Court Opinion

ID: 9917448
Source: CourtListenerOpinion
Date Created: 2024-01-12 15:05:23.043209+00
Date Added: 2024-06-11T08:03:04.868435
License: Public Domain

RENDERED: JANUARY 5, 2024; 10:00 A.M.
                        NOT TO BE PUBLISHED

                 Commonwealth of Kentucky
                           Court of Appeals
                              NO. 2023-CA-0100-MR

RONALD D. HELD, JR.,
AND CAROL LEAR, ON BEHALF
OF THEMSELVES AND ALL
OTHERS SIMILARLY SITUATED                                            APPELLANTS

                 APPEAL FROM MADISON CIRCUIT COURT
v.                 HONORABLE COLE A. MAIER, JUDGE
                        ACTION NO. 18-CI-00294

HITACHI AUTOMOTIVE SYSTEMS
AMERICAS, INC.                                                           APPELLEE

                                    OPINION
                                   AFFIRMING

                                   ** ** ** ** **

BEFORE: CETRULO, GOODWINE, AND TAYLOR, JUDGES.

TAYLOR, JUDGE: Ronald D. Held, Jr., and Carol Lear, on behalf of themselves

and all others similarly situated, bring this appeal from a January 13, 2023,

summary judgment of the Madison Circuit Court dismissing their complaints

alleging the violation of Kentucky’s wage and hour laws. We affirm.
              This case centers upon whether Hitachi Automotive Systems

Americas, Inc., (Hitachi) violated Kentucky Revised Statutes (KRS) 337.285(1) by

failing to pay overtime compensation at a rate of one and one-half times the

applicable hourly rate to supervisors employed at Hitachi production facilities in

Berea, Kentucky.1

              Held and Lear filed a class action on behalf of over 200 supervisors

who currently work or had previously worked at the Hitachi facilities (hereinafter

referred to as Supervisors). The circuit court certified the class action by order

entered August 22, 2019, and the order was affirmed on appeal to the Court of

Appeals in Hitachi Automotive Systems Americas, Inc. v. Held, Appeal No. 2019-

CA-1318-ME, 2020 WL 2510534 (May 15, 2020).

              In the class action, the Supervisors claimed that they routinely worked

in excess of forty hours per week but were not paid the statutorily mandated rate of

one and one-half times the applicable hourly rate per KRS 337.285(1). The

Supervisors asserted that Hitachi improperly classified the Supervisors as

executive or supervisory employees exempt from the overtime mandate of KRS

337.285(1). Specifically, the Supervisors asserted:

                    19. During the time period covered by this
              lawsuit, Plaintiffs and the Supervisors at Hitachi’s Berea,

1
  The class was divided into two subclasses: (1) Supervisors employed by Hitachi any time from
April 24, 2012, to the time of this action, and (2) Supervisors employed by Hitachi at any time
from April 24, 2012, to June 13, 2016.

                                              -2-
Kentucky, production facilities who they seek to
represent have routinely worked in excess of 40 hours in
a workweek.

       20. In fact, Plaintiffs and the Supervisors routinely
work 11 to 12 hours per shift, six (and sometimes seven)
days per week. In other words, Plaintiffs and those they
seek to represent routinely work 60 and 70 hours per
week (and, in many weeks, even more than 70 hours).

      ....

      23. Supervisors use a timekeeping system
operated and maintained by Hitachi to clock in and out to
record their work time.

     24. Hitachi tracks and records the number hours
worked by the Supervisors to the minute.

       25. The Supervisor work time tracked and
recorded by Hitachi includes regular hours (i.e., hours up
to 40 in a workweek) and overtime hours (i.e., hours over
40 in a workweek).

      26. Hitachi tracks and records this time to the
minute based on the Supervisors’ time punches for pay
purposes.

      27. Hitachi pays the Supervisors for their work on
an hourly basis based on their recorded work time in
Hitachi’s timekeeping system.

      28. This hourly pay is for both regular hours (i.e.,
hours up to 40 in a workweek) and overtime hours (i.e.,
hours over 40 in a workweek).

      29. However, Hitachi does not pay Supervisors
overtime premium pay for all hours worked over 40 in a
workweek at one and one-half times their regular rates of
pay.

                            -3-
      30. On occasions when Supervisors have not
worked 40 hours in a workweek and have run out of Paid
Time Off (PTO) or holiday pay benefits, Supervisors
have been paid less than 40 hours in a workweek,
because they recorded less than 40 hours worked in such
workweeks.

      31. In other instances, when Hitachi did not have
work available, Supervisors have been paid less than 40
hours in a workweek.

      32. Hitachi does not guarantee an amount of pay
for Supervisors regardless of how many hours they work
in a workweek.

      33. Until June 13, 2016, Hitachi’s pay practice
was to pay Plaintiffs and other Supervisors the same
hourly rate for all hours worked, including hours over 40
(“Pre-June 2016 Pay Practice”).

       34. Since June 13, 2016, Hitachi has capped the
number of paid hours for Plaintiffs and the [S]upervisors
they seek to represent at 50 in a workweek, though they
routinely work more than 50 hours per week (“Post-June
2016 Pay Practice”). In other words, since June 13,
2016, Hitachi has paid Plaintiffs and other Supervisors
the same hourly rate for all hours worked up to 50 in a
workweek and does not pay them at all for hours in
excess of 50 hours. Despite the fact that Hitachi has
limited the pay for Supervisors to 50 hours in a week,
Hitachi tracks all the time they work, including time
worked in excess of 50 hours in a week, to the minute
using its timekeeping system.

      ....

      56. Even if Hitachi does pay a salary as it
contends, the facts demonstrate that it had an actual

                            -4-
practice of making improper deductions and therefore did
not intend to pay Supervisors on a salary basis.

      ....

       58. In other words, even if Hitachi does pay a
salary as it contends, any exemption from the KWHA
[Kentucky Wage and Hourly Act] is lost with respect to
all Supervisors during the pay periods when such
improper deductions occurred because Supervisors were
in the same job classification with the review of their pay
and any deductions being made to it by the same member
of management, the payroll administrator, who for most
of the period covered by this lawsuit was Peggy Weston.

      ....

       67. Because Hitachi does not pay the Supervisors
on a salary basis, but instead pays them on an hourly
basis, they are not exempt from the overtime protections
of the KWHA.

      68. Even if Hitachi’s purported salary is found to
be a guaranteed amount that constitutes a salary, the
amounts that Hitachi pays its Supervisors by the hour
bears no reasonable relationship to their guaranteed
amount.

      69. Accordingly, Hitachi’s failure to pay its
Supervisors for all overtime hours worked at one and
one-half times the regular rates of pay violates the
applicable provisions of the KWHA.

      ....

       100. Plaintiffs bring this second cause of action as
an alternative cause of action to the first cause of action
asserted herein.

                            -5-
May 13, 2021, Amended Complaint at 4-6, 9-12, 18. Hitachi answered and denied

violating KRS 337.285(1). Hitachi maintained that the Supervisors were

executive/supervisory employees exempt from the overtime mandate of KRS

337.285(1).

              Eventually, the Supervisors filed a motion for partial summary

judgment, and Hitachi filed a motion for summary judgment. In their motion for

partial summary judgment, the Supervisors pointed out that an employee must be

paid one and one-half times her applicable hourly wage for overtime work per

KRS 337.285(1); however, an employee does not include one employed in an

executive or supervisory capacity as set forth in KRS 337.010(2)(a)2. To be

considered either an executive or supervisory employee exempt from the overtime

mandate of KRS 337.285(1), the Supervisors argued that such employee must be

compensated on a salary basis pursuant to 803 Kentucky Administrative

Regulations (KAR) 1:070 Section 2(a) and 803 KAR 1:070 Section 5(2). The

Supervisors maintained that they were not paid on a salary basis, and thus, they

were entitled to the statutory overtime rate of pay set forth in KRS 337.285(1). In

fact, the Supervisors asserted that Hitachi paid them on an hourly basis without a

guaranteed predetermined amount of pay and did not pay them on a salary basis

per 803 KAR 1:070 Section 10. In particular, the Supervisors maintained:

              KRS 337.010 excludes from the definition of
              “employee,” and the overtime and minimum wage

                                         -6-
protections that attach to employee status, certain
categories of workers, including “[a]ny individual
employed in a bona fide executive, administrative,
supervisory, or professional capacity.” Hitachi contends
that its Berea Supervisors fall into two of these
categories: executive and supervisory. See Def.’s
Answers to Plfs.’ 2d Requests for Admission at Nos. 2, 4
(Exhibit 32). Under the relevant regulations, to qualify
as bona fide executive and supervisory employees, the
Supervisors must satisfy the “salary basis” test (as well as
the “duties test” which is not at issue here). 803 KAR
1:070 § 2(1)(a) (executive) and § 5(2) (supervisory).

       To be paid on a salary basis, as set forth above, an
employer must pay “a predetermined amount constituting
all or part of the employee’s compensation” that “is not
subject to reduction because of variations in the quality
or quantity of the work performed” on “a weekly, or less
frequent basis.” 803 KAR 1:070 § 10(1)(a). This, in
turn, requires a “guarantee” of a certain amount. See
generally, Hughes, 878 F.3d at 190-193. And, where
such an employee is paid on an hourly, daily, or shift
basis, there are additional requirements, including that
there also be a guarantee paid on a salary basis regardless
of the amount of time worked. 803 KAR 1:070 § 11(2).

       In short, where a worker is paid on an hourly basis
and there is no guarantee, that worker is not paid on a
salary basis. Where pay is not on a salary basis, there is
no executive or supervisory exemption. And, where
there is no exemption, the worker is an employee entitled
to the overtime protections of the KWHA. KRS 337.285
(requiring that employers pay employees for hours
worked over 40 in a workweek “at a rate of not less than
one and one-half (1-1/2) times the hourly wage rate”).

      In short, because there is no dispute that Hitachi
paid Supervisors on an hourly basis without a guarantee,
the Supervisors are employees entitled to overtime under
the KWHA as a matter of law. . . .

                            -7-
      ....

       Plaintiffs and the Class believe the undisputed
facts show that Hitachi paid them by the hour without
any guaranteed minimum amount, as explained above.
However, even if the Court concludes there was no
guarantee or leaves that question for the jury, there is no
reason to leave open the legal question of whether or not
the “reasonable relationship” requirement of the KWHA
applies.

      ....

       To meet the “reasonable relationship” test, the
weekly guarantee must be “roughly equivalent to the
employee’s usual earnings at the assigned hourly, daily,
or shift rate for the employee’s normal scheduled
workweek.” Id. Here, even if there is found to have
been a guarantee, the Supervisors’ long hours and the
resulting hourly pay over and above the supposed
guarantee caused the amount they actually earned to so
exceed the supposed guarantee that the two are not
reasonably related.

      ....

       Regardless of the outcome on the issues above,
Hitachi has admitted that its hourly adjustments of
“regular wages” constituted improper salary deductions
under the KWHA. See Section G, supra. Whether
Plaintiffs and the Class are found to have been paid by
the hour without a guarantee or on a salary basis is
immaterial to this claim.

       The KWHA’s regulations, specifically 803 KAR
1:070 § 10(2), permit certain deductions from a salary to
lawfully be made (including, for example, full-day
deductions for full-day absences, disciplinary
suspensions, and FMLA leave; offsets for jury duty or
military compensation; and proportional reductions for

                            -8-
partial work in initial and terminal weeks of
employment). These are exceptions to the general rule
that an “employee shall receive his or her full salary for
any week in which the employee performs any work
without regard to the number of days or hour worked.”
803 KAR 1:070 § 10(1)(a). They are also exceptions to
the rule that deductions may not be made from an
employee’s salary “for absences occasioned by the
employer or by the operating requirements of the
business.” 803 KAR 1:070 § 10(1)(b). However, where
deductions do not fall within the enumerated exceptions,
an employer “shall lose the exemption if the facts
demonstrate that the employer did not intend to pay
employees on a salary basis.” 803 KAR 1:070 §
10(4)(a).

       However, where deductions do not fall within the
enumerated exceptions, an employer “shall lose the
exemption if the facts demonstrate that the employer did
not intend to pay employees on a salary basis.” 803
KAR 1:070 § 10(4)(a). . . .

      ....

       Here, the undisputed facts show that Hitachi did
not intend to pay the Supervisors on a salary basis.

       First, Hitachi created an entire, hourly-based pay
system for Supervisors that resulted in a linear
correlation between the hours they recorded in their
timesheets and the amount of pay they received. See
Sections A and B, supra. This is not indicative of an
intent to pay Supervisors on a salary basis.

Second, as described in detail above, these deductions
occurred over years (from 2012 to 2017, . . . ), on some
occasions during the same pay period and during
different pay periods for the same basic improper reason.
See Section G, supra. This also specifically included
instances, such as scheduled shutdowns, where Hitachi

                            -9-
made these sorts of downward, hourly pay adjustments
for other employees without considering them improper.
Id.

      Third, these deductions were the result of
conscious application of Hitachi’s pay system to
Supervisors by their payroll administrator, who routinely
reviewed time records to make these adjustments. See
Section A(6)-(7), supra.

       Fourth, Hitachi had no policy prohibiting such
deductions, nor did it communicate such a policy, nor did
it have any complaint mechanism. See Section G, supra.
In fact, because the pay records Hitachi provided
Supervisors were simply inaccurate and provided no
information about these pay adjustments, even if there
had been such a complaint mechanism, there would have
been no meaningful way for Supervisors to identify and
address improper deductions. See Sections A(2)-(7) and
H, supra.

       Fifth, the timeline of Hitachi’s discovery and
efforts to pay back these underpayments demonstrate that
it had no intention of paying a salary and no commitment
to correcting its errors. . . .

       In short, the undisputed facts show that Hitachi did
not intend to pay Supervisors on a salary basis. In that
scenario, the relevant regulations provide that “the
exemption is lost during the time period in which the
improper deductions were made for employees in the
same job classification working for the same managers
responsible for the actual improper deductions.” 803
KAR 1:070 § 10(4)(b). . . .

       Hitachi can only avoid liability by showing that
these deductions are “isolated or inadvertent[.]”

      ....

                           -10-
                      The problem for Hitachi’s position is that the same
               facts identified above also show that these are not
               “isolated or inadvertent” deductions. The Sixth Circuit
               has held that the federal “window of correction”
               regulation “allows use of the defense only after an
               employer has first demonstrated an intention to pay its
               employees on a salary basis.” Takacs v. Hahn
               Automotive Corp., 246 F.3d 776, 783 (6th Cir. 2001). . . .

                      ....

                     In short, there is no dispute that Plaintiffs and the
               Class are entitled to judgment as a matter of law that
               Hitachi is liable for damages to all Supervisors employed
               during the pay periods when it improperly deducted the
               wages of its employees.

November 4, 2021, Memorandum in Support of Partial Summary Judgment at 53-

56, 61-64, 66.

               In its motion for summary judgment, Hitachi asserted that the

undisputed facts showed that it did not violate KRS 337.285(1). Hitachi claimed

that it consistently paid the Supervisors a predetermined and guaranteed yearly

salary. In addition to such salary, Hitachi also pointed out that in any week a

Supervisor worked over forty hours per week, she was paid for overtime on a

“straight time” basis until June of 2016.2 Hitachi’s Motion for Summary Judgment

at 16. After June of 2016, Hitachi asserted that it capped overtime pay to ten hours

per week. According to Hitachi, it paid the Supervisors overtime pay based on an

2
  The parties refer to straight time basis as meaning payment at the worker’s calculated hourly
rate.

                                              -11-
hourly rate derived from their respective predetermined annual salary.

Specifically, this hourly rate was determined by taking the Supervisors’ yearly

predetermined salary and dividing it “by 2,080 (52 weeks per year multiplied by 40

hours per week) or by dividing the monthly salary by 173.33 (2080 hours divided

by 12 months).” Hitachi’s Motion for Summary Judgment at 35. Hitachi

emphasized that the Supervisors received a set guaranteed yearly salary and also

received extra pay for hours worked over 40 per week. Hitachi rejected the

Supervisors’ allegation that their pay for time at or under 40 hour per week was

also computed on an hourly basis. Hitachi conceded to making 410 reductions or

deductions to the Supervisors’ guaranteed annual salary. Hitachi pointed out that

the great portion of these deductions (395) were legally permissible deductions and

that only fifteen of the deductions were legally impermissible. Even considering

the fifteen impermissible deductions, Hitachi maintained that it intended to pay the

Supervisors a guaranteed yearly salary. Additionally, Hitachi argued that the

fifteen legally impermissible deductions were inadvertent and isolated. Thus,

Hitachi maintained that the Supervisors were paid on a salary basis under 803

KAR 1:070 Section 10 and that no violation of KRS 337.285(1) occurred.

             By order entered January 13, 2023, the circuit court denied the

Supervisors’ motion for partial summary judgment and granted Hitachi’s motion

for summary judgment. In so doing, the circuit court reasoned:

                                        -12-
       Plaintiffs have advanced several theories as to why
they believe Hitachi was legally required to pay them the
overtime rate of pay for all hours worked over forty (40).
Hitachi argues that the Supervisors were paid on a
“salary basis” making them exempt from the overtime
provisions of the KWHA and that neither the pay system
utilized by Hitachi as to the Supervisors nor the failure to
pay them the overtime rate of pay violated the law.
Plaintiffs seek to recover unpaid overtime pay that they
claim Hitachi owes them pursuant to KWHA.

        In 2019, the Court certified the Class which
consists of “[a]ll current and former supervisors
(including, without limitation, Production Supervisors,
Quality Supervisors, and Warehouse Supervisors)
employed by Hitachi in its Berea, Kentucky,
manufacturing facilities at any time since April 24, 2012.
. . . ” The Class was divided into two Subclasses. The
first Subclass contains “[a]ll Class Supervisors employed
by Hitachi at any time from April 24, 2012[,] to the
present.” These Supervisors claim that they were not
paid on a “salary basis” but on an “hourly basis” and
were therefore entitled to overtime pay. The second
Subclass contains “[a]ll Class Supervisors employed by
Hitachi at any time from April 24, 2012[,] through June
13, 2016.” These Supervisors argue alternatively that
they qualify for overtime pay under the reasonable
relationship test.

       Plaintiffs’ [sic] have asserted three claims in their
motion. 1.) Supervisors were paid on an hourly basis
without a guaranteed minimum amount of pay and
therefore entitled to overtime compensation (one and
one-half times their regular rate of pay) for all hours
worked over forty (40) in a workweek. 2.) Even if the
Supervisors were paid a guaranteed minimum amount of
pay, the reasonable relationship test of the KWHA
applies to determine when Supervisors were entitled to
overtime compensation for hours over forty (40) in a
workweek. 3.) Regardless of the outcome of the first two

                            -13-
claims, Hitachi has violated the KWHA by improper
deductions of the wages of Supervisors which nullifies
any overtime exemption under KWHA for all
Supervisors employed during the pay period when the
deductions occurred.

      ....

       Under both the KWHA and Fair Labor Standards
Act (FLSA) 29 [United States Code] U.S.C. §§201-219,
there are certain types of workers to whom employers
must pay statutory time and one-half overtime and other
types of workers to whom employers have no obligation
to pay such overtime. Specifically, employers must pay
overtime to workers unless they are exempt from the
overtime provisions of the law. KRS 337.010, et seq.

      ....

       A central issue in this case is whether Hitachi pays
the Supervisors on a “salary basis” in accordance with
803 KAR 1:071 §10(1)(a) and federal counterpart 29
[Code of Federal Regulations] C.F.R. § 541.602(a)(1)-
(a)(2). Plaintiffs claim that Hitachi paid them on an
“hourly basis.” In support of this claim, Plaintiffs state
that Hitachi calculated their pay based upon their time
records as Hitachi tracked clock-in and clock-out times
of Supervisors; that Supervisors had an hourly rate of pay
which was reflected on their paystub, that Supervisors’
“regular wages” as listed on their paystub were computed
by the hour based upon a forty (40) hour workweek;
Supervisors received pay for hours over forty (40) in a
workweek at their “straight time” hourly rate, the same
rate used for hours up to forty (40); and that Supervisors’
“regular wages” were occasionally adjusted downward
for time they did not work using hourly computations
based upon their time records. Plaintiffs argue they
received no predetermined amount of pay. Rather, the
number of hours they recorded in their time records
determined the amount they were paid.

                           -14-
      Plaintiffs also claim Hitachi did not provide them
with a guaranteed minimum amount of pay. Plaintiffs
argue the facts do not support that Hitachi ever intended
to guarantee any amount. . . . Plaintiffs argue that the
record shows that Hitachi did not pay Supervisors
consistent with a legitimate guarantee and that there were
downward adjustments by the hour to their supposed
guarantee, some of which Hitachi concedes were
improper reductions in pay. . . .

       Counsel for Plaintiffs analyzed Hitachi’s pay
system in comprehensive fashion in their briefing and
through oral arguments at the hearing and demonstrated
how they believe Hitachi’s pay system as to Supervisors
is actually based upon calculations involving the
combination of hours worked and hourly rate thus
making them “hourly basis” employees, despite Hitachi’s
position to the contrary. Plaintiffs claim that because
they are paid on an “hourly basis without a guarantee,
they are employees entitled to overtime under the
KWHA.

        Hitachi disagrees, claiming that the Supervisors
are paid on a “salary basis.” Hitachi points out that all
the Supervisors received either an Employment
Agreement or an Offer Letter which confirmed their
initial employment or promotion to the position. . . .

      ....

Hitachi states the “regular wages” amount listed on the
Supervisors’ paystubs for the specified pay period
represents their salary, and upon review of the evidence,
the salary amount set forth in the Supervisors’
Employment Agreements, Offer Letters, or on the Salary
Spreadsheets exactly matched the pay amount listed
under “regular wages” on their paystubs, the only
exceptions being where deductions occurred to the
Supervisors’ predetermined amount. The amount

                            -15-
reflected under “regular wages” was a monthly increment
as Hitachi used a monthly pay period until a change to bi-
weekly in July of 2019.

       As to deductions, the record shows that 5,056 pay
periods occurred from April 2012 to August 2020. It
appears that in approximately 92% of those pay periods
(4,646), the predetermined salary matched the “regular
wages” figure on the respective paystubs. Thus, only 410
of those were pay periods where the “salary” amount
under “regular wages” did not exactly match the amount
contained in Employment Agreements, Offer Letters, or
Salary Spreadsheets, and those situations existed because
of deductions. In 395 of those 410 pay periods, the
deduction was for a lawful reason. Only on 15 occasions
were the deductions not in compliance with the
regulations over those eight years (discussed below).

       In addition to the predetermined salary for all
hours worked, Hitachi also pays extra compensation to
Supervisors for hours worked over forty (40) in a
workweek, but only on a “straight time” rate of pay. This
extra compensation provided by Hitachi is voluntary and
not required by law. The Supervisors were paid a salary
under “regular wages” for all hours worked, plus extra
compensation at “straight time” for the hours worked
beyond forty (40). . . . In June 2016, the extra
compensation was capped to hours recorded over forty
(40) and up to fifty (50) hours. . . .
       ....

       Based upon a review of the record and considering
the arguments of counsel with respect to this claim, the
Court finds Hitachi’s position to be well-taken and finds
as a matter of law that the Supervisors were paid on a
“salary basis.”

       The Court finds that the elements of the Salary
Basis test under the above regulations have been
satisfied. The Supervisors regularly received pay on a

                          -16-
weekly, or less frequent basis. Here, they were paid
monthly, until the change to bi-weekly in 2019, both of
which constitute pay on “a weekly, or less frequent
basis.” The pay periods for which compensation was
paid are reflected in the pay stubs of record at the top of
the paystub (i.e., May 1, 2016 – May 31, 2016) and
specifically under “pay period.”

       Hitachi provided Supervisors a predetermined
amount of pay. The Court finds Hitachi’s Employment
Agreements, Offer Letters, and the Salary Spreadsheets
all contain the Supervisors’ predetermined amounts of
compensation, that those amounts were reflected on the
paystubs of each Supervisor under “regular wages”, and
that the amount of compensation under “regular wages”
in the paystubs matched the “salary” listed in those
Employment Agreements, Offer Letters, and Salary
Spreadsheets, the only exceptions being where
deductions were applied. As noted above, in all but 15
pay periods over an eight-year span (5,041 out of 5,056
pay periods), these predetermined amounts were paid in
full or otherwise subject to lawful deduction. The
Employment Agreements and Offer Letters listed the
amount of salary, used the term “salary”[.] . . .

      ....

        The Court finds that the 173.33 figure under the
“hours” category on the paystubs is used to reach an
hourly rate of pay (monthly salary divided by 173.33),
which is used for hourly calculations only as to
deductions, and for the extra compensation for hours
worked in excess of forty (40) at a straight time rate of
pay. . . .

      ....

       The Court has reviewed the record which contains
the detailed examination of Hitachi’s pay system,
depositions, powerpoint presentations, payroll

                            -17-
documentation, and numerous other exhibits, and finds
that Plaintiffs have not satisfied their burden to show that
they were not paid on a salary basis. The Court finds no
genuine issue of material fact exists with respect to this
claim, and Hitachi is entitled to judgment as a matter of
law.

      ....

       Plaintiffs contend that the reasonable relationship
test of the KWHA applies, and that test shows that given
the long hours the Supervisors were working each week
and the resulting hourly pay over and above the
guarantee, the actual earnings received by the
Supervisors far exceeded their guarantee such that the
two are not reasonably related. This claim is asserted by
those Supervisors employed from April 2012 until extra
pay was capped in June 2016.

      ....

       The Court finds that the plain language of the
regulation precludes application of the reasonable
relationship test herein. The regulation states that the
reasonable relationship requirement shall apply “only if
the employee’s pay is computed on an hourly, daily, or
shift basis.” The Court has found that the Supervisors
were paid by Hitachi on a Salary Basis, with a
predetermined guaranteed minimum amount of
compensation, paid on a monthly basis for this group of
Supervisors, plus extra compensation on a straight-time
rate for hours worked above forty (40). The Court could
find no evidence to show the predetermined amounts
were computed by the hour, day, or shift. . . .

      ....

      The permissible deductions from an exempt
employee’s salary are provided in 803 KAR 1:071
§10(2)(a) and 29 C.F.R. § 541.602(b)[.] . . .

                            -18-
       Where deductions occur outside of those specific
exceptions under 29 C.F.R. § 541.602(b), the employer
“shall lose the exemption if the facts demonstrate that the
employer did not intend to pay employees on a salary
basis.” 803 KAR 1:071 §10(3); 29 C.F.R. § 541.603(a).

      ....

       Hitachi has admitted that it discovered 15
occasions where improper deductions occurred that did
not comply with the regulations. The record indicates
that these improper deductions impacted only 13 of the
Supervisors and the total sum of the deductions was
approximately $6,500.

      ....

       There is no dispute that Hitachi has reimbursed all
affected Supervisors, plus double the amount deducted.
Plaintiffs raise issues as to the timing of the
reimbursement, but there is no timing requirement under
the law. . . .

      ....

       The Court finds that these 15 improper deductions
were both isolated and inadvertent. They were isolated
as they occurred only 15 times over a span of
approximately 8 years and affected 13 out of over 200
Supervisors. Further, the Court finds that these improper
deductions were inadvertent mistakes based upon the
details of the deductions as reflected in the record.

Based upon the record, the Court sees no pattern or
course of conduct in taking improper deductions that
demonstrates that Hitachi did not intend to pay the
Supervisors on a Salary Basis such that the exemption
would be lost for any of the Supervisors subject to the
improper deductions.

                           -19-
                   ....

                    Based upon the above, the Court finds no genuine
             issues of fact exist with respect to this claim, and that
             Hitachi is entitled to judgment as a matter of law. The
             Court does not believe the circumstances surrounding
             these 15 deductions are sufficient to constitute a violation
             of the regulation and thus cause Hitachi to lose the
             exemption.

January 13, 2023, order denying Hitachi’s motion for partial summary judgment at

2-10, 12, 13, 15, 19-22. This appeal follows.

                            STANDARD OF REVIEW

             To begin, summary judgment is proper where there exists no material

issue of fact and movant is entitled to judgment as a matter of law. See Steelvest,

Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). All facts and

inferences therefrom are viewed in a light most favorable to the nonmoving party.

In addition, our review of summary judgment is always de novo. Seiller

Waterman, LLC v. Bardstown Cap. Corp., 643 S.W.3d 68, 74 (Ky. 2022);

Cunningham v. Kroger Ltd. P’ship I, 651 S.W.3d 199, 202 (Ky. App. 2022).

                                      ISSUES

             The primary issue in this appeal is whether the Supervisors were paid

on a salary basis and thus, were properly classified as executive/supervisory

employees exempt from the overtime mandate of KRS 337.285(1). To aid in our

examination of this issue, the Kentucky Supreme Court has recognized that the

                                        -20-
Fair Labor Standards Act (29 U.S.C. §§ 201-219) and its accompanying

regulations are substantially similar to Kentucky law; thus, federal case law may be

utilized. City of Louisville, Div. of Fire v. Fire Serv. Managers Ass’n, 212 S.W.3d

89, 92 (Ky. 2006). There are two caveats.

             First, under federal law, the employer carries the burden to

demonstrate that the employee is not entitled to overtime pay at a one and a half

times her hourly wage. Conversely, under Kentucky law, the employee carries the

burden of proving that she is an employee entitled to overtime pay at a one and

one-half times her hourly wage. City of Louisville, 212 S.W.3d at 94-95. Second,

federal case law that “require[s] an ‘exemption’ be narrowly construed against the

employer are similarly inapplicable here, since the drafting of KRS 337.010(2)(a)

to exclude bona fide supervisory employees from its scope does not constitute an

exemption.” Id. at 95. To facilitate the disposition of this appeal, we will not only

cite to the pivotal Kentucky regulations but also to appurtenant federal regulations.

                               APPLICABLE LAW

             This Commonwealth’s wage and hour law is set forth in KRS Chapter

337. KRS 337.285(2) mandates an employer to pay an employee a rate of at least

one and one-half times her hourly rate for work over forty hours a week. As

utilized in KRS 337.285(2), the term employee is defined in KRS 337.010 as:

                                        -21-
               (2) As used in KRS 337.275 to 337.325, 337.345,
               and 337.385 to 337.405, unless the context requires
               otherwise:

                 (a) “Employee” is any person employed by or suffered
                 or permitted to work for an employer, but shall not
                 include:

                 ....

                   2. Any individual employed in a bona fide executive,
                   administrative, supervisory, or professional capacity,
                   or in the capacity of outside salesman, or as an
                   outside collector as the terms are defined by
                   administrative regulations of the commissioner[.]

KRS 337.010(2)(a)2. Relevant to this appeal, to qualify as an executive or

supervisory employee, the executive/supervisor must be compensated on a “salary

basis.” And, 803 KAR 1:070 Section 103 defines salary basis:

                      Section 10. Salary Basis. (1)(a) An employee will
               be considered to be paid “on a salary basis” within the
               meaning of this administrative regulation if the employee
               regularly receives each pay period on a weekly, or less
               frequent basis, a predetermined amount constituting all or
               part of the employee’s compensation, which amount is
               not subject to reduction because of variations in the
               quality or quantity of the work performed. Subject to the
               exceptions in subsection 2 of this section, the employee
               shall receive his or her full salary for any week in which
               the employee performs any work without regard to the
               number of days or hour worked. Exempt employees
               need not be paid for any workweek in which they
               perform no work.

3
    803 KAR 1:070 was amended and renumbered as 803 KAR 1:071 in 2020.

                                          -22-
            (b) An employee shall not be considered to be “on a
            salary basis” if deductions from the employee’s
            predetermined compensation are made for absences
            occasioned by the employer or by the operating
            requirements of the business. Accordingly, if the
            employee is ready, willing and able to work, deductions
            shall not be made for time when work is not available.

803 KAR 1:070 Section 10(1)(a), (b); see also 29 C.F.R. § 541.602 (a)(1), (2).

            Thus, to be paid on a salary basis, an employee must receive a

guaranteed wage in a predetermined amount on a weekly or less frequent basis that

is not subject to impermissible reductions or deductions due to deviations on

quality or quantity of work performed. City of Louisville, 212 S.W.3d at 96;

Coates v. Dassault Falcon Jet Corp., 961 F.3d 1039, 1047 (8th Cir. 2020). The

phrase “on a weekly or less frequent basis” has recently been interpreted as

meaning:

            An employee must be paid on a “weekly [or biweekly or
            monthly] basis,” not on a daily or hourly one. Or said
            more fully, the “basis” in that phrase is the unit of time
            used to calculate pay, and that unit must be a week or less
            frequent measure; it cannot be a day, or other more
            frequent measure[.]

Helix Energy Sols. Grp., Inc. v. Hewitt, 598 U.S. 39, 52 (2023).

            An employee is not paid on a salary basis if deductions to

compensation are made based upon the unavailability of work. 803 KAR 1:070

Section 10(1)(b); see also 29 C.F.R. § 541.602(a)(2). There are permissible

deductions to compensation set forth in 803 KAR 1:070 Section 10(2) and include

                                        -23-
days missed for sickness or personal reasons. See also 29 C.F.R. § 541.602(b).

The effect of an employer’s impermissible deductions upon the exempt status of an

employee is found in 803 KAR 1:070 Section 10(4), and it provides:

                 (4) Effect of Improper deductions from salary.

                  (a) An employer who makes improper deductions
            from salary shall lose the exemption if the facts
            demonstrate that the employer did not intend to pay
            employees on a salary basis. An actual practice of
            making improper deductions demonstrates that the
            employer did not intend to pay employees on a salary
            basis. The factors to consider if determining whether an
            employer has an actual practice of making improper
            deductions include, but are not limited to: the number of
            improper deductions, particularly as compared to the
            number of employee infractions warranting discipline;
            the time period during which the employer make
            improper deductions; the number and geographic
            location of managers responsible for taking the improper
            deductions; and whether the employer has a clearly
            communicated policy permitting or prohibiting improper
            deductions.

                  (b) If the facts demonstrate that the employer has an
            actual practice of making improper deductions, the
            exemption is lost during the time period in which the
            improper deductions were made for employees in the
            same job classification working for the same managers
            responsible for the actual improper deductions.
            Employees in different job classifications or who work
            for different manager shall not lose their status as exempt
            employees. Thus, for example, if a manager at a
            company facility routinely docks the pay of engineers at
            that facility for partial-day personal absences, then all
            engineers at that facility whose pay could have been
            improperly docked by the manager lose the exemption;

                                       -24-
             except engineers at other facilities or working for other
             manager, remain exempt.

                  (c) Improper deductions that are either isolated or
             inadvertent shall not result in loss of the exemption for
             any employees subject to the improper deductions, if the
             employer reimburses the employees for the improper
             deductions.

803 KAR 1:070 Section 10(4)(a), (b), and (c), see also 29 C.F.R. § 541.603(a), (b),

and (c).

             If the employer makes improper deductions from salary, the employer

is not entitled to the exemption if “the employer did not intend to pay employees

on a salary basis.” 803 KAR 1:070 Section 10(4)(a); see also 29 C.F.R. §

541.603(a). There are several factors to be considered when determining whether

an employer had an actual practice of making improper deductions, which are

specifically set forth in 803 KAR 1:070 Section 10(4)(a). See also 29 C.F.R. §

541.603(a). Where an employer has an “actual practice of making improper

deductions[,]” such employer does not intend to compensate the employee on a

salary basis, and the employee is not exempt from the overtime mandate of KRS

337.285(1). 803 KAR 1:070 Section 10(4)(b); see also 29 C.F.R. § 541.603(b).

Nonetheless, isolated or inadvertent improper deductions “will not result in loss of

the exemption . . . if the employer reimburses the employees” for the improper

deductions. 803 KAR 1:070 Section 10(4)(c); see also 29 C.F.R. § 541.603(c).

                                        -25-
                                   ANALYSIS

            The Supervisors assert that they were not compensated on a salary

basis because Hitachi calculated their pay on an hourly basis. The Supervisors also

claim that Hitachi did not pay the Supervisors a predetermined and guaranteed

wage and that Hitachi reduced their wages commensurate with the quantity of

work they performed. As a result, the Supervisors allege they were entitled to

overtime pay per KRS 337.285(1) and that the circuit court erred by rendering

summary judgment in favor of Hitachi.

            To support their claim that Hitachi paid them on an hourly basis, the

Supervisors maintain that Hitachi alleged that it paid them a predetermined annual

salary; however, the Supervisors contend that Hitachi only utilized the annual

salary to determine each Supervisor’s hourly pay rate by dividing the annual salary

“by 12 to yield a monthly amount, then dividing that amount by 173.33 hours

(2080 hours ÷ 12 months = 173.33 hours per month).” Supervisors’ Brief at 6.

Additionally, the Supervisors point out that Hitachi used a timekeeping system to

track the time each supervisor worked, including regular time (40 hours per week)

and overtime hours. Hitachi automatically deducted time for meal periods each

shift and tracked Supervisors’ time off work. Additionally, the Supervisors claim

that Hitachi improperly deducted from their alleged predetermined salary for hours

when they worked less than forty hours per week. As a result, the Supervisors

                                        -26-
argue that they were paid on an hourly basis and that annual salary was not a

guaranteed amount. Rather, the annual salary was subject to reduction when a

Supervisor worked less than forty hours per week; therefore, the annual salary was

based upon the quantity of work in contravention of the salary basis test.

Moreover, the Supervisors argue that Hitachi engaged in an actual practice of

making improper deductions to their salary and did not intend to pay them on a

salary basis.

               1. Predetermined Salary on a Weekly or Less Frequent Basis

                 It is uncontroverted that each Supervisor received either an

Employment Agreement or an offer letter stating that the Supervisor would be paid

an annual predetermined salary. Salary spreadsheets and paystubs for the

Supervisors reveal that each Supervisor received either monthly or biweekly pay

consistent with the annual predetermined salary unless a deduction was applied.

Hitachi did utilize a timekeeping system that tracked the Supervisors’ work time,

and it did determine each Supervisor’s hourly pay by using her predetermined

annual salary. In fact, the Supervisors’ pay was based upon a two-part salary

structure where the Supervisors were paid a predetermined annual salary and also

were paid for hours worked per week in excess of forty hours as overtime.4 The

4
    In June of 2016, the Supervisors’ overtime pay was capped at ten hours per week.

                                               -27-
Supervisors were paid overtime at an hourly rate based upon their predetermined

annual salary for overtime worked in a week.

             803 KAR 1:070 Section 11(1) expressly permits an employer to pay

extra compensation to an employee without violating the salary basis test if the

base salary remains a guaranteed predetermined amount calculated upon a weekly

or less frequent basis. See also 29 C.F.R. § 541.604(1). Additionally, the mere

tracking of employees’ hourly worktime and the payment of extra compensation

for hours worked over forty hours a week are “not inconsistent with a finding that

they are salaried employees.” City of Louisville, 212 S.W.3d at 97. So, Hitachi’s

payment of overtime on an hourly basis and its tracking of the Supervisors’

worktime is acceptable so long as Hitachi paid the Supervisors a guaranteed

predetermined salary. See id.

             As to the deductions (410) made by Hitachi to the Supervisors’ pay,

most of the deductions (395) were permissible. These permissible deductions do

not affect the exempt executive/supervisory status of employees. On the other

hand, fifteen of the deductions taken from Supervisors’ pay were impermissible

and may result in the loss of the Supervisors’ exempt status if Hitachi did not

intend to pay them on a salary basis. 803 KAR 1:070 Section 10(4)(a); Takacs v.

Hahn Automotive Corp., 246 F.3d 776, 783 (6th Cir. 2001). An actual practice of

making improper deductions demonstrates that the employer did not intend to pay

                                        -28-
the employees on a salary basis, and there is a list of factors in 803 KAR 1:070

Section 10(4)(a) to consider when determining whether the employer had an actual

practice of making improper deductions. As Hitachi made improper deductions to

the Supervisors’ annual predetermined salary, we shall consider the factors set

forth in 803 KAR 1:070 Section 10(4)(a) to determine the effect of the improper

deductions on the exempt status of the Supervisors.

             To that end, it appears that the pay of over two hundred Supervisors at

the Hitachi manufacturing facilities in Berea, Kentucky, were examined by the

parties and the circuit court. The fifteen impermissible deductions spanned an

eight-year period (2012 – 2020) and affected thirteen Supervisors. The total

amount of the improper deductions from the Supervisors’ pay was $6,570.08.

             Viewing the facts most favorable to the Supervisors, we cannot

conclude that the Supervisors’ have established a genuine issue as to any material

fact as concerns whether Hitachi paid the Supervisors a guaranteed wage in a

predetermined amount on a weekly or less frequent basis that was not subject to

impermissible reductions or deductions due to deviations on quality or quantity of

work performed. Rather, the Offer Letters, Employment Agreements, Hitachi’s

spreadsheets, and Supervisors’ paystubs demonstrate that the Supervisors were

consistently paid their respective predetermined annual salary unless a deduction

was applied. The fifteen instances of improper deductions from thirteen

                                        -29-
Supervisors’ pay that occurred over an eight-year period is simply insufficient to

constitute an actual practice of making improper deductions or to demonstrate an

intent by Hitachi to not pay the Supervisors on a salary basis. 803 KAR 1:070

Section10(4)(a), (b); see also Ellis v. J.R.’s Country Stores, Inc., 779 F.3d 1184,

1195-96 (10th Cir. 2015); Block v. City of L.A., 253 F.3d 410, 414-15 (9th Cir.

2001); O’Brien v. Town of Agawam, 350 F.3d 279, 294 (1st Cir. 2003).

Furthermore, the fifteen improper deductions were isolated, and as Hitachi has

reimbursed the affected Supervisors for these improper deductions, 803 KAR

1:070 Section 10(4)(c) would apply, thus preserving the exempt status of the

Supervisors.

                             2. Reasonable Relationship

               As the Supervisors were paid a predetermined annual salary on a

weekly or less frequent basis, 803 KAR 1:070 Section 11(2) and its reasonable

relationship test are inapplicable. See also 29 C.F.R. § 541.604(b). 803 KAR

1:070 Section 11(2) provisions are only triggered when the employee is

compensated on a shorter basis than weekly, for instance on a daily, hourly, or shift

basis. See Helix Energy Sols. Group, Inc., 598 U.S. at 55-56.

                                    SUMMARY

               Accordingly, based on our review of the record below, applicable law,

and the circuit court’s thorough analysis of the issues presented, we must affirm.

                                         -30-
The circuit court properly granted Hitachi’s motion for summary judgment as there

exists no genuine issues of material fact as to whether the Supervisors were paid on

a salary basis. We view any remaining contentions of error as moot or without

merit.

            For the foregoing reasons, the circuit court’s January 13, 2023, order

granting Hitachi’s motion for summary judgment is affirmed.

            ALL CONCUR.

BRIEFS FOR APPELLANTS:                    BRIEF FOR APPELLEE:

Jerome P. Prather                         Craig P. Siegenthaler
J. Conner Niceley                         Timothy J. Weatherholt
Lexington, Kentucky                       Louisville, Kentucky

J. Chis Sanders                           ORAL ARGUMENT FOR
Louisville, Kentucky                      APPELLEE:

David W. Garrison                         Timothy J. Weatherholt
Joshua A. Frank, pro hac vice             Louisville, Kentucky
Nashville, Tennessee

ORAL ARGUMENT FOR
APPELLANTS:

David W. Garrison
Nashville, Tennessee

                                       -31-