Ale v. Tennessee Valley Authority

• Decision Date: 25 January 2001
• Docket Number: No. 99-6642,99-6642
• Citation: 269 F.3d 680
• Parties: (6th Cir. 2001) Stephen A. Ale, et al., Plaintiffs-Appellees, v. Tennessee Valley Authority, Defendant-Appellant. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 680

269 F.3d 680 (6th Cir. 2001)

Stephen A. Ale, et al., Plaintiffs-Appellees, v. Tennessee Valley Authority, Defendant-Appellant.

No. 99-6642

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: January 25, 2001

Decided and Filed: October 17, 2001

Appeal from the United States District Court for the Eastern District of Tennessee at Knoxville. No. 96-00935, Robert P. Murrian, Magistrate Judge. [Copyrighted Material Omitted] Cecilia S. Petersen, Knoxville, Tennessee, for Appellees.

A. Jackson Woodall, Thomas F. Fine, John E. Slater, Jane Park Farris, TENNESSEE VALLEY AUTHORITY, Knoxville, Tennessee, for Appellant.

Before: JONES, BATCHELDER, and CLAY, Circuit Judges.

OPINION

NATHANIEL R. JONES, Circuit Judge.

Plaintiffs, 20 former employees of the Tennessee Valley Authority ("TVA") worked in the TVA's Site Security Organization at its Watts Bar ("WBN") and Sequoyah Nuclear ("SNP") Plants. In November of 1996, plaintiffs brought a claim against the TVA charging that in June 1996, it willfully eliminated their overtime pay in violation of Section 7 of the Fair Labor Standards Act ("FLSA"). 29 U.S.C. § 207. Pursuant to 28 U.S.C. § 636(c), both parties agreed to have their case tried by a United States Magistrate Judge.

Prior to the damages phase of the trial, plaintiffs moved to amend their complaint to include all unpaid overtime compensation, including compensation owed prior to June 1996. The motion was granted. After conducting a non-jury trial on liability and damages, the magistrate judge found that TVA willfully violated the FLSA and issued an order granting damages on November 24, 1999. The TVA now appeals this order. For the reasons stated below, we AFFIRM.

I. Facts

As noted above, plaintiffs sued TVA for willfully failing to pay them time-and-a-half overtime wages in violation of section 7(a) of the FLSA. In response, TVA alleges that plaintiffs are not entitled to such compensation because they arebona fide executive and administrative employees and are exempt from the mandates of section 7(a).

A. Background

1.The Fair Labor Standards Act

Section 7(a) of the FLSA directs employers who regularly require their workers to work more than 40 hours a week to compensate those workers by paying them overtime wages at a rate of one and half times their regular rate of pay. 29 U.S.C. § 207. This law was evidently enacted to induce employers to employ more workers and/or compensate their workers for the burden of a long workweek. See Walling v. Youngerman-Reynolds Harwood Co., 325 U.S. 419, 423-24 (1945).

However, not all workers are covered by this scheme. Under Section 13(a) of the FLSA, Congress exempted employees employed in a bona fide executive, administrative, or professional capacity from the requirements of section 7(a). 29 U.S.C. § 213. Although Congress did not define these terms, it designated the Department of Labor ("DOL") to take responsibility for implementing and clarifying the act. See 29 U.S.C. § 213(a)(1); Auer v. Robbins, 519 U.S. 452, 456 (1997). The DOL regulations provide guidance regarding the scope of the executive and administrative exemptions at issue in this case.

2.Department of Labor Regulations

The DOL regulations contain different definitions of bona fide executive and administrator depending on the salary of the employee. If an employee earns more than $250 per week, the employer must show that the employee meets the "short test" definition of bona fide administrator or executive in order to prove that he is exempt from section 7(a). See 29 C.F.R. §§ 541.2(e)(2), 541.1(f). If the employee earns less than $250 per week, then the employer must meet a more rigorous "long test" in order to prove that the employee is exempt from section 7(a). See 29 C.F.R. §§ 541.1 (a)-(e), 541.2(a)-(e). Since it is not disputed that all of the plaintiffs earned more than $250 per week, the short test definitions of executive and administrator apply in this case.

a. Executive

The DOL "short test," defines the term employee employed in a bona fide executive capacity as any employee "whose primary duty consists of the management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof, and includes the customary and regular direction of the work of two or more other employees therein . . . ." See 29 C.F.R. §541.1(f).

The regulations provide guidance as to which duties are managerial in nature. According to 29 C.F.R. § 541.102(b),

[I]t is generally clear that work such as the following is exempt work when it is performed by an employee in the management of his department or the supervision of the employees under him: Interviewing, selecting and training of employees; setting and adjusting their rates of pay and hours of work; directing their work; maintaining their production or sales records for use in supervision or control; appraising their productivity and efficiency for the purpose of recommending promotions or other changes in their status; handling their complaints and grievances and disciplining them when necessary; planning the work; determining the techniques to be used; apportioning the work among the workers; determining the type of materials, supplies, machinery or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety of the men and the property.

In addition, the regulations also indicate how to determine whether the performance of managerial duties constitutes the employee's primary duty. 29 C.F.R. § 541.103 states,

The amount of time spent in the performance of the managerial duties is a useful guide in determining whether management is the primary duty of the employee. In the ordinary case it may be taken as a good rule of thumb that primary duty means the major part, or over 50 percent, of the employee's time. . . . Time alone, however, is not the sole test, and in situations where the employee does not spend over 50 percent of his time in managerial duties, he might nevertheless have management as his primary duty if the other pertinent factors support such a conclusion. Some of these pertinent factors are the relative importance of the managerial duties as compared with other types of duties, the frequency with which the employee exercises discretionary powers, his relative freedom from supervision, and the relationship between his salary and the wages paid other employees for the kind of nonexempt work performed by the supervisor.

b. Administrative

Pursuant to the DOL "short test," the term employee employed in a bona fide administrative capacity is defined as any employee "whose primary duty consists of the performance of [office or non-manual work directly related to management policies or general business operations of his employer or his employer's customers . . .,] which includes work requiring the exercise of discretion and independent judgement." 29 C.F.R. § 541.2(e)(2).

Section 541.205(c) explains the contours of the phrase "directly related to management policies or general business operations." It states,

(1)It is not possible to lay down specific rules that will indicate the precise point at which work becomes of substantial importance to the management or operation of a business. It should be clear that the cashier of a bank performs work at a responsible level and may therefore be said to be performing work directly related to management policies or general business operations. On the other hand, the bank teller does not. (2)An employee performing routine clerical duties obviously is not performing work of substantial importance to the management or operation of the business even though he may exercise some measure of discretion and judgment as to the manner in which he performs his clerical tasks. . . . . An employee operating very expensive equipment may cause serious loss to his employer by the improper performance of his duties. An inspector, such as, for example, an inspector for an insurance company, may cause loss to his employer by the failure to perform his job properly. But such employees, obviously, are not performing work of such substantial importance to the management or operation of the business that it can be said to be "directly related to management policies or general business operations" as that phrase is used in § 541.2.

29 C.F.R. § 541.205(c)(1)-(2). ¹

The regulations also provide guidance regarding what constitutes the exercise of discretion and independent judgement. Section 541.207(a) explains that,

In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. The term used in the regulations in subpart A of this part, more over, implies that the person has the authority or power to make an independent choice, free from immediate direction or supervision and with respect to matters of significance.

29 C.F.R. § 541.207(a).

In addition, section 541.207(c) distinguishes the exercise of discretion and independent judgement from the use of skill in applying techniques, procedures, or specific standards. It states,

(1)Perhaps the most frequent cause of misapplication of the term "discretion and independent judgement" is the failure to distinguish it from the use of skill in various respects. An employee who merely applies his knowledge in following prescribed procedures or determining which procedures follow, or who determines whether specified standards are met . . . is not exercising discretion and independent judgment within the meaning of § 541.2. This is true even if there is some leeway in reaching a conclusion, as when an acceptable standard includes a range or a tolerance above or below a specific standard.

(2)A typical example of the application of skills and...