In Webster v. Public School Employees of Washington, Inc., 2001 WL 388462, the U.S. Court of Appeals, Ninth Circuit, held that a non-public employee, whose employer docked his leave time for partial day absences, is nonetheless a “salaried” employee exempt from overtime requirements of the federal Fair Labor Standards Act (FLSA). The Court also held the employee’s duties, which involved negotiating agreements and handling union grievances, were administrative in nature so that he was exempt from federal overtime requirements.
Jay Webster (Employee) was a field representative employed by Public School Employees of Washington, Inc. (Employer), a labor union representing Washington State public school employees who are not teachers or supervisors. His annual salary was $65,000, and his duties included negotiating collective bargaining agreements and handling grievances for union members. If he worked less than a 40-hour week, however, Employer deducted the deficiency – calculated in 15-minute increments – from his accrued sick leave and vacation time. Under his employment agreement, unused vacation and sick leave could be “cashed out” in certain circumstances.
Employee filed suit in federal court claiming he was entitled to overtime under both FLSA and Washington state law because his job duties were such that he was not an “administrative” employee, and the deductions for partial-day absences meant he was not paid on a “salary basis.” The district court rejected his claim, and Employee appealed.
Noting that FLSA exempts from overtime protection persons “employed in a bona fide executive, administrative, or professional capacity,” the Court of Appeals first discussed Employee’s argument that his work on behalf of union members, or bargaining units, constituted “production” rather than “administrative” work. The Court looked to U.S. Department of Labor (DOL) regulations, under which an employer claiming an employee as exempt must show the employee’s “primary duty” consists of “administrative” work. DOL has described such work as including “work of substantial importance to the management or operation” of a business or its customers, and work performed by “so called white-collar employees” in “servicing” a business, such as “advising the management, planning, negotiating [and] representing the company.”
Looking to “[t]he importance of the issues decided by the collective bargaining agreements” negotiated by Employee, the procedures he used in negotiating, and the fact that Employee’s work allowed union members to produce services for school districts, the Court held Employee’s duties fell “squarely within the scope of exempt administrative work.” The Court specifically rejected Employee’s attempt to characterize the bargaining units with whom he worked as “units of production.”
The Court also rejected Employee’s argument that he was not paid on a “salary basis,” as required by DOL regulations in order for the overtime exemption to apply. Although Employee’s sick and vacation leave could be docked for absences of less than a day, FLSA only disqualifies deductions from salary – and not from leave time – for absences of less than a day, the Court held. Relying on an earlier decision in which it reached the same conclusion as to public employees, Barner v. City of Novato, 17 F.3d 1256 (9th Cir. 1994), the Court held Barner extends to non-public employees as well. Because “leave time is not salary,” the court held, the rule permitting exemption from overtime applies, even when deductions from leave are for partial-day absences, and even when accumulated leave is convertible to cash. Thus, Employee was exempt from federal overtime protection under FLSA.
The Court of Appeals also held, however, that Employee was potentially eligible for overtime under the labor laws of the State of Washington. Though Washington’s requirements concerning the “primary duty” aspect of overtime exemption are essentially identical to federal requirements, Washington State courts have rejected the federal courts’ interpretation of “salary basis” as set forth in Barner. Assessment of whether Employee was paid on a “salary basis” under Washington law requires factual determinations concerning the parties’ entire employment relationship, the Court of Appeals held, and it remanded the case to the district court for further consideration of that limited state law issue.