Norceide v. Cambridge Health Alliance

This case was before the court on multiple motions.  As discussed here, the court denied the defendants’ motion to dismiss plaintiffs’ so-called “gap time” claims.  The case is of significance because the court bucked the predominant trend, and- rather than accepting prior case law as gospel- examined the issue anew.  In so doing, the court held that “gap time” claims are permissible under the FLSA.

Before we get to the court’s analysis though, it’s important to actually explain what gap time is.  Gap time is comprised of non-overtime hours (their inclusion in an employee’s time in the workweek would not bring the employee above the 40 hour overtime threshold), typically worked off-the-clock.  Because some employees have a sufficiently high hourly rate, when all hours (including those the employer failed to specifically pay the employee for) are divided into the renumeration paid to the employee in a given week, the resulting number can be higher than the minimum wage.  The question then arises as to whether the FLSA only provides for an employee to receive minimum wage when all hours are divided into the weekly renumeration OR whether it requires an employee to be paid the minimum wage on an hourly basis for all such hours worked.  These extra hours- which do not bring the average hourly wage below minimum rate- are referred to as “gap time.”  Most courts have held that the FLSA does not provide for recovery of such “gap time” hours.  However, this court disagreed.

Examining the issue, the court reasoned:

“According to CHA, Plaintiffs’ minimum wage claims should be dismissed because they do not allege that CHA ever paid them less than the operative minimum wage. Specifically, CHA argues that, if the total wages paid to any given plaintiff in a week were divided by the total hours worked in the week, then the average hourly wage would be greater than the minimum wage. For instance, suppose that one week Barbatine was scheduled to work 26 hours at a rate of $10.00 an hour and was paid accordingly, meaning she earned $260. However, in fact, she worked an additional 4 hours during her breaks and before/after her shifts and was not paid for this time. According to CHA, Barbatine has no claim for a minimum wage violation, since $260 divided by 30 hours is an average hourly wage of $8.67, which still exceeds the minimum wage.

In reality, Plaintiffs counter, Barbatine was being paid at a rate of $0 per hour for her additional 4 hours. CHA intended for its payment of $260 to cover her scheduled shifts and nothing more. Barbatine’s payment statement for the week in question on its face would indicate that she was getting paid for 26 hours of work, not 30. I agree with Plaintiffs.

The weekly average wage measuring rod that CHA argues should be utilized when assessing minimum wage violations stems from the Second Circuit’s decision in United States v. Klinghoffer Bros. Realty Corp., 285 F.2d 487 (2d Cir.1960). In that case, due to some financial difficulties their employer faced, security guard employees agreed to work an additional six hours per week but not be paid for this time until some later date. Id. at 489–90. The employer, however, never provided compensation for this extra work. The federal government charged the company with violating the FLSA. The Second Circuit dismissed the government’s minimum wage claim on the basis of the weekly average wage theory. Id. at 490. Articulating the purpose of the FLSA only as “guarantee [ing] a minimum livelihood to the employees,” the court found that “the Congressional purpose is accomplished so long as the total weekly wage paid by an employer meets the minimum weekly requirements of the statute, such minimum weekly requirement being equal to the number of hours actually worked that week multiplied by the minimum hourly statutory requirement.” Id. at 490 (citing H.R.Rep. No. 75–2738, at 28 (1938); Sen. Rep. No. 75–884, at 1–3 (1937); H.R.Rep. No. 75–1452, at 8–9 (1937)).

Since the court’s decision in 1960, several other circuits have adopted the Second Circuit’s approach—what has come to be known as the Klinghoffer rule. However, they have mostly done so by citing to Klinghoffer without any further analysis of whether, in fact, the weekly average rule effectuates the legislative intent of the FLSA’s minimum wage law. See, e.g., U.S. Dep’t of Labor v. Cole Enter., Inc., 62 F.3d 775, 780 (6th Cir.1995) (simply noting what “several courts have held”); Hensley v. MacMillan Bloedel Containers, Inc., 786 F.2d 353, 357 (8th Cir.1986) (citing to Klinghoffer without analysis); Blankenship v. Thurston Motor Lines, 415 F.2d 1193, 1198 (4th Cir.1969) (stating without explanation that Klinghoffer “contains a correct statement of the law”). The D.C. Circuit is a notable exception, accepting the weekly average wage rule in Dove v. Coupe only after its own analysis. 759 F.2d 167, 171–72 (D.C.Cir.1985).  The First Circuit, however, has yet to address whether to use the hour-byhour or the Klinghoffer weekly average measure for evaluating minimum wage law compliance. In my view, as explained below, the Klinghoffer weekly average method ignores the plain language of the minimum wage provision and undermines the FLSA’s primary purpose of ensuring a fair wage for workers.

My review of the FLSA is guided by principles of statutory construction; my interpretation “depends upon reading the whole statutory text, considering the purpose and context of the statute, and consulting any precedents or authorities that inform the analysis.” Dolan v. Postal Service, 546 U.S. 481, 486, 126 S.Ct. 1252, 163 L.Ed.2d 1079 (2006).

I begin by looking to the language of the statute. See Kasten v. Saint–Gobain Performance Plastics Corp., ––– U.S. ––––, ––––, 131 S.Ct. 1325, 1331, 179 L.Ed.2d 379 (2011). The FLSA’s minimum wage provision mandates that an employer pay to each non-exempt employee “wages at the following rates: (1) except as other provided … not less than—(A) $5.85 an hour, beginning on the 60th day after May 25, 2007; (B) $6.55 an hour, beginning 12 months after that 60th day; and (C) $7.25 an hour, beginning 24 months after that 60th day.” 29 U.S.C. § 206(a). As the other courts to have considered this language concede, it speaks only of an hourly wage. Thus, while it is does not explicitly state how to calculate what an employee has been paid for a hour’s worth of work, the statute’s text is explicit that, with respect to the minimum wage, the only metric Congress envisioned was the hour, with each hour having its own discrete importance.

To be sure, other parts of the FLSA speak of a “workweek.” But, this unit of time is used for determining worker entitlement to other protections, most importantly overtime, not for assessing violations of the minimum wage law. See, e.g., 29 U.S.C. § 207(a)(2) (“[N]o employer shall employ any of his employees who in any workweek is engaged in commerce … for a workweek longer than forty hours … unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.”). In fact, the other provisions of the FLSA support the conclusion that, for the purpose of determining a minimum wage violation, the use of any unit of time other than an hour is a contrivance. When Congress meant to use the word “workweek” it did so. When it meant to use “hour” that was the word it used.

The FLSA’s legislative history does not explicitly address whether an hour-by-hour or weekly-average method should be employed when determining compliance with the minimum wage law. However, it does makes clear that Congress’ overriding riding purpose when enacting the FLSA was to ensure, as the bill’s name implies, fairness for workers. “The principal congressional purpose in enacting the [FLSA] was to protect all covered workers from substandard wages and oppressive working hours, ‘labor conditions [that are] detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers.’ ” Barrentine v. Arkansas–Best Freight Sys. Inc., 450 U.S. 728, 739, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) (citing 29 U.S.C. § 202(a)). One way Congress attempted to effectuate this somewhat amorphous goal through the FLSA was by “guarantee[ing] a minimum livelihood to the employees covered by the Act,” Klinghoffer, 285 F.2d at 490 (citing H.R.Rep. No. 75–2738, at 28 (1938); Sen. Rep. No. 75–884, at 1–3 (1937); H.R.Rep. No. 75–1452, at 8–9 (1937)). While the Senate and House reports do not indicate whether Congress had in mind a formula for determining the amount necessary for “a minimum livelihood,” they do reveal that Congress considered the test to be whether a worker received “ ‘a fair day’s pay for a fair day’s work,’ ” Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 578, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942) (quoting 81 Cong. Rec. 4983 (1937) (message of President Roosevelt)); see also Barrentine, 450 U.S. at 739.^FN5

Congress’ primary concern with protecting worker—not employers—buttresses the above conclusion that the plain language of the minimum wage provision should be read as an endorsement of the hour-by-hour method. When a statute is susceptible to two opposing interpretations—here, the hour-by-hour and weekly average methods—it must be read “in the manner which effectuates rather than frustrates the major purpose of the legislative draftsmen.”   Shapiro v. United States, 335 U.S. 1, 31–32, 68 S.Ct. 1375, 92 L.Ed. 1787 (1948). While the weekly method does ensure that workers earn a base amount after working a certain number of hours in a week, it frustrates the overall purpose of promoting fairness for workers.

Take the Barbatine example above. There, CHA intended for the $260 to compensate for only the 26 hours she was scheduled to work. CHA, therefore, got four free hours of work from Barbatine, while Barbatine received the same amount of compensation after working 30 hours as she would have for working 26 hours. Such a compensation scheme does promote not an environment in which a worker is ensured “a fair day’s pay for a fair day’s work.’ ” See Travis, 41 F.Supp. at 9 (“[I]f the act is given a very strict construction[,] averaging is probably not permitted.”); see also Dove, 759 F.2d at 171.

Taken together, the plain language of the minimum wage provision, the remaining parts of the FLSA, and the Congress’ primary goal of protecting workers buttresses the conclusion that Congress intended for the hour-by-hour method to be used for determining a minimum wage violation.  Here, Plaintiffs have alleged that CHA knew the Plaintiffs were working more hours than reported on their time sheet and that it was not compensating its employees for this time. In other words, Plaintiffs have alleged that CHA intentionally paid its workers $0 for each unrecorded hour worked during their meal breaks and before/after their shifts.  This allegation is sufficient to state a claim for a minimum wage violation at this stage, and CHA’s motion to dismiss Plaintiffs’ FLSA minimum wage claim is DENIED.”

It will be interesting to see if other courts begin following this well-reasoned opinion, and allowing for the recovery of “gap time” under the FLSA.

Click Norceide v. Cambridge Health Alliance to read the entire Memorandum and Order re: Motion to Dismiss, Motion to Amend, Motion for Conditional Certification.