Donovan v. McKissick Products Co., 82-1255

• Decision Date: 19 October 1983
• Docket Number: No. 82-1255,82-1255
• Citation: 719 F.2d 350
• Parties: 26 Wage & Hour Cas. (BN 791, 99 Lab.Cas. P 34,460 Raymond J. DONOVAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. McKISSICK PRODUCTS COMPANY and American Hoist and Derrick Company, d/b/a McKissick Products Division, Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 350

719 F.2d 350

26 Wage & Hour Cas. (BN 791, 99 Lab.Cas. P 34,460

Raymond J. DONOVAN, Secretary of Labor, United States

Department of Labor, Plaintiff-Appellee, v. McKISSICK PRODUCTS COMPANY and American Hoist and Derrick

Company, d/b/a McKissick Products Division,

Defendants-Appellants.

No. 82-1255.

United States Court of Appeals, Tenth Circuit.

Oct. 19, 1983.

Richard L. Barnes of Nichols & Wolfe, Inc., Tulsa, Okl., for defendants-appellants.

Patricia Saik, Atty., Washington, D.C. (T. Timothy Ryan, Jr., Sol. of Labor, Beate Bloch, Associate Sol., Joseph M. Woodward, Atty., Washington, D.C., and James E. White, Regional Sol., Dallas, Tex., with her on brief), for plaintiff-appellee.

Before SETH, Chief Judge, McWILLIAMS, Circuit Judge, and KERR, ^* District Judge.

McWILLIAMS, Circuit Judge.

The Secretary of Labor brought this action under the Fair Labor Standards Act, 29 U.S.C. Sec. 201, et seq., to enjoin McKissick Products Division and its parent corporation, American Hoist and Derrick Company, from violating the overtime pay provisions of the Act, 29 U.S.C. Sec. 207, and from continuing to withhold overtime compensation due certain of its employees.

The principal issue initially decided by the district court on cross-motions for summary judgment was whether the two wage plans under which McKissick paid its maintenance employees violated section 7(a) of the Act. 29 U.S.C. Sec. 207(a). During this stage of the proceedings, the district court had before it the two wage plans, answers to numerous interrogatories, and the deposition of Mr. Charles Lucas, vice-president and general manager of McKissick. The district court held that the pay plans under attack did not comply with the Act's overtime provisions.

McKissick had previously stipulated in a pretrial order that the duties of its maintenance employees did not require irregular hours of work, and admitted in the pre-trial order that it did not qualify for the overtime exception set forth in section 7(f) of the Act. 29 U.S.C. Sec. 207(f). Accordingly, the district court held that section 7(f) of the Act was inapplicable. Furthermore, having failed to affirmatively plead other exceptions to the overtime requirement, the district court held that such had been waived by McKissick.

Subsequent to the district court's order granting the Secretary's motion for partial summary judgment on the issue of whether the wage plans violated the overtime provision of the Act, the parties stipulated that certain payroll summaries prepared by an employee of the Department of Labor reflected the actual hours worked by McKissick's maintenance employees and the amounts actually paid to such employees for the hours worked by each. Thereafter, the Secretary moved for summary judgment. The district court granted the Secretary's motion holding, inter alia, that McKissick's violation of the overtime provisions of the Act were willful and that accordingly the three-year statute of limitations applied. Further, the district court held that the amount of compensation due McKissick's maintenance employees should be calculated according to the method proposed by the Secretary. This particular order was followed by formal judgment, entered the same date, enjoining McKissick from further violations of the overtime provisions of the Act and from withholding payment of back overtime pay in the amount of $90,218.75. McKissick thereafter filed a motion for a new trial and a motion to vacate judgment, which the district court denied. McKissick now appeals all of the orders above mentioned. We affirm.

McKissick Products Company, a division of American Hoist and Derrick Company, has a plant in Tulsa, Oklahoma, where it manufactures equipment such as lifting tackle, wire line, and chain accessories designed for use with wire rope. During the time period here in issue, i.e., from 1974 to date of judgment, McKissick compensated its maintenance employees according to the terms of individual agreements, each called an "Employee Compensation Contract," entered into with each of its maintenance employees on an individual basis. Although the form of the contract was slightly modified in December, 1976, the employment contracts, both before and after that date, contained the same essential feature, namely, a guaranteed wage which was paid regardless of how many hours were actually worked up to a contractually agreed minimum.

An example of the individual employment contract in effect from 1974 until December, 1976, is attached to this opinion as Appendix No. 1, and will hereinafter be referred to as Contract No. 1. An example of the individual employment contract in effect after December, 1976, is attached to this opinion as Appendix No. 2, and will be referred to as Contract No. 2.

Congress has determined that employers involved in interstate commerce shall pay their employees premium pay for overtime work. Specifically, section 7(a)(1) of the Act provides that such employee must receive compensation for hours worked in excess of 40 hours per week 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). The purpose behind the overtime pay requirement is two-fold: (1) to spread employment by encouraging employers to avoid overtime work and thereby employ additional workers on a regular basis; and (2) where the employer prefers overtime work, to compensate the employee for the burden of working longer hours. So, the basic issue to be resolved is whether the two pay plans of McKissick for its maintenance employees square with the simple statutory command that an employee who works more than 40 hours per week shall be paid for such additional hours at a rate which is at least one and one-half times his regular rate of pay.

Contract No. 1, Appendix No. 1, provides that the regular rate of pay is $3.94 per hour for the first 50 hours each week, and all hours worked in excess of 50 hours each week shall be paid at a rate of not less than one and one-half times the regular rate of pay. That contract further provides that an employee is guaranteed a monthly wage of not less than $850 per month for regular time and such overtime, if any, as the necessities of business demand, regardless of the number of hours actually worked. Charles Lucas, the vice-president and general manager of McKissick, in his deposition stated that $3.94 was not really the regular rate of pay. He testified that under the monthly guarantee, the regular rate of pay was not reflected in the contract. He also stated that some employees expressed concern about the overtime provisions of Contract No. 1. Without belaboring the matter, it is apparent that Contract No. 1 does not comply with the statutory mandate that an employee be paid at least time and one-half the regular rate of pay for all hours worked in excess of 40 hours per week.

Contract No. 2, Appendix No. 2, provides that the regular rate of pay is $6.34 per hour, and that all hours worked in excess of 40 hours per week shall be paid at a rate of not less than one and one-half times the regular rate. However, that contract goes on to provide that employees shall have a guaranteed minimum work week of 44 hours per week. In this regard, Charles Lucas testified in his deposition that the practical effect of this minimum work week provision was that an employee who actually worked less...