Opinion ID: 2581073
Heading Depth: 2
Heading Rank: 1

Heading: Statutorily Mandated Overtime Compensation Is Based on Hourly Wage as Negotiated in Employment Contract

Text: The MWA requires employers to pay an employee at least one and one-half times the regular rate at which he is employed  for every hour that employee works in excess of 40 during any given week. RCW 49.46.130(1) (emphasis added). And while RCW 49.46.130 exempts certain employees [2] or types of employment [3] from application of this requirement (none of which is at issue here), the regular rate at which [the employee] is employed remains the common denominator that must be calculated to ascertain what the qualifying employee is owed for overtime hours worked. Id. The legislature did not expressly define regular rate when it enacted the MWA. See RCW 49.46.010 (defining various terms other than regular rate); Inniss v. Tandy Corp., 141 Wash.2d 517, 523, 7 P.3d 807 (2000) (noting the MWA does not define the term `regular rate' under RCW 49.46.130(1).). Yet we need not interpret the term blindly. The Department of Labor and Industries (DLI) has defined regular rate by regulation: The regular rate of pay shall be the hourly rate at which the employee is being paid, but may not be less than the established minimum wage rate. Employees who are compensated on a salary, commission, piece rate or percentage basis, rather than an hourly wage rate, unless specifically exempt, are entitled to one and one-half times the regular rate of pay for all hours worked in excess of 40 per week. The overtime may be paid at one and one-half times the piecework rate during the overtime period, or the regular rate of pay may be determined by dividing the amount of compensation received per week by the total number of hours worked during that week. The employee is entitled to one and one-half times the regular rate arrived at for all hours worked in excess of 40 per week. WAC 296-128-550 (emphasis added). While the DLI's interpretation does not handcuff the judiciary from reaching a different construction, basic rules of statutory construction dictate the agency's view is entitled to considerable weight in determining the legislative intention, and the persuasive force of such interpretation is strengthened when the legislature, by its failure to amend or by amending some other particular without repudiating the administrative construction, silently acquiesces in the administrative interpretation. Bradley v. Dep't of Labor & Indus., 52 Wash.2d 780, 786-87, 329 P.2d 196 (1958), quoted in Seattle-King County Council of Camp Fire v. Dep't of Revenue, 105 Wash.2d 55, 66, 711 P.2d 300 (1985), and Hart v. Peoples Nat'l Bank of Wash., 91 Wash.2d 197, 201, 588 P.2d 204 (1978). There is no reason to depart from the DLI's interpretation. Under the DLI's definition the regular rate of pay generally references an employee's hourly wage if that is the formula mutually negotiated in an employment contract. Yet the definition also contemplates salary paid employees who are still entitled to statutory overtime benefits, as evidenced by the latter portion of the regulation. See WAC 296-128-550; see also Inniss, 141 Wash.2d at 529, 7 P.3d 807. Employers and employees are free to bargain the regular rate at which [the employee] is employed, RCW 49.46.130, so long as the hourly rate does not fall below the statutory minimum. See WAC 296-128-550. In short, freedom of contract  though slightly limited  remains. This was precisely the issue in Inniss, a case which the majority cites for the proposition the legislature `intended to allow a broad and flexible interpretation of the term [regular rate] so long as the purposes of the Washington Minimum Wage Act are satisfied.' Majority at 112 (quoting Inniss, 141 Wash.2d at 532, 7 P.3d 807). But the majority reads the quote out of context. Inniss considered whether Tandy Corporation [4] violated the MWA by calculating a store manager's regular rate pursuant to a scale in which the weekly salary fluctuated based on how many hours the manager worked. Inniss, 141 Wash.2d at 520-22, 7 P.3d 807. We held Tandy Corporation's definition of regular rate was permissible ... because the term is subject to a broad and flexible interpretation, id. at 534, 7 P.3d 807, and because the employees'compensation exceeded that required under the statutory minimum hourly wage, id. at 535, 7 P.3d 807. Our recognition of the legislature's intent to permit a broad and flexible interpretation of regular rate referenced the expansive freedom of employers and employees to mutually determine a wage or salary, so long as such an agreement did not run afoul of the MWA's purposes. Id. at 534, 7 P.3d 807; see also RCW 49.46.005 (stating MWA's purposes). Inniss did not reference, much less approve, the court's prerogative to impose its view of any payment offered by an employer as an alteration of a previously established regular rate of pay. Quite the contrary, Inniss stands for the proposition that employers and employees may negotiate any regular rate that may not be judicially altered so long as that regular rate does not sink below the minimum wage required by statute. As a consequence, the method by which certain compensation is calculated is not dispositive of whether or not the payment qualifies as the regular rate of pay. WAC 296-128-550.