Diaz v. Silver Bay Logging, Inc.

OPINION

MATTHEWS, Justice.

The main question in this case is whether a regulation prohibiting an employer from deducting the costs of food and lodging from an employee's pay applies to all such deductions or only those that reduce the employee's pay below the minimum wage. We conclude that the latter meaning applies because the language of the regulation will not reasonably support the former meaning.

*734The regulation in question is 8 AAC 15.160 as it existed until 1998. It was promulgated under section 28.10.085 of the Alaska Wage and Hour Act (AWHA) and became effective on September 28, 1985. We set out in the margin the text of the relevant subsections of the regulation, 8 AAC 15.160(a) and (d),1 and the statutory section which authorized the regulation, AS 28.10.085.2

(Globen Diaz worked as a logger for Silver Bay Logging, Inc., during the logging seasons of 1994 through 1997. While so employed he stayed at Silver Bay's remote camps. Pursuant to a written agreement, Silver Bay deducted from his earnings $10 a day for board and lodging. This deduction did not reduce his wage rate below the statutory minimum wage. No alternative public board and lodging facilities were accessible to Diaz at any of the camps.

Diaz brought this action against Silver Bay on his own behalf and as a class representative for others similarly situated claiming, among other things, that the board and lodging deductions were unlawful under 8 AAC 15.160. Silver Bay moved for summary judgment. After several rounds of briefing and oral argument, summary judgment was granted and a final judgment was entered.

Diaz's main contention was and is that 8 AAC 15.160(d) prohibits deductions for board and lodging except where an employee opts out of alternative board and lodging, an exception not applicable to his case as alternative board and lodging was never available. In the superior court Silver Bay took issue with this interpretation and argued that subsection .160(d) does not apply to deductions that do not reduce an employee's wage rate below the minimum wage. The superior court took a third position. The court ruled that subsection (d)(1) states a requirement that is additional to those of subsections (d)(2) and (d)(8) and that it only applies where alternative facilities are available. When alternative facilities are not available *735only subsection (d)(2) and (d)(8) must be satisfied. The court's ruling implies that subsection (d) applies to cases where the deduction does not reduce compensation to a wage rate below the statutory minimum.

For the reasons that follow we conclude that subsection (d) does not bar deductions that are permitted under subsection (a). Instead, subsection (d) permits, under the limits it expresses, deductions that would otherwise be barred by subsection (a). We thus agree with the position taken by Silver Bay before the superior court that subsection (d) does not apply to deductions that do not reduce an employee's wage rate to below the minimum wage.3

The prefatory language of subsection (d)"nothing in (a) of this section prohibits"-ecan only function to permit conduct that subsection (a) would otherwise prohibit, it cannot prohibit conduct that subsection (a) permits. Subsection (a) prohibits written deductions that "have the effect of reducing an employee's wage rate below the statutory minimum...." Thus subsection (d) can permit deductions that would take a wage rate below the minimum because those deductions are prohibited by subsection (a). But it cannot serve to prohibit deductions that do not reduce wages below the minimum, because such deductions are permitted by subsection (a).

Meaning, of course, can be conveyed by a negative implication. But the negative implication that might otherwise be drawn by a failure to satisfy one of the three conditions of subsection (d) is limited by the "nothing in (a) of this section prohibits" prefatory language of subsection (d). The failure to meet one of the (d) conditions implies only that conduct prohibited by subsection (a) is indeed prohibited.4

If the prefatory language to subsection (d) were "Notwithstanding (a), deductions are prohibited unless, (1) ... (2) ... (8)" the interpretation Diaz offers would be correct. But those are not the words used, and the words that are used will not, in our view, reasonably bear Diaz's offered meanings.5

The Alaska Department of Law has interpreted subsection .160(d) as we do. The attorney general, in a memorandum to the Department of Labor dated April 28, 1986, concerning the meaning of subsection .160(d), stated:

Thus, if the conditions in paragraphs (1)-(8) [of .160(d)] are met (Re., for our purposes, the employee is not at a remote site) nothing in (a) prohibits a deduction for room and board. Although one inference that might be drawn from this is that if (1)-(8) are not met, (a) would prohibit such a deduction, a reading of (a) does not support this conclusion.... When (d) is read together with subsection (a), it seems to provide that if the conditions in paragraphs (d)(1)-(@) are met, a written agreement for deductions is valid even though it would reduce the employee's wage rate below the minimum. There is nothing else in subsection (a) that would appear to limit the employer's ability to deduct the cost of room and board from an employee's wages. Nowhere in subsections (a) or (d) is the situation explicitly addressed regarding deductions when the conditions listed in (d)(1)-(8) are not pres*736ent (for example, when alternative facilities are not accessible), and therefore, the general prohibition in (a) against agreements for deductions that reduce the employee's wage rate below the statutory minimum is the only limitation on deductions in that situation. Stated simply, if there are alternative facilities available, and the employee declines to use them, then deductions for the cost of facilities furnished by the employer are allowed, even though they have the effect of reducing the employee's wage below a minimum wage; if alternative facilities are not available, then the exception in subsection (d) to the limitations of (a) does not apply, and deductions for facilities furnished by the employer may not reduce the employee's wages below the statutory minimum. In short, nothing in 8 AAC 15.160 prohibits deductions for room and board in a remote-site situation if the deductions do not take the wages below the statutory minimum.... (Footnote omitted.)

Diaz argues that his interpretation of 8 AAC 15.160(a) and (d) reflects the longstanding and consistent position of the Alaska Department of Labor. Diaz argues that his, and the Department of Labor's, position is therefore entitled to deference in accordance with the "well-settled rule that courts are to give deference to an agency's construction of its own legislative-type regulations...."

It appears that the Department of Labor interprets subsection .160(d) in accordance with Diaz's position. Counsel for Diaz wrote the department in 1998, asking about the meaning of subsection .160(d). JR. Carr, Chief of Labor Standards, responded that subsection (d) applies regardless of whether a "deduction reduces the wages below the statutory minimum wage. ..." And there are internal memoranda and correspondence dating back to 1986, which suggest that this was the position of the department. In addition, Diaz has gathered affidavits and deposition testimony of officials of the Department of Labor indicating that subsection (d) was, from the outset, meant to apply to deductions that did not reduce wages below the minimum wage. On the other hand the testimonial evidence as to the department's original interpretation of subsection .160(d) is in conflict. Donald Wilson, who as Deputy Director of Labor Standards in the Department of Labor drafted subsection .160(d), testified that it did not bar a deduction that "does not reduce the employee's wage below the statutory minimum."

Given the 1986 opinion of the attorney general and the conflicting testimonial evidence of labor department officials, the deference due the Department of Labor's current interpretation of subsection (d) is debatable,6 but, in context, the point is unimportant. Our rule is that an agency's interpretation of its own regulation "is normally given effect unless plainly erroneous or inconsistent with the regulation."7 Here the department's interpretation does not satisfy the conditions of this rule because, as we have explained above, it is inconsistent with the language of the regulation and, as such, it is unreasonable.

Diaz also argues that the board and lodging deduction violated the second sentence of 8 AAC 15.160(a) because Diaz was required to "give up ... the compensation to which [he] is entitled." The superior court ruled that a written agreement between an employee and employer made before the employment relationship commenced would not fall within the prohibition of this sentence:

The terms of 8 AAC 15.160(a) apply only where the employer/employee relationship has commenced. Prior to accepting and commencing employment with [Silver Bay], Diaz was not "entitled" to any remuneration because he was not yet an employee of [Silver Bay] and had not performed any services for them.

This rationale is correct. The concept of entitlement must refer to an employee's contractual or statutory and regulatory rights. *737In this case contracts between Silver Bay and Diaz entered into at the outset of each season provided for a $10 lodging and board deduction. No statutory or regulatory provision prohibited this deduction. Thus Diaz was not required to give up any part of compensation to which he was entitled.

Diaz also argues that the superior court should not have granted summary judgment concerning claims he asserted for unpaid overtime compensation and under-reporting of his wages to the Internal Revenue Service and the Social Security Administration. His argument concerning these claims is that Silver Bay should have added the $10 (divided by 8 for an 8-hour day) to his stipulated hourly pay rate for purposes of caleu-lating his overtime rate of pay and reported it as income for purposes of tax withholding. The superior court determined that these claims lacked merit because the furnishing of board and lodging was not a benefit furnished by Silver Bay as part of Diaz's compensation package: "Because the court finds that the deduction for room and board does not constitute a wage, Diaz's claims for un-derreporting of income, failure to withhold income and failure to pay taxes on the unreported income are all precluded as a matter of law." This conclusion is also correct. Diaz was not paid $10 or its equivalent in food and lodging, he was charged $10.8 To the extent that the charge reflected the value of what he received, this was not an employee benefit. He does not contend that the value of the board and lodging exceeded $10 per day.9

Diaz also argues that the court's award of $3500 in attorney's fees was error. Silver Bay's actual attorney's fees were $142,542. The norm under Civil Rule 82 in a summary judgment case would be to award twenty percent of actual fees-here $28,-508-to Silver Bay as the prevailing party."10 Diaz correctly notes that absent a finding of bad faith a loging claimant under the AWHA may not be subjected to an award of attor- , ney's fees,11 and that he litigated in good faith.101

The trial court adhered to this rule. But two of Diaz's claims were not covered by the AWHA. These were claims for breach of contract and for violation of AS 23.05.140(b). Civil Rule 82 applies to these claims. The trial court ordered Silver Bay to apportion its fees between the AWHA and these claims. Silver Bay made an effort to do so but the trial court did not accept Silver Bay's calculations. The court allocated most of the work performed by Silver Bay's counsel to the AWHA claims and attributed only a little less than 124% of the total effort to the other claims. Decisions such as this are discretionary.12 The court's allocation here was easily within the bounds of its discretion.

For these reasons the judgment of the superior court is AFFIRMED.

FABE, Chief Justice, with whom BRYNER, Justice, joins, dissenting. CARPENETI, Justice, not participating.

. 8 AAC 15.160 (1985) provided in relevant part:

(a) AS 23.10.085(c) does not limit the right of an employer and employee to enter into a written agreement to provide for deductions of monetary obligations of an employee. Requiring or inducing an employee to return or give up any part of the compensation to which the employee is entitled, whether by force, intimidation, or threat of dismissal from employment, or by any other manner, is prohibited. A written agreement for deductions payable to the employer or person acting in the employer's behalf or interest is not valid if it would have the effect of reducing an employee's wage rate below the" statutory minimum, or if it would require an employee to reimburse the employer for any of the following:
(1) customer checks returned due to insufficient funds or any other reason;
(2) non-payment for goods or services as a result of theft or credit default;
(3) cash or cash register shortages unless the employee admits, willingly and in writing, to having personally taken the specific amount of cash that is alleged to be missing;
(4) lost, missing, or stolen property, unless the employee admits willingly and in writing, to having personally taken the specific property alleged to be lost, missing, or stolen; or
(5) damage or breakage costs unless clearly due to willful conduct of the employee and the employee has acknowledged responsibility in writing.
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(d) Nothing in (a) of this section prohibits deductions from earnings, based on a written agreement, to reimburse an employer for the reasonable cost of furnishing board and lodging, if
(1) alternative public board and lodging facilities are accessible to the worksite and the employee has declined to use such facilities; (2) the board and lodging facilities of the
employer are customarily furnished by the employer and used by the employees; and
(3) the cost to the employee for the use of the employer's board and lodging facilities, is reasonable and without profit to the employer.

. AS 23.10.085 provides:

(a) The director may adopt, amend, or rescind administrative regulations not inconsistent with the purposes and provisions of AS 23.10.050-23.10.150 that are necessary for the administration of AS 23.10.050-23.10.150.
(b) The regulations may, without limiting the generality of (a) of this section, define terms used in AS 23.10.050-23.10.150, and restrict or prohibit industrial homework or other acts or practices that the director finds appropriate to carry out the purpose of AS 23.10.050-23.10.150, or to prevent the circumvention or evasion of AS 23.10.050-23.10.150.
(c) The regulations may permit deductions by an employer from the minimum wage applicable under AS 23.10.050-23.10.150 to employees for the reasonable cost, as determined by the director on an occupation basis, of furnishing board or lodging if board or lodging is customarily furnished by the employer and used by the employee.

. The court can affirm a summary judgment on grounds not relied on by the superior court. "Moreover, we should consider any matter appearing in the record, even if not passed upon by the lower court, in defense of the judgment." Beluga Mining Co. v. State, Dep't of Natural Res., 973 P.2d 570, 574 (Alaska 1999).

. Diaz seems to suggest that interpreting subsection (d) to apply only when board and lodging deductions would reduce effective pay to a rate lower than required rates would place AWHA in conflict with the federal Fair Labor Standards Act (FLSA), 29 U.S.C.A. §§ 201-219 (1998). But this is clearly not the case. The regulations concerning board and lodging deductions under the FLSA explicitly do not apply to deductions where the employee still receives more than the minimum wage after deductions are taken. 29 CER. § 531.36(a) (2002). Since we interpret subsection (d) of 8 AAC 15.160 to be effective under the same conditions as the FLSA regulations and since the Alaska minimum wage is higher than the federal minimum wage, AS 23.10.065(a), our interpretation of (d) will not result in a conflict between AWHA and FLSA.

. Similarly, we reject the superior court's interpretation because it, implicitly at least, also accepts the proposition that subsection (d) prohibits what subsection (a) permits.

. See 2B Norman J. Singer, SuruErtanp Staturory Construction § 49:05 (6th ed. 2000) ("[WJeight given to an agency interpretation depends on many factors, including ... its consistency with earlier and later agency pronouncements. ...").

. Trustees for Alaska v. State, Dep't of Natural Res., 795 P.2d 805, 812 (Alaska 1990).

. Diaz does not dispute Silver Bay's evidence showing that his overtime rate of pay was calculated before the room-and-board deductions were made.

. If there was an excess, it would still not be considered as income, at least for federal tax purposes because, as Diaz concedes, the board and lodging was furnished for the convenience of the employer. See 26 U.S.C. § 119(a) (2002).

. Alaska R. Civ. P. 82(b)Q2).

. See AS 23.10.110({). Prior to 1995, the AWHA did not authorize an award of attorney's fees to a prevailing defendant. Diaz's claims for overtime wages earned before August 22, 1995 (the effective date for amended AS 23.10.110) are exempt from having attorney's fees collected against them under former AS 23.10.110(c) or Civil Rule 82. See Grimes v. Kinney Shoe Corp., 938 P.2d 997, 1001 (Alaska 1997). His claims for wages earned after that date are subject to amended AS 23.10.110(f), which allows a defendant to collect attorney's fees in an action for unpaid overtime compensation only in the event of a frivolous or bad faith claim.

. See Dansereau v. Ulmer, 955 P.2d 916, 918-19 (Alaska 1998) (within court's discretion to independently calculate reasonable hours in determining appropriate attorney fee award).