Supreme Court of the State of Washington

                            Opinion Information Sheet

Docket Number:       67019-6
Title of Case:       Dan Drinkwitz, Kenneth Caproni
                     v.
                     Alliant Techsystems Inc
File Date:           04/06/2000
Oral Argument Date:  03/07/2000
                     03/23/1999


                                SOURCE OF APPEAL
                                ----------------
Appeal from Superior Court of Snohomish County
Docket No:      96-2-01677-1
Judgment or order under review
Date filed:     06/17/1998
Judge signing:  Hon. Joseph Thibodeau


                                    JUSTICES
                                    --------
Authored by Faith E Ireland
Concurring: Richard P. Guy
            Barbara A. Madsen
            Philip A. Talmadge
            Bobbe J. Bridge
Dissenting: Richard B. Sanders
            Charles W. Johnson
            Gerry L. Alexander
            Charles Z. Smith


                                COUNSEL OF RECORD
                                -----------------
Counsel for Petitioner(s)
            William K. Rasmussen
            2600 Century Square
            1501 4th Avenue
            Seattle, WA  98101-1688

            Thomas B. Hatch
            Robins Kaplan Miller & Ciresi L.L.P.
            2800 Lasalle Plaza
            800 Lasalle Ave South
            Minneapolis, MN  55402-2015

Counsel for Respondent(s)
            Scott J. McKay
            Law Offices of Scott McKay
            8108 17th Ave SW
            Seattle, WA  98106

            Mark R. Busto
            Sebris Busto P.S.
            1500 Plaza Center
            10900 NE 8th Street
            Bellevue, WA  98004-4405

            Jeffrey A. James
            Sebris Busto P.S.
            1500 Plaza Center
            10900 NE 8th Street
            Bellevue, WA  98004-4405

Amicus Curiae on behalf of Association of Washington Business
            Bruce M. Cross
            Perkins Coie
            1201 3rd Ave Ste 4800
            Seattle, WA  98101-3099

            Kevin J. Hamilton
            40th Fl
            1201 3rd Ave
            Seattle, WA  98101-3099

Amicus Curiae on behalf of Department of Laborand Industries
            Martha P. Lantz
            Atny Gen Offc/Labor & Ind
            PO Box 40121
            Olympia, WA  98504-0121

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

DAN DRINKWITZ, a Washington resident,            )
and KENNETH CAPRONI, a Washington                )
resident, on behalf of themselves and those      )
similarly situated,                              )
                                                 )
               Respondents,                      )
                                                 )
               v.                                ) 67019-6
                                                 )
ALLIANT TECHSYSTEMS, INC., a                     ) En Banc
foreign corporation.                             )
                                                 )
          Petitioner.                            ) Filed April 6, 2000
                                                 )
                                                 )

     IRELAND, J. --- This is a direct discretionary review of the trial
court's summary judgment ruling.  Plaintiffs, on behalf of a currently
uncertified class, sued their former employer, Alliant Techsystems, Inc.,
to recover overtime wages under Washington's Minimum Wage Act (MWA),
chapter 49.46 RCW.  On cross-motions for summary judgment involving the
issue of liability, plaintiffs argued they were "nonexempt" employees and,
thereby, entitled to overtime pay under the MWA.  The trial court granted
plaintiffs' motion and denied Alliant's motion for summary judgment.  In so
doing, the trial court determined the issue of liability in plaintiffs'
favor, certifying the issue for direct review while leaving the issue of
class certification and damages for future determination.
The key issue in this direct review is whether the employer preserved the
putative class representatives' "exempt" status under the MWA.  Finding
that some of Alliant's payroll policies and practices destroyed plaintiffs'
"exempt" status because they violated the MWA's "salary basis" test, we
affirm the trial court's summary judgment order and remand for further
proceedings consistent with this opinion.
STANDARD OF REVIEW
When reviewing an order granting summary judgment, an appellate court
reviews the matter de novo by engaging in the same inquiry as the trial
court.  E.g., Marquis v. City of Spokane, 130 Wn.2d 97, 104-05, 922 P.2d 43
(1996).  Under this standard, the appellate court determines whether
genuine issues of material fact exist and whether the moving party is
entitled to judgment as a matter of law.  Facts are reviewed in the light
most favorable to the nonmoving party.  E.g., Marquis, 130 Wn.2d at 105
(citing CR 56(c)).  Based on this deferential standard of review, we focus
on Alliant's assertions and admissions of fact.
FACTS
Alliant is a Delaware corporation, primarily engaged in the military
defense industry.  Alliant's national operations included its Marine
Systems Division headquartered in Mukilteo, Washington.  Between March 1,
1993 and March 1, 1996, Alliant employed approximately 335 individuals in
Washington, who were classified as exempt "time-reporting" employees.
Clerk's Papers (CP) 628, 630.  These employees were subject to the various
Alliant policies and practices described below.
Plaintiffs and putative class representatives, Dan Drinkwitz and Kenneth
Caproni, are engineers formerly employed by Alliant's Marine Systems
Division.  Alliant classified both Drinkwitz and Caproni as "exempt"
employees.
Alliant's Acknowledged Payroll Policies and Practices
Alliant acknowledges the following policies and practices applied to
plaintiffs, notwithstanding that they were classified as "exempt" and paid
on a "salary basis":
1.   A requirement that employees record their time and submit weekly
reports.
2.   A requirement that employees work the schedules established by their
managers.
3.   A practice of calculating and recording the monthly salaries of
employees into hourly rates of pay.
4.   A requirement that employees work a weekly quota of between 40 and 45
hours per week.
5.   A requirement that employees "make up" the difference between the time
worked and the expected workweek by one of the following:
(a)  working longer hours;
(b)  applying hourly credits from compensatory (comp) time banks; or
(c)  deducting from earned vacation time.

6.   Creation of a discipline plan which allowed management to suspend
employees for one or two days when hourly quotas were not met.
7.   Employee pay deductions for employees who failed to meet their quota
requirements of 40-45 hours per week.

Although Alliant acknowledges that "exempt" employees' pay was improperly
deducted for failing to meet workweek hourly quotas, Alliant claims this
practice was inadvertent.  Specifically, Alliant asserts it first received
notice of this practice when Plaintiff Caproni filed an affidavit to
support an action under the Fair Labor Standards Act of 1938 (FLSA), 29
U.S.C. sec.sec. 201-219, brought by Alliant employees in a Rhode Island
federal court in 1995.1  Caproni's affidavit stated he had recently
suffered an improper salary deduction.  In response, Alliant expressed
surprise to learn of Caproni's improper deduction, and to learn that the
Marine System's payroll clerk who had made the deduction was unaware of the
difference between "exempt" and "nonexempt" employees.2  Between March, 1,
1993 and March 1, 1996, this payroll clerk made 243 improper deductions in
54 "exempt" employees' pay.  After Alliant told the payroll clerk to stop
making such deductions, all affected employees were identified and fully
reimbursed in the amount of $33,691.43 by October 1996.  Alliant also
assured all current employees that steps had been taken to avoid similar
mistakes.
It is undisputed that Caproni suffered five improper deductions between
March 1, 1993 and March 1, 1996, all of which were reimbursed by October
1996.  It is also undisputed that Drinkwitz never suffered an improper
deduction between March 1, 1993 and March 1, 1996.

Alliant admits its management adopted a special disciplinary procedure to
enforce the 41-45 hour workweek which called for one- or two-day
suspensions without pay.  It admits that at least one, and perhaps two,
employees were subject to this disciplinary procedure.  Alliant claims that
both employees were reimbursed for the deductions and that a memorandum was
distributed to employees advising them to contact their manager if they had
experienced such discipline.
Despite these admissions, Alliant asserts that its salaried employees were
treated in a manner consistent with their "exempt" status.  Plaintiffs
disagree.  Therefore, the key issue on this direct review of summary
judgment is whether, when viewing the facts in the light most favorable to
the employer, Alliant preserved the named plaintiffs' "exempt" status under
the MWA as a matter of law.
ANALYSIS
Issue 1:  What is the appropriate "salary basis" test under the MWA?
The FLSA deals with overtime and minimum wage requirements for employees.
29 U.S.C. sec.sec. 201-219.  The FLSA is intended to be a "floor" below
which employers may not drop.  It is not a "ceiling" on benefits or terms
and conditions of employment.  Doctors Hosp., Inc. v. Silva-Recio, 429 F.
Supp. 560, 561-62 (D. P.R. 1975), aff'd, 558 F.2d 619 (1st Cir. 1977).
Because the MWA is based upon the FLSA, federal authority under the FLSA
often provides helpful guidance.  However, the MWA and FLSA are not
identical and we are not bound by such authority.  Chelan County Deputy
Sheriffs' Ass'n v. Chelan County, 109 Wn.2d 282, 291, 745 P.2d 1 (1987);
Weeks v. Chief of Wash. State Patrol, 96 Wn.2d 893, 897, 639 P.2d 732
(1982).
The MWA requires, in part, that employers pay their employees at a rate of
one and one-half times their regular hourly rate for time worked beyond 40
hours per week, unless an individual is employed in a "bona fide . . .
professional capacity."  RCW 49.46.010(5)(c).  Pursuant to its authority to
"define and delimit" the term "professional capacity," Washington's
Department of Labor and Industries (DLI) defines "professional" employees
as individuals compensated for their services "on a salary or fee basis."
RCW 49.46.010(5)(c); WAC 296-128-530(5).  Neither the MWA nor DLI
regulations define the term "on a salary or fee basis."
The only published Washington case discussing the MWA's "salary basis"
requirement is Tift v. Professional Nursing Servs., Inc., 76 Wn. App. 577,
886 P.2d 1158 (1995).  Tift held that an employee who qualified as an
"exempt" "administrative employee" under the MWA was "in reality an hourly
employee" when:  (1) the employee was required to keep track of hours
worked in excess of 40 hours per week; and (2) was compensated at a
straight hourly rate for all work done in excess of 40 hours per week.
Tift, 76 Wn. App. at 584-86 (citing Hilbert v. District of Columbia, 23
F.3d 429, 440-41 (D.C. Cir. 1994) (Mikva, C.J., concurring in the result in
part, dissenting in part)).  Shortly after Tift's publication, however, the
Washington State Legislature added the following language to the MWA:
The payment of compensation or provision of compensatory time off in
addition to salary shall not be a factor in determining whether a person is
exempt under RCW 49.46.010(5)(c){.}

Laws of 1995, ch. 5, sec. 1 (codified at RCW 49.46.130(2)(a)).
Plaintiffs and Alliant debate the effect this statutory amendment has on
Tift.  Alliant claims the amendment "legislatively overruled" Tift and
signaled a legislative intent to rely on federal authority under the FLSA.
Plaintiffs, in contrast, argue Tift's salary basis rationale still applies
because the amendment represents only an evidentiary limitation.
Regardless of the statutory amendment's effect on Tift's holding, the
parties' debate is of little consequence because the Legislature, by
failing to define "salary basis" in the MWA, has provided no specific
guidance for the issue at hand.  In contrast, the federal Department of
Labor's (DOL) regulations promulgated under the FLSA's authority have
generally defined "payment on a salary basis" as follows:
An employee will be considered to be paid "on a salary basis". . . if . . .
he regularly receives each pay period . . . a predetermined amount
constituting all or part of his compensation, which amount is not subject
to reduction because of variations in the quality or quantity of the work
performed.  . . . {T}he employee must receive his full salary for any week
in which he performs any work without regard to the number of days or hours
worked.  This policy is also subject to the general rule that an employee
need not be paid for any workweek in which he performs no work.

29 C.F.R. sec. 541.118(a).

While the Legislature did not adopt the DOL's definition of "salary basis,"
narrowly applying this definition to the facts of this case would render a
result consistent with Washington's long and proud history of being a
pioneer in the protection of employee rights.  Numerous statutory
provisions exemplify this long and proud history.  For example, 25 years
before Congress passed the federal minimum wage law in 1938, the people of
Washington enacted the following:
It shall be unlawful to employ any person in any industry or occupation
within the state of Washington under conditions of labor detrimental to
their health; and it shall be unlawful to employ workers in any industry
within the state of Washington at wages which are not adequate for their
maintenance.

Laws of 1913, ch. 174, sec. 2, amended by Laws of 1973, 2d Ex. Sess., ch.
16, sec. 3 (codified at RCW 49.12.020).  Washington has also had a law
requiring an eight-hour workday since 1899.  Chapter. 49.28 RCW.  More
recently, in response to social realities such as dual-career couples and
single working parents, the Legislature enacted a family leave law in 1989.
Laws of 1989, 1st Ex. Sess., ch. 11 (codified at chapter 49.78 RCW).
Furthermore, Washington law provides for double damages and attorney fees
to enforce the payment of wages.  Chapters 49.48, 49.52 RCW.
In light of the Legislature's concern for the health and welfare of
Washington's workforce, we rely on the DOL's general "salary basis" test
and utilize this definition to examine the seven factors below which are
dispositive in determining whether Alliant preserved the putative class
representatives "exempt" status under the MWA.  Nevertheless, except as
specifically referenced below, we do not adopt all DOL regulations
promulgated under the authority of the FLSA or under federal case law
relating to this issue.
Issue 2:  Based on the undisputed facts of this case, did the employer
preserve the putative class representatives' "exempt" status under the MWA?
Subject to certain exemptions, the MWA's general rule requires an employer
to pay its employees for time worked in excess of 40 hours per week at a
rate of one and one-half times their hourly rate of pay.  Chapter 49.46
RCW.  Although an employer can assert its employees qualify under an
exemption from this general rule, the employer bears the burden of proving
this "exempt" status.  Banks v. City of North Little Rock, 708 F. Supp.
1023, 1024 (E.D. Ark. 1988) (citing Knecht v. City of Redwood City, 683 F.
Supp. 1307, 1310 (N.D. Cal. 1987)).  Exemptions from remedial legislation,
such as the MWA and FLSA, are narrowly construed and applied only to
situations which are plainly and unmistakably consistent with the terms and
spirit of the legislation.  Knecht, 683 F. Supp. at 1310.
With this standard in mind, we review seven of Alliant's admitted policies
and practices to determine whether the MWA's salary basis test was met.
1.  Time Recording Requirements.
Requiring employees to record hours worked serves many valuable functions
in the workplace, without causing harm to the fundamental principle of
salaried employment.  We therefore hold that time recording requirements do
not violate the MWA's "salary basis" test.  Alliant did not violate the MWA
by requiring this practice.
2.  Set Workday Schedule Requirements.
There are many legitimate reasons why a business or professional
organization would want its salaried employees to be present during its
business hours, including the desire to have those employees available to
customers, management, and co-workers.  Nonetheless, requiring work by
salaried employees during certain hours of operation, which conveniently
adds up to 40 hours, could simply be a subterfuge for hourly employment.
We therefore hold that requiring salaried employees to work set schedules
established by management does not per se violate the MWA's "salary basis"
test, but may be considered as a factor in determining the true nature of
the employment arrangement, whether salaried or hourly.  Alliant did not
violate the MWA by requiring management approved schedules.  However, when
this factor is viewed in connection with Alliant's other policies and
practices, this court is persuaded that the actual employee arrangement was
hourly.
3.   Calculating "Exempt" Employees' Pay by Hourly Rates.

Having personnel records that translate monthly salaries into hourly rates
of pay may be a useful tool for employers for many legitimate reasons,
including client billing, financial information analysis, and fringe
benefit calculations.  As a result, the MWA is not violated by calculating
"exempt" employees' compensation using an hourly rate and including this
hourly rate in personnel records.  In this case, Alliant did not violate
the MWA by calculating and recording hourly rates.
4.  Weekly Hourly Quotas.
Requiring employees to work a weekly quota of  40 or more hours is
generally inconsistent with salaried employment.  "Salary is a mark of
executive status because the salaried employee must decide for himself the
number of hours to devote to a particular task.  . . . {T}he salaried
employee decides for himself how much a particular task is worth, measured
in the number of hours he devotes to it."  Brock v. Claridge Hotel &
Casino, 846 F.2d 180, 184 (3d Cir. 1988); see also Thomas v. County of
Fairfax, 758 F. Supp. 353 (E.D. Va. 1991).  While it is reasonable for an
employer to expect that a full-time salaried employee's work-related
responsibilities will occupy a normal workweek, employers should not be
permitted to impose a rigid workweek hour requirement with pay deductions
as a consequence for failure to meet such a quota.  Because we find below
that Alliant engaged in such a practice, Alliant's rigid requirement of
hourly quotas, together with its disciplinary "docking" practices, violated
the MWA.
5.   Requiring Employees to "Make Up" for Deficiencies in Hourly Quotas.

Requiring employees to "make up" the difference between the time worked and
the expected workweek is inconsistent with salaried employment.  Whether
this factor contributes to the loss of "exempt" status depends, in part, on
the method of "make up":  (1) whether additional hours of work are
required; (2) whether time is deducted from comp time accounts; or (3)
whether time is deducted from accrued vacation time accounts.  For example,
a.   "Make up" through working additional hours may be repugnant to
salaried employment, depending on the expectations of the employer.  This
practice should be looked at in the context of the entire employment
arrangement.

b.   Allowing salaried employees to accrue comp time for hours worked in
excess of an expected workweek is purely a voluntary practice by the
employer under the MWA.  Under the 1995 amendment to the MWA, paid overtime
or comp time for work in excess of forty hours per week cannot be
considered as a factor in determining whether an employee is "exempt."
Since the employer is not obligated to provide comp time when workweek
expectations are exceeded, logic would suggest that the employer may deduct
from accrued comp time when its workweek expectations are not met.

c.   "Make up" from vacation time is inconsistent with salaried employment
and is the most akin to "docking" of any of the "make up" practices.  In
Abshire v. County of Kern, 908 F.2d 483, 487 n.3 (9th Cir. 1990), the court
said "a strong argument can be made that even if deductions were required
only from fringe benefits such as leave time, and not from base pay, the
affected employees would still not qualify {as exempt employees}."

We hold that requiring "make up" from comp time does not violate the MWA.
We further hold that while requiring "make up," absent "docking," does not
per se violate the "salary basis" test under the MWA, it may be considered
in the context of the entire employment relationship to determine whether
the employment is salaried or hourly.  We find that Alliant's practices
exceeded the permissible boundaries for "make up" and violated the MWA.
6.  Discipline Plan Calling for Less Than a Full-Week Suspension.

Regardless of the number of days or hours worked, any discipline plan which
sanctions an employee with an unpaid suspension of less than a week
violates the "salary basis" test, defined by 29 C.F.R. sec. 541.118(a),
because a salaried employee must be paid his full salary "for any week in
which he performs any work."  Therefore, Alliant's discipline sanction plan
is among the form of plans that violates the MWA.
7.  Pay Deductions in Less Than Full-Day Increments for Partial Day
     Absences.

     Making deductions in pay when employees fail to meet hourly work quota
requirements is inconsistent with salaried employment.  Federal law under
the FLSA clearly prohibits this practice.  29 C.F.R. sec. 541.118(a).  We
therefore hold that it is improper under the MWA to "dock" employees' pay
when they fail to meet hourly work quota requirements.
To make an overtime claim for improper "docking" under the FLSA, an
employee's salary must be "subject to" improper deductions.  This
requirement flows from the prohibition in the FLSA "salary basis" test
which states that an "exempt" employee's pay shall "not {be} subject to
reductions because of variations in the quality or quantity of the work
performed."  29 C.F.R. sec. 541.118(a) (emphasis added).  An employee's
salary is "subject to" reduction when there is (1) an employment policy
that creates a  "significant likelihood" of making partial day deductions,
or (2) an "actual practice" of making deductions.  Auer v. Robbins, 519
U.S. 452, 461, 117 S. Ct. 905, 137 L. Ed. 2d 79 (1997).
In the present case, Alliant's policies and practices were well known.
Even employees who were not "docked" took special care to avoid sanctions
arising from these policies and practices.  For example, in August of 1994,
Plaintiff Drinkwitz wrote a letter to Alliant's management complaining that
he was being treated as an hourly employee because of the weekly hours
quota.  In the letter he stated, "These policies treat me as an hourly
employee with an assigned workweek of 45 hours instead of the exempt,
salaried position in which I am classified."  CP at 743.  We therefore
conclude that because Alliant engaged in a wide-spread practice of improper
"docking" extending over several years, the group of employees of which
plaintiffs were a part were "subject to" this practice.
In sum, we find that when Alliant's policies and practices regarding
plaintiffs are viewed in their totality, plaintiffs were not treated as
"salaried" employees under the MWA.
Window of Correction
Despite Alliant's admissions, including its admitted practice of making 243
improper deductions from 54 of its Washington employees' pay during the
relevant time period, Alliant claims it nevertheless preserved the "exempt"
status of its employees.  Alliant's position is that it properly took
advantage of the available "window of correction" exception when it fully
reimbursed those employees who suffered improper deductions.  Based on
Alliant's assertions, we address whether the "window of correction"
principle recognized under the federal regulations is available under the
MWA.
The FLSA regulations provide a "window of correction" exception under which
a deduction not permitted by the FLSA's regulations may be corrected
without loss of "exempt" status.  Under the FLSA,
{w}here a deduction not permitted by these interpretations is inadvertent,
or is made for reasons other than lack of work, the exemption will not be
considered to have been lost if the employer reimburses the employee for
such deductions and promises to comply in the future.

29 C.F.R. sec. 541.118(a)(6); see also Auer, 519 U.S. at 463-64.
Federal case law, however, on the "window of correction" exception is
convoluted and complicated.  See, e.g., Belcher v. Shoney's, Inc., 30 F.
Supp. 2d 1010 (M.D. Tenn. 1998) (federal courts split on whether window of
correction available to employers with actual practice of making deductions
pursuant to established policy) (citing cases).  Part of the debate centers
around whether the language of the regulation should be read as conjunctive
or disjunctive.
Alliant urges this court to adopt Davis v. City of Hollywood, 120 F.3d 1178
(11th Cir. 1997), and Arrington v. City of Macon, 973 F. Supp. 1467 (M.D.
Ga. 1997), which allowed deductions for multiple employees under
circumstances where the improper deductions were not inadvertent.  Under
these cases, any deductions made "for reasons other than lack of work" are
allowed, whether inadvertent or not.  See Davis, 120 F.3d at 1180-81;
Arrington, 973 F. Supp. at 1474-75.  To read
"inadvertent" and "made for reasons other than a lack of work" as distinct,
optional reasons to justify use of the "window of correction" exception,
however, allows the exception to swallow the rule.  This is illogical.
The MWA fails to provide a "window of correction" exception and no such
exception has been recognized by prior Washington case law.  Without clear
federal guidance or guidance from our own Legislature, and in the exercise
of judicial restraint, we find it appropriate to allow the Legislature to
decide whether to adopt a "window of correction" exception.  If the
Legislature chooses to do so, it will have the opportunity to clearly
detail the requirements necessary to qualify for that exception.
CONCLUSION
Using federal authority for general guidance to interpret the MWA's "salary
basis" test, and when viewing the facts in the light most favorable to the
nonmoving
 party, Alliant failed to satisfy its burden of preserving the putative
class representatives' "exempt" status under the MWA.  The case is remanded
for further proceedings consistent herewith.
     Based on our holding, plaintiffs are entitled to reasonable attorney
fees in an
amount to be determined by the Clerk of this court, pursuant to RCW

49.48.030 and RAP 18.1.

1Plaintiffs' motion to strike Alliant's collateral estoppel argument
regarding the Rhode Island federal court's decision, which was raised for
the first time in Alliant's reply brief, is addressed in a separate order.

2This claim of inadvertence is disputed since the practices of the payroll
clerk were the same as her predecessor who was employed in this position
for 14 years, until April of 1995.  However, for our purposes, we take the
facts as alleged by Alliant.\