Alaska employers received some welcome news from the Alaska Supreme Court that should help level the playing field when they must defend claims from employees under the Alaska Wage and Hour Act. Employers have the burden to prove that their employees are exempt from overtime compensation under one of the exemptions established by law, such as the so-called white collar exemptions for those working in a bona fide executive, professional and administrative capacity. If employers cannot prove that employees meet the exemption's requirements, then the employees must be paid overtime compensation for all hours worked exceeding eight hours per day under Alaska law, or exceeding 40 hours in a workweek under Alaska law and the analogous federal law, the Fair Labor Standards Act (FLSA). These federal and state wage and hour laws create substantial exposure for employers who get it wrong since employees can recover unpaid wages, statutory penalties and attorney's fees.
In a departure from well-established Alaska precedent, the Alaska Court ruled that Alaska's Wage and Hour Act will be interpreted consistently with the federal FLSA with regard to the employer's burden to prove that the employee falls within the exemption in Buntin v. Schlumberger Technology Corp., Slip Op. No. 7521 (April 23, 2021). In that case, the employer claimed that its Alaska-based employee was exempt from overtime under Alaska's exemption for individuals employed in a “bona fide executive, administrative, or professional capacity,” found in AS 23.10.055(a)(9)(A).
The Alaska Supreme Court overruled long-standing precedent when addressing questions of Alaska law certified to it for response by the U.S. District Court for the District of Alaska. The Court ruled that the employer has the burden to prove an exemption based on the “preponderance of evidence” under Alaska's Wage and Hour Act. In an Alaska decision dating back to 1993, the Court previously required employers to prove that an exemption applied “beyond a reasonable doubt.” This departure from the previous precedent should assist Alaska employers faced with overtime claims asserted by the Alaska Department of Labor and Workforce Development or in lawsuits brought by current or former employees.
A second question in Buntin was whether exemptions under the Alaska Wage and Hour Act should be given a “narrow” or “fair” interpretation. Under long-standing federal and state precedents, courts were required to interpret exemptions narrowly — that is to limit their application. But in 2018, the U.S. Supreme Court ruled that exemptions to the federal FLSA should be interpreted the same as the rest of the law, so they should be read “fairly,” rather than “narrowly,” in Encino Motorcars v. Navarro, 128 S. Ct 1134 (2018).
In Buntin, with respect to the “bona fide executive, administrative, and professional” exemption, the Alaska Supreme Court adopted the Encino approach that the exemptions should be read “fairly.” The Court reasoned that Alaska's Wage and Hour Act was amended in 2005 to ensure that the white collar exemptions were defined and interpreted in accordance with the FLSA. However, exemptions under Alaska's Act that were not expressly linked to FLSA exemptions must be treated differently and will continue to be narrowly construed, “absent legislative direction.”
Alaska employers are well advised to consult with their legal counsel to consider how the Court's holding will impact potential overtime claims under the Alaska Wage and Hour Act.
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