Alaska Supreme Court Opinions made Available by Touch N' Go Systems and Bright Solutions

Touch N' Go, the DeskTop In-and-Out Board makes your office run smoother. Visit Touch N' Go's Website.
  This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com

You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Whitesides v. U-Haul Company of Alaska (1/19/01) sp-5358

Whitesides v. U-Haul Company of Alaska (1/19/01) sp-5358

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907)
264-0608, fax (907) 264-0878.


             THE SUPREME COURT OF THE STATE OF ALASKA


WILLIAM O. WHITESIDES,        )
                              )    Supreme Court No. S-9204
               Appellant,     )
                              )    Superior Court No.
          v.                  )    3AN-97-6859 CI
                              )
U-HAUL COMPANY OF ALASKA,     )    O P I N I O N
                              )
               Appellee.      )    [No. 5358 - January 19, 2001]
                              )


          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
                    Peter A. Michalski, Judge.


          Appearances: John E. Havelock, Law Offices of
John E. Havelock, Anchorage, for Appellant.  Laura L. Farley, Le
Gros, Buchanan & Paul, Anchorage, for Appellee.


          Before: Fabe, Chief Justice, Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.


          BRYNER, Justice.

I.   INTRODUCTION
          William Whitesides sued U-Haul Company of Alaska for
overtime wages, claiming that the company improperly classified his
field manager job as administrative, which the Alaska Wage and Hour
Act exempts from overtime pay.  The superior court denied summary
judgment to Whitesides and submitted his claim to a jury, which
ruled for U-Haul.  We reverse.  To qualify as an exempt
administrative employee, a worker must be paid on a salary basis
and work only under general supervision.  Because undisputed record
evidence established that U-Haul failed to pay Whitesides on a
salary basis and required him to work under direct supervision,
Whitesides was entitled to summary judgment.
II.  FACTS AND PROCEEDINGS 
          William Whitesides began working for the U-Haul Company
of Alaska (U-Haul) in February 1995, when he was hired as a
"manager trainee" in U-Haul's Anchorage office.  As a manager
trainee, Whitesides received hourly wages and overtime pay.  After
a few months, Whitesides was promoted to general/center manager of
U-Haul's Anchorage retail center.  As a general/center manager,
Whitesides was a salaried employee and did not receive overtime
pay.  He oversaw the daily operations of the retail center and
supervised all of its employees.
          Whitesides was given the position of Area Field Manager
(AFM) on September 25, 1995.  He reported directly to the U-Haul
Company of Alaska's president, John Norris.  U-Haul requires all
AFM's to complete a training program, take a certification exam,
and learn U-Haul's policies and procedures.  After working for a
few months in his new position, Whitesides spent two weeks in
Seattle completing this AFM training and certification process.
          As an AFM, Whitesides was the point of contact between
the U-Haul Company of Alaska, which is essentially a marketing
company, and individual U-Haul dealerships, which are privately-
owned businesses.   
          Whitesides was responsible for servicing approximately
twenty-five dealerships along the road systems of south central and
interior Alaska, from Homer to Anchorage and Fairbanks to Tok.  One
of Whitesides's primary duties was to visit these dealerships.  U-
Haul expected him to make sixteen dealer visits per month, which
required him to spend approximately four days per week visiting
dealerships.  Whitesides drove a large U-Haul truck outfitted to
service U-Haul equipment in the field.  Whitesides described these
visits during his deposition:
          [A]n average dealer visit, I guess, would
consist of going into the dealership and looking . . . and seeing
. . . what their U-Haul operation looks like from the street, the
same as a customer would.  Then going in and making suggestions to
help them improve their business.  
          
               But I would go in and do equipment checks
and inspections, certifications, safety checks. I would do minor
equipment maintenance.
          
               Then there was a dealer service report,
which consisted of looking at the dealer's paperwork, auditing
their business and ensuring that they fully understood and complied
with the U-Haul policies and procedures.
          In February 1996 Whitesides lost control of his truck
while driving back from Fairbanks.  Soon after the accident, on
February 15, Norris handed Whitesides a memorandum reassigning him
for an unspecified time to U-Haul's Anchorage office, where he was
expected to work six days per week under the direction of Julie
Miller: 
          Effective immediately report to the Marketing
Company office daily.  Your hours are to be 8:00 am to 6:00 pm
Monday through Friday and 8:00 am to 4:00 pm Saturday.  I expect
you to work directly with Julie Miller, who has the priority list. 
You will remain at this status until further notice.
          The memorandum also indefinitely restricted Whitesides
from further travel unless expressly authorized by Norris or
Miller: 
          The AFM rig is to be parked until the shop can
get necessary repairs completed to return the rig to like new
condition.  Dustin Curtis has been notified of this matter.  All
travel will be authorized through myself or Julie Miller, to be
done in your own personal vehicle and mileage will be reimbursed. 
This will remain in effect until further notice.

          The day after receiving this memorandum, Whitesides
reported to work at 8:15 in the morning, fifteen minutes late.
Norris immediately suspended him without pay for three days.  When
Whitesides returned to work after his suspension, he reported to
Miller and essentially worked as her assistant for several weeks.
He eventually returned to the field.  Norris continued to be
dissatisfied with Whitesides's performance, finally firing him on
July 15, 1996. 
          Whitesides sued U-Haul in August 1997, seeking unpaid
overtime wages and liquidated damages.  In December 1997 U-Haul's
attorney mailed Whitesides's attorney a letter from Norris to
Whitesides explaining that, after reviewing its policies, U-Haul
had decided that Whitesides's pay "was inadvertently reduced" when
he was suspended.  Although the letter insisted that Whitesides's
three-day suspension was justified, it acknowledged that the
suspension "should have been with pay instead of without pay."
Accordingly, Norris enclosed a check for the withheld wages, plus
interest from the date of the suspension to the date of the letter. 
          Both parties thereafter moved for summary judgment: U-
Haul argued that Whitesides was an administrative employee and was
therefore exempt from overtime compensation; Whitesides contended
that his job duties did not qualify as administrative employment.
The superior court granted partial summary judgment to U-Haul,
finding that Whitesides was paid on a salary basis -- a requirement
of administrative employment.  As to other disputed issues, the
court concluded that a trial was necessary to determine "whether
the work being done by [Whitesides] qualifies as administrative." 
          At trial, Whitesides unsuccessfully moved for a directed
verdict.  The jury returned a verdict for U-Haul, finding that
Whitesides was an exempt administrative employee.  After the court
denied his motion for judgment notwithstanding the verdict,
Whitesides filed this appeal.
III. DISCUSSION
     A.   Standard of Review
          Whitesides contends that the superior court erred in
denying his motion for summary judgment.  A party moving for
summary judgment will prevail if there is no genuine issue of
material fact and if the movant is entitled to summary judgment as
a matter of law. [Fn. 1]  In reviewing a motion for summary
judgment, the court construes the facts in the light most favorable
to the non-moving party. [Fn. 2]  
     B.   Did the Superior Court Err in Refusing to Grant
Whitesides's Motion for Summary Judgment?

          Under the Alaska Wage and Hour Act (AWHA), an employee is
entitled to overtime pay for hours worked in excess of forty hours
per week or eight hours per day. [Fn. 3]  Certain kinds of
employees, including those serving in bona fide executive,
administrative, and professional capacities, are exempt from the
overtime provisions of the AWHA. [Fn. 4]  Here, U-Haul relies on
the administrative employment exemption; Whitesides maintains that
the evidence precludes a finding of administrative employment. 
          The Alaska Administrative Code defines the administrative
employment exemption to require proof of six factors, specifying
that an "administrative employee" is a worker
          (A)  whose primary duty consists of work
directly related to management policies or supervising the general
business operations of the employer;

          (B)  who customarily and regularly exercises
discretion and independent judgment;

          (C)  who performs work only under general
supervision;

          (D)  who is paid on a salary or fee basis;

          (E) who regularly and directly assists a
proprietor or an exempt executive employee of the employer; and

          (F) who performs work along specialized or
technical lines requiring special training, experience or knowledge
and does not devote more than 20 percent, or in the case of an
employee of a retail or service establishment who earns at least
two and one half times the state minimum wage per hour for the
first 40 hours of employment each week and who does not devote more
than 40 percent of the employee's weekly hours to activities that
are not described in this paragraph[.][ [Fn. 5]]
          Like the federal Fair Labor Standards Act (FLSA), [Fn. 6]
the terms of the AWHA, a remedial statute designed to effectuate
the legislature's goal of providing broad employment protection,
are to be liberally construed. [Fn. 7]  Accordingly, exemptions to
the AWHA, including the bona fide administrative exemption, are to
be narrowly construed and limited to those "plainly and
unmistakably within their terms and spirit." [Fn. 8] 
          The crux of Whitesides's argument at summary judgment was
that he was not "paid on a salary basis or fee basis," and
therefore did not meet the definition of an administrative
employee.  The AWHA does not define "salary basis," but the statute
provides that terms not defined in the AWHA or in regulations
adopted under it shall be defined as they are defined in the FLSA
or the regulations adopted under it. [Fn. 9]  The term "salary
basis" is defined by the Department of Labor's regulations, which
provide, in relevant part:    
          An employee will be considered to be paid "on
a salary basis" within the meaning of the regulations 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. Subject to the exceptions provided below, 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. This policy is also subject to the general rule that an
employee need not be paid for any workweek in which he performs no
work.[ [Fn. 10]]

Since U-Haul docked his wages when it suspended him, Whitesides
contends that his wages were "subject to reduction because of
variations in the quality or quantity of the work performed," and
so fail to qualify as "salary" under the "salary basis" test.  
          There is no real dispute that U-Haul improperly deducted
wages from Whitesides.  The regulation, however, provides a "window
of correction" under which an employer who has improperly deducted
pay from a salaried employee may reimburse the deducted wages and
avoid losing the overtime exemption:
          The effect of making a deduction which is not
permitted under these interpretations will depend upon the facts in
the particular case. Where deductions are generally made when there
is no work available, it indicates that there was no intention to
pay the employee on a salary basis. In such a case the exemption
would not be applicable to him during the entire period when such
deductions were being made.  On the other hand, where 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.[[Fn. 11]]
In opposing Whitesides's motion for summary judgment, U-Haul argued
that it was entitled to judgment on the issue of whether Whitesides
was a salaried employee, because it had reimbursed him within the
"window of correction."  The superior court agreed, writing: 
               The court is satisfied that the defendant
has properly utilized the "window of correction," if it applies,
and that, with that correction, the disciplinary treatment of the
plaintiff does not disqualify him from being treated as an
administrative employee.  This, however, does not resolve the
material factual issues, about which there are disputes, whether
the work being done by the plaintiff qualifies as administrative. 

          The court's written order was somewhat ambiguous as to
whether it granted summary judgment to U-Haul on the "salary basis"
prong of the administrative employment test or simply decided that
a triable issue of fact existed as to this prong, thereby
precluding Whitesides's competing claim for summary judgment.  This
ambiguity prompted Whitesides's attorney to ask for clarification:
          [T]here's a very technical definition of
salaried employee in the law, and if you suspend an employee except
for safety reasons or out of inadvertence, that then the employee,
even though salaried, is not salaried. . . . I don't know whether
this issue is still in the case or not. . . .  I don't know whether
you said they used the window [of correction] and fulfilled the
full requirement of the statute, or whether . . . there was a
question of fact involved . . . . I don't know whether [there] are
jury issues at this point, or whether Your Honor has ruled that, as
a matter of law, that that offering of a check a year later was
full compliance.  So that issue is sort of sitting out there.
          U-Haul's attorney responded, stating: "I understand your
order, Your Honor, I understand it to say salary is no longer at
issue.  He was paid a salary, and that element has been
established."  The parties continued to discuss the question, with
Whitesides insisting that there remained a question of fact and U-
Haul contending that the salary issue had been decided as a matter
of law.  The superior court resolved the ambiguity in U-Haul's
favor, declaring, as a matter of law, that Whitesides had been paid
on a salary basis:
          I understand the parties and the court's
question to be whether the court should leave open the question of
whether Mr. Whitesides was a salaried employee.  The only -- the
potential facts related to that being that he was treated as
salaried except for the disciplinary conduct -- disciplinary action
that was for something other than a safety rule, and . . . for
which there was then a later correction.  And my earlier ruling was
that this was a correction within the window of -- it was a window
of correction, or whatever it's called, and that there was -- the
correction was made.  And I do affirm or reaffirm the statement
that there's summary judgment as to that, that he is a -- that the
court finds he was salaried, he was treated as salaried . . . . But
that is not to say that I'm excluding the evidence and the proof
that the kind of work that he did doesn't qualify him for the
exemption from overtime.  So that's what I understand the trial to
be about.

          In keeping with this ruling, Whitesides presented little
evidence at trial regarding his disciplinary suspension, and did
not seek to prove that U-Haul failed to pay him on a "salary
basis."  In closing argument to the jury, he conceded that "under
the law, there are six tests [defining administrative employee]. 
You could ignore one of them, which has -- which is whether he got
a salary.  He did get a salary."  
          On appeal, Whitesides contends that U-Haul did not pay
him on a salary basis, and he insists the company's failure to meet
this prong of the administrative employment test entitled him to
summary judgment on his overtime compensation claim.  Upon review
of the record at summary judgment and the applicable law, we
conclude that Whitesides's arguments have merit.
          U-Haul convinced the trial court that it had properly
used the "window of correction" in refunding Whitesides's wages and
that its improper disciplinary deduction therefore did not affect
Whitesides's exempt status.  But U-Haul's attempt to refund the
wages occurred nearly two years after it had improperly docked
Whitesides's pay, more than sixteen months after it had terminated
his employment, and almost four months after he had filed his
action for overtime pay.  Opening a window of correction in these
circumstances would create an unwarranted loophole:
          An employer would be able to treat otherwise
exempt employees as non-exempt by subjecting their pay to
reduction, and at the same time refuse to pay these employees
overtime.  But if the employer is sued, it can still avoid the
payment of overtime simply by reimbursing the employees for the
deductions and promising to comply in the future. . . .

               An employer could thus retroactively
take advantage of the statutory exemption from paying overtime
compensation irrespective of how egregiously it flouted the 'salary
basis' test.[ [Fn. 12]] 

          To prevent this kind of abuse, we hold that the window of
correction ordinarily must be deemed to close when litigation
commences.  By the time U-Haul offered to "remedy" its "inadvertent
error," the opportunity for correction had already passed.  And
since reducing pay "because of variations in the quality or
quantity of the work performed" [Fn. 13] is fundamentally
inconsistent with the concept of salaried employment, it follows
that U-Haul failed to prove that it paid Whitesides on a salary
basis, as the Alaska Administrative Code requires, in order to
establish exempt administrative employment. [Fn. 14] 
          But even if we held the window of correction open after
litigation commenced, the undisputed facts of the present case
would compel us to resolve the issue of salaried employment in
Whitesides's favor.      
          Norris's memo of February 15, 1996, reassigned Whitesides
to U-Haul's Anchorage office, telling him that he would be required
to work six-day, fifty-eight-hour workweeks: "Your hours are to be
8:00 am to 6:00 pm Monday through Friday and 8:00 am to 4:00 pm
Saturday."  When Whitesides arrived fifteen minutes late the next
day, Norris immediately disciplined him for being late, suspending
him without pay for three days.  Although U-Haul belatedly
attempted to restore Whitesides's pay more than a year and a half
later, after Whitesides's filed his overtime compensation claim,
the company never acknowledged that the disciplinary suspension was
improper; indeed, Norris wrote Whitesides that "your suspension was
justified." 
          By subjecting Whitesides to a rigid hourly schedule and
strictly enforcing that schedule with severe disciplinary
sanctions, U-Haul unmistakably treated him like an hourly worker,
rather than a salaried employee.  In distinguishing between
salaried and hourly employment, the Third Circuit Court of Appeals
has observed:
          Salary is a mark of executive status because
the salaried employee must decide for himself the number of hours
to devote to a particular task.  In other words, the salaried
employee decides for himself how much a particular task is worth,
measured in the number of hours he devotes to it.  With regards to
hourly employees, it is the employer who decides the worth of a
particular task, when he determines the amount to pay the employee
performing it.  Paying an employee by the hour affords that
employee little of the latitude the salary requirement recognizes.[[Fn. 15]]
          More recently, the Ninth Circuit similarly commented: 
"It is precisely because [exempt employees] are thought not to
punch a time clock that the salary test . . . requires that an
employee's predetermined pay not be 'subject to reduction because
of variations in the . . . quantity of work performed.'" [Fn. 16] 
And more recently still, the Washington Supreme Court held that an
employer's rigid work-hour quotas, combined with a policy of
docking employees for working less than the required hours,
violated the Washington Minimum Wage Act's "salary basis" test.
[Fn. 17] 
          Even without considering the issue of suspended pay,
then, we conclude that U-Haul's treatment of Whitesides was
inconsistent with the notion of salaried employment. 
          Moreover, these circumstances independently establish
that U-Haul violated a separate prerequisite of administrative
employment: the Administrative Code's requirement that an
administrative employee must be a worker "who performs work only
under general supervision." [Fn. 18]  U-Haul's insistence that
Whitesides follow a rigid work schedule, its immediate use of
sanctions to punish a minor violation of that schedule, its
direction that Whitesides work with Julie Miller, its order
restricting him from travel except when expressly authorized, and
its imposition of these measures on an indefinite basis [Fn. 19]
all belie the conclusion that U-Haul expected Whitesides to work
"only under general supervision."  
          In summary, then, undisputed evidence in the record when
the superior court ruled on summary judgment established that U-
Haul's treatment of Whitesides violated two requirements of
administrative employment, as defined in 8 AAC 15.910(a)(1): that
an administrative employee must work only under general supervision
and that the employee must be paid on a salary basis. [Fn. 20] 
Since Whitesides's work can be labeled "administrative" only if it
met all six of the established requirements, [Fn. 21] he was not an
administrative employee, and thus was not exempt from the payment
of overtime wages.   
IV.  CONCLUSION 
          We therefore conclude that it was error to deny
Whitesides's motion for summary judgment on his claim for overtime
compensation.  Accordingly, we VACATE the judgment and REMAND for
further proceedings consistent with this opinion. [Fn. 22]


                            FOOTNOTES


Footnote 1:

     See Andrews v. Wade & De Young, Inc., 950 P.2d 574, 575
(Alaska 1997).


Footnote 2:

     See Mathis v. Sauser, 942 P.2d 1117, 1120 (Alaska 1997)
(citing Willner's Fuel Distribs., Inc. v. Noreen, 882 P.2d 399, 403
n.7 (Alaska 1994)).


Footnote 3:

     AS 23.10.060(b).


Footnote 4:

     AS 23.10.055(9).


Footnote 5:

     8 Alaska Administrative Code (AAC) 15.910(a)(1).


Footnote 6:

     29 U.S.C. sec.sec. 201-19.


Footnote 7:

     See Powell v. United States Cartridge Co., 339 U.S. 497, 516
(1950) (recognizing that "[b]readth of coverage" is "vital to the
[FLSA's] mission").


Footnote 8:

     Cf. Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960).


Footnote 9:

     AS 23.10.145.


Footnote 10:

     29 C.F.R. sec. 541.118(a).


Footnote 11:

     29 C.F.R. sec. 541.118(a)(6).


Footnote 12:

     Belcher v. Shoney's, Inc., 30 F. Supp. 2d 1010, 1024 (M.D.
Tenn. 1998) (quoting amicus curiae brief of United States Secretary
of Labor).


Footnote 13:

     See 29 C.F.R. sec. 541.118(a).


Footnote 14:

     8 AAC 15.910(a)(1)(D).


Footnote 15:

     Brock v. Claridge Hotel & Casino, 846 F.2d 180, 184 (3d Cir.
1988) (footnote omitted); see also Thomas v. County of Fairfax, 758
F. Supp. 353, 360-61 (E.D. Va. 1991).


Footnote 16:

     Abshire v. County of Kern, 908 F.2d 483, 486 (9th Cir. 1990),
superseded by regulation as stated in Yourman v. Dinkins, 826 F.
Supp. 736, 744 (S.D.N.Y. 1993) (interpreting 29 C.F.R. sec. 541.5d
to
overrule the express holding of Abshire due to its special
provisions for employees of public agencies, but noting that the
statute did not overrule the Abshire court's subject-to- reduction
analysis).


Footnote 17:

     Drinkwitz v. Alliant Techsystems, Inc., 996 P.2d 582, 588
(Wash. 2000).


Footnote 18:

     8 AAC 15.910(a)(1)(C).


Footnote 19:

     Norris's memorandum directed:  "You will remain at this status
until further notice."  We note that in its summary judgment
pleadings, U-Haul did not attempt to argue that Whitesides's
reassignment to Anchorage amounted to a temporary shift from
administrative to hourly work.  Indeed, at trial, U-Haul insisted
that the reassignment did not change the character of his work.  At
trial, U-Haul's attorney asked Norris: "Was it your intent to
change his job when you gave him that memo from a exempt position
to an hourly position?"  Norris responded "No, not at all."


Footnote 20:

     8 AAC 15.910(a)(1)(C) & (D).


Footnote 21:

     See D'Camera v. District of Columbia, 693 F. Supp. 1208, 1213
(D.D.C. 1988) (stating that "[i]n order to claim exempt status
under FLSA, an employer must meet every aspect of the definition
for an exempt employee") (citing Hodgson v. Barge, Waggoner &
Sumner, Inc., 377 F. Supp. 842, 844 (M.D. Tenn. 1972)). 


Footnote 22:

     Our conclusion that Whitesides was entitled to summary
judgment on his claim for overtime compensation makes it
unnecessary to consider his other claims of error, which are either
moot or premature in light of our ruling.