Highlander v. K.F.C. Nat. Management Co.

• Decision Date: 18 November 1986
• Docket Number: No. 85-3587,85-3587
• Parties: 42 Fair Empl.Prac.Cas. 654, 27 Wage & Hour Cas. (BN 1524, 41 Empl. Prac. Dec. P 36,675, 105 Lab.Cas. P 34,833 Evelyn M. HIGHLANDER, Plaintiff-Appellant, v. K.F.C. NATIONAL MANAGEMENT CO., d/b/a Zantigo; Heublin Corporation; Zantigo Mexican Restaurant, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 644

805 F.2d 644

42 Fair Empl.Prac.Cas. 654,

27 Wage & Hour Cas. (BN 1524,

41 Empl. Prac. Dec. P 36,675,

105 Lab.Cas. P 34,833

Evelyn M. HIGHLANDER, Plaintiff-Appellant, v. K.F.C. NATIONAL MANAGEMENT CO., d/b/a Zantigo; Heublin

Corporation; Zantigo Mexican Restaurant,

Defendants-Appellees.

No. 85-3587.

United States Court of Appeals, Sixth Circuit.

Argued April 18, 1986.

Decided Nov. 18, 1986.

Paul H. Tobias, Tobias & Kraus, Cincinnati, Ohio, Susan J. Hauck (argued), for plaintiff-appellant.

James K.L. Lawrence, Frost & Jacobs, Cincinnati, Ohio, Samuel H. Elkin (argued), KFC Management Co., Louisville, Ky., for defendants-appellees.

Before KRUPANSKY and WELLFORD, Circuit Judges, and PECK, Senior Circuit Judge.

KRUPANSKY, Circuit Judge.

Plaintiff-appellant Evelyn Highlander (Highlander) appealed from two separate final orders of the district court entering judgment for defendant-appellee Zantigo Mexican Restaurant (Zantigo) in this action initiated pursuant to the Fair Labor Standards Act, 29 U.S.C. Sec. 201 et seq., and Title VII, 42 U.S.C. Sec. 2000e et seq.

In September of 1981, Highlander was hired by Zantigo as an assistant manager and met with Pauline Howell (Howell), a Zantigo District Training Instructor, who explained to Highlander the fluctuating work week method of overtime compensation authorized under 29 C.F.R. Sec. 778.114 by referring to a printed form which incorporated detailed examples of the procedure by which weekly overtime compensation was calculated. She further advised Highlander that her weekly compensation would be determined by applying that method of calculation. Highlander executed a written acknowledgement that she understood the procedure that would be used in computing her weekly compensation.

Highlander was initially assigned to a six week training program which she completed in November 1981. Thereafter, she was designated an assistant manager at the Zantigo outlet located at North Bend and Colerain Streets in Cincinnati, Ohio. Phillip Altieri (Altieri), a North Bend outlet co-manager, was Highlander's immediate supervisor.

On or about February 1, 1982, Ron Kosisko (Kosisko), a Zantigo district training manager who had no supervisory authority over Highlander, approached Highlander and co-employee Ginger Morris (Morris) and commented about their chic company uniforms. Kosisko, who was inebriated at the time, touched Highlander's legs and buttocks. He also touched Highlander's name tag, which was displayed on the tunic over her breast. After patting Morris' buttocks, Kosisko stated that Highlander and Morris must have been wearing "Underalls."

The next day, Highlander and Morris reported the incident to Greg Van Winkle (Van Winkle), the other co-manager at the North Bend establishment. When Van Winkle informed them that he intended to immediately report the incident to management, Highlander stressed that she was not desirous of making an issue of the incident or raising "a big stink about it."

Pursuant to Highlander's request, the company transferred her to a newly opened outlet in Florence, Kentucky which was geographically closer to her home. Altieri had been selected to act as manager at the Florence location. Subsequent to her transfer, Highlander reported the Kosisko incident to Altieri. He immediately notified the area manager Abe Hatem (Hatem) and human resources manager Sandy Allgeier (Allgeier) about the incident. Allgeier promptly conducted an investigation of the accusations.

In an interview with Allgeier, Highlander stated that she did not dislike Kosisko and was not desirous of making an issue of the incident because she did not "think it was that big of a deal." When confronted, Kosisko denied Highlander's charge. Allgeier was unable to confirm Highlander's allegations that Kosisko had touched her breast and concluded that the circumstances of the Kosisko event did not constitute a case of sexual harassment. Nevertheless, the company ordered Kosisko to sign an advisory notice acknowledging his awareness of Zantigo's strict policy against sexual harassment.

In mid-February of 1982, Highlander confronted Altieri and "asked him out to go have a business drink if you want to call it that" to discuss her promotion possibilities. Altieri declined the invitation, but agreed to discuss the subject with Highlander at the Florence business location. Highlander asserted that, during their conversation, Altieri placed his arm around her and stated that if she was interested in becoming a co-manager, "there is a motel across the street." When confronted by the accusation some three months later Altieri categorically denied the charges.

Although Highlander did not herself report the Altieri meeting until May of 1982, her husband mentioned the Altieri statement when he telephoned Hatem in early March to complain about the company's resolution of the Kosisko incident. Hatem explained that it would be inappropriate for him to comment upon Altieri's alleged statement in the absence of an employee complaint, whereupon plaintiff's husband advised Hatem that the statement had apparently been made in jest.

On March 18, 1982, Highlander was returned to the North Bend outlet because she was unable to cope with the high business volume at the Florence site. In mid-May of 1982, Highlander phoned Zantigo's president, Harry Lavo (Lavo), and complained about alleged sexual harassment, failure to receive a promotion, and misconduct of North Bend employees. She also included charges of drug transactions and cash shortages. At a meeting attended by Allgeier, Lavo, Highlander and her husband, Highlander, for the first time, complained about Altieri's misconduct. She also submitted a written memorandum documenting the totality of her charges. In response to Highlander's allegations, Lavo immediately reopened the Kosisko investigation and initiated an inquiry into Altieri's conduct as well as the asserted cash shortages and drug transactions.

Although both Highlander and Kosisko agreed to participate in the revived investigation by submitting to polygraph examinations, Highlander ultimately refused to appear at scheduled appointments. Kosisko was, as a result of the investigation, demoted with an annual salary reduction of $2,000. Hatem also concluded that the evidence was insufficient to justify any disciplinary action against Altieri.

During the first six months of 1982, Highlander was formally disciplined on seven occasions for her unsatisfactory work performance. She received five written reprimands and one suspension. She was terminated on June 17, 1982 for absenteeism and failure to comply with the company's rules and regulations requiring medical verification for her unannounced and frequent absences.

Thereafter, Highlander filed this action wherein she charged sexual harassment pursuant to Title VII, 42 U.S.C. Sec. 2000 et seq., and violations of the overtime provisions of the Fair Labor Standards Act, 29 U.S.C. Sec. 201 et seq. After a trial on the merits, the district court entered judgment for the defendant on both the Fair Labor Standards Act and Title VII claims. This timely appeal ensued.

On appeal, it was undisputed that Highlander was protected by the provisions of the Fair Labor Standards Act (the "Act"), 29 U.S.C. Sec. 201 et seq. Section 7(a)(1) of the Act provides that an employee shall not be employed for more than forty hours in a given week, unless the employee receives compensation for all hours in excess of forty "at a rate not less than one and one half times the regular rate at which he is employed." 29 U.S.C. Sec. 207(a)(1).

Highlander's compensation had been calculated pursuant to the fluctuating work week method of overtime payment authorized under 29 C.F.R. Sec. 778.114. Under the applicable regulations, an employee was paid a fixed weekly salary, regardless of the number of hours worked during a given week. When the employee worked more than forty hours during a week, the employee's salary was supplemented by the payment of an overtime premium which was calculated by dividing the fixed weekly salary by the total number of hours worked during the week to derive the employee's regular hourly rate for that week. Thereafter, the employee was paid an overtime premium of one half of the derived regular hourly rate for the total hours worked in excess of forty during that week, thus ensuring that the employee had been compensated for all hours in excess of forty "at a rate of not less than one and one half times the regular rate at which he is employed." 29 U.S.C. Sec. 207(a)(1).

Although the fluctuating work week method of overtime compensation results in lower earnings per hour as the number of hours per week increases, the Act permits its implementation. See, e.g., Overnight Motor Transportation Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942). The Department of Labor has, however, promulgated regulations that mandate a clear mutual understanding between the parties that the weekly salary was to be calculated pursuant to the fluctuating work week method. See 29 C.F.R. Sec. 778.114.

Specifically, 29 C.F.R. Sec. 778.114(a) provides in relevant part:

Where there is a clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period, such a salary arrangement is permitted by the Act if the amount of the salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours he works is greatest, and if he receives extra compensation, in addition to such salary, for all overtime hours worked at a rate not less than one-half his regular rate of pay.

On appeal, Highlander challenged the district court's conclusion that she had a clear...