BRISCOE, Chief Judge.
This is a collective action brought under 29 U.S.C. § 216(b) by current and former employees (collectively, the Employees) of the defendant City of Albuquerque, New Mexico (the City), alleging violations of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (FLSA). The FLSA generally requires employers to compensate overtime hours at one and one-half times an employee's "regular rate" of pay. The district
The factual background of this case is best understood in the context of the relevant statute.
The FLSA generally requires covered employers to pay its employees overtime pay for work in excess of forty hours a week.
The first step in many FLSA disputes is to determine an employee's regular rate. See Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 424, 65 S.Ct. 1242, 89 L.Ed. 1705 (1945) ("The keystone of Section 7(a) is the regular rate of compensation. On that depends the amount of overtime payments which are necessary to effectuate the statutory purposes. The proper determination of that rate is therefore of prime importance."). The regular rate is "the
The Employees include police officers, firefighters, transit workers, clerical and technical workers, and others. They are members of labor unions that have entered into collective bargaining agreements with the City (each, a CBA, and together, the CBAs).
Generally, the CBAs provide overtime compensation for work beyond an employee's normal daily and weekly schedule, and on holidays. The contractual overtime rate is one and one-half times an employee's straight time rate. The CBAs generally provide for paid sick leave and vacation leave, and count this paid time off as hours worked for overtime purposes. Certain of the CBAs provide that employees who have accumulated a minimum amount of unused vacation or sick leave may sell that leave back to the City.
For all employees other than police officers, the City calculates an employee's wage entitlements under the FLSA and under the applicable CBA, and then pays the employee the greater of the two. No FLSA calculation is made for police officers because the City has determined that their contractual entitlements will always exceed their FLSA entitlements. This is because police officers receive overtime under the FLSA after working forty-three hours, whereas they receive overtime under their CBA after working forty hours. City's Opening Br., Attach. 5 at 14.
The City includes straight time and add-on payments in an employee's FLSA regular rate, but does not include vacation or sick leave buy-back. To calculate an employee's
The Employees claim that the City violates the FLSA in the following ways: it improperly calculates FLSA and contractual wage entitlements separately; it does not include vacation and sick leave buy-backs in the regular rate; it improperly uses total hours worked rather than the normal workweek as the divisor when calculating an employee's hourly regular rate; it incorrectly multiplies the regular rate by one-half rather than one and one-half; and it improperly takes credits or offsets against its FLSA liability.
The parties filed cross-motions for summary judgment. The district court granted summary judgment to the City on the divisor and multiplier claims. It held a bench trial on the remaining issues. The district court found that the Employees did not show that the City failed to pay any Employee FLSA overtime that he or she was owed. J.A. at 135-38. It compared the FLSA and contractual entitlements of various Employees and found that each Employee's CBA compensation was higher than what was required under the FLSA. Because the Employees failed to show that the City had any FLSA liability to offset, the district court found that the Employees could not show that the City was taking improper credits against FLSA liability. Id. at 143. It also determined that hours paid but not worked did not count towards the FLSA overtime threshold. Id. at 125. Finally, it determined that the City was required to include vacation and sick leave buy-back in its calculation of the regular rate. Id. at 141-42. This was the only claim upon which the Employees prevailed.
After the district court entered its order on summary judgment and its findings of fact and conclusions of law, the parties entered into a stipulation as to damages and the district court entered a final judgment. Therefore, we have jurisdiction under 28 U.S.C. § 1291.
The district court made its determinations regarding the divisor, multiplier, and inclusion of bonuses on summary judgment. It made its determinations regarding the buy-backs, threshold hours, and credits after a bench trial.
"We review the grant of summary judgment de novo, applying the same standard as the district court. . . ." Gwinn v. Awmiller, 354 F.3d 1211, 1215 (10th Cir.2004). Summary judgment is appropriate if there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). We view the record on summary judgment in the light most favorable to the nonmoving party. Gwinn, 354 F.3d at 1215. "In an appeal from a bench trial, we review the district court's factual findings for clear error and its legal conclusions de novo." Keys Youth Svcs., Inc. v. City of Olathe, Kan., 248 F.3d 1267, 1274 (10th Cir.2001).
The City calculates compensation due under the CBAs and under the FLSA and then pays the employee the higher of the two. The Employees argue that the City should calculate what is due under the CBAs and then apply the FLSA on top of that. The Employees misinterpret the FLSA. The FLSA is not a statutory enhancement of negotiated compensation, and the regular rate does not necessarily include all compensation provided for in the CBAs. There is nothing inherently wrong with the City's approach of calculating wage entitlements under the FLSA and under the applicable CBA, and then paying the greater of the two.
The FLSA guarantees minimum overtime compensation. See Barrentine v. Ark.-Best Freight Sys., Inc., 450 U.S. 728, 737, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) (describing the FLSA as a "statute designed to provide minimum substantive guarantees to individual workers"). It is not a supplement to contractual compensation. If an employee's contractual pay exceeds what the FLSA would require, an employer has no additional FLSA liability. See 29 U.S.C. § 216(b) (providing that an employer who violates the minimum overtime provisions shall be liable in the amount of unpaid overtime compensation (emphasis added)); cf. Valerio v. Putnam Assocs., Inc., 173 F.3d 35, 40 (1st Cir.1999) (noting that an employer's "obligation under the FLSA was extinguished" where the employee received more overtime payment than she was entitled to receive under the FLSA). Therefore, we reject the Employees' contention that the FLSA requires that they receive compensation on top of whatever they are due under the CBAs. The FLSA guarantees the Employees a minimum of one and one-half times the regular rate for overtime hours. The regular rate does not include all compensation due under the CBAs. It is "remuneration for employment paid to, or on behalf of, the employee," not within an exception. 29 U.S.C. § 207(e). Not all CBA compensation meets this definition.
The Employees cite to the City's Personnel Rule 302.2, which states that "when overtime is required for non-exempt employees, compensation must be in accordance with the [FLSA] and any applicable collective bargaining agreement." Employees' Answer Br. at 2 (emphasis in original). This language means that the City must comply with the FLSA and the CBAs. It does not mean that employees are to receive FLSA wages plus CBA wages. Further, the Employees did not bring a claim for violation of Personnel Rule 302.2, and the rule has no bearing on the City's FLSA liability. We conclude the City's dual calculation method does not violate the FLSA.
The City currently includes add-on payments in the regular rate, but does not include payments for buy-back of sick time and vacation time.
The Department of Labor's (DOL) position is that vacation buy-back is not part of the regular rate, but sick leave buy-back is. DOL issues interpretive bulletins that constitute the agency's official interpretation of the FLSA overtime requirements. 29 C.F.R. § 778.1. The rulings, interpretations, and opinions of DOL, while not controlling, are entitled to the level of deference announced in Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944). They "constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance." Id. at 140, 65 S.Ct. 161; see also Rodriguez v. Farm Stores Grocery, Inc., 518 F.3d 1259, 1268 n.5 (11th Cir.2008) (noting that 29 C.F.R. § 778.113 is an interpretive bulletin, not a regulation, and that it is entitled to Skidmore deference). One such bulletin states that extra pay for foregone vacation is not included in the regular rate:
29 C.F.R. § 778.219(a). According to DOL, an employee who is entitled to be paid for a week's vacation does not increase his regular rate by working instead of taking vacation, even though he or she is paid for the week of work and for an additional week of vacation time. See 29 C.F.R. § 778.219(a)(1).
Unlike pay for foregone vacation, DOL includes production and attendance bonuses in the regular rate. "Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay. Attendance bonuses. . . are in this category. They must be included in the regular rate of pay." 29 C.F.R. § 778.211(c). Thus, we must determine whether vacation and sick leave buy-backs are more analogous to payments for "periods when no work is performed due to vacation . . . [or] illness," or attendance bonuses. The Wage and Hour Division of DOL (the Wage and Hour Division) takes the position that vacation buy-back is not part of the regular rate, but that sick leave buy-back is part of the regular rate because sick leave buy-back is analogous to an attendance bonus. U.S. Department of Labor, Wage & Hour Opinion Letter FLSA 2009-10 dated Jan. 16, 2009, 2009 WL 649021.
Id. at 905.
In contrast, the Eighth Circuit has held that sick leave buy-back must be included in the regular rate. The Acton plaintiffs were firefighters who could sell back unused sick days in exchange for seventy-five percent of their straight time pay. 436 F.3d at 976. The Acton court found that "the primary effect of the buy-back program is to encourage firefighters to come to work regularly over a significant period of their employment tenure." Id. at 977. It reasoned that consistent workplace attendance is a general duty of employment and, therefore, "sick leave buy-back monies constitute remuneration for employment." Id. The Acton court rejected Featsent's reasoning, stating that the Sixth Circuit "did [not] recognize and explain how payments awarded to an employee for not using accrued sick leave, which necessarily requires employees to work more days than they are required, is not tantamount to payment for services rendered." Id. at 979.
We agree with the reasoning of the Wage and Hour Division and the Eighth Circuit and hold that sick leave buy-back payments must be included in the regular rate. We further hold that vacation buy back-payments are not part of the regular rate. To be sure, both vacation and sick leave buy-back reward attendance, in some sense, because they reward an employee for not taking days off.
For employees other than police officers and firefighters, the FLSA sets an overtime threshold of forty hours. This means that employees are entitled to FLSA overtime payments for each hour worked in excess of forty. The Employees argue that the City should count paid time off towards the FLSA overtime hours threshold because the CBAs count paid time off as time worked for the purposes of contractual overtime. We hold that the City is not required to count this time as time worked for FLSA purposes.
The Employees argue that, just as the FLSA regular rate incorporates some CBA compensation provisions, the FLSA should incorporate the CBAs' definitions of hours worked. The First Circuit has rejected this contention, and we do as well. See O'Brien v. Town of Agawam, 350 F.3d 279, 289 (1st Cir.2003) ("The CBAs label such extra pay `overtime,' but that does not control. For purposes of the FLSA, all hours worked under the statutory maximum are non-overtime labor."). Contractual overtime and FLSA overtime are not the same things. The FLSA's policy goals are not implicated when an employee does not actually work over forty hours in a week.
The DOL's position is that FLSA overtime applies only to hours actually worked. 29 C.F.R. § 778.101 states that "[h]ours worked in excess of the statutory maximum in any workweek are overtime hours under the statute; a workweek no longer than the prescribed maximum is a nonovertime workweek under the Act, to which the pay requirements of section 6 (minimum wage and equal pay) but not those of section 7(a) are applicable." Similarly, 29 C.F.R. § 778.102 states that "[i]f no more than the maximum number of hours prescribed in the Act are actually worked in the workweek, overtime compensation pursuant to section 7(a) need not be paid." One of the FLSA's purposes is to compensate employees for the strain of working long hours. This purpose is not implicated if the employee does not actually work the requisite number of hours in a week, regardless of whether the employee is compensated as though he or she did work.
The Employees argue that the Third Circuit's decision in Wheeler v. Hampton Township, 399 F.3d 238 (3d Cir.2005), should be persuasive here. The CBA at issue in Wheeler provided for paid vacations, holidays, and sick days (described as "non-work pay"), and stated that these payments would be included in the regular rate. It also provided for lump-sum yearly payments for longevity, educational attainment,
The Wheeler court determined that the township had to include add-on pay and non-work pay in the regular rate. It held that the township could not contract away the officers' right to FLSA overtime on add-on pay. Regarding the non-work pay, the Wheeler court reasoned that, while the FLSA itself did not require non-work pay to be included in the regular rate, the CBA required non-work pay to be included in the regular rate for FLSA purposes. See id. at 244. Relying on the language "shall not be deemed," in 29 U.S.C. § 207(e)(2), the Third Circuit reasoned that "the function of [that subsection] is to forbid this Court from deeming that the CBA include non-work pay." Id. As the CBA already provided that non-work pay would be included in the regular rate, the Third Circuit concluded that there was nothing for the court to "deem." Id.
The Wheeler court, like the Employees, conflated the CBA and the FLSA. In an FLSA case, the issue is the FLSA regular rate, not the contractual overtime rate. Including or not including vacation pay in the FLSA regular rate is not a matter of "deeming that the CBA include non-work pay," id. (emphasis added), because the CBA rate is not affected by the FLSA rate. The proper way to calculate the FLSA regular rate is to look at all the compensation provided for in the CBA and identify what part of that compensation is "remuneration for employment paid to, or on behalf of, the employee," not within an exception. 29 U.S.C. § 207(e).
Further, Wheeler is not apposite to the Employees' hours threshold argument. There is a difference between what compensation is included in the regular rate and which hours count toward the FLSA overtime threshold. While the FLSA regular rate incorporates the negotiated compensation rate, the FLSA overtime threshold is defined in the statute itself. The Wheeler defendant argued that the plaintiffs agreed to take certain compensation out of the FLSA regular rate that, by statute, is part of that regular rate. Here, the City does not argue that the Employees agreed to give up anything to which they would otherwise be entitled under the FLSA. The FLSA does not provide a right to overtime until an employee has first worked forty hours; therefore, the City is not attempting to take away any compensation guaranteed by the FLSA.
In this case, the first step in calculating the regular rate over a particular week is to total the week's straight time pay and add-ons. The parties disagree as to the second step: whether this total should be divided by the CBA's "normal workweek," or the hours actually worked by the employee. Conceptually, the issue is whether the add-ons are additional compensation for forty hours
Some courts have characterized longevity payments and other add-ons as "reflect[ing] the greater value of an experienced employee's labor." See Scott v. City of New York, 592 F.Supp.2d 475, 488 (S.D.N.Y.2008). If the add-ons are meant to compensate for additional value of each hour of labor, then it makes sense to compensate for this additional value in every overtime hour as well. See id. ("[T]he value of that experience is received by the employer for every hour that the employee works."). The problem with this approach is that the CBAs do not discuss the add-ons in terms of an hourly rate increase; the add-ons are described as biweekly lump-sum payments and are not dependent on hours worked. Sums paid as a reward for service, "the amounts of which are not measured by or dependent on hours worked, production, or efficiency," are not part of the regular rate. 29 U.S.C. § 207(e)(1); see also Zumerling v. Devine, 769 F.2d 745, 751 (Fed.Cir.1985) (holding that the proper divisor is hours worked because lump-sum premium pay is "not received in return for any particular hours of work . . . [rather, it is] a means of generally compensating the employees").
According to DOL, "the regular hourly rate of pay of an employee is determined by dividing his total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid." 29 C.F.R. § 778.109. The parties offer differing constructions of this statement. The City argues that it means that compensation is divided by total hours worked. The Employees argue that over-time hours are not hours "for which [add-on] compensation was paid," so overtime hours are not included in the divisor. We believe that 29 C.F.R. § 778.110(b) forecloses the Employees' interpretation. It provides:
DOL views a lump-sum production bonus as general compensation rather than additional hourly compensation. This interpretation is consistent with the language of 29 U.S.C. § 207(e)(1).
The Employees argue that using an hours worked divisor causes the bonus to diminish as overtime increases. This is the case any time there is a fixed and hourly component to an employee's compensation. Absent evidence of an intent to manipulate compensation to avoid FLSA liability, this result does not violate the FLSA. See Helmerich & Payne, 323 U.S. at 42, 65 S.Ct. 11 (explaining that parties are free to set the regular rate through contract, but that the regular rate may not be calculated "in a wholly unrealistic and artificial manner so as to negate the statutory purposes [of the FLSA]"). It is also the result for which the parties bargained under the CBAs, because CBA overtime is based solely on the straight time rate. Under the CBAs' overtime schemes, the value of the add-on payments decreases if an employee works overtime. Therefore, the Employees cannot claim that this result is unfair or surprising. Cf. Overnight
DOL's interpretation—that the proper divisor is hours worked—is consistent with the statutory language and is not illogical, unreasonable, or unfair. We find no reason to adopt a contrary position. Therefore, we hold that the FLSA hourly regular rate is calculated by dividing the relevant weekly compensation by the actual hours worked, rather than the normal workweek.
The Employees contend that the City's use of a one-half multiplier, rather than one and one-half, violates the FLSA. The City uses a one-half multiplier because it first applies the regular rate to all hours worked. To the extent that the Employees argue that the FLSA requires that they receive the regular rate for all hours worked and the regular rate and one-half for overtime hours, such an argument is without merit. Under that scenario, the Employees would receive two and one-half times the regular rate for each overtime hour worked, which is more than the one and one-half that the FLSA requires.
The same result is achieved if the City pays straight time for all hours and an additional one-half straight time on overtime hours, or if the City pays straight time for non-overtime hours and one and one-half straight time on overtime hours. To illustrate, assume that an employee's straight time pay is $10.00 an hour and he or she receives $55.00 in add-on pay each week. The employee works 44 hours in a particular week. To calculate the hourly regular rate for that week, divide the add-on by the total hours worked ($55.00/44 = $1.25) and add that to the straight time rate ($1.25 + $10.00 = $11.25).
This is because the two equations are mathematically the same.
The City's use of a one-half multiplier does not violate the FLSA.
The Employees assert that the City is taking improper credits against its FLSA liability. If an employer actually pays an employee certain compensation
The district court ruled in the City's favor on this issue because the Employees failed to show that the City had any FLSA liability at all. Instead of pointing to evidence that the City improperly calculates FLSA credits, the Employees simply assert that this is so. They have not identified a single instance of an improper credit. In fact, they did not identify any actual FLSA underpayment at the summary judgment or trial phases of this matter. The Employees had ample opportunity to support their allegations of improper credits, but they failed to do so. Their credits claim fails.
In summary, we hold the following: the City's dual calculation method does not violate the FLSA; buy-back of unused vacation time is not part of the FLSA regular rate; buy-back of unused sick time is part of the FLSA regular rate; paid time off does not count towards the FLSA overtime threshold; when calculating the hourly regular rate, weekly compensation is to be divided by total hours worked, rather than an employee's regular workweek; the City's use of a one-half multiplier does not violate the FLSA; and the City is not improperly taking credits against its FLSA liability.
Therefore, the district court's decision is affirmed in part and reversed in part. The decision is reversed with respect to the buy-back of vacation time, and the remainder is affirmed. This case is remanded for further proceedings not inconsistent with this opinion.
29 U.S.C. § 207(e).
