Title: GLICK v MONT DEPT OF INSTITUTION

State: montana

Issuer: Montana Supreme Court

Document:

No. 12326 I N T H E S U P R E M E C O U R T O F THE STATE O F M O N T A N A R O B E R T ELMER GLICK, et a l . , P l a i n t i f f s and Respondents, THE STATE O F M O N T A N A , ACTING BY AND THROUGH THE M O N T A N A D E P A R T M E N T O F INSTITUTIONS, Defendant and Appellant. Appeal from: D i s t r i c t Court of the F i f t h J u d i c i a l D i s t r i c t , Honorable John B. McClernan, Judge presiding. Counsel of Record: For Appellant : Hon. Robert L. Woodahl, Attorney General, Helena, Montana. Lawrence D. Huss and William N. Jensen, Assistant Attorney Generals argued, Helena, Montana. For Respondents: Corette, Smith and Dean, Butte, Montana. Kendrick Smith argued, Butte, Montana. Submitted: February 26, 1973 Decided: APR 9 - 1973 Filed: APR 3 - 4 9 7 3 M r , Justice John Conway Harrison delivered the Opinion of the Court. This i s an appeal from a judgment entered for plaintiffs i n the d i s t r i c t court of the f i f t h judicial d i s t r i c t , Madison County, and against defendant State of Montana, The judgment was i n the amount of $489,289.36. Plaintiffs are twenty-six employees of the Montana Children's Center. They filed a complaint on June 25, 1969, seeking t o recover wages and overtime allegedly due t o them - under the Federal Fair Labor Standards Act for a time period between February 1, 1967 to January 31, 1969. The complaint consisted of twenty-six counts, one for each plaintiff. A n amended complaint was filed stating causes of action under both state and federal law; l a t e r the f i r s t cause of action under s t a t e law was withdrawn. The matter was argued before two d i s t r i c t judges resulting i n the granting of a limited summary judgment by Judge Frank Davis. Judge Davis found plaintiffs were entitled t o the benefits and protection of the Fair Labor Standards Act, That decision was appealed to t h i s Court which sustained the t r i a l court's decision on l i a b i l i t y and returned the cause t o the d i s t r i c t court for de- termination of the amount due each plaintiff. Glick v. State of Montana, 157 Mont. 204, 485 P.2d 42. Thereafter, the d i s t r i c t court s i t t i n g without a jury on January 3 and 4, 1972, heard the testimony presented and took the matter under advisement. On February 7, 1972, the court issued i t s findings of fact and conclusions of law. Thereupon, defendant State filed consolidated motions to amend the judgment and for a new t r i a l . Upon denial of its motions, it now appeals. Four issues are presented for review: 1. Did the court e r r i n its findings as t o the number of hours worked by each plaintiff t o include an average of eight hours overtime ? Did the court err computing the "regular rate pay" under the Fair Labor Standards Act? 3, Did the court err in finding liquidated damages which i n effect doubled the award? 4. Did the court err i n awarding attorney fees i n the amount of $140,000? To properly consider the f i r s t issue it is necessary t o consider the original employment agreement. That agreement varies between male and females only insofar a s some of the male plain- t i f f s did s h i f t s a s night watchmen a s part of their duties, and those additional hours must be compensated for, Typical of those who worked a t the Children's Center are p l a i n t i f f s Glick. Mr. Glick t e s t i f i e d that he sought employment for himself and h i s wife i n 1964. He was interviewed by M r . Finch of the Children's Center, Glick i e s t i f i e d a s t o the periods of employment on the basis of a twenty-four hour day, and that "we was allowed one part of one day, we'll say, from I think it run from 7 o'clock i n the morning u n t i l we 9 o'clock a t night i n one weeklwere allowed that off, and the next week we w e r e allowed from 7 o'clock i n the morning u n t i l a l l that day and a l l that night u n t i l 7 o'clock the next night off." Later during the period i n question, from 1967 t o 1969, a s houseparents the Glicks got Monday and Sunday off. M r . Balkovatz, superintendent of the Children's Center, t e s t i f i e d a s to the work hours and conditions: "* * * I was not directly involved i n the inter- viewing of each and every one of the individuals, but I instructed m y s t a f f upon interviewing these people that they were t o instruct them specifically that they would have t o l i v e in, they would have two days off a week, that they would be required t o l i v e i n for 24 hours, and also they would be instructed too that they would have a two-hour rest period during the school hours o r during the 180 school days; and we also told them that i n the summer i n the event we were able t o provide additional staffing t o augment our program we would remove the children from t h e i r cottage and t h i s would give them additional free t i m e , " H e also t e s t i f i e d that i n h i s opinion each employee averaged about two hours off a week over and above sleep time and the two normal hours off each day. Some of the plaintiffs had been employed over twenty years, while others began their employment i n the 1950's and 1960's. A l l had similar working conditions, a s set forth above, and none of them had kept records. The State likewise had no provision prior t o February 1, 1969, t o record the actual hours worked, as the employment agreement was for a twenty-four hour day. A t the completion of the State's case, counsel for both plaintiffs and defendant entered into the following stipulation offered by plaintiffs' attorney as to those plaintiffs not t e s t i - f ying . "* * * w e would now ask counsel for the State t o stipulate that i f the other Plaintiffs were called, they would testify i n almost the same way a s Mrs. Moore, that they had 8 hours of effective sleep and during the daytime hours had one hour of free time available only during school days, and that i s the only effective time off that they would testify they had during these periods * * *," The t r i a l court found plaintiffs worked an average of sixteen hours per day, and night watchmen worked sixteen and two- tenths hours per day, on a five day week. The testimony given by Stewart Moore, Margaret Moore, Harry Helton, and the Roslings, reveals the t r i a l court erred i n setting the t o t a l work week a s eighty hours per week, plus ane hour extra for those who performed , night watchman duty, The sum t o t a l of the evidence shows work weeks running from sixty-five to seventy-five hours per week, which would average closer to seventy hours per week. Due t o t h i s obvious error i n the record, the case must be returned t o the d i s t r i c t court for recomputation. W e note that on recomputation, the record indicates as to night watchman time the plaintiffs did not perform these duties far the l a s t six months of the di~puted~period, ~efendant's second issue relates t o the t r i a l court's method of determining the regular r a t e of pay under the provision of the Federal Fair Labor Standards Act, The issue involves a novel question of the relationship between the Fair Labor Standards Act and ~ o n t a n a ' s constitutional provision for an eight hour day, and statutory provision for an eight hour per day work day, The formula adopted by the trial court was: Monthly wage x 1 2 month year i 52 weeks = Weekly wage. Weekly wage 3 40 hrs/wk = Regular r a t e of pay. Defendant State argues the court erred in using an a r t i f i - c i a l base of forty hours a s a divisor i n determining the regular r a t e of pay. Further that Fair Labor StandardsAct cases must be computed i n accord with the decisions of the various federal d i s t r i c t courts, circuit courts of appeal, and the United States Supreme Court, and these court decisions have adopted, i n an unbroken series of cases, the following formula to establish the regular r a t e of pay: Monthly wage x 1 2 moIyr 52 weeks/yr = Weekly wage. Weekly wage ; Actual no hrs workedlwk = Regular r a t e of pay. W e note both formulas are the same i n determining the weekly wage, but that i n determining the regular hourly rate, by using the actual number of hours worked,the regular r a t e of pay decreases as the number of hours worked increases. Defendant c i t e s and r e l i e s upon leading United States Supreme Court cases for setting forth the c r i t e r i a for the above formula. Overnight Motor Transport Co. v. Missel, 316 U.S. 572, 62 Sect. 1216, 86 L ed 1682; Walling v. Helmerich & Payne, Inc., 323 U.S. 37, 65 S.Ct. 11, 89 L ed 29; Bay Ridge Operating Co, v, Aaron, 334 U.S. 446, 68 S,Ct. 1186, 92 L ed 1502, However, a s noted by plaintiffs, the above citations do not consider the question considered here by the d i s t r i c t court -- a s t a t e with an eight hour constitutional provision plus a statutory provision so providing. Plaintiffs argue the Federal Fair Labor Standards Act provides a minimum base and that states can give greater benefits t o the workers of their state. In support of their position plaintiffs1 argue that the court's finding No. 4, relying on Montana's Constitution and statute is controlling. The d i s t r i c t court's finding No. 4 reads: "4. Qn the issue of the hourly wage rate, the Court finds and determines that by reason of the provisions of the Constitution of Montana (Mont, Const. ART, X V I I I , Sec.4) and by reason of the Montana Statute, R.C.M. 1947, Sec. 41-1121, a period of eight hours a day constitutes a day's work i n a l l employments and particular1 i n a l l employments by any s t a t e government * * *. x Article XVIII, Sec. 4, of the Montana Constitution, reads : "A period of eight hours shall constitute a daqs work i n a l l * * * employments,except farming and stock raising. 'I Section 41-1121, R,C.M. 1947, provides: "A period of eight hours shall constitute a day's work i n a l l works or undertakings carried on or aided by any * * * s t a t e government. 11 Plaintiffs c i t e and rely on a recent case from N e w Jersey, State v. Comfort Cab, Inc,, 118 N,J.Super, 162, 286 A.2d 742, 748, The facts there concern the Fair Labor Standards Act a s applied t o cab drivers, but much of what was considered there is applicable here i n our interpretation of what is "maximum work week" and "overtime rates1' where there i s a s t a t e law controlling. There the court held: "The federal act, 29 U,S.C,A. 5 218(a), mandates compliance with a s t a t e maximum workweek requirement lower than that s e t by the federal act, Though 'work- week' is not defined i n the federal act, it is clearly the intent of the Congress that a lower s t a t e maximum hour regulation, creating an overtime arrangement mare favorable t o the employee than that contained i n 5 207 of the federal act, should prevail, Such an inter- pretation is dictated by the plain meaning of the statutory language. 'Haximum workweek' does not i n fact l i m i t the number of hours an employee may work. Missel v, Overnight Motor Transp,Co,, 126 F.2d 98, 104 (4 C i r , 1942), aff'd 316 U,S. 572, 62 S,Ct, 1216, 86 LoEd. 1682, rehoden. 317 U.S. 706, 63 Sect. 76, 87 L, Ed. 563. It must refer t o that number of excess hours worked for which an overtime r a t e must be paid, This conclusion is further evidenced by the utilizstton .DT the term 'workweek' i n 29 U,S.C,A, 5 207, where it is used i n reference t o the number of hours worked i n excess of which the overtime r a t e must be paid. See, e.g., 29 U.S.C.A. 5 207(a)(2)(A). The term 'maximum workweek' i n 29 U.S.C.A. 8 218 (a) i s thus synonymous with maximum hour/overtime. Accordingly, the require- ment of 29 U.S.C.A. $218(a) that a lower s t a t e maximum workweek be enfarced mandates the enforcement of a s t a t e maximum hours/overtime provision more favorable t o the employee than that set by the federal act. Since, a s indicated, t h i s State's maximum hour/overtime provi- sion (N,J,S,A. 34:ll-56a4) does so favor employees, that statute is applicable to defendant's non- driver employees for the period February 1, 1967 to December 25, 1968, and the court has jurisdiction over violations thereof," Here, as in New Jersey, we have constitutional and statutory authority on the eight hour day that cannot be disregarded, While we give no credence to plaintiffs' argument that as a result of the bringing of this action the State began to computerize its payroll and the children's Center became the first institution to be so handled. However, commencing February 1, 1969, when the computer payroll went into effect, it is not denied that each employee was paid on a basis of a forty hour workweek and for time and a half on hours worked in excess of forty, We find this formula is proper in computing the overtime compiled during the two year period from February 1, 1967 to January 31, 1969. Defendant's third issue is directed to the trial court's granting liquidated damages against defendant. The trial court's finding of fact No. 6 reads: " 6 . O n the issue of liquidated damages, the Court finds and also concludes that under the Fair Labor Standards Act, when there has been a determination of the amount of total wages due, less wages received, then the amount of net wages due should be inserted in the form of the Exhibit attached hereto and marked Exhibit "Bt' and then and when that has been done, a like and equal amount must be inserted in said form as liquidated damage in line 2 near the bottom of said Exhibit "B", The Court finds and determines that liquidated damages are required and are not a matter of discretion because the State of Montana has not shown any good faith in failing to pay these Plain- tiffs for their overtime work. O n the contrary, the Court finds that the State of Montana chose to ignore and did ignore the statement or advice given by M r . Donald Drew, Field Office Supervisor, United States Department of Labor, Wage and Hour and Public Contracts Division of Salt Lake City, Utah, dated March 7, 1967, which specifically advised that the 'Act would apply to all employeest of Montana children's Center. The ignoringanddisregarding of this advice and the failure by the State and the Department of Institutions to do anything further until February 1, 1969, is an indica- tion of positive lack of good faith and shows an eva- siveness which in its effect, constitutes bad faith in not paying these Plaintiffs at the Childrens' Center for their overtime work, Additionally, the Court finds that payments made by the Defendant on an eight-hour day and 40-hour week to employees at Pine Hills School and Mountain View School, would also indicate a positive lack of good faith and evasiveness and indeed bad faith in not paying these Plaintiffs at the Childrens' Center for their overtime work." Historically the Fair Labor Standards Act had no appli- cation to a state children's home. In 1966 Congress amended the Fair Labor Standards Act (29 U . S . C . 5 2 0 3 ( s ) ( 4 ) ) to include the operation of an elementary or secondary school whether or not operated for profit. The amendment became effective February 1, 1967. The record here indicates that at about that time M r . Gooch, Personnel Director of the Department of Institutions, began making inquiries of the federal wage and hour office, located in Salt Lake City, Utah, to ascertain whether the personnel at the Montana children's Center came under the Fair Labor Standards Act. Several telephone calls were made to the federal office but the question raised was not resolved nor did M r . Gooch get a definite answer. He testified: " Q . As a result of your contact with the Federal Wage and Hour officials, did you receive a definite answer as to whether or not the Montana Children's Center was covered by the Fair Labor Standards Act? A . No, I did not. " Q . Did a question arise subsequent to this conver- sation concerning the application of the Fair Labor Standards Act to the Montana Children's Center? A, Yes. " Q . Approximately when did the question arise to the best of your recollection and memory? A. It was a continual question from the time that the Fair Labor Standards Act first came to our attention. " Q . All right, what action subsequent to your initial contact with the federal officials was taken to re- solve the question one way or another? A, Several telephone conversations to Salt Lake City, where the Fair Labor Standards people are based. " Q . And was the matter ever finally resolved? A . I t never was resolved. They could not give me definite informat ion. " Q . Were any meetings held, excuse me, did you ever meet with representatives of the Wage and Hour Division? A, We had requested meetings but none were held until December of '68. "Q. And where was that meeting held? A . It was held here in Helena, or rather in Helena in the museum building. " Q . And who attended that meeting? A . We invited superintendents as a department to attend the meeting, the Labor Commissioner's office was in attendance, the University System was invited, the Budget Office, other State people who would be concerned with implementation of the Wage and Hour provision. "Q. And when was this meeting held again, the date, the approximate date, at least by month? A . To the best of my recollection it was in the latter half of December of 1968. " Q . Now at this meeting in late December, were representatives from the Wage and Hour Division of the Department of Labor in attendance? A . Yes, Mr. Donald Drew was in attendance. "Q. Were any representatives of the over nor's office in attendance? A . I don't recall. "Q. What was the result of this meeting? A . I don't know if I could comment on the result. Well, I guess I could. The result af the meeting was to advise us, let me say the meeting was held to advise us of wage and hour provisions and their application,and the result of the advisement was that they were in- structed at that time that definitely the Children's Center would be a covered agency. "Q. This was in late December, 1968? A . Yes, sir. "Q. Was this the first knowledge that you yourself, and t o the best of your recollection the Department of Institutions had that the Montana Children's Center was covered by the Fair Labor Standards Act?" At this point there was considerable discussion as to whether or not this was the first knowledge, timewise, of this coverage, but the following testimony was later brought out in direct examination: "Q. Generally does the Board of Institutions, through the Director, require you to handle personnel matters relating ta State institutions as part of your job as Personnel Director? A, Yes, they do. " Q . During the period in question, February 1, '67, through January 31, '69, were you the representative of the Board at all proceedings concerning the wage and hour applications of the Fair Labor Standards Act to the various State institutions? A. Yes, I was. " Q . And during any of these meetings when you acted as a representative of the Board of Institutions prior I to the meeting of December, 68, were you ever advised as Personnel Director that the Montana Children's Center was covered by the provisions of the Fair Labor Standards Act? A . No, I was never so advised. "Q. Did you communicate with the Governor's office subsequent to the meeting held in December, '68, con- cerning application of the Fair Labor Standards Act? A . Yes, we did. "Q. You heard the testimony of Mr. Balkovatz in the intraduction into evidence of Executive Order 1-69 stating that it has been called to the attention of the Governor that the employees of the Montana Children's Center at Twin Bridges were not in compli8nce with federal wage hour legislation and federal law requires the institution t o be i n compliance no l a t e r than February Ist, 1969, are you familiar with that Executive Order? A. Yes, I am. t t Q. A s a result of that Executive Order, to the best of your knowledge did the Montana Children's Center come into compliance with the provisions of the Fair Labor Standards Act? A. Yes, they did." Some emphasis i s made by plaintiffs directed t o the l e t t e r of M r . Gooch, dated March 3, 1967, several months a f t e r the Act bcame effective, to a M r . Donald Drew, the administrator of the Act ' i n ' ' t h i s area, wherein he asked: "SITUATION The law specifies 'Educational Institutions' are included as covered agencies. W e have an institution that has the primary ob- jective of caring for dependent and neglected children, however, encompassed within this insti- tution's program i s education on the elementary and secondary level. "QUESTION: Would that portion of the institution that is involved i n the education process be con- sidered a s being subject t o the act? I f so, would it include such positions that are not directly involved i n the teaching process, but supportive thereof, such as clerks, janitors, etc. "We w i l l appreciate your consideration of t h i s request. I t Plaintiffs' Exhibltt "7" shows that on March 7, 1967, an answer was received from M r . Drew, which said: "If the educational program does constitute an elementary and secondary school as determined under State law, that Act would apply to a l l employees of the units. Lacking f u l l details on the program i n question, I cannot render an opinion. I f you wish to submit further informationh I w i l l give the matter additional consideration, The record indicates, and Mr,Gooch testified, that he understood the ward "units" to mean educational units located a t the Center and that u n t i l Executive Order 1-69, the Act did not apply t o the entire personnel of the institution, Personnel within the educational program w e r e put under the Act. These are not facts indicating a lack of good faith,much less do they indicate as the t r i a l court found, a "positive lack of good f a i t h and shows an evasiveness which i n its effect, con- s t i t u t e s bad faith," In our opinion the test for a determination of what constitutes good faith is found in Snelling v . 0 . R . Service Garage, Inc., (E,D.Ky. 1970), 311 F.Supp. 842, 846, where the court stated: "Left for determination is whether the plaintiffs are entitled to liquidated damages as provided for in section 16 of the Act. This is a fact question and must be decided according to the reasonableness of the defendant's decision not to pay minimum and overtime compensation. If the defendant in good faith reasonably believed the Act did not apply to his em- ployees then liquidated damages should be refused. The liquidated damage provision of the Act provides a mechanism whereby plaintiffs can be compensated for the withholding of a minimum wage which may have resulted in intangible damages concomitant with sub- standard living situations. Theoretically liquidated damages are compensatory, but whatever label is at- tached to such an award it cannot be gainsaid that it is a severe sanction. Prior to the Portal-to-Portal Act ok 1947, 29 U,S.C, section 260, liquidated damages were deemed-to be mandatory in all-minimum and o v e r : time compensation cases. [Cases cited] It became apparent, however, that such an onerous rule created wholly unexpected liabilities which threatened em- ployers with financial ruin and encouraged champertous suits involving employees who hoped to acquire a wind- fall. Accordingly Congress enacted the Portal-to- Portal Act of 1947 which authorized courts not to award liquidated damages where it appeared the employer had acted in good faith. Liquidated damages should only be granted where an oppressive employer, well knowing it has no defense to the application of the Fair Labor Standards Act, stubbornly retuses to comply with it. The facts of this case are not so clear cut m e defendant could not sincerely believe he was 1 t exempt . For cases citing examples of good faith see: Retail Store Emp. Loc.400 v . Drug Fair-Community Drug Co., 307 F.Supp. 473 (D~C. 1969); Martinez v. Phillips Petroleum Co., 283 F.Supp. 514 (Idaho 1968) ; Crago v . Rockwell Mfg. Co., 301 F.Supp. 743 (Penno 1969) ; Hodgson v . Daisy Mfg. Co., 317 F.Supp. 538, 554, (Ark. 1 9 7 0 ) . In HodgsonI the court speaking on the issue of good faith said : "This actian primarily involved an issue of law which was novel at the time the suit was commenced, in 1965, and concerning which this court has only recently been provided with binding precedent. The Third Circuit Court of Appeals * * * and more recently the Eighth Circuit Court of Appeals * * * have construed the word 'equal' as used in the Act, to mean 'substan- tially equal' as opposed to 'substantially identical.' This construction of one of the essential elements of the Act is contrary ta the meaning which might in good f a i t h be inferred by an employer from a f a i r reading of the legislative history of the statute * * *. The fact that the law as it applied to the defendant was unsettled for almost a l l of the five years t h i s s u i t has been pending i s clearly a factor bearing on the question of good faith, [Citing case] Few employers could satisfy a t e s t of good f a i t h i f required t o correctly anticipate judicial precedent. II Plaintiffs' counsel admits t h i s is a novel issue of law, one of f i r s t impression, and to hold defendant guilty of bad f a i t h is a manifest abuse of the t r i a l court's discretion, Defendant's f i n a l issue on appeal directs i t s e l f t o the award of attorney fees. Congress i n 29 U.S,C. Sec. 216(b), provided: "The court i n such action shall, i n addition t o any judgment awarded t o the plaintiff or plain- t i f f s , allow a reasonable attorney's fee to be paid by the defendant, and costs of the action. I I Here, counsel had a contingent fee contract arrangement with a l l plaintiffs that provided, according to counsel's testimony: "The Montana schedule adopted by the Bar Association for contingent fee arrangements is 25% of a contingent fee on the settlement; 33 113 a f t e r s u i t is brought i f settled; 40% i f tried; and 50% i f the matter goes to the Supreme Court. N o w t h i s has already been t o the Supreme Court, and for a l l I know it w i l l go again. W e do not ask for more than 40%, but w e do ask for that 40%. W e ask for it under the Fair Labor Standards Act, which specifically provides for the allowance of attor- ney fees i n the discretion of the Court and those attorney fees t o be paid by the State. A s I said i n m y opening statement t o the Court I a m not seeking and do not seek a duplication i n fees; but t o the extent that the Court w i l l impose upon the State of Montana the obligation to pay attorneys fees, to that extent the fees w e w i l l charge directly t o each Plaintiff w i l l be correspondingly reduced." The t r i a l court went the entire distance with counsel's request; it awarded 40% for attorney fees, amounting to approximately In view of our remand for modification of the amount of the award t o plaintiffs herein, the award of attorney fees must likewise be set aside and remanded for modification. In t h i s connection, w e note the Fair Labor Standards Act provides for an award of "a reasonable attorney's fee to be paid by defendant". In awarding attorney fees the d i s t r i c t court is not bound t o award attorney fees on the basis of the provisions of the con- tingent fee agreement between p l a i n t i f f s and t h e i r attorneys, but is entitled t o consider t h i s a s one of the factors t o be I t considered i n determining a reasonable attorney's fee" under the Fair Labor Standards Act. W e remand t o the d i s t r i c t court for that determination accordingly. The cause is remanded t o the t r i a l court for action not inconsistent with t h i s o p i n l k / \ Associate bustice j / / C h i e f Justice ................................. Associate Justices. ..... C . . . * . . . C M r . Justice Wesley Castles concurring i n part and dissenting i n part : I concur i n part of the majority opinion but dissent t o the Court's determination of Issue No. 2, that is a s t o the r a t e of pay, There is nothing "novel" about the question. The plain- t i f f s ' ra.te of pay was the weekly wage divided by the hours worked. That was the agreement; the only change came about by operation of law. I would reverse the d i s t r i c t court on that i t e m too. / /'- (kg. . I . - - - - 2 ; L r , Associate justice.