Salon Enterprises, Inc. v. Langford

• Decision Date: 29 December 2000
• Docket Number: No. 84,135.[1],84,135.[1]
• Citation: 29 Kan. App.2d 268,31 P.3d 290
• Parties: SALON ENTERPRISES, INC., Appellant, v. TOPAZE LANGFORD, Appellee.
• Court: Kansas Court of Appeals

29 Kan. App.2d 268

31 P.3d 290

SALON ENTERPRISES, INC., Appellant, v. TOPAZE LANGFORD, Appellee.

No. 84,135.¹

Court of Appeals of Kansas.

Opinion filed December 29, 2000.

Thomas Kelly Ryan, of Gates, Biles, Shields & Ryan, P.A., of Overland Park, for the appellant. Allan E. Coon and Gregory D. Kincaid, of Norton, Hubbard, Ruzicka & Kreamer, L.C., of Olathe, for the appellee.

Before LEWIS, P.J., RULON, C.J., and GLENN D. SCHIFFNER, District Judge, assigned.

SCHIFFNER, C.J.:

Salon Enterprises, Inc., d/b/a Par Exsalonce Hair Salon (Par Exsalonce) appeals from the ruling of the trial court that Par Exsalonce violated the Kansas Wage Payment Act (KWPA), K.S.A. 44-312 et seq., and the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 (1994) et seq.

Joan and Ronald Sandstrom are the owners and directors of Par Exsalonce. In November 1992, Par Exsalonce hired Topaze Langford as a hairstylist. No written employment agreement was entered into although Langford signed a form prepared pro se by Par Exsalonce agreeing not to work within 5 miles of Par Exsalonce for a 2-year period in the event she terminated her employment.

Pursuant to the oral agreement of the parties, Par Exsalonce was to deduct a 6% overhead from the total amount of money generated by Langford and then pay her a 50% commission on the balance. The overhead amount was later reduced to 5%. Langford also received a 10% commission on her retail product sales.

In January 1994, Par Exsalonce modified its pay plan. Under the new plan, Langford's compensation was calculated weekly, and she received commissions on retail and service revenues pursuant to a graduated scale. The commissions ranged from 50% to 60% after 5% for overhead expenses was subtracted from the total dollars she generated. Her retail product sales commission ranged from 10% to 15%, depending on the dollar level of her retail sales. Langford signed a document on January 15, 1994, entitled "Compensation Schedule" that contained the terms of the new pay plan but provided for nothing else.

Because of the increasing costs for retail hair products, Par Exsalonce instituted a new pay plan in June 1997 for all of its stylists. The 1997 plan increased the overhead percentage from 5% to 10% if a stylist failed to sell retail products amounting to at least 15% of his or her gross amount of revenue generated from services for the entire month. The commission was calculated monthly. Par Exsalonce reverted to its previous pay plan in January 1998.

Par Exsalonce informed the affected stylists of the new pay plan prior to its implementation and prior to the earnings by the stylists of any commissions affected by the plan. The plan was not in writing, and although Langford continued to work for Par Exsalonce, she objected to the plan, claiming that it was unfair and that a 10% deduction from gross service revenues was excessive.

Langford left Par Exsalonce in February 1998 and began working at another salon within 5 miles of Par Exsalonce. Par Exsalonce filed suit against Langford for breach of contract and against her new employer for tortious interference with a business relationship. Langford asserted counterclaims alleging Par Exsalonce had wrongfully withheld wages in violation of the KWPA and had failed to pay her overtime in violation of the FLSA.

The trial court dismissed Par Exsalonce's claim against Langford's employer with prejudice. Following a bench trial, the trial court denied Par Exsalonce's breach of contract claim, finding the covenant not to compete to be unenforceable.

The trial court found Par Exsalonce had wrongfully withheld wages of $369.80. It found that the withholding was intentional and that Langford was entitled to $739.40 in damages under K.S.A. 44-315(b). The trial court also found Par Exsalonce had violated the FLSA. However, because Langford failed to prove the number of overtime hours she had worked, it awarded Langford nominal damages of $1 and an amount for attorney fees to be assessed after a separate hearing. Langford was subsequently awarded $1,000 in attorney fees for the FLSA violation. Par Exsalonce timely appealed.

Par Exsalonce first argues the trial court erred in concluding it violated the KWPA, citing Alkire v. Fissell, 23 Kan. App.2d 487, 932 P.2d 1034 (1997), which held that the KWPA does not address wage or pay cuts for at-will employees. Langford asserted at trial that Par Exsalonce unilaterally modified the terms of her compensation structure and wrongfully withheld her wages in violation of the KWPA. This case involves the interpretation of statutes, and this court's review is unlimited. See Hamilton v. State Farm Fire & Cas. Co., 263 Kan. 875, 879, 953 P.2d 1027 (1998). Langford relies upon K.S.A. 44-319(a), which states:

"No employer may withhold, deduct or divert any portion of an employee's wages unless: (1) The employer is required or empowered to do so by state or federal law; (2) the deductions are for medical, surgical or hospital care or service, without financial benefit to the employer, and are openly, clearly and in due course recorded in the employer's books; or (3) the employer has a signed authorization by the employee for deductions for a lawful purpose accruing to the benefit of the employee."

The basic issue in this case is in the determination of what constituted Langford's "wages" and, therefore, whether Par Exsalonce's 1997 pay plan constituted a wage or pay cut for an at-will employee per Par Exsalonce's argument or wrongfully withheld Langford's wages in violation of the KWPA per Langford's argument.

K.S.A. 44-313(c) provides: "`Wages' means compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis less authorized withholding and deductions."

The facts are not in dispute. Langford was an at-will employee as was determined by the trial court. Langford's wage was commission based. Her wage constituted the commission she was paid on the balance of the gross revenues she generated less an overhead percentage. The 1997 pay plan was announced before any wages were earned. Changing the amount of the overhead percentage constituted a wage or pay cut as opposed to a wrongful withholding of wages. K.S.A. 44-319(a) does not prohibit at-will employee pay cuts announced before wages are earned; therefore, Par Exsalonce's 1997 pay plan was not violative of the KWPA. The trial court's findings on this point are not supported by the record, and its legal conclusion is incorrect.

Par Exsalonce next argues the trial court erred in concluding it violated the FLSA. It argues the evidence was insufficient to establish Langford worked more than 40 hours per week. It also argues it was not required to pay Langford overtime under 29 U.S.C. § 207(i). 29 U.S.C. § 207(a)(1) states:

"Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed."

In ruling from the bench that Par Exsalonce had violated the FLSA, the trial court stated:

"[T]he lunch hours count ... [T]he testimony is if you're having lunch and someone walks in, you get up and go cut their hair .... I don't know how you do operate one of these places unless you make people leave the shop for lunch hour. And it — I mean, frankly, it just doesn't make sense because in many instances the hairstylist would probably rather work through the lunch hour and make the money than they would have lunch....

"With respect to this overtime issue, I'm going to find that the evidence, by a preponderance of the evidence, establishes that [Langford] in this case at various times worked in excess of 40 hours per week and was not compensated in compliance with the federal regulations."

The trial court stated the following in its journal entry:

"D. The Plaintiff paid the Defendant in part by commission (for products sold) and in part by task or piece-meal.

"E. The Plaintiff, by making its employees available to work over lunch, even though not always requiring them to do so, violated the [FLSA] by failing to pay any overtime compensation.

"F. By a preponderance of the evidence, the Court finds that Defendant worked more than 40 hours in a workweek and was not compensated for such overtime work."

Langford asserted at trial that on occasion she had worked extra hours before and after her scheduled shifts as well as during her meal breaks. Nevertheless, the trial court's ruling was clearly based on evidence relating to the time Langford worked during her meal breaks.

The trial court erred in stating that Par Exsalonce violated the FLSA "by making its employees available to work over lunch, even though not always requiring them to do so." Recently, in Powell v. Simon Mgt. Group, L.P., 265 Kan. 197, 960 P.2d 212 (1998), the Supreme Court set forth the applicable test for determining whether a meal break period is compensable under the FLSA. It quoted the pertinent federal regulation as follows:

"29 C.F.R. § 785.19 (1997), which governs § 207(a)(1) employees, states in pertinent part:

"`(a) ... Bona fide meal periods are not worktime .... The employee must be completely relieved from duty for the purposes of eating regular meals .... The employee is not relieved if he is required to perform any duties, whether active or inactive, while eating....

"`(b) ... It is not necessary that an employee be permitted to leave the premises if he is otherwise completely freed from duties during the meal period.'" 265 Kan. at 203.

Based on interpretation of the statute and regulation by ...