Court Opinion

ID: 877156
Source: CourtListenerOpinion
Date Created: 2013-06-04 21:12:39.440426+00
Date Added: 2024-06-11T15:28:07.557143
License: Public Domain

No. 79-51
                 IN THE SUPREME COURT OF THE STATE OF MONTANA
                                   1980

STATE OF MONTANA, DEPARTMENT OF LABOR
AND INDUSTRY, LABOR STANDARDS DIVISION,
                      Complainant and Respondent,
        VS   .
ALFRED J. and JULIE F. WILSON, d/b/a
YELLOW CAB COMPANY,
                      Petitioner and Appellant.

Appeal from:     District Court of the Eighth Judicial District,
                 In and For the County of Cascade.
                 Honorable John M. McCarvel, Judge presiding.
Counsel of Record :
     For Appellant:
         C. L. Overfelt argued, Great Falls, Montana
     For Respondent:

         James Gardner, Dept. of Labor, argued, Helena, Montana

                                  Submitted:   April 16, 1980
                                    Decided:   JUL 3 3 1980

                                            Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.

     Alfred J. Wilson and Julie F. Wilson, defendants and
appellants, were found to be in violation of the Montana
Minimum Wage and Overtime Compensation Law, section 39-3-401,
et seq., MCA, in an administrative hearing before the Labor
Standards Division, Department of Labor and Industry.
Defendants sought judicial review in the Eighth Judicial
District Court, which granted the Department's motion for
summary judgment.   The Wilsons bring this appeal from the
summary judgment in favor of the Department.
     The Wilsons operated the Yellow Cab Company of Great
Falls since January 1976.    On December 5, 1977, the Department
of Labor and Industry initiated a field inspection of the
Wilsons' payroll records.    The inspection revealed that forty-
six persons employed by Yellow Cab Company at various times
during the years 1976 and 1977 were owed $18,020.70 in
additional wages.   This information was communicated to the
Wilsons in a February 9, 1978    letter from Mike Stump, the
Department's hearing officer, who had conducted the field
inspection.   The Wilsons, through their attorney, requested
an administrative hearing.
    An administrative hearing was held March 20, 1978.     The
hearings officer found that $15,639.20 in wages and $11,612.86
in penalties for failing to timely pay the wages were due.
The additional wages were owed for the period between January
1, 1976 and January 1, 1978, and the penalties were assessed
for an eighteen-month period from July 1, 1976'to January 1,
1978.   Although there appears to be a conflict of evidence
as to whether the employer-employee compensation agreement
was for a straight 43 percent commission on the fares they
collected or for the greater of the minimum wage and over-
time or 43 percent, the hearings officer found that the
Yellow Cab Company paid its employees on a straight commis-
sion basis without regard to the minimum wage and overtime
provisions.   There is substantial evidence in the record of
the administrative hearing to support the administrative
finding and the District Court's finding that appellants'
employees were paid on the basis of a straight 43 percent
commission of their gross receipts.   The additional wages
found to be due were based on defendants' failure to pay the
minimum wages and overtime required under sections 39-3-404
and 39-3-405, MCA.   The hearings officer did not consider
tips in calculating the gross earnings of employees.
     The Wilsons brought an appeal in the District Court
under the Montana Administrative Procedures Act provisions
for judicial review.   Upon judicial review, the District
Court accepted the findings of the hearing   officer and
granted summary judgment ordering the defendants to pay the
Department of Labor and Industry $27,252.06 for unpaid wages
and penalties.
     The issues presented by this appeal are:
     1.   Does the Labor Standards Division have authority to
bring this action?
     2.   Are the statutory penalty provisions applicable?
     3.   Was the method used by the Labor Standards Division
to calculate the amount of wages due to the employees lawful?
     Appellants' threshold argument is that the Department
of Labor and Industry does not have authority to bring this
action because there never was an employee complaint or wage
claim which appellants contend is essential to maintain this
                               -3-
action under the statutes as well as under the Department's
own regulations.   Contrary to this contention, the Labor
Standards Division is authorized by statute to bring this
action even though no complaint was filed by any of the wage
earners, such employee complaint being unnecessary.
     Section 39-3-407, MCA, allows the Commissioner of Labor
and Industry to enforce the minimum wage and overtime com-
pensation law without the necessity of a wage assignment and
it authorizes enforcement to be treated as a wage claim
action, indicating that the Department may act on its own
initiative without an employee complaint:
     "Enforcement. Enforcement of this part shall
     be treated as a wage claim action and shall
     be pursued in accordance with part 2 of this
     chapter, as amended.  ..  The commissioner may
     enforce this part without the necessity of a
     wage assignment."
     Part 2, section 39-3-209, MCA, gives the commissioner
of labor authority to bring a wage claim action and, in
fact, makes it his duty to institute actions for the col-
lection of unpaid wages and for penalties where necessary to
enforce the law without any requirement that there be an
employee complaint or wage claim.   Section 39-3-209, MCA,
provides :
     "Commissioner of labor to investigate viola-
     tions and institute actions for unpaid wages.
     It shall be the duty of the commissioner of
     labor to inquire diligently for any violations
     of this part and to institute actions for the
     collection of unpaid wages and for the penal-
     ties provided for herein in such cases as he
     may deem proper and to enforce generally the
     provisions of this part."
     Prior to its amendment by Section 1, Chapter 40, Laws
of 1967, section 39-3-209, MCA, provided that it was the
duty of the commissioner of labor   ". . . to   institute   ...
actions for penalties provided for herein, in such cases as
he may deem proper, and to enforce generally the provisions
of this act."   The 1967 amendment extended this duty to
include initiating actions "for - collection of unpaid
                            - the            -

wages - - - penalties provided for herein.
      and for the                                 . ."
Thus, it is apparent that the legislature intended to give
the commissioner of labor authority to bring actions for
unpaid wages without imposing any additional requirement
that there be an employee complaint or wage claim.   Likewise,
section 39-3-211, MCA, provides that the commissioner     ". . .
may maintain any proceeding appropriate to enforce the
claim.   . ."
     Appellants contend that the Department has violated its
own regulations by proceeding against appellants without an
employee complaint, citing ARM S24-3.14BII(26)-S14250.
While subsection (1) provides:
                                  -
     "Starting - - - - hour case--the complaint. The
               a wage
     employee complaint and routine inspection are con-
     sidered the basis of the enforcement structure of
     the law..  . ."
subsection (3) states :
     "Checking - - compliance. Inspections do not
               for non
     necessarily occur only when a complaint is filed
     against an employer. Routine investigations--on a
     spot check basis--are used to insure adequate
     compliance  .. ."
     Thus, it is apparent that the Department did not act in
violation of its own regulations.
     Appellants next argue that the statutory penalty pro-
visions of section 39-3-206, MCA, were improperly applied.
We note again that no complaint by the employee is necessary
to enforce penalties under section 39-3-407, MCA, which
authorizes the Department to pursue all remedies provided in
Part 2, Chapter 3 of Title 39, MCA.   This includes the
provision for penalties, section 39-3-206, MCA, which provides:
        " P e n a l t y f o r f a i l u r e - - wages - - e s s p e c i f i e d
                                            t o pay            a t tim
        law. Any employer, a s such employer i s d e f i n e d i n t h i s
        -
        p a r t , who f a i l s t o pay any of h i s employees a s p r o v i d e d
        i n t h i s p a r t o r v i o l a t e s any o t h e r p r o v i s i o n o f t h i s
        p a r t s h a l l be g u i l t y o f a misdemeanor. A p e n a l t y s h a l l
        a l s o be a s s e s s e d a g a i n s t and p a i d by such employer and
        become due s u c h employee a s f o l l o w s : a sum e q u i v a l e n t
        t o t h e f i x e d amount o f 5% o f t h e wages due and u n p a i d
        s h a l l be a s s e s s e d f o r e a c h d a y , e x c e p t Sundays and
        l e g a l h o l i d a y s , upon which s u c h f a i l u r e c o n t i n u e s a f t e r
        t h e day upon which s u c h wages w e r e due, e x c e p t t h a t
        such f a i l u r e s h a l l n o t be deemed t o c o n t i n u e more t h a n
        20 d a y s a f t e r t h e d a t e such wages w e r e d u e . "

        Appellants'         f i r s t argument i s t h a t p e n a l t i e s w e r e

improperly assessed f o r a period longer than t h e e i g h t e e n

months a l l o w e d under s e c t i o n 39-3-207,              MCA, which p r o v i d e s :

        " P e r i o d w i t h i n which employee m a y r e c o v e r p e n a l -
        t i e s . Any employee may r e c o v e r a l l s u c h p e n a l t i e s
        as are p r o v i d e d f o r t h e v i o l a t i o n o f 39-3-306
        which have a c c r u e d t o him a t any t i m e w i t h i n 18
        months s u c c e e d i n g s u c h d e f a u l t o r d e l a y i n t h e
        payment o f s u c h wages."

        T h i s argument i s n o t p e r s u a s i v e .        The s t a t u t e p r o v i d i n g

f o r t h e eighteen-month p e r i o d of l i m i t a t i o n s w i t h i n which

t h e p e n a l t y may b e r e c o v e r e d , s e c t i o n 39-3-207,        MCA, h a s

been i n t e r p r e t e d i n Pope v. Keefer (19791,                  - Mont .         -I

591 P.2d 206, 36 St.Rep.                 366, t o mean t h a t t h e p e n a l t y s h a l l

b e a s s e s s e d f o r t h e e n t i r e p e r i o d o f - e t h a t wages remain
                                                        -tim

u n p a i d , e x c e p t Sundays and l e g a l h o l i d a y s , s o l o n g a s t h e

c o m p l a i n t i s f i l e d w i t h i n e i g h t e e n months f o l l o w i n g t h e

accrual of t h e a c t i o n .         Pope i n v o l v e d a p r i v a t e c i v i l s u i t

by a n employee a g a i n s t h i s employer f o r unpaid minimum wages

and o v e r t i m e , t h e s t a t u t o r y p e n a l t y , and a t t o r n e y f e e s .

A f t e r q u o t i n g s e c t i o n 39-3-207,      MCA, w e s a i d :

        "The s t a t u t e i s h a r d l y a model of c l a r i t y , and
        i t s i n t e r p r e t a t i o n i s s u b j e c t t o d e b a t e . Defen-
        d a n t a r g u e s t h a t ' t h e 18 month f i g u r e must be
        computed from t h e f i l i n g o f t h e c o m p l a i n t , J u l y
        2 2 , 1976, and any c l a i m e d p e n a l t y f o r wages p r i o r
        t o t h a t p e r i o d o f t i m e a r e [ s i c ] l o s t by v i r t u e
        of s a i d s t a t u t e . '      P l a i n t i f f agrees t h a t t h e
        d a t e o f t h e f i l i n g o f t h e c o m p l a i n t s h o u l d be
        used b u t c o n t e n d s t h a t p e n a l t i e s a r e p r o p e r l y
        awarded b e c a u s e t h e d a t e of f i l i n g i s w i t h i n
     the eighteen month period following the date of
     the accrual of the action, May 4, 1975. We be-
     lieve that plaintiff's interpretation is correct
     and look to language appearing in section 41-
     1302, R.C.M. 1947, now section 39-3-206 MCA,
     which states that a penalty 'shall be assessed
     for each day, except Sundays and legal holidays,
     upon which such failure continues after the day
     upon which such wages were due .    .
                                        ." 591 P.2d
     at 213, 36 St-Rep. at 374.
     Appellants' second argument is that the penalty provi-
sions of section 39-3-206, MCA, do not apply because no
action was ever commenced by the filing of an employee
complaint to toll the eighteen-month period of limitations
under section 39-3-207, MCA.
     Thus, the crucial question is whether or not an action
has been properly commenced "within 18 months succeeding
such default or delay in the payment of such wages."    Section
39-3-207, MCA.   We have held that section 39-3-205, MCA,
requiring the payment of unpaid wages within three days
after an employee is separated from employment, fixes the
employer's default and the accrual of the employee's cause
of action at a time three days after the employment is
terminated.   Pope v. Keefer, supra, 591 P.2d at 212.
Therefore, as to each of appellants' former employees, the
cause of action arose three days after the employment was
terminated, and an action to recover the statutory penalties
must be properly commenced within eighteen months following
that date.
     The question remains:     Is the statute of limitations
tolled by the commencement of formal administrative proceedings,
or must an action be commenced by the Department's filing a
complaint with the District Court?    In Pope, we interpreted
section 39-3-207, MCA, as requiring the filing of a complaint
within eighteen months to toll the statute of limitations in
a situation where an employee brought a private civil suit
for a violation of the minimum wage and hours act.     This
case presents a different situation:   administrative enforce-
ment of the law by the Department of Labor and Industry.
Because of our conclusion that the filing of an employee
complaint with the Department of Labor and Industry is not
necessary for the Department to enforce the minimum wage and
hours law, the action should be deemed to have been com-
menced February 9, 1978, when the Department informed appel-
lants by letter that various employees were owed additional
wages.   In an administrative setting, where the agency acts
to enforce the law on its own initiative, this action is the
equivalent of the filing of a civil complaint.   The Depart-
ment's February 9, 1978   letter fulfilled the purposes of a
complaint by giving appellants notice of the claim being
made against them.
     Therefore, the assessment of the statutory penalty is
valid as to any employee of the appellants who was separated
from his or her employment on or after August 6, 1976.    We
arrive at that date by taking February 9, 1978, as the date
this action commenced and then by going back to claims which
accrued eighteen months prior to that time; that is, on or
before August 9, 1976.    Since payment of wages is due three
days after the employment is ended under section 39-3-205,
MCA, and the action for penalties accrues at that time,
employees whose employment terminated on or after August 6,
1976, are entitled to receive any penalties found to be due.
Penalties on behalf of employees terminated from employment
before August 6, 1976, are barred by the statute of limitations.
Section 39-3-207, MCA.    See Pope v. Keefer, supra.
     The final issue to be considered is whether or not the
method used by the Labor Standards Division to calculate the
                                -8-
amount of wages due to the employees under the minimum wage
and overtime compensation act is lawful.
        Montana's minimum wage law provides for both a minimum
wage, section 39-3-404, MCA, and for overtime compensation
at not less than one and one-half times the employee's
hourly wage rate for hours worked in excess of forty in a
week:
        "Overtime compensation. (1) No employer shall
        employ any of his employees for a workweek longer
        than 40 hours unless such employee receives com-
        pensation for his employment in excess of 40 hours
        in a workweek at a rate of not less than 1 1/2
        times the hourly wage rate at which he is employed."
        Section 39-3-405 (1), MCA.
The dispute here involves the validity of the Department's
calculation of the employee's hourly wage rate for purposes
of determining the overtime rate required under section 39-
3-405(1), MCA, which must be at least one and one-half times
the regular rate.
        Our statutes authorize the commissioner of labor to
make administrative regulations to carry out the purpose of
the minimum wage and overtime compensation law.     Section 39-
3-403, MCA.    Pursuant to this authority, the Department of
Labor and Industry has adopted regulation 524-3.14BII(38)-
S14340 in Title 24, Chapter 14, of the Administrative Rules
of Montana, which provides:
        "24-3.14BII (38)-S14340. THE REGULAR RATE (1) The
        'regular rate' of pay cannot be left to a declara-
        tion by the parties as to what is to be treated
        as the regular rate for an employee; it must be
        drawn from what happens under the employment con-
        tract. The U.S. Supreme Court has described it
        as the hourly rate actually paid the employee for
        the normal, nonovertime workweek for which he is
        employed - an 'actual fact'. The 'regular rate'
        may be more than the minimum wage; it cannot be
        less. An employee's regular rate includes all
        payments made by the employer to or on behalf of
        that employee. 'Once the parties have decided
        upon the amount of wages and the mode of payment
        the determination of the regular rate becomes a
        matter of mathematical computation, the result
       of which is unaffected by any designation of a
       contrary "regular rate" in the wage contracts.'
       "(2) The regular - - -an hourly rate. The
                        rate is
       'regular rate' under the Law is a rate per hour.
       The Law does not require employers to compensate
       employees on an hourly rate basis; their earn-
       ings may be determined on a piece-rate, salary,
       commission, or other basis, but in such case the
       overtime compensation due to employees must be
       computed on the basis of the hourly rate derived
       therefrom and, therefore, it is necessary to com-
       pute the regular hourly rate of such employees
       during each workweek. - regular hourly rate
                              The
       of - - - employee is determined by dividing
       -  pay of an
       his total remunerationfor employmentin -
                                             - any
       workweek by the total number of hours actually
       worked - - -n that workweerfor which -
              byhim -                 - --      such-
       compensation was paid .
                    --         . ."  (Emphasis added.)
       In the present case, the Labor Standards Division
determined the regular rate of pay of the Yellow Cab Company
employees by dividing the gross weekly earnings of the
employee, based on the 43 percent commission, by the total
number of hours actually worked by the employee in that
workweek.    This was a proper method of calculation of the
regular hourly rate.    The Department's regulations are taken
almost verbatim from the federal regulations issued pursuant
to the Fair Labor Standards Act, 29 U.S.C. S201 et seq.
Federal courts interpreting that act and the federal regulations
have held that where, as here, the employment contract
(calling for a 43 percent commission) does not satisfy the

requirements of the minimum wage and overtime law, the
regular hourly rate actually paid to the employee must be
calculated to determine whether the employee was paid the
overtime compensation required by the Fair Labor Standards
Act.
       Federal cases have upheld the calculation of an employee's
regular hourly rate on the same basis used here: by dividing

the employee's weekly gross pay by the total hours worked.
Bay Ridge Co. v. Aaron (1948), 334 U.S. 446, 464, 68 S.Ct.
                                -10-
1186, 92 L.Ed. 1502; Walling v. Helmerich       &   Payne (19441,
323 U.S. 37, 65 S.Ct. 11, 89 L.Ed. 29; Masters v. ~aryland
Management Company (4th Cir. 19741, 493 F.2d 1329, 1333;
Seneca Coal    &   Coke Co. v. Lofton (10th Cir. 1943), 136 F.2d
359; Warren-Bradshaw Drilling Co. v. Hall (5th Cir. 1941),
124 F.2d 42, aff'd. 317 U.S. 88, 63 S.Ct. 125, 87 L.Ed. 83;
Fair Labor Standards Act, 29 U.S.C. §207(a); 29 C.F.R.
5778.108.     In summary:
     "It seems well settled that where an employment
     contract is deemed not to satisfy the overtime
     provisions of the act, the 'regular rate' of
     pay at which an employee is employed is to be
     determined by dividing his total compensation
     each week by the total hours worked.   (Citation
     omitted.)" Annot., 89 L.Ed. 35, 57-58 (1945).
    Appellants contend that this method of determination of
the regular rate makes compliance impossible, because under
a commission arrangement, such as here, the employer will
always be in default.       That is the case, however, only where
the employment contract fails to satisfy the requirements of
the minimum wage and overtime compensation law.         Therefore,
an employer must at the inception agree with his employees,
when they are compensated on a commission basis, to pay the
stated commission or the minimum wage plus applicable over-
time, whichever is greater, to comply with the statutory re-
quirements.        To rule otherwise would be to open a loophole
in our statute that would be impossible to close, on the
overtime rates required under the forty hour workweek section.
     The employers in this case appear to have been in vio-
lation innocently.        However, the public policy on which the
minimum hours and wage law is based, as set out in section
39-3-401, MCA, requires no exception in case of innocent
violations.        Furthermore, public policy is served by following
the federal formula so as to develop harmony in the field,
as the Department has done making its calculations.         Cf.
                                  -11-
   Glick v. State, Montana Dept. of Institutions (1973), 162
   Mont. 82, 509 P.2d 1, 4, cert.den. 414 U.S. 856, 94 S.Ct.
   158, 38 L.Ed.2d 106, appeal after remand (1974), 165 Mont.
   307, 528 P.2d 686.
        With regard to appellants' argument that the Department
   failed to take into account the tips received by employees
   of the Yellow Cab Company in calculating their wages, we de-
   cline to consider the matter because appellants are attempting
   to raise the issue for the first time on appeal, having
   failed to raise the issue in their petition for review
   before the District Court.
        The case is remanded to the District Court to be modified
   by recalculating the penalties owing under the eighteen-
   month statute of limitations in section 39-3-207, MCA, in
   accordance with this opinion.   As so modified, the summary
   judgment is affirmed.

                                     CJifLa.
                                      -  ,
                                         .           w
                                                 Justice

We Concur: