Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Norton v. Maximus Inc.

United States District Court, D. Idaho

September 2, 2016

YVETTE NORTON, JEANNETTE RODRIGUEZ-GUZMAN, KELLY BARKER, JOSEPH BELL, BRAD EPPERLY, STEPHANIE JONES, KATHERINE KELLEY KNOWLES, NANCY RICHARDS, and MARK ZUMWALT, Individually and On Behalf of All Others Similarly Situated, Plaintiffs,
v.
MAXIMUS INC., Defendant.

          MEMORANDUM AND ORDER RE: MOTION FOR RECONSIDERATION OR INTERLOCUTORY APPEAL

          WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE

         On May 19, 2016, the court granted summary judgment in favor of the First-Level Supervisor plaintiffs (“Supervisors”) on their claim that defendant misclassified them as exempt employees in violation of the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. §§ 201-219. (Docket No. 187.) As explained in detail in the May 19, 2016 Order, defendant misclassified the Supervisors as exempt employees because it failed to comply with the salary basis test. Defendant now seeks reconsideration of the court's May 19, 2016 Order on the ground that it has since reimbursed the Supervisors for any improper deductions and thus can rely on the window of correction rule. Alternatively, defendant requests the court to certify its May 19, 2016 Order for interlocutory appeal.

         I. Motion for Reconsideration

         The FLSA's window of correction rule provides: “Improper deductions that are either isolated or inadvertent will not result in loss of the exemption for any employees subject to such improper deductions, if the employer reimburses the employees for such improper deductions.” 29 C.F.R. § 541.603(c). Defendant contends it has now reimbursed all Supervisors for deductions made under its formula that the court held violated the salary basis test in the May 19, 2016 Order. Relying on the argument that its improper deductions were “inadvertent” under the window of correction rule, defendant requests the court to reconsider its grant of summary judgment in favor of the Supervisors on their misclassification claim.

         In Klem v. County of Santa Clara, the Ninth Circuit held that the Secretary of Labor's interpretation that limited the scope of “inadvertent” deductions for purposes of the window of correction rule was entitled to deference. 208 F.3d 1085, 1093 (9th Cir. 2000). The Secretary of Labor had opined “that the window of correction is available only to employers that have demonstrated the ‘objective intention' to pay their employees on a salaried basis. . . . [W]hen an employer has not demonstrated that intention, it cannot, after the fact, use the window of correction to bring itself into compliance with the ‘salary basis' regulations and thereby turn nonsalaried employees into salaried employees.” Id. at 1091. “[U]nder the Secretary's interpretation, an employer ‘that engages in a practice of making impermissible deductions in its employees' pay, or has a policy that effectively communicates to its employees that such deductions will be made, necessarily has no intention of paying its employees on a “salary basis.”'” Id.

         As defendant appears to acknowledge, its subjective intent is not relevant. See id. (“The question is not whether an employer has the subjective intention that its employees be exempt from the FLSA's overtime provisions.”). Defendant nonetheless argues it can have an “objective intention” to pay its employees on a salaried basis if it adopts a policy that it reasonably (i.e., “objectively”) believes complied with the salary basis test. Nothing in Klem or the regulations support such an interpretation. The regulations expressly provide that “[a]n actual practice of making improper deductions demonstrates that the employer did not intend to pay employees on a salary basis.” 29 C.F.R. § 541.603(a). Klem similarly evaluated whether the employer's practice complied with the regulations, not whether the employer reasonably believed it did. See Klem, 208 F.3d at 1091.

         In the May 19, 2016 Order, this court found that defendant failed to meet the salary basis test as a matter of law because its formula for calculating deductions resulted in deductions affected by the varying number of hours in a pay period and thus were not “proportional to the time actually missed by the employee” as required under § 541.602(c). As one example, the same Supervisor incurred a deduction of $397.80 for missing 8 hours of work in a pay period with 72 hours, but only $117 for missing 8 hours of work in a pay period with 88 hours. (See May 19, 2016 Order at 15:15-16:7; see also May 19, 2016 Order at 11:3-16:7 (articulating defendant's formula and how the deductions varied based on the number of hours in a pay period).) As the court explained, the formula resulted in deductions that violated the salary basis test because a Supervisor's pay was reduced based on the “quantity” of work performed. (See id. at 8:17-22:4.)

         Because defendant had an actual practice of making improper deductions, it cannot rely on the window of correction rule. See Klem, 208 F.3d at 1093 (“The window of correction, therefore, is available to employers that have exempt employees, because those are the only employers who can lose exemptions. An employer that does not pay on a salaried basis does not have exempt employees. The window of correction is unavailable to such an employer, because the window operates to protect employers from losing exemptions or, in other words, to preserve existing exemptions.”).

         Nor can the Ninth Circuit's deference to the Secretary of Labor's interpretation in Klem be ignored simply because the Secretary was interpreting a prior version of the window of correction rule. At the time Klem was decided, the window of correction rule provided: “[W]here a deduction not permitted by these interpretations is inadvertent, or is made for reasons other than lack of work, the exemption will not be considered to have been lost if the employer reimburses the employee for such deductions and promises to comply in the future.” 29 C.F.R. § 541.118(a)(6) (2000). As amended in 2004, the window of correction rule now provides, “Improper deductions that are either isolated or inadvertent will not result in loss of the exemption for any employees subject to such improper deductions, if the employer reimburses the employees for such improper deductions.” Id. § 541.603(c). The 2004 amendments thus did not alter the rule's application to “inadvertent” deductions. Nor is there any suggestion that the Secretary of Labor has since abandoned the interpretation the Ninth Circuit deferred to in Klem.

         Despite Klem, defendant contends that its deductions should still be treated as “inadvertent” under the window of correction rule because, prior to this court's May 19, 2016 Order, neither the Department of Labor nor a court had evaluated and rejected its formula to calculate deductions and its formula was not an absurd application of the salary basis test. The Department of Labor, however, has described “[i]nadvertent deductions [as] those taken unintentionally, for example, as a result of a clerical or time-keeping error.” Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 69 Fed. Reg. 22122, 22181 (Apr. 23, 2004). The relief defendant seeks sounds more akin to a good faith or reasonableness defense, but defendant does not cite any authority giving rise to such a defense.

         Inferring the existence of a good faith or reasonableness defense in the absence of any language in the FLSA or regulations interpreting it would conflict with “the rule that FLSA exemptions are to be narrowly construed against . . . employers and are to be withheld except as to persons plainly and unmistakably within their terms and spirit.” Auer v. Robbins, 519 U.S. 452, 462 (1997) (internal quotation marks and citation omitted) (omission in original). Inferring such a defense from Congress's silence would also be inconsistent with 29 U.S.C. § 216(b), in which Congress expressly provided for consideration of an employer's good faith mistake when determining whether to award liquidated damages. See 29 U.S.C. § 260 (vesting the court with discretion to award a lesser amount only “if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that [the employer] had reasonable grounds for believing that his act or omission was not a violation of” the FLSA).

         Furthermore, none of the factors listed in § 541.603 that the court can consider “when determining whether an employer has an actual practice of making improper deductions” suggest that the employer's subjective intent or the reasonableness of improper deductions is relevant. See 29 C.F.R. § 541.603(a) (“The factors to consider when determining whether an employer has an actual practice of making improper deductions include, but are not limited to: the number of improper deductions, particularly as compared to the number of employee infractions warranting discipline; the time period during which the employer made improper deductions; the number and geographic location of employees whose salary was improperly reduced; the number and geographic location of managers responsible for taking the improper deductions; and whether the employer has a clearly communicated policy permitting or prohibiting improper deductions.”).

         The strongest support defendant has for some type of reasonableness defense relies on obiter dictum from Block v. City of Los Angeles, 253 F.3d 410 (9th Cir. 2001). In Block, the Ninth Circuit indicated it would be “hesitant to agree with the district court that the employees were entitled to summary judgment” under the salary basis test if the employer had imposed “only eight improper suspensions over six years, with fully half of those occurring as the result of an erroneous but not absurd interpretation of the law.” 253 F.3d at 418. The Ninth Circuit ultimately found, however, that the employer had “a pattern or practice of violations demonstrating an intention not to pay employees on a salaried basis” based on thirteen improper deductions that directly conflicted with the controlling regulations. Id. at 419 (internal quotation marks and citation omitted).

         Although the Block court mentioned the employer's “erroneous but not absurd interpretation of the law, ” it did not articulate why the error would be relevant or cite any authority suggesting that an “erroneous but not absurd interpretation” would entitle the employer to protection under the salary basis test. The court's hesitation could more easily be attributed to the small number of improper suspensions it referred to, especially when it ultimately held that the employer could not satisfy the salary basis test because the evidence revealed a greater number of improper suspensions. Id. at 418-19. As support for its “hesitation, ” the Block court also relied exclusively on two cases that held in favor of the employer based on the low number of improper suspensions. Id. at 418 (citing DiGiore v. Ryan, 172 F.3d 454, 464 (7th Cir. 1999), as “affirming grant of summary judgment to employer despite five improper suspensions because suspensions were infrequent and under unusual circumstances” and Davis v. City of Hollywood, 120 F.3d 1178, 1180 (11th Cir. 1997), as holding that “four suspensions for less than a week did not prevent employer from availing ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.