Haywood v. North American Van Lines, Inc.

• Decision Date: 31 July 1997
• Docket Number: No. 96-3114.,96-3114.
• Citation: 121 F.3d 1066
• Parties: Dorothy A. HAYWOOD, Plaintiff-Appellant, v. NORTH AMERICAN VAN LINES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

121 F.3d 1066

Dorothy A. HAYWOOD, Plaintiff-Appellant, v. NORTH AMERICAN VAN LINES, INC., Defendant-Appellee.

No. 96-3114.

United States Court of Appeals, Seventh Circuit.

Argued February 26, 1997.

Decided July 31, 1997.

Christopher C. Myers (argued), Samuel L. Bolinger, Myers & Geisleman, Fort Wayne, IN, for Plaintiff-Appellant.

Gary D. Johnson, Baker & Daniels, Fort Wayne, IN, Todd M. Nierman (argued), Baker & Daniels, Indianapolis, IN, Elliot R. Lewis, North American Van Lines, Incorporated, Fort Wayne, IN, for Defendant-Appellee.

Before EASTERBROOK, RIPPLE and MANION, Circuit Judges.

RIPPLE, Circuit Judge.

Dorothy Haywood filed a complaint in the district court alleging that North American Van Lines, her employer, had violated the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201 et seq., by failing to pay her overtime compensation. North American filed an answer in which it contended that it was not obligated to pay Ms. Haywood any overtime because she was a salaried exempt employee. North American subsequently filed a motion for summary judgment, which the district court granted. For the reasons set forth in the following opinion, we affirm the judgment of the district court.

I BACKGROUND

A. Facts

Ms. Haywood has been employed by North American since 1972. North American is in the business of shipping household goods for consumers relocating within the United States or Canada. Since 1991 Ms. Haywood has worked as a Consumer Service Coordinator ("CSC") and is responsible for trying to resolve billing, damage to cargo and delay claims with North American's customers. The CSC's primary role is to ensure quality service to North American's customers and to prevent the customer's dissatisfaction with some aspect of his move from escalating into litigation. The CSC is the sole contact person between North American and its customers with respect to these claims. CSCs spend a majority of their time adjusting claims and negotiating with customers to try to settle their claims.

Ms. Haywood's complaint states that she is paid bi-weekly and receives an annual salary of $28,000. As a CSC, Ms. Haywood alleges, she generally works 45 to 50 hours per week, but has not received overtime pay for hours worked in excess of 40 per week. Also, roughly four times a year, CSCs are required to work on Saturday, in addition to their weekly schedules. On those occasions, employees are expected to work their shift or to find a qualified replacement to fill in. If an employee does neither, he is disciplined; he receives either a written or verbal reprimand. North American does not, however, adjust such employee's paycheck to account for these lost hours. An employee unable to work on a scheduled Saturday may need to "trade" Saturdays with another employee or to provide a monetary incentive to another employee to work his shift. This tradition of having "to pay your replacement" was one established by the workers themselves, but it has been going on for some time, and the company knows of the practice. Ms. Haywood is not able to work her Saturday shifts. Instead, she pays another CSC to cover for her.

Ms. Haywood filed this suit in the district court. She contends that she is not an exempt salaried employee under the FLSA and therefore is entitled to overtime compensation for the hours in excess of 40 that North American has required her to work. North American, in response, filed a motion for summary judgment. It submitted that Ms. Haywood is not entitled to any overtime because she is an exempt employee.

B. District Court Proceedings

The district court applied the "short test"¹ to determine whether Ms. Haywood is exempt from the FLSA's usual requirement that an employer pay an employee overtime for the hours worked in excess of 40 hours per week. See 29 C.F.R. §§ 541.2, 541.214. First, the district court concluded that, as a matter of law, Ms. Haywood was paid on a salary basis for purposes of the FLSA. The court, analogizing Ms. Haywood's work to that of an insurance claims adjuster, also determined that Ms. Haywood's work fell within the category of administrative work and was directly related to North American's general business operations. Finally, the court concluded that, in resolving customer problems and negotiating with customers over the size of a settlement, Ms. Haywood's duties included the exercise of discretion and independent judgment and that she was not unduly circumscribed by North American's CSC guidelines. Because her work for North American met the three criteria of the short test, the district court concluded, she is exempt from the FLSA and is not entitled to overtime compensation. Consequently, the district court granted North American's motion for summary judgment.

II DISCUSSION

We review de novo the district court's grant of summary judgment. Bahl v. Royal Indem. Co., 115 F.3d 1283, 1289 (7th Cir. 1997). We examine the record in the most favorable light to the nonmoving party and draw all reasonable inferences in such party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986). If, considered in this light, the record "could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial," and the motion for summary judgment should be granted. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (internal quotation and citation omitted).

The FLSA generally requires employers to pay their employees at least one and a half times their regular wage rate for hours worked in excess of 40 in a given work week. See 29 U.S.C. § 207(a)(1). However, the FLSA exempts from these provisions "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)." Id. § 213(a)(1). Because the statute delegates the power to define and delimit the scope of § 207 to the Secretary of Labor, her regulations are given "the force and effect of law." Batterton v. Francis, 432 U.S. 416, 425 n. 9, 97 S.Ct. 2399, 2405 n. 9, 53 L.Ed.2d 448 (1977). Under this delegation of power, the Secretary has promulgated both a "long test," see 29 C.F.R. § 541.2(a)-(e), and a "short test," see id. § 541.214, for evaluating whether an employee qualifies as an exempt salaried employee who works in an administrative capacity-the exemption at issue in this case. Both parties agree that Ms. Haywood earned more than $250 per week and that the short test therefore governs our review. Section 541.214 provides that an individual who earns at least $250 per week qualifies as an exempt bona fide administrative employee if three conditions are met: (1) The employee is paid on a salary basis within the meaning of the FLSA; (2) the employee performs as his primary duty office or nonmanual work "directly related to management policies or general business operations"; and (3) the employee's work "includes work requiring the exercise of discretion and independent judgment." 29 C.F.R. § 541.214.² Ms. Haywood contends that she fails each of these three conditions.

1.

Under the first prong of the short test, North American first must demonstrate that Ms. Haywood was paid on a salary or fee basis.

According to the regulations, "an employee will be considered to be paid `on a salary basis' ... 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."

Auer v. Robbins, ___ U.S. ___, ___, 117 S.Ct. 905, 908, 137 L.Ed.2d 79 (1997) (quoting 29 C.F.R. § 541.118(a)).³ In Auer, the Supreme Court of the United States accepted the Secretary's interpretation of the "subject to" language and held that the salary-basis test denies exempt status "when employees are covered by a policy that permits disciplinary or other deductions in pay `as a practical matter.'" Id. at ___, 117 S.Ct. at 911 (emphasis added). That standard is met if there is an actual practice of such deductions or if there is an employment policy that creates a significant likelihood of such deductions. Id.

Many of the issues of fact in this case are not in dispute. All agree that Ms. Haywood received a predetermined amount of compensation on a regular basis from North American. She received a biweekly paycheck which reflects 1/26 of her annual salary. Each such paycheck was identical, regardless of the number of hours she actually worked.

Nonetheless, Ms. Haywood contends, she was not paid on a salary basis for purposes of the FLSA. This is borne out, she submits, by her allegations that: (a) If she cannot work her shift on a mandatory Saturday and is unable to find a replacement, she is subject to non-monetary discipline; (b) if she misses work during the work week, she must make up the time; (c) if she needs to find a replacement worker for her Saturday shifts, she may need to pay him; and (d) if she does not make up any time for which she was absent, her salary would be deducted. We agree with the district court that none of Ms. Haywood's allegations, upon close examination, is sufficient to create a genuine issue of material fact. None of the first three allegations reasonably supports an inference that Ms. Haywood's pay is "subject to" reduction because of variations in the quality or quantity of Ms. Haywood's work; at first glance, the fourth allegation is more problematic. We shall examine each of them.

Ms. Haywood's first contention — that non-monetary discipline for failing to work a scheduled shift supports a finding of nonsalaried status — finds no basis in the regulations. Nothing in the regulations suggests that an employee loses his exempt status simply because his...