Spradling v. City of Tulsa, Okl., 95-5162

• Decision Date: 13 September 1996
• Docket Number: No. 95-5162,95-5162
• Citation: 95 F.3d 1492
• Parties: 132 Lab.Cas. P 33,434, 3 Wage & Hour Cas.2d (BNA) 823 B.N. SPRADLING, B.C. Dow, J.D. Fellinger, L.M. Lamb, Robert McClary, Philip Morgans, Edgar Leon Wilson, F.L. Cook, D.R. Grant, E.L. Simpson, Thomas E. Holland, Robert E. Nantz, Billy Joe Geier, Ken Lorton, Billy J. Richardson, Plaintiffs--Appellees, v. CITY OF TULSA, OKLAHOMA, a municipal corporation, Defendant--Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1492

95 F.3d 1492

132 Lab.Cas. P 33,434, 3 Wage & Hour Cas.2d

(BNA) 823

B.N. SPRADLING, B.C. Dow, J.D. Fellinger, L.M. Lamb, Robert McClary, Philip Morgans, Edgar Leon Wilson, F.L. Cook, D.R Grant, E.L. Simpson, Thomas E. Holland, Robert E. Nantz Billy Joe Geier, Ken Lorton, Billy J. Richardson Plaintiffs--Appellees, v. CITY OF TULSA, OKLAHOMA, a municipal corporation Defendant--Appellant.

No. 95-5162.

United States Court of Appeals, Tenth Circuit.

Sept. 13, 1996.

David L. Pauling, City Attorney, and Ellen R. Hinchee, Assistant City Attorney, Tulsa, OK, and Edward W. Bergmann and Noah A. Finkel of Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for appellant.

Donald M. Bingham, of Riggs, Abney, Neal, Turpen, Orbison & Lewis, Tulsa, OK, for appellees.

Before TACHA, BRISCOE, and MURPHY, Circuit Judges.

BRISCOE, Circuit Judge.

Defendant City of Tulsa, Oklahoma, (City) appeals the district court's decision granting relief in favor of plaintiffs, a group of fifteen Tulsa firefighters, on their claim for additional overtime pay under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201-219. We affirm.

I.

Each plaintiff holds the rank of District Fire Chief (except plaintiffs E.L. Simpson and Billy J. Richardson, who are now retired). Plaintiffs filed this action on or about May 12, 1992, seeking compensation for alleged unpaid overtime wages. According to plaintiffs, they typically work a repeating cycle of one 24-hour tour of duty, followed by 48-hours off-duty, but receive no overtime pay. Plaintiffs further allege they are required to attend training sessions and staff meetings but receive no overtime compensation for time spent in these sessions and meetings.

In defending the action, the City characterized plaintiffs as exempt salaried employees under the FLSA. Although plaintiffs stipulated they met most of the criteria for "administrative" and "executive" exemptions under the FLSA, they denied that they met the "salary" test set forth in 29 C.F.R. § 541.118. After engaging in discovery, the parties waived a jury trial and jointly requested that the district court determine the issue of FLSA exemption as a matter of law.

On January 27, 1995, the district court issued a written order granting summary judgment in favor of plaintiffs. In its order, the court applied the "salary" test and found that: (1) plaintiffs were paid an hourly rate, with provisions made for the accumulation of overtime; (2) plaintiffs' pay was subject to reduction for absences of less than a day; (3) plaintiffs could be disciplined by reductions in pay for reasons other than infractions of safety rules of major significance; and (4) plaintiffs were subject to reductions in pay for absences due to temporary military leave after City-paid military time had been exhausted, and for absences due to attendance in court as witnesses. Based upon these findings, the court concluded the City had failed to demonstrate that plaintiffs were salaried employees. The court rejected the City's assertion that the FLSA's "salary" test was inapplicable to public employers and concluded plaintiffs were entitled to receive overtime compensation. After a non-jury trial on the issues of willfulness and liquidated damages, the court awarded plaintiffs damages in the amount of $333,881.46 plus interest. The court rejected plaintiffs' claim for liquidated damages on the ground that the City's violation of the FLSA was made in good faith. Final judgment was entered on July 17, 1995, and the City filed its notice of appeal on August 10, 1995.

II.

The City has the burden of proving plaintiffs were exempt employees under the FLSA. Aaron v. City of Wichita, 54 F.3d 652, 657 (10th Cir.), cert. denied --- U.S. ----, 116 S.Ct. 419, 133 L.Ed.2d 336 (1995). We review the district court's factual findings for clear error and its ultimate conclusion concerning applicability of the City's claimed exemptions de novo. Id.

III.

A. The FLSA's exemptions and related salary test

Under the FLSA, an employer must pay an employee overtime compensation at one and one-half the employee's regular rate of pay for all hours worked by the employee in a given week in excess of forty hours. 29 U.S.C. § 207(a)(1). Notably, the FLSA exempts from its overtime compensation requirements "any employee employed in a bona fide executive, administrative, or professional capacity." 29 U.S.C. § 213(a)(1). Here, the City contends plaintiffs fall within the "executive" and/or the "administrative" exemption(s) and are therefore not entitled to the claimed overtime compensation.

The "executive" and "administrative" exemptions are not specifically defined in the FLSA. Rather, the Department of Labor (DOL) is responsible for determining the operative definitions of these terms through interpretive regulations. 29 U.S.C. § 213(a)(1). Generally, DOL regulations are entitled to judicial deference, see Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965), and are the primary source of guidance for determining the scope and extent of exemptions to the FLSA.

In order to satisfy the overtime exemption for "administrative" or "executive" employees, an employer must satisfy a two-part test promulgated by the DOL, the "duties" test and the "salary" test. Barner v. City of Novato, 17 F.3d 1256, 1259-60 (9th Cir.1994). Exemptions are to be narrowly construed, and the employer bears the burden of showing "the employee fits 'plainly and unmistakenly within the exemption's terms'--under both the 'salary' test and the 'duties' test." Aaron, 54 F.3d at 657 (quoting Reich v. State of Wyoming, 993 F.2d 739, 741 (10th Cir.1993)). Here, the parties agree the City can satisfy the "duties" test. Only the "salary" test is at issue.

To satisfy the "salary" test, "the employer must prove that the employees in question are paid on a salary basis rather than an hourly rate." Aaron, 54 F.3d at 657-58. Under 29 C.F.R. § 541.118(a), an employee is compensated on a salary basis if "under his employment agreement he regularly receives each pay period ... a predetermined amount constituting all or part of his compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed." Under 29 C.F.R. § 541.118(b), "the salary may consist of a predetermined amount constituting all or part of the employee's compensation," and "additional compensation besides the salary is not inconsistent with the salary basis of payment."

B. Public sector employers and the FLSA's salary test

As initially enacted in 1938, the FLSA did not apply to public employers or employees. See Lamon v. City of Shawnee, 972 F.2d 1145, 1149-50 (10th Cir.1992) (discussing history of FLSA and its application to public sector employees), cert. denied, 507 U.S. 972, 113 S.Ct. 1414, 122 L.Ed.2d 785 (1993); see also 57 Fed.Reg. 37,666-68 (1992) (same). In 1974, Congress amended the FLSA in an attempt to bring public employees within the scope of the Act. Fair Labor Standard Amendments of 1974, Pub L. No. 93-259, 88 Stat. 58, 60, § 6(a)(1), (a)(6). In 1976, however, the Supreme Court struck down the amendment and held that extending FLSA coverage to state and city governmental employees was inconsistent with state sovereignty. National League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976). In 1985, the Supreme Court reversed itself and upheld the constitutionality of including public sector employees within the scope of the FLSA. Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985). Although Congress subsequently amended the FLSA in order to accommodate "the particular needs and circumstances of the States and their political subdivisions," S.Rep. No. 159, 99th Cong., 7 (1985), reprinted in 1985 U.S.C.C.A.N. 651, 655, Congress did not specifically address whether the salary test, which was promulgated by the DOL years earlier, should apply to the public sector. See Fair Labor Standards Amendments of 1985, Pub.L. No. 99-150, 99 Stat. 787.

In 1987, the DOL announced that, pending revision of its implementing regulations, it would not enforce the portions of the salary test concerning deductions for absences of less than a day for personal reasons, illness, or accident. See Fed.Reg. 37,668 (1992). Notably, this nonenforcement policy applied only with respect to those public sector employers who could demonstrate they were governed by a public accountability law, i.e., a provision in applicable State or local law that prohibited payments to an employee for absences of less than one day due to personal reasons, illness, or accident. See id. Moreover, notwithstanding this nonenforcement policy, the DOL did not bar employees' claims against public employers, including those governed by public accountability laws. See id.

On September 6, 1991, the DOL passed an interim final regulation providing "that an otherwise exempt public sector employee who is paid according to a pay system that requires the use of paid leave and, absent the use of paid leave, reduces the employee's pay for absences of less than one work-day, will not be disqualified from exemption due to such pay system." 56 Fed.Reg. 45,824 (1991). This interim final regulation effectively allowed state and local employers to continue to use pay systems based upon public accountability laws without losing "executive," "administrative," or "professional" exemptions for otherwise qualified employees. See id.

On August 19, 1992, the DOL published its final regulation on this issue, codified at 29 C.F.R. § 541.5d, which provides in pertinent part:

(a) An employee of a public agency who otherwise meets the requirements of § 541.118 [the salary test] shall not be disqualified from exemption under §§ 541.1, 541.2, or 541.3 [the executive, administrative, and professional exemption regulations] on the basis that such employee is paid according to a pay...