No. 80-236 IN THE SUPFW!lECOURT OF THE STATE OF MONTANA 1980

ROSEBUD COUNTY,Montana a body Politic and Corporate, Petitioner and Respondent,

LYNDON W. ROAN and LABOR STANDARDS DIVISION, Department of Labor & Industry, State of Montana, Respondents and Appellants.

Appeal from: DistrictCourt of the Sixteenth Judicial District, In and For the County of Rosebud,Montana Honorable Alfred B. Coate, Judgepresiding. Counsel of Record: ForAppellants: Lucas and Monaghan, Miles City,Montana A. Lance Tonn argued,Miles City,Montana James Gardner, Jr. argued,Dept. of Labor, Helena,

Montana For Respondent: John S. Forsythe argued,CountyAttorney, Forsyth,Montana

Submitted: November 24, 1980 Decided: 

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## 19BIMr. Justice Daniel J. Shea delivered the Opinion of the Court. Lyndon Roan, awage claimant, and the Department of Labor and Industry, appeal the decision of the Rosebud County District Court which reversed a ruling of the Department awarding Roan overtimepay as an employee of Rosebud County, and also reversing the penalty award for failure to pay the overtime. Lyndon Roan left the employ of Rosebud County on January 17, 1979. On February 3, 1979, he filed a claimwith the Department of Labor and Industry alleging that Rosebud County failed to pay him for 426.75 hours worked as overtime. At the hearing on June 21, 1979,Roan reduced his claim to 358 overtimehours. The hearings officer ruled that Roan had worked and was entitled to 277.25 hours worked as overtime between February 1, 1978 andAugust 21, 1978. The hearings officer also ruled that Roan's position with the County did not exempt the County from the duty to pay him overtime, although he ruled that from August 21, 1978 until the end of his employment, Roanwas a bona fide executive and the County had no duty to pay him overtime. Under section 39-3- 206,MCA, the hearings officer also ruled that the County must pay the penalty in the amount of the overtime wages owed. The overtime amounted to $2,606.50 and the penalty was $2,606.50, and this combined amount was awarded to Roan. The County appealed this decision to the Rosebud County District Court and there obtained a reversal of the Department's ruling. The County alleged in District Court that Roan's method of keeping track of his overtime hourswas inadmissible

as a matter of law and that absent this evidence, the award of overtime could not be sustained. The County also allegedthat the penalty was improper as a matter of law, in essence arguing that the County acted in good faith and therefore was not subject to the penalty provision. The District Court ruled that the calendar on which Roan kept track of his overtime hours was properly admitted at the agency hearing to prove his overtimehours. It also appears that the District Court found nothing wrong with the method by which Roan proved the overtimehours worked. But the District Courtnonetheless ruled on three separate grounds that Roan was not entitled to collect overtimepay. Although not necessary to its decision reversing the award of overtime, the District Court also ruled that the County had acted in good faith,and therefore, that the penalty provision under section 39-3-206, MCA, cannotbe enforced. We attempt here to summarize the District Court's rulings that Roan cannot collect overtime. First, the trial court ruled that Roan failed to demand the overtime at the time he did the work and that he failed to fill out the overtime forms, and therefore is precluded from collecting overtime. Second, Roan cannot collect overtime because "there is no evidence that the employer ever demanded, requested or even suggested that the employee work any overtime 

# .

# .." On this ground, the DistrictCourt ruled that because Roan had never been directed towork the overtime hours, and in doing it anyway Roan had illegally created his

own employment contract. Third,without analyzing the required factors, the District Court ruled that Roan was at all times a bona fide executive and therefore, exempt from application of the overtime laws. Fourth, althoughnot necessary to its decision, the District Court ruled that the County did not have to pay the statutorypenalty under section 39-3-206,MCA, because the coun'tyhad acted in good faith.Both Roan and the Departmentof Labor and Industry appeal from these rulings reversing the order of the agency. The County also alleges that the trial court erred in ruling that Roan's calendarwas properly admitted to prove overtime hours. We note that when the County appealed to the District Court, Roan also appealed from the ruling of the hearings officer that Roan became a bona fide executive on August 21, 1978 and therefore could not collect overtime wages between then and January 17, 1979,when his employment ended. But Roan does not raise this issue in this appeal. Roan's status as an employee of Rosebud County centers around three time periods: First, from February 1, 1978 to March 14, 1978, when hewas employed as a mechanic and was paid a monthly salary of $1,022per month. He was one of two mechanics in the shop and he was supervisedby Virgil Ferris, the county road foreman. Second, fromMarch 14, 1978 toAugust 21, 1978,when Roan acted as foreman of the county shop and supervised,to an extenbthework of one mechanicrandalso supervised 20 to 25 percent of the time of a secretarywho divided her time between county shop matters and county road foremanmatters. Roan's salary as foreman

was increased by $50per month to $1,072per month onApril 1, 1978 and on July 1, 1978,Roan's salarywas increased another $50per month to $1,122per month. His salary increase amounted to a 5percent higher salary than the othermechanic who worked in the shop. Third, the period betweenAugust 21, 1978,when a third mechanic startedworking in the county shop,and January 17, 1979,when Roan's employment ended. The hearings officer ruled that Roan was not a bona fide executive until August 21, 1978,and therefore that between February 1, 1978 andAugust 21, 1978, the Countyowed him overtime for all overtime hours worked during this period. The DistrictCourt's ruling is unclear as to when Roan became a bona fide executive,but it is clear to the extent that Roan was effectivelydeclared a bona fide executive for all of the time periods inwhich he claimed overtime. LyndonRoan started working for Rosebud County in November 1977when hewas hired as a truck driver. His employmentended on January 17, 1979. As a truck driver, he

was paid anhourly wage plus time and a half for overtime. Threemonths later, on February 1, 1978, the county commissioners hired him as a mechanic and changed his pay to a monthly salary. Roan was then one of twomechanics in the shop who had the duty of maintaining about 75 vehicles and assorted pieces of heavy machinery belonging to the County. The repair shop also housed the office and general headquarters of the road and bridge supervisor. Roan and the other mechanic worked under the direction of the road foreman. Roan started at a salary of $1,022per month. Because the County had a policy of not paying overtime to salaried employees, the County did not keep hourly records for salaried employees. Salaried employees, including Roan,

were required to sign a handful of blank time sheetsand the payroll clerk later filled in these time sheets--apparently to the effect that each salaried employeeworked a 40-hour week. The county commissionerswere aware of and approved of this procedure. Roan, however, kept a record of his overtimehours by writing them on a calendar he kept at home. He did sobecause he thought he would stillbe paid overtime even though he was a salaried employee. Within two or threemonths of startingwork as a mechanic

on salary,Roan asked the county commissioners to be paid forhis overtime. He was told that the County did not payovertime to salaried employees. Later, he gave one of the county commissioners a list of the overtimehoursworked, but still the County did not pay him. Roan continued as a fulltimemechanic until March 14, 1978. On March 14, 1978, the county commissioners created the job of shop-foreman and hired Roan. They gave him a $50per month salary increasewhich put his salary 5 percent above the othermechanic in the shop. The shop foremanwas in charge of allmechanicwork in the shop. Although Roan started as shop-foreman onMarch 14,his salary increasedid not become effective untilApril 1. After his appointment as shop-foreman, Roan's day-today activities did not changemuch. He supervised to an extent, the other mechanic in that he told him which equipment towork on,but both mechanics independently ordered parts as needed. They had no discretion where they purchased parts; the county commissioners told them where to purchase them.Roan had no power to hire and fire,although on one or two occasions, the commissionersmay have relied in part on Roan's recommendationwhen more help was hired for the county road department. In addition to supervising somewhat thework of the othermechanic, Roan also supervised the work of a secretary who spent 20 to 25 percent of her time

on shop-related work. The remaining 75 to 80 percent of her timewas spenton county road department matters and shewas directed by Virgil Ferris, the county road foreman. During times of equipment breakdown or bad weather, road crew employees stayed at the county shop and did minor repair and mechanical work 

### on their equipment. But Roan had

no control over these employees; the county road foremandirected their activities. This situation continued until August 21, 1978, when the county commissioners hired a third mechanic for the shop. Itwas only then that Roan actually began supervising thework of at least twomechanics and devoting more than 50 percent of his time to supervisory work rather than mechanic work. Roan continued to direct 20 to 25 percent of the secretary's time. Roan's employmentwith Rosebud County ended on January 17, 1979. In early February 1978,Roan filedwith the Department of Labor and Industry, an overtimewage claim against the County. For the period between.February 1, 1978 and March 

### 14, 1978, the hearings officer ruled that Roan was a fulltime mechanic and was entitled to overtime for this period. For the period between March 14, 1978 and August 21, 1978, the hearings officer ruled that although Roan was a foremanmechanic with some management functions,he was not a bona fide executive within themeaning of the regulations and was also entitled to overtimepay for this period. But for the period between August 21, 1978 and January 17, 1979, the period during which a third mechanic worked in the shop, the hearings officer ruled that Roan was a bona fide executive and was not able to collect overtime. The hearings officer ordered that Roan be paid for 277.25 overtime hours, which translated into $2,606.50, and also ordered the County to pay the statutorypenalty in the same amount,as provided for in section 39-3-206,MCA. We emphasize first that the trial court impliedly upheld the sufficiencyof the evidence to establish the number of overtime hours worked. Roan introduced a calendar into evidence which contained his record of overtimehours worked during his employment with the County. In addition,several witnesses supported his testimony that he worked overtime. The trial court, over the Court's objection, upheld the introduction of this calendar into evidence. The County now asks us to reverse the District Court on this ruling. The ruling was correct. Where the employer fails to keep adequate records of an employee's hours, it ispermissible for the employee to introduce his own evidence of the hours worked. Garsjo v. Dept. of Labor and Industry (1977),172 Mont 182, 189, 562 P.2d 473, 476. Therewe set out the policy on introduction of employee evidence to support a wage claim, and this case creates no violation of that policy. The testimony and evidence was clearly admissible. The first ground onwhich the trial court reversed the agency ruling appears to be because Roan had not filed

an overtimepay claimwith the County for each pay period and because he did not claim any overtime until the end of his employmentwith the County. We are aware of no law

(andthe trial! court cited none) thatpermits such a ruling. The trial court cited regulationM.A.C. section 24-3.14BII(38) -S14320(2) (1979),now A.R.M. 24.16.2505 (2)

### , in support of its ruling, but did not saywhat it is or attempt to apply it to the facts. This regulation states onlywhen overtime must be paid by the employer,but it does notmake liability for overtime compensation contingenton the employee submitting records of time worked. Itdoes not support the trial court's ruling cutting off liability for overtime because a claim

was not submitted. Furthermore, the trial court cited and quoted from cases that do not support the trial court's ruling. See, Gahagan

### v. Gugler (1935),100Mont. 599, 52 P.2d 150;~irtz

v. Harrigill 

### (S.D.Miss. 1963), 214 F.Supp. 813; Jackson

### v. Derby Oil Co. (1943),157 Kan. 53, 139 P.2d 146. Thesecases discuss recordkeeping requirementsof employers and employees and have nothing to do with the proposition for which they are cited. The duty of the employer to keep a record of an employee's time is set out in regulationM.A.C. section 24-3J4BII(50)- S14670 (1979),nowA.R.M. section 24.16.61(01). The County claims itdid not keep a record of Roan's hours worked because itdid not pay overtime to salaried employees and so therewas no need to keep the records. But the duty to keep records is that of the employer and the employer fails to keep the records at its own peril. If it later turns out that the employer is exempt from recordkeeping requirements, that is one thing; but it is yet another if it turns out that the employer thoughthewas exempt but in facthas not exempt. Here, the County attempted to qualify Roan as a bona fide executive and therefore exempted itself from recordkeeping requirementsas well as a duty to pay overtime. But the Countywas wrong. Although the issuewas not raised by the parties in the appeal to the District Court from the agency ruling, the second ground onwhich the court reversed the agency order isbecause "thereisno evidence that the employer ever demanded, requested or even suggested that the employeework any overtime except for Exhibit E at p. 5 [not involved in the issues on appeal.]" The court cited and paraphrased regulationM.A.C. section 24-3.14BII(14)-S14040 (1979),now A.R.M. section 24.16.1002, to the effect that "hoursworked" must be shownby the employee as hours that he "is -required to be on duty on the employer's premises." (Emphasisadded.) 

### ------ In effect, the District Court reversed the agency ruling because Roan had not proved at the hearing that the Countyhad ordered him to work overtime, even though that was never

an issue before the agency. The court ruled that Roan worked the overtimehours to suit his own convenience rather than to further the demands of his employer. The County neither raised this issue before the hearings officer nor in its appeal to the District Court from the agency ruling. Although the District Courts do not have to blind themselves to issuesnot raised by the parties,we do not think this is the kind of issue on which a reversal should be grounded if it was not raised before the hearings officer or before the District Court by the County. It is unfair to permit the County to take advantage of this ruling where it never raised the issue in the first instance. We hold, therefore, that the County waived any right to take advantage of this ruling by not first raising itbefore the hearings officer. Aside from the waiver holding, the record establishes that the County knewRoan was working overtime and that Roan had to work overtime to get the mechanic work done. If he did not onmany occasions come to work an hour earlier in themorning and leave work an hour later in the evening, the equipmentwould not have been ready for the road crew when they arrived at 8:00 a.m. The demands of the job required that Roan work overtime. The county commissionersknew that Roan worked overtime and at no time directed him to stop working overtime; theywere quitewilling to reap the benefits of Roan's overtime work, but balked only when he asked to be paid. We cannot adhere to a rule as imposed by the District Court which arbitrarily denies overtime unless the employer expressly ordered the employee to work overtime. Such a rule would effectively defeat many legitimate overtime wage claims.Here, twomechanics were required to maintain a fleet of 75 pieces of equipment. Roan felt that his supervisors required him to do all things necessary to keep this equipment running. His early arrival and late departure from work was his effort to fulfill the terms of his employment rather than an attempt to create his own employment contract. The thirdmechanic, who was hired onAugust 21, 1978, testified that he came towork early in the morning so he could do the mechanical work needed to have the equipment ready by 8:00

a.m. when the road crew operators came to work. To offset this 7:00 a.m. arrival, the third mechanic left work an hour earlier in the afternoon. But until the third mechanic was hired, Roan performed this earlymorning function as well as often remaining after 5:00 p.m. in the evening. The county commissionersdid not object to Roan putting in the extra time to keep the equipment operating; their objections came only when he claimed compensation for these compensation hours. Under these circumstances,the commissionersare in

no position to complain. They willingly reaped the benefit of Roan's overtimehours. The trial court's ruling onwhether Roan was a bona fide executive is also difficult to understand. It appears to be a two part ruling: First, that Roan should be judged

on the "sole charge" exception set out in regulationM.A.C. section 24-3.14BII (2) -S1450(13) (1979)

## ,nowA.R.M. section 24.I6204(13). But assuming the trial court to be correct, itdid not explain why Roan fit into this "sole charge" classification. Further, the trial court neglected to apply the remaining criteria of the regulation which still must be satisfiedbefore one can be classified as a bona fide executive.Second, the trial court ruled that the supervisionof other employees requirement in the regulation, is satisfied if the employee "had two employees under his supervision" and that itdid not have to be the same two employees. It appears the court ruled that Roan supervised a mechanic and

a parttime secretary,and therefore, fulfilled this requirement. The trial courtproperly quoted the test to be whether the employee's duties "includesthe customary and regular direction of the work of two ormore other employees therein

# . .." But, in ruling that Roan fit the test, the court ignored another regulation furtherdefining this test. Regulation M.A.C. section 24-3.14BII(2)-S1450(5) (1979),nowA.R.M. section 24.16.204(5), requires that the employee must "customarily and regularly supervise - at least two fulltime employees 

### -- or the equivalent." Until August 21, 1978, when the third mechanic was hired, Roan did not meet this requirement.Further, assuming that Roan did superviseat least

"two fulltime employees or the equivalent",he still could not be classified as a bona fide executivebecause regulation M.A.C. section 24-3.14BII(2)-S1450(3) (1979),nowA.R.M. section 24.16.204(3), further requires that this supervision be the primary duty of the employee. The testimony establishes that untilAugust 21, 1978,Roan devoted less than 50 percent of his time to management responsibilities; that is, he devoted more than 50 percent of his time to his ownwork as
a mechanic. Until August 21, Roan's secondary duty was management and his primary duty was work as a mechanic. Still another reason we must reverse the District Court isbecause it applied the "shorttest"but should have applied the "long test" in determining whether Roan was abona fide executive. Both tests are in regulationM.A.C. section 24-3.14BII(2) -S1420 (1979) 

### ,nowA.R.M. section 24.16.201. The "short test" is the lastparagraph of this regulationand applies if the employee is paid a salary of at least $200per week, exclusive of board, lodging, or other facilities

# . . .I1 Although Roan made well in excess of $200a week in salary, this "short test" is qualified by regulationM.A.C. section 24.3.14BII(2)-S1450(19) (b) (1979),

nowA.R.M. section 24.16.204(19) (b),which expressly exempts mechanics (amongother trades) from the short test "no matter how highly paid theymay be." Therefore, the short test cannot apply to Roan who is a mechanic. We note that the hearings officer also erroneously applied the "shorttest" in determining that Roanwas not a bona fide executive until August 21, 1978. But therewas no prejudice to the County because the short test ismore favorable to the employer than is the long test. Where the long test applies, in addition to the factors set out in the short test, the employer must prove additional facts before the employee can be classified as a bona fide executive. See, Garsjo, supra, 172Mont. at 185, 562 P.2d at 474-475, where we list the factors in the regulation that must be considered. Two factors are common to the long test and the short test. First, itmust be the primary work of the employee to manage and supervise rather than to perform thework itself. Second, the employee must customarily and regularly direct two ormore employees. We have already ruled that the employer failed the short test and he also must fail the long test for the same reasons. Because the employer has clearly failed these two factors in the long test, there is no need to set out and apply the additionalrequirements of the long test. Finally,we reverse the DistrictCourt's ruling that the penalty provision of section 39-6-206,MCA, does not apply. The opinion is again unclear, but seems to be primarily based on the court's conclusion that the County acted in good faithand therefore the penalty cannotbe imposed. The court cited and quoted from Glick v. State,Montana Dept. of Institutions (1973), 162Mont. 82, 94, 509 P.2d 1, to the effect that an employer's demonstration of good faithwill defeat imposition of thepenalty. But, Glickwas not a case arising under Montana's wage claim statutes; rather, it was

a case arising under the Fair Labor StandardsAct and this Act expressly states that liquidateddamagesneed not be awarded if the employer is found to be in good faith. On the other hand, section 39-3-206 expressly provides that the penalty "shall"apply if a violation is found. This statute leaves no discretion to determine whether the employerwas in good faith, because even if the employer was in good faith, the finding of a violation requires imposition of the penalty. It also appears that the District Court ruled that the penalty against the Countywas unjustified for two more

reasons. First, Roan's claimwas unjustified because he originally claimed 426.75 overtime hours but at the agency hearing on June 21, 1979,he reduced his claim to 358 overtime hours. The court ruled that Roan's initial claimwas

an unjustified claim that therewas no duty of the County to pay itand therefore the first time therewas a demand for payment was on June 21, 1979,when Roan reduced his claim to 358 hours. Second, the court ruled that section 7-6-2421, MCA, provides the only method for collecting claims against a county and Roan had not filed a claim for overtime pay on a proper claim form, nor had the County rejected the claim. -14-Therefore,the court ruled that "theaward of a penalty against the County isunjustified." We know of no law exempting the County fromhaving to pay a penalty for failure to pay overtime,and that is precisely the effect of the trial court's ruling. Roan properly filed an overtime claimwith the Department of Labor and Industry--the Department ruled in his favor and awarded him overtime and the statutorypenalty. Section 39- 3-206, MCA makes no exceptions for failure to pay wages and

wewill not create one by holding either that the employer was in good faithor that Roan had not properly followed the procedure forprocessing a claim against the County. The wage and hour laws of this state do not require an employee to exhaust his remedies against the county government before he can filea wage claim with the Departmentof Labor and Industry or by filing a claim directly in DistrictCourt. The decision of the District Court is reversed and the order of the Department of Labor and Industry is reinstated. This cause is remanded to the District Court for further proceedings consistentwith this op

ice We Concur:

/chief JustJustices to January 5, 1981. -15-