No. 13425 IN THE SUPREME COURT OF THE STATE OF MONTANA 1977

CARLYLE M. GARSJO, Petitioner and Appellant,

THE DEPARTMENT OF LABOR AND INDUSTRY OF THE STATE OF MONTANA, a Municipal Organization, and LORAINE HORNER, Defendants and Respondents.

Appeal from: District Court of the Seventeenth Judicial District Honorable M. James Sorte, Judge presiding. Counsel of Record: For Appellant: Robert Hurly argued, Glasgow, Montana For Respondents: Garden and McCann, Wolf Point, Montana Jerry M. Schuster argued, Wolf Point, Montana J. Mayo Ashley argued, Helena, Montana

Submitted: January 13, 1977 Decided: 

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Filed:

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## $7/Mr. Justice John Conway Harrison delivered the Opinion of the Court.

This isan appeal from the district court, Valley County, which affirmed a wage decisionby a hearings examiner in favor of Loraine Horner. CarlyleM. Garsjo, employer, 

### is the owner of the Rainbow Motel in Glasgow, Montana. Inmid-summer 1974, he hired Loraine Horner, employee, to operate the motel. The firstmonth she was employed on a trialbasis and paid by the hour. During this month she worked and was paid for 14hours per day. Atthe end of the trialperiod, she was hired full-time at $275 per month salary and an apartment atthe motel valued at$125 per month which she

was required to live in. During the term of the employment, employee's duties consisted of checking people inand out of the motel; attending the motel switchboard; keeping allof the motel records; doing a large part of the daily cleanup which included changing sheets, cleaning the rooms, doing the laundryi and other maintenance work. She was assisted inthe cleanup by a series of part-time maids. The employer came by every few days topick up the proceeds for deposit inthe bank. Employee kept the records atthe motel and the only hours she kept, after she became a salaried employee, were those hours she worked on her day off and forwhich she was paid overtime. In the fall 1974, employee asked for a raise and failing to get one filed a wage claim with the Montana Department of Labor and Industry. A hearing was held before a Department of Labor and Industry hearings examiner who found that employee (1) was not employed ina "bona fide executive

# ** JC capacity", 

### (2) was covered

### by the 

### Montana Minimum Wage and HoursAct; (3) was not paid the proper wage; and 

### (4)was due $2,267 in back wages. Employer appealed the ruling pursuant to section 82-4216, R.C.M.194?, the judicial review section of theMontana Administrative ProcedureAct. Inhis appeal to the district court employer raised the same issues he raises here: 1) Whether the Department of Labor's administrative regulations exceed the statutory authorization and are arbitrary and capricious. 2) Whether the live-inagreement is authorized by specific regulations promulgated by the Department. 

### 3) Whether there was a failure of proof. 

### 4) Whether therewere inadequate findings of fact. The district court ordered the employer to pay a 100% penalty and the employee's attorney fee. Employer also appeals from those orders. Issue 

### 1. Employer argues the regulationsas promulgated absolutely prohibit the employee frombeing an executive because she did not receive $150 per week and she did not direct the work of two or more employees,andare therefore unreasonable. TheMontana Minimum Wage and HoursAct provides at section

"The provisions of section 41-2303of this act shall

not apply to:

"(j) 

### Any individual employed in a bona fide

executive, administrative,or professional capacity as these terms are defined and delimited by regulations of the commissioner."The commissioner of labor has promulgated regulations which cover over 40 pages intheMontana Administrative Code interpreting this section of theAct. For the most part these rules

are a verbatim copy of the federal regulations (29 C.F.R. Part 541) promulgated to interpret the equivalent section of the Fair Labor Standards Act, modified tomake them compatible with the Montana statute.The regulations involved here areMAC 24-3.14BII (2)

# - S1420 and MAC 24-3.14BII (2)-S1450 (13). The firstrule defines "Executive" and reads as aplies here: "(1) The term 'employee employed in a bona fide executive

# *** capacity' in section 41-2304(j) of the Montana MinimumWage Law shall mean any employee: "(a) Whose primary duty consists of the management of the enterprise inwhich he is employed or of a customarily recognized department or subdivision thereof; and "(b) Who customarily and regularly directs the work of two ormore other employees therein; and "(c) Who has the authority tohire or fireother employees orwhose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status of other employees willbe given particular weight; and "(d) \ha customarily and regularly exercises discretionary powers; and "(e) Who does not devote more than 20 percent or in the case of an employee of a retail or service establishment who does not devote asmuch as40 percent, of hishours of work inthe workweek to activitieswhich are not directly and closely related to the performance of the work described in subsections (a) through (d) of this section: "Provided, That thisparagraph shallnot apply inthe case of an employee who isin sole charge of an independent establishment or a physically separated branch establishment, or who owns at least a 20 percent interest in the enterprise inwhich he is employed; and "(f) Who 

### is compensated forhis services on a salary basis at a rate of not less than $150 per week, exclusive of board, lodging, or other facilities

# ** *.I1MAC 

### 24-3.14BII(2)

### -S1450 (13) deals with the 

### ' sole-chargeexception' and states in pertinent part: "(a) 

### An exception from the percentage limitations onnonexempt work is provided inMAC 24-3.14BII(2)

# - S1420 subsection (e) for 'anemployee who is in sole charge of an independent establishment or a physically separatedbranch establishment

# ***'. Such an employee is considered to be employed in a bona fide executive capacity even though he exceeds the applicable percentage limitation on nonexempt work." This Court had held the Montana Wage and Hours Act constitutional and the specific section in question here was held not to constitute an unlawful delegation in City ofBillings v. Smith, 158Mont. 197, 207, 490P.2d 221,which sets out the test of the validity of regulations promulgated under the authority of section 41-2304(j), 

### R.C.M. 1947:

It* 

# ** suchpower is constitutionally exercisedwhere the definition formulatedby the administrator is within the limits laid down by the Congresswhich 

# *

# ** are marked out by the fair and naturalmeaning of thewords

'bona fide executive --- 

### -

# *** capacity.' (Emphasis added.) 

## his indicates that to find the power to have been unconstitutionally exercised, this Courtwill have to find the definitions of the Commissioner of Labor to be outside the fairand naturalmeaning of the words. SeeWalling 

### v. Yeakley,

# *

# * * 140 F.2d 830." The regulations attempt to set out specific objective and subjective criteriawhich are generally characteristic of an executive's job. Certainly an executive must manage as his primary duty, and it would be rare indeed to find an executive who did not direct two or more employees--employees he has the authority to hire and fire. The typical executive's job requires the exercise of discretionand he does executive type work as a substantial, if not exclusive,part of his job. Therefore, these regulations are logical and well within the boundaries of the fair and naturalmeaning of the word "executive".

### Here, employee does not fallwithin the requirements of subparts (a) through (e)

# ,MAC 24-3.14BII(2)-S1420,because she exercises little discretionand spends a substantial amount of her time doing nonexecutive work. InWilliams v. Corbett, 205 Ore. 69, 286 P.2d 115, 117, the Oregon court said: "Plaintiff's job was to clean the rooms,change bed linens, turn the mattresses from time to time, clean the windows, the hall and the lobby, take care of the lavatories and showers,and attend to the registering of guests. She kept themoney paid by the guests until the defendant called for it,but she did not order suppliesnor pay the bills. 

# * ***

"We do not think that the words 'administrative' and I

### executive', as they are commonly understood,may fairlybe said to comprehend the duties of the plaintiff. Those words suggest somethinghigher in the scale of employment than the calling of a maid-of-allwork, with the few additional responsibilitieswhichwe have described thrown in. 

# **

# *" The effect of the regulations set out above is that an employee who meets the requirements ofMAC 24-3.14BII(2)-S1420, subparts (a) through (e), is a bona fide executive and is excepted from theminimum wage and overtime provisions of the statute. If the employee 

### (1) spends over 

### 40% of her time doing nonmanagement work,but is in sole charge of an independent enterprise, (2) meets the requirements of subparts (a) through (d), and (3) ispaid more than $150per week, then there is also an exception to the general applicability of the wage and hour provisions of the statute. The logic of these regulations is clear. 

### A real full-timeexecutive doing executivework is given an exemption from the minimumwage and overtime provisions no matter what he is paid,but an executive who does a substantial amount of nonexecutive work forwhich the minimum wsge would have to be paid if done by another person,may
avoid the provisions of the Act only if the pay is high enough

assure that the minimum wage law is not being circumvented.

### In this case,assuming the hearings examiner's findings are correct and the employee worked a 

### 14 hour day, six days a 

### week, then the $150per week requirementworks out to approximately $1.80 per hour. This is certainlynot an outrageous rate ofpay for an executive. If the employee had been paid the $150 per week set by the 

### rule to avoid "subterfuge executives" and the only difficulty would be the two employee requirement, then the employer's argument that as applies to this employee the regulation is unreasonablemight carry someweight. But where, as here, the employee does not do a substantial amount of executivework, it 

### does not. The regulations are reasonable. Issue 2. The employer argues that 

### MAC 24-3.14BII (14)- S14090,which speaks in terms of allowing reasonable agreements applies here. That regulation interprets the term "hours worked'' and speaks of reasonable agreements as to computation of overtime where the employee is required to 

### reside at the place of work. The cases interpreting the equivalent federal rule indicate that the regulation concerns agreements for computing compensation for overtime actuallyworked, or in excess of those hours actually worked. Case lawholds that an employee may not enter into an agreement which operates to waive compensation for overtime actually worked. Skelly Oil Co. v. Jackson, 194Okl. 183, 148 P.2d 182, Travisv. Ray, 

### 41 F. Supp. 

### 6. That regulationdoes not apply here. 

### Issue 3. 

### The employer argues therewas a failure of proof. The section under which appeal to the district courtwas taken, section 82-4216(7), R.C.M. 1947, sets out the standard of review of the evidence:"The court shallnot substitute itsjudgment for that of the agency as to theweight of the evidence on questions of fact. 

# * * * The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions or decisions are:

"(e) clearly erroneous inview of the reliable, probative and substantial evidence on the whole record." Here, employer did not keep records required by law and which could have easily supplied the needed information. InAnderson

v. Mt. Clemens Pottery Co., 328 U.S. 680, 66 S.Ct. 1187, 90 L ed 1515, 1523, the United States Supreme Court ina Fair Labor Standards Act

case discussed this difficulty:

'I* 

# * * where the employer's records are inaccurate or inadequate and the employee cannot offer convincing substitutes, a more difficult problem arises. The solution, however, 

### isnot to penalize the employee by denying him any recovery on the ground that he 

### is unable toprove the precise extent of uncompensated work. Such a result would place a premium on an employer's failure tokeep proper records inconformity with his statutory duty; it would allow the employer tokeep the benefits of an employee's laborswithout paying due compensation as contemplated by the Fair Labor StandardsAct. In such a situationwe hold that an employee has carried out his burden ifhe proves that he has in fact performed work forwhich he was improperly compensated and ifhexproduces sufficient evidence to show the amount and extent of that work asa matter of just and reasonable inference. 

# * * *I1 In Purcell v. Keegan, 359 Mich. 571, 103N.W.2d 

### 494, 497, the Michigan Supreme Court discussed thisproblem and set out exact procedure: 

# "*** When the employee shows, ashe did here, 'that he did in fact.perform overtime work forwhich he was not properly compensated and produces sufficient evidence to show the extent and amount of such work as a matter of just and reasonable inference, theburden shifts to the employer to come forward with evidence of the precise amount of the work performed orwith evidence tonegate the reasonableness of the inference tobe drawn from the evidence of the employee. And if the employer fails to produce such evidence, it is the duty of the court to enterjudgment for the employee, even though the amount be only a reasonable approximation.' 

# *

# * +."In the instant case Loraine Horner testified she worked 16 hours each day but conceded that she left to take her child to school and do shopping. The time sheet forJuly indicates that while she was employed on an hourly basis, she was paid for 14hours per day. No evidence as to the precise amount of work done was offered by the employer and the inference of the hearings examiner is a reasonable one. 

### It 

### isnot clearly erroneous inview of the reliable, probative, and substantial evidence on the record as a whole. There 

### isno failure of proof. Issue 

### 4. Employer alleges the findings of fact are inadequate. Under the review provisions of the Montana Administrative Procedure Act, section 82-4216(7), quoted heretofore and under which the employer appealed, subsection (g) thereof allows the district court to reverse: "(g2 because findings of fact, upon issues essential to the decision, were not made although requested." No request for the missing finding was made. The finding claimed tobe missing finding settingout the number of hours forwhich payment isdue. We note that thehearings examiner attached tohis findings the worksheets he used to calculate the amount due. These worksheets adequately provided the necessary information. There 

### is

no error. Employer next argues the assessment of penalties by the district court was error particularly inview of the fact they were not assessed by the hearings examiner. He cites and relies on State ex rel. Neiss v. District Court, 162Mont. 324, 511 P.2d 

### 979. That case isnot applicable to the facts here for inNeiss the Court dealtwith three categories of wage claims: 1. In the first group a deposit had been made by employer into the districtcourt forwages due toa group of unidentified

### employees. We noted there the employer having complied, there

was no penalty due. Here, employer Garsjo made no deposit. 2. The second group, consisted of employeeswho had settled their claims. The Court held: "These employees having been represented by the county attorney

# **

# * liquidated damages

are not applicable." In the instant case, the employee had a private attorney. 3. The third group of employees brought the action either through the labor commissioner or the county attorney, and this Court noted the penalty was to be disposed of by the district court. Under the provisions of section 41-1302,R.C.M. 1947, the commissioner of labor is charged in cases where he institutes an action for the collectionofwages due, to collect the penalty. The wording of the statute is 

### "A penalty shall

# *** be assessed." We find here no error in assessing the penalty. The question of attorney fees is raised where not only the commissioner of labor presecutes the claim,but where in addition the employee has hired her own counsel. Employer here relies on Neiss but as noted heretofore, that case is distinguishable

on the facts. There the employeeswere representedby the county attorney,who was carrying out his official duties. Here, private counselwas hired, even though the claimwas assigned to the commissioner. Employee is entitled to an award of attorney fees. Section 41-1314.2, R.C.M. 

### 1947,provides that the judgment should include all costs reasonably incurred in connectionwith the proceedings, including reasonable attorneys' fees. Here, the trial court set the attorney fees in the amount of 

### $880 and no issue is raised as to the reasonableness of the fee. .'s 

### The judgment is affirmed. 

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