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Intracomm, Inc. Amicus Brief

No. 06-1516
_____________________________________

IN THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

_____________________________________

INTRACOMM, INC.; BABACK HABIBI,

Plaintiffs-Appellants,

v.

KEN S. BAJAJ, ET AL.,

Defendants-Appellees.

_____________________________________

On Appeal from the United States District Court
for the Eastern District of Virginia
_____________________________________

BRIEF FOR THE SECRETARY OF LABOR AS AMICUS CURIAE
_____________________________________

JONATHAN L. SNARE
Acting Solicitor of Labor

STEVEN J. MANDEL
Associate Solicitor

PAUL L. FRIEDEN
Counsel for Appellate Litigation

JOANNA HULL
Attorney

U.S. Department of Labor
Office of the Solicitor
200 Constitution Ave., N.W.
Suite N-2716
Washington, D.C. 20210
(202) 693-5555

TABLE OF CONTENTS

TABLE OF AUTHORITIES

ARGUMENT

The Department's Combination Exemption Regulation Permits considering together FLSA-Exempt Duties of individual exemptions for the purpose of establishing a primary duty, but it Does Not Relieve Employers of their burden to establish the Other Requirements of each individual Exemption being combined

CERTIFICATE OF COMPLIANCE

CERTIFICATE OF SERVICE

TABLE OF AUTHORITIES

Cases:

Acs v. Detroit Edison, Co., 444 F.3d 763 (6th Cir. 2006)

Arnold v. Ben Kanowsky, Inc., 361 U.S. 388 (1960)

Auer v. Robbins, 65 F.3d 702 (8th Cir. 1995), aff'd on other grounds, 519 U.S. 452 (1997)

Auer v. Robbins, 519 U.S. 452 (1997)

Ballou v. DET Distributing Co., No. 3-03:1055, 2006 WL 2035729 (M.D. Tenn. July 17, 2006)

Belt v. EmCare, Inc., 444 F.3d 403 (5th Cir.), cert. denied, 127 S. Ct. 349 (2006)

Condren v. Sovereign Chemical Co., 142 F.3d 432, 1998 WL 165148 (6th Cir. 1998)

Dalheim v. KDFW-TV, 918 F.2d 1220 (5th Cir. 1990)

Edwards v. Alta Colleges, Inc., No. CIVASA03CA0538OG(NN), 2005 WL 578333 (W.D. Tex. Jan. 28, 2005)

IntraComm v. Bajaj, No. 05-0955 (E.D. Va. Apr. 19, 2006)

Shockley v. City of Newport News, 997 F.2d 18 (4th Cir. 1993)

Statutes:

Fair Labor Standards Act of 1938, as amended 29 U.S.C. 201 et seq.

29 U.S.C. 206(a)
29 U.S.C. 207(a)(1)
29 U.S.C. 213(a)(1)

Code of Federal Regulations:

29 C.F.R. Part 541
29 C.F.R. 541.100(a)(1) (2006)
29 C.F.R. 541.200(a)(1) (2006)
29 C.F.R. 541.300(a)(1) (2006)
29 C.F.R. 541.500(c) (2006)
29 C.F.R. 541.600 (2003)
29 C.F.R. 541.602 (2006)
29 C.F.R. 541.702 (2006)
29 C.F.R. 541.708 (2006)

Miscellaneous:

Fair Labor Standards Act Opinion Letters:

Wage and Hour Opinion Letter (July 31, 1951)
Wage and Hour Opinion Letter (Aug. 11, 1943)
Wage and Hour Opinion Letter No. 298, 61-66 CCH-WH 30,901 (Sept. 25, 1964)

Federal Register:

69 Fed. Reg. 22,122 (Apr. 23, 2004)
68 Fed. Reg. 15,560 (Mar. 31, 2003)

Federal Rule of Appellate Procedure 32.1(a) (2007)

Sixth Circuit Rule 28(g)

No. 06-1516
_____________________________________

IN THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

_____________________________________

INTRACOMM, INC.; BABACK HABIBI,

Plaintiffs-Appellants,

v.

KEN S. BAJAJ, ET AL.,

Defendants-Appellees.

_____________________________________

On Appeal from the United States District Court
for the Eastern District of Virginia
_____________________________________

BRIEF FOR THE SECRETARY OF LABOR AS AMICUS CURIAE
_____________________________________

    By order dated March 19, 2007, this Court asked the Department of Labor ("Department" or "DOL") to file an amicus brief addressing the Department's interpretation of its regulation at 29 C.F.R. 541.708 (2006), which describes "combination exemptions." Specifically, the court asked the following questions:

Can an employee qualify for the combination exemption without independently qualifying for any other exemption? If so, what standards guide the determination of whether the requirements of such an exemption are met? For example, if the administrative or executive employee exemptions are at issue, must an employee satisfy the salary basis test to qualify for a combination exemption when the characteristics of other exemptions (e.g., the outside sales exemption) are considered?

The Secretary of Labor ("Secretary") submits this brief as amicus curiae in response to the Court's order.

ARGUMENT

The Department's Combination Exemption Regulation Permits considering together FLSA-Exempt Duties of individual exemptions for the purpose of establishing a primary duty, but it Does Not Relieve Employers of their burden to establish the Other Requirements of each individual Exemption being combined

  1. The Fair Labor Standards Act of 1938 ("FLSA" or "Act") generally requires employers to pay a minimum wage to covered employees, see 29 U.S.C. 206(a), and compensate these employees at one and one-half times their regular rate of pay for all hours worked in excess of forty hours in a workweek. See 29 U.S.C. 207(a)(1). Section 13(a)(1) of the Act, however, exempts from these minimum wage and overtime pay requirements "any employee employed in a bona fide executive, administrative, or professional capacity . . . or in the capacity of outside salesman[,] as such terms are defined and delimited from time to time by regulations of the Secretary[.]" 29 U.S.C. 213(a)(1).

    The Secretary has "broad authority to 'defin[e] and delimi[t]' the scope of the exemption[s]" provided by Section 13(a)(1).  Auer v. Robbins, 519 U.S. 452, 456 (1997). Pursuant to this authority, the Department has promulgated regulations at 29 C.F.R. Part 541 defining and delimiting the exemptions for executive, administrative, professional, outsides sales, and computer employees ("Part 541 exemptions").[1] When applying the Department's FLSA regulations, courts must be guided by the principle that the Act's "exemptions are to be narrowly construed against the employers seeking to assert them and their application limited to those [cases] plainly and unmistakably within their terms and spirit." Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960).

  1. The Department's regulation at 29 C.F.R. 541.708 states:

Employees who perform a combination of exempt duties as set forth in the regulations in this part for executive, administrative, professional, outside sales and computer employees may qualify for exemption. Thus, for example, an employee whose primary duty involves a combination of exempt administrative and exempt executive work may qualify for exemption. In other words, work that is exempt under one section of this part will not defeat the exemption under any other section.

29 C.F.R. 541.708 (2006). This regulation may come into play where an employee does not meet the primary duty requirement of any individual Part 541 exemption.  See Auer v. Robbins, 65 F.3d 702, 722 (8th Cir. 1995) ("[A]n employee whose primary duty is neither management nor administration may fall under a combination exemption based upon his administrative and management responsibilities."), aff'd on other grounds, 519 U.S. 452 (1997).[2]  In such cases, an employee may nonetheless be exempt from the FLSA's minimum wage and overtime pay requirements pursuant to the combination exemption, which permits considering together different exempt duties for purposes of meeting the primary duty test. See 29 C.F.R. 541.708 (2006) ("Employees who perform a combination of exempt duties . . . may qualify for exemption.").

    The regulation's reference to "a combination of exempt duties" (emphasis added) makes clear that an employee must satisfy each "duties" element contained in the individual Part 541 exemptions being combined, except that the work need not be the employee's "primary duty." 29 C.F.R. 541.708 (2006). Similarly, the regulation's example of an employee whose primary duty involves "a combination of exempt administrative and exempt executive work" (emphasis added), and statement that "work that is exempt under one section of this part will not defeat the exemption under any other section," emphasize that an employee must satisfy the requirements, other than the primary duty requirement, of the individual Part 541 exemptions being combined (e.g., the salary tests contained in the executive, administrative, and professional exemptions). See 29 C.F.R. 541.702 (2006) ("The term 'exempt work' means all work described in 541.100, 541.101, 541.200, 541.300, 541.301, 541.302, 541.303, 541.304, 541.400 and 541.500[.]").

    Opinion letters from the Department's Wage and Hour Division show that DOL has consistently interpreted this exemption as allowing the combination of two or more sets of duties that separately would be exempt under an individual Part 541 exemption if they qualified as the employee's primary duty, to form a combined primary duty of exempt work. See Wage and Hour Opinion Letter dated July 31, 1951, at 2 (an employee who performs a combination of duties that, taken separately, would meet the requirements of an individual Part 541 exemption except that the work is not the employee's primary duty, will be exempt under the combination exemption regulation if the employee's duties, when combined, constitute her primary duty); Wage and Hour Opinion Letter dated Aug. 11, 1943, at 2 ("[I]n proper cases a combination exemption under two or more sections of Regulations, Part 541, may operate to exempt an employee performing some duties falling within more than one of these sections.").[3] The Department's interpretation of its own regulation contained in these opinion letters is entitled to controlling deference. See Auer, 519 U.S. at 461-62 (deferring to DOL's interpretation of its own regulation in amicus brief); Acs v. Detroit Edison, Co., 444 F.3d 763, 769 (6th Cir. 2006) (opinion letter interpreting DOL regulation entitled to controlling deference); Belt v. EmCare, Inc., 444 F.3d 403, 415-16 (5th Cir.) (opinion letter, field operations handbook, and amicus brief interpreting DOL regulation entitled to controlling deference under Auer), cert. denied, 127 S. Ct. 349 (2006).

    Thus, contrary to the employer's argument in this case, see Br. of Appellees/Cross Appellants at 24-25, the combination exemption cannot be used to avoid the other requirements of the Part 541 exemptions, including the salary basis test that applies to the exemptions for executive, administrative, and professional employees, 29 C.F.R. 541.100(a)(1), 541.200(a)(1), and 541.300(a)(1) (2006), respectively.[4] See Shockley v. City of Newport News, 997 F.2d 18, 25 (4th Cir. 1993) (to successfully claim combination executive-administrative exemption, city had to prove both that police officers were salaried, and that each officer's primary duty was a combination of both management and administration); Condren v. Sovereign Chemical Co., 142 F.3d 432, 1998 WL 165148, at *2, *6 (6th Cir. 1998) (unpub'd opinion) (employee must meet each requirement of exemption, including salary test, "either outright or through the combination exemption").[5] As the Fifth Circuit has stated, the combination exemption applies only where "(1) an employee performs more than one type of work that would be exempt except that (2) neither type of work alone can be termed the employee's primary duty, but (3) all of the putatively exempt work taken together constitutes the employee's primary duty."  Dalheim v. KDFW-TV, 918 F.2d 1220, 1232 (5th Cir. 1990).

  1. A number of courts have recognized that when an employer combines duties from an executive, administrative, or professional exemption with duties from the outside sales exemption to establish a combination exemption, the salary basis test that applies to the former exemptions also applies to the combination exemption. See Condren, 1998 WL 165148, at *2, *6; Ballou v. DET Distributing Co., No. 3-03:1055, 2006 WL 2035729, at *17 (M.D. Tenn. July 17, 2006) (employees not paid on a salary basis cannot qualify for a combination executive-outside sales exemption); Edwards v. Alta Colleges, Inc., No. CIVASA03CA0538OG(NN), 2005 WL 578333, at *10 (W.D. Tex. Jan. 28, 2005) (applying administrative exemption's salary test in analyzing whether employee qualified as exempt under a combination administrative-outside sales exemption). These decisions are consistent with the Department's longstanding interpretation. See Wage and Hour Opinion Letter No. 298, 61-66 CCH-WH 30,901 (Sept. 25, 1964) (employee performing executive and outside sales duties must meet the salary test for executive employees in order to be exempt as a combination executive-outside sales employee under the Part 541 regulations); July 31, 1951 Opinion Letter, at 2 (employee must meet the salary requirements of the executive exemption to be exempt under a combination executive-outside sales exemption). These opinion letters are entitled to controlling deference under Auer. See supra, pp. ­­­5-6.

    Thus, there is no basis for applying the combination exemption differently, i.e., without a salary requirement, when an employer relies on an employee's outside sales duties to establish such an exemption. Indeed, because a combination exemption by definition requires reliance on at least two exemptions, it defies logic to conclude that including outside sales duties in a combination exemption should eliminate the compensation requirements that generally apply to the other exemptions. As discussed above, there is nothing in the language of the regulation to support this conclusion.

    Interpreting the combination exemption regulation as relieving an employer of its burden to establish all of the requirements of each exemption being combined, with the exception of the primary duty element, and instead permitting resort to a new, hybrid exemption, would be inconsistent with Section 13(a)(1) of the FLSA, which expressly exempts only bona fide executive, administrative, professional, outside sales, and computer employees.  See Dalheim, 918 F.2d at 1232 ("[A]n employer cannot tack various nonexempt duties and hope to create an exemption."). It also would allow employers effectively to usurp the Secretary's authority to define and delimit these exemptions, see 29 U.S.C. 213(a)(1).

  1. Contrary to the employer's suggestion in this case, see Br. of Appellees/Cross Appellants at 30-31, the 2004 revisions to the Part 541 regulations did not substantively change the scope of the combination exemption. Rather, the Department expressly stated that it was not proposing any substantive changes to the combination exemption. See 68 Fed. Reg. 15,560, 15,573 (Mar. 31, 2003) (indicating in its Notice of Proposed Rulemaking that most of the proposed regulations in Subpart H, including the combination exemption regulation (proposed section 541.707), "have been moved from the existing regulations without substantial change, although some changes have been made to simplify and update the current regulations").[6] While the Department deleted some language included in the former version of the combination exemption regulation, such deletions were made throughout the revised rule and were "intended to consolidate and streamline the regulatory text, reduce unnecessary duplication and redundancies, [and] make the regulations easier to understand and decipher when applying them to particular factual situations." See 69 Fed. Reg. at 22,126. Thus, the 2004 revisions to the Part 541 regulations did not substantively change the combination exemption.

  2. Here, the district court determined that Mr. Habibi could not qualify for a combination administrative-outside sales exemption because he was paid less than the salary required under the administrative exemption and did not customarily and regularly sell outside his employer's place of business. See IntraComm v. Bajaj, No. 05-0955, slip op. at 7-8 (E.D. Va. Apr. 19, 2006) (concluding that Mr. Habibi could not qualify for a combination exemption because he did not perform any exempt work).  Assuming the correctness of these underlying factual determinations,[7] the district court properly denied the combination exemption.[8]

Respectfully submitted,

JONATHAN L. SNARE
Acting Solicitor of Labor

STEVEN J. MANDEL
Associate Solicitor

PAUL L. FRIEDEN
Counsel for Appellate Litigation

___signed_______
JOANNA HULL
Attorney
U.S. Department of Labor
Office of the Solicitor
200 Constitution Ave., N.W.
Suite N-2716
Washington, D.C. 20210
(202) 693-5555

CERTIFICATE OF COMPLIANCE

    Pursuant to Federal Rules of Appellate Procedure 29(c)(5) and (d), and 32(a)(7)(C), I certify the following with respect to the foregoing Amicus Brief for the Secretary of Labor:

  1. This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because this brief contains 2,333 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

  2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a monospaced typeface with 10.5 characters per inch, using Microsoft Office Word 2003, Courier New font, 12 point type.

___signed___
Joanna Hull
Attorney

Date: April 23, 2007

CERTIFICATE OF SERVICE

    I hereby certify that on this 23rd day of April, 2007, I sent by Federal Express overnight delivery the original and 7 copies of the foregoing Brief for the Secretary of Labor as Amicus Curiae to the Clerk of the United States Court of Appeals for the Fourth Circuit.

    I also certify that 2 copies of this brief have been served on each of the following counsel of record by Federal Express overnight delivery this 23rd day of April, 2007:

Brad D. Weiss
Charapp & Weiss, LLP
8300 Greensboro Drive, Suite 200
McLean, VA 22102
    Counsel for Plaintiffs-Appellants

Kevin B. Bedell
John Francis Scalia
Greenberg & Traurig, LLP
1750 Tysons Boulevard, Suite 1200
McLean, VA 22102
    Counsel for Defendants-Appellees

___signed___
Joanna Hull
Attorney


Footnotes

[1]    The Department revised these regulations in 2004.  See 69 Fed. Reg. 22,122, 22,126 (Apr. 23, 2004). The revised Part 541 regulations became effective on August 23, 2004. Id. These regulations apply to this case.  See IntraComm v. Bajaj, No. 05-0955, slip op. at 3, 6-7 (E.D. Va. Apr. 19, 2006).

[2]    While Auer addresses the combination exemption as it existed prior to the 2004 revisions to the Part 541 regulations, see 29 C.F.R. 541.600 (2003) ("former" regulation), those revisions did not substantively change this exemption. See infra, pp. 9-10. Thus, cases and opinion letters interpreting the former regulation remain good law.

[3]    Copies of the Wage and Hour Opinion Letters cited in this brief are included in the addendum. These copies are redacted to protect identifying information.

[4]    These salary tests generally require that: (1) an employee be paid on a salary basis, which is defined in 29 C.F.R. 541.602 (2006); and (2) that the employee receive at least $455 per week. See, e.g., 29 C.F.R. 541.100(a)(1) (2006). The exemption for outside sales employees does not include a salary requirement. See 29 C.F.R. 541.500(c) (2006).

[5]    The Sixth Circuit permits citation of its unpublished opinions without limitation. See 6th Cir. R. 28(g); cf. Fed. R. App. P. 32.1(a) (2007).

[6]    The Department made only one change to the combination exemption between the proposed and final rules. Specifically, the Department revised an example in the proposed rule stating that "an employee who works forty percent of the time performing exempt administrative duties and another forty percent of the time performing exempt executive duties may qualify for exemption," 68 Fed. Reg. at 15,596 to avoid the suggestion that "an employee who works 40 percent of the time performing exempt administrative duties would be nonexempt absent the additional time spent on executive duties". 69 Fed. Reg. at 22,190. Because such a suggestion was contrary to the Department's revised regulation defining "primary duty," the Department removed the 40 percent reference and replaced it with language consistent with the revised regulation's definition of the term "primary duty." Id.

[7]    For purposes of this amicus brief, the Secretary assumes the facts as set out by the district court.

[8]    In context, we do not believe that the district court's statement that "the combination exemption does not apply to Habibi because he does not qualify for either the outside salesman or administrative employee exemption," see IntraComm, No. 05-0955, slip op. at 8, should be interpreted as stating that the combination exemption only applies where an employee independently satisfies all of the requirements of an individual Part 541 exemption, including the requirement that the work be the employee's "primary duty."  Such an interpretation would not be correct.