Reversing long-standing precedent, the Alaska Supreme Court recently lowered the burden of proof employers must meet to establish an exemption under the Alaska Wage and Hour Act (AWHA). The court held employers must prove the employee fits within an exemption by a preponderance of the evidence, rather than the far-higher threshold it had long applied. Also, state courts will more broadly interpret AWHA exemptions that are identical to those under the federal Fair Labor Standards Act (FLSA), potentially leading to their increased application.

How AWHA and FLSA Exemptions Work

Under both the AWHA and the FLSA, employers bear the burden of proving employees meet one of the statutory exemptions because it’s considered an affirmative defense. If an employer in Alaska fails to prove the employee meets one of the exemptions, then she is owed overtime compensation for work performed in excess of eight hours per day or 40 hours per week.

The federal standard of proof (and the standard in virtually every other jurisdiction) is a preponderance of the evidence. In other words, there’s a greater than 50 percent chance the employee meets one of the exemptions. Before the recent supreme court ruling, Alaska alone required an employer to establish a wage and hour exemption beyond a reasonable doubt, the highest standard of proof and one almost exclusively applied in a criminal context.

The recent ruling standardizes the burdens of proof by which an employer must prove an exemption under the AWHA and the FLSA. Thus, an Alaska judge or jury now needs to analyze the facts based on a single standard, not two, which should help to eliminate confusion at trial and lead to more consistent decisions between Alaska and federal law. Any Alaska employer defending against an AWHA claim should significantly benefit from the change by arguing the employee meets one of the statutory exemptions.

Statutory Construction of Exemptions

In 2018, the U.S. Supreme Court departed from the rule that courts were to interpret exemptions under the FLSA narrowly. Since Encino, many federal courts (as noted by the Alaska Supreme Court) have concluded they must fairly interpret the FLSA exemptions, meaning an expanded application of the exemptions.

Against that backdrop, the Alaska Supreme Court recently analyzed whether the exemptions set forth in the AWHA should be interpreted in a manner consistent with the federal exemptions. The court agreed they should, up to a point. It noted the Alaska Legislature amended the AWHA in 2005 to ensure its “white-collar” exemptions were defined and interpreted in the same manner as those under the FLSA.

The court reasoned the exemptions must therefore be interpreted fairly, not narrowly. The AWHA contains exemptions not expressly linked to the FLSA, however, and the court ruled they should be treated differently and will continue to be interpreted narrowly. Buntin v. Schlumberger Technology Corporation.

Takeaways

Alaska employers no longer must prove an AWHA exemption beyond a reasonable doubt. The lower burden of proof should benefit Alaskan employers defending against AWHA claims. Further, the alignment between the federal and Alaskan standards for overtime exemptions should result in more consistent decisions between state and federal law as well as reduce unnecessary confusion at trial.

Finally, the exemptions in the AWHA expressly linked to the FLSA will be interpreted fairly, leading to potentially broader application by employers. Exemptions not expressly linked to the federal law, however, will continue to be interpreted narrowly.

As with all new legal changes, you should inquire with legal counsel to determine how the decision will affect any potential overtime claims filed under the AWHA.

Chad Darcy and Kristal Leonard are attorneys with Davis Wright Tremaine LLPin Anchorage, Alaska. Darcy is a litigator who focuses his practice on employment matters and is a U.S. Marine Corps veteran. Leonard's experience encompasses a wide range of legal matters, including employment, litigation, natural resource, and business transactions. You can reach them at chaddarcy@dwt.com and kristalleonard@dwt.com.