Gilbertson v. City of Sheboygan

• Decision Date: 05 February 2016
• Docket Number: Case No. 15–C–139
• Citation: 165 F.Supp.3d 742
• Parties: Daniel Gilbertson, Matthew Walsh, and Matthew Braesch, on behalf of themselves and all others sharing a question of common and general interest, Plaintiffs, v. City of Sheboygan, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

165 F.Supp.3d 742

Daniel Gilbertson, Matthew Walsh, and Matthew Braesch, on behalf of themselves and all others sharing a question of common and general interest, Plaintiffs,

v.City of Sheboygan, Defendant.

Case No. 15–C–139

United States District Court, E.D. Wisconsin.

Signed February 5, 2016

Yingtao Ho, The Previant Law Firm SC, Milwaukee, WI, for Plaintiffs.

Oyvind Wistrom, Alan M. Levy, Lindner & Marsack SC, Milwaukee, WI, for Defendant.

DECISION AND ORDER

HON. RUDOLPH T. RANDA

, United States District Judge

This is a putative class action brought by three current employees of the City of Sheboygan. The plaintiffs allege claims under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq.,

and Wisconsin's Wage Claim Statute, Wis. Stat. § 109.03. On cross-motions for summary judgment, the plaintiffs argue that the City's annual bonus payments and reimbursed medical expenses should be counted as part of their regular rate for purposes of calculating overtime premiums. Plaintiffs also argue that the City diverted some monies deducted from their wages for the purpose of paying for workers compensation premiums or expenses in violation of Wis. Stat. § 102.16(3). The City opposes these claims on the merits and also argues that the entire action is barred by Wisconsin's notice of claim provision. Wis. Stat. § 893.80

.

For the reasons that follow, the plaintiffs' state law claims are barred by § 893.80

. However, the plaintiffs are entitled to summary judgment on their FLSA claims.

BACKGROUND

The first plaintiff, Daniel Gilbertson, works for the City of Sheboygan Department of Public Works. The other two plaintiffs, Matthew Walsh and Matthew Braesch, work for the City of Sheboygan Police Department. All three plaintiffs were employed by the City at all times relevant to this lawsuit.

In the fall of 2011, the City developed a new compensation program for employees not subject to collective bargaining agreements—i.e., “non-represented” employees—because of changes brought by Act 10 in Wisconsin. Effective January 1, 2012, all non-represented employees were subject to an annual performance evaluation on which their wage increase (if any) is based. 2012 was a “transition year” during which all employees received the same increase in compensation as they became familiar with the evaluation process. Each year thereafter, the City's Common Council set the total amount budgeted for increases. Supervisory personnel then determined the amount, if any, to be paid each non-represented employee, always subject to that budget. Part of the possible wage increase was attributable to a “merit” increase, and part to an “incentive” increase. Not all employees received the maximum increases allotted to these categories.

Starting January 1, 2012, annual evaluations were to be made at the anniversary of a non-represented employee's date of hire. To whatever extent an increase would cause the employee's rate of pay to exceed the maximum for his or her job classification, that excess amount would be paid as a lump sum. For example, if an employee making $10.00 in a job with a maximum classification of $10.10 per hour received a $0.25/hour raise, his new pay rate would be $10.10 per hour and he would receive the remaining $0.15/hour in a lump sum. Merit increases, in general, are paid starting on the semi-monthly payroll distribution date following the employee's hiring anniversary. Any lump sum payment is also made at that time, even if the employee does not work the full year thereafter and no matter the number of hours actually worked during that year.

In 2012 and 2013, the City offered a Health Reimbursement Arrangement (“HRA”) benefit to its employees. An HRA program allows an employer to make non-taxable payments of otherwise allowable health costs on behalf of an employee or dependent of the employee. The money can be paid directly to a health care provider or to an employee for reimbursement. In practice, the third-party administrator for the HRA program, Diversified Benefit Services, Inc., paid the portion of the claim eligible for coverage, and Diversified invoiced the City. A sum certain is allocated as the maximum amount of HRA payments to a participant in a year. Unused amounts can be carried into the following year, but only to be used for other medical expenses.

As for health insurance, the program provided by the City for its employees is self-insured with reinsurance or “stop-loss” for both individual and aggregate fund claims. The City also maintains a self-insured worker compensation benefit program.

As a self-insured health plan, the City makes a budgetary allocation to fund the employee health benefit and informs employees that it will pay all eligible costs.

However, premium costs are set each year to determine rates for retiree and COBRA payments and, since 2012, payment of the employee share of the benefit costs. The rates charged as premiums are determined upon the advice of outside consultants. Employees, as relevant here, pay 10% of the premiums for coverage, with the City paying the balance.

In 2013 and 2014, as each fiscal year was ending and final budget reconciliation for the year was being made, the City determined that it had larger amounts than anticipated and budgeted in its employee health program and shortfalls in its worker compensation reserves. In each of those years, the City transferred money from its employee health plan budget to its worker compensation reserves. These transfers had no effect on the City's payment of all health fund benefits to participants.

The City utilized the recommendations of an independent consultant to set the premium rates on which it bases the payroll deductions for employees who participate in and share the costs of its employee health benefit plans. Neither the consultant nor the underwriter who provided the data to the consultant ever recommended to the City that premium rates be reduced. In fact, the consultant told the City that it had been lucky that it did not have any catastrophic claims during the 2010–2014 period, and that premium rates should remain at the same levels because that luck was not likely to last.

ANALYSIS

Summary judgment should be granted if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a)

. The plain language of the rule “mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When cross-motions for summary judgment are filed, courts “look to the burden of proof that each party would bear on an issue of trial; [courts] then require that party to go beyond the pleadings and affirmatively to establish a genuine issue of material fact.” Santaella v. Metro. Life Ins. Co., 123 F.3d 456, 461 (7th Cir.1997).

I. Notice of claim

In order to commence a lawsuit against a governmental entity in Wisconsin, a claimant “must, as a precursor to actually filing suit, serve written notice of the circumstances of the claim within 120 days after the happening of the event.” E–Z Roll Off, LLC v. Cnty. of Oneida, 335 Wis.2d 720, 800 N.W.2d 421, 428 (2011)

(citing Wis. Stat. § 893.80 ). The notice of claim provision “delays the filing of potential claims in order to afford the municipality an opportunity to settle the claim without litigation. Section 893.80(1)(b) prohibits an individual from bringing an action against a municipality ... unless a notice of claim is first presented and the claim is disallowed. The municipality has 120 days to disallow any claim presented.” State ex rel. Auchinleck v. Town of LaGrange, 200 Wis.2d 585, 547 N.W.2d 587, 590 (1996).

As an initial matter, the City argues that the plaintiffs' failure to provide notice of their claims is dispositive of this entire litigation. However, another judge in this district has held that § 893.80

cannot stand as a bar to FLSA claims. See

Heder v. City of Two Rivers, 149 F.Supp.2d 677 (E.D.Wis.2001) (judgment vacated on other grounds) (citing Felder v. Casey, 487 U.S. 131, 108 S.Ct. 2302, 101 L.Ed.2d 123 (1988)

). Heder is not binding precedent, but the City did not address Heder in any of its briefs to the Court. Therefore, the Court will proceed on the assumption that § 893.80 is relevant only in relation to the plaintiffs' claims under the wage claim statute. § 109.03, Wis. Stats. Plaintiffs argue that such claims are exempt from the requirements set forth in § 893.80. Wisconsin courts examine three factors to determine whether to exempt a specific statute from the notice of claim requirements.

First, courts consider “ ‘whether there is a specific statutory scheme for which the plaintiff seeks exemption’ from the notice of claim requirements found in Wis. Stat. § 893.80

. If a statute provides a specific statutory scheme that conflicts with the general intent behind the 120–day time limit provided in Wis. Stat. § 893.80, then the specific statutory scheme will take precedence.” E–Z Roll Off, 800 N.W.2d at 429 (quoting Town of Burke v. City of Madison, 225 Wis.2d 615, 593 N.W.2d 822, 826 (Wis.Ct.App.1999) ). Only statutes that specifically allow claimants to obtain or pursue relief more quickly than § 893.80 allows will prevail over the general application of § 893.80. See

id. at 430 (collecting cases). For example, when a statute “allows a claimant to seek immediate injunctive relief, that statute irreconcilably conflicts with the general notice of claim provisions of Wis. Stat. § 893.80, ‘which requires a plaintiff to provide a governmental body with a notice of claim, and to wait 120 days or until the claim is disallowed before filing an action.’ ” Id. at 429–30 (citing Gillen v. City of Neenah, 219...