Black v. Settlepou, P.C.

• Decision Date: 11 October 2013
• Docket Number: No. 12–10972.,12–10972.
• Citation: 732 F.3d 492
• Parties: Betty BLACK, on behalf of herself and all others similarly situated, Plaintiff–Appellant v. SETTLEPOU, P.C., Defendant–Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

732 F.3d 492

Betty BLACK, on behalf of herself and all others similarly situated, Plaintiff–Appellant

v.SETTLEPOU, P.C., Defendant–Appellee.

No. 12–10972.

United States Court of Appeals, Fifth Circuit.

Oct. 11, 2013.

Joseph Halcut Gillespie, James Dennis Sanford, Esq., Gillespie, Rozen & Watsky, P.C., for Plaintiff–Appellant.

Susanna Elaine Johnson, Bourland & Kirkman, L.L.P., Fort Worth, TX, Keith A. Clouse, Clouse Dunn, L.L.P., Dallas, TX, for Defendant–Appellee.

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

Before REAVLEY, ELROD, and GRAVES, Circuit Judges.

JAMES E. GRAVES, JR., Circuit Judge:

Betty Black is a former employee of SettlePou, and after a jury found that SettlePou had misclassified Black as exempt from the Fair Labor Standards Act (FLSA), Black became eligible for an award of unpaid overtime wages. In computing the overtime payment award, the district court applied the “Fluctuating Workweek” (FWW) method of calculating overtime by multiplying the number of overtime hours Black worked by one-half of her regular rate of pay. Black contends that the FWW method of calculating overtime is not warranted here, and we agree. We therefore REVERSE the ruling of the district court, VACATE the amount of actual damages awarded to the plaintiff and REMAND for recalculation and entry of an appropriate judgment. We further VACATE the award of liquidated damages and the amount of attorney's fees and REMAND for reconsideration.

FACTS AND PROCEDURAL HISTORY

Betty Black was employed as a legal secretary and paralegal at the Dallas law firm SettlePou, P.C. from 2005–2010. SettlePou first hired Black in 2005 as a non-exempt legal secretary, a position in which she received a fixed salary and overtime premiums at a rate of time and one-half her regular rate of pay in addition to her salary if she worked more than forty hours per week. Black was promoted to paralegal in 2006, and remained a non-exempt employee, as defined by the Fair Labor Standards Act, 29 U.S.C. §§ 201–19 (FLSA), earning overtime at one and one-half her regular rate of pay. In 2007, SettlePou informed Black that she was to begin supervising one of their legal secretaries, therefore, she would be reclassified as exempt. Black became ineligible for overtime pay as an exempt employee. Immediately following her reclassification Black complained both verbally and in writing to her supervisor, Karl Morgan who was a partner with SettlePou, and to SettlePou's Human Resources Directors stating that she thought she should be paid overtime for her extra hours worked. Black was terminated in 2010 and she filed suit against SettlePou on behalf of herself and all other similarly situated paralegals for violations of the FLSA.

The collective action suit alleged that SettlePou had misclassified Black as an exempt employee and sought damages for unpaid overtime wages, liquidated damages, back pay, and emotional pain and suffering. Black also claimed that SettlePou had terminated her in retaliation for her complaints about the lack of overtime pay. A jury found that SettlePou had willfully violated the FLSA by misclassifying Black as exempt from overtime pay and that she was owed 274 hours of overtime pay. The jury also found that SettlePou did not unlawfully retaliate against Black.

After the jury rendered its verdict, the district court calculated the amount of overtime premiums owed to Black by multiplying her 274 overtime hours by one-half of her hourly pay rate of $28.89 ¹ for an actual damages award of $3957.93. The district court also awarded liquidated damages in the same amount, as required under the FLSA for SettlePou's willful violation of the statute, 29 U.S.C. § 216(b), for a total damages award of $7,915.86. Black then filed a motion to alter or amend the judgment, arguing that the district court erred in awarding only half the regular hourly rate for the overtime hours instead of one and one-half times the regular hourly rate of pay. The district court denied the motion.

Black's attorneys also filed a motion to recover their attorney's fees and costs. The district court determined the proper lodestar was $232,400.81, but in its discretion reduced the award to only $45,000.00 in attorney's fees. Black appealed both the calculation of actual damages and the award of attorney's fees to this Court.

STANDARD OF REVIEW

This Court reviews the district court's findings of fact only for clear error. Lee v. Coahoma Cnty., 937 F.2d 220, 224 (5th Cir.1991) (“We will not disturb the district court's fact findings unless they are clearly erroneous.”). This Court reviews liquidated damages awards for clear error. Singer v. City of Waco, 324 F.3d 813, 823 (5th Cir.2003). “Clear error exists when although there may be evidence to support it, the reviewing court on the entire record is left with the definite and firm conviction that a mistake has been committed.” Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 569 (5th Cir.2011) (citations, alterations and internal quotation marks omitted).

In a misclassification case, once the fact finder has established that the employee is due unpaid overtime, the proper determination of the regular rate of pay and overtime premium to which an employee is entitled is a question of law. Ransom v. M. Patel Enterprises, Inc., 734 F.3d 377, 381–82, No. 12–10972, 2013 WL 4402983, at *3 (5th Cir. Aug. 16, 2013); see also Singer, 324 F.3d at 823 (“We review de novo the district court's determination of the regular rate of pay under the FLSA.”).

“A district court's determination of attorneys' fees is reviewed for abuse of discretion, and the findings of fact supporting the award are reviewed for clear error.” McClain v. Lufkin Indus., Inc., 519 F.3d 264, 284 (5th Cir.2008).

DISCUSSION

A. Overtime Pay

The FLSA sets the standard workweek at forty hours and requires employers to pay non-exempt employees no less than one and one-half times their regular rate of pay for any hours worked in excess of forty. 29 U.S.C. § 207(a)(1). The FWW is one method of satisfying the FLSA's overtime pay requirement. Samson v. Apollo Resources, Inc., 242 F.3d 629, 636 (5th Cir.2001) (“[T]he FWW method is one method of complying with the overtime payment requirements of 29 U.S.C. § 207(a)(1).”). The FWW is an employment arrangement in which an employee receives a fixed weekly pay for a fluctuating work schedule with a varying number of hours worked each week.

After the trier of fact has found that a misclassified employee is due overtime pay, the court must determine as a matter of law whether to apply the standard method of calculating the amount of overtime pay using the one and one-half times the regular rate of pay multiplier found in the FLSA, or to apply the FWW multiplier of only one-half of the regular rate of pay. See Ransom, 734 F.3d at 381, 2013 WL 4402983, at *3 (“[T]he appropriate methodology to determine the total amount [of overtime pay] owed [is] a question of law.”); Urnikis–Negro v. Am. Family Prop. Servs., 616 F.3d 665, 679 (7th Cir.2010) (stating that the court “must ascertain the employee's regular rate of pay and calculate an appropriate overtime premium based on that rate”). The decision of when and how to apply the FWW's half-time formula in misclassification cases has divided the federal courts. See Urnikis–Negro, 616 F.3d at 666. This division has been focused on whether the FWW formula as expressed in 29 C.F.R. § 778.114 may be applied retroactively in misclassification cases.²See, e.g., Clements v. Serco, Inc., 530 F.3d 1224, 1230–31 (10th Cir.2008) (applying Section 778.114 to retroactively calculate overtime premiums in a misclassification case); Valerio v. Putnam Assocs., Inc., 173 F.3d 35, 40 (1st Cir.1999) (affirming a district court's application of Section 778.114 to calculate overtime damages award in a misclassification case). But see Lamonica v. Safe Hurricane Shutters, Inc., 711 F.3d 1299, 1311 (11th Cir.2013) (stating that Section 778.114 “is not a remedial measure that specifies how damages are to be calculated”) (citing Urnikis–Negro, 616 F.3d at 666);Urnikis–Negro, 616 F.3d at 666 (“[S]ection 778.114(a) itself does not provide the authority for applying the FWW method in a misclassification case.”); Russell v. Wells Fargo & Co., 672 F.Supp.2d 1008, 1013 (N.D.Cal.2009) (holding that Section 778.114 “cannot be used to calculate overtime pay retroactively in a misclassification case”).

Courts have rejected the application of Section 778.114 as a basis for applying the FWW method in misclassification cases for various reasons. Some courts have found that the rule on its face is forward looking, and therefore is not a remedial measure. See, e.g., Lamonica, 711 F.3d at 1311;Urnikis–Negro, 616 F.3d at 677–78.Section 778.114 also requires the contemporaneous payment of overtime premiums at one-half the employee's regular rate of pay, a requirement that by definition has not been met in an employee's suit for unpaid overtime premiums. Id. at 677–79.

In rejecting the retroactive application of Section 778.114, courts have relied instead on the Supreme Court's endorsement of the FWW method in Overnight Motor Trans. Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942) for the authority to calculate the overtime premium using the FWW half-time multiplier. See, e.g., Lamonica, 711 F.3d at 1311 (“[U]nder Missel, the fluctuating workweek method may be used to calculate an employee's regular rate of pay and corresponding overtime premium for use in determining damages under the FLSA.” (citation omitted)); Desmond v. PNGI Charles Town Gaming, L.L.C., 630 F.3d 351, 357 (4th Cir.2011) (holding that “Overnight Motor provides the appropriate method for calculating the unpaid overtime compensation”); Urnikis–Negro, 616 F.3d at 666 (holding that Missel provides the authority for applying the FWW method in calculating overtime premiums). The Supreme Court explained in Missel...