* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### FEB 12 1999 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

HEATHER HAGADORN,

Plaintiff-Appellant,

v. M.F. SMITH & ASSOCIATES, INC., a New Jersey corporation,

Defendant-Appellee. No. 97-1446 (D.C. No. 96-B-655) (D. Colo.)

ORDER AND JUDGMENT *

Before BRORBY , BRISCOE , and LUCERO , Circuit Judges.

After examining the briefs and appellate record, th is panel has determined unanimously that oral argument would not materiallyassist the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). T he case is therefore ordered submitted without oral argument.-2-

Heather Hagadorn brought this action against her fo rmer employer, M.F. Smith & Associates, Inc. (M.F. Smith or defendant), alleging violation of the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201-19, an d asserting state law claims for breach of contract and promissory estoppel. Oncross-motions for summary judgment, the district court granted judgment in favor of M.F. Smith on all claims. Hagadorn appeals only the court’s grant of summary judgment on her FLSA claim. We review the district court’s grant of summary jud gment de novo, applying the same legal standard the district courtused pursuant to Fed. R. Civ. P. 56(c). See Wolf v. Prudential Ins. Co. , 50 F.3d 793, 796 (10th Cir. 1995). Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together w ith the affidavits, if any, show that there is no genuine issue as to any material f act and that the moving party is entitled to a judgment as a matter of law.” Rule 5 6(c). “When applying this standard, we examine the factual record and reasona ble inferences therefrom in the light most favorable to the party opposing summary judgment.” Wolf , 50 F.3d at 796 (quotation omitted). Summary judgment “nece ssarily implicates the substantive evidentiary standard of proof that woul d apply at the trial on the merits.” Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 252 (1986). Consequently, summary judgment in favor of a party is not appropriate where the-3-

evidence presented is insufficient “to establish th e existence of an element essential to that party’s case, and on which that p arty will bear the burden of proof at trial.” Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986). Applying these rules to the matter before us, we reverse and remand for further proceedings. M.F. Smith provides on-site computer consulting services to its clients. It hired Hagadorn in August 1994, and from that time u ntil September 15, 1995, she worked on an M.F. Smith project at US West in Denve r. On completion of the US West project, M.F. Smith did not have additional work for Hagadorn, and it furloughed her effective October 16, 1995, indicati ng that she would be rehired if new work for her became available before December 3 1, 1995. Shortly after Hagadorn was furloughed, M.F. Smith claimed it lear ned she had removed a computer from US West’s premises and had contacted US West about employment, which was in violation of her employmen t contract. M.F. Smith terminated her effective October 24, 1995. In her FLSA claim, Hagadorn contends that she was an hourly employee and seeks overtime compensation for 522.5 hours she worked for which she was paid straight time. M.F. Smith claims that she was a salaried administrative employee exempt from the FLSA and not entitled to o vertime pay.-4-

Generally under the FLSA, an employer must pay an e mployee overtime pay at one and one-half times the employee’s regula r rate of pay for all hours worked in a given week in excess of forty hours. See 29 U.S.C. § 207(a)(1). The FLSA exempts from its overtime pay requirements “any employee employed in a bona fide executive, administrative, or professional capacity.” Id. § 213(a)(1). The FLSA does not define the “administrative” exemp tion, but regulations issued by the Department of Labor do. Generally, these re gulations “are entitled to judicial deference, and are the primary source of g uidance for determining the scope and extent of exemptions to the FLSA.” Spradling v. City of Tulsa , 95 F.3d 1492, 1495 (10th Cir. 1996) (citation omitted). Ex emptions to the FLSA are to be narrowly construed, and the burden of proving an ex emption is on the employer.
See id.; Aaron v. City of Wichita , 54 F.3d 652, 657 (10th Cir. 1995). Moreover, the employer’s burden is heightened beyond the usua l preponderance standard, such that the employer must show that the employee fits “plainly and unmistakably” within the exemption’s terms. Arnold v. Ben Kanowsky, Inc. , 361 U.S. 388, 392 (1960); see also Aaron , 54 F.3d at 657 (“An employer must prove that the employee is exempt by ‘clear and affirmati ve’ evidence.”) (quotation omitted). The FLSA provides both a “long” and a “short” test for determining whether an employee falls within the administrative exemption. See 29 C.F.R.-5-

§ 541.2; see generally Shaw v. Prentice Hall Computer Publ’g, Inc. , 151 F.3d 640, 642 (7th Cir. 1998); Reich v. John Alden Life Ins. Co. , 126 F.3d 1, 8 (1st Cir. 1997); Douglas v. Argo-Tech Corp. , 113 F.3d 67, 70 (6th Cir. 1997). Because it is undisputed that Hagadorn was paid more than $250 a week, the short test applies here. See, e.g. , John Alden , 126 F.3d at 8; Douglas , 113 F.3d at 70. Under the short test, the employer must prove (1) that the employee’s primary duty consists of the “performance of office or nonm anual work directly related to management policies or general business operations of his employer or his employer’s customers,” 29 C.F.R. § 541.2(a)(1); (2) that the employee “customarily and regularly exercises discretion and independent judgment,” id. § 541.2(b); and (3) that it paid the employee on a “salary or fee basis,” id. § 541.2(e)(1). See also Shaw , 151 F.3d at 642-43; Douglas , 113 F.3d at 70-71. Dividing the short test further, the first two requ irements are generally referred to as the “duties” test, and the third as the “salary” test. Hagadorn challenges the district court’s conclusion that M.F. Smith met its burden of proof on both tests. We turn to the duties test first. While at US West, Hagadorn worked primarily on a pr oject designed to reuse computer hardware and software as part of an effort by US West to consolidate its facilities. She worked with US Wes t teams to locate hardware at various facilities, identify its capabilities, and propose plans for reconfiguring,-6-

moving, and reusing the hardware at other locations . She also identified the client’s needs and requirements for software invent ory. Additionally, she helped develop the overall project plan for the US West co nsolidation project and prepared reports and conducted weekly conferences o n its progress. The district court noted that her description of her duties was almost identical to an example provided in the regulations of an exempt administrative consultant whose duties were directly related to the employer’s business op erations, as required by the duties test: The particular employee is employed by a firm of co nsultants and performs work in which he customarily and regularlyexercises discretion and independent judgment. The work cons ists primarily of analyzing, and recommending changes in, the busines s operations of his employer’s client. This work falls in the cate gory of exempt work described in § 541.2. 29 C.F.R. § 541.208(b)(1). On appeal, Hagadorn does not attempt to explain how her work differed from the example above on which the district court relied. Instead, she contends only that M.F. Smith’s evidence failed to show that her primary duties were administrative. We find her contention unpersuasiv e. She admitted that the duties in connection with reusing hardware describe d above were the “main functions of my job. I probably did other things, but I don’t know how significant they were.” Appellant’s App. at 76 (Hagadorn dep. at 29). Thus, we agree with the district court that her administrative duties w ere clearly her primary duties,-7-

see 29 C.F.R. §§ 541.206, 541.103, and that M.F. Smith met its burden under the duties test. To meet its burden under the salary test, an employ er is required to demonstrate that the employee “‘regularly receives each pay period . . . a predetermined amount constituting all or part of hi s compensation, which amount is not subject to reduction because of variations i n the quality or quantity of the work performed.’” Aaron , 54 F.3d at 658 (quoting 29 C.F.R. § 541.118(a)). Hagadorn contends that she was an hourly employee w ho received no predetermined amount each pay period. M.F. Smith c ontends, and the district court found, that she was a salaried employee paid a predetermined amount each pay period, although that amount was permissibly ex ceeded by paying her straight time on an hourly basis for time she worked exceedi ng the minimum 37.5 hours required each pay period. We conclude that the evi dence falls short of “plainly and unmistakably” showing that M.F. Smith paid her a predetermined amount each pay period. The only evidence M.F. Smith submitted directly ind icating that it paid Hagadorn a predetermined amount was (1) an affidavi t stating that it paid her an initial base salary of $45,000 a year that was late r increased to $48,500, and (2) a memorandum indicating the same annual salary inform ation. The memorandum contained the handwritten notation “$24.88/hr.” De fendant explains that it-8-

computed this hourly amount by dividing the $48,500 salary by 52 weeks and then by 37.5 hours to determine Hagadorn’s regular salary rate on an hourly basis. It then used this hourly amount to pay Hagadorn on a s traight time basis for hours worked (or billed to the client) that exceeded the standard 37.5 hour work week. (The corresponding hourly rate when her salary was $45,000 was $23.08.) Hagadorn counters, through her testimony and affidavit, that she was not paid on a salary basis, but only on an hourly basis for onl y the hours she worked. Both sides point to Hagadorn’s pay statements, time sheets and related documents to support their positions, but these doc uments are confusing and ambiguous. Critically, the pay statements fail to indicate that Hagadorn was paid any predetermined amount for each pay period. The pay statements simply show the number of work and holiday hours for which Haga dorn is being paid and the corresponding gross and net pay amounts--based on the appropriate hourly rates-- along with various deductions. The statements do n ot separate the regular, minimum required hours for which M.F. Smith contend s Hagadorn was being paid, i.e., 37.5 hours per week, from any overtime hours. All hours are lumped together and multiplied by the hourly rate to arriv e at her gross pay. Moreover, considering time worked and holiday pay, Hagadorn w as never paid for fewer1 We say “apparently” here because the pay statements and time sheets

account for Hagadorn’s time on a basis different fr om the 37.5 hours per week standard. The pay statements and time sheets refle ct her time on a semi-monthly basis, covering the first through the fifteenth and then the remainder of each month. This semi-monthly accounting does not direc tly correlate to the 37.5 hours per week or even 75 hours per two weeks stand ard. On a semi-monthly basis, the regular number of hours per pay period w ould appear to be either 81.25 (on a 37.5 hour per week basis) or 86.67 (on a 40 h our per week basis). The only time the record shows that she was paid for fewer than 92.25 hours in a semimonthly pay period was for the period ending August15, 1994, for which she was paid 81.75 hours. Her gross pay for this period, a s for all other periods, was based on her hourly rate ($23.08) times the number of hours (81.75). See Appellant’s App. at 230. Referring to this same exhibit, M.F. Smith argues t hat “during those pay periods in which plaintiff’s billings were below defendant’s standard seventy-five hours for a two week period, (e.g. week of 11/30/94 reflecting 72.5 hours,) plaintiff still received compensation exceeding the aforestated mi nimum level.” Appellee’s Br. at 14. We note, however, that the 72.5 hours represent billable hours, which is not necessarily the same as time wo rked, and that Hagadorn was paid for 96 hours during this period, which include d the Thanksgiving holiday. Her gross salary for this period was based on the 9 6 hours at her hourly rate.

-9- than what apparently was the regular, minimum required hours per pay period. 1 Had she been, and had she then been paid the predet ermined amount, the pay statements would support M.F. Smith’s position. Inshort, the only thing the pay statements necessarily show is that Hagadorn’s gros s pay each period was based on her compensable hours times her hourly rate. Th ey do not show that her regular pay was a “predetermined amount . . . not s ubject to reduction because of variations in the . . . quantity of the work perfor med.” 29 C.F.R. § 541.118(a).-10-

Relying on our decisions in Aaron and Spradling , M.F. Smith argues that the fact that it paid Hagadorn on an hourly basis w hen she worked more than the required minimum does not mean that it did not pay her on a salary basis. That is true, but irrelevant. As we stated in Aaron , “[s]ince overtime is not inherently inconsistent with one’s status as a salaried employ ee, the fact that the [employees’] paystubs indicated the number of hours covered is also not inconsistent with salaried status. Such an account ing of hours is necessary to compute overtime compensation.” 54 F.3d at 658; see also Spradling , 95 F.3d at 1500. But neither Aaron nor Spradling help M.F. Smith show that it paid Hagadorn on a salary basis in the first place. The fact that the employees received a predetermined base amount of salary was not disputed in either case.
See Aaron , 54 F.3d at 658 (“The City claims, and the firefig hters do not dispute, that the chiefs and captains were paid a predetermi ned amount constituting at least part of their compensation.”); Spradling , 95 F.3d at 1500 (“Plaintiffs each received a predetermined amount of pay based upon w here each fell in the City’s applicable classification and pay schedule.”). The question in each case was the effect of the hourly-based payments above the prede termined amounts. In2 Defendant also argues that “in the absence of plain tiff pointing to a pay

period in which she received less than her fixed sa lary, she cannot effectively argue that her compensation basis failed to meet th e criteria of the salary test.” Appellee’s Br. at 14. Again, defendant incorrectly presupposes that it has proven, sufficient for summary judgment purposes, that it p aid Hagadorn a “fixed salary.” Furthermore, the fact that it never paid Hagadorn l ess than what it contends would have been her “fixed salary” does not support its c ontention that it necessarily paid her a regular, predetermined amount per pay pe riod. That amount must not be “subject to reduction” due to the quantity of work performed. See 29 C.F.R. § 541.118(a). Defendant’s evidence does not show th at, had she worked less than the standard requirement, she would not have receiv ed a reduction in pay. We do agree with defendant, and the district court, that the fact that defendant did not pay Hagadorn for the weeks in whi ch she was furloughed due to its lack of work does not mean that she was not pai d on a salary basis, as she contends. Her argument is based on 29 C.F.R. § 541 .118(a)(1), which states in part: “An employee will not be considered to be ‘on a salary basis’ if deductions from his predetermined compensation are made for ab sences occasioned by the employer or by the operating requirements of the bu siness.” Hagadorn, however, did not perform any work during the weeks in which she was furloughed, and the district court correctly found this situation gover ned by § 541.118(a). That section provides that, to be considered on a salarybasis, “the employee must receive his full salary for any week in which he performs any work without regard to the number of days or hours worked. This policyis also subject to the general rule that an employee need not be paid for any workweek in which he performs no work.” (Emphasis added.) -11- contrast, M.F. Smith has failed to demonstrate the preliminary fact that Hagadorn received a regular, predetermined base amount. 2 In sum, there is evidence showing that M.F. Smith p aid Hagadorn a predetermined salary and, permissibly for FLSA purp oses, supplemented that salary by paying her overtime on a straight time ba sis. However, the evidence can also reasonably be viewed as demonstrating that M.F . Smith paid Hagadorn on a-12-

straight hourly basis without regard to any regular , predetermined amount per pay period. As a result, M.F. Smith failed to meet its burden of showing “plainly and unmistakably” that it paid Hagadorn on a salary bas is and therefore qualified for the administrative exemption. The district court e rred in granting summary judgment in defendant’s favor. Hagadorn contends that not only was the district co urt’s award of summary judgment in defendant’s favor unwarranted, but thatthe court actually should have granted summary judgment in her favor. There are disputed facts regarding whether defendant paid her on a salary basis as the exemption to the FLSA requires, and we cannot say on this record that def endant cannot meet its burden. We therefore decline to order judgment in her favor

. The summary judgment entered in favor of M.F. Smith on Hagadorn’s FLSA claim is REVERSED, and the case is REMANDED fo r further proceedings consistent with this order and judgment. Entered for the Court

Mary Beck Briscoe Circuit Judge