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COMMONWEALTH v. LUZIK, et al.



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COMMONWEALTH

v.

LUZIK, et al.


January 14, 2000

Record No. 982635

COMMONWEALTH OF VIRGINIA

v.

DOUGLAS W. LUZIK, et al.

FROM THE circuit court of the city of richmond

OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.

Present: Carrico, C.J., Compton, Lacy, Keenan,
Koontz and Kinser, JJ.

Theodore J. Markow, Judge

 


In this appeal, we consider whether the
Commonwealth has waived its right to assert the bar of sovereign
immunity to a suit by state employees in state court for back
overtime wages under the federal Fair Labor Standards Act (FLSA),
29 U.S.C. ? 201, et seq.

BACKGROUND

On June 25, 1992, Douglas W. Luzik and fifteen
other juvenile probation officers (the complainants), who work in
various Court Service Units for the Virginia Department of Youth
and Family Services (the Department),
[1] filed a
bill of complaint against the Commonwealth alleging a violation
of the FLSA. The complainants asserted that they are
"non-exempt" employees under the FLSA and sought to
enforce the right provided therein to receive hourly payment of
time and one half if and when they work more than 40 hours in a
workweek. The complainants sought back overtime wages,
enforcement of future overtime pay, and attorney’s fees and
costs.

The Commonwealth’s initial response was to
file a plea in bar of sovereign immunity, asserting that it was
exempt from being sued in its own courts by its employees for an
alleged violation of the FLSA. The Commonwealth asserted that the
Eleventh Amendment to the United States Constitution precludes
Congress from subjecting a state and its officials to being sued
in federal court absent an express intent in a given statute to
permit such suits. Contending that there is no abrogation of the
sovereign immunity of the states express in the FLSA, the
Commonwealth asserted that it cannot be sued for a violation of
that law in federal court and, by extension, neither can it be
sued in state court. The Commonwealth contended that is so
because in the absence of a waiver by the General Assembly, the
Commonwealth and her officials have absolute immunity from the
award of damages sought by the complainants. The Commonwealth
further contended that such immunity also applies to any
injunctive relief requiring future payment of overtime pay as the
establishment and revision of wages and salaries is discretionary
under the laws of the Commonwealth.

After receiving briefs and hearing argument, by
letter opinion dated March 11, 1993, the chancellor denied the
Commonwealth’s plea in bar. The chancellor reasoned that
language within the FLSA defining an employer to include a
"public agency," 29 U.S.C. ? 203(d), which is
further defined as "the government of a State" and
"any agency of . . . a State," 29 U.S.C.
? 203(x), evinces an intent on the part of Congress to
subject the states to enforcement of the FLSA in federal courts,
thus answering the Commonwealth’s assertion that such an
action is barred therein by the Eleventh Amendment. The
chancellor further reasoned that to bar the suit in state court
under a theory of sovereign immunity "would [improperly] allow state law to determine the applicability of federal
law."

The Commonwealth noted an appeal of this ruling
to this Court. The Commonwealth’s petition for appeal was
limited to the issue of whether sovereign immunity barred state
employees from bringing suit against the state in state court.
Finding that there was not yet an appealable order, Code
? 8.01-670, we refused the Commonwealth’s petition for
appeal and its subsequent petition for rehearing.

The complainants then filed an amended bill of
complaint joining eighty-seven additional juvenile probation
officers as complainants. The Commonwealth filed a demurrer,
again asserting the application of the bar of sovereign immunity
and the preclusive effect of the Eleventh Amendment. The
Commonwealth further asserted that application of the FLSA to the
states exceeded congressional authority as limited by the Tenth
Amendment. The chancellor took no action with reference to the
Commonwealth’s demurrer. Thereafter, the Commonwealth filed
an answer, which it subsequently amended, and the matter
proceeded to an ore tenus hearing before the chancellor.

The principal issues before the chancellor were
whether the complainants were salaried employees and, if so,
whether their employment requirements and job duties caused them
to fall within one of the recognized exemptions within the FLSA
as administrative, professional, or executive employees under the
"short test" promulgated in the regulations
implementing the FLSA for determining the exempt status of
salaried employees. The Commonwealth contended that all the
complainants are salaried and that ninety-nine of the
complainants are subject to administrative or professional
exemptions. The Commonwealth contended that the remaining four
employees are exempt executive employees.

The complainants contended that they are not
salaried because they are subject to a reduction in pay for less
than a workweek under a disciplinary policy applicable to all
employees of the Department. With the exception of three of the
complainants, who conceded that they were "executives,"
the complainants further contended that their job duties do not
qualify for any of the exemptions provided for under the FLSA.
One complainant contended that she was neither salaried nor an
exempt executive.

On May 5, 1995, the chancellor entered an order
awarding judgment to the Commonwealth. In an accompanying opinion
letter, the chancellor found that the complainants are salaried
employees despite the existence of the disciplinary policy.
Applying the "short test" applicable to salaried
employees, the chancellor found that the majority of the
complainants have job duties that reflect the requirements for
either administrative or professional employee status. The
chancellor further found that the one "executive"
employee who had challenged the application of that exemption to
her is an executive employee for purposes of the FLSA.

The complainants appealed the judgment to this
Court, assigning error to the chancellor’s finding that they
are salaried employees and that they are subject to the
exemptions of the FLSA. In its brief in opposition, the
Commonwealth asserted as an assignment of cross-error the failure
of the chancellor to sustain the Tenth Amendment claim raised in
its demurrer to the amended bill of compliant.
[2] The Commonwealth did not assign cross-error to the
denial of its claim of sovereign immunity. On December 20, 1995,
this Court refused the petition for appeal.

The complainants then filed a petition for a
writ of certiorari in the United States Supreme Court. The first
of the three questions presented in that petition challenged the
chancellor’s determination that the complainants are
salaried employees even though they are subject to potential
reductions in pay in amounts less than a full workweek’s pay
"regardless whether any actual deductions have
occurred." On February 24, 1997, the Court granted the
petition and by order vacated the judgment and remanded the case
"for further consideration in light of Auer v. Robbins,
519 U.S. [452] (1997)."

Auer involved a claim under the FLSA for
overtime pay by sergeants and a lieutenant employed by the St.
Louis, Missouri Police Department. Id. at 454. In Auer,
an opinion of the Secretary of Labor, presented to the Court in
the form of an amicus curiae brief, stated the Department
of Labor’s position that employees "covered by a policy
that permits disciplinary or other deductions in pay ‘as a
practical matter’" are not "salaried"
employees "if there is either an actual practice of making
such deductions or an employment policy that creates a
‘significant likelihood’ of such deductions." Id.
at 461. The Court held that the Secretary’s opinion was
controlling since it constituted an interpretation "of the
Secretary’s own regulations."
[3] Id.

On July 29, 1997, we remanded the case to the
chancellor for further proceedings consistent with the order of
the United States Supreme Court. The complainants, first in a
letter brief to the chancellor and subsequently by formal brief
and argument, contended that the remand was not limited to the
issue addressed in Auer but, rather, permitted them to
address all aspects of the case with respect to the possible
controlling effect of opinions from the Secretary of Labor.

Agreeing with the complainants’ contention
on the scope of the mandated reconsideration, the chancellor
determined that he was required to reconsider the exempt status
of the employees with respect to Department of Labor letter
rulings he had previously discounted.
[4] The chancellor confirmed his prior ruling that all the
complainants are salaried employees. However, relying on four
Department of Labor letter rulings which address the status of
juvenile and adult probation officers generally and "child
protective investigators," the chancellor found, contrary to
his prior ruling, that the complainants are not exempt as
administrative or professional employees. With respect to the one
complainant who had previously been found to be an exempt
executive employee, the chancellor concluded that the
Commonwealth "has not met its burden of establishing by
clear and convincing evidence that [the complainant’s] primary duties relate to supervisory management
. . . . She is not exempt from the overtime
provisions of the FLSA."

In an order dated November 25, 1997, the
chancellor entered judgment for the complainants and referred the
matter to a commissioner in chancery for a determination of the
back overtime wages due them from the Commonwealth. On December
24, 1997, the Commonwealth filed a motion reasserting its plea of
sovereign immunity. In a terse letter to counsel, the chancellor
stated that "[a]t best, the Commonwealth is too late; at
worst, it is requesting reconsideration . . . .
There must be finality to a case!" The chancellor stated
that he was summarily overruling the Commonwealth’s motion;
however, no order memorializing that action appears in the
record.

After receiving the report of the commissioner
in chancery, the chancellor entered a final order dated September
21, 1998, in which the procedural history of the case from its
inception is recounted and the interlocutory and final rulings
are memorialized. Relevant to this appeal, the order makes
express mention of the Commonwealth’s original plea in bar
and the denial of that motion. The chancellor awarded the
complainants judgment for back overtime wages in the amounts
determined by the commissioner in chancery, $254,770.92 in
attorney’s fees, and $16,638.21 costs.

The Commonwealth filed a petition for appeal
assigning error to the chancellor’s failure to sustain its
plea in bar and to the determination that the complainants are
not exempt employees under the FLSA. By order dated April 8,
1999, we awarded the Commonwealth this appeal.

On June 23, 1999, after the Commonwealth had
filed its opening brief, the United States Supreme Court decided
the case of Alden v. Maine, ___ U.S. ___, 119 S.Ct. 2240
(1999). The procedural history and factual background of Alden
are remarkably similar to those of the present case. Alden
involved the claims of juvenile probation officers employed by
the State of Maine for back overtime wages under the FLSA. The
claims raised in Alden had first been asserted in a suit
filed in federal court, but this suit was dismissed before
judgment was entered following the determination in Seminole
Tribe of Florida v. Florida
, 517 U.S. 44 (1996), that
Congress lacked the authority to abrogate the states’
sovereign immunity from suit in the federal courts. An action was
then filed in state court in Maine, where it was dismissed on the
ground that, absent a waiver by the state, sovereign immunity
barred that suit also. The Maine Supreme Judicial Court upheld
this ruling and the United States Supreme Court granted
certiorari.

In affirming the judgment of the Maine courts,
the Court held that "the powers delegated to Congress under
Article I of the United States Constitution do not include the
power to subject nonconsenting States to private suits for
damages in state courts." Alden, ___ U.S. at ___, 119
S.Ct. at 2246. The Court further found that Maine had not waived
its sovereign immunity and, thus, had not consented to the suit. Id.
It is important to note that sovereign immunity was the only
issue addressed in Alden. Although the opinion states that
Maine "has altered its conduct so that its compliance with
the federal law cannot now be questioned," id. at
___, 119 S.Ct. at 2269, the Court did not address whether these
particular juvenile probation officers were "exempt" or
"nonexempt" employees.

On July 28, 1999, we granted the
Commonwealth’s motion to file a supplemental brief
addressing the application of Alden and, thereafter,
briefs were filed by both parties.

DISCUSSION

Alden clearly establishes that the
Commonwealth may not be sued by state employees in its own courts
for an alleged violation of the FLSA without its consent. That
consent in the context of an FLSA action brought by state
employees must be established by a waiver of the
Commonwealth’s sovereign immunity. Here, the Commonwealth
asserts that it has not consented to such suits and, therefore,
the trial court’s judgment must be reversed. The
complainants contend, however, that by its actions and omissions
in this case, the Commonwealth has waived its claim of sovereign
immunity. We disagree with the complainants.

The complainants’ initial contention is
based on the established rule of appellate procedure in this
Commonwealth that if a matter is appealed and a party fails to
preserve a challenge to an alleged error made by the trial court
by assignment of error or cross-error, the judgment of the trial
court becomes final as to that issue, a doctrine commonly
referred to as the "law of the case," and precludes
further litigation of that issue if the case is remanded to the
trial court for further proceedings by the appellate court. See
Lockheed Information Management Systems v. Maximus, 259
Va. ___, ___, ___ S.E.2d ___, ___ (2000)(decided today); Searles’
Adm’r v. Gordon’s Adm’r
, 156 Va. 289, 294-98,
157 S.E. 759, 761-62 (1931). Although the Commonwealth has
asserted its sovereign immunity throughout the proceedings in the
trial court, as recited above the Commonwealth did not assign
cross-error in the initial appeal to the trial court’s
ruling that the Commonwealth was not immune from this suit under
the doctrine of sovereign immunity. However, this rule of
appellate procedure and the resulting finality of judgments are
not applicable to the issue of sovereign immunity in this case.

This is so because only the legislature acting
in its policy-making capacity can abrogate the
Commonwealth’s sovereign immunity. In the absence of such
action by the legislature, the courts of this Commonwealth do not
have the necessary jurisdictional authority to entertain FLSA
actions brought against the Commonwealth by its employees. Thus,
the issue of wavier of sovereign immunity in this case does not
turn upon the preservation of arguments about the defense, but
upon whether the Commonwealth acting through the legislature has
acted to vest the circuit court with jurisdiction to entertain
this action. Accordingly, we initially conclude, contrary to the
complainants’ contention, that the actions of an attorney
for the Commonwealth on a procedural matter are obviously not
those of the legislature in its policy-making capacity and,
therefore, those actions cannot constitute the
Commonwealth’s waiver of its sovereign immunity and consent
to the FLSA suit in this case.

The complainants further contend that even if
the Commonwealth has not waived its right to assert sovereign
immunity by its actions in this case, it has done so generally by
statute. Citing Code ? 8.01-192, which provides in
pertinent part that "[w]hen the Comptroller or other
authorized person shall disallow . . . any such claim
against the Commonwealth as is provided for by
[? 2.1-223.1] . . . the person presenting such
claim may petition an appropriate circuit court for
redress," the complainants contend that their claim for back
wages should be construed as a claim to recover a debt owed under
their contracts of employment. They assert that because the
chancellor ultimately found that they were non-exempt employees
entitled to receive overtime pay, their suit constitutes a valid
"pecuniary claim against the Commonwealth." Code
? 2.1-223.1.

We will assume, without deciding, that a claim
for unpaid wages by a state employee would be subject to the
waiver found in Code ? 8.01-192. But see Code
? 2.1-116.06(C) (providing that the "establishment and
revision of wages" is not subject to grievance hearing). The
principal difficulty with the complainants’ contract debt
theory, however, is that their suit was not brought in the style
of a contract claim or in the manner prescribed for such claims
by the statutory scheme and case law they cite in support of
their position. Although the complainants’ assert on brief
that they pursued administrative remedies prior to advancing
their claims in litigation, the record does not support this
assertion. Moreover, even if we were to accept this assertion,
their suit still would not satisfy the requirements for seeking
payment of a contract debt from the Commonwealth as prescribed by
the statute.

The complainants’ urge, however, that the
waiver of sovereign immunity for claims against the Commonwealth
should be broadly construed to act as a general waiver whenever
the remedy sought might be characterized as a claim for a debt
owed under a contractual relationship regardless of the nature of
the proceeding in which the claim is brought or the theory
advanced to assert that claim. This proposition ignores the basis
underpinning the Commonwealth’s assertion of sovereign
immunity in this case.

As the Commonwealth notes, the plea in bar was
advanced in order to exercise the Commonwealth’s prerogative
not to be subject to suit in her own courts pursuant to an act of
Congress. The issue is not one of the avoidance of a just
contract debt, but of the preservation of a right reserved to the
states by the United States Constitution. We see no reason to
vitiate that right by a broad and unwarranted interpretation of
the legislative intent behind the limited waiver of sovereign
immunity in Code ? 8.01-192, and nothing in our cases
interpreting that statute suggests that it should be applied in
circumstances other than in claims properly instituted under that
statute and the scheme provided for pursuing such claims in Code
?? 8.01-193 to -195.

Finally, the complainants contend that due
process requires that the Commonwealth be barred from asserting
its sovereign immunity in order to avoid liability for "an
unconstitutional taking without just compensation." In
essence, they are asserting that the back overtime wages they
allege they are owed under the FLSA is a property right of which
they have been unjustly deprived.
[5] This novel theory rests on the faulty premise that the
complainants’ entitlement to an award of damages as
prescribed by the FLSA for the Commonwealth’s alleged
failure to comply with the Act’s overtime provisions accrues
independent of the complainants’ ability to maintain and
prevail in an action for those damages. Under the
complainants’ theory, the Commonwealth’s potential
liability on any claim would require a "due process
waiver" of its sovereign immunity since the failure to pay
the putative damages would, prospectively, constitute a
governmental taking without just compensation.

Contrary to the complainants’ assertion,
the failure to compel the Commonwealth to make this "due
process waiver" does not unjustly deprive them of a remedy
under the FLSA. As noted in Alden, for example, the FLSA
provides for a remedy in the form of a suit by the federal
government on behalf of the employees. Alden, ___ U.S. at
___, 119 S.Ct. at 2269. Moreover, even in the absence of an
alternative remedy, it is self-evident that the doctrine of
sovereign immunity cannot be overcome simply on the ground that
it deprives a claimant of a recovery, for that is the very nature
of the doctrine when it is properly applied.

For these reasons, we hold that the
Commonwealth has not waived its sovereign immunity and, thus, has
not consented to be sued in its own courts by its employees for
an alleged violation of the FLSA. Accordingly, applying Alden,
we will reverse the chancellor’s denial of the
Commonwealth’s plea of sovereign immunity and enter final
judgment for the Commonwealth with respect to those claims.
[6]

Reversed and final judgment.

 

 

FOOTNOTES:

[1]By amendment to Code ? 66-1 in 1996, this
department became the Department of Juvenile Justice.

[2] There is no merit to this
assertion. Congress has the power to extend the coverage of the
FLSA to public sector-employees consistent with the Tenth
Amendment. See Garcia v. San Antonio Metropolitan
Transit Authority
, 469 U.S. 528, 555-57 (1985).

[3] The Court rejected a claim by the
Police Department that the suit, which originated in federal
court, was barred by the Eleventh Amendment, because the City of
St. Louis was "not an ‘arm of the state’ for
Eleventh Amendment purposes." Auer, 519 U.S. at 456
n.1. There is no dispute in the present case that the Department
is an agency of the Commonwealth.

[4] The chancellor also examined the
application of the specific holding of Auer with respect
to his prior determination that the complainants are salaried
employees. He determined that Code ? 2.1-114.5(11), which
authorizes the creation of regulations permitting reductions in
pay as a disciplinary tool, is "nominally applicable"
to the entire range of personnel in the Department. As such, the
chancellor found that there is not a "significant
likelihood" that the complainants would be subject to such
reductions. Accordingly, the chancellor confirmed his prior
ruling that all of the complainants are salaried employees. The
complainants do not challenge this finding in this appeal.

[5] Within the same argument the
complainants assert that the taking is the result of the
Commonwealth not fulfilling its obligation to pay overtime under
their employment contracts. This assertion is merely an attempt
to recast the prior contention that their suit should be deemed a
contract debt action.

[6] Because we hold that the
Commonwealth was not subject to being sued by its employees in
its own courts, we need not consider the Commonwealth’s
further assignment of error addressing the chancellor’s
finding that the complainants were non-exempt employees.
Moreover, we reject the complainants’ contention that even
if the Commonwealth was entitled to assert its claim of sovereign
immunity, the fact that they "prevailed" on the merits
after that claim was erroneously denied entitles them to recover
the attorney’s fees and costs awarded to them by the
chancellor. Because of our holding that the Commonwealth cannot
be sued by its own employees under the FLSA, it cannot be
required to pay the attorney’s fees and costs of such
litigants when a suit is allowed improperly to go forward.

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