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M.D.La.: Defendant Not Entitled to FWW in Salary Misclassification Case, Where Failed to Pay Plaintiff “Fixed Salary” as Required by 778.114
McCumber v. Eye Care Center of America, Inc.
This case was before the court on the parties cross-motions seeking summary judgment. As discussed here, the court held that Plaintiff’s unpaid overtime damages, if any, were to be calculated using the FLSA’s default time and a half methodology, rather than the fluctuating workweek (“FWW”) methodology. Although the Defendant claimed it was entitled to use the FWW to calculate Plaintiff’s damages, due to the fact that Plaintiff was salaried misclassified, the court disagreed. The court held that Defendant had failed to pay Plaintiff a “fixed salary” as required for application of 29 C.F.R. § 778.114, because the evidence showed that Defendant docked Plaintiff’s pay on at least 2 occasions when Plaintiff worked fewer than 40 hours in a workweek.
Reviewing the parties’ respective arguments and holding that any damages ultimately found due were to be calculated at time and a half, the court reasoned:
“Defendants’ motion for partial summary judgment seeks judgment in its favor declaring that any wages found to be due plaintiff in this case shall be calculated using the fluctuating workweek method (“FWW method”) pursuant to 29 C.F.R. § 778.114. Subsection (a) of the provision at issue instructs that
‘[a]n employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many.’
Under the FWW method, the amount of overtime owed to such an employee is paid at the rate of one-half-time pay, rather than one-and-a-half-time pay. The reason for this is that, according to the salary agreement among the parties, all the hours worked by the employee have already been compensated at straight-time pay and, thus, these hours are only shortchanged by half-time pay, rather than completely uncompensated.
In order to calculate the amount actually due under the FWW method, the fixed weekly salary is divided by the number of hours actually worked in a particular week. The resulting sum is the employee’s “regular rate of pay.” An employee found to be due overtime pay would be paid one half of the regular rate of pay for each hour of overtime worked in that particular week. While the regular rate of pay decreases as hours worked each week increase, the fixed salary must be sufficient such that the regular rate of pay never falls below the minimum wage requirement of 29 U.S.C. § 206(a)(1).
In addition to the requirement that the minimum wage requirement be sustained by the regular rate of pay calculation, the employer who has allegedly misclassified a position as exempt under the FLSA bears the burden of proving that there existed a “clear mutual understanding” among the employer and employee that the fixed weekly salary is compensation for the hours worked in any given workweek, no matter how few or many, in order to impose the FWW method for calculating overtime due.
Defendants argue that “it is undisputed that [p]laintiff was classified as exempt under the FLSA and was paid a fixed salary of $40,000 per year, regardless of the hours he worked.” Defendants point to plaintiff’s testimony that he was “usually paid a set amount in each paycheck” and “often worked before and more often after the time set on the schedule” as evidence that plaintiff and defendants were parties to a “clear mutual understanding” that his salary was fixed, despite his varying hours .
The court has examined plaintiff’s written statement, as cited by defendants, and finds that the citation offered by defendants quotes only a portion of plaintiff’s statement. In its entirety, the passages cited by defendants reads
22. I was usually paid a set amount in each paycheck, plus production and other bonuses.
23. The weekly schedule made by the store manager was the minimum time I was expected to work. I often worked before and more often after the time set on the schedule when there were orders to fill or equipment to maintain or repair, or when I had to drive to one of the other labs in the district to repair or maintain equipment. I was also frequently called in to repair machinery on my days off.
Plaintiff asserts that he was not party to a “clear mutual understanding” as is required for application of the FWW method. Plaintiff points out that, on at least two occasions, his biweekly paycheck was reduced by 8 hours so that he was paid for only 72 hours, though he is usually paid for 80 hours. Plaintiff argues that, pursuant to 29 C.F.R. 778.114(c), the FWW method is inapplicable in the instant case because subsection (c) clearly instructs that the employer must pay the salary agreed to by the parties even when the employee does not work the full number of hours scheduled.
Plaintiff further asserts that ECCA internal policies instruct general managers to assume a 40 hour workweek when scheduling various management personnel to work in their stores. Plaintiff also points to the ECCA policy entitled “Work Schedules and Attendance,” which states that “[t]he normal workweek will consist of forty hours. The normal workday will consist of eight hours of work with an unpaid meal period.” Plaintiff argues that these policies, as well as the documented deductions in his biweekly paychecks demonstrate that defendants expected plaintiff to work a minimum of 40 hours and, in the event he failed to do so and did not claim leave or other holiday to make up for the time, defendants expected not to pay him the full amount of his salary.
The court has reviewed the documentary evidence cited by plaintiff, as well as plaintiff’s statement, cited by defendants and finds that defendants have failed to demonstrate that no genuine dispute exists as to the applicability of the FWW method in this case. In light of the documentary evidence produced by plaintiff, the court finds that plaintiff has demonstrated that, pursuant to 29 C.F.R. 778.114(c), the FWW method is inapplicable to the case at bar. More specifically, the court finds that the check summary documents offered by plaintiff demonstrate that, on two occasions (9/25/2009 and 10/9/2009), plaintiff failed to work the required 80 hours in a designated two-week period and did not claim any holiday or vacation to make up for the shortage in his hours and, accordingly, eight hours worth of pay was deducted from his salary. Thus, no sincere argument may be made by defendants that its intention was to pay plaintiff a set salary regardless of the hours he worked in a given week, as required for application of the FWW method. On the contrary, the evidence before the court demonstrates defendants’ expectation that plaintiff work a minimum of forty hours each week and that he would be compensated only for those hours he worked or for which he claimed holidays or vacation to which he was entitled. Defendants’ motion will be denied as to its request for application of the FWW method in this case and, accordingly, any overtime found by the jury to be owed to plaintiff shall be compensated at the rate of one and one-half times the amount of plaintiff’s regular hourly wage pursuant to 29 C.F.R. 541.207(a)(1).”
Click McCumber v. Eye Care Center of America, Inc. to read the entire Memorandum Ruling.
D.N.J.: Defendants’ Purported Use Of Fluctuating Workweek (FWW) Violated FLSA, Because There Was No “Fixed” Amount As Straight Time Pay; Docking Of Pay, Although Infrequent Violated FLSA; Time And A Half Damages Due
Brumley v. Camin Cargo Control, Inc.
This matter was before the Court on the cross-motions for summary judgment filed by Defendant and Plaintiffs, on a variety of issues arising from Defendant’s purported use of the Fluctuating Workweek (FWW), to calculate Plaintiffs’ overtime compensation. As discussed partially herein, Defendant’s motion was denied in its entirety and Plaintiffs’ motion was granted in part and denied in part. Significantly, the Court held that Defendant’s purported use of the FWW violated the FLSA for a variety of reasons, and under such circumstances, Plaintiffs’ damages were to be calculated using the FLSA’s default time and a half method not the FWW, as Defendant’s had proposed.
After outlining the applicable law, the Court first discussed the Defendant’s infrequent docking of Plaintiffs’ pay, ruling that same necessarily resulted in a failure to comply with the stringent requirements of 29 C.F.R. 778.114, and thus Defendant was not entitled to summary judgment.
“With respect to decreases in the fixed salary, regulation calls for a fixed salary regardless of the length of the workweek. 29 C.F .R. § 778.114 (“An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many.”). An employer may deduct from an FWW employee’s vacation time bank for workdays missed, but may not deduct from the fixed salary for time an FWW employee misses from work. DOL Opinion Letter, 1999 WL 1002399 (May 10, 1999). Similarly, the DOL stated that “it is the longstanding position of the Wage and Hour Division that an employer utilizing the fluctuating workweek method of payment may not make deductions from an employee’s salary for absences occasioned by the employee[,]” unless the deductions are of a nonroutine disciplinary nature “for willful absences or tardiness or for infractions of major work rules.” DOL Opinion Letter, 2006 WL 1488849 (May 12, 2006).
Several of the cases cited by the parties are not on point with respect to the issue of salary decreases under the FWW. Although Aiken v. County of Hampton discusses the FWW, its ruling on the fixed salary requirement relates to deductions from accrued vacation banks and the effect of legal holidays that are not at issue in the instant matter. 977 F.Supp. 390, 395-97 (D.S.C.1997). Lance v. Scotts Co. addresses the effect of commissions on FWW calculations, something governed by 29 C.F.R. § 778.118, a regulation not at issue here. No. 04-5270, 2005 WL 1785315, at *4-7 (N.D.Ill. Jul. 21, 2005) (Keys, M.J.). Rau v. Darling’s Drug Stores, Inc. addresses not the existence of a fixed weekly payment, but the correct calculation of damages for a non-exempt, salaried employee. 388 F.Supp. 877, 883-86 (E.D.Pa.1977). In Spring v. Washington Glass Co. the parties stipulated to the use of the FWW to calculate overtime pay damages, so the issue of whether it applied was never contested before that court. 153 F.Supp. 312, 318-19 (W.D.Pa.1957).
Defendant does, however, cite Cash v. Conn Appliances, Inc., 2 F. Supp 2d 884, 906 (E.D.Tx.1997), which supports the proposition that it did not violate the FWW when it docked inspectors for missing work. Cash read the regulation as permitting an employer to dock pay when an employee failed to show up for scheduled work. 2. F. Supp 2d at 906 (“The docking policy only called for a loss of pay for absences during scheduled time; it in no way sanctioned reducing pay because of a failure to assign a coefficient employee forty hours of work for a week.”). Cash also holds that occasional violations of FWW requirements do not result in a broad invalidation of the method when calculating damages. Id. This Court fails to find the Cash interpretation of the regulation persuasive as to docking of employees’ pay. First, the regulation itself specifies that the fixed salary must be paid regardless of hours worked without reference to which party is responsible for the shortfall. 29 C.F.R. § 778.114 (“The ‘fluctuating workweek’ method of overtime payment may not be used unless … the employer pays the salary even though the workweek is one in which a full schedule of hours is not worked.”). Second, the DOL’s interpretation of the regulation denies employers the ability to routinely dock the fixed FWW salary. DOL Opinion Letter, 2006 WL 1488849 (May 12, 2006); DOL Opinion Letter, 1999 WL 1002399 (May 10, 1999).
Here, Defendant concedes that on at least one occasion, it docked a Plaintiff inspector’s fixed salary for an impermissible reason. (Def. Reply Br. at 6.) Although it characterizes such an event as statistically insignificant, such an argument goes to weight. This Court, therefore, denies summary judgment to Defendants on the issue of whether they complied with the FWW method of paying the Plaintiff inspectors.”
Next, the Court held that the addition of certain premium pay into Plaintiffs’ straight time pay each week resulted in non-fixed straight time pay, and thus violated the requirements for use of the FWW, in lieu of the default time and a half methodology required by the FLSA.
“The relevant language in the regulation regarding additional payments to FWW employees reads as follows: “[w]here all the legal prerequisites for use of the ‘fluctuating workweek’ method of overtime payment are present, the Act, in requiring that ‘not less than’ the prescribed premium of 50 percent for overtime hours worked be paid, does not prohibit paying more.” 29 C.F.R. § 778.114(c). Department of Labor (“DOL”) Opinion Letters interpreting the FWW regulation have weighed in on the issue of additional payments. The DOL has stated that an employer can make additional payments to an FWW employee for a holiday occurring in a given week. DOL Opinion Letter, 1999 WL 1002399 (May 10, 1999). An employer may also pay employees more than the minimum calculated rate under the FWW method for overtime. DOL Opinion Letter, 2002 WL 32255314 (Oct. 31, 2002).
Courts interpreting the FWW, however, have emphasized that additional payments can result in the finding that there is no fixed salary. Although the court in O’Brien v. Town of Agawam found that variations in the weekly pay of law enforcement officers for other reasons prevented the finding of a fixed FWW salary, it used this reasoning with regard to incentive payments:
The officers’ compensation varies from week to week even without reference to the number of hours worked. Any officer required to work a nighttime shift receives money-expressly termed “additional compensation” under the CBA-in the form of a $10 shift-differential payment added to his check for the week. The Supreme Court has specifically held that such shift differentials, when paid, are part of the worker’s regular rate of pay. Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 468-69 (1948). So while the shift differential itself may be small, it requires the larger conclusion that most officers do not receive a “fixed amount” for their straight-time labor each week. 350 F.3d 279, 288-89 (1st Cir.2003). See also Dooley v. Liberty Mut. Ins. Co., 369 F. Supp 2d 81, 86 (D.Mass.2005) (following O’Brien ). Similarly, Ayers v. SGS Control Servs., Inc. found that employees performing similar work to the inspector Plaintiffs in this case did not receive a fixed salary because they received lump-sum “day-off pay” and “sea pay” for working on their days off and on offshore vessels. No. 03-9077, 2007 WL 646326, at *8-10 (S.D.N.Y. Feb. 27, 2007). Finally, a case in this District, Adeva v. Intertek USA, Inc., stands for the proposition that shift premiums preclude application of the FWW. No. 09-1096, 2010 WL 97991, at *2-3 (D.N.J. Jan. 11, 2010) (Chesler, J.). “The record demonstrates that Plaintiffs’ compensation for non-overtime hours varied, depending upon earned offshore pay, holiday pay or day-off pay. The Court is convinced that due to such payments, Plaintiffs cannot receive the fixed salary required to apply the FWW.” Id.
Some of the cases brought forth by Defendant are inapposite. See, e.g., Clements v. Serco, Inc., 530 F.3d 1224, 1230-31 (10th Cir.2008) (commissions under the FWW); Lance, No. 04-5270, 2005 WL 1785315, at *4-7 (same). Two, however, are potentially instructive. In Cash, discussed supra, the court found that the defendant had failed to incorporate bonuses into its calculation of the regular rate, thereby decreasing plaintiffs’ overtime, but that such failure was considered insufficient to deny the defendant the benefit of the FWW. 2 F. Supp 2d at 893 n. 17, 896, 908. The court in Aiken found that an employer’s payment of holiday pay to a law enforcement officer who worked on a holiday did not result in the absence of a fixed salary. 977 F.Supp. at 399-400. The reasoning used in Aiken was that the employee would have received the holiday pay anyway, regardless of whether or not the employee worked the holiday, and that the holiday pay simply operated as a permissible increase in overtime pay under the circumstances. Id.
This Court finds that Cash and Aiken can be distinguished on their facts. Cash dealt with employees of an appliance store; Aiken dealt with law enforcement personnel. The only cases brought to this Court’s attention that deal with inspectors similar to Plaintiffs are Ayers and Aveda, and this Court finds their reasoning persuasive as to the applicability of the FWW to this case, not only because of the factual similarity, but because they give meaning to the plain language of 29 C.F.R. § 778.114. Plaintiffs were paid day off pay and holiday pay in addition to their regular salary and overtime. (Def. R. 56.1 Statement ¶¶ 15, 39, 41.) For example, Camin concedes that the use of day off and holiday pay resulted in the one inspector’s non-overtime earnings varying from $1,670 to $2,170 over two pay periods. (Def. Opp. R. 56.1 Statement § 23.) Such a scheme results in the absence of the “fixed salary” required by the regulation. 29 C.F.R. § 778.114(a); Aveda, No. 09-1096, 2010 WL 97991, at *2-3. This Court therefore grants Plaintiffs’ motion for summary judgment on the issue of whether Defendant’s policies and practices violated the FLSA due to the absence of the fixed salary requirement, and declines to reach the remaining arguments of the parties on the FWW. Adeva, No. 09-1096, 2010 WL 97991, at *3.”
Having held that the Defendant’s pay structure violated the FLSA, the Court next turned to the issue of how to calculate Plaintiffs’ damages, and held that the appropriate measure of damages was the FLSA’s default time and a half, not the FWW as Defendant had argued.
“Camin moves this Court to find that any liability it is subject to for violation of the FWW method of calculating pay be done so according to the FWW method. (Def. Br. at 24-27.) It maintains that such a measure of damages is permissible where the violation is computational as opposed to a violation of the clear understanding requirement or the minimum wage. (Id. at 24-25.) Plaintiffs argue that such a damages calculation is impermissible where a prerequisite to the FWW has not been met by the employer. (Pl. Opp. Br. at 24-26).
The primary case relied upon by Camin is Cash. The discussion of the FWW in Cash is quite broad, and describes the measure of damages available in FWW claims under many factual scenarios. 2 F. Supp 2d at 896-97. Cash noted that under the FWW, “[l]iability arises if the employer either miscomputes overtime pay or uses the fluctuating workweek method despite the absence of one or more of the criteria for doing so[,]” but differentiated between the types of violation in which damages were available. Id. at 896. The discussion of the available remedies breaks down into two broad categories: those where the measure of damages would be calculated under the FWW and those where overtime compensation would be adjusted so that it would be recalculated at the default FLSA rate of “time-and-a-half” overtime. Id. The following violations were permitted damages calculations under the FWW in Cash: “[e]mployer infrequently violated the minimum wage criterion and failed to cure its breaches fully[,]” “[e]mployer infrequently violated the minimum wage criterion and made no effort to cure its breaches[,]” and “[e]mployer made a computational mistake.” Id. at 896-97. Cash found that the following violations abrogated the FWW: “[e]mployer regularly violated the minimum wage criterion” and “[e]mployer violated the clear understanding criterion, full schedule criterion or both.” Id. at 896. The Cash court only considered failure of an employer to provide a fixed salary insofar as such a failure would lower overtime rates. Id. at 896.
Although this Court finds the discussion of damages in Cash useful, it is not entirely persuasive. This Court found supra that the fixed salary requirement of the FWW was violated. The regulation states that the fixed salary is a prerequisite to use of the FWW method. 29 C.F.R. § 778.114(c). The Cash court found that when other prerequisites of the FWW method were systematically violated, that the employer could not obtain the benefit of the FWW in calculating damages, but failed to reach the same conclusion concerning the fixed salary. Id. at 896. Instead, this Court finds the pre-trial motions opinion in Ayers v. SGS Control Servs., Inc. persuasive. No. 03-9078, 2007 WL 3171342, at *1-3 (S .D.N.Y. Oct. 9, 2007) (“Ayers II” ). In Ayers II, the Court found that as the defendant had violated the fixed salary requirement of the FWW method, it could not have damages calculated under the FWW method. No. 03-9078, 2007 WL 3171342, at *2. The Court held that the proper measure of damages was the default FSLA method: “time-and-a-half for all hours over 40.” Id. at *3. This Court finds that the default FSLA damages calculation, “time-and-a-half for all hours over 40,” will also apply to Plaintiffs who have suffered FWW violations in this case, and that summary judgment on this issue is denied to Defendant.”
Although not discussed here, the Court ruled that the factual issues precluded a finding regarding liquidated damages, and the length of the statute of limitations, at the summary judgment stage.
This case is one of several pending against Oil & Gas Inspection companies currently. To read more about a similar case, brought on behalf of OGC Inspectors at Inspectorate America, click here. You can also learn more about similar separate cases pending against Intertek Caleb Brett, Saybolt, Amspec and Inspectorate America by calling 1-888-OVERTIME.