Gagnon v. United Technisource Inc

• Decision Date: 27 May 2010
• Docket Number: No. 09-20098.,09-20098.
• Citation: 607 F.3d 1036
• Parties: Timothy S. GAGNON, Plaintiff-Counter Defendant-Appellee,v.UNITED TECHNISOURCE, INC.; AIS Tech Services, Inc., Defendants-Counter Claimants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

607 F.3d 1036

Timothy S. GAGNON, Plaintiff-Counter Defendant-Appellee,v.UNITED TECHNISOURCE, INC.; AIS Tech Services, Inc., Defendants-Counter Claimants-Appellants.

No. 09-20098.

United States Court of Appeals, Fifth Circuit.

May 27, 2010.

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Jo Miller (argued), Law Office of Jo Miller, P.L.L.C., Conroe, TX, for Gagnon.

Robert Glenn Chadwick, Jr. (argued), Campbell & Chadwick, P.C., Dallas, TX, for United Technisource, Inc., AIS Tech Services, Inc.

Appeal from the United States District Court for the Southern District of Texas.

Before HIGGINBOTHAM, GARZA and PRADO, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

This is an appeal from the district court's judgment awarding Timothy Gagnon backpay, liquidated damages, and attorney's fees and costs under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201-19, against United Technisource, Inc. (UTI) and AIS Tech Services, Inc. (AIS).

I

Gagnon is a skilled craftsman with many years experience in prepping and painting the exterior and interior of aircrafts. When Gagnon began working for UTI, he executed a contract in which UTI agreed to pay Gagnon $5.50 per hour for “straight time” and $20.00 per hour for overtime.¹ Although the record indicates differing hourly wage rates for aircraft painters in the area and at the time in which Gagnon was working,² none are remotely close to the $5.50 per hour that the UTI/AIS contracts³ established as Gagnon's “straight time” wage. In addition to his straight time wage, UTI also agreed to pay Gagnon $12.50 for every hour he worked each week up to forty hours per week or a maximum of $500.00. The contract referred to this additional hourly pay as “per diem.”

About a year after he began working for UTI/AIS, Gagnon received a memo that notified him of a “raise in all pay.” The memo noted that “[w]e are pleased to announce that our client [Wing Aviation] has authorized a $1.00 per hour raise in all pay starting this pay check.” To effectuate the raise, however, Gagnon was not given an increase in his “straight time” pay rate of $5.50 per hour. Rather, he received a $1.00 raise in his hourly per diem for all hours worked under forty each week and a $1.00 increase in his overtime rate. The record does not indicate that this increase in hourly per diem was based on any reasonably approximated increase in Gagnon's expenses.

Eventually, Gagnon filed suit against UTI/AIS and Wing Aviation, ⁴ claiming violations of the Americans with Disabilities Act (ADA), the Family and Medical Leave Act (FMLA), and the FLSA. All three Defendants answered and UTI/AIS filed a counterclaim alleging breach of contract and fraud against Gagnon. UTI/AIS contended that Gagnon breached the employment contract and committed fraud by failing to notify UTI/AIS when he moved from a city 280 miles from the Wing Aviation facility to one only nine miles away, and by continuing to receive per diem pay after the move.

Defendants moved for summary judgment on all claims. The district court granted summary judgment to Defendants on the ADA and FMLA claims,⁵ and found in Gagnon's favor on the FLSA overtime claim. The district court held that “the per diem allowance is to be included in Gagnon's regular rate of pay,” and ordered Defendants to “recalculate Gagnon's rate of pay, determine the credit that is due based on his relocation, and submit same to Gagnon and the Court for review.” The district court did not address UTI/AIS's counterclaim.

In response to the court's order, Defendants filed a calculation that excluded “the per diem allowance improperly received ... during and after October 2005” when Gagnon moved closer to Wing Aviation's facility, and that included a request that the district court order Gagnon to pay $8,150.49 for “the per diem improperly received ... during and after October 2005.” Gagnon filed numerous responsive pleadings as well as his own motion for entry of judgment and for liquidated damages that sought back overtime pay of $4,266.82. Gagnon also moved for attorney's fees and costs.

The district court denied UTI/AIS's motion and request, finding “them to be contrary to the Court Memorandum Opinion and rulings from the bench.” After considering the motions and all competent evidence offered by the parties, the district court entered judgment awarding Gagnon back pay of $4,266.82 and, finding UTI/AIS's violations willful, liquidated damages of $4,266.82. Over UTI/AIS's objections, the district court also awarded Gagnon $55,908 in attorney's fees and $3,568.57 in costs. This appeal followed.

II

We review the district court's grant of summary judgment de novo. Ackermann v. Wyeth Pharmaceuticals, 526 F.3d 203, 207 (5th Cir.2008). Summary judgment is proper when there is an absence of genuine issues of material fact and one party is entitled to judgment as a matter of law. Thurman v. Sears, Roebuck & Co., 952 F.2d 128, 131 (5th Cir.1992). Thus, “[t]he appropriate inquiry is ‘whether the evidence presents a sufficient disagreement to require submission to a [factfinder] or whether it is so one-sided that one party must prevail as a matter of law.’ ” Septimus v. University of Houston, 399 F.3d 601, 609 (5th Cir.2005) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

A

UTI/AIS argue that their payment scheme does not violate the FLSA because the FLSA only requires employers to pay overtime at a rate of time and a half, and UTI/AIS paid Gagnon overtime at a rate more than three times his base pay. UTI/AIS also argue that Gagnon's per diem reasonably approximated his reimbursable expenses and should therefore be excluded from the determination of Gagnon's regular rate for the purposes of overtime pay. According to UTI/AIS, “[i]t cannot be argued ... [that] the per diem was a ploy to avoid paying Gagnon overtime compensation.” We disagree.

The FLSA requires that non-exempt employees who work more than forty hours in a work week must be paid one and one-half times their “regular rate” of pay. 29 U.S.C. § 207(a)(1). The FLSA broadly defines “regular rate” as the hourly rate actually paid the employee for “all remuneration for employment.” 29 U.S.C. § 207(e); see also Walling v. Helmerich & Payne, Inc., 323 U.S. 37, 42, 65 S.Ct. 11, 89 L.Ed. 29 (1944). “The regular rate by its very nature must reflect all payments which the parties have agreed shall be received regularly during the workweek, exclusive of overtime payments.” Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 461, 68 S.Ct. 1186, 92 L.Ed. 1502 (1948). The “regular rate” becomes a mathematical computation once the parties have decided on the amount of wages and the mode of payment, which is unaffected by any designation to the contrary in the wage contract. Id. The “regular rate” is not an arbitrary label-it is an actual fact. Id.

Here, UTI/AIS have tried to avoid paying Gagnon a higher “regular rate” by artificially designating a portion of Gagnon's wages as “straight time” and a portion as “per diem.” Although per diem can be excluded from an employee's regular rate, 29 U.S.C. § 207(e)(2); see also 29 C.F.R. § 778.217(b), the “ ‘regular rate’ of pay ... cannot be left to a declaration by the parties as to what is to be treated as the regular rate for an employee; it must be drawn from what happens under the employment contract.” 29 C.F.R. § 778.108 (citing Bay Ridge Operating Co., 334 U.S. at 465, 68 S.Ct. 1186). The Department of Labor has recognized that when, as here, the amount of per diem varies with the amount of hours worked, the per diem payments are part of the regular rate in their entirety.⁶

Furthermore, we are suspicious of UTI/AIS's claims that Gagnon's employment contracts were not a scheme to avoid paying overtime. It is difficult to believe that a skilled craftsman would accept a wage so close to the minimum wage when the prevailing wage for similarly skilled craftsmen was approximately three times the minimum wage. We are similarly troubled by the fact that the combined “straight time” and “per diem” hourly rates approximately match the prevailing wage for aircraft painters. Further, it is suspect that a “raise in all pay” was effectuated by increasing the hourly “per diem” rate rather than the “straight time” rate. Finally, we can conceive of no reason why a legitimate per diem would vary by the hour and be capped at the forty-hour mark,⁷ which not- so-coincidentally corresponds to the point at which regular wages stop and the overtime rate applies.

We find this case analogous to other cases in which employers have sought to artificially lower an employee's regular rate by mischaracterizing a portion of it as a bonus or where employees were paid low “straight rates” for the first hour or two worked-usually set around minimum wage-after which they earned one and one half times the straight rate, and were consequently paid no premium for their actual overtime work. See Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 425, 65 S.Ct. 1242, 89 L.Ed. 1705 (1945); see also 29 C.F.R. § 778.502.

We hold that Gagnon's hourly per diem allowances of $12.50 and $13.50 were part of his hourly “remuneration for employment” and must be considered in his regular rate for the purpose of determining overtime pay due under the FLSA. Helmerich & Payne, 323 U.S. at 42, 65 S.Ct. 11. Accordingly, we affirm the district court's determination that UTI/AIS violated the FLSA by not including Gagnon's per diem in their calculation of his regular rate.

B

Having concluded that the hourly per diem is part of Gagnon's base pay, we turn to UTI/AIS's contract and fraud counterclaims. UTI/AIS argue that Gagnon breached the employment agreements by not reporting that he moved closer to the work site and by continuing to receive per diem when he lived less than ten miles from the work site. The district court did not address UTI/AIS's counterclaims. Although our conclusion that the hourly per diem...