Douglas v. Argo-Tech Corp.

• Decision Date: 19 June 1997
• Docket Number: 95-3822,ARGO-TECH,Nos. 95-3772,s. 95-3772
• Citation: 113 F.3d 67
• Parties: 133 Lab.Cas. P 33,523, 3 Wage & Hour Cas.2d (BNA) 1569 Glynn DOUGLAS, Plaintiff-Appellee/ Cross-Appellant, v.CORPORATION, Defendant-Appellant/ Cross-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 67

113 F.3d 67

133 Lab.Cas. P 33,523, 3 Wage & Hour Cas.2d

(BNA) 1569

Glynn DOUGLAS, Plaintiff-Appellee/ Cross-Appellant, v. ARGO-TECH CORPORATION, Defendant-Appellant/ Cross-Appellee.

Nos. 95-3772, 95-3822.

United States Court of Appeals Sixth Circuit.

Argued Sept. 18, 1996.

Decided May 6, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied June 19, 1997.

Steven D. Shafron (argued and briefed), Susan C. Margulies, Berkman, Gordon, Murray, Palda & DeVan, Cleveland, OH, for Plaintiff-Appellee/Cross-Appellant.

Carl H. Gluek (argued), Thomas Merritt Bumpass, Jr. (briefed), Thompson, Hine & Flory, Cleveland, OH, for Defendant-Appellant/Cross-Appellee.

Before: KEITH, SILER, and BATCHELDER, Circuit Judges.

BATCHELDER, Circuit Judge.

Defendant Argo-Tech Corporation appeals the district court's order granting summary judgment to plaintiff Glynn Douglas on his action for unpaid overtime. Douglas cross-appeals the denial of his claim for liquidated damages. Because Douglas was an exempt administrative employee, we REVERSE the grant of summary judgment for Douglas and REMAND this action to the district court with instructions to grant Argo-Tech's motion for summary judgment.

I. STATEMENT OF THE FACTS

Argo-Tech manufactures and assembles fuel pumps for both commercial and military aircrafts, along with torpedo and nuclear reactor parts for the United States Navy. Douglas has been employed by Argo-Tech since 1986 in a variety of production capacities.

In October 1987, the National Labor Relations Board certified the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America and its Local Number 2262 (hereinafter "Union") as the collective bargaining representative of certain hourly employees of Argo-Tech. Consequently, the Union and Argo-Tech began negotiations for their initial collective bargaining agreement in November. Douglas was a member of the negotiating team. After more than thirty-five meetings, the parties reached a tentative agreement on January 30, 1988, which the Union membership ratified the next day.

An important subject of the negotiations was how Argo-Tech planned to compensate Union officers for the time they devoted to Union business. The parties agreed that the Union president and vice-president would have the right to devote their full-time efforts to the performance of Union duties. In other words, the president and vice-president would not engage in production work for Argo-Tech. The bargaining agreement also specified that Argo-Tech would compensate the Union president and vice-president at a rate of forty hours per week plus the average overtime worked by the employees in their home department. Argo-Tech calculated weekly compensation under this formula with reference to the officers' normal hourly wage rate. Argo-Tech also asked the Union officers to continue using the company's time clock for record-keeping purposes.

In May 1988, the Union membership elected Douglas vice-president of Local 2262. He served in that capacity until June 1991. As vice-president, Douglas had many responsibilities. For instance, Douglas handled employee grievances and worker's compensation claims. Douglas also served on a joint company-union staff committee and performed a variety of other functions to ensure that Argo-Tech followed the terms of the collective bargaining agreement. Douglas, however, performed no production work for Argo-Tech.

Once Douglas became Union vice-president, Argo-Tech ceased scheduling his hours and Douglas was free to come and go as he pleased. Argo-Tech did, however, advise the Union that it did not want Douglas in the facility on the weekends because weekend employees received premium wages and Argo-Tech believed that the presence of the Union vice-president might slow production. Douglas, despite these requests, continued to work on the weekends when he chose to, and Argo-Tech never disciplined him for doing so.

On many occasions during his tenure as Union vice-president, Douglas worked in excess of forty hours per week. When Douglas demanded that Argo-Tech pay him time-and-a-half for these overtime hours, Argo-Tech refused, citing the compensation provisions of the collective bargaining agreement. Thus, for those weeks in which Douglas worked overtime, he was compensated for forty hours at his regular rate of pay, plus an amount reflecting the average overtime worked by the employees in his home department. ¹ Douglas was paid in accordance with this formula no matter how many hours he actually worked.

II. PROCEDURAL HISTORY

After his term as vice-president ended, Douglas sued Argo-Tech alleging that Argo-Tech violated the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (hereinafter "FLSA"), by refusing to pay him time-and-a-half for his overtime hours. ²

Each of the parties moved for summary judgment. Argo-Tech argued that Douglas was an administrative employee who was paid on a salary basis, and as such, he was not entitled to overtime under the FLSA. Douglas claimed that he was not exempt from the FLSA and that Argo-Tech had willfully failed to pay him the overtime wages to which he was entitled.

The case was referred to a magistrate judge, who recommended that Douglas be granted summary judgment on his FLSA claim and awarded unpaid overtime for a two-year period. The magistrate judge also recommended that Argo-Tech's motion for summary judgment be denied. The magistrate, however, did not address Douglas's claim for liquidated damages.

Both parties filed objections to the magistrate's recommendations. The district court overruled these objections and entered an order adopting the magistrate's recommendations. Further, the district court ruled that Douglas was not entitled to liquidated damages under the FLSA. Both parties appeal the district court's order.

III. DISCUSSION

A. Standard of Review

We review de novo the district court's grant of summary judgment. Moore v. Holbrook, 2 F.3d 697, 698 (6th Cir.1993). The decision to deny a motion for summary judgment, while ordinarily reviewed for an abuse of discretion, is reviewed de novo when it is based on the resolution of a legal issue rather than on the presence of a material issue of fact for trial. Garner v. Memphis Police Dep't, 8 F.3d 358, 363 (6th Cir.1993).

B. The Fair Labor Standards Act and the Administrative Employee Exemption

Section 7(a) of the FLSA requires an employer to compensate an employee who works over forty hours a week "at a rate not less than one and one-half times the regular rate at which he is employed." 29 U.S.C. § 207(a)(1). This right to overtime pay cannot be waived during the course of collective bargaining. Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739-41, 101 S.Ct. 1437, 1444-45, 67 L.Ed.2d 641 (1981). Section 13(a) of the FLSA, however, entirely exempts from the overtime pay requirement any employee who is employed in a bona fide executive, administrative, or professional capacity. 29 U.S.C. § 213(a)(1). This exemption is to be "narrowly construed against the employers seeking to assert [it]." Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 456, 4 L.Ed.2d 393 (1960); Michigan Ass'n of Governmental Employees v. Michigan Dep't of Corrections, 992 F.2d 82, 83 (6th Cir.1993). Application of the exemption is limited to those circumstances plainly and unmistakably within the exemption's terms and spirit. Arnold, 361 U.S. at 392, 80 S.Ct. at 456. The employer bears the burden of proving that the exemption applies to the employee in question. Michigan Ass'n of Governmental Employees, 992 F.2d at 83.

Argo-Tech contends that the district court erred in granting Douglas summary judgment on his claim for unpaid overtime because Douglas was an exempt administrative employee. We agree.

Congress did not define the phrase "bona fide administrative capacity" in the FLSA, choosing instead to delegate that responsibility to the Secretary of Labor. See 29 U.S.C. § 213(a)(1); 29 C.F.R. § 541.2 (1996). Under the FLSA's implementing regulations, an employer may prove that an employee is an exempt "administrative employee" by satisfying a five part test, commonly known as the "long test." The long test applies to employees who are paid "on a salary or fee basis at a rate of not less than $155 per week." See 29 C.F.R. § 541.2(e)(1). The regulations, however, also create a "short test," described at 29 C.F.R. § 541.2(e)(2), which applies to employees who are paid "on a salary or fee basis at a rate of not less than $250 per week."

Because there is no question that Douglas was paid over $250 per week, we will apply the "short test" to determine whether Douglas falls within the administrative exemption. Under this test, Argo-Tech must prove that: (1) it paid Douglas on a salary or fee basis; (2) Douglas's primary job duties consisted of nonmanual work directly related to the management policies or general business operations of Argo-Tech; and (3) Douglas's job duties required him to customarily and regularly exercise discretion and independent judgment. 29 C.F.R. § 541.2(a)(1), (e)(2).

Under the short test, Argo-Tech must first prove that Douglas was paid on a salary or fee basis. The regulations define "salary" as "a predetermined amount constituting all or part" of an employee's compensation which is "not subject to reduction because of variations in the ... quantity of the work performed." 29 C.F.R. § 541.118(a) (1996); see also Michigan Ass'n of Governmental Employees v. Michigan Dep't of Corrections, 992 F.2d 82, 84 n. 3 (6th Cir.1993). An employee is salaried even if his compensation consists of a guaranteed predetermined amount plus additional compensation. 29 C.F.R. § 541.118(b); Michigan Ass'n of Governmental Employees, 992 F.2d at 84 n. 3. Further, the Wage-Hour Administrator of the Labor Department has advised that hourly employees may be salaried if they are guaranteed a predetermined number of paid hours....