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 : MAR I 7 5971~ 

Filed: A 1 ( $7/ 
Mr. Justice John Conway Harrison delivered the Opinion of the 

Court. 

This is an appeal from the district court, Valley County, 

which affirmed a wage decision by a hearings examiner in favor 

of Loraine Horner. 

Carlyle M. Garsjo, employer, is the owner of the Rainbow 

Motel in Glasgow, Montana. In mid-summer 1974, he hired Loraine 

Horner, employee, to operate the motel. The first month she was 

employed on a trial basis and paid by the hour. During this month 

she worked and was paid for 14 hours per day. At the end of the 

trial period, she was hired full-time at $275 per month salary 

and an apartment at the 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 in and out of the 

motel; attending the motel switchboard; keeping all of 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 in the cleanup by a series 

of part-time maids. The employer came by every few days to pick 

up the proceeds for deposit in the bank. Employee kept the records 

at the motel and the only hours she kept, after she became a salaried 

employee, were those hours she worked on her day off and for which 

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 in a "bona fide executive * * JC capacity", (2) was covered 
by the Montana Minimum Wage and Hours Act; (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 the Montana Administrative Procedure Act. In his 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-in agreement is authorized by specific 

regulations promulgated by the Department. 

3) Whether there was a failure of proof. 

4) Whether there were 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 regulations as promulgated 

absolutely prohibit the employee from being an executive because 

she did not receive $150 per week and she did not direct the work 

of two or more employees,and are therefore unreasonable. 

The Montana Minimum Wage and Hours Act provides at section 

"The provisions of section 41-2303 of 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 in the Montana Administrative Code 

interpreting this section of the Act. 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 to make them compatible with the Montana 

statute. 

The regulations involved here are MAC 24-3.14BII (2) - 

S1420 and MAC 24-3.14BII (2) -S1450 (13). The first rule 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 Minimum Wage Law shall mean any 

employee : 

"(a) Whose primary duty consists of the management of the enterprise in which he is employed or of 

a customarily recognized department or subdivision thereof; 

and 

"(b) Who customarily and regularly directs the work 

of two or more other employees therein; and 

"(c) Who has the authority to hire or fire other 

employees or whose 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 

will be 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 as much as 40 percent, of 

his hours of work in the workweek to activities which 

are not directly and closely related to the performance 

of the work described in subsections (a) through (d) 

of this section: 

"Provided, That this paragraph shall not apply in the 

case of an employee who is in sole charge of an independent 

establishment or a physically separated branch establishment, or who owns at least a 20 percent interest in the 

enterprise in which he is employed; and 

"(f) Who is compensated for his services on a salary 

basis at a rate of not less than $150 per week, exclusive 

of board, lodging, or other facilities * * *.I1 
MAC 24-3.14BII (2) -S1450 (13) deals with the ' sole-charge exception' and states in pertinent part: 

"(a) An exception from the percentage limitations 

on nonexempt work is provided in MAC 24-3.14BII (2) - 

S1420 subsection (e) for 'an employee who is in sole 

charge of an independent establishment or a physically 

separated branch 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 of Billings v. Smith, 

158 Mont. 197, 207, 490 P.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* * * such power is constitutionally exercised where 

the definition formulated by the administrator is within 

the limits laid down by the Congress which * * * are 

marked out by the fair and natural meaning of the words 

'bona fide executive --- - * * * capacity.' (Emphasis added.) 

 his indicates that to find the power to have been unconstitutionally exercised, this Court will have to find 

the definitions of the Commissioner of Labor to be outside 

the fair and natural meaning of the words. See Walling 

v. Yeakley, * * * 140 F.2d 830." 

The regulations attempt to set out specific objective 

and subjective criteria which 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 discretion and 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 natural meaning of the word "executive". 
Here, employee does not fall within the requirements of 

subparts (a) through (e) , MAC 24-3.14BII (2) -S1420, because she 

exercises little discretion and spends a substantial amount of her 

time doing nonexecutive work. 

In Williams 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 the money paid by the guests until 

the defendant called for it, but she did not order 

supplies nor pay the bills. * * * * 

"We do not think that the words 'administrative' and I executive', as they are commonly understood, may 

fairly be said to comprehend the duties of the plaintiff. 

Those words suggest something higher in the scale of 

employment than the calling of a maid-of-all work, with 

the few additional responsibilities which we have described 

thrown in. * * *" 

The effect of the regulations set out above is that an 

employee who meets the requirements of MAC 24-3.14BII (2) -S 1420, 

subparts (a) through (e), is a bona fide executive and is excepted 

from the minimum 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) is paid more 

than $150 per 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-time executive 

doing executive work is given an exemption from the minimum wage 

and overtime provisions no matter what he is paid, but an executive 

who does a substantial amount of nonexecutive work for which the 

minimum wsge would have to be paid if done by another person, may 

avo id 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 $150 per week requirement works out to approximately 

$1.80 per hour. This is certainly not an outrageous rate of pay 

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 unreasonable might carry some weight. But where, as here, the 

employee does not do a substantial amount of executive work, 

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 actually worked, or in excess of those hours actually 

worked. Case law holds that an employee may not enter into an 

agreement which operates to waive compensation for overtime actually 

worked. Skelly Oil Co. v. Jackson, 194 Okl. 183, 148 P.2d 182, 

Travis v. Ray, 41 F. Supp. 6. That regulation does not apply 

here. 

Issue 3. The employer argues there was a failure of proof. 

The section under which appeal to the district court was taken, 

section 82-4216(7), R.C.M. 1947, sets out the standard of review 

of the evidence: 
"The court shall not substitute its judgment for that 

of the agency as to the weight 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 in view 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. In Anderson 

v. Mt. Clemens Pottery Co., 328 U.S. 680, 66 S.Ct. 1187, 90 L ed 1515, 

1523, the United States Supreme Court in a 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, is not to penalize the employee by denying 

him any recovery on the ground that he is unable to prove 

the precise extent of uncompensated work. Such a result 

would place a premium on an employer's failure to keep 

proper records in conformity with his statutory duty; it 

would allow the employer to keep the benefits of an 

employee's labors without paying due compensation as contemplated by the Fair Labor Standards Act. In such a 

situation we hold that an employee has carried out his 

burden if he proves that he has in fact performed work 

for which he was improperly compensated and ifhexproduces 

sufficient evidence to show the amount and extent of that 

work as a matter of just and reasonable inference. * * *I1 

In Purcell v. Keegan, 359 Mich. 571, 103 N.W.2d 494, 497, 

the Michigan Supreme Court discussed this problem and set out exact 

procedure: 

"* * * When the employee shows, as he did here, 'that 

he did in fact .perform overtime work for which 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, the burden shifts to 

the employer to come forward with evidence of the precise 

amount of the work performed or with evidence to negate 

the reasonableness of the inference to be drawn from the 

evidence of the employee. And if the employer fails to 

produce such evidence, it is the duty of the court to 

enter judgment 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 for July indicates that 

while she was employed on an hourly basis, she was paid for 14 hours 

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 is not clearly erroneous in view of the 

reliable, probative, and substantial evidence on the record as a 

whole. There is no 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 

to be missing finding setting out the number of hours for which 

payment is due. We note that the hearings examiner attached to his 

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 in view of the fact they were 

not assessed by the hearings examiner. He cites and relies on 

State ex rel. Neiss v. District Court, 162 Mont. 324, 511 P.2d 979. 

That case is not applicable to the facts here for in Neiss the Court 

dealt with three categories of wage claims: 

1. In the first group a deposit had been made by employer 

into the district court for wages due to a 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 employees who 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 collection of wages 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 employees were represented by the county 

attorney, who was carrying out his official duties. Here, private 

counsel was hired, even though the claim was 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 connection with 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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Justice : J. 

I 
We Concur: 

Chief Justice