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Hageland Aviation Services, Inc. v. Harms

Supreme Court of Alaska

June 5, 2009

HAGELAND AVIATION SERVICES, INC., L. Michael Hageland, and James Tweto, Appellants,
v.
John HARMS and Other Pilots Similarly Situated, Appellees.

Rehearing Denied July 15, 2009.

Page 445

[Copyrighted Material Omitted]

Page 446

Thomas M. Daniel, James N. Leik, and Jacob Nist, Perkins Coie LLP, Anchorage, for Appellant Hageland Aviation Services, Inc.

Peter J. Maassen, Ingaldson, Maassen & Fitzgerald, P.C., Anchorage, for Appellants L. Michael Hageland and James Tweto.

Timothy J. Petumenos, Max D. Garner, and Peter C. Nosek, Birch, Horton, Bittner & Cherot, Anchorage, for Appellees.

Before : FABE, Chief Justice, MATTHEWS, EASTAUGH, and CARPENETI, Justices.

OPINION

FABE, Chief Justice.

I. INTRODUCTION

Pilots of Hageland Aviation Services, Inc. filed a class action lawsuit in 2002 for unpaid overtime wages under the Alaska Wage and Hour Act. After the Alaska Legislature amended the Act in 2003 to exempt pilots from the Act's overtime compensation provision, Hageland moved to dismiss the lawsuit. The superior court held that the legislative change exempting pilots from the Act applied only from the amendment's effective date of July 16, 2003. The legislature again amended the Act in 2005 to make its 2003 amendment to the Act retroactive to 2000. Hageland moved for summary judgment based on the retroactive exemption, and the pilots cross-moved for summary judgment, arguing that the retroactive exemption violates numerous provisions of the state and federal constitutions. The superior court concluded that the 2005 amendment violates the takings and contract clauses of the Alaska Constitution. Hageland appeals. Because we agree with the superior court that the 2005 amendment is a violation of the takings and contract clauses, we affirm.

II. FACTS AND PROCEEDINGS

Hageland Aviation Services, Inc. is a regional air carrier that provides commercial passenger service and hauls mail to more than seventy villages. John Harms, a former pilot of Hageland, filed a class action suit against Hageland on June 26, 2002, seeking unpaid overtime wages under the Alaska Wage and Hour Act [1] for himself and other similarly situated employees.

A few months Before the class was certified, the superior court granted Harms's motion for summary judgment on Hageland's liability for Harms's unpaid overtime. Superior Court Judge Peter A. Michalski concluded that Harms was entitled to overtime wages as a matter of law because he earned less than $300.00 per day, which made him a per se nonexempt employee under the regulations promulgated by the Alaska Department of Labor and Workforce Development for the Act's overtime compensation provision.[2]

The class was certified in August 2003. As of May 2007 the class consisted of twenty-three then-current and former pilots of Hageland who were paid a daily rate between June 26, 2000, and July 16, 2003. The basic term of the pilots' employment agreement, which was not in writing, was that they would receive a daily rate for each day they were on duty. The pilots were on duty for fourteen hours per day and their daily rates varied from $66.67 to $350.00. Like other regional air carriers, Hageland never paid overtime wages to its pilots, and none of the pilots testified that they believed that they were entitled to overtime wages while they were working for Hageland.

In 2003 the Alaska Legislature expressly exempted pilots from the Act's overtime compensation provision by passing Chapter 11 of SLA 2003, which is codified as

Page 447

AS 23.10.060(d)(19). In October 2003 the superior court held that the statutory exemption applied only from the amendment's effective date of July 16, 2003, which left intact the pilots' claims between June 26, 2000, and July 16, 2003. In the superior court's order, it noted that Chapter 11 " simply changes Alaska law, without directly overturning court or executive decisions."

In a second summary judgment order on liability, the superior court held in January 2004 that the pilots were per se nonexempt employees and thus entitled to overtime wages. The superior court reasoned that Hageland's practice of reducing the pilots' pay for partial-day absences violated the Alaska labor department's regulations, which require that exempt employees' salaries not be subject to reduction because of variations in the quantity of work performed.[3]

In 2005 the legislature passed another amendment to the Act's overtime compensation provision. Chapter 19 of SLA 2005 made the 2003 amendment's statutory exemption of pilots retroactive to January 1, 2000, and explicitly stated that it applied to all actions and proceedings under the Act's overtime compensation provision that were not determined by a final judgment Before its effective date of May 18, 2005. The sponsor statement for Chapter 19's senate bill explained that Chapter 19 " clarifies legislative intent by retroactively removing flight crews from the scope of statutory overtime compensation required under the Alaska Wage and Hour Act found in AS 23.20.060." The sponsor statement also recognized that three class action suits had been filed and that they would be covered by the retroactive provision. According to the sponsor statement, Chapter 11 was enacted to " codif[y] what ... had been [Department of Labor] policy exempting flight crews from the [Act's] overtime compensation rules." The statement also highlighted the burdens placed on the " critical yet fragile" air carrier industry threatened by " superfluous litigation."

In December 2005 the superior court considered the parties' cross-motions for summary judgment on the constitutionality of Chapter 19. The superior court granted the pilots' cross-motion for partial summary judgment and denied Hageland's motion for summary judgment, ruling that Chapter 19 violates the Alaska Constitution's takings and contract clauses.[4] The superior court reasoned that the pilots' property rights in their claims for unpaid overtime pay vested at the end of each pay period for which overtime wages would have been due. The superior court further determined that the pilots had a reasonable expectation to receive the overtime compensation Before Chapter 11 was enacted and Chapter 19 caused a direct financial loss to the pilots. The superior court also held that because Chapter 19's purpose was to eliminate the pilots' claims, it violated the contract clause by substantially impairing the overtime compensation term of the parties' employment agreement. The superior court reasoned that this impairment served a " questionable" purpose and was " manifestly unfair."

After holding Chapter 19 unconstitutional, the only unresolved issue Before the superior court was the amount of unpaid overtime wages owed to the pilots. In August 2007 the parties stipulated to $1,600,000 in damages and final judgment was entered. Hageland appeals the superior court's summary judgment order holding ...


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