mean, however,
that the time spent traveling to and from work must also be counted as hours worked.
An employee who travels from home before his regular workday and
returns to his home at the end of the workday is engaged in ordinary home
to work travel which is a normal incident of employment. This is true
whether he works at a fixed location or at different job sites. Normal travel
from home to work is not worktime.
29 C.F.R.§ 785.35 (1997). Ordinary travel from home to work "need not be counted
as hours worked even if the employer agrees to pay for it." 29 C.F.R. § 785.34 (1997)
(citing Tennessee Coal, Iron & R.R. Co. v. Muscoda Local (1944), 321 U.S. 590, 64
S.Ct. 698, 88 L.Ed. 949; Anderson v. Mt. Clemens Pottery Co. (1946), 328 U.S. 680,
66 S.Ct. 1187, 90 L.Ed. 1515; Walling v. Anaconda Copper Mining Co. (1946), 66
¶26 Accordingly, we hold that the District Court erred in determining that the DCA
may not be included in the base pay of MDT employees for the purpose of calculating
overtime.
¶27 Reversed and remanded for further proceedings consistent with this opinion.
/S/ JAMES C. NELSON
We Concur:
/S/ J. A. TURNAGE
/S/ WILLIAM E. HUNT, SR.
/S/ JIM REGNIER
/S/ TERRY N. TRIEWEILER
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