Opinion ID: 1350657
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Heading: THE TRIAL COURT ERRED IN CONSTRUING FORMER 8 AAC 15.100(b).

Text: AS 23.10.060 provides that an employer may not employ a non-supervisory employee for more than eight hours per day or 40 hours per week unless the employer pays overtime at the rate of one and one-half times the employee's regular rate of pay: Payment for overtime. An employer who employs employees engaged in commerce, or other business, or in the production of goods or materials in Alaska may not employ an employee not acting in a supervisory capacity, either male or female, for a workweek longer than 40 hours or for more than eight hours a day, except that if the employer finds it necessary to employ an employee in excess of 40 hours a week or eight hours a day, compensation for the overtime at the rate of one and one-half times the regular rate of pay shall be paid, and this provision is considered included in all contracts of employment. Former 8 AAC 15.100(b) (Eff. 12/9/78) defined regular rate of pay as follows: 8 AAC 15.100. PAYMENT FOR OVERTIME. (a) An employee's regular rate is the basis for computing overtime. The regular rate is an hourly rate figured on a weekly basis. Employees need not actually be hired at an hourly rate; they may be paid by piece-rate, salary, commission or any other basis agreeable to the employer and employee. However, the applicable compensation basis must be converted to an hourly rate when determining the regular rate for computing overtime compensation. (b) The regular rate referred to in (a) is that fixed hourly amount determined from an employee's hourly wage, salary, commission, piece-rate or other basis of compensation that he is to be paid for all contract hours up to the daily or weekly maximum, established under AS 23.10.060, that he is regularly employed to work during a workweek. (Emphasis supplied). During the litigation in this case, the DOL amended 8 AAC 15.100 (am. 9/28/85) as follows: 8 AAC 15.100. PAYMENT FOR OVERTIME. (a) An employee's regular rate is the basis for computing overtime. The regular rate is an hourly rate figured on a weekly basis. An employee need not actually be hired at an hourly rate. The employee may be paid by piece-rate, salary, commission, or any other basis agreeable to the employer and employee. However, the applicable compensation basis must be converted to an hourly rate when determining the regular rate for computing overtime compensation. The following provisions apply for an employee paid on a salary basis: .... (b) In order to compute a regular hourly rate for the purpose of determing [sic] the overtime rate for an employee who is paid other than hourly or by salary, the following provisions of 29 C.F.R. Part 778 apply: .... (2) for an employee who works at two or more hourly rates, 29 C.F.R. sec. 778.115[.] (Emphasis added). 29 C.F.R. § 778.115 (1986) provides in part: Employees working at two or more rates: Where an employee in a single workweek works at two or more different types of work for which different non-overtime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates. That is, his total earnings (except statutory exclusions) are computed to include his compensation during the workweek from all such rates, and are then divided by the total number of hours worked at all jobs. Both the pre- and post-amendment regulations apply to the case at bar. Both were controlling during their respective periods of effectiveness. Therefore we address the construction of each. In construing former 8 AAC 15.100(b), the trial court stated: The Court construes the term, all contract hours up to daily or weekly maximum,  to mean the total or maximum hours an employee actually worked per given daily or weekly period. In the Court's view, this construction makes sound policy sense, for under [Janes'] interpretation, an employer could deliberately depress overtime compensation by maintaining particularly low hourly rates for the first 8 hours of each day (or 40 hours of each week). Conversely, were an employee to earn unusually high rates (due to unique employment) for the first 8 (or 40) hours, the overtime compensation rates could be artificially inflated. The weighted average approach makes the most sense to both employee and employer, in this Court's opinion. (Emphasis in original). Janes contends that the trial court's interpretation of former 8 AAC 15.100(b) is contrary to the plain language of the regulation, that it ignores the purpose of the overtime statute, that it usurps the quasilegislative function of the DOL and that the hypothetical abuses by employers cited by the trial court are unrealistic. Janes argues specifically that the plain language of former 8 AAC 15.100(b) requires the employer to compute the employee's regular rate for overtime purposes by using the hourly rate paid for the first eight hours per day (or 40 hours per week) because the phrase established under AS 23.10.060 in former 8 AAC 15.100(b) is meant to modify the phrase up to the daily or weekly maximum also contained in that regulation. We agree. We begin our analysis by observing that [t]here is no safer nor better settled canon of [statutory] interpretation than that when language is clear and unambiguous it must be held to mean what it plainly expresses. 2A C. Sands, Sutherland Statutory Construction § 46.01 at 73 (4th ed. 1973) (footnote omitted). [2] However, [t]he literal interpretation of the words of an act should not prevail if it creates a result contrary to the apparent intention of the legislature and if the words are sufficiently flexible to allow a construction which will effectuate the legislative intention. Id. § 46.07 at 110. The legislative intent of our overtime statute and regulations is twofold: 1. to establish minimum wage and overtime compensation standards for workers at levels consistent with their health, efficiency and general well-being, and 2. safeguard existing minimum wage and overtime compensation standards which are adequate to maintain the health, efficiency and general well-being of workers against the unfair competition of wage and hour standards which do not provide adequate standards of living. Dresser Indus. v. Alaska Dep't of Labor, 633 P.2d 998, 1005 (Alaska 1981), cert. denied, 455 U.S. 1019, 102 S.Ct. 1716, 72 L.Ed.2d 137 (1982); see also AS 23.10.050. Put more bluntly, the purposes are to compensate those who labored in excess of the statutory maximum number of hours for the wear and tear of extra work and to spread employment through inducing employers to shorten hours because of the pressure of extra cost. 633 P.2d at 1006 n. 15 (quoting Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 460, 68 S.Ct. 1186, 1194, 92 L.Ed. 1502, 1514 (1948)). It is consistent with these purposes to read former 8 AAC 15.100(b) as requiring the regular rate to be calculated by considering a normal workweek of 40 hours, or eight hours per day, rather than the total number of hours actually worked. Construing the regulation otherwise would allow Otis to deliberately deflate the overtime rate by crediting its employees with low hourly rates for the overtime worked. Then, the more overtime an employee worked, the more the weighting system would work to lower the value of each hour worked. This is clearly contrary to the purpose of the overtime statutes because it lessens the premium the employer must pay to work his employees more than 40 hours per week. ( See Appendix). We construe former 8 AAC 15.100(b) as requiring the employer to determine the regular rate by determining what the employee would receive if the employee only worked 40 hours per week or eight hours per day. Applying this standard to Otis' plan, if Janes had only worked up to eight hours per day to the maximum of 40 hours in a week, his salary would not be weighted by the non-revenue hours worked. Instead, Otis' guarantee that Janes will be credited with 12 revenue hours per day (or 40 revenue hours each week) would operate to ensure that each regular rate hour worked was valued at least at the revenue rate. Otis may value some hours more than this minimum because of bonuses, [3] in which case the resulting value of a regular rate hour would be weighted higher by the number of bonus hours worked. But, given Otis' guarantee, Otis may not devalue the regular rate paid Janes by incorporating hours of lower value into its calculations. Nor may Otis pay less than a 50% premium on the overtime hours worked. Otis' argument, which the trial court accepted, that considering only the first eight hours per day or 40 hours per week as the basis of the regular rate may lead to manipulation, is unpersuasive in the context of the case at bar. This is because of Otis' guaranteed minimum 12 hours per day or 40 hours per week at the revenue rate. We realize that without the guarantee the answer to the question: What would Janes receive if he worked only eight hours per day or 40 hours per week? would be the same as the answer to the question: What would Janes receive for his first eight hours per day or 40 hours per week? The answer to the second question depends on the actual values of the first eight hours worked per day. But Otis has said that, were an employee only to work eight hours per day or 40 hours per week, he would receive the revenue rate for all these hours; the actual values of the hours worked would not determine his pay for that week. ( See Appendix). The record reflects that the Alaska DOL issued a letter to Otis, apparently upon request, evaluating Otis' use of the weighted average method under former 8 AAC 15.100(b). That letter stated: The department, after a review of your payroll and compensation procedures, is of the opinion that there is no violation of AS 23.10.060 or attending regulations. (Emphasis in original). We accord some deference to the agency's expertise in evaluating pay plans of employers. See Arndt v. State, Dep't of Labor, 583 P.2d 799, 803 (Alaska 1978). However, that deference does not prohibit us from independently construing a regulation when our construction is more consistent with the objective of the underlying statute. Otis also argues that the amendments to 8 AAC 15.100(b) clarified rather than changed the language of former 8 AAC 15.100(b). As we discuss in Part II. C., infra, these amendments might allow Otis to use all the hours an employee works in a week to determine the regular rate. However, we disagree with Otis as to the effect of these amendments. First, Otis presented evidence that the DOL believed the amendments only served to clarify the regulation. This evidence was in the form of a document entitled Summary of Contemplated Action and Reasons Supporting Need to Amend, Repeal or Adopt and the testimony of DOL Deputy Director Donald R. Wilson. While the opinion of the governing agency of the effect of an amendment should certainly be given weight in our own interpretation of the amendment's effects, it is not dispositive. Where, as in the case at bar, we have determined that an agency's proferred interpretation is inconsistent with the language and purposes of the subject regulation we may substitute our interpretation of the regulation for that of the agency's. Second, an amendment to an unambiguous statute is generally presumed to indicate a change in the law. Torkko/Korman/Engineers v. Penland Ventures, 673 P.2d 769, 773-74 (Alaska 1983); see also 1A C. Sands, supra p. 7, § 22.30 at 178-79. This advice is well followed where the amended regulation is substantially reworded and the amendment incorporates a reference to a new standard. The new standard in 8 AAC 15.100, which is 29 C.F.R. § 778.115, requires consideration of all hours worked while the old standard, AS 23.10.060, refers to a 40 hour workweek. While we recognize that former 8 AAC 15.100 is not without ambiguity, we feel it is better interpreted by relying on the language of the regulation itself and the policies it promotes rather than by referring to amendments which substantially changed the regulation.