Bonner v. Metro. Sec. Serv.
| Decision Date | 15 March 2011 |
| Docket Number | Civil Action No. SA-10-CV-937-XR |
| Parties | WILLIAM BONNER, Plaintiff, v. METROPOLITAN SECURITY SERVICES, INC. , Defendant. |
| Court | U.S. District Court — Western District of Texas |
Plaintiff was formerly employed by Metropolitan Security Services, Inc. d/b/a Walden Security (hereinafter Walden Security) as a security officer and was assigned to provide security services at Fort Sam Houston.1 All parties agree that this position is a non-exempt position pursuant to the Fair Labor Standards Act (FLSA). Defendant was paid an hourly rate and was also paid an additional $3.42 per hour for health and wellness benefits. He complains that this additional amount was not included in the calculation of his overtime rate of pay.2 In addition, Plaintiff alleges that security officers were not relieved of all their job duties while on their meal break.3 Accordingly, he argues that he should have been paid for this thirty minute period per work day because this was not a bona fide meal period.4 It appears Plaintiff also complains that the omission of the thirty minutes per work day may have also affected whether he worked over forty hours during certain weeks.5
Defendant argues, that as a matter of law, Plaintiff cannot state a valid claim because the exclusion of the additional $3.42 per hour from the overtime calculation rate is expressly permitted under the FLSA.
Both parties agree that Walden Security's pay obligations under this Army contract are governed by the McNamara-O'Hara Service Contract Act of 1965 ("Service Contract Act" or "SCA"), 41 U.S.C.A. §§ 351, et. seq. Both parties also agree that a security officer is a "serviceemployee" as that term is defined in the Service Contract Act.
Section 351(a)(2) of the Service Contract Act requires that
service employees... be provided... prospective fringe benefits increases.... Such fringe benefits shall include medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, vacation and holiday pay, costs of apprenticeship or other similar programs and other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor. The obligation under this subparagraph may be discharged by furnishing any equivalent combinations of fringe benefits or by making equivalent or differential payments in cash under rules and regulations established by the Secretary.
Walden Security provided "equivalent or differential payments in cash" in lieu of the statutorily required benefits.
Under the FLSA, "Except as otherwise provided no employer shall employ any of his employees for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed." 29 U.S.C.A. § 207(a)(1). The "regular rate" is defined in section 207(e).6
In relevant part, the SCA states: "In determining any overtime pay to which such service employees are entitled under any Federal law, the regular or basic hourly rate of pay of such an employee shall not include any fringe benefit payments computed hereunder which are excluded from the regular rate under the Fair Labor Standards Act [29 U.S.C.A. § 201 et seq.] by provisions of section 7(d) thereof [29 U.S.C.A. § 207(d)]."7
The Department of Labor has promulgated interpretations of the SCA8, which generally should be afforded deference by courts pursuant to Skidmore v. Swift & Co., 323 U.S. 134 (1944).
29 C.F.R. § 4.177(e) states:
Section 6 of the [SCA] excludes from the regular or basic hourly rate of an employee, for purposes of determining the overtime pay to which the employee is entitled under any other Federal law, those fringe benefit payments computed under the Act which are excluded from the regular rate under the Fair Labor Standards Act by provisions of section 7(e) () of that Act (29 U.S.C. 207(e)). Fringe benefit payments which qualify for such exclusion are described in subpart C of Regulations, 29 CFR part 778. When such fringe benefits are required to be furnished to service employees engaged incontract performance, the right to compute overtime pay in accordance with the above rule is not lost to a contractor or subcontractor because it discharges its obligation under this Act to furnish such fringe benefits through alternative equivalents as provided in this section. If it furnishes equivalent benefits or makes cash payments, or both, to such an employee as authorized herein, the amounts thereof, which discharge the employer's obligation to furnish such specified fringe benefits, may be excluded pursuant to this Act from the employee's regular or basic rate of pay in computing any overtime pay due the employee under any other Federal law. No such exclusion can operate, however, to reduce an employee's regular or basic rate of pay below the monetary wage rate specified as the applicable minimum wage rates under sections 2(a)(1), 2(b), or 4(c) of this Act or under other law or an employment contract.
Plaintiff argues that 29 C.F.R. § 4.177(e) and 29 C.F.R. Part 778, which provide that cash payments made by an employer in lieu of fringe benefits are excludable from the regular rate, "conflict with the plain language of the statutes they purport to interpret and are therefore arbitrary and capricious." Accordingly, Plaintiff argues that these regulations should not be afforded any Skidmore deference.
Plaintiff argues that § 355 of the SCA states: "In determining any overtime pay to which such service employees are entitled under any Federal law, the regular or basic hourly rate of pay of such an employee shall not include any fringe benefit payments computed hereunder which are excluded from the regular rate under the Fair Labor Standards Act [29 U.S.C.A. § 201 et seq.] by provisions of section 7(d) thereof [29 U.S.C.A. § 207(d)]." Turning then to section 207(d) [now 207(e)], Plaintiff argues that cash payments made by an employer in lieu of fringe benefits are not found in section 207(e). The only subpart that comes close to addressing cash payments is subpart (4), which excludes: "contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life, accident, or health insurance or similar benefits for employees." Plaintiff argues that it is uncontroverted that thecash payments at issue were not made by the employer to any trustee or third person.
This Court agrees that 29 C.F.R. § 4.177(e) and 29 C.F.R. Part 778 are inconsistent with §355 of the SCA and §207(e) of the FLSA. "Exemptions from or exceptions to the [FLSA's] requirements are to be narrowly construed against the employer asserting them." Donovan v. Brown Equipment and Service Tools, Inc., 666 F.2d 148, 153 (5th Cir. 1982); Madison v. Resources for Human Development, Inc., 233 F.3d 175, 187 (3rd Cir. 2000). Although the Defendant here has correctly cited and relied upon 29 C.F.R. § 4.177(e) for its calculation of the "regular rate", the Department of Labor regulations are not supported by the plain language of the SCA and FLSA.9 See also Local 246 Utility Workers Union of America v. Southern California Edison Co., 83 F.3d 292, 296 (9th Cir. 1996) ( ). Indeed, in the regulations adopted for section 207(e)(4) of the FLSA, 29 C.F.R. § 778.215, the DOL states: "The primary purpose of the [exclusion of benefit-plan contributions under section 7(e)(4)] must be to provide systematically for the payment of benefits to employees on account of death, disability, advanced age, retirement, illness, medical expenses, hospitalization, and the like." The provision of cash payments directly to an employee, with no accountability that those payments will be used for health insurance or like benefits, does not meet "the primary purpose"of section 207(e)(4).
Defendant argues that
the SCA states that 'the regular rate or basic hourly rate of pay of... an employee shall not include any fringe benefit payments computed hereunder which are excluded from the regular rate under the [FLSA].' Although this language addresses fringe benefit payments, Plaintiff contends it unambiguously requires that cash payments be included in employees' regular rates since cash payments are not expressly excluded under the FLSA. This interpretation of the SCA is, at best, strained because it assumes that the term fringe benefit payments encompasses cash payments.
Defendant's argument is misplaced. Defendant bears the burden of establishing any FLSA exemptions and it also carries the burden of establishing that the SCA and FLSA explicitly authorize it to not include its cash payments in the calculation of the regular rate. See Vela v. City of Houston, 276 F.3d 659, 666-67 (5th Cir. 2001). The Defendant may not rely upon 29 C.F.R. § 778.215. The DOL has construed the SCA in a manner not authorized by the SCA's reference to the FLSA, and the DOL's regulation is accordingly not entitled to Skidmore deference.10
Defendant's Motion for Judgment on the Pleading (doc. no. 21) is denied.
Plaintiff and approximately 18 other security officers request that this Court certify a...
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