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Piquniq Mgt. Corp. v. Reeves (11/6/98), 965 P 2d 732
<![CDATA[
Notice: This opinion is subject to formal 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
PIQUNIQ MANAGEMENT CORPORATION, )
) Supreme Court No. S-8016
Appellant, )
)
) Superior Court No.
v. ) 3AN-95-5631 CI
)
JESSE A. REEVES, ) O P I N I O N
)
Appellee. ) [No. 5044 - November 6, 1998]
)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Peter A. Michalski, Judge.
Appearances: Kenneth P. Eggers, Todd J.
Timmermans, Groh Eggers, LLC, for Appellant. Richard W. Maki,
David H. Shoup, Partnow Tindall Bennett & Shoup, P.C., for
Appellee.
Before: Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.
BRYNER, Justice.
Jesse A. Reeves worked sixty weeks for Piquniq Management
Company at an annual salary of $57,876. He worked a two-weeks-
on/two-weeks-off schedule and averaged ninety-eight-hour weeks
while on the job, but received no overtime pay. Reeves sued PMC
for overtime wages and won. To determine Reeves's damages, the
trial court converted his salary to a regular hourly rate. It used
this rate as a basis for computing his overtime earnings. Without
computing his straighttime or total wages on the same basis, the
court awarded Reeves the entire amount of his overtime earnings as
damages. Because this award pays Reeves twice his regular hourly
rate for his actual straighttime work, we reverse.
I. FACTS AND PROCEEDINGS
PMC operates a waste disposal facility for the North
Slope Borough. Reeves worked there as a PMC employee for about two
years, regularly spending two weeks on the job and two weeks off;
when on the job, he worked seven days a week and at least twelve
hours a day.
PMC initially placed Reeves in a non-exempt position and
paid him eighteen dollars per hour for straighttime work and
twenty-seven dollars per hour for overtime work. After several
months, PMC promoted Reeves to the newly created position of
operations supervisor, which it considered to be exempt from
overtime compensation. Reeves accepted the job at an annual salary
of $57,876. PMC gave Reeves no written employment contract, but he
understood that he would continue to work seven-day workweeks on a
schedule of two weeks on and two weeks off and that his normal
workday would remain approximately twelve hours.
Reeves stayed in the operations supervisor position for
sixty weeks. Because of his alternating work schedule, he actually
worked thirty of those weeks. During this sixty-week period, his
annual salary of $57,876 yielded him total pay of $66,780. After
sixty weeks, PMC moved Reeves to another position. Less than four
months later, it laid him off.
Reeves sued PMC, claiming that the company had improperly
classified him as an exempt employee during his stint as operations
supervisor and that he was entitled to overtime pay for his sixty
weeks in that position.
At a bench trial before Superior Court Judge Peter A.
Michalski, the parties litigated whether Reeves was properly
classified as an exempt employee while he was PMC's operations
supervisor, how many hours per week he worked, and how much
overtime compensation PMC owed him. The court found that PMC had
improperly classified Reeves as exempt. It also found that, in his
sixty weeks as operations supervisor, Reeves had worked thirty
weeks, with each workweek consisting of seven working days, each
workday averaging fourteen hours.
The court next calculated Reeves's unpaid overtime wages.
Deducting forty hours of straighttime work from Reeves's average
ninety-eight-hour workweek, the court found that Reeves had worked
fifty-eight hours of overtime each workweek. This gave Reeves 2940
total hours, with 1200 at straighttime pay and 1740 at overtime
pay. [Fn. 1]
Reeves was entitled to his "regular rate of pay"for his
straighttime hours and to one and one-half times his regular rate
for his overtime hours. [Fn. 2] To compute Reeves's regular rate
of pay, the trial court treated his $57,876 annual salary as
straighttime wages for fifty-two weeks of forty hours per week.
This resulted in a regular rate of $27.83 per hour; multiplied by
one and one-half, the regular rate resulted in an overtime rate of
$41.74 per hour. [Fn. 3] Multiplying this hourly overtime rate by
the 1740 overtime hours Reeves worked during his sixty weeks as
operations supervisor, the court calculated his overtime earnings
to be $72,627.60.
The court considered this full amount of overtime
earnings to be unpaid overtime wages, awarding them to Reeves as
his overtime damages; adding an equivalent amount for liquidated
damages, [Fn. 4] the court calculated Reeves's total damages
(excluding prejudgment interest, costs, and attorney's fees) to be
$145,255.20. PMC appeals.
II. THE TRIAL COURT ERRED IN CONCLUDING THAT PMC OWED REEVES THE
FULL AMOUNT OF HIS OVERTIME EARNINGS.
A. The Applicable Legal Framework
To determine the extent of a worker's overtime damages in
a case involving an Alaska Wage and Hour Act (AWHA) overtime claim,
the court must answer two distinct questions: how much pay the
worker has earned, and how much the employer still owes. At issue
in this case is how these questions should be answered when the
claimant has been paid an annual salary rather than an hourly wage.
[Fn. 5] The AWHA requires that they be answered by using the
worker's regular rate of pay: "If an employer finds it necessary to
employ an employee in excess of 40 hours a week or eight hours a
day, compensation for the overtime at the rate of one and one-half
times the regular rate of pay shall be paid."[Fn. 6]
But the AWHA does not itself define what "regular rate of
pay"means for a worker who, like Reeves, receives an annual salary
instead of an hourly wage. Title 8, section 15.100(a) of the
Alaska Administrative Code (AAC) addresses this issue. It provides
that, for purposes of computing overtime compensation, all salary
must be converted to an hourly rate figured on a weekly basis:
(a) An employee's regular rate is the
basis for computing overtime. The regular rate is an hourly rate
figured on a weekly basis. An employee need not actually be hired
at an hourly rate. . . . However, the applicable compensation basis
must be converted to an hourly rate when determining the regular
rate for computing overtime compensation. [Fn. 7]
Two subparagraphs of this regulation further define the
methods for converting salary to regular rate of pay. The first
allows a salaried employee's regular rate of pay to be set by
employment contract, but only if the contract clearly spells out
the expectations of the employer and worker, and only if actual
practice conforms to those expectations:
(1) The employment contract must set out
the specific number of hours the employee is expected to work each
day and each week. The contract must establish a regular hourly
rate of pay with respect to the salary to be paid and the hours to
be worked. Changes to the pay schedule of a salaried employee must
conform to the provisions of AS 23.05.160. [Fn. 8]
The second subparagraph applies in default of the first;
it requires that, in the absence of an employment contract
complying with subparagraph (a)(1), the worker's salary must be
deemed compensation for a forty-hour week of eight-hour days:
(2) If a contract fails to establish a
fixed number of daily and weekly hours for which the salary is
intended to compensate, or if the actual hours of work deviate from
the hours specified in the contract, the salary will be considered
to be compensation for an eight-hour work day and 40-hour workweek,
and overtime will be computed on that basis. [Fn. 9]
This is the provision that the superior court relied on to
calculate Reeves's overtime award.
B. The Parties' Arguments
On appeal, PMC does not dispute that the superior court
correctly applied 8 AAC 15.100(a)(2) to convert Reeves's annual
salary to a regular hourly rate of pay, or that it correctly
determined, on that basis, how much overtime pay Reeves actually
earned. But it questions the court's assumption that all of
Reeves's earned overtime wages should be treated as being unpaid.
PMC draws a distinction between the total amount of overtime wages
earned on the basis of regular rate of pay and the total amount of
"overtime damages"-- PMC's term for the total amount of overtime
earnings remaining unpaid. PMC argues that 8 AAC 15.100(a)(2)
applies in computing overtime earnings, but not in determining the
ultimate issue of "overtime damages." PMC proposes that, for
purposes of determining overtime damages, the overtime rate of pay
calculated under 8 AAC 15.100(a)(2) should be plugged into a
federal formula, applicable for purposes of determining overtime
damages under the Fair Labor Standards Act (FLSA), 29 U.S.C. sec.
207(a)(1) (1994), whose terms would vary depending on how Reeves's
employment contract with PMC is interpreted. But the federal
formula and the cases PMC cites supporting it are inapposite in the
context of the AWHA, since the FLSA contains no provision analogous
to 8 AAC 15.100(a)(2). Thus we need not discuss the federal
formula proposed by PMC or the federal case law it cites.
Reeves, for his part, defends the court's award of
damages. He insists that the method of computing overtime
compensation set out in 8 AAC 15.100(a)(2) encompasses "overtime
damages,"as well as overtime earnings. According to Reeves,
subparagraph (a)(2) "allocates the entire salary to regular hours
and allocates nothing to the overtime hours." Reeves thus
maintains that the court correctly treated all of his overtime
earnings as overtime damages.
We conclude that each party's argument is only partially
persuasive. To explain our conclusion, we begin by reviewing the
manner in which the trial court arrived at Reeves's total overtime
earnings. Then we consider whether the court correctly treated all
of his overtime earnings as overtime damages.
C. The Superior Court Correctly Calculated How Much Overtime
Pay Reeves Earned.
PMC paid Reeves an annual salary of $57,876. To convert
this annual salary to a regular rate of pay, the court was first
required to "figure[]"this annual salary "on a weekly basis."[Fn.
10] Reeves's annual salary translated to a weekly salary of $1113.
[Fn. 11] Next, since Reeves's regular rate of pay was not set by
an employment contract, the court converted his salary to a regular
hourly rate by the method specified in 8 AAC 15.100(a)(2); treating
Reeves's $1113 weekly salary as straighttime compensation for
eight-hour workdays totaling forty hours of work per week, the
court determined his regular hourly wage to be $27.83, and his
overtime rate to be $41.74. [Fn. 12]
The court then used this overtime rate to compute
Reeves's overtime earnings. In sixty weeks of salaried employment
at $1113 per week, Reeves received pay totaling $66,780. [Fn. 13]
During this time, because of his two-weeks-on/two-weeks-off work
schedule, Reeves actually worked only thirty weeks, averaging
ninety-eight hours (seven fourteen-hour workdays) of work each
workweek, for a total of 2940 hours. [Fn. 14] Of this total, 1200
hours were straighttime; 1740 were overtime. [Fn. 15] Multiplying
Reeves's 1740 actual overtime hours by his $41.74 hourly overtime
rate of pay, the court figured his earned overtime pay to be
$72,627.60. [Fn. 16]
While the parties contested various aspects of this
computation below, on appeal the parties no longer challenge the
court's conclusion that Reeves actually earned $72,627.60 in
overtime pay; nor do they dispute the method of converting salary
to regular pay that led the court to reach this conclusion. Thus
it is undisputed that the court correctly applied 8 AAC
15.100(a)(2) to answer the first question posed in determining
Reeves's overtime damages: how much overtime did Reeves earn?
D. After Computing How Much Overtime Pay Reeves Earned, the
Court Erred in Failing to Consider Separately How Much Pay PMC
Still Owed Him.
Upon determining how much overtime Reeves earned, the
court, without further explanation, awarded him the entire amount
of his overtime earnings as overtime damages. In failing to
consider separately how much of Reeves's earned overtime wages PMC
still owed him, the court made two tacit assumptions: first, that
none of Reeves's overtime earnings had yet been paid; and, second,
that all of his previously paid salary should count as straighttime
compensation, no matter how few straighttime hours Reeves had
actually worked.
Reeves insists that the court correctly applied
8 AAC 15.100(a)(2) in reaching this result. He reasons that
subparagraph (a)(2)
is clear on its face. It expressly provides
the salary "will be considered to be compensation for an eight-hour
work day and 40-hour workweek . . . ." Contrary to PMC's claims,
this regulation does more than simply define the regular and
overtime rates; it provides that the salary is the compensation for
a regular workweek.
But subparagraph (a)(2) is not a freestanding provision;
it must be read in the context of 8 AAC 15.100(a) as a whole. In
its opening sentences, 8 AAC 15.100(a) defines regular rate of pay
as "an hourly rate figured on a weekly basis"and provides that
salary "must be converted to an hourly rate when determining the
regular rate[.]" This provision requires Reeves's annual salary to
be "figured"as a weekly salary; his weekly salary -- $1113 -- is
what subparagraph (a)(2) refers to in commanding that "the salary
will be considered to be compensation for an eight-hour work day
and 40-hour workweek."
Moreover, subparagraph (a)(2) does not directly define
overtime damages; it merely prescribes the correct method by which
a worker's salary "must be converted to an hourly rate . . . for
computing overtime compensation."[Fn. 17] Because paragraph (a)
specifies that "the regular rate is the basis for computing
overtime,"subparagraph (a)(2) cannot in itself be considered to
define overtime damages. Instead, it seems apparent that, once the
regular rate of pay is derived by following subparagraph (a)(2)'s
conversion process, paragraph (a) effectively makes the rate
determinative of overtime damages by prescribing that it be used
"as the basis for computing overtime."
Thus, when read in light of paragraph (a), subparagraph
(a)(2) does not support the proposition that Reeves's entire annual
salary should automatically be treated as compensation for whatever
straighttime hours he actually worked. Rather, it stands for the
narrower and more sensible proposition that each week of Reeves's
salary should be treated as compensation for a corresponding week
of actual straighttime work at his regular rate of pay. In effect
then, subparagraph (a)(2) strives to ensure that salaried workers,
like hourly workers, are compensated on the basis of their regular
rate of pay for all of the hours they actually work.
So construed, 8 AAC 15.100(a)(2) requires a salaried
worker's overtime compensation to be measured by the difference
between the total salary actually paid by the employer and the
total wages earned by the employee for all hours actually worked --
straighttime and overtime -- based on the regular rate of pay.
Because the difference between total pay earned and total salary
paid will always reflect the additional wages necessary to ensure
payment based on the regular rate for all hours actually worked,
this difference must serve as the primary measure of overtime
damages. As a secondary measure, this difference must be doubled
to account for liquidated damages. See AS 23.10.110.
Accordingly, 8 AAC 15.100(a) and (a)(2) require a
salaried worker's award for unpaid overtime compensation to be
computed by: (1) "figuring"the worker's salary on a weekly basis;
(2) assuming that the week of salary represents pay for a week of
straighttime work; (3) using the "regular rate"of hourly pay
derived from this assumption as the basis for determining the
worker's total compensation for all hours actually worked; and (4)
deducting from this amount all amounts of salary actually paid.
Applying this approach to Reeves's situation yields the
following computation. In his sixty weeks of work at an annual
salary of $57,876, Reeves received pay totaling $66,780. [Fn. 18]
During this time, he actually worked a total of 2940 hours. Of
that total, 1200 hours were straighttime; 1740 were overtime. [Fn.
19] Under 8 AAC 15.100(a)(2), his weekly salary was $1113, and so
his regular rate of pay was $27.83 per hour and his overtime rate
was $41.74. [Fn. 20] Applying the overtime rate to Reeves's
overtime hours yields earned overtime pay of $72,627.60; [Fn. 21]
applying the regular rate of pay to Reeves's actual straighttime
hours yields earned straighttime pay of $33,396.00. [Fn. 22] The
total of straighttime and overtime earnings is $106,023.60. [Fn.
23]
Based on his regular rate of pay, this is the amount that
Reeves earned for the work that he actually performed. Deducting
the $66,780 in salary that PMC actually paid Reeves from the wages
of $106,023.60 that he actually earned leaves $39,243.60. This is
the amount of Reeves's overtime damages -- the overtime
compensation that remains unpaid.
In many cases, the trial court's method might yield the
same result; that method, again, was to simply treat all earned
overtime wages as damages and all previously paid salary as
actually earned straighttime pay. But, as we have seen, the court
determined Reeves's regular rate of pay on the premise that each
week of his annual salary would pay for a week of actual
straighttime work. Yet because of his alternating work schedule,
Reeves actually worked only half of the weeks for which he received
annual salary. In sixty weeks of salaried employment, he earned
only thirty weeks of straighttime pay.
Under these peculiar circumstances, treating all of
Reeves's salary as straighttime pay and all of his earned overtime
as damages would yield an anomalous result: the salary PMC paid
Reeves would amount to straighttime pay of $55.65 per hour, or
twice the regular hourly rate of pay contemplated under
8 AAC 15.100(a)(2). [Fn. 24]
Because this hourly rate doubles the regular rate imputed
to Reeves under the regulation, it has no basis in law. And
because no evidence in the record suggests that Reeves's sixty
weeks of salary were actually intended to pay only forty hours per
week of straighttime wages for thirty workweeks, [Fn. 25] this rate
of pay has no basis in reality, either. Nor can Reeves plausibly
justify this enhanced rate of pay as an intended or appropriate
sanction for PMC's failure to make timely payment of his full
overtime wages. The liquidated damages provision of AS 23.10.110
already imposes the appropriate measure of punishment for PMC's
late payment. [Fn. 26]
In short, to count Reeves's entire sixty weeks of salary
as pay for only thirty weeks of actual straighttime work would
violate subparagraph (a)(2)'s mandate to consider each week of his
salary as a week of straighttime pay.
III. CONCLUSION
We thus conclude that the trial court erred in treating
Reeves's entire salary as straighttime pay. We hold that a court
converting annual salary to a regular rate of hourly pay under
8 AAC 15.100(a)(2) must use the regular rate as a basis for
computing total earnings for all hours actually worked. All salary
actually paid must be deducted from these total earnings. The
difference will reflect the award necessary to ensure that
straighttime, overtime, and total compensation are all based on the
applicable regular rate of pay. This is the proper measure of
Reeves's overtime damages.
Because the trial court's decision to treat all of
Reeves's earned overtime pay as unpaid overtime wages would pay
Reeves at twice his regular rate for his actual straighttime hours,
we REVERSE the judgment and REMAND for recalculation of damages in
a manner consistent with this opinion.
FOOTNOTES
Footnote 1:
1 Under AS 23.10.060(b), workers must be paid overtime
wages at one and one-half times their regular rate of pay for all
hours in excess of 8 per day or 40 per week; hours worked up to 8
per day or 40 per week are straighttime.
Reeves's straighttime hours, overtime hours, and total
work hours are computed as follows: 30 workweeks x 40 straighttime
hours per week = 1200 straighttime hours; 30 workweeks x 58
overtime hours per week = 1740 overtime hours. 1200 straighttime
hours + 1740 overtime hours = 2940 total hours.
Footnote 2:
2 See supra note 1.
Footnote 3:
3 $57,876 annual salary ö 52 weeks = $1113 weekly salary.
$1113 weekly salary ö 40 straighttime weekly hours = $27.83 per
hour regular rate of pay. $27.83 per hour regular rate x 1.5 =
$41.74 per hour overtime rate of pay.
Footnote 4:
4 Under the version of AS 23.10.110(a) that applied when
Reeves worked for PMC, an employer who failed to pay overtime
automatically became liable for liquidated damages in an amount
equal to the unpaid overtime compensation. The statute has
recently been amended to allow an exemption from liquidated damages
for employers who establish that they acted in good faith. See ch.
37, sec.sec. 1, 3, SLA 1995.
Footnote 5:
5 This issue involves the interpretation of 8 Alaska
Administrative Code (AAC) 15.100. We have held this particular
regulation to be "quasi-legislative,"Dresser Indus., Inc. v.
Alaska Dep't of Labor, 633 P.2d 998, 1004 (Alaska 1981), and have
further held that "administrative regulations which are legislative
in character are interpreted using the same principles applicable
to statutes." State, Dep't of Highways v. Green, 586 P.2d 595, 603
n.24 (Alaska 1978). We interpret statutes de novo. See Tipton v.
ARCO Alaska, Inc., 922 P.2d 910, 912 n.1 (Alaska 1996); Janes v.
Otis Eng'g Corp., 757 P.2d 50, 53 n.2 (Alaska 1988). In
interpreting a statute or regulation, we will adopt the most
persuasive rule of law in light of precedent, reason, and policy.
See Boone v. Gipson, 920 P.2d 746, 748 (Alaska 1996).
Footnote 6:
6 AS 23.10.060(b). This provision applies to all employ-
ment contracts. See AS 23.10.060(c).
Footnote 7:
7 8 AAC 15.100(a).
Footnote 8:
8 8 AAC 15.100(a)(1).
Footnote 9:
9 8 AAC 15.100(a)(2).
Footnote 10:
10 8 AAC 15.100(a).
Footnote 11:
11 See supra note 3. Reeves concedes that he was a full-
time employee of PMC. He acknowledged below that his annual salary
must be divided by fifty-two weeks, rather than by his twenty-six
actual workweeks per year, to derive his regular weekly rate of
pay. On appeal, Reeves does not dispute that the court correctly
computed his overtime earnings on that basis.
Footnote 12:
12 See id.
Footnote 13:
13 60 weeks of salary at $1113 per month = $66,780 total
salary.
Footnote 14:
14 See supra note 1.
Footnote 15:
15 See id.
Footnote 16:
16 1740 overtime hours x $41.74 per hour overtime pay (based
on 1.5 x the regular hourly rate of $27.83) = $72,627.60.
Footnote 17:
17 8 AAC 15.100(a).
Footnote 18:
18 See supra note 14.
Footnote 19:
19 See supra note 1.
Footnote 20:
20 See supra note 3.
Footnote 21:
21 See supra note 17.
Footnote 22:
22 1200 hours of straighttime wages x $27.83 regular rate of
pay per hour = $33,396.00.
Footnote 23:
23 $33,396.00 in straighttime pay + $72,627.60 in overtime
pay = $106,023.60 total pay.
Footnote 24:
24 Actual pay of $66,780 ö 1200 actual straighttime hours
= $55.65 per hour. $55.65 ö 2 = $27.825.
Footnote 25:
25 As we have previously observed, Reeves himself understood
his salary to cover a two-week-on/two-week-off schedule of seven
days a week at approximately twelve hours a day.
Footnote 26:
26 See McKeown v. Kinney Shoe Corp., 820 P.2d 1068 (Alaska
1991); Alaska Int'l Indus. Inc. v. Musarra, 602 P.2d 1240 (Alaska
1979). Moreover, automatic treatment of all earned overtime as
actual damages would be wholly arbitrary if construed as an added
sanction for late payment of overtime. Such a sanction would, for
no apparent reason, single out for additional punishment those
nonpaying employers with workers on irregular schedules. Besides
being arbitrary, a sanction of this kind would produce anomalous
results. In the current case, for instance, it would have the
effect of punishing PMC for failing to recognize that Reeves might
have been required to work increased hours for no additional pay;
had PMC known that Reeves's entire salary would automatically be
considered compensation for Reeves's straighttime hours, it could
have required him to work thirty additional 40-hour workweeks of
straighttime for no additional pay. The added work would only have
increased Reeves's straighttime hours, which his salary would
already be deemed to cover; it would not have increased his
overtime or affected his regular rate of pay, as calculated under
8 AAC 15.100(a)(2).
In the Supreme Court of the State of Alaska
Piquniq Management Corporation, )
) Supreme Court No. S-08016
Appellant, )
v. ) Order
) Petition for Rehearing
Jesse A. Reeves, )
)
Appellee. ) Date of Order: 11/6/98
)
Trial Court Case # 3AN-95-05631CI
Before: Matthews, Chief Justice, Compton, Eastaugh, Fabe, and Bryner, Justices.
Upon consideration of the Piquniq Management Corporation's and Reeves's petitions for
rehearing filed on October 14, 1998 and October 20, 1998,
It is Ordered:
1. Reeves' petition for rehearing is DENIED.
2. Piquniq's petition for rehearing is GRANTED.
3. Opinion No. 5038, issued on October 9, 1998, is WITHDRAWN and Opinion No.
5044 is issued in its place on November 6, 1998. The revised opinion incorporates the following
changes:
Page 13, lines 12, 16 and the last line of footnote 23: substitute "$106,023.60"for
"$110,023.60".
Page 13, line 16: substitute "$39, 243.60 for "$43,243.60".
Entered by the direction of the court.
Clerk of the Appellate Courts
Cheryl Jones, Deputy Clerk
cc: Supreme Court Justices
Judge Michalski
Trial Court Appeals Clerk
West Publishing for Opinions (Opinion 5038, 10/9/98)
Kenneth P. Eggers
Todd J. Timmermans
David H. Shoup
]]>
