Coates v. Dassault Falcon Jet Corp.

• Decision Date: 10 June 2020
• Docket Number: No. 19-2167,19-2167
• Citation: 961 F.3d 1039
• Parties: Craig COATES, et al., Plaintiffs - Appellees v. DASSAULT FALCON JET CORP., Defendant - Appellant
• Court: U.S. Court of Appeals — Eighth Circuit

961 F.3d 1039

Craig COATES, et al., Plaintiffs - Appellees

v.DASSAULT FALCON JET CORP., Defendant - Appellant

No. 19-2167

United States Court of Appeals, Eighth Circuit.

Submitted: January 15, 2020

Filed: June 10, 2020

Rehearing and Rehearing En Banc Denied July 30, 2020

Counsel who presented argument on behalf of the appellant was Gavin Samuel Martinson, of Dallas, TX. The following attorney(s) appeared on the appellant brief; John Bridges Brown, of Dallas, TX, Brian A. Vandiver, of North Little Rock, AR, and Jeremy William Hays, of Dallas, TX.

Counsel who presented argument on behalf of the appellee was Josh Sanford, of Little Rock, AR.

Before SMITH, Chief Judge, LOKEN and GRUENDER, Circuit Judges.

LOKEN, Circuit Judge.

Craig Coates and Edwin Smith commenced this action under the Fair Labor Standards Act of 1938 ("FLSA"), alleging that their employer, Dassault Falcon Jet Corp. ("Falcon Jet"), violated the FLSA, 29 U.S.C. § 207(a)(1), and the Arkansas Minimum Wage Act ("AMWA"), Ark. Code Ann. § 11-4-211(a), when it failed to pay team leaders and production liaisons not less than one and one-half times their regular rates for hours worked in excess of forty per week after June 6, 2014. Sixteen other team leaders and production liaisons opted into the collective lawsuit (collectively, "Plaintiffs"). See 29 U.S.C. § 216(b). Falcon Jet contends that team leaders and production liaisons at its airplane components facility in Little Rock, Arkansas are exempt from FLSA and AMWA overtime compensation requirements because they are executive or administrative employees and highly-compensated employees performing executive, administrative, or professional duties. See 29 U.S.C. § 213(a)(1) ; Ark. Code R. § 010.14.1-106(B)(1), (B)(1)(c).

Ruling on cross-motions for summary judgment, the district court held that the exemptions do not apply because Falcon Jet failed to provide sufficient evidence that Plaintiffs were paid on a salary basis. Following entry of a Consent Judgment awarding Plaintiffs $167,377.91 in liquidated damages and preserving Falcon Jet's right to appeal the salary-basis determination, the district court denied Falcon Jet's motions to reconsider and amend the consent judgment. Falcon Jet appeals the resulting final order, arguing that material disputed issues of fact precluded the grant of summary judgment in Plaintiffs’ favor. Reviewing the grant of summary judgment de novo and considering the evidence in the light most favorable to Falcon Jet, the non-moving party, we agree and therefore reverse. See Grage v. N. States Power Co. -- Minn., 813 F.3d 1051, 1054 (8th Cir. 2015).

I. FLSA Exemption Principles¹

For an employer such as Falcon Jet, the FLSA exempts from its overtime requirements "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 [of Labor]." 29 U.S.C. § 213(a)(1) ; see Fife v. Harmon, 171 F.3d 1173, 1175 (8th Cir. 1999). A separate regulation governs each exemption. See 29 C.F.R. §§ 541.100 (executive), 541.200 (administrative), 541.300 (professional).² To establish any exemption, an employer must establish that the employee's "primary duty" is the performance of exempt work, 29 C.F.R. § 541.700 ; that he is paid not less than the minimum salary level, § 541.600; and that he is paid on a "salary basis," § 541.602, the issue on this appeal. See Grage, 813 F.3d at 1054 (employer's burden of proof).

The regulations provide that an employee is paid on a salary basis "if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee's compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed." 29 C.F.R. § 541.602(a). The Secretary first adopted this general definition in 1944. It is subject to numerous interpretive rules:

- "An exempt employee's earnings may be computed on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the payment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked ...." § 541.604(b).

- "[T]he exemption is not lost if an exempt employee who is guaranteed [the minimum weekly salary amount] also receives additional compensation based on hours worked for work beyond the normal workweek. Such additional compensation may be paid on any basis (e.g. ... straight-time hourly amount ...), and may include paid time off." § 541.604(a).

- Employers "may take deductions from [salaried employee] leave accounts" and may require exempt employees "to record and track hours," so long as the employee's predetermined salary is not reduced. Ellis v. J.R.’s Country Stores, Inc., 779 F.3d 1184, 1200 (10th Cir. 2015). Exempt status "is only affected by monetary deductions for work absences and not by non-monetary deductions from fringe benefits such as personal or sick time." Schaefer v. Ind. Mich. Power Co., 358 F.3d 394, 400 (6th Cir. 2004) ; see Defining & Delimiting the Exemptions, 69 Fed. Reg. at 22178. Employers can "make deductions for absences from an exempt employee's leave bank in hourly increments, so long as the employee's salary is not reduced ." U.S. Dep't of Labor, Wage & Hour Div., Opinion Letter on FLSA (Jan. 16, 2009), 2009 WL 649020, at *2 (emphasis added). Several circuits have applied this guidance. See, e.g., McBride v. Peak Wellness Center, Inc., 688 F.3d 698, 705 (10th Cir. 2012).

- "Deductions from pay may be made when an exempt employee is absent from work for one or more full days for personal reasons ...." § 541.602(b)(1) ; see Guerrero v. J.W. Hutton, Inc., 458 F.3d 830, 835-36 (8th Cir. 2006). But reductions for partial day absences are inconsistent with a salary that is "not subject to reduction because of variations in the ... quantity of the work performed." See Defining & Delimiting the Exemptions, 69 Fed. Reg. at 22176.

- "An employer is not required to pay the full salary for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act [FMLA]." § 541.602(b)(7).

- Deductions from pay of exempt employees may be made for infractions of safety rules of major significance and for infractions of workplace conduct rules. § 541.602(b)(4)-(5).

- "An employer who makes improper deductions from salary shall lose the exemption if the facts demonstrate that the employer did not intend to pay employees on a salary basis. An actual practice of making improper deductions demonstrates that the employer did not intend to pay employees on a salary basis." § 541.603(a).³

This is a complex, intricate regulatory scheme, one that has changed relatively little in the last 80 years. In Auer v. Robbins, the Supreme Court noted that the FLSA "grants the Secretary broad authority to ‘defin[e] and delimi[t]’ the scope of the exemption." The regulation requiring that an exempt employee be paid on a "salary basis" -- now found in 29 C.F.R. § 541.602(a) -- was the Secretary's "chosen approach" to exercising that authority, and "we must sustain the Secretary's approach so long as it is ‘based on a permissible construction of the statute.’ " 519 U.S. 452, 456-57, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997), quoting Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). The Secretary promulgated revised salary basis regulations in 2004 after full notice and comment rulemaking, which must be given the force and effect of law in deciding FLSA exemption issues. See generally Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. 44, 55-58, 131 S.Ct. 704, 178 L.Ed.2d 588 (2011). Courts must rely on these regulations, considered in the context of the Department's lengthy preamble in the Federal Register, "when ruling on the potentially ambiguous concept of intent to pay a salary." Ellis, 779 F.3d at 1199.⁴ These issues may not be decided on the basis of what a judge concludes is the "plain meaning" of a common term like "salary" that is obviously ambiguous in the context of the statute or regulation at issue. See Mayo Found. for Med. Educ. & Research v. United States, 568 F.3d 675, 679-80 (8th Cir. 2011), aff'd, 562 U.S. at 52-53, 131 S.Ct. 704.

II. Falcon Jet's Payroll Procedures

The summary judgment record includes a Falcon Jet Payroll Notification, effective October 26, 2015, advising team leader Coates of a "merit increase" changing his compensation to an "annual salary" of $74,244.96 and a "new rate" of $2,855.5754. Production liaison Smith received a notice effective the same day increasing his compensation to an "annual salary" of $71,549.57 and a "new rate" of $2,751.9064. Each team leader and production liaison Plaintiff received a comparable Payroll Notification. The record also includes a form completed by plaintiff Robert Anderson when he was promoted to team leader stating that his compensation switched from hourly wage to annual salary.

Falcon Jet paid Plaintiffs bi-weekly. Though it classified team leaders and production liaisons as exempt salaried employees, it required them to clock in and out of work and to track the projects on which they worked on an hourly basis. This enabled Falcon Jet to accurately determine project costs for cost accounting purposes and to pay Plaintiffs straight-time overtime compensation for hours they were "directed" to work over 40 hours in a one-week period. For "regular" hours worked, Falcon Jet calculated the hourly rate by dividing each employee's annual salary by 2,080 -- 40 hours per week multiplied by 52 weeks in a year.⁵ When a team leader or production liaison recorded fewer than 40 hours in a work week, Falcon Jet deducted available time from one of the employee's paid leave banks, usually vacation or...