|
Wage and Hour Sample Articles:
COURT REJECTS WINDOW OF CORRECTION BOEING
MUST PAY WORKERS FOR ORIENTATION SESSION US
SUPREME COURT AFFIRMS MANDATORY COMP TIME USE
In a case of first impression, a divided Washington State
Supreme Court examined an employer's pay practices against criteria it
established for determining whether an employee is "exempt" under
the Washington Minimum Wage Act (MWA) and refused to recognize the
"window of correction" available under the federal Fair Labor
Standards Act (FLSA).
Human resource professionals are generally aware of the FLSA's requirements for maintaining an employee's exempt status from the overtime pay requirements. Indeed, most of the reported litigation on this topic arises under federal law, as seen in various past issues of the REVIEW. Washington's Minimum Wage Act, RCW 49.46, parallels the FLSA, but nevertheless is a separate and distinct statute, as the high court was quick to point out. It drove the point home by refusing to recognize the federal "window of correction" that allows employers to correct inadvertent payroll errors without causing the loss of an employer's exempt status.* In the case before it, the employer acknowledged that certain "exempt" employees' pay was improperly deducted for failing to meet workweek hourly quotas, but it claimed the deduction was inadvertent. Only after the lawsuit was filed did management learn that the payroll clerk who had made the deduction was unaware of the difference between "exempt" and "nonexempt" employees. Over a three year period, the clerk made 243 improper deductions affecting 54 employees considered exempt. Upon discovering the error, the employer fully reimbursed all affected employees and saw to it that the error did not reoccur. The employer also admitted that a special disciplinary procedure to enforce its 41-45 hour work week resulted in one or two improper suspensions without pay. The affected employees were reimbursed. The MWA, like the FLSA, the court noted, exempts employees who receive "payment on a salary basis." Washington law does not define "salary basis," so the court turned to the federal Department of Labor regulations for a definition: An employee will be considered to be paid "on a salary basis" if he regularly receives each pay period "a predetermined amount constituting all or part of his compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed." The employee must receive his full salary for any week in which he performs any work without regard to the number of days or hours worked. Justice Ireland, writing for the majority, opined that the U.S. Department of Labor's (DOL) definition of "salary basis" produced "a result consistent with Washington's long and proud history of being a pioneer in the protection of employee rights." Her opinion cautioned, however, that "except as specifically referenced below, we do not adopt all DOL regulations promulgated under the authority of the FLSA or under federal case law relating to this issue." Not All Federal Precedent Applicable DOL regulations recognize a "window of correction" when an improper deduction "is inadvertent, or is made for reasons other than lack of work." The exemption will not be lost if the employer reimburses the employee and pledges future compliance. The high court's majority refused to recognize this "window of correction" exemption because it found the federal regulations and cases "convoluted and complicated," and the exemption does not appear in Washington statute: Without clear federal guidance or guidance from our own Legislature, and in the exercise of judicial restraint, we find it appropriate to allow the Legislature to decide whether to adopt a "window of correction" exception. As to whether certain pay practices cause an employer to lose the exemption, the court found as follows:
In the case before it, the employer's undisputed practices were out of bounds and violated the MWA, the court held. It affirmed the trial court's granting of summary judgment in favor of the employees. Dissent: Single Clerical Error Will Cause Exemption Loss Justice Sanders and three of his colleagues sharply disagreed with the majority's rejection of the federal "window of correction." The dissent accused the majority of confusing judicial restraint with the "abdication of our duty to protect the legal rights of all concerned." This abdication is not justified merely because the federal law is complicated or confusing. In any event, the dissent found the federal "window of correction" principle to be clear and simple. Noting that the MWA was modeled after the FLSA, the dissent found it "illogical to look to a federal regulation to establish the test for determining whether an employee qualifies as an exempt employee, but disregard the same regulation" on the window of correction issue: The practical effect of the majority's arbitrary strict liability standard is that a single mistaken deduction by a payroll clerk destroys the employee's 'professional' status under the MWA. There is more to being a 'professional' under the statute than the complete absence of clerical error by a pay clerk. The dissenting justices would remand the proceedings for trial on the "inadvertence" issue. Drinkwitz et al. v. Alliant Techsystems, No. 67019-6, (Wn. S.Ct., April 6, 2000) *Editor's note: See Klem v. Santa
Clara County (Review, Spring 2000) where the 9th Circuit addressed the
circumstances under which the "window of correction" can be claimed
in a federal FLSA suit.
The Fair Labor Standards Act (FLSA) permits public sector
employers to give compensatory time off in lieu of cash payment for overtime
work as long as the employer has an agreement or understanding with employees
to that effect. The FLSA imposes additional conditions: (1.) an employer must
allow the employee to use the comp time within a reasonable period; (2.) the
number of compensatory hours accruable are capped; (3.) the employer may cash
out accrued compensatory time hours at any time, and (4.) it must pay cash
for any accrued compensatory time remaining upon the termination of
employment.
Spokane Valley Fire District Decision Implicitly Affirmed In a 1999 decision, Collins v. Lobdell, the Ninth Circuit affirmed Spokane Valley Fire Protection District No. 1's policy of requiring employees to schedule time off in order to reduce the amount of accrued compensatory time. (See the Fall 1999 REVIEW.) The Fifth Circuit Court of Appeals made a similar ruling in a Texas case. The Supreme Court has affirmed the Fifth Circuit's ruling, and by implication the ruling in favor of the employer in the Spokane Valley Fire Protection District case. FLSA Silent on Mandatory Comp Time Use Justice Thomas, writing for the Court's majority of six, emphasized that the FLSA ensures the liquidation of accrued compensatory time. It says nothing, however, about restricting an employer's efforts to require employees to use the time. Because the statute is silent on this issue, an employer that requires the use of compensatory time does not violate the statute. Two other provision of the FLSA support the employer's position, according to the court's majority. First, employers are permitted to decrease the number of hours that employees work; and second, employers also may cash out accumulated compensatory time by paying the employee his regular hourly wage for each hour accrued. The employer's policy merely involved doing both of these steps at once, the court observed. The court rejected the employees' and the U.S. Department of Labor's argument that a section of the FLSA requiring an employer to reasonably accommodate employee requests to use compensatory time provides the exclusive means of utilizing accrued time in the absence of an agreement to the contrary. According to the Court: Viewed in the context of the overall statutory scheme, the FLSA is better read not as setting forth the exclusive method by which compensatory time can be used, but as setting up a safeguard to ensure that an employee will receive timely compensation for working overtime. The court further observed that the Secretary of Labor, in her regulations, identified this precise concern when she stated that comp time cannot be used as a device to avoid compensating for overtime. Those regulations state that employees cannot be coerced into accepting more compensatory time than they can reasonably use. Because no statutory provision expressly or implicitly prohibits an employer from pursuing its policy of forcing employees to utilize their compensatory time, an employer does not violate the FLSA in so doing, the court concluded. Justice Stevens, writing for the dissent, opined that because comp time in lieu of cash overtime is allowed only when there is an agreement to that effect, any required use of compensatory time off must be in accordance with that agreement. Christensen v. Harris County, No. 98-1167 (U.S.S.Ct. May 1, 2000) |
Minimum Wage Act Only Guarantees Minimum Wage
The Supreme Court agreed with the employer, explaining that the Minimum Wage Act "merely sets the floor below which the agreed rate cannot fall without violating the statute." The court also agreed with its argument that exempt salaried employees were not entitled to seek remedies under the Minimum Wage Act. The court rejected the argument that the salaried employees fall under the statute's protection because the orientation sessions occurred prior to their contractual start dates, before they were salaried employees:
If the employees were not employed when they attended the orientation sessions, then they were not covered by the Minimum Wage Act at all because an employee under the act is "any individual employed by an employer.
The employees argued that they were entitled to restitution at their regular rate of pay for work they performed for which the company was unjustly enriched. The court stated that "incompleteness and inadequacy of the legal remedy are what determine the right to the equitable remedy of injunction." Because the employees had an adequate remedy at law, the court explained, it is not necessary to grant equitable relief.
Court Throws Out "Mutual Mistake" Argument
The employees claimed that the written provision in their contracts requiring them to attend the orientation session is the result of a mutual mistake, which requires reformation of their contracts. Quoting from an appeals court decision, the supreme court wrote that a mutual mistake occurs "when the parties, although sharing an identical intent when they formed a written document, did not express that intent in the document." The court concluded that there was no mutuality of intent between the company and the employees. Although the employees may have expected payment, they never communicated this expectation to their employer which made it clear to its employees that it never intended to pay them for the sessions.
The employees requested that the court strike the provision in their contracts requiring them to attend the pre-employment orientation session. They argued that the contracts as written violate public policy because they are contrary to the minimum wage statute. The court refused, explaining that it would have to alter the starting dates of employment to make the requested rescission meaningful. This alteration would be more than "lining out" contract language, which the court was not at liberty to do.
Minimum Wage Claims Subject to Three Year Statute of Limitations
The court agreed with the trial court that the proper statute of limitations is the three year period found in RCW 4.16.080(2), which applies to taking or detaining personal property. Although this statute has not been traditionally applied to labor and employment cases, the court found the employees' claim similar to unjust enrichment cases, to which the three year statute of limitations typically has been applied.
Seattle Professional Engineering Employees Association v. The Boeing
Company, No. 67519-8 (Wn. S.Ct., January 27, 2000)