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9th Cir.: Finding of Willfulness Affirmed Where Defendant Involved in Prior Related Litigation; Offsets Applied on a Workweek-By-Workweek Basis
This case was on appeal by the Defendant, City of Los Angeles, following an order granting the plaintiffs summary judgment on their claims. Specifically, city fire department dispatchers and aeromedical technicians brought action challenging city employer’s classification of them as employees “engaged in fire protection,” for purpose of standard overtime exemption under Fair Labor Standards Act (FLSA). As discussed here, in addition to finding—as a matter of law—that the defendant has misclassified the employees at issue as exempt from the FLSA’s overtime provisions, the court below also held that such misclassification was willful and that any offsets claimed were limited in application to the weeks in which the monies paid for the alleged offsets were paid to plaintiffs.
Addressing the facts relevant to the willfulness issue, the Ninth Circuit explained:
In 1985, the Supreme Court held that FLSA overtime requirements apply to governmental functions. Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 531, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985). That same year, the City sent the Department of Labor a letter with twenty questions regarding application of the FLSA to City employees, including Fire Department paramedics. The City did not inquire as to dispatchers or aeromedical technicians.
In 1997, in Acrich v. City of Los Angeles, single-function paramedics (those paramedics not also trained as firefighters) sued the City, asserting they were improperly classified under § 207(k). In 1999, the City again contacted the Department of Labor regarding whether single-function paramedics were “fire protection” employees under the FLSA. The City settled Acrich in 2000, after which it began paying single-function paramedics the standard overtime rate of time and a half for hours worked over forty in a workweek.
In 1999, in Cleveland v. City of Los Angeles, dual-trained paramedics (those trained as both paramedics and firefighters) and Quality Improvement Analysts sued the City, asserting that they too had been improperly classified under § 207(k). After a bench trial, the district court held that the City had improperly classified these employees. The district court also ruled that the City had not acted reasonably or in good faith, and awarded liquidated damages equal to the plaintiffs’ back pay. The City appealed as to the paramedics, but not as to the Quality Improvement Analysts. This court affirmed the district court’s ruling in August 2005. See Cleveland v. City of Los Angeles, 420 F.3d 981 (9th Cir.2005) (Pregerson, J.), cert. denied, 546 U.S. 1176, 126 S.Ct. 1344, 164 L.Ed.2d 58 (2006).
Citing these facts, and the fact that the defendant itself never considered the plaintiffs to be exempt until they attempted to raise an exemption defense in the course of the litigation of the case, the Ninth Circuit held that the court below had properly deemed the defendant’s FLSA violations to be willful:
The City’s conduct in this case was willful, thus entitling Plaintiffs to a three-year statute of limitations. The City has extensively litigated the meaning of § 207(k). In 2002, the district court in Cleveland ruled that the City was in violation of § 207(k) as to dual-trained paramedics and those who held desk job positions as Quality Improvement Analysts. The City did not appeal as to the Quality Improvement Analysts, and lost on appeal as to the paramedics. Yet at no time thereafter did the City take any steps to obtain an opinion letter from the Department of Labor regarding Plaintiffs’ positions, although it had done so as to other employees. Ignoring these red flags and failing to make an effort to examine the positions at issue in this case show willfulness.
Also, the City itself appears not to have viewed dispatchers as “engaged in fire protection” until this case was underway. When this lawsuit began, the City had assigned dispatchers to the Bureau of Support Services, which included the Supply and Maintenance Division, Fire Facilities Division, and Operations Control Division. The Fire Department’s Manual of Operations states that the primary objectives of the Bureau of Support Services include “the dispatching of resources and equipment to the scene of emergencies; operation of the Department’s … Dispatch Center … and the development, maintenance and repair of Fire Department Facilities.” Three months before the parties entered into their mutual stipulation of facts, however, the City reassigned the dispatchers to the Bureau of Emergency Services, which, according to the Manual of Operations, includes “[a]ll personnel normally engaged in fire fighting …” The timing of this reassignment provides further evidence that the City’s behavior was willful.
Thus, we affirm the district court’s finding that the City’s conduct was willful and justifies a third year of withheld overtime pay.
The Ninth Circuit then went on to discuss the proper methodology for calculating damages, where a defendant claims an offset for monies already paid to the employees and claims same as partial payment for overtime wages, an issue of first impression in the Ninth Circuit and one in which the Circuits are in conflict. Framing the issue, the Court explained:
The district court issued an order selecting Plaintiffs’ calculation method. The district court first noted that circuits are split over whether a workweek-by-workweek method must be used, and the Ninth Circuit has not yet addressed the issue. While the Sixth and Seventh Circuits have ruled that a week-by-week offset must be used, the Fifth and Eleventh Circuits have held that offsets may be applied cumulatively over longer periods of time. The district court was persuaded by the reasoning of the Sixth and Seventh Circuits.
Holding that the FLSA mandates a workweek-by-workweek application of any applicable offsets, the Court explained:
There is still, however, a split of authority over how to calculate offsets, and the Ninth Circuit has not yet decided the matter. The reasoning from circuits supporting a week-by-week offset is persuasive. In Howard v. City of Springfield, 274 F.3d 1141 (7th Cir.2001), the Seventh Circuit disagreed with the defendant that offsetting on a workweek basis would create an undeserved windfall. Id. at 1148. The court noted that
if the City were able to use premium payments [in a cumulative fashion], the City would be the recipient of the windfall, and in fact would be placed in a substantially better position than if it had complied with the overtime requirements of the FLSA all along…. It is contrary to the language and the purpose of the statute. Id.
Likewise, in Herman v. Fabri–Centers of America, Inc., 308 F.3d 580 (6th Cir.2002), the Sixth Circuit extensively reviewed the FLSA’s plain language, caselaw, and § 207(h)‘s legislative history to find in favor of a workweek restriction. Id. at 586–90.
Both the Seventh Circuit in Howard and the Sixth Circuit in Herman note that the Department of Labor’s regulations implementing the FLSA support prompt payment of overtime, suggesting that overtime payments should be credited within the same workweek in which they were paid:
The general rule is that overtime compensation earned in a particular workweek must be paid on the regular pay day for the period in which such workweek ends. When the correct amount of overtime compensation cannot be determined until some time after the regular pay period, however, the requirements of the Act will be satisfied if the employer pays the excess overtime compensation as soon after the regular pay period as is practicable. Payment may not be delayed for a period longer than is reasonably necessary for the employer to compute and arrange for payment of the amount due and in no event may payment be delayed beyond the next payday after such computation can be made. Howard, 274 F.3d at 1148 (citing 29 C.F.R. § 778.106); Herman, 308 F.3d at 589.
The City cites alternative, yet unpersuasive, caselaw supporting a cumulative approach. In Kohlheim v. Glynn County, 915 F.2d 1473 (11th Cir.1990), the Eleventh Circuit held that previously-paid overtime can be cumulatively offset against the damages calculated. Yet the court summarily decided the issue, citing no supporting authority. Id. at 1481.
Likewise, in Singer v. City of Waco, 324 F.3d 813 (5th Cir.2003), the Fifth Circuit affirmed the district court’s cumulative offset calculation. Yet that case is inapposite, as the court explicitly stated that ” § 207(h) does not apply in this case,” and that ” § 207(h), and the cases interpreting it, are inapplicable.” Id. at 827.
We thus affirm the district court’s decision that previously-paid overtime should be offset using a week-by-week calculation.
Click Haro v. City of Los Angeles to read the entire Opinion.
8th Cir.: Where Employer’s Change to Workweek Was Permanent, “Legitimate Business Purpose” Not Required
Abshire v. Redland Energy Services, LLC
Following an order granting the defendant-employer summary judgment, the plaintiff appealed. At issue was whether the employer’s permanent change to its workweek- for the stated purpose of reducing overtime hours worked by its employees- violated the FLSA. The lower court held that the purpose behind the employer’s change to its workweek was irrelevant, so long as the change was intended to be permanent. Affirming the award of summary judgment, the Eighth Circuit agreed.
The facts were relatively straight-forward and not in dispute. The defendant-employer changed the designation of its workweek from Tuesday-to-Monday to Sunday-to-Saturday for employees who worked 12 hour shifts for seven consecutive days from Tuesday to Monday, followed by seven days off. The change was intended to and did result in fewer hours calculated as overtime.
Initially, the court explained that an employer may pick any contiguous 168 hours as its workweek. The court then explained:
Having concluded that the FLSA does not prescribe how an employer must initially establish its “workweek” for overtime purposes, we come to the issue raised in this case—whether the FLSA limits an employer’s freedom to change an existing workweek designation. Again, § 778.105 of the Department of Labor’s regulations directly addresses the issue: “The beginning of the workweek may be changed if the change is intended to be permanent and is not designed to evade the overtime requirements of the Act.” This sentence makes one limitation clear—a change must be “intended to be permanent.” But that is not at issue here. Appellants have never challenged Redland’s contention that the May 2009 change in the oil rig operators’ workweek was intended to be permanent. Rather, Appellants argue that Redland’s change violated § 207(a)(1) because it was made for the purpose of reducing the number of hours in their normal work schedules that must be paid at the overtime rate, and therefore it was “designed to evade the overtime requirements of the Act.”
The caution that a workweek change may not be designed to evade the requirements of § 207(a)(1) has been part of the Department of Labor’s interpretive pronouncements since the FLSA was first enacted. See Department of Labor, Interpretative Bulletin No. 4, ¶ 3 (Nov. 1, 1938), cited in Harned, 192 S.W.2d at 380. It was an understandable caution in advising how this initially controversial Act would be construed and applied. Many early FLSA cases dealt with payroll plans devised to evade the Act’s new payroll expense obligations. For example, in an early case applying § 207(a), the Supreme Court invalidated a “split-day” compensation plan “so designed as to deprive the employees of their statutory right to receive [overtime pay] for all hours worked in excess of the first regular 40 hours.” Walling v. Helmerich & Payne, Inc., 323 U.S. 37, 40, 65 S.Ct. 11, 89 L.Ed. 29 (1944). That decision is now codified in the regulations. See 29 C.F.R. § 778.501(a). But the Department has never interpreted its general caution that changes to the workweek may not be “designed to evade the overtime requirements,” nor has it attempted to clarify what constitutes “evasion.”
Citing an Illinois Minimum Wage Law case as authority, the court rejected the plaintiff’s assertion that an employer may not make a change to its workweek absent a “legitimate business purpose” (i.e. just to reduce overtime hours/pay):
The precise issue before us was presented, and Appellants’ contention persuasively rejected, in a case applying overtime requirements of the Illinois Minimum Wage Law for which administrative regulations including 29 C.F.R. § 778.105 had been adopted. Kerbes v. Raceway Assocs., LLC, –––Ill.App.3d ––––, 356 Ill.Dec. 476, 961 N.E.2d 865, 870 (2011). In Kerbes, the racetrack employer changed its designated workweek so as to split racing event weekends into two different workweeks, eliminating overtime pay for its part-time hourly employees. Concluding that an employer’s right to establish a workweek was “well-settled” by the above-cited cases, the court further concluded the racetrack’s modification of its workweek did not violate the overtime requirements of the FLSA…. [T]he FLSA does not require a workweek schedule that maximizes an employee’s accumulation of overtime pay. Thus, a schedule whereby an employee’s actual work schedule is split between two workweeks does not violate the federal legislation. If such a schedule does not itself violate the FLSA, we fail to see how a change to such a schedule could be viewed as having been “designed to evade the overtime requirements of this Act.” Id., 356 Ill.Dec. 476, 961 N.E.2d at 872. We agree with this reasoning.
Appellants argue that a workweek change intended to reduce hours of overtime earned is contrary to the purposes of the FLSA’s overtime requirements and is therefore “designed to evade” those requirements. We disagree. Appellants’ assumption that an original purpose of the FLSA was to maximize the payment of overtime rates is contrary to more contemporary authority. See Missel, 316 U.S. at 578, 62 S.Ct. 1216 (“In a period of widespread unemployment and small profits, the economy inherent in avoiding extra pay was expected to have an appreciable effect in the distribution of available work.”). Thus, an employer’s effort to reduce its payroll expense is not contrary to the FLSA’s purpose. Moreover, Christensen v. Harris Cnty., 529 U.S. 576, 585, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000), clearly teaches that courts may not imply a prohibition that cannot be found in the Act. Cases involving other FLSA requirements illustrate this principle. For example, in Lamon v. City of Shawnee, 972 F.2d 1145, 1153 (10th Cir.1992), the court concluded that a public employer’s new workweek adopted to take advantage of an FLSA amendment did not violate the Act “[e]ven if [the employer’s] sole purpose were to avoid the prospect of paying overtime rates.” And in Morehead v. City of Pearl, 763 F.Supp. 175, 176 (S.D.Miss.1990), the court noted that a scheduling change intended to reduce overtime hours was not “an evasion” of the overtime requirements; it was “straight-up avoidance” of overtime that the FLSA does not require be paid.
We reject Appellants’ contention that an employer’s permanent change in the designated workweek violates § 207(a)(1) unless it is justified by a “legitimate business purpose.” So long as the change is intended to be permanent, and it is implemented in accordance with the FLSA, the employer’s reasons for adopting the change are irrelevant. Accordingly, whether Redland in fact adopted the change in question to achieve administrative efficiencies in calculating and paying wages and overtime, and if so, whether that was a “legitimate business purpose” justifying the change, were not genuine disputes of material fact that precluded the grant of summary judgment in favor of Redland. Fed.R.Civ.P. 56(a).
Thus, the Eighth Circuit affirmed the judgment for the defendant.
Given the clear language of the CFR regulation that an employer’s change to a workweek must not be “designed to evade the overtime requirements of the [FLSA],” and the defendant’s acknowledgement here that its change was explicitly made to reduce overtime pay to its employees, while having them work the same number of hours, the Eighth Circuit’s holding is somewhat curious. At least for now however, the Eighth Circuit is the only Circuit to have pondered the issue.
Click Abshire v. Redland Energy Services, LLC to read the entire Opinion.