Sarah Magnussen v. State

2022 WI APP 23

COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION

Case No.: 2021AP538

†Petition for Review filed

Complete Title of Case:

SARAH MAGNUSSEN,

PLAINTIFF-APPELLANT,†

V.

STATE OF WISCONSIN,

DEFENDANT-RESPONDENT.

Opinion Filed: April 5, 2022
Submitted on Briefs: January 12, 2022
Oral Argument:

JUDGES: Brash, C.J., Donald, P.J., and Dugan, J.
Concurred:
Dissented:

Appellant
ATTORNEYS: On behalf of the plaintiff-appellant, the cause was submitted on the
briefs of James A. Walcheske, Scott S. Luzi, and David M. Potteiger of
Walcheske & Luzi, LLC of Brookfield.

Respondent
ATTORNEYS: On behalf of the defendant-respondent, the cause was submitted on the
brief of Joshua L. Kaul, attorney general, Colin A. Hector, assistant
attorney general, and Steven C. Kilpatrick, assistant attorney general.
2022 WI App 23

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
April 5, 2022
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.

Appeal No. 2021AP538 Cir. Ct. No. 2019CV3112

STATE OF WISCONSIN IN COURT OF APPEALS

SARAH MAGNUSSEN,

PLAINTIFF-APPELLANT,

V.

STATE OF WISCONSIN,

DEFENDANT-RESPONDENT.

APPEAL from an order of the circuit court for Milwaukee County:
DAVID C. SWANSON, Judge. Affirmed.

Before Brash, C.J., Donald, P.J., and Dugan, J.

¶1 BRASH, C.J. Sarah Magnussen appeals an order granting summary
judgment in favor of the State of Wisconsin, her employer, with regard to her wage
claim. Magnussen asserts that the trial court erred in rejecting her claim that the
State violated the Wisconsin Wage Payment and Collection Laws by categorizing
No. 2021AP538

her position as a nurse clinician as being exempt from their provisions, particularly
with regard to the calculation of overtime pay as set forth in the Fair Labor Standards
Act (FLSA). The trial court determined that the State met its burden of
demonstrating that Magnussen satisfies the criteria for exemption from those
provisions. Upon review, we affirm.

BACKGROUND

¶2 Magnussen, a registered nurse, works for the State Department of
Corrections as a “nurse clinician.” The State treats all nurse clinicians as salaried
employees, which means that they receive a specific amount of base pay for “every
pay period during which they are ready, willing and able to work.”

¶3 Based on this pay structure, the State categorizes nurse clinicians as
exempt from FLSA overtime requirements. Those requirements generally prohibit
an employee from working more than forty hours per week without being
compensated for that overtime “at a rate not less than one and one-half times the
regular rate at which he [or she] is employed.” See 29 U.S.C. § 207(a)(1) (2010).
However, the FLSA allows for an exemption from its overtime pay requirements
for employees who are “employed in a bona fide executive, administrative, or
professional capacity[.]” See 29 U.S.C. § 213(a)(1) (2018). The State considers
nurse clinicians exempt under that professional exemption.1

1
The Wisconsin Department of Workforce Development has determined that the FLSA
regulations relating to overtime issues are applicable to employees of the State. See WIS. ADMIN.
CODE § DWD 274.08(2) (April 2018). Magnussen’s initial complaint included claims that the
State had violated the FLSA as well, but those claims were dismissed with prejudice by the trial
court on the grounds that they were barred because of sovereign immunity. Magnussen does not
raise any arguments on appeal regarding that dismissal, so we do not address it. See Cosio v.
Medical Coll. of Wis., Inc., 139 Wis. 2d 241, 242-43, 407 N.W.2d 302 (Ct. App. 1987) (arguments
not briefed on appeal are deemed abandoned).

2
No. 2021AP538

¶4 Magnussen, however, asserts that nurse clinicians should be
considered non-exempt employees based on their pay structure. In addition to their
salary, nurse clinicians may receive supplemental or “add-on” pay, which is offered
for positions where incentives are necessary to recruit and retain employees. For
example, when Magnussen was working as a “weekend nurse,” she received add-
on pay of $10 per hour. Nurse clinicians are also eligible to receive an additional
$1 per hour as add-on pay when providing “direct patient care.”

¶5 Additionally, nurse clinicians are paid additional compensation when
they work more than forty hours per week. However, this additional compensation
is calculated in accordance with the State Compensation Plan—as opposed to the
provisions of the FLSA—since they are considered exempt employees. The State’s
method calculates this additional compensation for hours beyond the forty-hour
work week at a rate of one and one-half times Magnussen’s base hourly rate.
Magnussen contends that this rate is significantly less than if it was calculated based
on her “regular” rate—which she asserts should include her add-on pay—as
required under the FLSA.

¶6 Therefore, Magnussen filed this action contending that she and other
nurse clinicians should be considered hourly, non-exempt employees rather than
salaried, exempt employees. She argued that the method by which she is required
to record her hours, as well as the structure of her add-on pay, support her claims.
She further pointed to at least two occasions where she was not paid her guaranteed
minimum salary. Finally, she contended that even if the State demonstrated that she

3
No. 2021AP538

was an exempt employee, her guaranteed salary was not reasonably related to her
total actual compensation, as required by 29 C.F.R. § 541.604(b) (2020).2

¶7 Magnussen filed a motion for partial summary judgment asking the
trial court to find, as a matter of law, that she is an hourly, non-exempt employee.
The State, on the other hand, filed a motion for summary judgment arguing that
Magnussen is an exempt employee because she satisfies the criteria of the “salary
basis” test.3 See 29 C.F.R. § 541.602(a). That test is met if the employee “regularly
receives each pay period … 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.” Id. The State further
asserted that the reasonable relationship requirement of 29 C.F.R. § 541.604(b) is
not applicable to Magnussen since her guaranteed salary is not “computed on an
hourly, a daily or a shift basis,” as described in that regulation. See id.

¶8 The trial court determined that Magnussen met the criteria of the
salary basis test and was therefore an exempt employee. The court noted that the
FLSA regulations generally allow for the practice of tracking hours without
forfeiting the exemption “if the employment arrangement also includes a guarantee
of at least the minimum weekly-required amount paid on a salary basis,” see 29
C.F.R. § 541.604(a), and found that Magnussen’s compensation records supported
the State’s position that she receives a guaranteed salary amount. It noted that her
paychecks show that she received a set amount of wages for eighty “regular hours”

2
All references to the Code of Federal Regulations are to the 2020 version unless
otherwise noted.
3
There are two tests for determining whether the professional exemption from FLSA is
applicable: the duties test and the salary basis test. See 29 C.F.R. § 541.2; see also Auer v.
Robbins, 519 U.S. 452, 455 (1997). Magnussen concedes that the duties test is satisfied.

4
No. 2021AP538

worked, stating that “[t]he uniformity of these compensation records is highly
indicative of a salary compensation structure.”

¶9 Additionally, the trial court rejected Magnussen’s argument that her
receipt of less than her guaranteed wages on two occasions defeated the exemption,
citing the “public accountability” exception to the criteria of the salary basis test
that prohibits a reduction of the guaranteed salary amount for hours not worked. See
Demos v. City of Indianapolis, 302 F.3d 698, 701-02 (7th Cir. 2002). Under the
public accountability exception, a government entity is permitted to dock an
employee’s pay for hours not worked and still satisfy the salary basis test. See id.
at 702.

¶10 The trial court also rejected Magnussen’s argument that her
compensation did not meet the reasonable relationship requirement of 29 C.F.R.
§ 541.604(b). The court reasoned that because it had found that Magnussen was
paid a guaranteed salary, she was not an hourly employee, and thus that provision
did not apply to her.

¶11 Therefore, the trial court denied Magnussen’s motion for partial
summary judgment, and granted summary judgment in favor of the State. This
appeal follows.

DISCUSSION

¶12 This court reviews a trial court’s decision to grant summary judgment
independently, applying the same methodology, in accordance with WIS. STAT.
§ 802.08 (2019-20).4 Kohn v. Darlington Cmty. Sch., 2005 WI 99, ¶11, 283 Wis.

4
All references to the Wisconsin Statutes are to the 2019-20 version unless otherwise
noted.

5
No. 2021AP538

2d 1, 698 N.W.2d 794. Summary judgment shall be granted only if “the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.” Sec. 802.08(2). In
determining whether summary judgment was appropriately granted, this court
reviews the summary judgment materials in the light most favorable to the
nonmoving party. Kohn, 283 Wis. 2d 1, ¶11.

¶13 The trial court’s decision was based on its interpretation of the
relevant federal regulations, and our review requires us to engage in such an analysis
as well. Courts should apply the “general principles of statutory interpretation when
construing federal regulations.” Voces De La Frontera, Inc. v. Clarke, 2017 WI
16, ¶13, 373 Wis. 2d 348, 891 N.W.2d 803. That is, the meaning of the relevant
regulations must be determined “so that it may be given its full, proper, and intended
effect.” See State ex rel. Kalal v. Circuit Ct. for Dane Cnty., 2004 WI 58, ¶44, 271
Wis. 2d 633, 681 N.W.2d 110. For this analysis, the language of the regulations is
“interpreted in the context in which it is used; not in isolation but as part of a whole;
in relation to the language of surrounding or closely-related [regulations]; and
reasonably, to avoid absurd or unreasonable results.” See id., ¶46. This analysis
presents a question of law, which we review de novo. See DOR v. River City Refuse
Removal, Inc., 2007 WI 27, ¶26, 299 Wis. 2d 561, 729 N.W.2d 396. Furthermore,
the application of a statute or regulation to undisputed facts is a question of law,
which we also decide independently. See Kox v. Center for Oral & Maxillofacial
Surgery, S.C., 218 Wis. 2d 93, 99, 579 N.W.2d 285 (Ct. App. 1998).

¶14 As previously stated, the trial court held that the State had met its
burden of proving that Magnussen was an exempt employee. See Kennedy v.
Commonwealth Edison Co., 410 F.3d 365, 370 (7th Cir. 2005) (“It is the

6
No. 2021AP538

employer’s burden to establish that an employee is exempt from the FLSA’s
overtime requirements.”). The court’s decision was based on its finding that
Magnussen’s compensation met the salary basis test pursuant to 29 C.F.R.
§ 541.602(a). To satisfy the criteria of that test, an employee must receive a
“predetermined amount” of wages for each pay period that is “not subject to
reduction because of variations in the quality or quantity of the work performed.”
Id. In other words, “[i]f an employer docks an employee’s pay for partial day
absences, violations of rules other than those of safety, or based on the quantity or
quality of the employee’s work, the employee is not considered to be on a salary
basis.” Kennedy, 410 F.3d at 370 (citation omitted).

¶15 However, an employer which is a government entity may dock its
employees’ pay for working fewer than the minimum amount of hours required and
still meet the criteria for the salary basis test, under the principles of public
accountability. See Demos, 302 F.3d at 702. This public accountability exception
is grounded in the fact that government employment positions are funded by
taxpayer money; thus, government employers track their employees’ hours “either
because they are required by law to keep track of individual employees’ hours or
because the public expects government workers to be available during normal
business operating hours.” Id.

¶16 Moreover, the State’s requirement that its employees track their hours
does not negate their exempt status under the salary basis test, because those
employees can still be considered “salaried” if their compensation “consists of a
guaranteed predetermined amount plus additional compensation.” Douglas v.
Argo-Tech Corp., 113 F.3d 67, 71 (6th Cir. 1997). This rule was confirmed in an
Opinion Letter by the United States Department of Labor on this issue:

7
No. 2021AP538

Provided that employees regularly receive each biweekly
pay period under the employment agreement no less than
1/26th of their annual salary (except those deductions
expressly permitted), their exempt status is not affected by
the actual number of hours that are entered for a particular
pay period or for each separate week within that pay period,
or by how the time is described when it is entered into the
payroll system (e.g., regular time, overtime, holiday pay,
sick leave, personal leave or other codes).

See U.S. Dep’t of Labor, Wage & Hour Div., Opinion Letter on the Fair Labor
Standards Act (July 9, 2003), 2003 WL 23374601, at *2.

¶17 Magnussen’s appointment letter from the State for the nurse clinician
position indicated that she would be paid a salary based on an hourly rate. The State
calculates an hourly rate of pay for all of its employees, regardless of exemption
status. This is due in part to principles of public accountability, as explained above.
See Demos, 302 F.3d at 702.

¶18 Magnussen argues that her appointment letter did not specify a
guaranteed salary. However, her compensation records indicate that, generally, her
regular wages were for eighty hours per pay period at the hourly rate set forth in the
letter.5 Any pay periods where she was docked wages for hours she did not work
were properly subtracted under the public accountability exception. See id. This
pay structure meets the criteria of the salary basis test. See Douglas, 113 F.3d at
71; 29 C.F.R. § 541.602(a).

¶19 Nevertheless, Magnussen argues that even if this court determines that
she meets the salary basis test, her guaranteed salary is based on an hourly
calculation and, as a result, the reasonable relationship requirement for additional
compensation of 29 C.F.R. § 541.604(b) is applicable. As stated in Douglas,

5
State employees are paid bi-weekly. See WIS. STAT. § 16.53(1)(d)1.

8
No. 2021AP538

salaried employees may receive additional compensation without losing their status
as exempt employees, see id., 113 F.3d at 71, with the guidelines for such additional
compensation set forth in § 541.604(a)-(b). Specifically, § 541.604(a) allows for an
employer to “provide an exempt employee with additional compensation without
losing the exemption or violating the salary basis requirement, if the employment
arrangement also includes a guarantee of at least the minimum weekly-required
amount paid on a salary basis.” Such additional compensation may include “a
percentage of the sales or profits of the employer” or “additional compensation
based on hours worked for work beyond the normal workweek.” Id. This additional
compensation “may be paid on any basis (e.g., flat sum, bonus payment, straight-
time hourly amount, time and one-half or any other basis), and may include paid
time off.” Id. (emphasis added).

¶20 The provisions of 29 C.F.R. § 541.604(b) explain that an employee
whose earnings are “computed on an hourly, a daily or a shift basis” may also
receive additional compensation without losing exemption status as long as “the
employment arrangement also includes a guarantee of at least the minimum weekly
required amount paid on a salary basis … and a reasonable relationship exists
between the guaranteed amount and the amount actually earned.” Furthermore, this
subsection specifically states that “[t]he reasonable relationship requirement applies
only if the employee’s pay is computed on an hourly, daily or shift basis.” Id.

¶21 We conclude that Magnussen’s compensation clearly falls within the
parameters of 29 C.F.R. § 541.604(a). As previously discussed, the record indicates
that Magnussen is paid on a salary basis; that is, she was paid a set amount each pay
period regardless of the number of hours she worked, except for deductions under
the public accountability exception. The fact that her compensation is broken down
into an hourly amount—as is the case for all State employees’ compensation—does

9
No. 2021AP538

not translate into her wages being “computed on an hourly, daily or shift basis,” as
required for the application of § 541.604(b) and the reasonable relationship
requirement. See id.

¶22 Furthermore, the add-on pay Magnussen received for working
weekend shifts or for direct patient care is an incentive the State offers, akin to the
examples of sales commissions or bonuses described in 29 C.F.R § 541.604(a). In
fact, as noted above, § 541.604(a) expressly allows for such incentives to be paid
on an hourly basis. See id. We therefore conclude that § 541.604(a), by its plain
language, applies to Magnussen’s compensation. See Kalal, 271 Wis. 2d 633, ¶49
(the “purpose or scope” of a statute or regulation “may be readily apparent from its
plain language”). Thus, we need not address § 541.604(b) and its reasonable
relationship requirement.

¶23 In sum, based on the FLSA regulations and other applicable case law
as applied to the facts of this case, we conclude that Magnussen was paid a
guaranteed salary, and thus the State has met its burden of demonstrating that she is
exempt from the FLSA overtime requirements. See Kennedy, 410 F.3d at 370.
Accordingly, we affirm the trial court’s grant of summary judgment in favor of the
State.

By the Court.—Order affirmed.

10