Opinion
Case No. C-3-95-404
January 4, 1999
John R. Doll for plaintiff.
Robert J. Brown for defendant.
This matter comes before the Court upon the Defendant's Motion for Certification for an Interlocutory Appeal. (Doc. #83). Pursuant to 28 U.S.C. § 1292(b), the Defendant asks the Court to certify for immediate appeal its April 16, 1997, Decision and Entry (Doc. #55), granting partial summary judgment in favor of the Plaintiffs. Specifically, the Defendant seeks certification of the Court's finding that the "window of correction," established by 29 C.F.R. § 541.118(a)(6), was not available to the Defendant to preserve the Plaintiffs' exempt status under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq.
Certification of an interlocutory order is appropriate when a District Court determines that its ruling "involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b). A District Court should authorize such appeals only sparingly and in extraordinary cases.Cardwell v. Chesapeake Ohio Railway Co., 504 F.2d 444, 446 (6th Cir. 1974).
In the present case, the Defendant insists that it meets the requirements for an interlocutory appeal. First, it argues that availability of the "window of correction" is a controlling question of law because it will avoid FLSA liability if the provision applies. Second, it contends substantial ground for difference of opinion exists for two reasons: (1) because the Sixth Circuit has not revisited the "window of correction" issue since the U.S. Supreme Court's decision in Auer v. Robbins, 519 U.S. 452 (1997), upon which this Court relied in its April 16, 1997, Decision and Entry (Doc. #55); and (2) because three Circuit Courts have allowed employers to utilize the "window of correction" after the Supreme Court's Auer ruling. Third, the Defendant claims early review by the Sixth Circuit will materially advance the termination of this litigation, because if the "window of correction" applies, it will avoid any liability it may have incurred for making improper disciplinary deductions, and the length and complexity of discovery and trial will be reduced. (Defendant's Motion for Certification for an Interlocutory Appeal, Doc. #83 at 1-2; Defendant's Reply to Plaintiffs' Memorandum in Opposition to Defendant's Motion for Leave to File an Interlocutory Appeal, Doc. # 86 at 1-2).
Upon review, the Court cannot agree that the Defendant has demonstrated exceptional circumstances warranting certification of an interlocutory appeal. In particular, the Defendant has not demonstrated substantial ground for difference of opinion regarding application of the "window of correction" in the present case. Nor has the Defendant demonstrated that granting an interlocutory appeal would materially advance the ultimate termination of this litigation. Before addressing the merits of the Defendant's Motion in more detail, the Court briefly will set forth the basis for its prior conclusion that the "window of correction" does not apply in this litigation.
In its April 16, 1997, Decision and Entry (Doc. #55), the Court found the Plaintiffs not exempt from the FLSA's overtime compensation requirements. In so doing, the Court determined that they failed to meet the "salary test" set forth in 29 C.F.R. § 541.1(f). The Plaintiffs failed to meet this test because (1) the Defendant maintained a disciplinary policy that allowed the Plaintiffs to be suspended for up to one week, and (2) at least three of the Plaintiffs actually were suspended under the policy. These facts persuaded the Court that the Plaintiffs were not paid on a salary basis. Accordingly, the Court concluded that they were not exempt from the FLSA's overtime compensation requirements. Having determined that the Plaintiffs were non- exempt, because they were not salaried employees, the Court also rejected the Defendant's "window of correction" argument. Under the "window of correction" provision, 29 C.F.R. § 541.118(a)(6), if an employer takes actions that have the effect of changing an employee's status from exempt to non-exempt under the FLSA, the employer may "cure" the status change by taking certain corrective actions. Given its determination that the Plaintiffs were not salaried, and therefore were not exempt, the Court reasoned that the Defendant could not invoke the "window of correction" to transform the Plaintiffs into exempt employees.
In its present Motion, the Defendant correctly notes that the Sixth Circuit has not revisited the "window of correction" issue following the Supreme Court's Auer decision. This fact, however, does not suggest substantial ground for difference of opinion, given this Court's conclusion that the Sixth Circuit's pre-Auer ruling in Martin v. W.E. Monks Co., No. 92-3739, 1993 WL 300332 (6th Cir. 1993), upon which this Court relied in its April 16, 1997, Decision and Entry, is not inconsistent with Auer. To the contrary, because Auer is entirely consistent with Martin in all relevant aspects, the Court finds no reason to believe that the Sixth Circuit would reject Martin in the future.
In Auer, the Supreme Court accepted the Secretary of Labor's interpretation of the "salary basis" test. Under that interpretation, employees are not exempt from overtime compensation if the employer has an "actual practice" of reducing employees' pay for disciplinary reasons, or a policy that creates a "significant likelihood" of such deductions. Auer, 519 U.S. at 461-462. In its April 16, 1997, Decision and Entry (Doc. #55), the Court applied this test and found that the Plaintiffs were not salaried and, therefore, were not exempt from overtime compensation.
The Court then rejected the Defendant's attempted utilization of the "window of correction" provision, 29 C.F.R. § 541.118(a)(6). In so doing, the Court relied upon Martin v. W.E. Monks Co., No. 92-3739, 1993 WL 300332 (6th Cir. 1993). In that case, the Sixth Circuit had found the "window of correction" unavailable because the employees at issue "were not paid as salaried employees," and were, therefore, non-exempt. Given that the Plaintiffs in the present case also were not salaried employees, the Court deemed Martin persuasive with respect to application of the "window of correction."
Upon further review, the Court finds nothing in Auer that would call into question the continued validity of Martin, and the Court has no reason to suspect that the Sixth Circuit would deviate from Martin in the future. In Auer, the Supreme Court found a St. Louis police sergeant exempt from overtime compensation under the FLSA, but noted that the respondent had reduced the officer's pay as punishment for violating a residency requirement. The Court then discussed the one-time pay reduction's impact on the officer's exempt status, finding the "window of correction" available to "preserve" such status. However, inMartin, as in the present case, the employees at issue were not exempt under the FLSA. Consequently, their exempt status could not be "restored" or "preserved" via the "window of correction." Nothing in Auer is inconsistent with this conclusion. Accordingly, in light of Martin and Auer, the Court finds no substantial ground for difference of opinion regarding application of the "window of correction," particularly within the Sixth Circuit.
In opposition to this conclusion, the Defendant cites three decisions from other Circuits. It argues that these rulings are inconsistent with this Court's interpretation of the "window of correction" provision, thereby indicating substantial ground for difference of opinion on the issue. The first of these cases,Childers v. City of Eugene, 120 F.3d 944 (9th Cir. 1997), is not inconsistent with the Court's ruing in the present case. InChilders, the Ninth Circuit reasoned that city employees were exempt from overtime compensation under the FLSA, even though the city once suspended an exempt employee without pay for four hours. The court concluded that these facts did not render the appellants non-exempt under the FLSA. Furthermore, with respect to the one improperly suspended employee, the court found the "window of correction" available to restore the employee's exempt status. Id. at 946-947. In the present case, however, the Defendant maintained a policy that permitted disciplinary pay deductions "as a practical matter" and, in fact, had an "actual practice" of implementing that policy to reduce the pay of several employees. (Doc. #55 at 13-14). Consequently, the Plaintiffs were not exempt, and the "window of correction" did not apply. Thus, the present case is distinguishable from Childers on its facts, and the two rulings are not inconsistent.
In Balgowan v. State of New Jersey, 115 F.3d 214 (3rd Cir. 1997), upon which the Defendant also relies, the court concluded that the plaintiff employees were exempt under the FLSA. In reaching this conclusion, the Third Circuit noted that the defendant employer did not have an "actual practice" of making disciplinary deductions from the employees' pay, nor did the employer maintain an employment policy creating a "significant likelihood" of such deductions. Id. at 219. The court also stressed that "no engineer has ever suffered a reduction in pay under the policy. . . ." Id. In a final paragraph, the court reasoned that even if any employee's pay had been reduced improperly, the "window of correction" would preserve the employee's exempt status.
Once again, this Court does not dispute the Balgowan court's holding. Absent the State of New Jersey's adoption of a policy creating a "significant likelihood" of improper pay deductions, or an actual practice of making such deductions, this Court agrees that the employees in Balgowan were exempt under the FLSA. Given their exempt status, this Court also agrees that the State could have utilized the "window of correction" to restore the exempt status of any employee whose pay might have been improperly reduced. In the present case, however, the Defendants did maintain a policy making disciplinary pay reductions "significantly likely" and, in fact, have reduced employees' pay under the policy. As a result, the Plaintiffs are not exempt, andBalgowan does not contradict this Court's holding.
Finally, the Defendant cites Davis v. City of Hollywood, 120 F.3d 1178 (11th Cir. 1997). In Davis, the Eleventh Circuit engaged in a one-paragraph analysis, finding the "window of correction" available to the defendant, and therefore, reasoning that the employees did not "lose" their exempt status. Id. at 1180. Although Davis includes little reasoning, the Eleventh Circuit necessarily determined that the disciplined employees initially were exempt under the FLSA. Otherwise, the "window of correction" could not have prevented the "loss" of their exempt status. In the present case, however, the Plaintiffs are not exempt under the FLSA. Thus, Davis too is distinguishable. In any event, even assuming arguendo that the foregoing cases support the Defendant's position, in light of Auer and Martin, they do not demonstrate substantial ground for difference of opinion within the Sixth Circuit.
Equally importantly, the Court cannot agree with the Defendant's suggestion that allowing an interlocutory appeal would materially advance the termination of this litigation. Although the Defendant filed its Motion some time ago, the trial date for this litigation is now approximately one month away. As a result, essentially all pretrial discovery and preparation have been completed. Additionally, the Court already has determined that the Plaintiffs are not exempt from the overtime pay requirements of the FLSA. The only remaining issue for trial is the amount of damages due to the Plaintiffs. Consequently, the Court does not envision expensive and protracted litigation in this matter. Moreover, proceeding with a trial will only minimally delay the Defendant's ability to obtain appellate review of the "window of correction" issue. On the other hand, if the Court certifies an interlocutory appeal of the issue, a delay will result before the Sixth Circuit reviews the question, and given the Court's belief that the Sixth Circuit likely would follow Martin, the probable result of early appellate review would be affirmance and a remand to determine damages at a time far beyond the presently established trial date. Under these circumstances, considerations of fairness and judicial economy do not favor imposing prematurely upon the resources of the Sixth Circuit. The present case simply does not involve extraordinary circumstances warranting certification of an interlocutory appeal.
One other issue, the Defendant's status as an "employer" under the FLSA, also remains to be resolved. The Plaintiffs have moved for summary judgment on the issue. (See Doc. #88).
For the foregoing reasons, the Defendant's Motion for Certification of an Interlocutory Appeal (Doc. #83) is OVERRULED.
Pursuant the Court's November 16, 1998, Notation Entry on the Defendant's Motion for Extension of Time to Respond to Plaintiffs' Motion for Summary Judgment Directed to Defendant's Status as an Employer under the FLSA (Doc. #89), the Defendant is directed to respond, within fourteen days, to the Plaintiffs' Motion for Summary Judgment (Doc. #88) directed toward the Defendant's FLSA "employer" status.
The Court realizes that in its November 16, 1998, Notation Entry, it granted the Defendant twenty-one days to respond to the Plaintiffs' Motion for Summary Judgment, following resolution of the present Motion. Unfortunately, however, the rapidly approaching trial date for this litigation necessitates the Court's authorization of a shorter time. Otherwise, the Plaintiffs would be denied the opportunity to file a Reply memorandum prior to trial.