Archuleta v. Wal-Mart Stores, Inc.

• Decision Date: 06 October 2008
• Docket Number: No. 07-1065.,07-1065.
• Citation: 543 F.3d 1226
• Parties: Jerry ARCHULETA, Billy Presley, Cindy Wacaster, Michael Fiorenzi, for and on behalf of themselves and other employees similarly situated, Plaintiffs-Appellants, v. WAL-MART STORES, INC., a Delaware corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

543 F.3d 1226

Jerry ARCHULETA, Billy Presley, Cindy Wacaster, Michael Fiorenzi, for and on behalf of themselves and other employees similarly situated, Plaintiffs-Appellants, v. WAL-MART STORES, INC., a Delaware corporation, Defendant-Appellee.

No. 07-1065.

United States Court of Appeals, Tenth Circuit.

October 6, 2008.

Gerald L. Bader, Jr., Bader & Associates, LLC, Aurora, Colorado (Renee B.

Taylor, Bader & Associates, LLC, Aurora, CO; Franklin D. Azar, Franklin D. Azar & Associates, Aurora, CO, with him on the briefs) for Plaintiffs-Appellants.

Steven J. Merker (Gregory S. Tamkin with him on the brief), Dorsey & Whitney LLP, Denver, CO, for Defendant-Appellee.

Before BRISCOE, EBEL and MURPHY, Circuit Judges.

EBEL, Circuit Judge.

Although the Fair Labor Standards Act ("FLSA") generally requires an employer to pay its employees at a rate of one and one-half times their regular rate of pay for any time worked in excess of forty hours in a given workweek, it exempts from this requirement "executive, administrative or professional" employees. At issue here is whether full-time pharmacists working for Wal-Mart Stores, Inc. from 1993 through 1998 fell within this exemption. In arguing that they did not, Plaintiffs contend that, although Wal-Mart purported to pay its pharmacists as salaried professionals, it actually changed their salaries so frequently that it treated them, in effect, as hourly non-exempt employees. Because Plaintiffs have presented sufficient evidence to establish a genuinely disputed issue of material fact as to two pharmacists, we REVERSE the district court's decision to grant Wal-Mart summary judgment on those two claims and REMAND to the district court for further proceedings. In all other respects, we AFFIRM.¹

I. BACKGROUND

The FLSA requires that an employer pay its employees one and one-half times their regular rate of pay for any time worked in excess of forty hours per workweek. 29 U.S.C. § 207(a)(2)²; see also Christensen v. Harris County, 529 U.S. 576, 578-79, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000). But the Act exempts from this requirement "any employee employed in a bona fide executive, administrative, or professional capacity." 29 U.S.C. § 213(a)(1); see also Ackerman v. Coca-Cola Enters., Inc., 179 F.3d 1260, 1263 (10th Cir.1999). Wal-Mart contends that its full-time pharmacists are exempt professionals.

"The FLSA does not define professional; rather, it delegates to the [Department of Labor ("DOL")] the responsibility of `defin[ing] and delimit[ing]' the term through regulations." In re Wal-Mart Stores, Inc., 395 F.3d 1177, 1180 (10th Cir.2005) (quoting 29 U.S.C. § 213(a)(1)). For purposes of this appeal, the relevant regulation defining who is a "professional" employee is 29 C.F.R. § 541.3 (2003).³ This section defines a professional employee using a two-part test which considers both the method by which the employer compensates the employee and the employee's job duties. See Wal-Mart, 395 F.3d at 1180. In this case, the only disputed issue is whether Wal-Mart paid its employees on a salary, rather than hourly, basis.

DOL regulations provide that "[a]n employee will be considered to be paid `on a salary basis' ... if under his employment agreement he regularly receives each pay period ... 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." 29 C.F.R. § 541.118(a) (2003).⁴ This regulation does permit an employer to make reductions in any employee's pay "when the employee absents himself from work for a day or more for personal reasons, other than sickness or accident," "for absences of a day or more occasioned by sickness or disability (including industrial accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by both sickness or disability," or for "infractions of safety rules of major significance" without defeating the FLSA exemption for salaried professional employees. Id. § 541.118(a)(2), (3), (5).

On the other hand,

[a]n employee will not be considered to be `on a salary basis' if deductions from his predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. Accordingly, if the employee is ready, willing, and able to work, deductions may not be made for time when work is not available.

Id. § 541.118(a)(1). Nor can the employer make deductions "for absences of an employee caused by jury duty, attendance as a witness, or temporary military leave." Id. § 541.118(a)(4).

Plaintiffs, full-time pharmacists who worked for Wal-Mart between 1993 and 1998, allege that Wal-Mart violated the FLSA by failing to pay them overtime for work performed in excess of forty hours in a given workweek. Wal-Mart counters that it was not required to pay its full-time pharmacists overtime under the FLSA because they were professional employees exempt from the FLSA's overtime requirements.

From 1987 to 1998, Wal-Mart set forth its compensation plan for full-time pharmacists in a form entitled "POLICY STATEMENT FULL-TIME PHARMACIST COMPENSATION," which Wal-Mart had pharmacists sign when they were hired. This form stated that "[f]ull-time pharmacists are those pharmacists that work at least 28 hours every week. They are covered with all the management benefits. Each full-time pharmacist is paid by salary. This salary is based on a 3, 4, or 5 day work week depending on the situation." Aplt.App. at 174. On each employee's individual "policy statement" form, there would be circled either the "3, 4, or 5 day work week." Then, in a section at the bottom of the form labeled "Base Salary Hours Per Week for Payroll Clerk," there would be written the number of hours per week this particular pharmacist would be scheduled to work and the hourly rate of pay the pharmacist would receive, such as "45 hours per week; 25.00/hour." Id. Each pharmacist, therefore, agreed to work a specific number of base hours each week for a specific rate of pay; there was not a uniform pay scale governing all pharmacists in all stores.

Wal-Mart, in turn, agreed to pay its pharmacists for these base hours, regardless of whether a pharmacist actually worked all of the base hours in a given pay period. Plaintiffs do not dispute this.

If a pharmacist worked more than his base hours in a given pay period, Wal-Mart further agreed to pay that pharmacist additional compensation for those extra hours:

Pharmacists are also paid for any time worked over the usual work week such as days worked when [a] relief [pharmacist] could not cover days off. This extra pay is paid along with the regular paycheck and is prorated on the base salary pay. In order to accommodate this with the large number of stores that Wal-Mart has, the biweekly salary is broken down to a calculated hourly amount by dividing biweekly salary by 2 weeks and then by dividing by the average base salary hours. This amount is placed in the computer at the store as the "hourly rate". Then if the pharmacist works an extra 9 hour day, he can turn in an extra 9 hours that week and be compensated additionally over his base salary on a prorated basis.

Id. A full-time pharmacist, therefore, received overtime compensation of a sort, but did not receive overtime compensation to the same extent the FLSA would require. The fact that Wal-Mart compensated its pharmacists for extra hours worked during a pay period did not change their salaried status. See C.F.R. § 541.118(b)⁵; see also Aaron v. City of Wichita, 54 F.3d 652, 658 (10th Cir.1995).

Plaintiffs do not contend that this method by which Wal-Mart purported to compensate its full-time pharmacists failed to meet the DOL's "salary-basis" test. Instead, Plaintiffs argue that, even though Wal-Mart purported to pay them as salaried professionals, it actually changed their base hours, and thus their base salary, so frequently that Wal-Mart was, in effect, treating them as hourly employees.⁶ See Wal-Mart, 395 F.3d at 1179.

In an earlier appeal taken in this litigation, this court, relying on the DOL's interpretation of its own regulations, held that an employer could prospectively change its employees' salaries without defeating the exemption for professionals. See id. at 1179, 1184. That would be true "unless the purported `salary' becomes a sham — the functional equivalent of hourly wages." Id. at 1179; see also id. at 1184, 1189. We remanded "for further factual determinations" on this issue. Id. at 1180.

On remand, the district court granted Wal-Mart summary judgment on the issue of whether Wal-Mart prospectively changed its pharmacists' base salary so frequently that it treated them, in effect, like they were hourly employees. It is that decision that Plaintiffs challenge on appeal. We have jurisdiction under 28 U.S.C. § 1291.

II. STANDARD OF REVIEW

This court reviews a summary judgment decision de novo, viewing the evidence in the light most favorable to the non-moving party. See Seegmiller v. LaVerkin City, 528 F.3d 762, 766 (10th Cir.2008). Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).

III. ANALYSIS

A. Relevant legal standard

"[A]n employer may prospectively reduce salary to accommodate the employer's business needs unless it is done with such frequency that the salary is the functional equivalent of an hourly wage." Wal-Mart, 395 F.3d at 1184. "If ... the salary changes are so frequent as to make the salary the functional equivalent of an hourly wage, we will treat the `salary' as a sham and deny the employer the FLSA exemption for professional employees." Id. at 1189.

The authorities we relied upon in reaching...