Summary
In Wright, the defendant had pled that plaintiff was exempt from the FLSA and state labor laws because of his status as a white collar employee.
Summary of this case from Aros v. United Rentals, Inc.Opinion
No. 99 Civ. 9115 (CSH).
February 2, 2001.
MEMORANDUM OPINION AND ORDER
This case involves a claim for unpaid overtime wages instituted by a former employee of the defendant pursuant to the Fair Labor Standards Act ("FLSA" or the "Act"), 29 U.S.C. § 201 et seq. and the New York State Labor Law, N.Y. Labor Law §§ 1 et seq. Discovery is complete and the defendant now moves for summary judgment dismissing the case in its entirety, contending that plaintiff was not subject to the overtime requirements of the FLSA due to his status as an exempt administrative employee. As discussed below, I conclude that the existence of disputed issues of material fact relevant to the application of this exemption renders summary judgment inappropriate.
As the parties do not discuss the standards applicable to a New York State Labor Law claim, I will assume for purposes of this motion, as the parties do, that the standards are substantially the same as those governing the FSLA claim.
BACKGROUND
The defendant, Aargo Security Services, Inc. ("Aargo"), provides security services to residential buildings and businesses in the New York metropolitan area. Aargo hired plaintiff Ernest Wright as a security guard in 1990, and promoted him to the newly created position of "field supervisor" in 1994 or 1995. During his tenure as field supervisor, Wright was the only employee with that title. Wright remained in that position until his termination in April of 1999. Constrained by the FLSA statute of limitations, plaintiff seeks overtime only from August 24, 1996 to his termination.
As a field supervisor, Wright supervised the security guards in the 20 to 40 buildings with which Aargo contracted to provide security services. His job involved making daily site visits, being on call on the weekends and occasionally filling in for a security guard who did not show up to work. According to Wright's deposition in this case, he consistently worked 80 to 100 hour weeks. Wright Deposition ("Dep.") at 94. Wright maintains that he worked every weekday from about 4 or 5 a.m. to about 5 or 6 p.m. Dep. at 119. He did not punch a clock. There is apparently no dispute that Wright was never absent from work apart from his two-week paid vacation each year.
From July to December 1996, Wright consistently received $300 per week. His weekly payroll records from ADP, the outside payroll register used by Aargo, reveal that in December of 1996 his hourly pay rate was $7.50 and that the regular hours for which he was being compensated were 40. From January to August of 1997, Wright received $480 per week. The payroll records for that period also note that his hourly pay rate remained at $7.50 per hour with an overtime rate of $12.50 per hour, and that his regular hours were 40 and his overtime hours were 16. Although the payroll records from June to December of 1997 are missing, it is not disputed that from August to December of 1997 Wright's weekly pay was $512. Beginning in December of 1997 and continuing to his termination, plaintiff was earning $785 each week. His payroll records from December 1997 to May 22, 1998 note a regular hourly rate of $19.625 and an overtime rate of $29.4375. After May 22, 1998, however, Wright's payroll records indicate no regular hourly rate but rather a weekly "salary" of $785, and an overtime rate of $29.4375. In addition to his regular weekly pay, from May 1998 until his termination plaintiff made an additional $15 per week for performing the task of collecting coins from machines in certain buildings and depositing them at a bank.
After his termination, Wright filed the instant complaint alleging that Aargo failed to pay him substantial amounts of overtime from August 24, 1996 to April 23, 1999 in violation of the FLSA and the New York State Labor Law. The complaint also alleged a violation of the Equal Pay Act, 29 U.S.C. § 206(d), but Wright has since dropped that claim. See Plaintiffs Memorandum in Opposition to Defendant's Motion for Summary Judgment ("Pl. Mem.") at p. 25.
Following completion of discovery, defendant moves for summary judgment dismissing the FLSA and state claims on the ground that plaintiff is an exempt administrative employee within the meaning of Section 13(a)(1) of the Act, 29 U.S.C. § 213(a)(1). Plaintiff opposes the motion, both on the merits — arguing that issues of fact preclude a finding that he functioned as an exempt employee — and on procedural grounds — arguing that defendant has waived that affirmative defense. I turn first to the waiver issue.
DISCUSSION
A. General FLSA Standards
The overtime provisions of the FLSA establish a general rule that employees must be paid at a rate of at least one and a half times their regular rate for all hours worked in excess of 40 in a given week. 29 U.S.C. § 207(a)(1) see Reich v. State of New York, 3 F.3d 581, 587 (2d Cir. 1993). As with many rules, however, the overtime provision is not absolute. The Act provides numerous categories of exemptions which are set forth in Section 13(a), 29 U.S.C. § 213 (a). Employees whose jobs fall within one of the enumerated categories are not entitled to certain protections of the Act. Employers need not pay exempt employees overtime no matter how many hours they work each week. However, it is the employer's burden to demonstrate its entitlement to a given FLSA exemption, and because the Act is a remedial statute, its exemptions are construed narrowly against the employer. See Martin v. Malcom Pirnie, Inc., 949 F.2d 611, 614 (2d Cir. 1991); Dambreville v. City of Boston, 945 F. Supp. 384, 391 (D.Mass. 1996).
B. Waiver
A claim of exemption under the FLSA is an affirmative defense that must be specifically pleaded under Fed.R.Civ.P. 8(c) or it will be considered waived. See Magana v. Comm. of the Northern Mariana Islands, 107 F.3d 1436, 1445-46 (9th Cir. 1997); Rotondo v. City of Georgetown, South Carolina, 869 F. Supp. 369, 373 (D.S.C. 1994). In its answer, Aargo pleaded as a Second Affirmative Defense that "The Plaintiff was exempt from being entitled to overtime compensation under either the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., and/or the New York State Labor Law, N.Y. Labor Law §§ 1 et seq., due to his status as a white collar employee." Plaintiff contends that since there is no specific exemption in the Act for "white collar" employees, the answer does not adequately plead the exemption that defendant seeks to invoke on this motion.
Plaintiff's argument is unconvincing. Although plaintiff correctly notes that the term "white collar" employee does not appear in Section 13(a) the FLSA, the exemption upon which defendant relies is nonetheless commonly regarded by the courts, and even referred to in the Act's regulations, as the "white collar exemption". The exemption at issue is found in 29 U.S.C. § 213(a)(1), which provides in relevant part:
The provisions of section 206 . . . and section 207 of this title [the minimum wage and maximum hour requirements] shall not apply with respect to —
(1) any employee employed in a bona fide executive, administrative, or professional capacity. . . .
Defendant has cited several regulations and numerous cases which refer to this exemption as the "white collar employee" exemption. See, e.g., 29 C.F.R. § 516.3 (describing the Section 13(a)(1) exemptions as the "so-called "white collar' employee exemptions"); McCloskey v. Triborough Bridge and Tunnel Auth., 903 F. Supp. 558, 562 (S.D.N.Y. 1995) ("Congress created an exemption to [the overtime rule] for 'any employee employed in a bona fide executive, administrative, or professional capacity.' 29 U.S.C. § 213(a)(1) (the 'white-collar exemption')."). Contrary to plaintiff's understanding, the cited regulations and cases reflect that the exemption is commonly labeled, among other monikers, the "white collar" exemption.
While plaintiff may be correct in arguing that it is insufficient to simply plead as a defense an "exemption" to the Act, See Crean v. M. Moran Transp. Lines, Inc., 50 F. Supp. 107, 110 (W.D.N.Y. 1943), Aargo has done more than that. Although plaintiff professes confusion in identifying the exemption to which the answer's "white collar" reference points, he has not suggested that any other Section 13(a) exemption would accommodate that description. By referring to white collar status, defendant has narrowed the field of possible exemptions to one, making the affirmative defense specific enough to pass muster. Plaintiff cites no case that requires more specificity than this.
Crean, supra, 50 F. Supp. 107, cited by plaintiff is not to the contrary. In that case, the court held that the defendant had failed to adequately plead an exemption to the FLSA as an affirmative defense because its answer had merely referred to "the exemptions contained in Section 13 of such Act." Id. at 108. The obvious difference between this case and Crean is that unlike the defendant in Crean, Aargo did not broadly refer to "exemptions" under the Act but instead specified a particular basis for an exemption, "white collar employee," which in turn is tied to one particular category of exemption. Even though the defendant did not identify' the subdivision of Section 13(a) relied upon, the reference to "white collar employee" leaves little room for doubt as to which category is intended. Thus, the defendant furnished a sufficient level of specificity in the answer to provide adequate notice of which exemption it intended to prove. The affirmative defense may therefore stand.
C. Summary Judgment Standards
Having determined that defendant's affirmative defense of exemption from the Act may remain a part of this case, I now turn to the merits of defendant's summary judgment motion which relies on this exemption.
Summary judgment may be granted in favor of the moving party "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); See also, D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.), cert. denied, 524 U.S. 911 (1998). In considering such a motion the court must "view the evidence in the light most favorable to the party against whom summary judgment is sought and must draw all reasonable inferences in his favor." L.B. Foster Co. v. America Piles, Inc., 138 F.3d 81, 87 (2d Cir. 1998) (citingMatsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986)). In determining whether to grant a motion for summary judgment, the court "cannot try issues of fact; it can only determine whether there are issues to be tried." American Mfrs. Mut. Ins. Co. v. American Broadcasting — Paramount Theatres, Inc., 388 F.2d 272, 279 (2d Cir. 1967). The party "seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying . . . [what] it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
Once such a showing is made, the party opposing the motion must come forward with "specific facts showing that there is a genuine issue for trial." Rule 56(e). In so doing, the "non-moving party may not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). Moreover, while the party resisting summary judgment must show a dispute of fact, it must also be a material fact in light of the substantive law. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986). However, "[t]he mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient" to defeat a properly supported motion for summary judgment. Anderson, id. at 252. Instead, the non-movant must offer concrete evidence from which a reasonable juror could return a verdict in his favor." Id. at 256. Summary judgment should only be granted if no rational factfinder could rule in favor of the non-moving party. Heilweil v. Mount Sinai Hospital, 32 F.3d 718, 721 (2d Cir. 1994).
The question for determination on the present motion is whether Aargo has shown that no disputed issue of fact exists regarding inclusion of plaintiff in the category of exempt administrative employees under § 213(a)(1). As discussed below, I conclude that Aargo has failed to do so as to one of the two aspects of the applicable test.
D. Section 13(a)(1) "Short Test"
The exemption Aargo invokes covers employees working in a "bona fide executive, administrative or professional capacity". See 29 U.S.C. § 213(a)(1). Because Aargo focuses on the administrative capacity category of this exemption, I will refer to it here as the "administrative exemption." The regulations promulgated by the Secretary of Labor to implement the FLSA set forth two different tests for determining whether an employee falls within the Section 13(a)(1) exemption: the "short test" and the "long test". The choice of test primarily depends on whether the employee makes more or less than $250 per week. Because the parties agree that at all relevant times Wright made more than $250 per week, the short test applies. Under the short test, an employee is an exempt administrative employee as relevant here if he:
is compensated on a salary or fee basis at a rate of not less than $250 per week . . . and [his] primary duty consists of . . . the performance of office or nonmanual work directly related to management policies or general business operations of his employer or his employer's customers . . . which includes work requiring the exercise of discretion and independent judgment. . .29 C.F.R. § 541.2(e)(2); see also 29 C.F.R. § 541.214.
The regulations, such as this one, promulgated by the Secretary of Labor pursuant to statute "have the force of law, and are to be given controlling weight unless they are found to be arbitrary, capricious, or manifestly contrary to the statute." Freeman v. National Broadcasting Co., 80 F.3d 78, 82 (2d Cir. 1996) (citation omitted).
Thus the short test contains two independent components, the "salary basis" requirement, and the "duties" test. Each of these requirements must be satisfied to achieve exempt status. This motion concerns both factors.
1. Salary Basis Requirement
I turn first to an analysis of whether the salary basis test is met here. Wright does not dispute that after May 22, 1998 he was a salaried employee. However, he vigorously disagrees with Aargo's contention that he was compensated on a salary basis prior to that date.
An employee is considered salaried if:
under his employment agreement he regularly receives each pay period on a weekly, or less frequent basis, 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.
29 C.F.R. § 541.118(a) (emphases added). An employee paid strictly on an hourly basis would not fall within the definition of a "salaried" employee.
In the case at hand, Wright easily meets the "predetermined amount" aspect of the salary test. It is undisputed that for except for periodic increases Wright received the same amount of money from Aargo each week no matter how many hours he worked. From July to December 1996, he made $300 per week. From January to August 1997, he made $480 weekly. From August to December 1997 he made $512 per week, and from December 1997 through May 1998 he made $785 each week. Wright testified in his deposition that his hours were not static — they fluctuated from between 80 to 100 per week. Yet, his compensation never varied regardless of the number of hours he worked. Under those circumstances, Wright's steady weekly pay must reasonably be considered "a predetermined amount constituting all or part of his compensation".
In an effort to refute this contention Wright relies on the fact that from 1990 to about December 1997, he received additional weekly payments from Aargo in the form of checks made out to fabricated names and social security numbers. Wright alleges that this so-called "bogus check" system was designed by Aargo to circumvent the FLSA overtime pay requirements. Aargo does not deny that Wright received such payments see Deposition of Herbert Freedman ("Freedman Dep.") at 171-174, but takes issue with Wright's account of their purpose. Aargo suggests that it was Wright who schemed to defraud Aargo by orchestrating the receipt of payments to fictional employees because he believed he was being paid unfairly. See Defendant's Reply Memorandum at 8 n. 5. Whatever the reason for this rather peculiar practice, and even accepting that the checks were intended as additional compensation to Wright, the bogus checks make no practical difference to the determination of whether Wright was a salaried employee.
Under Department of Labor regulations, "additional compensation besides the salary is not inconsistent with the salary basis of payment." 29 C.F.R. § 541.118(b). Applying this regulation, courts have consistently held that an employee's receipt of additional amounts, including overtime, above his predetermined base compensation does not destroy the employee's otherwise valid salary status. See, e.g., West v. Anne Arundel County, Maryland, 137 F.3d 752, 762 (4th Cir. 1998) ("Additional compensation does not alter the status of salaried employees, so the receipt of overtime does not defeat the salary basis of plaintiffs' employment.") (citations omitted); Boykin v. Boeing Company. 128 F.3d 1279, 1281 (9th Cir. 1997) ("The [Department of Labor] has unequivocally and consistently declared that additional compensation in the form of hourly overtime payment does not defeat exempt status under the salary-basis test. . . The overtime payment need not be at time and one-half but may be at straight time, or at one-half time, or flat sum, or on any other basis."); Michigan Assoc. of Gov. Employees v. Michigan Dep't of Corr., 992 F.2d 82, 84 (6th Cir. 1993) ("additional pay at an hourly rate for each hour worked beyond an employee's regular schedule is expressly permitted by 29 C.F.R. § 541.118(b)").
Despite the general permissibility under the salary test of additional compensation beyond the guaranteed minimum, employers can encounter statutory difficulty when the employee's predetermined base pay is so far below his total compensation as to make the base pay's status as a salary merely an illusion. See Brock v. The Claridge Hotel and Casino, 846 F.2d 180, 187 (3d Cir. 1988) (salary test not satisfied by compensation scheme in which employees were paid by the hour but received a weekly minimum guaranteed "salary" of $250, where weekly salaries varied tremendously and in exact correlation with the hours employees worked and the need to pay the "guaranteed" minimum rarely arose because the hourly wages were so high). Numerous opinion letters of the Wage-Hour Administrator, including one cited by plaintiff, Pl. Mem. at 16 n. 103, echo this sentiment by indicating that an employer cannot take advantage of the additional compensation regulation to pay a "guarantee" of "some arbitrary amount unreasonably below the intended rate of pay set simply to avoid overtime payments of the FLSA". Hood v. Mercy Healthcare Arizona, 23 F. Supp.2d 1125, 1128 (D.Ariz. 1997). The opinion letter cited by Wright postulates that:
the guaranteed salary must bear a reasonable relationship to the employee's actual weekly compensation, calculated on an hourly basis. This reasonable relationship requirement is satisfied if the weekly guarantee is roughly equivalent to the employee's total earnings at the hourly rate for his normal workweek. Thus, if the guarantee is roughly equivalent to the employee's normal weekly pay, payment for additional hours may be made on an hourly basis.
Opinion Letter dated July 26, 1996, Wage and Hour Manual (BNA) 99:8058-8059.
These concerns are not implicated here. No records have been produced to show the amounts Wright received by means of bogus checks. In the absence of records, the only evidence in the record concerning the amount of the checks is Wright's testimony. Wright testified that he received the same bogus check payment each week. According to Wright, over the years he was always paid via these checks at a rate of between $5.25 and $6.00 per hour for 40 hours each week no matter how many hours he had actually worked that week. Wright Dep. at 92-94. Pursuant to Wright's testimony, he received in addition to his base pay, without variation, an amount of between $210 and $240 per week depending on the applicable hourly rate. At the same time, Wright was earning compensation under his own name of between $300 and $785 per week. Unlike the situation inBrock, there is no dispute that Wright's "additional" pay always constituted less than half of his total weekly pay including his base pay and that he was always paid the full amount of his base compensation which never varied depending on his hours. Accordingly, this record affords no basis upon which to conclude that Wright's bogus checks were so disproportionate to his weekly base pay as to preclude a conclusion that his base pay was legitimate and "predetermined".
Wright also argues that because his payroll records up to May 22, 1998 categorize him as hourly, his status was that of an hourly employee within the meaning of the FLSA regulations. There is some force to this argument. The weekly records from Aargo's payroll register until the week ending May 22, 1998 depict Wright as earning specified hourly and overtime rates, and as having worked either 40 "Reg." hours, or 40 "Reg." hours plus 16 "O/T" hours in a given week. Beginning the week ending May 22, 1998, however, Wright's records undergo a demonstrable change. In place of a regular hourly rate he is listed as having a "salary" of $785.00 — which happens to be exactly the same gross amount he had received in the preceding months albeit under an "hourly" wage. In addition, the number of hours Wright worked no longer appears in the "Hours" column. The payroll records for the relevant time periods clearly demarcate between hourly and salary status among employees. During the period the records listed Wright's hourly rate and hours, the documents show other employees who were paid a "salary" and whose hours were not recorded. After May 22, 1998 when Wright's pay became listed as a "salary," the records show other workers earning hourly rates. Thus, this was clearly not a global record-keeping change. It suggests a change in Wright's status which indicates that Aargo may have viewed him, for whatever purpose, as an hourly employee before the week ending May 22, 1998 and a salaried employee after that date.
Wright concedes that he was a salaried employee after May 22, 1998.
It is a fair assumption given the absence of contrary indications that "Reg." means "regular" and "O/T" means "overtime."
But that revelation does not end the inquiry. This evidence is not as significant as it appears at first glance. The label an employer or a time record furnishes an employee for internal purposes is not determinative of the employee's status under the FLSA. The employer's subjective intent is not the litmus test. "[A] payroll accounting system which calculates an exempt employees [sic] pay on an hourly basis does not indicate that the employee was not salaried and, thus, is not subject to the FLSA's minimum wage or overtime wage requirements."Palazzolo-Robinson v. Sharis Mgmt. Corp., 68 F. Supp.2d 1186, 1192 (W.D.Wash. 1999). This principle is supported by many cases holding that an employee is salaried despite the fact that time records registered the number of hours worked and listed an hourly rate of pay. See McGuire, v. City of Portland, 159 F.3d 460, 464 (9th Cir. 1998) (although fire chiefs were paid under an hourly accounting system, they were salaried employees because their base salary was not ordinarily subject to reduction for absences from work); B.N. Spradling v. City of Tulsa, Oklahoma, 95 F.3d 1492, 1500 (10th Cir. 1996) (fact that pay stubs included the number of hours worked did not preclude finding that employees were paid on a salary basis, particularly in light of the fact that salaried employees could permissibly be compensated for overtime worked and "'an accounting of hours is necessary to compute overtime compensation'") (quoting Aaron v. City of Wichita, Kansas, 54 F.3d 652, 658 (10th Cir. 1995) (finding that plaintiffs' salaried status was not contradicted by the "fact that their paychecks indicated the number of hours covered"));Aiken v. County of Hampton, South Carolina, 977 F. Supp. 390, 397 (D.S.C. 1997) (fact that employer kept an hourly accounting of plaintiffs' time did not indicate that plaintiffs were salaried employees where predetermined pay could not be reduced for missing work), aff'd without published opinion, 172 F.3d 43 (4th 1998).
The regulation governing the determination of whether an employee should be considered salaried speaks objectively in terms of the receipt of a "predetermined amount" that is not "subject to reduction" due to the quality or quantity of work. 29 C.F.R. § 541.118. Neither it nor any regulation of which this Court is aware focuses on the nomenclature used to describe the employee or the category in which he is placed by the employer or its payroll records. of the two pay characteristics the regulation highlights, predetermination and immunity from reduction, the latter is the key factor in most cases. That follows because all pay, even that of an hourly employee, may be regarded as "predetermined" in some fashion. Hourly rates of pay are generally predetermined. Thus, when an employee consistently works 40 hours at a set rate of $10 per hour, he will invariably make $400 per week — an amount which will appear predetermined if his hours never vary. The regulation implicitly distinguishes between two employees, one salaried and one hourly, who both receive regular, predetermined pay of $400 per week, by requiring that a salaried employee's predetermined pay not be subject to reduction.
This is logical since if obtaining an exemption were as simple as that, many employers would merely label their employees salaried in order to avoid overtime requirements.
Thus, the pivotal issue is generally whether or not an employee's salary is subject to reduction for absences of less than a day. As the Second Circuit has recognized, "if an employee can be docked for fractions of a workday missed, then that employee is an hourly, not a salaried, employee." Whitmore v. Port Authority of New York New Jersey, 907 F.2d 20, 21 (2d Cir. 1990). In cases where an employee is paid, as Wright was, an amount which appears predetermined because it does not vary from week to week, the crucial indicator of salary status becomes whether his pay is subject to reduction due to variations in the hours worked. See MeGuire, 159 F.3d at 464 (although pay stubs reflected an hourly rate, predetermined weekly pay was held to be "salary" because it was not subject to reductions for absences in ordinary course of events); Aiken, supra, 977 F. Supp. at 397 (in finding plaintiffs to be salaried employees, court held that the difference between hourly employees and plaintiffs, who were all accounted for in pay records on an hourly basis, was that unlike plaintiffs' pay, hourly employees' pay was subject to reduction if they exhausted their leave time); Dole v. Malcolm Pirnie, Inc., 758 F. Supp. 899, 903 (S.D.N.Y.) ("Fixed pay is a 'salary;' pay which varies according to the quantity or quality of work results in hourly status. It is the potential for reduction that destroys exempt status.") (emphasis added; footnote omitted), rev'd on other grounds, 949 F.2d 611 (2d Cir. 1991).
The test established by the Supreme Court in Auer v. Robbins, 519 U.S. 452 (1997), for determining whether an employee's pay is subject to reduction under the regulations is whether there is an actual practice of making deductions, or an employment policy that creates a "significant likelihood" of such deductions. Id. at 461. "A finding of "significant likelihood' pursuant to Auer requires the existence of a clear and particularized policy — one which effectively communicates that deductions will be made in specified circumstances." Yourman v. Giuliani, 229 F.3d 124, 129 (2d Cir. 2000) (internal quotations omitted).
On this issue, the record is clear. There is no dispute that Wright's regular weekly compensation was never reduced during the pertinent period. But the fact that Wright's pay was not actually reduced is not dispositive of the question because he apparently never presented Aargo with an opportunity to do so. Wright testified that he never missed work other than to take his yearly paid vacation, and Aargo does not submit evidence contradicting this assertion. Given that Wright's pay was never reduced and Aargo has not shown that it did not dock pay given the opportunity to do so, the dispositive issue becomes whether there was a "significant likelihood" that his pay would have been reduced had he missed work. On this score, defendant prevails. Defendant has submitted the sworn affidavit of its controller, Arthur Bratter, who unequivocally states that Wright's predetermined compensation for each designated period was never subject to reduction based on variations in the quality or quantity of his work. See Defendant's Notice of Motion at Ex. 6 ¶¶ 3-6, 8. Wright does not offer any evidence to dispute this crucial point. In fact, Wright testified that he did not know whether Aargo ever had a policy of docking pay for sick leave or other employee absences. Dep. at 95-97.
Bratter's uncontroverted affidavit, coupled with Wright's professed lack of knowledge of any policy permitting his pay to be docked if he missed work, reveals the absence of any issue of fact concerning whetherAuer's "significant likelihood" requirement has been met. Plaintiff has failed to counter defendant's evidence with evidence tending to show that Aargo had a clear and particular policy that applied to Wright which permitted deductions for absences and, if so, that such deductions would in fact "be made in specified circumstances." Auer, 519 U.S. at 461.
The fact that plaintiff's payroll status changed from hourly to salaried in May of 1998 gives some pause because it infers that Aargo intended to designate Wright as an hourly employee before that date. But, neither the regulations nor the case law suggests that manifestations of hourly status on Wright's pay stubs affect the determination of whether he was a salaried employee. The subjective motivation of Aargo in its categorization of Wright is not determinative. See Evans v. McClain of Georgia, Inc., 131 F.3d 957, 965 (11th Cir. 1997) ("We do not believe that an employer's subjective motivations are relevant to the inquiry of whether or not an employee was compensated on a salary basis. The regulations speak purely in objective terms."). The meaningful inquiry is not what Aargo intended but whether as an objective matter Wright's predetermined pay was subject to reduction. Bratter's affidavit and Wright's testimony leave no room for doubt that no clear policy was communicated to Wright that deductions would be made based on variations in his hours. Accordingly, defendant has demonstrated that plaintiff's predetermined compensation was not "subject to reduction" within the meaning of the applicable regulation and that he was therefore a salaried employee during the disputed period. 2. Duties Test
Plaintiff moves to strike Bratter's affidavit and its accompanying summary of Wright's payroll history on the grounds that the affidavit is made without personal knowledge and the summary lacks a proper foundation. Upon reading Wright's arguments it becomes clear that his chief difficulty with the substance of Bratter's affidavit is not necessarily that Bratter lacks sufficient personal knowledge to make the statements therein but that his statements concerning Wright's salaried status contradict the hourly information disclosed in the ADP payroll records. Plaintiff's assertion that Bratter's statements lack verity does not furnish a ground to strike the affidavit. There is no reason to doubt that Bratter, as the controller of Aargo, had sufficient personal knowledge of Aargo's payroll records and plaintiffs payroll history to make the challenged statements in the affidavit.
Plaintiff's argument concerning the admissibility of the attached payroll summary stands on firmer footing. Plaintiff correctly points out that Bratter has failed to establish that the report was made in the regular course of business so as to be admissible under Fed.R.Evid. 803(6), and defendant has not suggested another exception to the hearsay rule under which these records would be admissible.
To lay a proper foundation for a business record, "a custodian or other qualified witness must testify that the document was kept in the course of a regularly conducted business activity and also that it was the regular practice of that business activity to make the [record]." United States v. Williams, 205 F.3d 23, 34 (2d Cir.) (internal quotations omitted) (alteration in Williams), cert. denied, 121 S.Ct. 203 (2000). Bratter does not so affirm. Instead he merely states that "[a]ttached to my affidavit is an accurate report maintained by me of Ernest Wright's compensation for his employment with Aargo from 1996 through the time of his termination, in April, 1999." Bratter Aff. At ¶ 9. Bratter is silent about when these records were complied and whether they were kept in the course of regularly conducted Aargo business activities. That is an insufficient Rule 803(6) foundation. I therefore strike the summary on the present motion. The preclusion of the summary is of no practical consequence, however, because I have not relied on it in concluding that Aargo has demonstrated that plaintiff was a salaried employee.
Having satisfied the salary prerequisite, Aargo must also prevail on the second component of the administrative employee exemption — the so-called "duties" test. Applying the short test, a salaried employee achieves exempt status if his "primary duty consists of the performance of . . . office or nonmanual work directly related to management policies or general business operations of his employer or his employer's customers, . . . which includes work requiring the exercise of discretion and independent judgment." 29 C.F.R. § 541.2(e)(2). The three chief components of this test — "primary duty," "directly related to management policies or general business operations," and "exercise of discretion and independent judgment" — are the subject of further Department of Labor regulations.
As to the first element, the Secretary has given the following guidance:
In the ordinary case it may be taken as a good rule of thumb that primary duty means the major part, or over 50 percent, of the employees' time. . . . Some [other] pertinent factors are the relative importance of the managerial duties as compared with other types of duties, the frequency with which the employee exercises discretionary powers, his relative freedom from supervision, and the relationship between his salary and the wages paid other employees for the kind of nonexempt work performed by the supervisor.29 C.F.R. § 541.103 (emphasis added). The implementing regulations explain that "directly related to management policies or general business operations":
describes those types of activities relating to the administrative operations of a business as distinguished from "production" or, in a retail or service establishment, "sales" work. In addition to describing the types of activities, the phrase limits the exemption to persons who perform work of substantial importance to the management or operation of the business of his employer or his employer's customers. . . .
The administrative operations of the business include the work performed by so-called white-collar employees engaged in "servicing" a business as, for example, advising the management, planning, negotiating, representing the company, purchasing, promoting sales, and business research and control. [The phrase] is not limited to persons who participate in the formulation of management policies or in the operation of the business as a whole. Employees whose work is "directly related" to management policies or to general business operations include those [whose] work affects policy or whose responsibility it is to execute or carry it out. The phrase also includes a wide variety of persons who either carry out major assignments in conducting the operations of the business, or whose work affects business operations to a substantial degree. . . .
29 C.F.R. § 541.205(a),(b)(c) (emphasis added). Finally, the Secretary has articulated that with respect to the third component:
the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. The term . . . implies that the person has the authority or power to make an independent choice, free from immediate direction or supervision and with respect to matters of significance.
29 C.F.R. § 541.207(a). The regulations make clear, however, that:
decisions . . . concerning relatively unimportant matters are not those intended by the regulations . . . the discretion and independent judgment exercised must be real and substantial, that is, they must be exercised with respect to matters of consequence. . . . The decisions made as a result of the exercise of discretion and independent judgment may consist of recommendations for action rather than the actual taking of action. The fact that an employee's decision may be subject to review and that upon occasion the decisions are revised or reversed after review does not mean that the employee is not exercising discretion and independent judgment. . . . The requirement is not met by the occasional exercise of discretion and independent judgment.
29 C.F.R. § 541.207(d)(1),(e)(1)(g) (emphases added).
Because the duties test is a creature of the Secretary's regulations, "his interpretation of it is . . . controlling unless plainly erroneous or inconsistent with the regulation." Auer 519 U.S. at 461 (internal quotations omitted).
Recognizing that it is defendant's burden to show that each of these elements was present in Wright's employment, and heeding the command to construe the exception narrowly, I conclude that issues of fact concerning the nature of the work Wright performed prevents summary judgment in defendant's favor.
Analyzing whether an employee falls under the administrative exemption involves consideration of mixed questions of fact and law. The ultimate decision pertaining to whether the duties and activities Wright's work involved qualify as administrative is a question of law. However, the question of how Wright spent his time working and the nature of his duties is a fact-specific inquiry. See Icicle Seafoods, Inc. v. Worthington, 475 U.S. 709, 714 (1986). See also Freeman v. National Broadcasting Co., 80 F.3d at 82 (nature of employees' work involved factual findings while ultimate conclusion that employees were not exempt was a legal question); Cooke v. General Dynamics Corp., 993 F. Supp. 56, 63 (D.Conn. 1997) (issues of fact included degree of independent judgment and discretion employees were allowed to exercise and whether primary duties consisted of administrative rather than production work); Yuen v. U.S. Asia Comm. Devel. Corp. 974 F. Supp. 515, 526 (E.D.Va. 1997) (nature, extent and relative importance of plaintiff's duties were questions of fact); Ahern v. State of New York, 807 F. Supp. 919, 923 (N.D.N.Y. 1992) ("job-related activities of the employees — their primary duties — become material facts"), aff'd sub nom. Reich v. State of New York, 3 F.3d 581 (2d Cir. 1993); Fife v. Harmon, 171 F.3d 1173, 1176 (8th Cir. 1999) (finding that disputed issues of fact included the nature and relative extent of plaintiffs' duties).
In support of its motion, Aargo relies exclusively on Wright's deposition testimony. In opposing the motion, plaintiff relies on his testimony, his affidavit dated September 5, 2000, and the deposition testimony of Herbert Freedman, an officer of Aargo. What emerges from this evidence is a clear picture of Wright as an employee with wide-ranging duties. Not surprisingly, the parties engage in a classic conflict of interpretation over the significance and extent of these duties. Defendant portrays Wright as a highly responsible supervisor; whereas Wright makes himself out to be a glorified errand boy. Exercises of advocacy aside, the evidence shows the following.
Wright spent a fair portion of his weekdays driving alone in the company car to visit the various sites for which Aargo provided security services. Herbert Freedman described him as Aargo's "representative in the field." Freedman Dep. at 161. During these visits, Wright monitored the security guards to ensure they were in uniform and that their posts were covered, determined whether there were any security problems, and on occasion walked the floors to check on the building. He also used the site visits as an opportunity to pick up paperwork destined for the management office. On site visits Wright occasionally posted and informed the guards of new directives or policies issued by management. Once every month or two Wright would speak to the building manager of a site, either at his own initiative or in response to a direction by his supervisors in order to assess how things were going and whether any security issues needed to be addressed. Dep. at 150. If there were issues to be addressed, Wright would typically "relay the message" to his managers — he did not independently solve the problem. Id. Wright generally chose which sites to visit on a given day and how long to spend at a particular site. He visited at least one site per day.
While Wright was visiting sites, he sometimes found cause to write-up an employee for misconduct or a company rule violation. From August 1996 to April 1999, he filled out approximately 1,300 such rule violation forms — an average of 1 to 2 per day. Although Wright completed misconduct forms, his role was limited to the initial application of company rules to an individual employee's conduct. Once he completed a form and gave it to the office, his managers took it from there; he had no further function in determining whether to take disciplinary action against the employee. Dep. at 140, 193. A handful of times Wright filled out pay increase authorization forms for employees whom he believed deserved a pay raise, but he had no ability to independently authorize such pay raises. Dep. at 196.
Wright also spent a good deal of his time performing a variety of errands for the individuals in the management office. In fact, as Wright testified, "most of the time I was doing a lot of errands for the office, whatever, and I didn't get to visit too many sites." Dep. at 162. The errands Wright performed included chauffeuring two of the managers, Mangino and Turner, Dep. at 136, driving paperwork between corporate offices, transporting security guards between sites, Dep. at 147, 169, moving furniture, collecting and depositing coins, picking up office supplies, and doing "whatever came up." Dep. at 166-169. "Once or twice a month," Wright would drive one of the managers to visit a potential new client. Sometimes the manager would invite Wright to sit in on the meeting. Other times he was not invited and would sit in the car and wait for the manager to return. Dep. at 173-75.
On the weekends and at night, Wright was on call along with other employees to deal with security problems that arose. Dep. at 120-21, 130. Wright estimates that he received about 50 calls from the office per weekend. Dep. at 121. These calls were generally from the dispatcher seeking Wright's aid in finding replacements for guards who failed to appear for work or who had to be sent home. When he received such a call, Wright suggested to the dispatcher an appropriate replacement based on his considerable knowledge of the guards and their schedules and the needs of the various sites. Dep. at 132. About once every two weeks, Wright was required to fill in for a delinquent guard because no other replacement was available. Dep. at 132. He was also called when emergencies such as fires occurred at sites. In such emergencies, Wright traveled to the site to make a report and assess the need for additional security.
Although Wright counseled dispatchers on which employees to call as replacement guards or whom to schedule, he was not the only one to do so. Several other employees were also on call at night and on weekends and they provided similar advisory service and response to emergencies. Dep. at 132. Based on his accumulation of knowledge about the guards and the needs of the sites, Wright occasionally consulted with Aargo's director, Chris Turner, about switching particular employees from one site to another. Wright has stated that these consultations occurred about once every six months. Affidavit of Ernest Wright dated September 5, 2000 ("Wright Aff.") at ¶ 12.
When Wright was not performing errands or visiting sites on weekdays, he spent time in the corporate office. He testified that he spent no more than 2 to 3 hours a day in the office. Dep. at 170. Among the duties he performed while there included placing orders for uniforms and distributing uniforms to guards. Freedman Dep. at 153. He was the only employee responsible for placing uniform orders. Id. Wright did not assist in formulating company policies. He did not participate in management meetings. Nor did he negotiate contracts with suppliers or clients. Freedman Dep. at 160-161.
Viewing this evidence in the light most favorable to Wright, I cannot conclude that Wright's primary duties involved work directly related to management policies or the general business operations of Aargo which required the customary and regular exercise of his discretion and independent judgment. The record reflects disputed issues of fact related to several aspects of this inquiry.
To begin with, it is apparent that Wright's myriad duties varied widely in terms of responsibility and use of judgment, but the record does not reveal with clarity the relative breakdown of time Wright spent in these duties. Aargo relies on selective excerpts of Wright's testimony in arguing that his primary duties were not errand-running. For example, Aargo points to Wright's explanation at one point in his testimony that he spent "most" of his time roving around and checking on sites, Dep. at 136, but neglects another excerpt in which Wright suggests that "most of the time" he did errands and anything else his supervisors told him to do. Dep. at 162. It is not self-evident that Wright spent the majority of his time visiting sites, particularly given that he sometimes visited only one building per day and had many other duties which required his attention. The ambiguity in Wright's testimony alone is sufficient to create an issue of fact with respect to what portion of his time he spent on incontrovertibly non-administrative activities as opposed to duties arguably closer to the administrative realm.
Even assuming arguendo that the record clearly demonstrated the breakdown between Wright's various duties, it does not show the relative significance to Aargo of the duties that Aargo contends were manifestly administrative, such as checking on the sites, talking to building managers and offering scheduling and replacement advice to the dispatchers and to his superiors. Implicit in Aargo's argument is an assumption that checking on sites is necessarily more consequential than transporting guards between sites or collecting office supplies. However, the relative significance must be assessed not in terms of the importance of these activities in a theoretical vacuum, but as Wright actually performed them and as Aargo actually valued them. For example, although meeting with building managers to discuss their problems sounds important, its significance diminishes if one considers that Wright's role was not to troubleshoot but merely to ascertain the problem and pass it along to a manager.
Yet, Aargo presents no evidence which conclusively establishes that the sort of scheduling and field work that Wright performed was of "substantial importance" to Aargo's business operations. See 29 C.F.R. § 541.205(a). Although Aargo contends that Wright provided his judgment and opinions to the director regarding the transfer of employees between sites and furnished "indispensable" advice to dispatchers and his managers on scheduling and replacements, Defendant's Memorandum in Support of Summary Judgment ("Def. Mem.") at 13-15, it is not clear how significant his role in these duties were, particularly since he shared the latter duties with other employees. Dep. at 130. In addition, it is not evident how frequent his advice to management on truly significant matters was. Aargo makes much of Wright's testimony that he advised Aargo's director of operations on switching employees between sites. Brief at 13-15. Yet, Wright avers that he counseled the director only once every six months about scheduling. Wright Aff. at ¶ 12.
Nor is it axiomatic that Wright's personnel advice was crucial to Aargo's business operations. Aargo has submitted no affidavit from a manager or deposition testimony that attests to the significance of these or any of Wright's responsibilities. The brief merely takes for granted that "Plaintiff played a critical and essential role in advising management on personnel related issues. . . ." Def. Mem. at 15. Without any admissible evidence from Aargo explaining how his supposedly "administrative" duties were of substantial importance to the business despite the fact that Wright merely passed along problems from building managers, shared personnel advice duties, was left to sit in the car during many new business meetings and did not participate in policy planning or company meetings, defendant's conclusory assertions cannot be enough to prevail on this point when Wright's testimony suggests otherwise.
Moreover, although Aargo has shown that Wright wrote-up employees and occasionally recommended pay raises, it is not clear whether these activities, and others, involved the exercise of independent judgment and discretion on Wright's part. Even if they involved some element of discretion and not just the rote following of prescribed procedures, the record does not establish whether these were matters of significance or, as Wright argues, of little "consequence". See 29 C.F.R. § 541.207(g). Nor is it clear that they were done with regularity. Wright has portrayed his job as one in which he had no independent discretion or judgment. According to Wright, all significant decisions were made by management and his duties involved nothing more than carrying out the instructions of his superiors. He contends that he did not resolve problems but simply relayed them to management for consideration. These contentions, supported by his testimony, and the conclusion he draws from them are not inherently implausible. Aargo offers no other evidence which compels the opposite conclusion. It is not possible to conclude from Wright's testimony alone that he customarily and regularly exercised discretion and independent judgment in carrying out his primary duties. Accordingly, a dispute of fact exists as to this component of the duties test.
It is Aargo's burden to demonstrate that Wright's duties rendered him an exempt employee. This in turn requires satisfaction of all of the major aspects of the duties test; that is: his (1) primary duty was (2) directly related to management policies or general business activities of Aargo, and (3) the performance of that primary duty required the customary and regular exercise of his discretion and independent judgment. Aargo has failed at this juncture to carry its burden of establishing all three prongs. The only evidence Aargo has provided, Wright's testimony, creates, rather than eliminates, triable issues of fact as to whether Wright was an exempt administrative employee. There are significant gaps, ambiguities and internal inconsistencies in his testimony that prevent the formation of a complete understanding of his work as pertinent to the duties test. Viewed favorably to Wright, this evidence does not compel a reasonable factfinder to conclude that Wright's work responsibilities satisfy the duties test. Instead, disputed issues of fact exist concerning the extent and relative importance of Wright's wide-ranging responsibilities, and whether they actually required him to exercise, on a regular basis, discretion and judgment with respect to significant matters. Defendant's motion for summary judgment is accordingly denied.
CONCLUSION
For the foregoing reasons, I conclude that defendant has not waived its ability to invoke the administrative employee exemption to the FLSA as a defense to this action. I further conclude that defendant has demonstrated the absence of disputed issues of fact as to whether plaintiff was a salaried employee from August 24, 1996 to May 22, 1998 within the meaning of that exemption. Defendant has not, however, demonstrated that plaintiff is an exempt administrative employee because issues of fact relevant to whether plaintiff's employment responsibilities qualified him under the "duties" test of that exemption remain. Accordingly, defendant's motion for summary judgment is denied. Plaintiff's cross-motion to strike the affidavit of Arthur Bratter is denied in part and granted in part. Bratter's affidavit may stand, but on the present record the attached payroll summary is stricken as inadmissible hearsay.
This ruling is without prejudice to Aargo's effort at trial, if so advised, to lay a sufficient foundation for this document under the rules of evidence.
The parties are directed to attend a pre-trial conference in Room 17C, 500 Pearl Street, at 2:00 p.m. on March 2, 2001.
The foregoing is SO ORDERED.