An Evaluation of Alaska's Standard for Wage and Hour Exemptions

JurisdictionAlaska,United States
Publication year2011
CitationVol. 28

§ 28 Alaska L. Rev. 97. AN EVALUATION OF ALASKA'S STANDARD FOR WAGE AND HOUR EXEMPTIONS

Alaska Law Review
Volume 28
Cited: 28 Alaska L. Rev. 97


AN EVALUATION OF ALASKA'S STANDARD FOR WAGE AND HOUR EXEMPTIONS


By Gregory S. Fisher [*]


Abstract

What burden of proof should govern wage and hour exemptions under Alaska law? Under federal law, the majority rule is that wage and hour exemptions are established by a preponderance of the evidence. However, in Fred Meyer of Alaska, Inc. v. Bailey the Alaska Supreme Court adopted a "beyond a reasonable doubt" standard, the most stringent burden that could be imposed. This Article explains why the Fred Meyer standard conflicts with precedent, reason, and policy and proposes an analytical model for either the Alaska Supreme Court or the Alaska Legislature to use in abandoning Fred Meyer and adopting a preponderance of the evidence standard.

Introduction

In the classic formulation well-known to Alaska lawyers, Alaska courts will "adopt the rule of law that is most persuasive in light of precedent, reason, and policy." [1] However, is this necessarily correct? In the 1993 opinion Dayhoff v. Temsco Helicopters, Inc., [2] the Alaska Supreme Court quoted, in dicta, a federal lower court opinion for the proposition that wage and hour exemptions should be denied if there was a reasonable doubt as to their applicability. [3] Eleven years later in Fred Meyer of Alaska, Inc. v. Bailey, [4] the Alaska Supreme Court applied this dicta to hold that a "beyond a reasonable doubt standard" governed analysis of wage and hour exemptions. [5] This is the most stringent standard that could be imposed. The court adopted this standard without explanation or analysis. [6] Instead, it simply cited Dayhoff, which itself cited a Court of Claims opinion [7] analyzing a threshold jurisdictional issue and quoting a policy from the Civil Service Commission (an agency that does not even exist anymore, having been replaced by the Office of Personnel Management). In short, traced back to its origins, the "beyond a reasonable doubt" standard is based on an attempt by an official for a now defunct federal agency to articulate the concept that exemptions are narrowly construed. Moreover, in adopting this elevated burden of proof, the court ignored the settled principle that the default burden of proof in civil actions should be the preponderance of the evidence standard. Subsequent statutory amendments to the Alaska Wage and Hour Act cast further doubt on Fred Meyer's result.

This Article briefly reviews wage and hour principles, explains why the Fred Meyer standard conflicts with precedent, reason, and policy, and proposes an analytical model for either the Alaska Supreme Court or the Alaska Legislature to use in abandoning Fred Meyer and adopting a preponderance of the evidence standard. Part I briefly reviews background principles and developments in the law necessary for an understanding of the Fred Meyer standard. Part II analyzes the Fred Meyer standard and concludes that it is an unsound rule that should be abandoned. Part III discusses judicial and legislative options that could be applied for purposes of addressing and correcting Fred Meyer. [8]

I. THE ROAD TO FRED MEYER

A. A Brief Review of State and Federal Wage and Hour Law

This Article is not intended as a comprehensive review of wage and hour principles. However, a brief review of significant concepts is necessary in order to evaluate the Fred Meyer standard in context. Wage and hour law establishes rules governing compensation for employees. The Fair Labor Standards Act (FLSA) is the federal scheme enacted during the Great Depression both as a means of improving working standards and as an incentive to encourage employers to hire more workers. [9] Its chief components are establishment of a minimum wage and a premium, or overtime, rate that is calculated based on the minimum wage. [10] Overtime is the pay rate that employers must pay when employees work over a specified number of hours. [11] The overtime rate is one and one half the regular rate of pay. [12] For example, if an employee's regular rate of pay was twelve dollars per hour of work, his or her overtime rate would be eighteen dollars per hour of work ($12 x 1.5 = $18). If an employee is entitled to overtime, the overtime rate is paid for all work over forty hours in a given workweek. [13] The Alaska Wage and Hour Act (AWHA) is patterned after the FLSA and incorporates many of the same terms with a few significant variations discussed further below.

Indeed, the FLSA and the AWHA were both enacted for the same general purpose: "to establish minimum wage, maximum workweek, and overtime compensation standards which are adequate to maintain the health, efficiency and general well-being of workers." [14] In a sense, the AWHA supplements the FLSA in that it covers entities not engaged in interstate commerce; otherwise such entities would avoid the requirements of the FLSA. [15] That is, the AWHA functions as a backstop to ensure that employers engaged solely in intrastate commerce are nevertheless covered by wage and hour requirements.

Courts frequently describe wage and hour law as being remedial legislation enacted for the benefit of workers. [16] This accurately reflects public policy findings declared by both the FLSA and the AWHA. [17] However, an often overlooked or underappreciated concept underlying the FLSA was to spur job growth. [18] The nation was mired in the Great Depression, and the FLSA was a product of social engineering. Its key components (a forty-hour workweek, the establishment of a minimum wage, and overtime) were designed, in part, to encourage employers to hire more employees. [19] For example, the concept was that if an employer had one employee who usually worked sixty hours in a week, the employer would have an incentive to hire another worker because it would be more cost effective for the employer to hire a part-time employee to work the extra twenty hours rather than pay the full-time employee an overtime rate.

1. Key elements of wage and hour law

Under the FLSA, the key time period is forty hours in a given workweek. [20] A workweek is any period of seven consecutive twenty-four hour days. [21] The employer defines the workweek but may not do so in a manner designed to evade overtime requirements. [22] An employee eligible for overtime is paid overtime for all work over forty hours in that workweek. [23] In the prior example, if the employee worked forty-seven hours in one workweek, his or her wages for that week would be $606 ($12/hour X40 = $480 + $18/hour X7 = $126). The AWHA incorporates the same forty-hour workweek standard but also includes a daily time period of eight hours a day. [24]

The concept of being employed is broadly defined under both the FLSA and the AWHA. To employ means "to suffer or permit to work." [25] All employees are eligible for the minimum wage and overtime unless they are exempt. Accordingly, a critical concept in wage and hour law concerns the classification of employees as exempt or non-exempt. [26] Exemptions are established by law. The exemptions often overlap; that is, an employee classified as exempt under one exemption may also be classified as exempt under another exemption as well.

The AWHA includes seventeen exemptions that apply to both state minimum wage and overtime requirements, [27] nineteen exemptions that apply to state overtime requirements, [28] and three exemptions that apply to minimum wage. [29] The FLSA includes eleven exemptions that apply to federal minimum wage and overtime requirements [30] and twenty-one that apply to federal overtime. [31]

Some of these exemptions are "industry" exemptions that exclude coverage for employees in an entire industry. For example, under the AWHA, agricultural workers are exempt from the Act. [32] Others are "business-related" exemptions that exclude coverage for businesses of a certain size. For example, under the AWHA, employers that employ less than four employees in the regular course of business are exempt from the Act's overtime requirements, [33] as are lumber operations employing fewer than twelve employees. [34] "Worker-related" exemptions exclude certain specific workers from coverage, such as executives, administrative employees, professionals, outside sales personnel, and computer analysts (if they satisfy prescribed regulatory standards). [35] These are merely illustrative examples.

Of these three general exemption categories, the industry and business-related exemptions usually pose little or no difficulty in interpreting and applying the relevant standards because the exemptions are generally straightforward. Employers will usually know whether or not they fit the defined concepts. However, the worker-related exemptions often pose more significant challenges because they depend upon analysis of each worker's actual job duties in connection with the relevant legal standards governing the exemption in question.

2. Interpreting and applying "white collar" exemptions

The worker-related exemptions that pose the most significant analytical and practical problems are the so-called Section 13(a)(1), or "white collar," exemptions. [36] Three of the more difficult "white collar" exemptions are the exemptions for executive, administrative, and professional employees. These exemptions depend upon application of the salary basis test. In...

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