Colburn v. Department of Public Safety & Correctional Services

GREENE, J. We are asked in this appeal to determine whether correctional supervisors are entitled to overtime compensation under the Fair Labor Standards Act (FLSA), 1 when their employer—the Eastern Correctional Institute (ECI), a correctional facility within the Division of Corrections of the Maryland Department of Public Safety and Correctional Services (DPSCS)—required them to work overtime and perform tasks in their overtime capacity that were normally assigned to correctional officers who would receive overtime compensation if they were required to work more than forty hours per workweek. Joseph Colburn and the thirty-nine other appellants 2 are correctional supervisors at ECI. In March 2008, appellants filed a grievance with their employer seeking overtime compensation at a rate of one and one-half times their regular hourly rate of pay for their overtime performance of non-supervisory correctional duties. Appellants claimed that in performing these duties outside their regular forty-hours-a-week schedule, they became non-exempt employees under the FLSA and were, therefore, entitled to overtime compensation at a rate of one and one-half times their regular hourly rate of pay under Md.Code (1993, 1997 Repl.Vol.), §§ 8-303 and 8-305 of the State Personnel and Pensions Article.

DPSCS, instead, gave appellants straight compensatory time, on an ¹¹⁹ hour-for-hour basis, for the additional hours worked. The grievance was considered by ECI’s warden, a designated representative of DPSCS, and the Maryland Office of Administrative Hearings. After a hearing on the merits of the grievance, the Administrative Law Judge (ALJ) assigned to hear the case denied appellants’ grievance, concluding that appellants were exempt employees for the purposes of the FLSA and, therefore, were not eligible for overtime compensation. Appellants, thereafter, filed a Petition for Judicial Review in the Circuit Court for Somerset County.

The Circuit Court affirmed the decision of the ALJ. Appellants then filed a timely appeal to the Court of Special Appeals. We granted certiorari, Colburn v. Dep’t of Corrections, 400 Md. 646 , 929 A.2d 889 (2007), on our initiative, while the appeal was pending in the intermediate appellate court, in order to consider the following question: 3 Whether [appellants] are entitled to be compensated at the overtime rate for all hours worked in excess of 40, plus any appropriate fees and liquidated damages, for overtime hours worked? We hold that appellants are not entitled to overtime compensation for time worked on non-supervisory activities in excess of forty hours per workweek.

Therefore, we affirm the judgment of the Circuit Court. BACKGROUND On February 4, 2003, the state Commissioner of Corrections issued a memorandum to all wardens within the Maryland Division of Corrections advising them to implement a staffing plan which would reduce overtime expenditures at all Maryland correctional facilities. On February 13, 2003, Robert J. Kupec, then Warden of ECI, issued a memorandum to ECI ¹²⁰ staff 4 detailing ECI’s Overtime Reduction Measures. The memorandum read in relevant part: [B]y [an earlier] memorandum, I outlined specific cost saving measures that were needed to reduce overtime cost.

We have now received additional saving mandates that will necessitate reducing our overtime expenditures by $127,000. With the recent military call-up of fourteen of our coworkers, this will be a challenge. The following steps will be implemented: 2. Correctional Officer Supervisors below the rank of Major will fill Officer I, II, and III overtime posts on their assigned shifts. 3.

Supervisors may volunteer to work on “other” shifts and compounds to reduce overtime cost. Shift Commanders will determine how best to utilize supervisory resources. They will also be responsible for entitlement issues, and minimum staffing levels for supervisors. 9. Supervisors, and correctional officers who have special assignments, Trainings, ARPs, Search Team, will be available one day per week to fill overtime needs.

Under the plan, correctional supervisors, including the appellants, would be required to work extra hours in posts typically staffed by non-supervisory correctional officers. 5 Correctional supervisors working overtime shifts were given ¹²¹ straight compensatory time, on an hour-by-hour basis for hours worked in excess of 40 hours per workweek. Thereafter, on or about March 3, 2003, appellants filed a grievance claiming Warden Rupee’s Overtime Reduction Measures require ECI’s correctional supervisors to work overtime without the required overtime rate of compensation. 6 The grievance read in relevant part: Issue of Employee’s Grievance: An order from Warden Kupec dated February 13, 2003, requires that Grievants, Lieutenants, Captains and Majors, to expend substantial portion of the work week performing non-exempt work, e.g. manning standard correctional posts, traditionally manned by non-exempt personnel. The specific reason for this is to reduce overtime costs through the use of exempt personnel to do work of non-exempt employees. Grievants may be required to work an excess of 40 hours per week and are to be paid for only 40 hours per week under current orders from the Warden.

Grievants could be denied leave or drafted to work as a result of staffing shortages. Grievants will be required to do these duties for the indefinite future. Grievants conten[d] that their current duties under the order of February 13, 2003, and their duties prior to that date demonstrate that they are and have been non-exempt employees under Federal and State Wage and Hour laws. Grievants are being required to perform duties and responsibilities that are clearly applicable to a different class, in violation § 7-102(e) of the State Personnel and Pensions Article, Md. Annotated Code. ¹²² Employee’s Requested Remedy Overtime at one and one[-]half the normal rate for all hours in excess of 40, attorneys fees and liquidated damages per Maryland and Federal law.

Grievants be required to perform only those duties which are consistent with the duties and responsibilities of their assigned class. On January 9, 2006, Administrative Law Judge Mary Seely Klair held an evidentiary hearing on the merits of the grievance. 7 At the start of the hearing, counsel for appellants ¹²³ began by noting that the number of correctional supervisors participating in the grievance had been pared down to “28 named individuals.” Counsel for appellants, however, did not provide an explanation for the loss of thirteen correctional supervisors’ participation in the grievance. The ALJ then heard oral argument from Counsel, received exhibits into evidence, and considered testimony from Captain Colburn and Ronald Dryden, the Security Chief at ECI. Upon conclusion of the hearing, the ALJ took the matter under advisement pending written memoranda submitted by the parties.

On or about April 6, 2006, the ALJ issued a written opinion and order denying appellants’ grievance. In her opinion, the ALJ made the following factual findings: 1. At all times relevant to this matter the Grievants were employed as Lieutenants, Captains, or Majors at ECI, and were exempt employees not entitled to overtime under FLSA. 2. The Grievants were required to perform duties of non-exempt correctional officers pursuant to a Modified Staffing Plan authorized by the Governor to reduce overtime expenditures. 3.

All of the employees in this case earn in excess of $250.00 per week; minimum annual salary for Lieutenants is $35,660; for Captains, $38,007; and for Majors, $40,518; and are salaried employees within the meaning of FLSA. 4. Although the Grievants performed some duties normally performed by non-exempt officers; at least 50% of their time was spent performing their normal supervisory duties: managing personnel, instructing and evaluating subordinates, performing administrative tasks relative to management, preparing reports, making recommendations to improve the overall operation and safety of ECI, a recognized subdivision of the Division of Corrections; and they customarily and regularly direct the work of two or more employees. ¹²⁴ 5. The Grievants perform duties directly related to the operation of ECI and are essential to the management of the facility. 6. Lieutenants, Captains, and Majors exercise independent judgment and discretion in the performance of their primary supervisory duties including making judgments and recommendations regarding: proper staffing and security, changing/modifying post orders, improving the overall operation and safety of the facility, briefing/instructing subordinates, investigating employee infractions, coordinating inmate and cell searches, inspecting prison and grounds daily, and drafting institutional policy on security matters.

Thereafter, the ALJ explained the rules governing overtime compensation found in the Fair Labor Standards Act. The ALJ then applied the applicable rule-based tests to her findings of facts. First utilizing the “salary-based test,” the ALJ concluded that the grievants were exempt employees because they were “salaried employees within the meaning of the FLSA.” The ALJ noted: There is no dispute that all of the employees in this case earn in excess of $250.00 per week; minimum salary for Lieutenants is $35,660; for Captains $38,007; and for Majors, $40,518.... [Tjhere was no evidence that those salaries are subject to, “... reduction because of variation in the quality or quantity of work performed.” ... Here, there is no claim that the Grievants are subject to a policy that permits disciplinary deductions in pay.

The ALJ then applied the “Primary Duties Test” and found that the unrefuted evidence shows that Lieutenants, Captains, and Majors spend almost all of their time managing personnel, instructing and evaluating subordinates, performing administrative tasks relative to management, preparing reports, making recommendations to improve the overall operation and safety of ECI, ... and they customarily and regularly direct the work of two or more employees. ¹²⁵ Furthermore, the ALJ noted that while Captain Colburn “testified that the position descriptions [offered into evidence as an exhibit] are not accurate, the descriptions were offered as joint exhibits, and there was no successful refutation of the contents of the position descriptions.” The ALJ then stated: I conclude that Lieutenants, Captains, and Majors perform duties directly related to the operation of ECI and are essential to the management of the facility. Their primary duties are unquestionably, “office or non-manual work directly related to management policies or general business operations” of ECI____The duties of Lieutenants, Captains, and Majors are not only of substantial importance to the management or operation of ECI but [also] critical to it, and easily satisfy the criteria for the executive exemption from overtime. Last, the ALJ applied the “Discretion and Independent Judgment Test.” The ALJ stated in relevant part: It is apparent from the testimony and job description that the primary tasks of Lieutenants, Captains, and Majors necessitate the exercise of [independent] judgment and discretion. It is undisputed that these primary tasks include making judgments and recommendations regarding: proper staffing and security, ehanging/modifying post orders, improving the overall operation and safety of the facility, briefing/instructing subordinates, investigating employee infractions, coordinating inmate and cell searches, inspecting prison and grounds daily, and drafting institution policy on security matters.

The fact that some recommendations are subject to review by superior officers is no bar to application of the executive exemption. I conclude that ... the Grievants’ responsibilities ... satisfy the criteria for executive exemption from overtime. Therefore, the ALJ concluded that “as a matter of law[,] the Grievants failed to sustain their burden of proving that [ECI]’s refusal to pay overtime to exempt employees was a misinterpretation or misapplication of any policy or regulation over which [ECI] has control.” ¹²⁶ Unsatisfied with the ALJ’s decision, forty correctional supervisors filed a Petition for Judicial Review in the Circuit Court for Somerset County on May 8, 2006. 8 A hearing on the petition was held on December 15, 2006, at which time the Circuit Court affirmed the decision of the ALJ. The Circuit Court stated: The standard of review for the court in an appeal from an administrative decision, which this is, is whether there is substantial evidence in the record to support the findings and conclusions of Judge Klair and whether or not the decision is premised on an erroneous conclusion of law.

The issue to be decided by Judge Klair basically—there was no dispute, on the underlying law that was applicable to the case. And the issues Judge Klair had to decide was [sic] whether applying the short test as set forth in the regulations, federal regulations is whether the grievants were exempt employees under the Fair Labor Standards Act. And under the short test the employees to be exempt must be salaried employees and their primary duties must have included the exercise of discretion and independent judgment. It consists of the performance of office or non-manual work directly related to management policies.

In resolving these issues, the administrative judge Klair made six specific findings of fact. She specifically found the employees were paid a set salary, an annual salary was established for the office of lieutenant, captain, and major. Those salaries being in excess of two hundred and fifty dollars per week. They were paid a set salary.

It was true that the set salary could be reduced for time that the employee did not work, if there was no leave time available or not used, but the court does not believe that meeting the requirements of public accountability by reducing the salary ¹²⁷ for time not worked makes the income to the grievants nonsalaried. I think they are salaried employees. I agree with the inferences draw by Judge Klair in arriving at that decision and the fact that they are subject to the same disciplinary actions as other state employees and there could be a deduction of income as a result of a suspension does not destroy the salary that is paid to these grievants. As to the primary duties of the grievants, Judge Klair found that they spend more than fifty percent of their time performing exempt duties.

They exercised discretion and independent judgment. They supervised two or more employees. She found as a fact that their duties were set out in their position descriptions and class descriptions and that they primarily performed supervisory and management duties. From a review of the record these findings were supported by substantial evidence and certainly the court believes that reasoning minds could have reached the same conclusions as Judge Klair did in this case.

Therefore, the Court is going to affirm the decision of the administrative judge. The written order affirming the decision of the ALJ was filed on January 8, 2007. This appeal ensued. DISCUSSION I. A. “ ‘We review an administrative agency’s decision under the same statutory standards as does the Circuit Court.’” Kane v. Board of Appeals of Prince George’s County, 390 Md. 145, 159 , 887 A.2d 1060, 1068 (2005) (quoting Annapolis Market Place, L.L.C. v. Parker, 369 Md. 689, 703 , 802 A.2d 1029, 1037 (2002)).

Judge Eldridge, writing for this Court in Board of Physician Quality Assurance v. Banks, 354 Md. 59, 67-68 , 729 A.2d 376, 380 (1999), explicated the standard of review for administrative agency decisions: A court’s role in reviewing an administrative agency adjudicatory decision is narrow, it is limited to determining if ¹²⁸ there is substantial evidence in the record as a whole to support the agency’s findings and conclusions, and to determine if the administrative decision is premised upon an erroneous conclusion of law. (Internal quotations and citations omitted). Accord Maryland Aviation Administration v. Noland, 386 Md. 556, 571-74 , 873 A.2d 1145, 1154-56 (2005). We review the agency’s factual findings using the substantial evidence test.

Banks, 354 Md. at 67 , 729 A.2d at 380 . In applying this test, we ask, after reviewing the evidence in a light most favorable to the administrative agency, “whether a reasoning mind reasonably could have reached the factual conclusion the agency reached.” Id. at 68 , 729 A.2d at 380 (internal quotation omitted). We treat “the agency’s decision [a]s prima facie correct and presumed valid.” Id., 729 A.2d at 381 . It is the agency’s province, not ours, to resolve conflicting evidence ánd to draw inferences from that evidence.

Id. With regard to legal issues before the administrative agency, we addressed the deference affordéd to administrative agencies in Schwartz v. Maryland Dep’t of Natural Resources, 385 Md. 534, 554 , 870 A.2d 168, 180 (2005): With respect to an agency’s conclusions of law, we have often stated that a court reviews de novo for correctness. We frequently give weight to an agency’s experience in interpretation of a statute that it administers, but it is always within our prerogative to determine whether an agency’s conclusions of law are correct, and to remedy them if wrong. (Citation omitted.) Furthermore, decisions of the Office of Administrative Hearings (OAH) are subject to review under the Administrative Procedure Act (APA), Md.Code (1984, 2004 RepLVol.), § 10-222 of the State Government Article. 9 ¹²⁹ B. The statutory provisions that are the focus of this dispute are found in Title 8 of the State Personnel and Pensions Article.

Appellants claim they are due overtime compensation under § 8-303. This section, entitled “Compensation for overtime work,” reads as follows: (a) Except as otherwise provided in this subtitle, an employee who works more than the normal workweek for that employee’s unit is entitled to compensation for that overtime work in the form of: (1) payment as provided in § 8-305 of this subtitle; or (2) compensatory time as provided in § 8-307 of this subtitle. (b) The Secretary shall adopt regulations to prevent: (1) the granting of unnecessary overtime; and (2) the failure to grant overtime compensation to an eligible employee. Section 8-305(a), entitled “Work period,” mandates the rate of payment for work performed outside the employee’s normal workweek.

It provides: (a) Except as otherwise provided in this section: (1) payment for time worked in excess of an employee’s normal workweek but not in excess of 40 hours in that workweek shall be made at the employee’s regular hourly rate of pay; and ¹³⁰ (2) payment for time worked in excess of 40 hours in a workweek shall be made at one and one-half times the employee’s regular hourly rate of pay. Most pertinent to the instant appeal, § 8-302 makes clear that our construction, reading, and application of §§ 8-303 and 8-305 in the case sub judice shall be “to the extent applicable, in accordance with the federal Fair Labor Standards Act.” II. Appellants contend that they are entitled to overtime compensation at a rate of one and one-half times their regular hourly rate of pay for all hours worked in excess of forty hours per workweek because they do not qualify as exempt employees under the FLSA. Specifically, appellants argue, that they are neither paid on a salary basis nor perform the requisite executive functions necessary for the exempt status.

Focusing instead on the correctness of the ALJ’s decision, DPSCS asserts that the ALJ did not err in concluding that appellants were exempt employees under the FLSA. Upon review of the record before this Court, we hold that the ALJ did not err in concluding that appellants are exempt employees within the meaning of FLSA and, therefore, appellants are not entitled to receive cash compensation from DPSCS. A. The Fair Labor Standards Act, originally enacted in 1938, establishes, among other things, minimum wage and overtime pay standards for workers within the United States. 29 U.S.C. §§ 201 , et seq. (2002).

Congress expanded FLSA’s coverage to state and local government employees in 1974. Pub.L. 93-259, § 6 , 88 Stat. 58 -62. See also 29 C.F.R. §§ 553.2 (b) and 553.32(c) (1996) (expressly applicable to public-sector employees). Under its provisions, the FLSA mandates that employers must pay at least the federal minimum wage for all hours worked and, if the employer permits or requires employees to work more than forty hours per workweek, pay employees at least one and one-half times the ¹³¹ regular hourly rate of pay for all overtime hours performed. 29 U.S.C. §§ 206 and 207(a)(1).

The FLSA, however, provides an exemption to its minimum wage and overtime pay requirements for workers “employed as bona fide executive, administrative, or professional employees.” 29 U.S.C. § 213 (a)(1). In enacting the FLSA and providing this exemption, Congress did not define important phrases of the provisions, including who qualifies as a “bona fide executive, administrative, or professional employee.” Instead, Congress delegated to the Secretary of Labor the responsibility of promulgating regulations defining the scope of the exemption. See 29 U.S.C. § 213 (a)(1). The regulations in force at the time of the grievance provided that an employer may prove that an employee is an exempt employee by satisfying a five-part test, commonly referred to as the “long test.” See 29 C.F.R. § 541.2 (2002).

This test applies to employees who are paid “on a salary or fee basis at a rate of not less than $155 per week.” See 29 C.F.R. § 541.2 (e)(1) (2002). The regulations also provided for a second test, commonly referred to as the “short test,” for those employees who are paid “on a salary or fee basis at a rate of not less than $250 per week.” 10 See 29 C.F.R. § 541.2 (e)(2) (2002). It is undisputed that appellants were paid over $250 per week; 11 therefore, we shall apply the “short test” to deter ¹³² mine whether appellants fall within the bona fide administrative employee exemption. 12 Under this test, DPSCS must first prove that it paid appellants on a salary basis. 29 C.F.R. § 541.2 (a)(1); see also Donovan v. Burger King Corp., 675 F.2d 516, 517-18 (2d Cir.1982). In addition, DPSCS must prove that appellants meet a set of criteria concerning their job duties.

For example, to be considered an exempt administrative employee, the appellants’ primary duties must consists of: (1) “[t]he performance of office or non-manual work directly related to management policies or general business operations of his employer or his employer’s customers,” and (2) the performance of work “requiring the exercise of discretion and independent judgment.” 29 C.F.R. § 541.2 (e)(2) (2002). Likewise, an executive employee is exempt if the employee: (1) “primarily engages in management of the enterprise, department or subdivision in which the employee is employed, and (2) customarily and regularly directs or supervises two or more other employees.” 29 C.F.R. § 541.1 (f) (2002). B. Analysis 1. Salary Appellants first contend that they are not exempt employees under the FLSA because they are not salaried employees.

Appellants argue: [Appellants] have no set minimum which they receive regardless of the number of hours worked. Rather, they are paid only for hours worked or hours for which they have eligible leave available for their use. There is no predeter ¹³³ mined amount of pay to which [appellants] are entitled.... If [appellants] do not work or are not otherwise on paid leave, they are not paid.

DPSCS argues that there is substantial evidence to support the ALJ’s finding that appellants were salaried employees. DPSCS contends that appellants’ claim that they do not receive a “predetermined amount” of compensation because they are “paid only for hours actually worked or hours for which they have eligible leave available for their use” is incorrect. DPSCS, citing to 29 C.F.R. § 541 .5d(a) (2002), Shockley v. City of Newport News, 997 F.2d 18, 25 (4th Cir.1993) and Demos v. City of Indianapolis, 302 F.3d 698, 701-03 (7th Cir.2002), states: The Department of Labor’s FLSA regulations specifically provide that a public agency plan, which reduces compensation ... “pursuant to principles of public accountability,” is consistent with a finding that the employee is paid on a salary basis. In reviewing the record, w e hold that the ALJ did not err in concluding that appellants were employed on a salary basis.

An employee is employed 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