VOGT POWER INTERNATIONAL, INC. APPELLANT
LABOR DEPARTMENT OF WORKPLACE STANDARDS; DAVID A. DICKERSON IN HIS OFFICIAL CAPACITY AS ACTING SECRETARY OF THE KENTUCKY LABOR CABINET;  and STEPHEN KAPSALIS APPELLEES
FROM FRANKLIN CIRCUIT COURT HONORABLE THOMAS D. WINGATE,
JUDGE ACTION NO. 16-CI-00526
FOR APPELLANT: Michael D. Risley Shannon Antle Hamilton
Ashley Owens Hopkins Louisville, Kentucky
FOR APPELLEES, LABOR DEPARTMENT OF WORKPLACE STANDARDS AND
DAVID A. DICKERSON IN HIS OFFICIAL CAPACITY AS ACTING
SECRETARY OF THE KENTUCKY LABOR CABINET: Mikala L. Noe
BEFORE: DIXON, KRAMER, AND K. THOMPSON, JUDGES.
April 12, 2016 final administrative order, the Secretary of
the Kentucky Labor Cabinet determined that appellant Vogt
Power International, Inc., violated Kentucky Revised Statute
(KRS) 337.055 by wrongfully withholding wages belonging
to Vogt's former employee, Stephen Kapsalis. Vogt
petitioned the Franklin Circuit Court for review and
declaratory relief, and the circuit court affirmed. Vogt now
appeals to this Court, and for the reasons set forth below we
affirm in part and vacate in part.
general background of this wages and hours matter is
relatively straightforward. As conceded by all parties to
this appeal, Stephen Kapsalis was the type of
"employee" classified as a "bona fide
executive" as set forth in KRS 337.010(2)(a)2; to that
end, he served as Vogt's President and CEO from July 2009
until April 12, 2013, and he was paid $350, 000 per year for
his services. Kapsalis operated Vogt for its parent
corporation, Babcock Power. Months after his resignation,
Kapsalis filed a complaint with the Cabinet alleging that
Vogt had violated KRS 337.055 by failing to pay him $8,
788.62 in wages, an amount representing 58 hours of his
accrued annual leave. After investigating Kapsalis's
complaint, the Cabinet then issued tentative findings of fact
on February 25, 2014. In its findings, the Cabinet concluded
that Vogt had indeed violated KRS 337.055 by failing to pay
Kapsalis $8, 788.62 for 58 hours of accrued annual leave.
Accordingly, the Cabinet directed Vogt to pay a civil penalty
of $250, and to pay Kapsalis $8, 788.62 in restitution.
Thereafter, Vogt administratively contested the tentative
findings of fact; an evidentiary hearing was held; the
Secretary of the Cabinet ultimately affirmed the penalty and
amount of restitution in an April 12, 2016 final order; and,
following a petition for judicial review,  the Franklin
Circuit Court likewise affirmed.
pause here to note that in part of this appeal, Vogt
argues that no evidence of substance supports that it owed
Kapsalis $8, 788.62 in unpaid wages, or that it otherwise
violated or should have been penalized for violating KRS
337.055. For the sake of brevity, we will address that part
first. The Secretary's April 12, 2016 final order set
forth the evidence and applied the law in relevant part as
Mr. Kapsalis accrued annual leave pursuant to Babcock
Power's vacation policy. Mr. Kapsalis stated the accrual
occurred at a rate of 160 vacation hours per year. Mr. [John]
Heffernan confirmed that figure on direct
examination. Each year, Mr. Kapsalis was allowed to carry
over up to two times the maximum amount of hours accrued
Mr. Kapsalis had an accrued annual leave balance of 168 hours
at the time of his separation from employment of Petitioner.
Mr. Kapsalis's claimed balance of 168 hours was
substantiated by Mr. Heffernan on direct examination when he
stated: "So based on accruing 160 hours a year, having
over 160 hours upon departure, it did seem like a lot."
Petitioner's counsel asked on direct examination of Mr.
Heffernan: "Why did you do an investigation after Mr.
Kapsalis left and make a decision not to pay him the total
amount of vacation pay?" Mr. Heffernan responded not by
claiming Petitioner paid the total amount of vacation pay but
rather went on at length as to why the internal investigation
was performed. This exchange shows there is no dispute that
Mr. Kapsalis's original leave balance upon departure was
168 hours as he claimed. It also confirms that Petitioner
disliked how large the balance was and refused to pay the
Petitioner did make a payment for one-hundred-ten (110) hours
of accrued vacation time earned. However, Petitioner failed
to pay a balance of fifty-eight hours remaining for accrued
annual leave. Mr. Heffernan wrote Investigator Blevins on
August 6, 2013, stating in relevant part: "Mr. Kapsalis
was paid for 110 hours of accrued vacation time." Mr.
Heffernan went on to state in that letter: "We refute
the additional 58 hours of accrued time Mr. Kapsalis is
As there was a total balance of 168 hours of accrued annual
leave for Mr. Kapsalis upon his separation from Petitioner,
and he was only paid for 110 hours of that leave, payment for
58 hours of leave is still due to Mr. Kapsalis.
Petitioner refused to pay the remaining 58 hours of accrued
leave due to Mr. Kapsalis based on its assertion that he
incorrectly report[ed] his work time and sick time. This
contention is detailed in a letter from Mr. Heffernan to
Inspector [Michael] Blevins dated August 12, 2013. On two of
the days in question, Mr. Kapsalis took sick leave while on
an out-of-town business trip. Each of the other dates in
question occurred on a day Mr. Kapsalis was out of the
office, did not report business expenses, and took annual
leave for at least part of that day, the day prior, or the
Mr. Heffernan appeared to assume if Mr. Kapsalis did not
report business expenses on his expense report that he must
not have worked on the days in question. Specifically, he
stated: "There was no indication that showed that there
was any business that was being conducted while on travel
because there were no expenses associated with those
days." This assumption is not supported by testimony in
When questioned as to whether he himself would report
business expenses when working from home, Mr. Heffernan
stated: "I wouldn't have any expense." The same
holds true for Mr. Kapsalis if or when he was working from
his homes in Louisville, Florida, or the property he leased
in the Carolinas. Additionally, if Mr. Kapsalis was out of
town for personal reasons, and he performed a half-day of
work for Petitioner, there would not have been any added
expense to report.
When questioned on the type of proof an employee is required
to provide to show work was actually being done while working
outside of the office, Mr. Heffernan stated none was
required. The exchange was as follows:
Cabinet Counsel: "There's been a lot of talk about
e-mails and phone calls while out of the office on the days
in question. What proof is an employee required to present on
a workday outside of the office to prove they worked?"
Mr. Heffernan: "What are they required to prove?"
Cabinet Counsel: "Is there a policy requiring employees
to prove it?"
Mr. Heffernan: "No."
Mr. Heffernan's understanding that there was not a proof
requirement regarding work performed was echoed by Mr.
Kapsalis. When questioned as to what records would be
required to prove he worked when out of the office he stated:
"None that I'm aware of."
While there is no requirement to provide proof of working
when out of the office, there is proof Mr. Kapsalis performed
work on each day in question where working hours were
reported. For each day, there are numerous work phone calls
and emails made by Mr. Kapsalis occurring over a number of
hours. While the total time spent on work calls varies from
day to day, the records prove Mr. Kapsalis was performing
work on those days. Simply because Mr. Kapsalis was not on a
business call at a given time is not proof he wasn't
working at that time.
Petitioner's assertions that Mr. Kapsalis was hunting or
traveling on a particular day are irrelevant. Both Mr.
Kapsalis and Mr. Heffernan agree that there were not specific
set hours which Mr. Kapsalis was required to work by
Petitioner. Both also agree that Mr. Kapsalis often worked
both nights and weekends as part of his job. As such, any
non-work activity that may have occurred on a given day
during normal nine-to-five work hours is not determinative as
to whether or not he was working on that day.
Petitioner asserts Mr. Kapsalis's report of sick leave
was improper for March 6th and 7th of
2013. Mr. Heffernan stated on direct, "I just assumed
again, since he is back in that same area that it was another
long weekend hunting trip." This assumption is not
credible. Mr. Kapsalis was there for a long weekend, yet the
Petitioner did not question Monday and Tuesday (March
4th and 5th) or Friday (March
8th) which were reported as work days. Any lack of
proof that Mr. Kapsalis worked on these days would be due to
his illness. Nothing in the vacation policy would prevent Mr.
Kapsalis from taking sick leave while on a business trip. In
fact, had he even been on a personal vacation during this
time and took ill, he would still be allowed to take sick
leave. During cross-examination Mr. Heffernan confirmed this
availability of sick time during a personal vacation.
Mr. Kapsalis reported his worktime each week as seen in his
timesheets. Each of Mr. Kapsalis's timesheets was
approved by an employee designated by Mr. Kapsalis's
supervisor Mike LeClair. Petitioner had an opportunity to
reconcile any perceived inconsistencies in Mr. Kapsalis's
timesheets prior to approval, yet no claims were raised prior
to his resignation.
Section 2.6.1 of the Babcock Power Vacation Policy states:
"Employees who leave the company will be paid for unused
vacation hours that have been accrued up to the termination
date." Mr. Heffernan confirmed that it was
Petitioner's policy to pay unused ...