Marshall v. Western Union Telegraph Co.
| Decision Date | 05 May 1980 |
| Docket Number | No. 79-1695,79-1695 |
| Citation | 621 F.2d 1246 |
| Parties | 24 Wage & Hour Cas. (BN 704, 60 A.L.R.Fed. 235, 88 Lab.Cas. P 33,904 Ray MARSHALL, Secretary of Labor, United States Department of Labor v. WESTERN UNION TELEGRAPH COMPANY, Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
Thomas L. Morrissey (argued), Newark, N. J., Thomas M. Healy, Upper Saddle River, N. J., Laurence Reich, Rosemary A. Hall, Carpenter, Bennett & Morrissey, Newark, N. J., for appellant.
Carlin Ann Clauss, Sol. of Labor, Donald S. Shire, Associate Sol., Lois G. Williams, David A. Grant (argued), Attys., U. S. Dept. of Labor, Washington, D. C., Francis V. LaRuffa, Regional Sol., New York City, for appellee.
Before GIBBONS, ROSENN and GARTH, Circuit Judges.
We are called upon in this appeal to consider a question of widespread importance to both employers and employees under the Fair Labor Standards Act (FLSA or the Act), 29 U.S.C. §§ 201-216b (1976): How is the exempt status of managerial employees from the overtime pay provisions of the FLSA to be measured when those employees perform nonexempt work during a strike? The district court answered this question by adopting a "workweek standard" proposed by the Secretary of Labor (the Secretary) by which the exempt status of managerial employees would be determined through an evaluation each week of the "primary duty" of the employee.
This case arose in the context of the use by appellant, Western Union Telegraph Company (Western Union), of managerial employees to perform non-managerial duties during a strike by rank and file employees. The district court held that Western Union must determine whether the "primary duty" of the managerial employee during each week of the strike was managerial and thus exempt, or non-managerial, and therefore subject to the overtime pay provisions of the FLSA. Western Union appeals. We reverse.
This case has its factual roots in a strike in 1971 by Western Union's entire rank and file work force. In order to continue limited services, particularly those connected with domestic defense communications, Western Union used approximately 2,100 managerial employees to perform the struck-work. A substantial number of them spent more than 50 percent of their time during this period on tasks normally performed by the rank and file. Managerial employees are those working in a bona fide executive, administrative or professional capacity.
Under FLSA, the general rule is that employers must pay overtime compensation to employees working over forty hours per week. 29 U.S.C. § 207(a)(1) (1976). 1 Managerial employees, however, are exempt from the overtime pay provisions by virtue of section 213(a)(1) of the Act. 2 Western Union did not pay overtime to its managerial employees for hours worked in excess of forty per week while performing the non-managerial struck-work. The Secretary of Labor petitioned the district court for an injunction 3 to prohibit the non-payment of overtime by Western Union to its managerial employees and for a determination of how much retroactive overtime pay was owed. The issue before the court was whether a managerial employee could lose his exempt status by performing non-managerial struck-work. The district court held that the administrative and professional employees could indeed lose their exempt status, but that under the emergency exemption to FLSA, 4 executive employees retained their managerial status. The court held that administrative and professional employees who work more than forty hours per week at non-managerial duties must be paid one and one-half times their regular rate of pay for the hours of overtime worked.
On appeal, we upheld the district court's determination that the administrative and professional personnel could lose their exempt status during the strike, and because Western Union abandoned its emergency exemption argument for executive personnel, we held that executives could similarly lose their exempt status. Brennan v. Western Union Telegraph Co., 561 F.2d 477, 484 (3d Cir. 1977) (Seitz, C. J.). We remanded the case because, inter alia, "the district court (had) not yet specifically decided if, under the regulations, the determination of whether an employee is 'employed in a bona fide executive . . . capacity' is to be made with respect to each week separately or with respect to a broader period of time." Id. at 483.
On remand, the Secretary proffered a workweek standard under which an employer must in each workweek in which a managerial employee works more than forty hours, determine whether the managerial employee performed primarily exempt managerial work or nonexempt, non-managerial work. If in any given week of the strike at Western Union, an executive, administrative or professional employee performed primarily nonexempt duties, the company would be required to pay overtime at the rate of one and one-half times the managerial employee's salary for each hour worked over the forty-hour limit. The district court adopted the workweek standard and continued the injunction. Western Union appeals from this order as it pertains to high-salaried managerial employees whose eligibility for exemption can be determined under the "short test" of the final provisos of 29 C.F.R. §§ 541.1(f), 541.2(e)(2) and 541.3(a) (1979). In assessing whether the district court properly adopted this workweek standard, it is necessary to examine first the regulations defining managerial employee status.
Whether an employee is a managerial employee may be determined in one of two ways under the FLSA regulations promulgated by the Department of Labor. Executive, administrative or professional status may be determined under a "long" or a "short" test. Under the "long test," whether an individual is a managerial employee is determined through various job-related criteria. For example, an executive is an employee who:
(1) has management as a primary duty;
(2) customarily and regularly directs the work of two or more employees;
(3) has authority to hire or fire or who has weight in the determination of other employees' job status;
(4) exercises discretionary powers on a customary and regular basis;
(5) does not spend beyond a certain percentage of his hours in each workweek performing non-executive duties;
(6) earns at least $155 per week.
See 29 C.F.R. § 541.1(a)-(e) (1979). 5
Under the "short test" for high-salaried managerial employees, managerial status is determined by reference to the employee's salary level and his "primary duty" as an employee. For example, an employee who earns not less than $250 per week (as opposed to $150 per week under the long test) and whose "primary duty consists of the management of the enterprise . . . , and includes the customary and regular direction of two or more other employees therein," 29 C.F.R. § 541.1(f), is deemed to have met the requirements for executive status. 6
Only the short test definitions of managerial employees are at issue in this case. The dispute between Western Union and the Secretary is whether the "primary duty" of a managerial employee under the short tests can be determined in such a narrow time frame as a workweek. The district court indicated that the Secretary's workweek standard was entitled to deference unless Western Union could show that it was "plainly erroneous and unreasonable." Although admitting that the question was a "close one," the court deferred to the Secretary's proffered workweek standard.
We believe that the district court erred in deferring to the Secretary's position because the workweek standard is in reality not an "interpretation" of the governing statute or of the existing short test regulations, but rather a substantive amendment of the regulations. As such, we believe the Secretary must engage in a rulemaking procedure conforming with the notice and comment provisions of the Administrative Procedure Act, 5 U.S.C. § 553 (1976).
At the heart of these proceedings is the question of how to measure the "primary duty" of high-salaried managerial employees when they deviate from their normal work course and perform nonexempt work. There is no difficulty in determining when exempt status is lost through the performance of nonexempt work by a managerial employee under the long tests. If a long test managerial employee spends more than 20 percent of his time in a given workweek performing nonexempt work, the managerial exemption is lost. 7 See 29 C.F.R. §§ 541.1(e); 541.2(d); 541.3(d). No such formula is found in the short test provisos for managerial employees. Indeed, the district court conceded this stating:
It is clear that the language (of the provisos) is far from conclusive on the issue of whether "primary duty" should be determined on a workweek basis or some longer period. The defendant stresses that "primary duty" cannot be read as "primary strike duty." On the other hand, the proviso cannot be read to exclude the workweek time frame. The Secretary, while noting that the week is the time frame for measuring salary, does concede that the regulation does not say that "primary duty" is to be ascertained on a weekly basis.
As to this proviso, the following can be said: It does not mandate the adoption of either party's position in the matter in explicit terms.
The district court thereupon deferred to the Secretary's workweek standard as an "interpretation" of primary duty under the short tests because it was not "unreasonable or plainly erroneous."
The fundament of the Secretary's position is that although the short test provisos do not themselves provide the source of the workweek standard, the presence of the workweek standard in other parts of FLSA, including the long tests, makes it reasonable to apply a workweek standard in measuring primary duty under the short tests. The workweek is used to gauge the obligations of employers to pay the...
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