Condo v. Sysco Corp.

• Decision Date: 04 August 1993
• Docket Number: No. 92-3684,92-3684
• Citation: 1 F.3d 599
• Parties: , 1 Wage & Hour Cas. 2d 904 Ralph CONDO, Plaintiff-Appellant, v. SYSCO CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 599

1 F.3d 599

62 USLW 2107, 1 Wage & Hour Cas. 2d 904

Ralph CONDO, Plaintiff-Appellant, v. SYSCO CORPORATION, Defendant-Appellee.

No. 92-3684.

United States Court of Appeals Seventh Circuit.

Argued April 16, 1993.

Decided Aug. 4, 1993.

Douglas W. Graham (argued), Chicago, IL, for plaintiff-appellant.

Kathleen M. Paravola and Walter P. Loomis, Jr. (argued), Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for defendant-appellee.

Before COFFEY, EASTERBROOK, and ROVNER, Circuit Judges.

COFFEY, Circuit Judge.

Ralph Condo sued his employer, Sysco Corporation, claiming that Sysco's practice of paying him a fixed salary for all hours worked and one-half of his hourly rate for each hour that he worked overtime violated Sec. 7(a)(1) of the Fair Labor Standards Act ("FLSA" or "Act"), 29 U.S.C. Sec. 207(a)(1) (1988), and its equivalent under Illinois law, 820 ILCS 105/4a(1) (1993). The district court entered summary judgment in favor of Sysco, and we affirm.

I. BACKGROUND

On March 23, 1984, Condo entered into a written employment contract with Sysco Corporation. Under the terms of the contract, Condo's duties were serving as chauffeur for Sysco's chairman of the board and working in the company's mail room. The job entailed significant overtime. In exchange for his services, Condo received a fixed salary of $400 per week for all hours worked plus overtime pay for all hours worked in excess of forty. The amount of overtime pay was calculated by dividing Condo's fixed weekly salary of $400 by the total number of hours that he worked each week to yield an hourly rate of pay for the workweek. All hours that Condo worked in excess of forty were compensated at fifty percent of this hourly rate. For purposes of clarification, the employment contract included illustrations of how Condo's overtime pay was to be calculated. ¹

Condo was paid for his services in accordance with the terms of this contract from March 23, 1984, until October 2, 1986. ² In March of 1991 Condo brought an action against Sysco, alleging that the system it had used to calculate his compensation violated Sec. 7(a)(1) of the FLSA, 29 U.S.C. Sec. 207(a)(1) (1988), and the parallel section of the Illinois Minimum Wage Law, 820 ILCS 105/4a(1) (1993). Section 7(a)(1) of the FLSA provides that an employee shall not be employed for more than forty hours in a given week unless the employee receives compensation for all hours in excess of forty "at a rate not less than one and one-half times the regular rate at which he is employed." The language of the Illinois law is substantially the same. Condo argued that the system of payment for overtime in the contract violated the federal and state laws because under the system he was paid for his overtime hours not at a rate of one and one-half times his hourly rate of pay as is mandated by these laws, but rather at a rate of only one-half his hourly rate of pay. Each party moved for summary judgment, and the district court entered judgment in Sysco's favor. The court found that the system of payment was consistent with Sec. 7(a)(1) of the FLSA and its counterpart under Illinois law, and furthermore, that the system was explicitly authorized by 29 C.F.R. Sec. 778.114 (1992), a regulation promulgated by the Department of Labor to help explain Sec. 7(a), and by Illinois Administrative Code tit. 56, Sec. 200.420(f) (1991), the corresponding state regulation. This appeal followed.

II. DISCUSSION

On appeal, Condo contends that summary judgment in favor of Sysco was inappropriate because the district court incorrectly concluded that the system used by Sysco to compensate him for working overtime complied with Sec. 7(a)(1) of the FLSA. ³ We review issues decided on summary judgment de novo and resolve all reasonable inferences in favor of the nonmoving party. Kennedy v. United States, 965 F.2d 413, 417 (7th Cir.1992). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The parties agree that Condo was paid for working overtime in accordance with the employment contract and that the system of payment used by Sysco is the system enumerated in 29 C.F.R. Sec. 778.114. The only points of contention are whether the district court correctly concluded that Sec. 778.114 applies to this case and, if so, whether the regulation is lawful.

A. Does section 778.114 apply to this case?

Section 778.114 provides that a salaried employee whose hours of work fluctuate from week to week may reach a mutual understanding with his employer that he will receive a fixed amount as straight-time pay for whatever hours he is called upon to work in a workweek, whether few or many, and that he will be compensated for his overtime work at a rate of fifty percent of his regular hourly pay. 29 C.F.R. Sec. 778.114(a). The regular hourly pay is calculated by dividing the employee's regular, weekly pay by the total number of hours that he worked during the week. Id. The fixed amount must be sufficient to provide compensation at a regular rate of not less than the minimum hourly rate, 29 U.S.C. Sec. 206(a)(1) (1988 & Supp. III 1991), and the overtime premium cannot be less than one-half the regular rate. 29 C.F.R. Sec. 778.114(c).

Each of the requirements of the regulation was satisfied in this case. Condo worked fluctuating hours (although Condo never worked fewer than forty hours each week, the amount of overtime that he worked varied) for a fixed salary. Condo and Sysco had a mutual understanding that Condo would be paid according to the system that is set forth in Sec. 778.114 and the employment contract. ⁴ Condo's fixed salary of $400 per week was more than sufficient to provide compensation at a regular rate of not less than the minimum hourly rate. Finally, the overtime premium that Condo received was not less than one-half the regular hourly rate, for the contract states: "You will receive half ( 1/2) of the weekly hourly rate on all hours worked in excess of 40 per week."

Condo argues that Sec. 778.114 does not apply to this case because the regulation applies only to employment contracts that are authorized by Sec. 7(f) of the FLSA, 29 U.S.C. Sec. 207(f) (1988), and his contract was not of that type. Section 7(f) provides an exception to Sec. 7(a)'s requirement that an employee who works more than forty hours in a week must receive compensation for working overtime at a rate of at least one and one-half times his regular hourly rate. Under Sec. 7(f), if an employee's hours of work are "irregular," his employer can pay him a guaranteed salary of an amount that compensates overtime for up to sixty hours per week. The salary cannot fall below the statutory minimum hourly rate, and the employer must pay one and one-half times the employee's weekly rate for hours in excess of the agreed-upon workweek. 29 U.S.C. Sec. 207(f).

The parties (as well as the district court) agree that Sec. 7(f) is irrelevant to this case because Condo's duties did not necessitate "irregular hours of work" within the meaning of the provision. The regulations make it clear that an employee's hours of work cannot be considered "irregular" for purposes of Sec. 7(f) unless both his nonovertime hours and his overtime hours fluctuate. See 29 C.F.R. Secs. 778.405, 776.405 (1992); see also Donovan v. Brown Equip. & Tools, Inc., 666 F.2d 148 (5th Cir.1982) (section 7(f) exception does not apply unless the employee's hours fluctuate above and below forty hours per week); Foremost Dairies, Inc. v. Wirtz, 381 F.2d 653, 661 (5th Cir.1967) (same). Condo's overtime hours fluctuated, but his regular hours did not: he always worked at least forty hours each week. As such, Sec. 7(f) does not apply to Condo. Condo submits that because Sec. 7(f) cannot apply, neither can Sec. 787.114, because the regulation "does nothing more than demonstrate the necessary arithmetic to determine overtime pay under a Sec. 7(f) contract, to explain the fact that the employee has already received his 'straight time' compensation for his overtime hours, and need only be paid the 'half time' to which he is additionally entitled."

We disagree. Condo's position was explicitly rejected by the Fifth Circuit in Yadav v. Coleman Oldsmobile, Inc., 538 F.2d 1206 (5th Cir.1976) (per curiam). There the court found that an employee who had worked a "fluctuating work week" within the meaning of Sec. 787.114, but who had not worked "irregular hours" within the meaning of Sec. 7(f), was entitled to back pay for 1500 overtime hours. Id. at 1208. The court stated that "[t]he application of the 'fluctuating work week' formula is not at all dependent upon a finding that the employer is entitled to the exception commonly referred to as the 'Belo' provision." ⁵ Id.

The Appellate Court of Illinois reached the same conclusion in Haynes v. Tru-Green Corp., 154 Ill.App.3d 967, 107 Ill.Dec. 792, 507 N.E.2d 945 (1987). Haynes, the employee, never worked fewer than forty hours per week, but worked up to forty hours of overtime per week. Tru-Green paid him by using the system that is described in Sec. 778.114. Id., 107 Ill.Dec. at 793-94, 507 N.E.2d at 946-47. Haynes made substantially the same argument that Condo advances here: the "fluctuating-workweek" regulation should not be applied unless the "irregular hours" requirement of FLSA Sec. 7(f) is satisfied. Id., 107 Ill.Dec. at 796, 507 N.E.2d at 949. The court rejected this argument and held that Sec. 778.114 may be applied when an employer does not qualify for the Sec. 7(f) exception. See also Triple "AAA" Co. v. Wirtz, 378 F.2d 884 (10th Cir.1967) (applying Sec. 778.114 where Sec. 7(f) did not apply because employees always...