Clark v. J.M. Benson Co., Inc.

• Decision Date: 24 April 1986
• Docket Number: No. 85-1050,85-1050
• Citation: 789 F.2d 282
• Parties: 27 Wage & Hour Cas. (BN 1080, 104 Lab.Cas. P 34,766 Martha Skidmore CLARK, Appellant, v. J.M. BENSON CO., INC., Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 282

789 F.2d 282

27 Wage & Hour Cas. (BN 1080, 104 Lab.Cas. P 34,766

Martha Skidmore CLARK, Appellant, v. J.M. BENSON CO., INC., Appellee.

No. 85-1050.

United States Court of Appeals, Fourth Circuit.

Argued Jan. 6, 1986.

Decided April 24, 1986.

Glen M. Fallin, Ellicott City, Md. (Julia Marrero-Brill, Westminster, Md., Richard W. Fancher, Baltimore, Md., on brief), for appellant.

Allen Poppleton (Meryl C. Weiser, Baltimore, Md., on brief), for appellee.

Before WINTER, Chief Judge, and SPROUSE and CHAPMAN, Circuit Judges.

HARRISON L. WINTER, Chief Judge:

Martha Skidmore Clark sued her former employer J.M. Benson Company, Inc. (Benson) for failure to pay overtime compensation in violation of the Fair Labor Standards Act, 29 U.S.C. Sec. 201 et seq. At the close of plaintiff's case, the district court directed a verdict for Benson on the ground that Clark was, as a matter of law, an administrative employee exempt from the Act's protection. Clark appeals, claiming that the district court erred in allocating the burden of proof and evaluating the evidence relating to the Act's exemptions. We agree and therefore reverse.

I.

Benson hired Clark in May 1980 to work as a bookkeeper for $250 per week, a figure raised to $275 some three months later. Clark was hired to work thirty-five hours per week with no overtime. The present dispute arose when one Estrella Nalda, Benson's controller and the person who hired Clark, resigned on November 30, 1980. Benson did not immediately replace Nalda, and Clark began performing her accounting duties. During the period beginning when Nalda left, until Benson hired a new controller in February 1981, Clark alleged that she worked substantially in excess of forty hours per week but received no overtime compensation.

At trial, a critical issue was whether Clark worked as an administrative employee who, under the Fair Labor Standards Act, is not entitled to overtime compensation. Much of Clark's testimony, upon direct and cross-examination, therefore concerned the nature of her work. Before Nalda left Benson, Clark described her duties as "[p]osting of journals, doing billings, accounts payable, [and] learn[ing] the computer" for payroll purposes. When Nalda left, Clark worked without immediate supervision. She undertook much of Nalda's work and her duties expanded to include "[t]yping up bills, making out bank deposits, recording cash receipts, handling the petty cash, checking prices on things that [Benson] sold, calculating hours that were worked against different jobs for [one of Benson's subsidiary corporations], [and] recording inventories...." In addition, she worked on the financial books, W-2 forms, account aging reports, payroll and commissions. During the period when Clark was essentially doing the work of two people, she often found it necessary to take work home with her, where it would sometimes remain for several days until she completed it.

On the basis of Clark's testimony, the district court found that she was an administrative employee as a matter of law, and directed a verdict for Benson. Before dismissing the jury, the district court denied Clark's motion to amend her complaint to allege a cause of action for breach of her contract to work only thirty-five hours per week.

II.

The Fair Labor Standards Act generally requires payment of overtime compensation for hours worked in excess of forty hours in a work week. 29 U.S.C Sec. 207(a)(1). The Act, however, exempts certain categories of employees including those working in an "administrative capacity," as defined by regulations promulgated by the Secretary of Labor. The pertinent regulation, 29 C.F.R. Sec. 541.2, defines administrative capacity according to one of two formulations, depending on how much money the employee earns. Clark conceded at oral argument that the "short test" of Sec. 541.2(e)(2) governs her status because she earned more than $250 per week. Under Sec. 541.2(e)(2), Clark is an administrative employee if (1) her "primary duty consists of the performance of ... office or nonmanual work directly related to management policies or general business operations of [her] employer or [her] employer's customers," and (2) that duty "includes work requiring the exercise of discretion and independent judgment." ¹

The basis of the district court's ruling was the failure of Clark to meet her burden of proving that she was not an administrative employee. It reasoned that Nalda was certainly an administrative employee, as a controller or comptroller would necessarily have a primary duty directly related to management policies or general business operations, so that when Clark undertook to perform Nalda's job in addition to her own, Clark became an administrative employee. The fact that Clark comprised the "entire accounting department" made her an "indispensable" employee, vital to the continuation of Benson's general business operations. The district court then reviewed the work Clark inherited from Nalda, such as preparation of W-2 forms and commission checks, and especially Clark's decisions as to the order in which to perform the various tasks and whether to complete work at home or in the office, and concluded that Clark's duties included work requiring the exercise of discretion and independent judgment.

III.

Benson incorrectly argues that we should apply the "clearly erroneous" standard to the district court's decision to direct a verdict for Benson. The proper standard of appellate review of a directed verdict was stated in Kim v. Coppin State College, 662 F.2d 1055, 1059 (4 Cir.1981) (quoting Proctor v. Colonial Refrigerated Transportation, Inc., 494 F.2d 89, 93 (4 Cir.1974)): "[T]he district court is entitled to grant a directed verdict even though some evidence supports the opposite proposition so long as 'there are no controverted issues of fact upon which reasonable minds could differ.' " The question, therefore, is whether, on the basis of the evidence adduced, reasonable minds could differ as to the characterization of Clark as an administrative employee.

In addressing this question, we hold that the district court erred in assigning Clark the burden of disproving her administrative status. That burden rested on Benson, and we further hold that reasonable minds can differ as to whether Benson in fact proved the exemption's applicability. We therefore conclude that the direction of a verdict for Benson was reversible error.

A.

The district court expressly placed on Clark the burden of proving that she was not an administrative employee, and hence, not exempt from the Act's protection. The district court justified this allocation of burden by reference to Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981). In Burdine, the Supreme Court explained how the burden of producing evidence relating to discriminatory intent in Title VII cases shifts between the parties, while the ultimate burden of persuasion always rests on the plaintiff.

Burdine is inapplicable here. The statutory scheme of the Fair Labor Standards Act is entirely separate from Title VII, and the Supreme Court has established a different allocation of the burden of proof. The plaintiff employee must prove facts demonstrating a violation of some provision of the Act, as Clark makes out of violation of the maximum hours provision of 29 U.S.C. Sec. 207(a)(1). But the exemptions are stated in a separate provision, Sec. 213, and "the general rule [is] that the application of an exemption under the Fair Labor Standards Act is a matter of affirmative defense on which the employer has the burden of proof." Corning Glass Works v. Brennan, 417 U.S. 188, 196-97, 94 S.Ct. 2223, 2229, 41 L.Ed.2d 1 (1974). See also Idaho Sheet Metal Works v. Wirtz, 383 U.S. 190, 206, 86 S.Ct. 737, 747, 15 L.Ed.2d 694 (1966) (defendant employer has "the burden of establishing the facts requisite to an exemption"); Walling v. General Industries Company, 330 U.S. 545, 548-49, 67 S.Ct. 883, 884-85, 91 L.Ed. 1088 (1947) (defendant employer has "the burden of proving the existence of [the] conditions" of the "executive capacity" exemption).

We have previously spoken of the defendant employer as having "failed to meet its burden" to prove the applicability of one of the Act's exemptions. Wirtz v. Charleston Coca Cola Bottling Company, 356 F.2d 428, 430 (4 Cir.1966). More specifically, the Tenth Circuit has considered the very exemption at issue here, the "short test" of Sec. 541.2(e). See Donovan v. United Video, Inc., 725 F.2d 577 (10 Cir.1984). Relying on the Supreme Court's decision in Walling, the Donovan court concluded that "[t]he employer who asserts the [administrative employee] exemption has the burden of establishing both of [the Sec. 541.2(e)(2) ] requirements by clear and affirmative evidence." Id. at 581. See also Jones v. Bethlehem-Fairfield Shipyard, Inc., 75 F.Supp. 86, 91 (D.Md.1947) ("the burden is on the defendant to show that the plaintiff employee was properly classified as exempt in accordance with ... the definition of 'executive or administrative' [employee]"). None of these cases state or imply that the defendant only bears the burden of producing some evidence demonstrating the exemption's applicability; rather, the defendant bears the full burden of persuasion for the facts requisite to an exemption.

The district court therefore erred in persistently framing the issue as whether Clark met her burden to disprove her administrative status. Its error could be harmless, however, if Clark's own testimony demonstrated that her primary duty directly related to management policies or general business operations, and included the exercise of discretion and independent judgment. We are, however, not convinced that Benson met this burden.

B.

The administrative capacity exemption first requires that the employee's "primary duty" consist in the performance of office or nonmanual work ...