OAH Docket No. 11-1900-19544-2

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE COMMISSIONER OF LABOR AND INDUSTRY

In the Matter of the Order to Comply/Labor Law Violation of Daley Farm of Lewiston; Labor Standards File No. 6737-033005

RECOMMENDATION AND ORDER ON MOTION FOR SUMMARY DISPOSITION

This matter comes before Administrative Law Judge Barbara L. Neilson pursuant to a Notice and Order for Hearing and Pre-Hearing Conference dated March 18, 2008; and on Respondent Daley Farm’s June 12, 2008 Motion for Summary Disposition. The Department of Labor and Industry (Department) filed its response on June 30, 2008.[1] Oral argument with respect to the motion was heard on July 24, 2008, and the record closed on that date.

Rory H. Foley, Assistant Attorney General, appeared on behalf of the Department. Paul V. Sween, Attorney at Law, Adams, Rizzi and Sween, P.A., appeared on behalf of Respondent Daley Farm.

Based on all the files, records and proceedings herein, and for the reasons set forth in the accompanying Memorandum, the Administrative Law Judge makes the following:

RECOMMENDATION AND ORDER

IT IS RECOMMENDED that the Commissioner grant the Respondent’s Motion for Summary Disposition and DISMISS the Department’s Order to Comply: Labor Law Violation.

IT IS ORDERED that the hearing in this matter currently scheduled for September 16, 2008, shall be CANCELLED.

Dated: August 27, 2008 s/Barbara L. Neilson

__________________________

BARBARA L. NEILSON

Administrative Law Judge

MEMORANDUM

Summary Disposition Standard

Summary disposition is the administrative equivalent of summary judgment.[2] Summary disposition is appropriate when there is no genuine dispute about the material facts, and one party is entitled to judgment as a matter of law.[3] The Office of Administrative Hearings has generally followed the summary judgment standards developed in judicial courts in considering motions for summary disposition regarding contested case matters. A genuine issue is one that is not a sham or frivolous. A material fact is a fact whose resolution will affect the result or outcome of the case.[4]

When considering a motion for summary disposition, the decision maker must view the facts in the light most favorable to the non-moving party.[5] The Respondent, as the moving party in the current case, has the initial burden of showing the absence of a genuine issue concerning any material fact.[6] To successfully resist a motion for summary judgment, the non-moving party must show by substantial evidence that there are specific facts in dispute that have a bearing on the outcome of the case. The nonmoving party cannot rely upon general statements or allegations but must show the existence of specific material facts which create a genuine issue.[7] When considering a motion for summary judgment, the Administrative Law Judge must view the facts in the light most favorable to the non-moving party. All doubts and factual inferences must be resolved against the moving party. If reasonable minds could differ as to the import of the evidence, judgment as a matter of law should not be granted.[8]

Legal and Factual Background

The Department enforces the Fair Labor Standards Act (FLSA) in Minnesota pursuant to chapter 177 of the Minnesota statutes. On October 16, 2006, the Department issued an Order to Comply: Labor Law Violation to Respondent alleging that it had failed to pay certain of its employees time and a half for all hours worked over 48 in a week.[9] The Order to Comply cited Minnesota statutes, section 177.25, which requires:

No employer may employ an employee for a workweek longer than 48 hours, unless the employee receives compensation for employment in excess of 48 hours in a workweek at a rate of at least 1½ times the regular rate at which the employee is employed.[10]

Minnesota’s FLSA defines “employee” as “any individual employed by an employer” but specifically excludes:

any individual employed in agriculture on a farming unit or operation who is paid a salary greater than the individual would be paid if the individual worked 48 hours at the state minimum wage plus 17 hours at 1-1/2 times the state minimum wage per week . . . .[11]

Daley Farm objected to the Order to Comply: Labor Law Violation on October 24, 2006.[12] The Department and Daley Farm engaged in unsuccessful attempts to resolve the issues in this matter over an extended period of time before the Order to Comply was issued.[13]

For purposes of this motion, the material facts are undisputed. Daley Farm acknowledges that the individuals identified by the Department worked in excess of 48 hours in a workweek at times.[14] The Department does not allege that Daley Farm paid its workers any less than the amounts Daley Farm claims it paid them.[15] The legal question to be addressed is whether Daley Farm’s workers are considered employees for purpose of the Minnesota overtime compensation statute.

Issues Presented

Daley Farm argues that, because its workers were paid more on an hourly basis than they would have been paid if they had worked 48 hours at the applicable state minimum wage plus 17 hours at 1½ times the state minimum wage per week, they are excluded from the definition of “employee” pursuant to section 177.23, subdivision 7(2).[16] Because its workers fit the statutory exclusion, Daley Farm asserts that it was not required to pay time-and-a-half overtime. Daley Farm also argues that its workers are included in the federal agricultural worker exemption in the federal Fair Labor Standards Act and that state law cannot make those workers subject to overtime requirements. Finally, Daley Farm argues that the principle of collateral estoppel bars this claim due to a prior decision in its favor in a conciliation court case in Minnesota’s Third Judicial District.

The Department disputes each of these arguments, asserting that the state FLSA requirements apply to the Daley Farm workers. Furthermore, the Department argues that, if Daley Farm’s arguments regarding the federal law are correct, that would “render meaningless the express authorization in 29 U.S.C. section 218(a) for states to enact higher minimum wage rates than provided for by federal law.”[17] Finally, the Department contends that the conciliation court decision is not relevant because it does not satisfy the elements required for collateral estoppel to apply.

Analysis

State FLSA

Daley Farm relies for its state law argument on a 2006 Minnesota Court of Appeals case. In Weniger v. Johnson, the Court of Appeals considered an FLSA claim by Weniger, an agricultural worker, against his employer, a pig farmer. Weniger was paid an hourly wage of $5.50 per hour for his work on the farm, plus a piecework payment of 50 cents per can of waste food he collected from local restaurants to be used as feed for the pigs.[18] In analyzing Weniger’s state FLSA claim, the court applied the language of the exception to the definition of employee set forth in Minn. Stat. section 177.23, subd. 7(2). Based on a minimum wage of $5.15 per hour, the court multiplied 48 x $5.15 plus 17 x $7.73 (time and a half wages) for a total annual salary of $19,687.22. During 1999 and 2000, the years at issue in the case, Weniger earned $36,540.95 and $32,590.69 respectively. Therefore, the court reasoned, Weniger fell within the exception described in the statute, and was not covered by the FLSA.[19] There is no discussion in Weniger about the use of the word “salary” in section 177.23, subd. 7(2). Although the court’s recitation of the facts clearly states that Weniger was paid on an hourly plus piecework basis, it ultimately refers to his wages as “salary.”[20]

During the motion argument, the Department’s General Counsel asserted that the Weniger case was wrongly decided. The Department argues that the language of subdivision 7(2) which refers to an “individual employed in agriculture . . . who is paid a salary” only applies to employees who are paid a “salary” as that word is defined in the state rule, not to employees whose wages are calculated on an hourly basis. Thus, the Department asserts, the Daley Farm workers, who were all paid on an hourly basis, cannot be subject to the exception described in subdivision 7(2) and must be covered by the overtime wage provisions of the FLSA. In support of its argument, the Department points to its own rule defining “salary”:

A salary is not an hourly rate. An employee is paid a salary if the employee, through agreement with an employer, is guaranteed a predetermined wage for each workweek. An employee may still be salaried even if complete days absent are deducted from salary for reasons other than no work available. Should those deductions reduce the salary for the workweek below the minimum salary required by Minnesota Statutes, section 177.23, subdivision 7, clause (2), or parts 5200.0190 to 5200.0210, the employer will lose the exemption in that workweek.[21]

While it appears that an hourly worker would be considered an employee subject to the overtime payment provisions if the rule’s definition of “salary” were strictly applied, the Court of Appeals took a different view of the statute in Weniger. The Administrative Law Judge is bound to follow the Court of Appeals’ decision, which is controlling in this case. “Where a question of law is decided on appeal, it becomes the law of the case, which the trial court is bound to follow.”[22]

Generally, an administrative agency must follow a decision of an intermediate court of appeals rendered within the territorial jurisdiction of that court of appeals.[23] In Allegheny General Hospital, the court stated the general rule:

A decision by this court, not overruled by the United States Supreme Court, is a decision of the court of last resort in this federal judicial circuit. Thus, our judgments in Memorial Hospital and St. Vincent’s Hospital are binding on all inferior courts and litigants in the third judicial circuit, and also on administrative agencies when they deal with matters pertaining thereto.

In Ithaca College, the court recognized that an administrative agency has the same responsibility to follow the “law of the circuit” as does a district court. A district court has no discretion in the matter; it must follow a decision of its intermediate appellate court until another panel of the court of appeals or the state supreme court changes the precedent.[24] Thus, it is not the role of the Administrative Law Judge to refuse to follow a decision of a higher court.

The Administrative Law Judge also recognizes that there is a rational policy reason for the Court of Appeals’ interpretation of the statute. In the FLSA, the legislature has set a floor defining how much agricultural workers should be paid without the usual overtime provisions applying to wages earned. To apply the floor only to hourly workers would encourage agricultural employers to call all of their employees salaried and pay them less, knowing that the overtime requirements would not apply. Moreover, Daley Farm’s relatively generous treatment of its agricultural workers was consistent with the purpose to be served by the FLSA. Its workers earned hourly wages that were high enough to bring them well within the scope of the exception described in section 177.23, subd. 7(2). In addition, although this is not included in the calculation of wages, Daley Farm paid for health insurance for many of its workers.

Accordingly, given the precedential authority of the Weniger case, the Administrative Law Judge has concluded that Daley Farm is entitled to summary disposition in this matter.

Federal Law and Collateral Estoppel

Because the Administrative Law Judge has found Daley Farm’s state FLSA argument persuasive, it is not necessary to reach the further arguments Daley Farms raised in support of its motion. Therefore, this Report will not address the Respondent’s assertion that the federal FLSA’s exemption of agricultural workers preempts any contrary provisions of the state FLSA, or its argument that the prior conciliation court decision bars the Department’s claim under the principle of collateral estoppel.

Conclusion

The workers whose overtime hours are at issue in this matter all earned wages which, if the language of 177.23, subd. 7(2) applies, would exclude them from the Minnesota FLSA overtime requirements. Because, under the Weniger case, the workers’ hourly wages are subject to the calculation set forth in section 177.23, subd. 7(2), the workers are all excluded from the definition of “employee” in the FLSA. Therefore, the time-and-a-half requirements do not apply to them and the Department’s Order to Comply: Labor Law Violation should be dismissed.

B. L. N.

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[1] The Department also filed its own Motion for Summary Disposition on June 13, 2008, to which Daley Farm responded on June 27, 2008. However, the Department withdrew its motion in a letter dated July 7, 2008, and affirmed its decision to withdraw the motion at the July 24 motion argument. Therefore, this Report does not address the Department’s motion.

[2]Pietsch v. Bd. of Chiropractic Examiners, 683 N.W.2d 303, 306 (Minn. 2004); Minn. R. 1400.5500 (K).

[3] Sauter v. Sauter, 70 N.W.2d 351, 353 (Minn. 1955); Louwagie v. Witco Chemical Corp., 378 N.W.2d 63, 66 (Minn. App. 1985); Minn. R. Civ. P. 56.03.

[4] Illinois Farmers Insurance Co. v. Tapemark Co., 273 N.W.2d 630, 634 (Minn. 1978); Highland Chateau v. Minnesota Department of Public Welfare, 356 N.W.2d 804, 808 (Minn. App. 1984).

[5] Ostendorf v. Kenyon, 347 N.W. 834 (Minn. App. 1984), Carlisle v. City of Minneapolis, 437 N.W.2d 712, 715 (Minn. App. 1988).

[6] Theile v. Stich, 425 N.W.2d 580, 583 (Minn. 1988).

[7] Murphy v. Country House, Inc., 307 Minn. 344, 351-52, 240 N.W.2d 507, 512 (Minn. 1976).

[8] Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51 (1986); Thompson v. Campbell, 845 F.Supp. 665, 672 (D. Minn. 1994); Thiele v. Stich, 425 N.W.2d 580, 583 (Minn. 1988); Greaton v. Enich, 185 N.W.2d 876, 878 (Minn. 1971); Dollander v. Rochester State Hospital, 362 N.W.2d 386, 389 (Minn. App. 1985).

[9] Notice and Order for Pre-Hearing, Ex. A.

[10] Minn. Stat. § 177.25, subd. 1 (2005).

[11] Minn. Stat. § 177.23, subd. 7(2).

[12] Notice and Order for Pre-Hearing, Ex. B.

[13] Id.

[14] Respondent’s Motion for Summary Disposition, Affidavit of Michaelle Depestel, Exhibits B, B1 (Resp. Ex. B, B1).

[15] Resp. Ex. B3; see Department’s Response Memorandum to Respondent’s Motion for Summary Disposition (June 30, 2008).

[16] The state minimum wage has increased since the time at issue in this matter. The applicable minimum wage at the time was $5.15 per hour.

[17] Department’s Response to Respondent’s Motion, page 2.

[18] Weniger v. Johnson, 712 N.W. 2d 190, 197 (Minn. App. 2006).

[19] Weniger, at 204-205.

[20] Id.

[21] Minn. R. 5200.0211, subp. 1.

[22] State v. Schabert, 222 Minn. 261, 24 N.W.2d 846 (Minn. 1946); see Richardson v. General Motors Corp., 139 Mich. 727; 363 N.W.2d 22 (Mich. App. 1984) (Workers’ Compensation Appeal Board bound by state court of appeals’ decisions until contrary result reached by court of appeals or supreme court).

[23] Allegheny General Hospital v. NLRB, 608 F.2d 965 (3d Cir. 1979); Ithaca College v. NLRB, 623 F.2d 224 (2d Cir. 1980); Lopez v. Heckler, 713 F.2d 1432 (9th Cir. 1983).

[24] Matter of Hague, 412 Mich. 532, 315 N.W.2d 524 (1982); Moorhouse v. Ambassador Insurance Co., Inc., 383 N.W.2d 219 (Mich. App. 1985); Exstrum v. Union Casualty & Life Insurance Co., 91 N.W.2d 632 (Neb. 1958); State v. Clark, 507 N.W.2d 172 (Wis. App. 1993).