824 F.3d 890 (9th Cir. 2016), 14-56421, Flores v. City of San Gabriel

Docket Nº:14-56421, 14-56514
Citation:824 F.3d 890
Opinion Judge:Andre M. Davis, Circuit Judge:
Party Name: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, v. CITY OF SAN GABRIEL, Defendant-Appellant/Cross-Appellee and CRUZ HERNANDEZ, Plaintiff-Appellee, and GILBERT LEE; RENE LOPEZ, ...
Attorney: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-Appell...
Judge Panel:Before: Stephen S. Trott, Andre M. Davis[*], and John B. Owens, Circuit Judges. OWENS, Circuit Judge, with whom TROTT, Circuit Judge, joins, concurring. John B. Owens, Circuit Judge, with whom TROTT, Circuit Judge, joins, concurring:
Case Date:June 02, 2016
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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824 F.3d 890 (9th Cir. 2016)

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

Nos. 14-56421, 14-56514

United States Court of Appeals, Ninth Circuit

June 2, 2016

Argued and Submitted, Pasadena, California February 10, 2016.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Appeal from the United States District Court for the Central District of California. D.C. No. 2:12-cv-04884-JGB- JCG. Jesus G. Bernal, District Judge, Presiding.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

SUMMARY[**]

Labor Law

On an appeal and a cross-appeal, the panel affirmed in part and reversed in part the district court's summary judgment partially in favor of the plaintiffs in an action under the Fair Labor Standards Act, alleging that the City of San Gabriel failed to include payments of unused portions of police officers' benefits allowances when calculating their regular rate of pay, resulting in a lower overtime rate and a consequent underpayment of overtime compensation.

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 made payments to trustees or third parties. The district court held that the plaintiffs were restricted to a two-year statute of limitations because the City's violation was not willful. The district court also found that the City qualified for a partial overtime exemption, limiting its liability for overtime to hours worked in excess of 86 in a 14-day work period.

The panel held 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. The panel held that the City's violation of the Act was willful because it took no affirmative steps to ensure that its initial designation of its benefits payments complied with the Act and failed to establish that it acted in good faith. Accordingly, the plaintiffs were entitled to a three-year statute of limitations and liquidated damages for the City's violations. The panel also concluded, however, that the City had demonstrated that it qualified for the partial overtime exemption under § 207(k) of the Act, limiting its damages for the overtime violations.

Judge Owens, joined by Judge Trott, wrote that he concurred fully in the majority's opinion but believes that the court's willfulness caselaw is off track.

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. OWENS, Circuit Judge, with whom TROTT, Circuit Judge, joins, concurring.

OPINION

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Andre M. 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,

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" 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.

I. BACKGROUND

A. Statutory background

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

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grounds to believe that its actions did not violate the FLSA. § 260.

B. Factual and procedural background

1. Flexible Benefits Plan

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...

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