Chavez v. City of Albuquerque

Decision Date12 January 2011
Docket NumberNos. 09–2274,09–2288.,s. 09–2274
PartiesPatrick CHAVEZ, on behalf of himself and all other City employees who have been paid overtime that was improperly determined under the Fair Labor Standards Act; Jeannine Chavez; Rudy Campos; Michael Cocchiola; Fortino Ortega, on behalf of themselves and all other City employees who have been paid overtime that was improperly determined under 29 U.S.C.A. 207(a)(1) of the Fair Labor Standards Act; Robert C. Gutierrez, Plaintiffs–Appellants and Cross–Appellees,v.CITY OF ALBUQUERQUE, Defendant–Appellee and Cross–Appellant.
CourtU.S. Court of Appeals — Tenth Circuit

OPINION TEXT STARTS HERE

Paul Livingston, Attorney at Law, Placitas, NM, (Sam Bregman and Eric Loman of Bregman & Loman, P.C., Albuquerque, NM, with him on the briefs), for PlaintiffsAppellants and Cross–Appellees.Edward W. Bergmann of Seyfarth Shaw LLP, Chicago, IL, (Robert J. Perry, City Attorney, City of Albuquerque, NM; Michael I. Garcia, City of Albuquerque Legal Department, Albuquerque, NM; Jerry A. Walz of Walz & Associates, Cedar Crest, New Mexico, with him on the briefs), for DefendantAppellee and Cross–Appellant.Before BRISCOE, Chief Judge, HOLLOWAY, and O'BRIEN, Circuit Judges.BRISCOE, Chief Judge.

This is a collective action brought under 29 U.S.C. § 216(b) by current and former employees (collectively, the Employees) of the defendant City of Albuquerque, New Mexico (the City), alleging violations of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (FLSA). The FLSA generally requires employers to compensate overtime hours at one and one-half times an employee's “regular rate” of pay. The district court concluded that the City violated the FLSA by failing to include compensation for unused vacation and sick time (vacation and sick leave buy-backs) in the FLSA regular rate. The district court ruled in the City's favor on all other claims. Both the Employees and the City have appealed from these rulings. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court in all regards, except we reverse and remand its inclusion of vacation buy-backs in the FLSA regular rate.

I

The factual background of this case is best understood in the context of the relevant statute.

The FLSA generally requires covered employers to pay its employees overtime pay for work in excess of forty hours a week.1 The purpose of FLSA overtime is “to compensate those who labored in excess of the statutory maximum number of hours for the wear and tear of extra work and to spread employment through inducing employers to shorten hours because of the pressure of extra cost.” Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 460, 68 S.Ct. 1186, 92 L.Ed. 1502 (1948). Overtime hours must be compensated “at a rate not less than one and one-half times the regular rate at which [the employee] is employed.” 29 U.S.C. § 207(a)(1). The regular rate “shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee,” with eight exceptions. 29 U.S.C. § 207(e).2

The first step in many FLSA disputes is to determine an employee's regular rate. See Walling v. Youngerman–Reynolds Hardwood Co., 325 U.S. 419, 424, 65 S.Ct. 1242, 89 L.Ed. 1705 (1945) (“The keystone of Section 7(a) is the regular rate of compensation. On that depends the amount of overtime payments which are necessary to effectuate the statutory purposes. The proper determination of that rate is therefore of prime importance.”). The regular rate is “the hourly rate actually paid for the normal, non-overtime workweek.” Walling v. Helmerich & Payne, 323 U.S. 37, 40, 65 S.Ct. 11, 89 L.Ed. 29 (1944). It is determined by looking to the employment arrangement. See Bay Ridge, 334 U.S. at 461, 68 S.Ct. 1186 (“Every contract of employment, written or oral, explicitly or implicitly includes a regular rate of pay for the person employed.”). The regular rate may include more than just an employee's contractually-designated hourly wage if the employee is, in fact, paid more than that hourly wage. Contractual stipulations as to the regular rate are not controlling, because the regular rate is an “actual fact,” rather than “an arbitrary label chosen by the parties.” Youngerman–Reynolds, 325 U.S. at 424, 65 S.Ct. 1242. This means that a contract cannot designate an artificially low regular rate in order to reduce the minimum statutory overtime due. See Walling v. Wall Wire Prods. Co., 161 F.2d 470, 473 (6th Cir.1947) (explaining that parties cannot avoid the purposes of the FLSA by designating a fictitious regular rate).

IIThe Employment Contracts

The Employees include police officers, firefighters, transit workers, clerical and technical workers, and others. They are members of labor unions that have entered into collective bargaining agreements with the City (each, a CBA, and together, the CBAs).3 Employees other than firefighters have contractual “normal” workweeks of forty hours. All Employees are paid a base hourly (or straight time) rate set out in the relevant CBA. In addition to straight time pay, certain of the CBAs provide for various types of add-on pay, such as longevity, hazard, shift differential, assignment, education, and firearms qualification pay (collectively, add-on payments). These add-on payments are made as lump sums on a bi-weekly basis.

Generally, the CBAs provide overtime compensation for work beyond an employee's normal daily and weekly schedule, and on holidays. The contractual overtime rate is one and one-half times an employee's straight time rate. The CBAs generally provide for paid sick leave and vacation leave, and count this paid time off as hours worked for overtime purposes. Certain of the CBAs provide that employees who have accumulated a minimum amount of unused vacation or sick leave may sell that leave back to the City.

The City's Wage Calculations

For all employees other than police officers, the City calculates an employee's wage entitlements under the FLSA and under the applicable CBA, and then pays the employee the greater of the two. No FLSA calculation is made for police officers because the City has determined that their contractual entitlements will always exceed their FLSA entitlements. This is because police officers receive overtime under the FLSA after working forty-three hours, whereas they receive overtime under their CBA after working forty hours. City's Opening Br., Attach. 5 at 14.

The City includes straight time and add-on payments in an employee's FLSA regular rate, but does not include vacation or sick leave buy-back. To calculate an employee's FLSA regular rate for a certain pay period, the City multiplies the total hours worked by the straight time rate and adds the add-on payments. This sum is divided by the total number of hours worked, and the quotient is the hourly regular rate. Total FLSA wages are calculated by multiplying the hourly regular rate by total hours worked (paying the regular rate for each hour worked) and then adding one-half the regular rate multiplied by overtime hours (adding an overtime premium for the extra hours). The City does not count hours of paid leave towards the FLSA overtime threshold. Thus, under the City's calculations, an employee is not entitled to FLSA overtime unless he or she actually works more than forty hours in a week.

Procedural History

The Employees claim that the City violates the FLSA in the following ways: it improperly calculates FLSA and contractual wage entitlements separately; it does not include vacation and sick leave buy-backs in the regular rate; it improperly uses total hours worked rather than the normal workweek as the divisor when calculating an employee's hourly regular rate; it incorrectly multiplies the regular rate by one-half rather than one and one-half; and it improperly takes credits or offsets against its FLSA liability.

The parties filed cross-motions for summary judgment. The district court granted summary judgment to the City on the divisor and multiplier claims. It held a bench trial on the remaining issues. The district court found that the Employees did not show that the City failed to pay any Employee FLSA overtime that he or she was owed. J.A. at 135–38. It compared the FLSA and contractual entitlements of various Employees and found that each Employee's CBA compensation was higher than what was required under the FLSA. Because the Employees failed to show that the City had any FLSA liability to offset, the district court found that the Employees could not show that the City was taking improper credits against FLSA liability. Id. at 143. It also determined that hours paid but not worked did not count towards the FLSA overtime threshold. Id. at 125. Finally, it determined that the City was required to include vacation and sick leave buy-back in its calculation of the regular rate. Id. at 141–42. This was the only claim upon which the Employees prevailed.

IIIJurisdiction

After the district court entered its order on summary judgment and its findings of fact and conclusions of law, the parties entered into a stipulation as to damages and the district court entered a final judgment. Therefore, we have jurisdiction under 28 U.S.C. § 1291.

Standard of Review

The district court made its determinations regarding the divisor, multiplier, and inclusion of bonuses on summary judgment. It made its determinations regarding the buy-backs, threshold hours, and credits after a bench trial.

We review the grant of summary judgment de novo, applying the same standard as the district court....” Gwinn v. Awmiller, 354 F.3d 1211, 1215 (10th Cir.2004). Summary judgment is appropriate if there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). We view the record on summary judgment in the light most favorable to the nonmoving party. Gwinn, 354 F.3d at 1215. “In an appeal from a bench trial, we review the district court's...

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