HUNZIKER v. AAPPTEC LLC (2020)

OPINION

Daniel Hunziker appeals from the trial court's granting of a directed verdict in favor of Hossain Saneii, Ph.D., the trial court's denial of a motion for directed verdict in Appellant's favor, and the trial court's denial of including two jury instructions submitted by Appellant. We believe that the court erred in granting a directed verdict in favor of Dr. Saneii and declining to include one of Appellant's proposed jury instructions. We reverse and remand as to these two issues only.

FACTS AND PROCEDURAL HISTORY

Dr. Saneii is the president and one of the members of AAPPTec, LLC. AAPPTec provides scientific products to pharmaceutical companies and research universities. Appellant was hired by AAPPTec in April of 2011 as a domestic sales consultant. Appellant's primary job was to sell AAPPTec's instruments to university and pharmaceutical companies. Appellant had an annual salary of $48,000, plus commissions. Appellant was to spend most of his time outside of the office selling products; however, he claims that he was required to remain in the office, perform routine clerical work, and answer customer calls. Dr. Saneii claims Appellant was supposed to primarily work outside of the office, but was not good at his job and did not set up sales appointments.

In December of 2012, Appellant ended his employment with AAPPTec. On July 9, 2013, he brought the underlying action against AAPPTec and Dr. Saneii. Appellant claimed that Appellees did not pay him for all the hours he worked in violation of KRS ¹ 337.010, et seq.,² which makes it unlawful for employers to withhold any portion of an employee's wage and makes it unlawful for an employer to not pay time-and-a-half for overtime hours worked. Appellant claimed he routinely worked 45 or more hours a week, but was only paid for 40 hours a week. He also claimed that his pay was reduced if he did not work at least 40 hours a week.

After discovery was completed, the parties both filed motions for summary judgment. The court denied both motions and the case proceeded to a jury trial. After the close of Appellant's evidence, Appellees moved for a directed verdict in favor of Dr. Saneii. This motion was granted. Appellant moved for directed verdict in his favor, but it was denied. At the close of all the evidence, Appellant again moved for directed verdict, but that motion was denied. The jury ultimately returned a verdict in favor of AAPPTec. This appeal followed. Further facts will be set forth as they become relevant to our analysis.

ANALYSIS

The primary issues in this case concern the definitions of “employer” and “employee.” As previously stated, KRS 337.060 makes it unlawful for an employer to withhold wages from an employee. Employer is defined by KRS 337.010(1)(d) as “any person, either individual, corporation, partnership, agency, or firm who employs an employee and includes any person, either individual, corporation, partnership, agency, or firm acting directly or indirectly in the interest of an employer in relation to an employee[.]” Employee is generally defined by KRS 337.010(2)(a) as “any person employed by or suffered or permitted to work for an employer[.]” KRS 337.010(2)(a) has exceptions to the definition of employee. One such exception is relevant to the case at hand. KRS 337.010(2)(a)2 excludes from the definition of employee “[a]ny individual employed in a bona fide executive, administrative, supervisory, or professional capacity, or in the capacity of outside salesman, or as an outside collector as the terms are defined by administrative regulations of the commissioner[.]”

We will now move on to the arguments presented on appeal. Appellant's first argument on appeal is that the trial court erred in granting a directed verdict in favor of Dr. Saneii. As previously stated, a directed verdict was granted in favor of Dr. Saneii at the close of Appellant's evidence. The trial court held that Dr. Saneii was not Appellant's employer. The court held that only AAPPTec was an employer because allowing an individual to be found liable in this case would negate the purpose of an LLC. The court also held that because Appellant was employed by the LLC, no individual could be considered an employer. Appellant argues that these holdings go against the language defining an employer. This is an issue of first impression.

When engaging in appellate review of a ruling on a motion for directed verdict, the reviewing court must ascribe to the evidence all reasonable inferences and deductions which support the claim of the prevailing party. Once the issue is squarely presented to the trial judge, who heard and considered the evidence, a reviewing court cannot substitute its judgment for that of the trial judge unless the trial judge is clearly erroneous.

Banks v. Fritsch, 39 S.W.3d 474, 478 (Ky. App. 2001) (citations omitted). When engaging in statutory interpretation,

our main goal is “to give effect to the intent of the General Assembly.” The clearest indicator of that intent is the “language the General Assembly chose, either as defined by the General Assembly or as generally understood in the context of the matter under consideration.” And “[w]here the words used in a statute are clear and unambiguous and express the legislative intent, there is no room for construction and the statute must be accepted as written.”

Bell v. Bell, 423 S.W.3d 219, 223 (Ky. 2014) (citations omitted).

We believe the plain language of the statute supports Appellant's position and that the court was clearly erroneous in granting a directed verdict. As previously stated, an employer is “any person, either individual, corporation, partnership, agency, or firm who employs an employee and includes any person, either individual, corporation, partnership, agency, or firm acting directly or indirectly in the interest of an employer in relation to an employee[.]” KRS 337.010(1)(d). Here, it is clear AAPPTec is an employer because it employed Appellant; however, the statute goes further and includes in the definition of employer “any person, either individual, corporation, partnership, agency, or firm acting directly or indirectly in the interest of an employer in relation to an employee[.]” Id. Dr. Saneii would seemingly fit into the “person ․ acting directly ․ in the interest of an employer” category as he was the president of AAPPTec and the person who hired Appellant.

The trial court granted a directed verdict because it believed allowing Dr. Saneii to be personally liable would conflict with the purpose of an LLC. It also seems as though the trial court did not consider the “any person ․ acting directly or indirectly in the interest of an employer” language of the statute. Courts are bound by the plain language of statutes, and a conflict with LLC law was not a valid reason to grant a directed verdict in favor of Dr. Saneii. Additionally, not considering the full language of the statute was also error. We, therefore, reverse and remand in order for the trial court to determine if Dr. Saneii is an employer as defined by KRS 337.010(1)(d).³

Appellant next argues that the trial court erred in not granting a directed verdict in his favor. Appellees’ defense in this case was that Appellant was exempted from the definition of employee because he was a “bona fide professional” and an “outside salesman.”⁴ Appellant argued that he was entitled to a directed verdict in his favor as to the bona fide professional exemption because he did not meet the definition of such a professional.

803 KAR ⁵ 1:070 Section 4 defines the bona fide professional exemption.⁶ 803 KAR 1:070 Section 4 states in pertinent part:

(1) The term “individual employed in a bona fide professional capacity” in KRS 337.010(2)(a)(2) shall mean any employee:

(a) Compensated on a salary or fee basis at a rate of not less than $455 per week, exclusive of board, lodging, or other facilities; and

(b) Whose primary duty is the performance of work:

1. Requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction; or

2. Requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

(2) Learned professionals.

(a) To qualify for the learned professional exemption, an employee's primary duty shall 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 (3) elements:

1. The employee shall perform work requiring advanced knowledge;

2. The advance knowledge shall be in a field of science or learning; and

3. The advanced knowledge shall be customarily acquired by a prolonged course of specialized intellectual instruction.

This exemption is not available for “occupations that customarily may be performed with only the general knowledge acquired by an academic degree in any field[.]” 803 KAR 1:070 Section 4(2)3(d).

Appellant argues that the job description only required a bachelor's degree. Appellant claims that because any bachelor's degree was acceptable, the bona fide professional, or learned professional, exemption did not apply. Dr. Saneii testified that a person in Appellant's position would need advanced knowledge of chemistry and how AAPPTec's complex products worked. Dr. Saneii also testified that a person with a non-scientific college degree would not be qualified to sell AAPPTec's products. Finally, Dr. Saneii testified that the job description did not list all of the qualifications needed for the position; it was only a summary.

Based on Dr. Saneii's testimony, the trial court did not err in denying Appellant's motion for directed verdict. The issue as to whether Appellant was a bona fide professional was properly put before the jury.

Appellant's next argument on appeal concerns a proffered jury instruction. Appellant asked the court to instruct the jury as follows:

If you find that Hunziker was an exempt employee, he was entitled to receive his full salary every pay period. An employer may not deduct any pay from an exempt employee's salary during any pay period where the employee performed work.

Hunziker claims that, if you find he was an exempt employee, he suffered damages when Defendants wrongfully deducted wages from his salary because he did not work a certain number of hours. Thus, Hunziker must show:

• He received an annual salary;

• His salary was supposed to be paid in equal parts each pay period; and

• Defendants deducted any amount of pay from his salary in any pay period.

The instruction goes on further to ask the jury to find if either Appellee deducted pay from Appellant's pay in any pay period. Finally, if the jury found that either Appellee did deduct pay from a pay period, it was to determine how much pay was wrongfully withheld. This instruction revolved around the regulation requiring that exempt employees must be paid on a salary basis. 803 KAR 1:070 Section 8(1) states that to qualify for an exemption, an employee must be paid on a salary basis. 803 KAR 1:070 Section 10 defines salary basis as:

(1)(a) An employee will be considered to be paid “on a salary basis” within the meaning of this administrative regulation if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee's compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Subject to the exceptions in subsection 2 of this section, the employee shall receive his or her full salary for any week in which the employee performs any work without regard to the number of days or hour worked. Exempt employees need not be paid for any workweek in which they perform no work.

Appellant argues that AAPPTec made deductions from his salary payments when he missed work.⁷ For example, Appellant provided evidence that when he would be absent from work, either for full days or just a few hours, his weekly pay would be reduced accordingly. Essentially, this was an alternative argument which maintained that Appellant was an exempt employee, but Appellees, from time to time, made improper deductions from his salary.

The trial court refused to include this instruction because it believed this argument had not been raised in the complaint. We review a trial court's decision on whether or not to give a particular jury instruction for abuse of discretion. Sargent v. Shaffer, 467 S.W.3d 198, 203 (Ky. 2015). “The test for abuse of discretion is whether the trial judge's decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles.” Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999) (citations omitted).

We conclude that Appellant's complaint sufficiently set forth this issue as a claim and that the trial court abused its discretion in not giving the proffered jury instruction.

A pleading which sets forth a claim for relief must contain “a short and plain statement of the claim showing that the pleader is entitled to relief and ․ a demand for judgment for the relief to which he deems himself entitled.” Kentucky Rules of Civil Procedure (CR) 8.01. This Court has clarified that “[t]he true objective of a pleading stating a claim is to give the opposing party fair notice of its essential nature.” Cincinnati, Newport & Covington Transp. Co. v. Fischer, 357 S.W.2d 870, 872 (Ky. 1962)․ The purpose of CR 8.01 is to give notice and formulate issues without the requirement of detail. Stewart v. Lawson, 437 S.W.2d 733, 734 (Ky. 1969).

Rose v. Ackerson, 374 S.W.3d 339, 343 (Ky. App. 2012).

Here, Appellant's complaint states in relevant part that: “Hunziker was regularly required to work 45 or more hours per week, but was only paid for 40 hours”; “Hunziker's pay was reduced if he worked less than 40 hours per week”; and “Defendant's failure to pay Hunziker wages for all hours worked violates KRS 337.010 et seq.” We believe this fulfilled the fair notice requirement of CR 8.01 to put Appellees on notice Appellant was seeking overtime pay and any money deducted from his salary. In addition, this issue was more specifically argued in Appellant's motion for summary judgment. It was also discussed in Appellant's pre-trial memorandum which set forth the issues Appellant intended to introduce at trial. Appellees were on notice that Appellant was seeking reimbursement for money improperly withheld from his salary; therefore, the trial court erred in not putting this issue before the jury.

Appellant's final argument on appeal is that the trial court erred in not giving a jury instruction regarding the possibility that Appellant could become a non-exempt employee if Appellees made routine deductions from his salary. This argument is based on 803 KAR 1:070 Section 10(4), which states in relevant part:

(a) An employer who makes improper deductions from salary shall lose the exemption if the facts demonstrate that the employer did not intend to pay employees on a salary basis. An actual practice of making improper deductions demonstrates that the employer did not intend to pay employees on a salary basis. The factors to consider if determining whether an employer has an actual practice of making improper deductions include, but are not limited to: the number of improper deductions, particularly as compared to the number of employee infractions warranting discipline; the time period during which the employer make improper deductions; the number and geographic location of managers responsible for taking the improper deductions; and whether the employer has a clearly communicated policy permitting or prohibiting improper deductions.

(b) If the facts demonstrate that the employer has an actual practice of making improper deductions, the exemption is lost during the time period in which the improper deductions were made for employees in the same job classification working for the same managers responsible for the actual improper deductions․

(c) Improper deductions that are either isolated or inadvertent shall not result in loss of the exemption for any employees subject to the improper deductions, if the employer reimburses the employees for the improper deductions.

We hold that this argument is without merit because the trial court did give a version of this instruction to the jury.

Jury instruction number 1 stated that if the jury found AAPPTec employed Appellant in a bona fide professional capacity, it should find in favor of AAPPTec, but if the jury found Appellant was not employed in a bona fide professional capacity, it should find for Appellant. The instruction then went on to define bona fide professional. Part of that definition indicated that the employee be paid on a salary basis. The instruction then defined salary basis as follows:

An employee will be considered to be paid on a salary basis if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee's compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. A salaried employee is entitled to receive his or her full salary for any week in which (s)he performs any work without regard to the number of days or hours worked but need not be paid for any workweek in which (s)he performs no work. An employee shall not be considered to be on a salary basis if deductions from the employee's predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. Accordingly, if the employee is ready, willing and able to work, deductions shall not be made for time when work is not available. However, deductions from pay may be made, if a salaried employee is absent from work for one (1) or more full days for personal reasons, other than sickness or disability. Thus, if an employee is absent for two (2) full days to handle personal affairs, the employee's salaried status is not be [sic] affected if deductions are made from his salary for two (2) full days. Except, if a salaried employee is absent for one and one-half (11/212) days for personal reasons, the employer may deduct only for the one (1) full-day absence.

This instruction clearly sets forth the argument that an employee must receive his or her full salary and that deductions can only be made in certain situations. It also indicates that if deductions were improperly made, then Appellant could not be considered to have been paid on a salary basis and would, therefore, not be a bona fide professional. We find no error.

CONCLUSION

Based on the foregoing, we affirm in part, reverse in part, and remand. On remand, the issues left for adjudication are whether Dr. Saneii is a “person, either individual, corporation, partnership, agency, or firm acting directly or indirectly in the interest of an employer in relation to an employee[,]” KRS 337.010(1)(d), and what amount, if any, was improperly deducted from Appellant's salary. Appellant being a bona fide professional and being exempt from the Kentucky Wages and Hours Act is not to be relitigated as that issue is res judicata.

FOOTNOTES

1.   Kentucky Revised Statutes.

2.   Known as the Kentucky Wages and Hours Act.

3.   To be clear, we are not holding that Dr. Saneii is an “employer” who is subject to the Kentucky Wages and Hours Act. We are only holding that the trial court erred in its analysis and must make this determination based on the definition, not any perceived conflict with LLC law.

4.   The jury found that Appellant was a bona fide professional; therefore, he was not entitled to overtime payments or the protections of the Kentucky Wages and Hours Act.

5.   Kentucky Administrative Regulations.

6.   This is also known as the learned professional exemption.

7.   We note that 803 KAR 1:070 does allow an employer to make deductions from an employee's salary under certain circumstances.

THOMPSON, L., JUDGE:

ALL CONCUR.