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Ronald Wood, An Individual v. Kinetic Systems

April 19, 2011

RONALD WOOD, AN INDIVIDUAL PLAINTIFF,
v.
KINETIC SYSTEMS, INC., A CALIFORNIA CORPORATION, DEFENDANT.



ORDER

INTRODUCTION

Before the Court are nine pending pre-trial motions. First, Defendant Kinetic Systems, Inc. ("KSI") asks the Court to clarify the legal standards applicable to KSI's burden of proof on its affirmative defense that Plaintiff Ronald Wood ("Wood") was an exempt employee under the Fair Labor Standards Act ("FLSA").

KSI filed also eight motions in limine requesting the Court to rule on various evidentiary issues anticipated at trial. (Dkts. 58-65.) Wood filed responses to all of the pre-trial motions, (Dkt. 67-75), and the Court conducted a hearing on all pre-trial motions at the pre-trial conference held on April 18, 2011. The Court issues its preliminary ruling, which may be subject to revision upon consideration of evidentiary issues presented within the context of the trial.

ANALYSIS

1. Clarification Order

A. The FLSA

Congress enacted the FLSA in 1938 to protect workers from substandard wages. Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739 (1981). Section 207(a)(1) of the FLSA sets forth the right of employees to receive overtime pay "at a rate not less than one and one-half times the regular rate" for any hours worked in excess of 40 hours in any work week. 29 U.S.C.S. § 207(a)(1). Simultaneously, however, Section 213 of the FLSA specifically exempts certain employers and employees from Section 207 coverage. Specifically, an exemption from overtime compensation exists for persons "employed in a bona fide executive, administrative, or professional capacity." 29 U.S.C. § 213(a)(1). See also 29 C.F.R. § 541.204. These are commonly known as the "white collar" exemptions. In 2004, the regulations were amended to include a presumption that "highly compensated" executives, administrators, and professionals who earn at least $100,000.00 per year are deemed exempt, eliminating the need for a detailed analysis of the employee's job duties. See 29 C.F.R. § 541.601(a), (c).*fn1

In its Motion for Clarification, KSI asserts that the executive exemption under 29 C.F.R. § 541.100 differs from the highly compensated employee exemption under 29 C.F.R. § 541.601, and seeks guidance regarding KSI's burden at trial regarding the latter. (Mem. at 2-3, Dkt. 56-1.) Specifically, KSI asserts that, for a highly compensated executive, the "primary duties" test is inapplicable. (Id. at 4.) Conversely, Wood replies that the "primary duties" test applies to both executives and highly compensated executives. As explained below, both parties are partially correct. If an employee is "highly compensated," then the primary duties test is streamlined and less burdensome, but still applicable. If an employee does not meet the definition of a "highly compensated" employee, then the more burdensome primary duties test is applicable and the employer carries a heavier burden of proof at trial. The standards for each exemption will be discussed in turn.

(1) The Executive Exemption

To fall within the executive exemption under 29 C.F.R. § 541.100, an employer must establish that the employee is:

(1) Compensated on a salary basis at a rate of not less than $455 per week . . . exclusive of board, lodging or other facilities;*fn2

(2) Whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;

(3) Who customarily or regularly directs the work of two or more other employees; and

(4) Who has the authority to hire or fire other employees, or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

29 C.F.R. § 541.100(a) (emphasis added). See also Barner v. City of Novato, 17 F.3d 1256, 1260 (9th Cir. 1994). The first part of the test is called the "salary test" and the second part comprises the "duties test." Barner, 17 F.3d at 1260. An employee is entitled to overtime pay if the employer cannot satisfy both tests.*fn3 Service Employees Int'l Union v. County of San Diego, 60 F.3d 1346, 1350 (9th Cir. 1994).

The "primary duty"*fn4 analysis is extensive, and defined as: the principal, main, major or most important duty that the employee performs. Determination of an employee's primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee's job as a whole. Factors to consider when determining the primary duty of an employee include, but are not limited to, the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee's relative freedom from direct supervision; and the relationship between the employee's salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.

29 C.F.R. § 541.700.*fn5

Additional definitions for what constitutes "management" of a "department or subdivision," supervision of "two or more other employees," and the weight given to the employee's suggestions and recommendations are set forth in 29 C.F.R. §§ 541.102--106.

(2) 2004 Amendment: Highly Compensated Employee*fn6

In 2004, the implementing regulations were amended to add a presumption that the exemption from overtime compensation applied to high wage-earners. See 29 C.F.R. § 541.601. Section 541.601 states, in pertinent part:

(a) An employee with total annual compensation of at least $100,000 is deemed exempt under section 13(a)

(1) of the Act if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee ...


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