Drinkwitz v. Alliant Techsystems, Inc.

• Decision Date: 06 April 2000
• Docket Number: No. 67019-6.,67019-6.
• Parties: Dan DRINKWITZ, a Washington resident, and Kenneth Caproni, a Washington resident, on behalf of themselves and those similarly situated, Respondents, v. ALLIANT TECHSYSTEMS, INC., a foreign corporation. Petitioner.
• Court: Washington Supreme Court

996 P.2d 582

140 Wash.2d 291

Dan DRINKWITZ, a Washington resident, and Kenneth Caproni, a Washington resident, on behalf of themselves and those similarly situated, Respondents, v. ALLIANT TECHSYSTEMS, INC., a foreign corporation. Petitioner.

No. 67019-6.

Supreme Court of Washington, En Banc.

Argued March 7, 2000.

Decided April 6, 2000.

Perkins, Coie, Bruce Michael Cross, Kevin J. Hamilton, Seattle, Amicus Curiae on Behalf of Association of Washington Businesses.

Christine Gregoire, Attorney General, Martha P. Lantz, Asst., Olympia, Amicus Curiae on Behalf of Department of Labor & Industries.

William Rasmussen, Seattle, Robins, Kaplan, Miller & Ciresi, Thomas B. Hatch, Minneapolis, MN, for Petitioner.

Law Offices of Scott McKay, Scott J. McKay, Seattle, Sebris, Busto, Jeffrey James, Mark Busto, Bellevue, for Respondents.

IRELAND, J.

This is a direct discretionary review of the trial court's summary judgment ruling. Plaintiffs, on behalf of a currently uncertified class, sued their former employer, Alliant Techsystems, Inc., to recover overtime wages under Washington's Minimum Wage Act (MWA), chapter 49.46 RCW. On cross-motions for summary judgment involving the issue of liability, plaintiffs argued they were "nonexempt" employees and, thereby, entitled to overtime pay under the MWA. The trial court granted plaintiffs' motion and denied Alliant's motion for summary judgment. In so doing, the trial court determined the issue of liability in plaintiffs' favor, certifying the issue for direct review while leaving the issue of class certification and damages for future determination.

The key issue in this direct review is whether the employer preserved the putative class representatives' "exempt" status under the MWA. Finding that some of Alliant's payroll policies and practices destroyed plaintiffs' "exempt" status because they violated the MWA's "salary basis" test, we affirm the trial court's summary judgment order and remand for further proceedings consistent with this opinion.

STANDARD OF REVIEW

When reviewing an order granting summary judgment, an appellate court reviews the matter de novo by engaging in the same inquiry as the trial court. E.g., Marquis v. City of Spokane, 130 Wash.2d 97, 104-05, 922 P.2d 43 (1996)

. Under this standard, the appellate court determines whether genuine issues of material fact exist and whether the moving party is entitled to judgment as a matter of law. Facts are reviewed in the light most favorable to the nonmoving party. E.g., Marquis, 130 Wash.2d at 105,

922 P.2d 43 (citing CR 56(c)). Based on this deferential standard of review, we focus on Alliant's assertions and admissions of fact.

FACTS

Alliant is a Delaware corporation, primarily engaged in the military defense industry. Alliant's national operations included its Marine Systems Division headquartered in Mukilteo, Washington. Between March 1, 1993 and March 1, 1996, Alliant employed approximately 335 individuals in Washington, who were classified as exempt "time-reporting" employees. Clerk's Papers (CP) 628, 630. These employees were subject to the various Alliant policies and practices described below.

Plaintiffs and putative class representatives, Dan Drinkwitz and Kenneth Caproni, are engineers formerly employed by Alliant's Marine Systems Division. Alliant classified both Drinkwitz and Caproni as "exempt" employees.

Alliant's Acknowledged Payroll Policies and Practices

Alliant acknowledges the following policies and practices applied to plaintiffs, notwithstanding that they were classified as "exempt" and paid on a "salary basis":

1. A requirement that employees record their time and submit weekly reports.

2. A requirement that employees work the schedules established by their managers.

3. A practice of calculating and recording the monthly salaries of employees into hourly rates of pay.

4. A requirement that employees work a weekly quota of between 40 and 45 hours per week.

5. A requirement that employees "make up" the difference between the time worked and the expected workweek by one of the following:

(a) working longer hours;

(b) applying hourly credits from compensatory (comp) time banks; or

(c) deducting from earned vacation time.

6. Creation of a discipline plan which allowed management to suspend employees for one or two days when hourly quotas were not met.

7. Employee pay deductions for employees who failed to meet their quota requirements of 40-45 hours per week.

Although Alliant acknowledges that "exempt" employees' pay was improperly deducted for failing to meet workweek hourly quotas, Alliant claims this practice was inadvertent. Specifically, Alliant asserts it first received notice of this practice when Plaintiff Caproni filed an affidavit to support an action under the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. §§ 201-219, brought by Alliant employees in a Rhode Island federal court in 1995.¹ Caproni's affidavit stated he had recently suffered an improper salary deduction. In response, Alliant expressed surprise to learn of Caproni's improper deduction, and to learn that the Marine System's payroll clerk who had made the deduction was unaware of the difference between "exempt" and "nonexempt" employees.² Between March, 1, 1993 and March 1, 1996, this payroll clerk made 243 improper deductions in 54 "exempt" employees' pay. After Alliant told the payroll clerk to stop making such deductions, all affected employees were identified and fully reimbursed in the amount of $33,691.43 by October 1996. Alliant also assured all current employees that steps had been taken to avoid similar mistakes. It is undisputed that Caproni suffered five improper deductions between March 1, 1993 and March 1, 1996, all of which were reimbursed by October 1996. It is also undisputed that Drinkwitz never suffered an improper deduction between March 1, 1993 and March 1, 1996.

Alliant admits its management adopted a special disciplinary procedure to enforce the 41-45 hour workweek which called for one- or two-day suspensions without pay. It admits that at least one, and perhaps two, employees were subject to this disciplinary procedure. Alliant claims that both employees were reimbursed for the deductions and that a memorandum was distributed to employees advising them to contact their manager if they had experienced such discipline.

Despite these admissions, Alliant asserts that its salaried employees were treated in a manner consistent with their "exempt" status. Plaintiffs disagree. Therefore, the key issue on this direct review of summary judgment is whether, when viewing the facts in the light most favorable to the employer, Alliant preserved the named plaintiffs' "exempt" status under the MWA as a matter of law.

ANALYSIS

Issue 1: What is the appropriate "salary basis" test under the MWA?

The FLSA deals with overtime and minimum wage requirements for employees. 29 U.S.C. §§ 201-219. The FLSA is intended to be a "floor" below which employers may not drop. It is not a "ceiling" on benefits or terms and conditions of employment. Doctors Hosp., Inc. v. Silva-Recio, 429 F.Supp. 560, 561-62 (D.P.R.1975), aff'd, 558 F.2d 619 (1st Cir.1977). Because the MWA is based upon the FLSA, federal authority under the FLSA often provides helpful guidance. However, the MWA and FLSA are not identical and we are not bound by such authority. Chelan County Deputy Sheriffs' Ass'n v. Chelan County, 109 Wash.2d 282, 291, 745 P.2d 1 (1987); Weeks v. Chief of Wash. State Patrol, 96 Wash.2d 893, 897, 639 P.2d 732 (1982).

The MWA requires, in part, that employers pay their employees at a rate of one and one-half times their regular hourly rate for time worked beyond 40 hours per week, unless an individual is employed in a "bona fide... professional capacity." RCW 49.46.010(5)(c). Pursuant to its authority to "define and delimit" the term "professional capacity," Washington's Department of Labor and Industries (DLI) defines "professional" employees as individuals compensated for their services "on a salary or fee basis." RCW 49.46.010(5)(c); WAC 296-128-530(5). Neither the MWA nor DLI regulations define the term "on a salary or fee basis."

The only published Washington case discussing the MWA's "salary basis" requirement is Tift v. Professional Nursing Servs., Inc., 76 Wash.App. 577, 886 P.2d 1158 (1995). Tift held that an employee who qualified as an "exempt" "administrative employee" under the MWA was "in reality an hourly employee" when: (1) the employee was required to keep track of hours worked in excess of 40 hours per week; and (2) was compensated at a straight hourly rate for all work done in excess of 40 hours per week. Tift, 76 Wash.App. at 584-86, 886 P.2d 1158 (citing Hilbert v. District of Columbia, 23 F.3d 429, 440-41 (D.C.Cir.1994) (Mikva, C.J., concurring in the result in part, dissenting in part)). Shortly after Tift's publication, however, the Washington State Legislature added the following language to the MWA:

The payment of compensation or provision of compensatory time off in addition to salary shall not be a factor in determining whether a person is exempt under RCW 49.46.010(5)(c)[.]

Laws of 1995, ch. 5, § 1 (codified at RCW 49.46.130(2)(a)).

Plaintiffs and Alliant debate the effect this statutory amendment has on Tift. Alliant claims the amendment "legislatively overruled" Tift and signaled a legislative intent to rely on federal authority under the FLSA. Plaintiffs, in contrast, argue Tift's salary basis rationale still applies because the amendment represents only an evidentiary limitation.

Regardless of the statutory amendment's effect on Tift's holding, the parties' debate is of little consequence because the Legislature, by failing to define "salary basis" in the MWA, has provided no specific guidance for the issue at hand. In contrast, the federal Department of Labor's (DOL) regulations promulgated under the FLSA's authority have generally defined "payment on a salary basis"...