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Diaz v. Silver Bay Logging, Inc (9/27/2002) sp-5635
Diaz v. Silver Bay Logging, Inc (9/27/2002) sp-5635
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,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
GLOBEN A. DIAZ, for Himself )
and on Behalf of All Others ) Supreme Court No. S-10023
Similarly Situated, )
) Superior Court No.
Appellant, ) 1JU-98-1521 CI
)
v. )
) O P I N I O N
SILVER BAY LOGGING, INC., )
)
Appellee. ) [No. 5635 - September 27,
2002]
)
Appeal from the Superior Court of the State
of Alaska, First Judicial District, Juneau,
Larry R. Weeks, Judge.
Appearances: Laurel K. Tatsuda, Law Office
of Laurel K. Tatsuda, Anchorage, for
Appellant. Robert K. Reges, Jr., Ruddy,
Bradley, Kolkhorst & Reges, Juneau, for
Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Bryner, Justices. [Carpeneti,
Justice, not participating.]
MATTHEWS, Justice.
FABE, Chief Justice, with whom BRYNER, Justice, joins,
dissenting.
The main question in this case is whether a regulation
prohibiting an employer from deducting the costs of food and
lodging from an employees pay applies to all such deductions or
only those that reduce the employees pay below the minimum wage.
We conclude that the latter meaning applies because the language
of the regulation will not reasonably support the former meaning.
The regulation in question is 8 AAC 15.160 as it
existed until 1998. It was promulgated under section 23.10.085
of the Alaska Wage and Hour Act (AWHA) and became effective on
September 28, 1985. We set out in the margin the text of the
relevant subsections of the regulation, 8 AAC 15.160(a) and (d),1
and the statutory section which authorized the regulation, AS
23.10.085.2
Globen Diaz worked as a logger for Silver Bay Logging,
Inc., during the logging seasons of 1994 through 1997. While so
employed he stayed at Silver Bays remote camps. Pursuant to a
written agreement, Silver Bay deducted from his earnings $10 a
day for board and lodging. This deduction did not reduce his
wage rate below the statutory minimum wage. No alternative
public board and lodging facilities were accessible to Diaz at
any of the camps.
Diaz brought this action against Silver Bay on his own
behalf and as a class representative for others similarly
situated claiming, among other things, that the board and lodging
deductions were unlawful under 8 AAC 15.160. Silver Bay moved
for summary judgment. After several rounds of briefing and oral
argument, summary judgment was granted and a final judgment was
entered.
Diazs main contention was and is that 8 AAC 15.160(d)
prohibits deductions for board and lodging except where an
employee opts out of alternative board and lodging, an exception
not applicable to his case as alternative board and lodging was
never available. In the superior court Silver Bay took issue
with this interpretation and argued that subsection .160(d) does
not apply to deductions that do not reduce an employees wage rate
below the minimum wage. The superior court took a third
position. The court ruled that subsection (d)(1) states a
requirement that is additional to those of subsections (d)(2) and
(d)(3) and that it only applies where alternative facilities are
available. When alternative facilities are not available only
subsection (d)(2) and (d)(3) must be satisfied. The courts
ruling implies that subsection (d) applies to cases where the
deduction does not reduce compensation to a wage rate below the
statutory minimum.
For the reasons that follow we conclude that subsection
(d) does not bar deductions that are permitted under subsection
(a). Instead, subsection (d) permits, under the limits it
expresses, deductions that would otherwise be barred by
subsection (a). We thus agree with the position taken by Silver
Bay before the superior court that subsection (d) does not apply
to deductions that do not reduce an employees wage rate to below
the minimum wage.3
The prefatory language of subsection (d) nothing in
(a) of this section prohibits can only function to permit
conduct that subsection (a) would otherwise prohibit, it cannot
prohibit conduct that subsection (a) permits. Subsection (a)
prohibits written deductions that have the effect of reducing an
employees wage rate below the statutory minimum . . . . Thus
subsection (d) can permit deductions that would take a wage rate
below the minimum because those deductions are prohibited by
subsection (a). But it cannot serve to prohibit deductions that
do not reduce wages below the minimum, because such deductions
are permitted by subsection (a).
Meaning, of course, can be conveyed by a negative
implication. But the negative implication that might otherwise
be drawn by a failure to satisfy one of the three conditions of
subsection (d) is limited by the nothing in (a) of this section
prohibits prefatory language of subsection (d). The failure to
meet one of the (d) conditions implies only that conduct
prohibited by subsection (a) is indeed prohibited.4
If the prefatory language to subsection (d) were
Notwithstanding (a), deductions are prohibited unless, (1) . . .
(2) . . . (3) the interpretation Diaz offers would be correct.
But those are not the words used, and the words that are used
will not, in our view, reasonably bear Diazs offered meaning.5
The Alaska Department of Law has interpreted subsection
.160(d) as we do. The attorney general, in a memorandum to the
Department of Labor dated April 23, 1986, concerning the meaning
of subsection .160(d), stated:
Thus, if the conditions in paragraphs (1)--
(3) [of .160(d)] are met (i.e., for our
purposes, the employee is not at a remote
site) nothing in (a) prohibits a deduction
for room and board. Although one inference
that might be drawn from this is that if (1)-
-(3) are not met, (a) would prohibit such a
deduction, a reading of (a) does not support
this conclusion. . . . When (d) is read
together with subsection (a), it seems to
provide that if the conditions in paragraphs
(d)(1)--(3) are met, a written agreement for
deductions is valid even though it would
reduce the employees wage rate below the
minimum. There is nothing else in subsection
(a) that would appear to limit the employers
ability to deduct the cost of room and board
from an employees wages. Nowhere in
subsections (a) or (d) is the situation
explicitly addressed regarding deductions
when the conditions listed in (d)(1)--(3) are
not present (for example, when alternative
facilities are not accessible), and
therefore, the general prohibition in (a)
against agreements for deductions that reduce
the employees wage rate below the statutory
minimum is the only limitation on deductions
in that situation. Stated simply, if there
are alternative facilities available, and the
employee declines to use them, then
deductions for the cost of facilities
furnished by the employer are allowed, even
though they have the effect of reducing the
employees wage below a minimum wage; if
alternative facilities are not available,
then the exception in subsection (d) to the
limitations of (a) does not apply, and
deductions for facilities furnished by the
employer may not reduce the employees wages
below the statutory minimum. In short,
nothing in 8 AAC 15.160 prohibits deductions
for room and board in a remote-site situation
if the deductions do not take the wages below
the statutory minimum. . . . (Footnote
omitted.)
Diaz argues that his interpretation of 8 AAC 15.160(a)
and (d) reflects the longstanding and consistent position of the
Alaska Department of Labor. Diaz argues that his, and the
Department of Labors, position is therefore entitled to deference
in accordance with the well-settled rule that courts are to give
deference to an agencys construction of its own legislative-type
regulations . . . .
It appears that the Department of Labor interprets
subsection .160(d) in accordance with Diazs position. Counsel
for Diaz wrote the department in 1998, asking about the meaning
of subsection .160(d). J. R. Carr, Chief of Labor Standards,
responded that subsection (d) applies regardless of whether a
deduction reduces the wages below the statutory minimum wage
. . . . And there are internal memoranda and correspondence
dating back to 1986, which suggest that this was the position of
the department. In addition, Diaz has gathered affidavits and
deposition testimony of officials of the Department of Labor
indicating that subsection (d) was, from the outset, meant to
apply to deductions that did not reduce wages below the minimum
wage. On the other hand the testimonial evidence as to the
departments original interpretation of subsection .160(d) is in
conflict. Donald Wilson, who as Deputy Director of Labor
Standards in the Department of Labor drafted subsection .160(d),
testified that it did not bar a deduction that does not reduce
the employees wage below the statutory minimum.
Given the 1986 opinion of the attorney general and the
conflicting testimonial evidence of labor department officials,
the deference due the Department of Labors current interpretation
of subsection (d) is debatable,6 but, in context, the point is
unimportant. Our rule is that an agencys interpretation of its
own regulation is normally given effect unless plainly erroneous
or inconsistent with the regulation.7 Here the departments
interpretation does not satisfy the conditions of this rule
because, as we have explained above, it is inconsistent with the
language of the regulation and, as such, it is unreasonable.
Diaz also argues that the board and lodging deduction
violated the second sentence of 8 AAC 15.160(a) because Diaz was
required to give up . . . the compensation to which [he] is
entitled. The superior court ruled that a written agreement
between an employee and employer made before the employment
relationship commenced would not fall within the prohibition of
this sentence:
The terms of 8 AAC 15.160(a) apply only where
the employer/employee relationship has
commenced. Prior to accepting and commencing
employment with [Silver Bay], Diaz was not
entitled to any remuneration because he was
not yet an employee of [Silver Bay] and had
not performed any services for them.
This rationale is correct. The concept of entitlement must refer
to an employees contractual or statutory and regulatory rights.
In this case contracts between Silver Bay and Diaz entered into
at the outset of each season provided for a $10 lodging and board
deduction. No statutory or regulatory provision prohibited this
deduction. Thus Diaz was not required to give up any part of
compensation to which he was entitled.
Diaz also argues that the superior court should not
have granted summary judgment concerning claims he asserted for
unpaid overtime compensation and under-reporting of his wages to
the Internal Revenue Service and the Social Security
Administration. His argument concerning these claims is that
Silver Bay should have added the $10 (divided by 8 for an 8-hour
day) to his stipulated hourly pay rate for purposes of
calculating his overtime rate of pay and reported it as income
for purposes of tax withholding. The superior court determined
that these claims lacked merit because the furnishing of board
and lodging was not a benefit furnished by Silver Bay as part of
Diazs compensation package: Because the court finds that the
deduction for room and board does not constitute a wage, Diazs
claims for underreporting of income, failure to withhold income
and failure to pay taxes on the unreported income are all
precluded as a matter of law. This conclusion is also correct.
Diaz was not paid $10 or its equivalent in food and lodging, he
was charged $10.8 To the extent that the charge reflected the
value of what he received, this was not an employee benefit. He
does not contend that the value of the board and lodging exceeded
$10 per day.9
Diaz also argues that the courts award of $3500 in
attorneys fees was error. Silver Bays actual attorneys fees were
$142,542. The norm under Civil Rule 82 in a summary judgment
case would be to award twenty percent of actual fees here
$28,508 to Silver Bay as the prevailing party.10 Diaz correctly
notes that absent a finding of bad faith a losing claimant under
the AWHA may not be subjected to an award of attorneys fees,11 and
that he litigated in good faith.
The trial court adhered to this rule. But two of Diazs
claims were not covered by the AWHA. These were claims for
breach of contract and for violation of AS 23.05.140(b). Civil
Rule 82 applies to these claims. The trial court ordered Silver
Bay to apportion its fees between the AWHA and these claims.
Silver Bay made an effort to do so but the trial court did not
accept Silver Bays calculations. The court allocated most of the
work performed by Silver Bays counsel to the AWHA claims and
attributed only a little less than 12 1/2% of the total effort to
the other claims. Decisions such as this are discretionary.12
The courts allocation here was easily within the bounds of its
discretion.
For these reasons the judgment of the superior court is
AFFIRMED.
FABE, Chief Justice, with whom BRYNER, Justice, joins,
dissenting.
I. INTRODUCTION
Due to the remoteness of Silver Bays logging operations
and the fact that it frequently moved those operations during the
logging season, it was necessary for Silver Bay to house its
employees on highly mobile, waterborne barges in order to conduct
its business. Thus, Silver Bays board and lodging facilities
were indispensable to Silver Bays logging business and were
furnished primarily for Silver Bays convenience. No alternative
public facilities were available to Diaz that were accessible to
Silver Bays worksite, and it was not Diazs choice to live at
Silver Bays facilities. For these reasons, the cost of the board
and lodging provided by Silver Bay cannot be deducted from Diazs
earnings.
The pluralitys interpretation of 8 AAC 15.160(d) to
allow such a deduction flatly ignores the federal regulatory
definitions and interpretations that have been adopted by the
Alaska Department of Labor pursuant to its grant of authority
from the legislature. And the pluralitys decision affords no
deference to the Departments longstanding interpretation of its
own regulation to prohibit board and lodging deductions where no
alternative public facilities are accessible to the worksite.
Finally, the pluralitys unique interpretation of the regulatory
scheme finds no support in case law from any jurisdiction,
federal or state. This is because its interpretation would place
the Alaska Wage and Hours Act in direct conflict with the federal
Fair Labor Standards Act (FLSA) by allowing an employee to deduct
board and lodging costs from wages under circumstances not
recognized as reasonable under FLSA regulations. We have held
that the Alaska Act should be construed to avoid conflicts with
the FLSA.1 And it is only where state law is more restrictive or
more favorable to the employee that it governs in lieu of the
federal Act.2 I therefore disagree with the plurality opinion.3
II. THE ALASKA DEPARTMENT OF LABOR HAS ADOPTED FEDERAL
REGULATORY DEFINITIONS THAT PREVENT DEDUCTION OF SILVER BAYS
LODGING AND BOARD FROM DIAZS PAY.
The Alaska Legislature has granted the Alaska
Department of Labor broad discretionary power to formulate policy
consistent with the Alaska Wage and Hours Act.4 Alaska Statute
23.10.145 requires us to apply federal regulatory definitions
where terms have not been defined by the Alaska Department of
Labor.5 The legislature has left it to the Departments
discretion whether federal definitions can be applied
consistently with the Alaska Wage and Hours Act.6 The Department
has used this broad grant of discretionary authority to adopt
regulations requiring an employers lodging and board charges to
be reasonable7 and has incorporated federal regulations and
interpretations to determine the reasonable cost of the employers
board and lodging deductions.8 Under these federal regulations,
reasonable cost does not include the cost of furnishing board or
lodging found to be primarily for the benefit or convenience of
the employer.9 Thus, under the Alaska Department of Labors
regulations, an employer may deduct from an employees wages the
cost of employer-provided board and lodging facilities only if
the facilities are furnished primarily for the benefit of the
employee.
The relevant state regulation, 8 AAC 15.160(d)(3),
provides that the cost of employer-furnished board and lodging
must be reasonable:
Nothing in (a) of this section prohibits
deductions from earnings, based on a written
agreement, to reimburse an employer for the
reasonable cost of furnishing board and
lodging, if
. . . .
(3) the cost to the employer for the
use of the employers board and lodging
facilities, is reasonable and without profit
to the employer
(Emphasis added.) The regulations expressly provide that the
director of the Wage and Hour Division will make a determination
of reasonable cost based on standards set forth under the FLSA,
adopting by reference the FLSAs regulations pertaining to the
determination of reasonable cost.10 The language of 29 C.F.R.
531.3(d)(1) excludes from the definition of reasonable cost the
cost of furnishing meals and lodging that are primarily for the
benefit or convenience of the employer:
The cost of furnishing facilities found by the
Administrator to be primarily for the benefit or
convenience of the employer will not be recognized
as reasonable and may not therefore be included in
computing wages.
In addition, reasonable costs may not exceed the employers actual
cost,11 may not include a profit to the employer,12 and may not
exceed the fair rental value or fair price of the employer-
provided lodging.13
Thus, to determine reasonable costs in accordance with
these provisions of the Code of Federal Regulations, a threshhold
determination must be made as to whether the housing and meals at
issue are being furnished primarily for the benefit or
convenience of the employer or the employee. Only when the
lodging and board are found to be provided primarily for the
convenience of the employee does one move to the second step of
evaluating whether the amount to be deducted from the employees
wages is the reasonable value of the furnished board and lodging.
In this case, it is clear from the record that the lodging and
board that Silver Bay furnished to Diaz were primarily for Silver
Bays benefit, and thus could not be deducted from Diazs wages as
reasonable costs.14
III. THE DEPARTMENT OF LABORS LONGSTANDING AND CONSISTENT
INTERPRETATION PROHIBITS DEDUCTIONS OF LODGING AND BOARD
COSTS FROM DIAZS WAGES.
In addition to adopting by reference the federal
convenience to the employer doctrine, the Department also
codified this doctrine. Indeed, the language of 8 AAC
15.160(d)(1) expressly prohibits deductions for board and lodging
in the two most common circumstances where board and lodging have
been found to be furnished primarily for the employers business
convenience or benefit: (a) where no alternative public board and
lodging facilities are accessible to the worksite; and (b) where
the employer requires the employee to accept the employers
facilities to meet some need of the employer even though
alternative facilities are available. The Departments
longstanding interpretation of 8 AAC 15.160 to prohibit lodging
and board deductions where no alternative public facilities are
accessible to the employers worksite is both consistent and
reasonable.
Alaska Administrative Code regulation 8 AAC
15.160(d)(1) provides that board and lodging deductions from
wages are prohibited in two circumstances: (a) at a remote
location where there are no alternative public board and lodging
facilities accessible to the worksite; and (b) where the employer
requires the employee to use the employers board and lodging even
though alternative public housing is accessible to the worksite.
This is how the Department of Labor has interpreted its
regulation disallowing such deductions even where they do not
reduce the employees pay below the minimum wage.
In 1998 Randy Carr, the Departments Chief of Labor
Standards and Safety, issued an opinion letter to Diaz based on
the specific facts of Diazs employment with Silver Bay and
concluded that employers may only deduct room and board from
wages where alternative facilities are accessible to the worksite
and employees voluntarily choose to reside in employer-provided
facilities, regardless of whether they reduce the employees pay
below the minimum wage.15 Carr confirmed that 8 AAC 15.160(d)(1)
requires that alternative facilities be accessible to the
worksite and that use of the employers facilities be voluntary in
order for such a deduction [for lodging and board] to be allowed.
. . . When work is performed at a remote site, the use of
employer-provided room and board is a condition of employment.
It is not voluntary. No deduction may be made. Moreover, in
response to a query whether his conclusion depend[s] in any way
on whether the deductions from wages reduce an employees wage
rate below Alaskas statutory minimum rate, his answer was No.
Carr proceeded to point out that whereas 8 AAC 15.160(c)
specifically states that deductions for transportation are
allowed so long as they do not reduce the employees wages below
the statutory minimum, no such requirement is contained in 8 AAC
15.160(d), leading to the conclusion that the prohibition of
deductions from wages for involuntary lodging is entirely
independent of the statutory minimum wage.
Carr later confirmed that this opinion letter
accurately reflects both the Departments current interpretation
of the regulation and its interpretation at the time of the
regulations adoption in 1985. An earlier opinion letter issued
by Carr in 1985, at the time the regulation was being drafted,
confirms the longstanding consistency of this interpretation.16
When asked if charges for room and board could be withheld from
an employees wages, Carr, then statewide Supervisor of the Labor
Standards and Safety Division, responded:
Yes, if alternate facilities are available
and the employee has declined the use of such
alternate facilities. . . . Deductions for
the cost of room & board are not permitted on
floating processors or shore based operations
where alternate facilities are not available.
We uphold an agencys interpretation of its own
regulations unless it is plainly erroneous.17 Although under
this deferential standard we exercise our independent judgment in
determining the validity of an administrative regulation and in
interpreting the underlying regulation, we will not substitute
our judgment for that of the agency with regard to the efficacy
or wisdom of the regulation.18 Even under the independent
judgment standard, this court gives some weight to what the
agency has done, especially where the agency interpretation is
longstanding.19
The plurality opinion today affords no deference to the
Alaska Department of Labors interpretation of 8 AAC 15.160. Carr
testified that the Departments purpose in writing the regulation
was to prevent employers from requiring employees at remote work
sites to shoulder the cost of the employers doing business.
Thus, adoption of 8 AAC 15.160(d)(1) reflected a clear policy
choice, and policies regarding the determination of allowable
wage deductions are squarely within the Departments purview and
expertise.
Moreover, the Departments interpretation is
longstanding and, contrary to the pluralitys suggestion,
consistent. The Department has always maintained that 8 AAC
15.160 prevents employers from deducting the cost of board and
lodging from employee wages at remote work sites where no
alternative housing is available. Regulations implementing the
Alaska Wage and Hours Act were not adopted until 1974, but at
that time they did not address wage deductions for board and
lodging.20 A 1969 letter from then Attorney General G. Kent
Edwards provided that deductions for room and board were not
permitted unless the director decided otherwise:
The Alaska Legislature enacted AS 23.10.085
as a permissive statute, leaving the board
and lodging deductions at the discretion of
the director. By doing so, it is apparent
that the legislature intended that no board
and lodging deductions be made unless and
until the director so provides by regulation.
(Emphasis added.)
In 1982 a team from the Department began to redraft
what is now 8 AAC 15.160. Notice of the proposed regulations was
published in newspapers throughout Alaska in 1983, and hearings
were held the same year. The record reveals that companies
likely to be affected by the proposed regulation understood it to
mean that employers operating in remote locations where no
alternative lodging facilities were available would have to bear
the cost of employee room and board.21 Donald Wilson, then Deputy
Director of the Labor Standards and Safety Division, noted that
the Department elected not to change the regulation in spite of
opposition by employers as it was designed to prevent employers
from shifting their costs to employees:
Cominco/Alaska, The Alliance and Colorado
Mining, Inc. also took exception to 8 AAC
15.160. We do not intend to make any changes
to this section since the law is quite clear
with regard to employers causing their
employees to shoulder the cost of the
employer doing business.
The Departments regulations were adopted in 198522 and have
remained unaltered.23
In accordance with its purpose of preventing employers
from shifting their costs to employees, the Department has from
the regulations inception interpreted it to prevent employers
from deducting the cost of room and board from employee wages
where there are no alternative facilities available. Jim
Robison, Commissioner of the Department of Labor from 1982 to
1986, wrote a letter to Warren Gore, then Executive President of
the AFL-CIO, explaining that employers were not permitted to
charge their employees to use employer-owned facilities where no
public lodging was available:
Governor Sheffield has provided me with
a copy of your letter . . . concerning
employer campsite requirements for remote
work. Having reviewed your comments, I would
like to offer an explanation of the
Department of Labors interpretation of these
regulations.
. . . .
Employers operating in remote areas
where there is no public housing available
which is immediately accessible or in close
proximity to the work site are prohibited
from charging employees for the use of any
employee facilities. . . .
An affidavit submitted by Robison in this case confirms that the
letter to Gore accurately reflected the Departments
interpretation of 8 AAC 15.160(d) at the time it was adopted.
Robison also specified that it was Department policy that
employers who operate in remote areas with no public housing were
prohibited from charging employees for the use of employer-owned
room and board. Finally, Robison confirmed that the opinion
letter written by Carr for Diazs case accurately reflects the
Departments interpretation.
These interpretations by current and former Department
officials are also consistent with the Departments administrative
decisions on this issue. For example, in Rhule v. Gildersleeve,
the Department determined that an employers deductions from an
employees wages to pay for room and board were unlawful because
there were no alternative board and lodging facilities accessible
to the remote worksite.24 Rhule was an employee at a remote
logging camp who was required to authorize, before beginning
employment, a deduction from his wages of $12 per day to cover
the cost of room and board. After quoting in full 8 AAC
15.160(d), a Wage and Hour investigator from the Departments
Juneau regional office informed Gildersleeve Logging:
The key factor is that there are no
alternative facilities accessible to the
worksite. This alone, renders all other
arguments moot. The fact that this
arrangement is also a condition of employment
reinforces our determination that deductions
for room & board under these conditions do
not meet the requirements of [8 AAC
15.160(d)].
(Emphasis added.) This Wage and Hour investigator emphasized to
Gildersleeve that the fact that there are no alternative public
board and lodging facilities accessible to the worksite renders
any deduction from wages unlawful.
And Silver Bay itself was the subject of a similar wage
complaint in 1993. In Chapman v. Silver Bay Logging, the
Department informed Silver Bay that it was not permissible to
deduct the cost of room and board when alternate facilities were
not available:25
Please note that there are three criteria
which must be met in order for deductions for
room and board to be considered permissible.
In order for board and lodging deductions to
be valid, alternative public board and
lodging facilities must be accessible to the
worksite and the employee must have declined
to use such facilities. . . . Unless you can
prove that alternative public board and
lodging facilities were accessible to the
work site and that Mr. Chapman and other
workers declined to use such facilities, the
deductions for board and lodging are not
permissible.
Thus, the record reveals that the Department of Labor
has maintained a single, consistent interpretation of 8 AAC
15.160 since the regulations promulgation in 1985. The
Departments administrative actions reveal one policy: Employers
are not permitted to make wage deductions for room and board
unless alternative facilities are available and the employee has
declined to use them even where those deductions would not
reduce the employees pay below minimum wage.
The plurality has accepted Silver Bays argument that
there was not a single, consistent interpretation of the
regulation and that the plurality therefore owes little deference
to the Departments interpretation. Silver Bay relies on the
testimony during the course of this litigation of Donald Wilson,
who served as Deputy Director of Labor Standards from 1983 to May
1987. Wilson is now retired. Wilson was part of the original
team that drafted the regulation. He was deposed for this case
and provided his own interpretation of the regulation. Wilson
testified that he did not intend to prohibit deductions for room
and board where there was no alternative to employer-owned
lodging. He characterizes the employee choice of lodging this
way: He can turn down the job and go somewhere else. That is
the choice. . . . It is the interpretation of the law as I live
it.
However, the plurality overlooks the fact that while
Wilson was at the Department, his interpretation was identical to
that of Diaz and the other Department witnesses in this case. In
a September 19, 1986 memorandum, Wilson explained to then
Commissioner Robison that 8 AAC 15.160(d) required that employers
operating at inaccessible sites provide their employees with
transportation or bear the cost of room and board:
Because [of the companys provision of free,
daily, round-trip transportation from Nome to
the worksite] and the ready availability of
public board and lodging facilities in Nome
it is my opinion that [the company] can
legally apply the terms of 8 AAC 15.160(d)
and charge the reasonable cost of board and
lodging at the camp site to those employees
who elect to use it rather than return to
Nome each day.
Of course if [the company] should stop
providing transportation and the road
condition were to remain hazardous, or if it
were rendered otherwise impassable by acts of
God, [the company] would then have to bear
the cost of providing board and lodging to
its employees and subcontractors[] employees.
(Emphasis added.) Wilson also sent a memorandum to Bob Bacolas,
Director of Labor Standards in July 1984, stating that
[r]egardless of whether an employer operates
or sub-leases his camp site in a remote area,
the employer [is] going to have to bear the
burden of providing board and lodging. As
long as the employee is essentially
institutionalized and cannot commute to his
true domicile and the work site except on an
infrequent basis, and then only by commercial
carrier, the cost of providing room and board
must be borne by the employer. The
regulations were heard at public hearing[s]
in the three major population centers of the
state. . . . There may be some employers who
think they can circumvent the law and make a
profit. Every time a law is enacted, someone
tries to take advantage of it for the reason
of financial gain. It is up to the
enforcement agency to ensure that such events
do not occur.
(Emphasis added.) These two documents authored by Wilson at the
time of the regulations adoption contradict his deposition
testimony, given twelve years after his retirement from the
Department.
The plurality further relies on a single opinion
contained in a letter from the attorney general in 1986.
However, such opinions are not binding authority on this court,
nor do they have any precedential value.26 Furthermore, this
particular opinion letter has been challenged by the Department
of Labor and therefore is not entitled to great weight.27
In conclusion, when the agency has received such a
broad delegation of power to make policy consistent with the
Alaska Wage and Hours Act, has drafted a regulation that reflects
a policy choice, and has then clearly and consistently
implemented that regulation over a period of fifteen years, this
court must defer to the interpretation unless it is clearly
unreasonable.
IV. THE DEPARTMENTS INTERPRETATION OF THE REGULATION IS
REASONABLE.
Finally, the plurality concludes that even if the
Departments interpretation is longstanding and consistent, it is
unreasonable and thus accorded no deference. The plurality
maintains that when an employee is required to live in employer-
provided housing because this arrangement suits the convenience
of the employer, the employer may deduct the cost of that lodging
from the employees wages as long as the deduction does not reduce
the wages below the statutory minimum. Yet, the pluralitys
strained interpretation of 8 AAC 15.160 finds no support in any
federal or state decision, and the Departments interpretation is
more reasonable.
First, as discussed above, the Department has expressly
incorporated the federal FLSA definitions of reasonable cost and
customarily furnished, which exclude the cost of furnishing meals
and lodging that are primarily for the benefit or convenience of
the employer or that do not permit the employee to choose
voluntarily to live in the employer-furnished facilities. The
Departments interpretation of its regulation to preclude
deductions for employer-provided lodging when the lodging is
provided for the employers convenience is thus consistent with
the FLSA definitions adopted by the Department under its
legislative grant of authority and is therefore reasonable.
Second, the plurality concludes that subsection (d)s
limitations on reimbursement for board and lodging facilities of
the employer apply only if the reimbursement would reduce wages
below the statutory minimum. The plurality maintains that
subsection (d) cannot serve to prohibit deductions that do not
reduce wages below the minimum, because such deductions are
permitted by subsection (a).28 But subsection (d) contains three
conditions that must be met before a deduction from earnings can
be made for employer-provided housing: (1) alternative public
board and lodging facilities must be accessible to the worksite
and the employee must have declined to use these available
facilities; (2) the employer-provided board and lodging
facilities must be customarily furnished by the employer and used
by the employees; and (3) the cost to the employee for use of the
employers board and lodging facilities must be reasonable and
without profit to the employer. If, as the plurality reasons,
these limitations of subsection (d) (1), (2), and (3) do not
apply unless wages are reduced below statutory minimums, then
employers could require employees to live in their facilities and
charge unreasonable or profit-making rates, deducting these
charges from wages, as long as the deductions did not reduce the
employees wages below the statutory minimum. It is the
pluralitys interpretation of this regulation that is
unreasonable, particularly in light of its purpose to prevent
employers from shifting to its employees the cost of doing
business.
Finally, the Departments analysis of the interplay
between the various subsections of 8 AAC 15.160 is superior to
the pluralitys interpretation.29 Randy Carr explained that
interpretation in his opinion letter to Diaz. As Carr points
out, subsection (a) of 8 AAC 15.160 lists a number of specific
deduction practices that are prohibited, despite the presence of
a written employment agreement. These banned practices include
any deduction that would reduce an employees wages below the
statutory minimum. However, subsections (b), (c), and (d)
proceed to describe various types of permissible wage deduction
practices and specify that the prohibitions of subsection (a)
will not apply to these various wage practices as long as the
specific conditions contained within each subsection are met.
For example, subsection (c), which allows deductions for certain
transportation costs, contains the condition that no
transportation deduction may reduce the employees wages below the
minimum wage.
However, the subject of minimum wages is not reflected
in subsection (b), which allows deductions from earnings where
the employee directs the employer to pay a sum for the benefit of
a creditor, donee, or third party. Thus, even if the directed
third-party payment reduces the employees wages below the
statutory minimum, it is permissible. And similarly, subsection
(d), which addresses deductions of board and lodging costs, does
not contain as one of its conditions that the employees wages
must not be reduced below the statutory minimum. As the
Department concluded in the opinion letter, [t]he subject of
minimum wages is not mirrored in subsection (d), which addresses
room and board deductions. If the deduction practices satisfy
the three conditions listed in the regulations, a deduction would
be legal even if it reduced the employees wages below the
statutory minimum. By implication, however, if any of the three
conditions are not satisfied, the deduction cannot be made,
regardless of whether this would leave the employees wages above
the statutory minimum.
V. CONCLUSION
When the Alaska Department of Labor promulgated 8 AAC
15.160, it made a policy choice to prevent employers from forcing
their employees to shoulder the cost of the employer doing
business. Because the Department has adopted the FLSA regulatory
definitions, has consistently interpreted its regulation to
prohibit the deductions made from Diazs wages, and has adopted an
interpretation that is not unreasonable, I believe that this
court should defer to the Departments view that alternative
facilities must be available before an employer may deduct the
cost of room and board.
_______________________________
1 8 AAC 15.160 (1985) provided in relevant part:
(a) AS 23.10.085(c) does not limit the
right of an employer and employee to enter
into a written agreement to provide for
deductions of monetary obligations of an
employee. Requiring or inducing an employee
to return or give up any part of the
compensation to which the employee is
entitled, whether by force, intimidation, or
threat of dismissal from employment, or by
any other manner, is prohibited. A written
agreement for deductions payable to the
employer or person acting in the employers
behalf or interest is not valid if it would
have the effect of reducing an employees wage
rate below the statutory minimum, or if it
would require an employee to reimburse the
employer for any of the following:
(1) customer checks returned due to
insufficient funds or any other reason;
(2) non-payment for goods or services as
a result of theft or credit default;
(3) cash or cash register shortages
unless the employee admits, willingly and in
writing, to having personally taken the
specific amount of cash that is alleged to be
missing;
(4) lost, missing, or stolen property,
unless the employee admits willingly and in
writing, to having personally taken the
specific property alleged to be lost,
missing, or stolen; or
(5) damage or breakage costs unless
clearly due to willful conduct of the
employee and the employee has acknowledged
responsibility in writing.
. . . .
(d) Nothing in (a) of this section
prohibits deductions from earnings, based on
a written agreement, to reimburse an employer
for the reasonable cost of furnishing board
and lodging, if
(1) alternative public board and lodging
facilities are accessible to the worksite and
the employee has declined to use such
facilities;
(2) the board and lodging facilities of
the employer are customarily furnished by the
employer and used by the employees; and
(3) the cost to the employee for the use
of the employers board and lodging
facilities, is reasonable and without profit
to the employer.
2 AS 23.10.085 provides:
(a) The director may adopt, amend, or
rescind administrative regulations not
inconsistent with the purposes and provisions
of AS 23.10.050 - 23.10.150 that are
necessary for the administration of AS
23.10.050 - 23.10.150.
(b) The regulations may, without
limiting the generality of (a) of this
section, define terms used in AS 23.10.050 -
23.10.150, and restrict or prohibit
industrial homework or other acts or
practices that the director finds appropriate
to carry out the purpose of AS 23.10.050 -
23.10.150, or to prevent the circumvention or
evasion of AS 23.10.050 - 23.10.150.
(c) The regulations may permit
deductions by an employer from the minimum
wage applicable under AS 23.10.050 -
23.10.150 to employees for the reasonable
cost, as determined by the director on an
occupation basis, of furnishing board or
lodging if board or lodging is customarily
furnished by the employer and used by the
employee.
3 The court can affirm a summary judgment on grounds not
relied on by the superior court. Moreover, we should consider
any matter appearing in the record, even if not passed upon by
the lower court, in defense of the judgment. Beluga Mining Co.
v. State, Dept of Natural Res., 973 P.2d 570, 574 (Alaska 1999).
4 Diaz seems to suggest that interpreting subsection (d)
to apply only when board and lodging deductions would reduce
effective pay to a rate lower than required rates would place
AWHA in conflict with the federal Fair Labor Standards Act
(FLSA), 29 U.S.C.A. 201-219 (1998). But this is clearly not the
case. The regulations concerning board and lodging deductions
under the FLSA explicitly do not apply to deductions where the
employee still receives more than the minimum wage after
deductions are taken. 29 C.F.R. 531.36(a) (2002). Since we
interpret subsection (d) of 8 AAC 15.160 to be effective under
the same conditions as the FLSA regulations and since the Alaska
minimum wage is higher than the federal minimum wage, AS
23.10.065(a), our interpretation of (d) will not result in a
conflict between AWHA and FLSA.
5 Similarly, we reject the superior courts interpretation
because it, implicitly at least, also accepts the proposition
that subsection (d) prohibits what subsection (a) permits.
6 See 2B Norman J. Singer, Sutherland Statutory
Construction 49:05 (6th ed. 2000) ([W]eight given to an agency
interpretation depends on many factors, including . . . its
consistency with earlier and later agency pronouncements
. . . .).
7 Trustees for Alaska v. State, Dept of Natural Res.,795
P.2d 805, 812 (Alaska 1990).
8 Diaz does not dispute Silver Bays evidence showing that
his overtime rate of pay was calculated before the room-and-board
deductions were made.
9 If there was an excess, it would still not be
considered as income, at least for federal tax purposes because,
as Diaz concedes, the board and lodging was furnished for the
convenience of the employer. See 26 U.S.C. 119(a) (2002).
10 Alaska R. Civ. P. 82(b)(2).
11 See AS 23.10.110(f). Prior to 1995, the AWHA did not
authorize an award of attorneys fees to a prevailing defendant.
Diazs claims for overtime wages earned before August 22, 1995
(the effective date for amended AS 23.10.110) are exempt from
having attorneys fees collected against them under former AS
23.10.110(c) or Civil Rule 82. See Grimes v. Kinney Shoe Corp.,
938 P.2d 997, 1001 (Alaska 1997). His claims for wages earned
after that date are subject to amended AS 23.10.110(f), which
allows a defendant to collect attorneys fees in an action for
unpaid overtime compensation only in the event of a frivolous or
bad faith claim.
12 See Dansereau v. Ulmer, 955 P.2d 916, 918-19 (Alaska
1998) (within courts discretion to independently calculate
reasonable hours in determining appropriate attorney fee award).
1 Webster v. Bechtel, Inc., 621 P.2d 890, 901 (Alaska
1980).
2 Alaska Intl Indus. v. Musarra, 602 P.2d 1240, 1246
(Alaska 1979).
3 Because we are equally divided on this issue, the
decision favoring affirmance has the effect of a plurality
opinion: it will affirm the superior courts ruling in the
present case but will not be binding in future cases. Our case
law establishes that [a] decision by an evenly divided court
results in an affirmance. Ward v. Lutheran Hosps. & Homes Socy
of America, Inc., 963 P.2d 1031, 1037 n.11 (Alaska 1998) (quoting
Thoma v. Hickel, 947 P.2d 816, 824 (Alaska 1997)). Moreover, an
affirmance by an equally divided court is not precedent. City of
Kenai v. Burnett, 860 P.2d 1233, 1239 n.11, 1246 (Alaska 1993)
(Compton, J., concurring).
4 See AS 23.10.085, which states:
(a) The director may adopt, amend, or
rescind administrative regulations not
inconsistent with the purposes and provisions
of AS 23.10.050 - 23.10.150 that are
necessary for the administration of AS
23.10.050 - 23.10.150.
(b) The regulations may, without
limiting the generality of (a) of this
section, define terms used in AS 23.10.050 -
23.10.150, and restrict or prohibit
industrial homework or other acts or
practices that the director finds appropriate
to carry out the purpose of AS 23.10.050 -
23.10.150, or to prevent the circumvention or
evasion of AS 23.10.050 - 23.10.150.
(c) The regulations may permit
deductions by an employer from the minimum
wage applicable under AS 23.10.050 -
23.10.150 to employees for the reasonable
cost, as determined by the director on an
occupation basis, of furnishing board or
lodging if board or lodging is customarily
furnished by the employer and used by the
employee.
5 AS 23.10.145 provides: If not defined in this title or
in regulations adopted under this title, terms used in AS
23.10.050 - 23.10.150 shall be defined as they are defined in the
federal Fair Labor Standards Act of 1938, as amended, or the
regulations adopted under it.
6 See Dresser Indus., Inc. v. Alaska Dept of Labor, 633
P.2d 998, 1003 (Alaska 1981). Alaska Statute 23.10.095 provides
that [t]he commissioner may adopt regulations and interpretations
that are made by the administrator of the Wage and Hour Division
of the federal Department of Labor and that are not inconsistent
with AS 23.10.050 - 23.10.150.
7 8 Alaska Administrative Code (AAC) 15.160(d)(3) (2000).
8 8 AAC 15.160 (f) provides that [t]he director will make
the determination regarding the cost of board and lodging under
(d)(3) of this section. The determination will be made in
accordance with 29 C.F.R. 531.3 - 531.5 and 531.29 - 531.35.
9 See 29 C.F.R. 531.3(d)(1) (2000).
10 8 AAC 15.160(f).
11 29 C.F.R. 531.3(a) (2002).
12 29 C.F.R. 531.3(b) (2002).
13 29 C.F.R. 531.3(c) (2002).
14 The Departments regulations further require that
employer-provided board and lodging must be customarily furnished
by the employer before the employer can require reimbursement. 8
AAC 15.160(d)(2). Under the federal regulatory definition
adopted by the Department, board and lodging is customarily
furnished only when the employees acceptance of the employers
facilities is voluntary and uncoerced. 29 C.F.R. 531.30 (2002).
15 Wage and Hour Opinion Letter (WHOL) # 133.
16 WHOL # 30.
17 Bd. of Trade, Inc. v. State, Dept of Labor, 968 P.2d
86, 89 (Alaska 1998) (quoting State, Dept of Highways v. Green,
586 P.2d 595, 602 n.21 (Alaska 1978)).
18 Bd. of Trade, 968 P.2d at 89 (citations omitted).
19 Usibelli Coal Mine, Inc. v. State, Dept of Revenue, 921
P.2d 1134, 1142-43 (Alaska 1996) (quoting Fairbanks N. Star
Borough Sch. Dist. v. NEA-Alaska, Inc., 817 P.2d 923, 925 (Alaska
1991)).
20 The original regulations were numbered as 8 AAC 15.050.
21 No changes to the proposed regulations were made after
comments and hearings.
22 8 AAC 15.160, am. 9/28/85, Register 95.
23 8 AAC 15.160 was last amended in 1999, but the
provisions at issue in this case were not altered. 8 AAC 15.160,
am. 4/29/99, Register 150.
24 Dept of Labor, Claim J1296-076T (1996-1997).
25 Dept of Labor, Claim J0893-078G (1993-1994).
26 Allison v. State, 583 P.2d 813, 816 n.15 (Alaska 1978).
27 Id. (providing that the fact that the opinion of the
attorney general had not been challenged entitled his opinion to
great weight).
28 Plurality Opinion at 5.
29 WHOL #133.
