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McCoy v. North Slope Borough

United States District Court, Ninth Circuit

August 26, 2013



SHARON L. GLEASON, District Judge.

Plaintiffs move for partial summary judgment.[1] This motion is opposed and Defendant cross-moves for summary judgment.[2] Oral argument on the motions was heard on July 25, 2013.


Plaintiffs Lawrence McCoy, Todd McDonald, Donald Meany, Robert Mercier, Richard Patterson, Gary Quarles, Lawrence Shue, Rick Tidwell, and Steve Williamson are former and current employees of Defendant, the North Slope Borough (NSB). Plaintiffs have all been employed as pilots, lead pilots, or as a coordinator in Defendant's Department of Search and Rescue (SAR). In addition to these positions, SAR is staffed by a Director and Deputy Chief, a Chief Pilot, and three support employees.

During the time period relevant to this litigation, which is April 29, 2008 until the present, McCoy was employed as the SAR coordinator, a SAR pilot, and a lead pilot.[3] McDonald, Meany, Quarles, Shue, and Tidwell were employed as SAR pilots.[4] Mercier and Williamson were employed as SAR pilots and lead pilots.[5] Patterson has been employed as the SAR coordinator, a SAR pilot, and the Chief Pilot.[6] Certain Plaintiffs are no longer employed in these positions by NSB. Plaintiffs all seek overtime compensation for the entire relevant time period to the extent they were then employed by NSB except Patterson is not seeking overtime compensation for the period after he became the Chief Pilot.[7]

SAR pilots are required to have a high school education or the equivalent, an FAA Airline Transport Pilot (ATP) License with multi-engine airplane or rotorcraft/helicopter rating, an FAA First Class Medical Certificate, an FCC Radio Permit, 3, 000 hours of total flight time, and 500 hours of Arctic or remote area flying experience.[8] SAR pilots must also be able to obtain an Alaska driver's license within six months of hire.[9] A SAR pilot's primary purpose is to "serve[] as Pilot-in-Command or Second-in-command in Borough aircraft [and] safely pilot[] assigned aircraft to and from destinations, and for search, rescue and medevac situations."[10] A SAR pilot who is not a lead pilot is called a line pilot.

Lead pilots are required to have the same education, experience, and certificates as SAR pilots, except they must have 4, 000 hours of total flying experience and one year of management and supervisory experience.[11] According to their job description, a lead pilot's primary purposes are: 1) to "[a]ssist in the management and monitoring of operations and safety of NSB Search and Rescue flight crew as Pilot in Command of Borough operated aircraft;" 2) to "assist[] in development and implementation of flight crew training programs of NSB Search and Rescue (SAR) personnel;" and 3) to "assist[] in ensuring compliance with Federal Aviation Administration (FAA) and Borough regulations and policies."[12]

The SAR coordinator is required to have the same education, experience, and certificates as a SAR pilot.[13] The SAR coordinator's primary purposes are to "[c]oordinate[] search and rescue efforts between the NSB Search and Rescue (SAR) Department and village, state and Federal search and rescue organizations; [and] serve[] as Pilot in Command in Borough aircraft."[14]

Defendant has treated SAR pilots, lead pilots, and the SAR coordinator as exempt employees for purposes of overtime wages. In 1997, three of the SAR pilots questioned whether they were properly classified as exempt employees. Although the Wage and Hour Division of the Department of Labor (DOL) conducted an investigation and did not agree with Defendant's position that its pilots were exempt, [15] nothing came of the investigation.

In 2004, the pilots and lead pilots approached Defendant about instituting a rotational schedule. Defendant's Department of Law concluded that the SAR pilots were exempt employees and thus could work a rotational schedule.[16] The rotational schedule required the SAR pilots and lead pilots to work a two weeks on/two weeks off schedule.[17] During their two weeks off, the pilots could be called back to work. During their two weeks on, the pilots were originally required to be available for a flight at all times, but in January 2012, the schedule was changed to monitoring the radio and being on call for 12-hour shifts.[18]

During their two weeks on, the pilots were not required to be at the SAR facility at all times but were required to be able to respond to a tone-out within 30 minutes. A tone-out is the tone transmitted on the SAR radio frequency to notify a pilot of a mission. The pilots could engage in other activities while waiting for a tone-out, except they could not, per federal regulation, drink alcohol within twelve hours of a flight. The pilots were also required to be aware of weather conditions while waiting for a mission. Plaintiffs checked the weather anywhere from every 30 minutes to every three to four hours. There is evidence in the record that "[t]he number of dispatch calls per day for each Plaintiff average[d] less than one call per day."[19]

The proposal for the rotational schedule stated that the salary would be based on 75 hours every two-week pay period, but that the SAR pilots would be working 168 hours in each two-week pay period.[20] In answer to an interrogatory, Defendant stated that "[p]ilots were paid for 52 weeks per year but were on duty only 75 hours per pay period, but generally worked only two weeks on, followed by two weeks off."[21] Plaintiffs' payroll records indicate that they were paid based on working 75 hours per two-week pay period.[22]

While on the rotational schedule, the pilots accrued leave according to Defendant's personnel policies.[23] However, it is undisputed that while on the rotational schedule, the pilots were not permitted to take leave. Instead, the pilots were able to periodically cash out their leave so long as they maintained a specified minimum balance.[24]

Plaintiffs contend that they have been improperly classified as exempt employees and that pursuant to the Fair Labor Standards Act (FLSA) they should have been paid overtime for any hours more than 40 that they worked in a week. They assert they worked 168 hours a week during their rotation. Plaintiffs' Second Amended Complaint also asserts a breach of contract claim under state law based on Defendant's alleged failure to pay Plaintiffs overtime and holiday pay, and a claim that Defendant failed to timely pay certain Plaintiffs the compensation they were due upon termination as required by AS 23.05.140.

In its Answer, Defendant asserts that Plaintiffs were exempt employees under the FLSA. Defendant also asserts, as affirmative defenses, that Plaintiffs' damages are barred by the doctrine of unclean hands, that Plaintiffs have failed to mitigate their damages, that there were legitimate business reasons for all actions taken regarding Plaintiffs, and that Plaintiffs are barred from recovering any damages because they breached their duty of loyalty to their employer.[25]

Plaintiffs now move for summary judgment on their FLSA overtime claim, their breach of contract claim, and several of Defendant's affirmative defenses. Defendant cross-moves for summary judgment on all of Plaintiffs' claims. In the alternative, should the Court find that some or all of Plaintiffs were misclassified as exempt, Defendant moves for summary judgment that its conduct was not willful, that it did not act in bad faith, that Plaintiffs' overtime compensation should be calculated at a 50% premium, and that it is entitled to offset any overtime that may be owed to Plaintiffs by all its payments of compensation.


Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.[26] The initial burden is on the moving party to show that there is an absence of genuine issues of material fact.[27] If the moving party meets its initial burden, then the non-moving party must set forth specific facts showing that there is a genuine issue for trial.[28] In deciding a motion for summary judgment, the court views the evidence of the non-movant in the light most favorable to that party, and all justifiable inferences are also to be drawn in its favor.[29] "Where the parties file cross-motions for summary judgment, the court must consider each party's evidence, regardless under which motion the evidence is offered."[30]

I. FLSA Overtime Claim

The FLSA requires employers to pay employees one-and-a-half times the employee's regular rate of pay for hours worked above forty hours in a workweek, unless the employee is exempt.[31] "FLSA exemptions are to be narrowly construed against... employers and are to be withheld except as to persons plainly and unmistakably within their terms and spirit.'"[32] "An employer who claims an exemption from the FLSA bears the burden of demonstrating that such an exemption applies.'"[33] "The criteria provided by regulations are absolute and the employer must prove that any particular employee meets every requirement before the employee will be deprived of the protection of the Act.'"[34] AThe FLSA includes an exemption from the overtime requirement for any employee employed in a bona fide executive, administrative, or professional capacity[.]"[35] Whether an employee is exempt is a question of law.[36] But how an employee spent his working time is a question of fact.[37]

Defendant has raised three specific exemptions-the learned professional exemption, the highly compensated employee exemption, and the administrative exemption-which the Court addresses in turn below.

A. Exemptions

1. The learned professional exemption

Defendant contends that the SAR pilots are exempt because they are "learned professionals" under the FLSA. The applicable regulation provides as follows:

To qualify for the learned professional exemption, an employee's primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. This primary duty test includes three elements:
(1) The employee must perform work requiring advanced knowledge;
(2) The advanced knowledge must be in a field of science or learning; and
(3) The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.[38]

There is no dispute that the SAR pilots' primary duty is to fly Defendant's aircraft. The dispute here focuses on whether the SAR pilots meet the third element of the "primary duty" test, to which the Court will next turn.

A SAR pilot is required to have an ATP certificate or license. Defendant contends that an ATP certificate is customarily acquired by a prolonged course of specialized intellectual instruction.

The applicable regulation includes the following detail regarding this third element of the exemption:

The phrase "customarily acquired by a prolonged course of specialized intellectual instruction" restricts the exemption to professions where specialized academic training is a standard prerequisite for entrance into the profession. The best prima facie evidence that an employee meets this requirement is possession of the appropriate academic degree ... [T]he learned professional exemption is not available for occupations that customarily may be performed with only the general knowledge acquired by an academic degree in any field, with knowledge acquired through an apprenticeship, or with training in the performance of routine mental, manual, mechanical or physical processes. The learned professional exemption also does not apply to occupations in which most employees have acquired their skill by experience rather than by advanced specialized intellectual instruction.[39]

The parties do not dispute the general route that a person takes to acquire an ATP certificate. The first certification level for pilots is the private pilot certificate. To be eligible for a private pilot certificate a person must be at least 17 years of age; be able to read, speak, and write English; receive a logbook endorsement from a certified instructor who either instructed the student or reviewed the student's home study; obtain a passing score on a multi-choice knowledge test covering areas such as weather, federal regulations, aircraft operating systems, flight maneuvers, emergencies, communications, flight planning, chart reading, navigation, and aerodynamics; receive flight training from an instructor; and pass a practical test with a flight instructor.[40]

After receiving a private pilot certificate, a person may then obtain an instrument rating, which allows a pilot to fly under Instrument Flight Rules. To obtain an instrument rating, a person must obtain a passing score on a multiple-choice test and receive a logbook endorsement from a certified instructor.[41] Earning an instrument rating generally requires between 50 and 70 additional hours of in-flight instruction.[42]

After receiving an instrument rating, many pilots obtain a commercial certificate, which allows a pilot to receive compensation for flying. To obtain a commercial certificate, a person must obtain a passing score on a multiple-choice test and receive a logbook endorsement from a certified instructor.[43]

A pilot may then obtain an ATP certificate. To obtain an ATP certificate, a person must obtain a passing score on a multiple-choice test but is not required to receive an endorsement from a certified instructor.[44] Michael Buckland, Defendant's aviation expert, testified that a person obtaining an ATP certificate is not required to do any classroom training, but may do as much as 170 hours of classroom training.[45] Buckland stated that doing no classroom training was "wildly unrealistic" but that the regulations did not expressly require any classroom training.[46] But in order to obtain an ATP certificate, a pilot must have extensive flying experience, including 1, 500 total flying hours, 500 cross-country flying hours, 100 night-flying hours, and 75 hours of instrument flight time. Plaintiff Patterson once stated that

[w]hen compared to other qualifications, this rating is akin to a doctorate or other extended college degree.... This certificate requires extensive aeronautical experience, knowledge and flight proficiency to attain. On average it takes at least 5 years to attain at an average cost of $50, 000.[47]

Buckland's report estimated that a pilot who met the qualifications required for a SAR pilot would have approximately 1, 062 hours of training time, which in his opinion, was the functional equivalent of two-thirds of a bachelor of science degree.[48]

Defendant argues that there can be no dispute that the foregoing constitutes a prolonged course of specialized study because Plaintiffs could not safely fly aircraft had they not had this specialized instruction, which they obtained in ground schools, through self-study, or in the military. Defendant argues that this specialized instruction is prolonged, given that a pilot has approximately 1, 500 hours of classroom and dual instruction by the time he acquires an ATP certificate. Defendant argues that the fact that pilots do not have academic degrees does not mean that they do not meet the third requirement of the "primary duty" test because the learned professional exemption applies to nurses and accountants who do not have a special advanced academic degree[49] and the same should be true for pilots.

Defendant has, however, misread the regulation pertaining to nurses, which provides:

Registered nurses who are registered by the appropriate State examining board generally meet the duties requirements for the learned professional exemption. Licensed practical nurses and other similar health care employees, however, generally do not qualify as exempt learned professionals because possession of a specialized advanced academic degree is not a standard prerequisite for entry into such occupations.[50]

The regulation does not provide that all nurses are exempt, including those that do not have advanced academic degrees. Rather, it provides that those categories of nurses who have specialized training, such as a licensed practical nurse, are not exempt because they do not have the requisite "specialized advanced academic degree[.]"[51] The same is true of ...

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