Flores v. City of San Gabriel
| Decision Date | 02 June 2016 |
| Docket Number | Nos. 14-56421,14-56514,s. 14-56421 |
| Citation | 824 F.3d 890 |
| Parties | Danny Flores; Robert Barada; Kevin Watson ; Vy Van; Ray Lara ; Dane Woolwine; Rikimaru Nakamura; Christopher Wenzel; Shannon Casillas; James Just ; Steve Rodrigues; Enrique Deanda, Plaintiffs–Appellees/Cross–Appellants, and Cruz Hernandez, Plaintiff–Appellee, and Gilbert Lee ; Rene Lopez, Plaintiffs, v. City of San Gabriel, Defendant–Appellant/Cross–Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Brian P. Walter (argued) and Alex Y. Wong, Liebert Cassidy Whitmore, Los Angeles, California, for Defendant–Appellant/Cross–Appellee.
Joseph N. Bolander (argued), Brandi L. Harper, and Christopher L. Gaspard, Gaspard Castillo Harper, APC, Ontario, California, for Plaintiffs–Appellees/Cross–Appellants.
Before: Stephen S. Trott, Andre M. Davis** , and John B. Owens, Circuit Judges.
OPINION
DAVIS
, Circuit Judge:
Plaintiffs-Appellees and Cross-Appellants Danny Flores, Robert Barada, Kevin Watson, Vy Van, Ray Lara, Dane Woolwine, Rikimaru Nakamura, Christopher Wenzel, Shannon Casillas, James Just, Steve Rodrigues, and Enrique Deanda and Plaintiff-Appellee Cruz Hernandez (collectively, “Plaintiffs”) are current or former police officers employed by the City of San Gabriel, California (“City”). The Plaintiffs brought suit against the City for violations of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201
–19, alleging that the City failed to include payments of unused portions of the Plaintiffs' benefits allowances when calculating their regular rate of pay, resulting in a lower overtime rate and a consequent underpayment of overtime compensation. The Plaintiffs asserted that the City's violation of the FLSA was “willful,” entitling them to a three-year statute of limitations for violations of the Act, and sought to recover their unpaid overtime compensation and liquidated damages.
The City claimed that its cash-in-lieu of benefits payments were properly excluded from the Plaintiffs' regular rate of pay pursuant to two of the Act's statutory exclusions and argued that it qualified for a partial overtime exemption under § 207(k), which allows public agencies employing firefighters or law enforcement officers to designate an alternative work period for purposes of determining overtime. The City denied that any violation of the FLSA was willful and that the Plaintiffs were entitled to liquidated damages.
For the reasons that follow, we conclude that the City's payment of unused benefits must be included in the regular rate of pay and thus in the calculation of the overtime rate for its police officers as well. And because the City took no affirmative steps to ensure that its initial designation of its benefits payments complied with the FLSA and failed to establish that it acted in good faith in excluding those payments from its regular rate of pay, the Plaintiffs are entitled to a three-year statute of limitations and liquidated damages for the City's violations. We also conclude, however, that the City has demonstrated that it qualifies for the partial overtime exemption under § 207(k) of the Act, limiting its damages for the overtime violations alleged here.
Under the FLSA, an employer must pay its employees premium overtime compensation of one and one-half times the regular rate of payment for any hours worked in excess of forty in a seven-day work week. Cleveland v. City of Los Angeles , 420 F.3d 981, 984–85 (9th Cir. 2005)
(citing § 207(a)). The “regular rate” is defined as “all remuneration for employment paid to, or on behalf of, the employee,” subject to a number of exclusions set forth in the Act. § 207(e). The FLSA also provides “a limited exemption from the overtime limit to public employers of law enforcement personnel or firefighters.” Adair v. City of Kirkland , 185 F.3d 1055, 1059 (9th Cir. 1999) (citing § 207(k)). The partial overtime exemption in § 207(k) “increases the overtime limit slightly and it gives the employer greater flexibility to select the work period over which the overtime limit will be calculated.” Id. at 1060 (citation omitted).
The FLSA provides a private cause of action for employees to seek unpaid wages owed to them under its provisions. § 216(b). The Act has a two-year statute of limitations for claims unless the employer's violation was “willful,” in which case the statute of limitations is extended to three years. § 255(a). An employer who violates the FLSA's overtime provisions is liable in the amount of the employee's unpaid overtime compensation, in addition to an equal amount in liquidated damages. § 216(b). The Act provides a defense to liquidated damages for an employer who establishes that it acted in good faith and had reasonable grounds to believe that its actions did not violate the FLSA. § 260.
The City provides a Flexible Benefits Plan to its employees under which the City furnishes a designated monetary amount to each employee for the purchase of medical, vision, and dental benefits. All employees are required to use a portion of these funds to purchase vision and dental benefits. An employee may decline to use the remainder of these funds to purchase medical benefits only upon proof that the employee has alternate medical coverage, such as through a spouse. If an employee elects to forgo medical benefits because she has alternate coverage, she may receive the unused portion of her benefits allotment as a cash payment added to her regular paycheck.
In 2009, an employee who declined medical coverage received a payment of $1,036.75 in lieu of benefits each month. This amount has increased each year, so that employees who declined medical coverage received $1,112.28 in 2010, $1,186.28 in 2011, and $1,304.95 in 2012. This payment appears as a designated line item on an employee's paycheck and is subject to federal and state withholding taxes, Medicare taxes, and garnishment.
In 2009, the City paid $2,389,468.73 to or on behalf of its employees pursuant to its Flexible Benefits Plan, and it paid $1,116,485.77 of that amount, or 46.725% of total plan contributions, to employees for unused benefits. While the exact figures vary each year, the percentage of the total plan contributions that the City pays to employees for unused benefits has remained somewhat consistent. In 2010, the City paid $1,086,202.56 to employees for unused benefits, reflecting 42.842% of total plan contributions; in 2011, $1,138,074.13, or 43.934% of total plan contributions; and in 2012, $1,213,880.70, or 45.179% of total plan contributions.
At some time prior to 2003, the City designated its cash-in-lieu of benefits payments as “benefits” that were excluded from its calculation of a recipient's regular rate of pay, and, accordingly, has not included the value of the payments in its calculation of employees' regular rate of pay. The City has not revisited its designation since that time.
Since at least 1994, the City's police officers have been paid overtime when they have worked more than eighty hours in a fourteen-day work period. Since at least 2003, the City's eighty-hour/fourteen-day work period has been memorialized in several documents. A 2003 City resolution concerning the “work week” states that police officers work eighty hours in a bi-weekly period. This same eighty-hour/fourteen-day work period was restated in the City's Salary, Compensation and Benefit Policy Manual, dated July 3, 2010, and in the 2005–2007 Memorandum of Understanding between the City and the police officers' collective bargaining unit. Because the City's cash-in-lieu of benefits payments are excluded from its calculation of an officer's regular rate of pay, the benefits payments are not incorporated into the City's calculation of the officer's overtime rate.
The Plaintiffs instituted this suit against the City in 2012. Following discovery, both parties moved for partial summary judgment on the Plaintiffs' claims. The district court agreed with the Plaintiffs that the City's cash-in-lieu of benefits payments were not properly excluded from its calculation of the regular rate of pay, except to the extent that the City makes payments to trustees or third parties. Flores v. City of San Gabriel , 969 F.Supp.2d 1158, 1169–77 (C.D. Cal. 2013)
(“Flores I ”). Finding that the City's violation of the Act was not willful, however, it held that the Plaintiffs were restricted to the two-year statute of limitations for their claims. Id. at 1177. The district court also found that the City qualified for the § 207(k) partial overtime exemption and thus limited the City's liability for overtime to hours worked in excess of eighty-six in a fourteen-day work period. Id. at 1177–79. After receiving supplemental briefing, the district court denied the Plaintiffs' motion for partial summary judgment on the issue of liquidated damages and sua sponte entered summary judgment in favor of the City on that issue. Flores v. City of San Gabriel , No. CV 12-04884-JDB (JCGx), 2013 WL 5817507, at *1 (C.D. Cal. Oct. 29, 2013) (“Flores II ”).
The City timely appealed the district court's rulings concerning the exclusion of the cash-in-lieu of benefits payments from the regular rate of pay. The Plaintiffs cross-appealed, challenging the district court's rulings that the payments qualified for exclusion under the Act if made to a trustee or a third party, that the City qualified for a § 207(k) partial overtime exemption, that the applicable statute of limitations was two years, and that the Plaintiffs were not entitled to liquidated damages.
We review a grant of summary judgment or partial summary judgment de novo, applying the same standard of review as the district court under Federal Rule of Civil Procedure 56
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