Paul O. Spinden v. GS Roofing Products ( 1996 )

___________
No. 95-1893
___________
Paul O. Spinden, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Arkansas.
GS Roofing Products Company, *
Inc., *
*
Appellant. *
___________
Submitted: April 8, 1996
Filed: August 22, 1996
___________
Before MAGILL, Circuit Judge, HENLEY, Senior Circuit Judge, and LOKEN,
Circuit Judge.
___________
MAGILL, Circuit Judge.
GS Roofing Products Company, Inc. (GS) appeals the district court's
ruling that GS's former controller, Paul O. Spinden, was not an exempt
administrative employee under the Fair Labor Standards Act (FLSA), 29
U.S.C. §§ 201-216. We reverse.
I.
Spinden worked as the plant controller for the GS plant in Little
Rock, Arkansas, from January 1985 until September 1993. When Spinden first
joined the company, he had an accounting clerk and an accounts payable
clerk who reported to him. In December 1986, the clerks were terminated
as part of a downsizing effort by
GS, and Spinden took over their duties.1 As a result of these additional
duties, Spinden consistently worked longer than forty hours each week.
Spinden received only his base salary and bonuses as compensation, however,
which at the time of his retirement was $42,792 annually. Spinden brought
this lawsuit against GS in August 1993, seeking overtime compensation for
hours worked in excess of forty hours per week for the last two years of
his employment with GS.2
In its defense against Spinden's claim for overtime wages, GS argued
that Spinden was exempt from the FLSA's overtime compensation provisions
because he was an administrative employee under the definition provided by
the FLSA's enabling regulations. Both Spinden and GS submitted evidence
which described Spinden's duties at GS. GS relied, in part, on Spinden's
own resume, which summarized his work at GS:
* Provided accurate and timely financial reporting,
including accounts payable, inventory, cash receipts and
disbursements, journal and bank account reconciliation,
production and variance report
* Posted daily, weekly, and monthly production, including
downtime and loss time
* Maintained personnel records
* Prepared hourly payroll
* Prepared quarterly and annual federal and state tax
reports, including multi-state reports
* Managed cash flow
* Prepared annual budgets for plant operation and for all
departments
1
While GS never replaced Spinden's permanent assistants, it
did occasionally employ temporary employees who assisted Spinden in
his work. Spinden denies that he directly supervised these
temporary employees.
2
Spinden's claim for overtime compensation was tried by the
district court in a bench trial. Spinden also brought a suit under
the Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634,
alleging age discrimination by GS. The discrimination suit was
simultaneously tried before a jury, which found for GS. Spinden
does not appeal this adverse verdict.
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* Analyzed standard/actual cost for all production
* Responsible for obtaining and maintaining all employee
insurance
* Prepared monthly journal entries
* Maintained general ledger
Def. Ex. 1, reprinted in Appellant's App. at 34.
GS presented evidence that Spinden regularly created a variety of
reports, including the Variance Report. The Variance Report measured the
Little Rock plant's actual monthly performance against its projected
monthly performance; where actual costs exceeded projected costs, a
negative variance existed. Spinden acknowledged that when he noted
negative variances, he "might say something [to the plant manager], because
in the course of setting up the standard, we may have set the standard up
a little bit too low." Trial Tr. at 364.
In addition, GS presented a "Performance Improvement Plan," signed
by Spinden and dated March 2, 1992, which listed "performance criteria
(knowledge, skill, and other personal factors critical to job success)" for
Spinden's position:
Must be able to determine the best way to program all schedules
for timely reporting.
Must have accounting skills and knowledge of accounting
principles and practices.
Th[o]rough knowledge of GS Roofing Products Co. needs and
requirements to stay abreast of all changes from Corporate
Office.
Ability to analyze, process, interpret and effectively
communicate cost data.
Def. Ex. 18, reprinted in Appellant's App. at 47 (emphasis added). The
plan also described several "key job objectives":
Work with Admin Ass't to develo[p] a method to balance
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and audit Distribution Trial Balance Summary Report on monthly
basis . . .
Design a Cost Reduction Reporting Form that will generate all
data needed to accurately report savings . . .
Work with Production Superintendent to develop plan and
implement[at]ion schedule for computerizing production and
usage reporting on a daily basis . . .
Id.
GS also presented evidence that Spinden had been responsible for
computerizing the accounting procedures at the Little Rock plant; that
Spinden met with the Little Rock GS plant manager, production
superintendent, traffic manager, process engineer, and corporate process
engineer for weekly staff meetings, see Trial Tr. at 524 (Spinden
Testimony); that Spinden was, upon his own recommendation, responsible for
accepting service of process as the registered agent for GS in Little Rock,
see id. at 463; that Spinden signed documents from the city of Little Rock
Revenue Collection Division for GS, thereby agreeing that he was an "owner,
officer or manager" of GS, see Appellant's App. at 52; and that Spinden
signed equipment leasing contracts for GS. See id. at 54.
Spinden testified at trial that most of his time was occupied by
[j]ust a bunch of number crunching and basically doing all the
accounting work as far as clerical work that had to be done
getting production reports and putting in production and the
time sheets and time cards and just menial, everyday
bookkeeping jobs.
Trial Tr. at 523 (Spinden Testimony). During his cross-examination,
Spinden testified regarding his other duties at GS:
Q. Mr. Spinden, in your controller job from 1987 until 1993,
your duties included the following things, correct,
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and I'm going to list them for you: Accountable for the timely
and accurate reporting of manufacturing costs and variances?
A. Yes.
Q. Experience in a manufacturing environment with emphasis on
standard costing, variance analysis, and the corollary
disciplines of accounting normally associated with the
maintenance of a general ledger?
A. No.
Q. You don't believe that that was one of your
responsibilities?
A. Not analysis. I did not have time to do analysis.
. . .
Q. All right. Did you give the following answer [during your
deposition on April 26, 1994] to the following question:
. . . "Now, No. 2, three to five years' experience
in a manufacturing environment with emphasis on
standard cost variance analysis and corollary
disciplines of accounting normally associated with
maintenance of a general ledger. Would you agree
that the plant controller--as plant controller at
GS Roofing, that these were skills that you used as
plant controller and skills that you possess?"
"Answer: Yes."
Did you give that answer at that time?
A. I may have.
Trial Tr. at 452-54. Spinden also agreed that he: reconciled the payroll
bank account and audited weekly payroll earnings and deductions; prepared
journal entries for the recording of accounts payable accruals, liabilities
associated with the hourly payroll, conception of raw materials and related
variances; scrutinized all production and inventory dates to insure
accuracy, policy compliance, and control; and developed systems/programs
which
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reduced clerical effort and improved office productivity. Id. at 457-60.
The district court concluded that Spinden was not an exempt employee,
and was therefore entitled to overtime compensation. The court stated:
[This case] comes down to the, as everyone agrees, what
[Spinden's] primary duty was. . . . I think these concepts are
a little slippery. So when I first heard about that 50 percent
rule, a good rule of thumb . . . I figured, well, that will
give me something I can tie to. Then I hear about the Burger
King case [3] that's 90 percent and they go for managerial or
administrative or whichever . . . .
This case is so close that I'm still making up my mind as
I'm talking in my opinion . . . .
But it seems to me that primary duty has to have some tie
in some way in most cases to amount of time spent on a
particular duty. Now, if it were 50 percent, I could easily
find in Mr. Spinden's case because I think clearly that more
than 50 percent of his time was spent in doing things, what I'd
call mere bookkeeping or things that I would not call
discretionary or decision making or management-type decisions.
On the other hand, if we went with the Burger King case on 90
percent, I might be inclined clearly to go the other way.
I do think the Burger King case is distinguishable
because I think somebody that is a manger or supervisor in a
fast food place really can be the manager and spend most of his
time doing--cooking hamburgers and dipping french fries and
doing that sort of thing and still have a finger on the pulse
of everything, still be directing everything and probably
doesn't have to do much directing when he's got trained
employees. I don't think that that is a very close analogy.
I think it was Holmes who said, "All similes limp," and so I
don't think that's a very close analogy.
3
It is unclear whether the district court referred to Donovan
v. Burger King Corp., 675 F.2d 516 (2d Cir. 1982) (Burger King II),
or Donovan v. Burger King Corp., 672 F.2d 221 (1st Cir. 1982)
(Burger King I). Both cases involved the same essential facts, and
arrived at the same legal conclusions.
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So I get back to, well, how much time under all the facts
of this case do I think that Mr. Spinden spent doing primarily
what I'd call administrative, more managerial, decision making,
discretion, independent judgment-type things. I know that even
though the law is clear that he doesn't have to make the final
decision himself, that sending information to others who will
make the decision doesn't necessarily--can't necessarily mean
that it's an administrative duty because just the purest
bookkeepers could send numbers into the corporate or to the
plant manager and it would be a basis of the final decision.
You could say that he helped or she helped in the decision in
that respect.
Well, my overall impression is--and when I say "overall
impression," I mean my opinion is that Mr. Spinden spent about
80 to 90 percent in nonexempt work. Well, is that enough to
make him nonexempt under all the facts and circumstances of the
case? And I find that it is. I find him nonexempt, the 80 to
90 percent. So I'm going to make a specific finding of fact
that in my opinion that he did about 80 to 90 percent of
nonexempt work and, conversely, the other percentage would be
what would normally be exempt work.
I think that clearly that Mr. Spinden did more exempt
work than his testimony in his view he did, but I don't find
that he did much more. I've got to tie it in some way to how
much he did and how important it was. I just don't get the
overall impression that he was much more than a bookkeeper. He
was something more but not enough for me to find that that was
his primary duty, and so that will be the finding of the Court
on that.
Trial Tr. at 1148-51. The district court supplemented this finding during
a subsequent telephonic conference with the parties:
I want to make one comment on the finding I made that Mr.
Spinden was not an administrative person under the exception.
I am even more confident of my finding as I have reflected on
the trial and the evidence. I feel, as I stated earlier, he
probably did do about ten to twenty percent, probably about
fifteen percent work which would probably be called
administrative. Just for example, he took over the work of two
employees who undeniably did nothing other than clerical,
bookkeeping type work. So, I think he was basically your
garden variety bookkeeper with a few administrative duties.
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So, bottomline, when viewed as a whole I do not believe
he was an administrative employee as defined by the statute and
the regulations.
Conference of March 9, 1995 Tr. at 5-6.
The district court also found that GS and Spinden had agreed that his
salary was for forty hours per week, and that Spinden was entitled to one-
and-a-half times his normal rate of pay for hours worked over forty. The
district court entered a judgment for Spinden for $54,507.28, plus
$5,028.86 in simple interest from September 15, 1993 through March 9, 1995,
plus postjudgment interest at a rate of 6.57 percent until paid, and
awarded Spinden attorney's fees. GS now appeals, arguing that the district
court erred in (1) concluding that Spinden was a nonexempt employee; (2)
finding that there was an agreement between the parties that Spinden's
salary was for a forty-hour week; and (3) calculating Spinden's overtime
wages at one-and-a-half times his base rate of pay.4
II.
A.
We review the district court's findings of fact for clear error, see
Fed. R. Civ. P. 52(a), and its legal conclusions de novo. See Reich v.
Avoca Motel Corp., 82 F.3d 238, 240 (8th Cir. 1996). "A finding is
'clearly erroneous' when although there is evidence to support it, the
reviewing court on the entire evidence is left with the definite and firm
conviction that a mistake has been committed." United States v. United
States Gypsum Co., 333
4
Spinden has moved to dismiss GS's appeal on the ground that
GS failed to provide a complete record. We deny this motion. GS
has countermoved for sanctions against Spinden, for what it
considers a frivolous motion. This motion is also denied.
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U.S. 364, 395 (1948). In an FLSA exemption analysis, "the amount of time
devoted to administrative duties, and the significance of those duties,
present factual questions." Avoca, 82 F.3d at 240 (quotations and
citations omitted). The ultimate question, however, of "whether
[employees'] particular activities excluded them from the overtime benefits
of the FLSA is a question of law . . . governed by the pertinent
regulations promulgated by the Wage and Hour Administrator." Icicle
Seafoods, Inc. v. Worthington, 475 U.S. 709, 714 (1986).
B.
Under the FLSA, employees are entitled to additional compensation for
working more than forty hours in a week. See 29 U.S.C. § 207(a). Bona
fide administrative employees, however, are exempt from this provision, and
are not entitled to additional compensation. See 29 U.S.C. § 213(a)(1).
This exemption is "narrowly construed in order to further Congress' goal
of providing broad federal employment protection." McDonnell v. City of
Omaha, Neb., 999 F.2d 293, 295 (8th Cir. 1993), cert. denied, 114 S. Ct.
1188 (1994). The burden is on the employer to prove that this exemption
applies by "demonstrat[ing] that their employees fit 'plainly and
unmistakably within the exemption's terms and spirit.'" McDonnell, 999
F.2d at 296 (quoting Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392
(1960)).
Different tests apply to determine if an employee is qualified for
the administrative exemption, depending on the employee's level of
compensation. Where, as in Spinden's case, an employee earns more than
$250 per week, the "short test" applies. See Shockley v. City of Newport
News, 997 F.2d 18, 28 (4th Cir. 1993). Under the short test, an employee
qualifies for the administrative exemption if his "primary duty consists
of the performance of [office or nonmanual work directly related to
management policies or general business operations of his employer or his
employer's customers],
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which includes work requiring the exercise of discretion and independent
judgment." 29 C.F.R. § 541.2(e)(2) (incorporating 29 C.F.R. §
541.2(a)(1)).
Regulations at 29 C.F.R. § 541.103, incorporated by 29 C.F.R. §
541.206(b), define "primary duty" for this exemption:
A determination of whether an employee has [administration] as
his primary duty must be based on all the facts in a particular
case. The amount of time spent in the performance of the
[administrative] duties is a useful guide in determining
whether [administration] is the primary duty of an employee.
In the ordinary case it may be taken as a good rule of thumb
that primary duty means the major part, or over 50 percent, of
the employee's time. Thus, an employee who spends over 50
percent of his time in [administration] would have
[administration] as his primary duty. Time alone, however, is
not the sole test, and in situations where the employee does
not spend over 50 percent of his time in [administrative]
duties, he might nevertheless have [administration] as his
primary duty if the other pertinent factors support such a
conclusion. Some of these pertinent factors are the relative
importance of the [administrative] duties as compared with
other types of duties, the frequency with which the employee
exercises discretionary powers, his relative freedom from
supervision, and the relationship between his salary and the
wages paid other employees for the kind of nonexempt work
performed by the [administrator].
(emphasis added). Under these regulations, therefore, an "employee's
primary duty is that which is of principal importance to the employer,
rather than collateral tasks which may take up more than fifty percent of
his or her time." Reich v. Wyoming, 993 F.2d 739, 742 (10th Cir. 1993).
In concluding that Spinden did not have administration as his primary
duty as GS's employee, the district court relied entirely on its finding
that 80 to 90 percent of Spinden's tasks were routine and nondiscretionary
in nature. See Trial Tr. at 1148-51; Conference Tr. at 5-6. The district
court did not conduct the
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analysis set out in 29 C.F.R. § 541.103, which applies when the 50 percent
"rule of thumb" is inapplicable. While we accept the district court's
finding that only 10 to 20 percent of Spinden's duties involved discretion,
we must reject as clearly erroneous its finding that administration was not
Spinden's primary duty.
As the regulations make clear, the percentage of time an employee
spends on administrative tasks is but one factor in determining if
administration is that employee's primary duty. In Murray v. Stuckey's,
Inc., 939 F.2d 614, 618 (8th Cir. 1991), cert. denied, 502 U.S. 1073
(1992), we held that the fact that an employee spent 65 to 90 percent of
his time on nonexempt tasks "is not a controlling factor under the
regulations" for determining whether the employee was exempt from the
FLSA's overtime provisions. See also Jones v. Tiller, 72 F.3d 138, 1995
WL 712674, *3 (10th Cir. 1995) (unpublished opinion) (employee who spent
90 percent of her time on nonexempt tasks qualified for administrative
exemption); Burger King II, 675 F.2d at 521 (analyzing primary duty where
50 percent rule of thumb was inapplicable); Burger King I, 672 F.2d at 226-
27 (same).
Applying the proper analysis to the facts of this case, we conclude
that Spinden's primary duty as controller of GS's Little Rock plant5
consisted of the performance of office work directly related to the
management policies or the general business operations of GS. Viewing the
record as a whole, we must therefore
5
While it may be true that "a controller or comptroller would
necessarily have a primary duty directly related to management
policies or general business operations," Clark v. J.M. Benson Co.,
789 F.2d 282, 285 (4th Cir. 1986) (paraphrasing district court), we
agree that "[a] title alone is of little or no assistance in
determining the true importance of an employee to the employer or
his exempt or nonexempt status." 29 C.F.R. § 541.201(b)(1).
Rather than using Spinden's controller title as a yardstick, the
proper analysis is "whether his duties, responsibilities, and
salary meet all the requirements" for the exemption. 29 C.F.R.
§ 541.201(b)(2).
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conclude that the district court's finding that Spinden "was basically your
garden variety bookkeeper with a few administrative duties," Conference Tr.
at 6, was clearly erroneous.6
Unlike any bookkeeper, Spinden was a member of the Little Rock
plant's management team, and participated in weekly meetings with senior
management personnel. At these meetings, Spinden and the others discussed
issues of importance to GS, including opening a new production line at the
Little Rock plant. See Trial Tr. at 379-81 (Spinden Testimony). In
addition, Spinden's administrative duties included serving as the
registered agent for service of process, computerizing the Little Rock
plant's accounting procedures, and signing contracts and tax documents.
Perhaps most significantly, Spinden created Variance Reports for GS, which
acted as a "score card" for the Little Rock plant. See Trial Tr. at 770
(Testimony of Tom Smith, Little Rock plant manager). Spinden agrees that
the Variance Reports were "vital to pricing and production information."
Appellee's Br. at 10. Spinden's role in this area strikes this Court as
extremely similar to the example of an exempt statistician provided by the
regulations:
Some firms employ persons whom they describe as
"statisticians." If all such a person does, in effect, is to
tabulate data, he is clearly not exempt. However, if such an
employee makes analyses of data and draws conclusions which are
important to the determination of, or which, in fact, determine
financial, merchandising, or other policy, clearly he is doing
work directly related to management policies or general
business operations.
6
It is true that Spinden did complete bookkeeping tasks as
part of his overall duties, and that these tasks occupied much of
his time after downsizing limited his accounting staff to
occasional temporary employees. We conclude, however, that merely
because Spinden took on additional clerical tasks does not
necessarily mean that his primary duty became clerical in nature.
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29 C.F.R. § 205(c)(3) (emphasis added).7
The other elements of the primary duty analysis also support our
conclusion that Spinden was an administrative employee. Spinden engaged
in discretionary duties at least 10 to 20 percent of the time, which we
hold constitutes a frequent exercise of discretionary duties under the
regulations. See, e.g., Jones, 72 F.3d 138, 1995 WL 712674, at *3;
Stuckey's, 939 F.2d at 618. In 1993, Spinden was the third highest paid
employee of the Little Rock plant, earning more than every other employee
except for the plant manager and the plant superintendent,8 and his salary
far outpaced that of purely clerical employees who otherwise would have
carried out Spinden's bookkeeping duties. See Appellant's App. at 133.
Spinden acknowledges that employees receiving less compensation than he
were clearly exempt. See Trial Tr. at 524-25; Appellant's App. at 133.
It is clear from the record that Spinden was not only the chief financial
employee of the Little Rock plant, but that he was essentially a one-man
department, receiving only occasional assistance. As such, Spinden was not
directly supervised by any financial officer at the Little Rock plant, but
rather received direction only from the plant manager at the Little Rock
plant and the corporate office. See Appellee's App. at 63 (organizational
chart of Little Rock plant); Trial Tr. at 456 (Spinden's testimony that he
received direction from corporate office).
7
In addition, the specific objectives listed in Spinden's
Performance Improvement Plan for Spinden to achieve involved the
design and development of accounting reports and methods,
quintessential administrative tasks. See Appellant's App. at 47.
8
Spinden earned $42,792 in 1993, while the plant manager, the
highest paid individual at the Little Rock plant, earned $65,208
that year. See Pl. Ex. 36, reprinted in Appellant's App. at 141.
We note that, if Spinden were to be paid the more than $27,000 per
year in overtime which the district court's judgment provides, he
would, as a nonexempt employee, be the highest paid person at the
plant.
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C.
Spinden has also met the second prong of the short test: as the
district court found, he spent 10 to 20 percent of his time "doing
primarily what I'd call administrative, more managerial, decision making,
discretion, independent judgment-type things." Trial Tr. at 1150. The
term "discretion and independent judgment" is defined in the regulations
at 29 C.F.R. § 541.207:
(a) In general, the exercise of discretion and independent
judgment involves the comparison and the evaluation of possible
courses of conduct and acting or making a decision after the
various possibilities have been considered. The term . . .
implies that the person has the authority or power to make an
independent choice, free from immediate direction or
supervision and with respect to matters of significance. . . .
[(e)(1)] The term "discretion and independent judgment" . . .
does not necessarily imply that the decisions made by the
employee must have a finality that goes with unlimited
authority and a complete absence of review. The decisions made
as a result of the exercise of discretion and independent
judgment may consist of recommendations for action rather than
the actual taking of action. . . .
See also Dymond v. United States Postal Serv., 670 F.2d 93, 96 (1982)
("Even though an employee's work is subject to approval, even to the extent
that a decision may be reversed by higher level management, it does not
follow that the work did not require the exercise of discretion and
independent judgment as the terms are defined for the administrative
employee exemption."). In addition to his analytical duties, such as
making suggestions to senior management about negative variances in the
Variance Report, see Trial Tr. at 364, Spinden made recommendations about
the need for additional personnel, see id. at 380, and about terminating
personnel. See id. at 378. We agree that Spinden spent at least 10 to 20
percent of his time engaged in discretionary duties, which adequately
fulfills this element of the short test. See, e.g., Dymond, 670 F.2d at
95 (under short test, employees "qualify for
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the administrative employee exemption if they meet the more liberal
standard requiring that their duties merely 'include' work requiring the
exercise of discretion and independent judgment").
In light of the entire record in this case, and with "due regard
. . . to the opportunity of the trial court to judge of the credibility of
the witnesses," Fed. R. Civ. P. 52(a), we reverse the district court for
clear error, and hold that GS has met its burden of proving that Spinden
fits "plainly and unmistakably within the [administrative] exemption's
terms and spirit." McDonnell, 999 F.2d at 296 (quotations and citation
omitted).
III.
Because we hold that Spinden was an exempt administrative employee
under the FLSA, he is not entitled to overtime compensation. Because we
reverse on this ground, we need not reach GS's other arguments.
Accordingly, we reverse the district court's judgment and award of
attorney's fees.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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