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Donovan v. Burger King Corp.

decided: April 2, 1982.

RAYMOND J. DONOVAN, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, PLAINTIFF-APPELLANT-CROSS-APPELLEE
v.
BURGER KING CORPORATION, DEFENDANT-APPELLEE-CROSS-APPELLANT.



Appeal from a Judgment of the United States District Court, Eastern District of New York.

Before Oakes, Newman, and Winter, Circuit Judges.

Author: Winter

This case involves cross-appeals from a judgment entered by the District Court for the Eastern District of New York.

The plaintiff Secretary of Labor brought this action under 28 U.S.C. § 217 alleging defendant Burger King's failure to pay overtime compensation to certain employees and to keep related records as required by the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 207, 211(c), 215(a)(2) and (a)(5) (1976). Burger King raised as an affirmative defense a claim that the employees, designated Assistant Managers, are "bona fide executive" employees under 29 U.S.C. § 213(a)(1) and exempt from both overtime and recordkeeping requirements.

Burger King operates a chain of fast food restaurants, which employ hourly employees, one salaried Manager and two salaried Assistant Managers. There are substantial periods of time during which an Assistant Manager is the sole supervisor in the restaurant. Among the duties performed by Assistant Managers are assigning hourly employees to particular tasks and monitoring their performance; determining the quantity of food to be prepared; ordering supplies and maintaining sufficient inventory; dealing with customer complaints; and auditing cash receipts. The Assistant Managers also spend time performing the same work as hourly employees, such as preparation and service of food. To assist the Managers and the Assistant Managers in the running of the restaurant, Burger King has prepared a "Manual of Operating Data." The Manual prescribes and explains standardized practices relating to the operation of the restaurant.

After a court trial, Judge Sifton held that Assistant Managers earning less than $250 per week were not exempt and made a back pay award. He ordered Burger King to comply with the overtime provisions of the FLSA as to all such employees in defendant's New York region and to keep records as to their allocation of work time between production and managerial tasks. Judge Sifton also found that Assistant Managers earning $250 or more were exempt under § 213(a)(1) from the FLSA overtime provisions. Burger King appeals from the back pay award and injunction, while the Secretary appeals from the determination that Assistant Managers earning $250 per week are exempt. We affirm.

The Secretary's Regulations

This case turns upon the meaning and application of regulations promulgated by the Secretary of Labor under 29 U.S.C. § 213(a)(1),*fn1 which define which employees are bona fide executives. Employees earning less than $250 per week must satisfy the so-called "long test" criteria of 29 C.F.R. § 541.1 (1981)*fn2: their "primary duty" must be management, id. § 541.1(a); they must regularly direct the work of two or more other employees, id. § 541.1(b); they must have "authority to hire and fire" or have their personnel recommendations accorded "particular weight", id. § 541.1(c); they must regularly exercise "discretionary powers", id. § 541.1(d); they must not devote more than 40% of their workweek to activities "not directly and closely related" to management, id. § 541.1(e). Employees earning $250 or more must satisfy the requirements of the so-called "short test": their "primary duty" must be management, and they must regularly direct the work of two or more other employees. Id. § 541.1(f). The regulation thus establishes different legal tests according to salary level, see Marshall v. Western Union Telegraph Co., 621 F.2d 1246, 1252 (3d Cir. 1980), employees earning less than $250 being subject to the "long test" while those earning $250 or more are governed by the "short test".

The "Long Test" Assistant Managers

Judge Sifton found as a fact that the Burger King Assistant Managers "spent at least half of their time doing the same work as the hourly employees." Marshall v. Burger King Corp., 504 F. Supp. 404, 410 (S.D.N.Y.1980). This was a direct consequence of a deliberate corporate policy at the regional level which dictated "ideal" ratios of hourly labor to production and thereby required Assistant Managers to serve as an "extra hand" during high volume meal periods. Were the Assistant Managers to abstain from production work, more hourly employees would be needed, "thereby "blowing payroll'-that is, spending more than the store's budgeted amount for hourly labor." Id. at 410.

Under the "long test," a finding that more than 40% of an employee's work time in one week is spent on non-exempt work is dispositive. Judge Sifton thus held the "long test" Assistant Managers subject to the FLSA.

Burger King's attack on these findings is unpersuasive. First, it argues that Assistant Managers often do two things at once, e.g., prepare a hamburger while directing an hourly employee to clean an area. This claim was fully explored in the testimony before Judge Sifton and provides no grounds for us to disturb his findings as to allocation of time between production and managerial tasks, particularly since Burger King bears the burden of proof on this issue. Corning Glass Works, Inc. v. Brennan, 417 U.S. 188, 196-197, 94 S. Ct. 2223, 2229, 41 L. Ed. 2d 1 (1974); Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S. Ct. 453, 456, 4 L. Ed. 2d 393 (1960).

Second, Burger King relies on an express written policy of the corporation and admonitions made during the training period at Whopper College forbidding Assistant Managers from spending in excess of 40% of their time on production tasks. The District Judge, however, rightly looked to what Burger King did rather than what it said. He found that the "ideal" ratio of hourly labor to production was inconsistent with the ostensible restrictions on Assistant Managers' doing of production work and that Burger King's district managers, knowing of the inconsistency, nevertheless continued to enforce the personnel/output ratio. Marshall v. Burger King Corp., 504 F. Supp. at 408-409. The record supports the finding as to Burger King's actual practices, in contrast to its public declarations.

As part of the judgment, Judge Sifton enjoined Burger King to pay FLSA overtime to all "long test" Assistant Managers in the New York region in weeks in which they spend in excess of 40% of their time on non-exempt work. The injunction further requires that records relating to allocation of time to non-exempt work by "long test" Assistant Managers be kept. This relief is admittedly broader than that sought by the Secretary, who asked for injunctive relief only as to five restaurants. Burger ...


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