Frank v. McQuigg

• Decision Date: 06 December 1991
• Docket Number: No. 90-35108,90-35108
• Citation: 950 F.2d 590
• Parties: 120 Lab.Cas. P 35,576 Anthony M. FRANK, Postmaster General, et al., Petitioners-Appellants, v. Donald D. McQUIGG, et al., Respondents-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 590

950 F.2d 590

120 Lab.Cas. P 35,576

Anthony M. FRANK, Postmaster General, et al., Petitioners-Appellants, v. Donald D. McQUIGG, et al., Respondents-Appellees.

No. 90-35108.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 10, 1991.

Decided Dec. 6, 1991.

James A. Friedman, Office of Labor Law, U.S. Postal Service, Washington, D.C., Crandon Randall, Asst. U.S. Atty., Anchorage, Alaska, for petitioners-appellants.

Peter A. Galbraith, Galbraith & Owen, Stephen F. Frost, Anchorage, Alaska, for respondents-appellees.

Appeal from the United States District Court for the District of Alaska.

Before WRIGHT, FARRIS and TROTT, Circuit Judges.

TROTT, Circuit Judge:

Donald McQuigg and several others (collectively, "McQuigg") sued their employer, the United States Postal Service (the "Postal Service") for failure to pay adequate overtime wages. McQuigg claimed the Postal Service's formula for computing overtime pay violated the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (1988).

The district court granted partial summary judgment for McQuigg, concluding: (1) the Postal Service's formula for computing overtime pay violated the Act; and (2) the Postal Service could not avail itself of a statutory good-faith defense to liability. We have jurisdiction under 28 U.S.C. § 1292(b) (1988), and we affirm in part and reverse in part. This case involves several technical terms; accordingly, we include a glossary as Appendix 1.

STATUTORY & REGULATORY FRAMEWORK

A

The Fair Labor Standards Act (the "Act") requires the Postal Service to pay its employees a premium for overtime work. See 29 U.S.C. § 203(e)(2)(B) (1988); 29 U.S.C. § 207(a)(1) (1988). The Postal Service must pay its employees "at a rate not less than one and one-half times the regular rate" for all hours over 40 hours per week. 29 U.S.C. § 207(a)(1); see 29 C.F.R. § 778.107 (1990). An employee's "regular rate" under the Act is always an hourly rate. 29 C.F.R. § 778.109 (1990). The "regular ... rate ... is determined by dividing [an employee's] total remuneration ... [before he receives the overtime premium] in any workweek by the total number of hours actually worked by him in that workweek...." Id.; but cf. Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 424, 65 S.Ct. 1242, 1245, 89 Postal Service employees working in Alaska receive a Territorial Cost of Living Adjustment ("TCOLA") in addition to their basic pay. ¹ See 5 U.S.C. § 5941 (1988); 39 U.S.C. § 1005(b) (1988). The TCOLA is "calculated and paid as a percentage of an employee's hourly rate of basic pay [i.e., the base rate] for those hours for which the employee receives basic pay...." 5 C.F.R. § 591.210(b)(1) (1991). By statute, Postal Service employees receive basic pay for a 40-hour workweek. 5 U.S.C. § 6101(a)(2)(A) (1988).

                L.Ed. 1705 (1945) ("the regular rate refers to the hourly rate actually paid the employee for the normal, non-overtime workweek for which he is employed" (emphasis added)).   Thus, if an employee receives $600 (before any overtime premium) for a 50-hour week (whether in hourly wages, a lump sum, or both), his "regular rate" under the Act is $12/hour.   The employee would be paid for his 10 overtime hours at a rate of (1 1/2 X $12/hour) = $18/hour.   See 29 U.S.C. § 207(a)(1)
                

The parties agree on how to calculate TCOLA payments. For example, consider an employee who works 50 hours/week at a base rate of $10/hour, and receives a TCOLA of 25%. Under the applicable regulations, the TCOLA is paid only during the basic, 40-hour week, even though the employee actually works 50 hours. See 5 C.F.R. § 591.210(a) (1991). Accordingly, the employee's TCOLA is 25% of $10/hour = $2.50/hour. The TCOLA is paid for 40 hours, and yields a TCOLA payment of (40 hours X $2.50/hour) = $100. ²

The parties also agree the TCOLA contributes to the hourly "regular rate" under the Act. See generally 5 C.F.R. § 591.210(e)(2) (1991). The regular rate is calculated by dividing the employee's total remuneration (exclusive of any overtime premium, but including the TCOLA ) by his total number of hours worked (including overtime hours). See id.; 29 C.F.R. § 778.109. In the example above, the employee's "regular rate" is his total remuneration, [ (50 hours X $10/hour) + (TCOLA payments of: 40 hours X $10/hour X 25%) ] = [ ($500) + ($100) ] = $600, divided by the total number of hours worked, 50, = ($600/50 hours) = $12/hour. See 29 U.S.C. § 207(a)(1); 29 C.F.R. § 778.109.

These equations also demonstrate that the regular rate is always greater than the base rate. The regular rate is greater than the base rate because the regular rate includes the TCOLA, while the base rate does not. In the example above, the regular rate is $12/hour, while the base rate is only $10/hour, because the regular rate includes the $100 in TCOLA payments spread over a 50-hour week. The TCOLA payments add $2/hour to the regular rate. [ (40 hours X $10/hour X 25%)/(50 hours) ] = [ ($100)/(50 hours) ] = $2/hour.

Finally, in an overtime week, the hourly regular rate is always less than the sum of the base rate plus the TCOLA. This is so because the TCOLA is paid only for the basic workweek, 40 hours, while the regular rate is computed using the total workweek, including overtime hours. In any overtime week, the TCOLA payments are a constant, and insofar as they contribute to the regular rate, are spread more and more thinly as the employee works more and more overtime hours. Modifying the example above, if the employee works 40 hours,

                the TCOLA payments would contribute ($100/40 hours) = $2.50/hour to the regular rate. 3  If the employee works 60 hours, the TCOLA payments would contribute only ($100/60 hours) = $1.67/hour to the regular rate.   As soon as the employee exceeds 40 hours, the TCOLA stops being paid, and therefore makes a smaller contribution to the regular rate
                

B

This case arises at the intersection of the Act and the TCOLA. It centers on the proper method for calculating the pay of Postal Service employees who receive a TCOLA and work overtime. As noted above, the parties agree the TCOLA is part of an employee's "regular rate" under the Act. See generally 5 C.F.R. § 591.210(e)(2). Indeed, there is no dispute over how to calculate either the regular rate or the TCOLA. The district court noted: "[o]ne might think that if, as is the case here, the parties agree on the computation of 'regular rate of pay' then there could be no disagreement about the product of one and one-half times the regular rate of pay." The Postal Service states in its brief: "this appeal involves neither a factual nor a purely legal dispute, but largely an arithmetic one." Although the case does involve some difficult mathematical issues, it actually turns on Congress' intent in enacting the TCOLA statute.

FACTS AND PROCEEDINGS BELOW

Prior to this case, the interplay between the Act and the TCOLA had generated a substantial amount of litigation. In 1977, shortly after the Act became applicable to the Postal Service, the District Court for the District of Columbia ruled the Postal Service had wrongfully excluded the TCOLA from its employees' regular rate in calculating overtime pay under the Act. Kaplan v. United States Postal Service, No. 75-1505, memorandum at p 5 (D.D.C. Oct. 4, 1977); see Donovan v. United States Postal Service, 530 F.Supp. 872, 877-78 (D.D.C.1981). In 1978, the court ordered the Postal Service to pay liquidated damages for the violations. Kaplan v. United States Postal Service, No. 75-1505, memorandum at pp 5-8 (D.D.C. Jan. 13, 1978); see Donovan, 530 F.Supp. at 877-78.

Later in 1978, the Department of Labor (the "DOL") sued the Postal Service for further violations of the Act. ⁴ See Donovan, 530 F.Supp. at 872; Donovan v. United States Postal Service, 530 F.Supp. 894 (D.D.C.1981). In 1982, the Donovan case was settled with a judicially-approved agreement prohibiting all private lawsuits against the Postal Service under the Act. See 29 U.S.C.A. § 216(b)-(c) (West Supp.1991) (authorizing such a settlement agreement). On June 15, 1983, the Donovan case was dismissed, opening the door to new private lawsuits against the Postal Service.

On February 14, 1983, four months before the dismissal of Donovan, McQuigg filed this lawsuit under 29 U.S.C.A. § 216(b) against the Postal Service in Alaska federal district court. McQuigg claimed the Postal Service was undercompensating him for overtime work. On August 4, 1986, the court dismissed the part of McQuigg's complaint relating to activity before June 15, 1983, based on the settlement in Donovan, ⁵ and sustained the rest of the complaint.

On January 8, 1982, counsel for the National Association of Letter Carriers ("NALC") wrote to the DOL's Wage and Hour Administrator ("Administrator"). NALC's counsel requested "an opinion under the [Act] ... regarding the method used by the United States Postal Service ... to calculate overtime payments where a Despite the Opinion Letter, on April 30, 1987, the district court ordered partial summary judgment for McQuigg on the issue of the Postal Service's liability under the Act. The court held the methodology in the Administrator's Opinion Letter "directly contravenes the requirements of section 207(a)(1) of [the Act]."

                ... TCOLA ... is involved."  (Opinion Letter of May 13, 1983).   The DOL's Opinion Letter unequivocally approved the Postal Service's methodology.   On August 8, 1983, in response to a letter from McQuigg's counsel, the Administrator reaffirmed the Opinion Letter's conclusions
                

Subsequently, the Postal Service claimed a defense to liability under the Act based on its asserted good-faith reliance on the DOL's administrative regulations in calculating overtime pay. See 29 U.S.C. § 259 (1988). However, the district court disagreed, and on December 7, 1988, it ordered summary judgment for McQuigg on the Postal Service's good-faith defense.

On November 2, 1989, the district court...