Hilbert v. District of Columbia, a Mun. Corp.

• Decision Date: 17 May 1994
• Docket Number: No. 92-7101,92-7101
• Parties: , 128 Lab.Cas. P 33,096, 2 Wage & Hour Cas.2d (BNA) 1 John J. HILBERT, Jr., et al. v. DISTRICT OF COLUMBIA, A MUNICIPAL CORPORATION, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 429

23 F.3d 429

306 U.S.App.D.C. 121, 128 Lab.Cas. P 33,096,

2 Wage & Hour Cas.2d (BNA) 1

John J. HILBERT, Jr., et al. v. DISTRICT OF COLUMBIA, A MUNICIPAL CORPORATION, Appellant.

No. 92-7101.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 29, 1993.

Decided May 17, 1994.

Appeal from the United States District Court for the District of Columbia (D.C. Civ. No. 90-2973).

Karen L. McDonald, Asst. Corp. Counsel, Washington, DC, argued the cause for appellant. Also appearing on the briefs were John Payton, Corp. Counsel at the time the briefs were filed, and Charles Reischel, Deputy Corp. Counsel, Washington, DC. Susan S. McDonald, Washington, DC, entered an appearance.

Michael J. Riselli, Washington, DC, argued the cause for appellees. Also appearing on the brief was James W. Pressler, Jr., Washington, DC.

Before: MIKVA, Chief Judge, WILLIAMS and HENDERSON, Circuit Judges.

Opinion for the Court in part and concurring in the result in part filed by Circuit Judge STEPHEN F. WILLIAMS.

Opinion concurring in part and dissenting in part filed by Circuit Judge KAREN LeCRAFT HENDERSON.

Opinion concurring in the result in part and dissenting in part filed by Chief Judge MIKVA.

STEPHEN F. WILLIAMS, Circuit Judge:

The Fair Labor Standards Act ("FLSA") requires employers to pay their employees time-and-a-half for overtime. 29 U.S.C. Sec. 207(a). When this statute was originally enacted in 1938, it applied only to the private sector. In 1974, however, Congress extended the FLSA to cover employees of state and municipal governments. Pub.L. No. 93-259, 88 Stat. 55. The Supreme Court held this extension largely unconstitutional in National League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976), but changed its mind in Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985). Congress then amended the FLSA to soften its impact on state and local governments, permitting some overtime payments to be made in the form of compensatory time off rather than as cash. Pub.L. No. 99-150, 99 Stat. 787 (1985), codified at 29 U.S.C. Sec. 207(o ), (p).

The District of Columbia, however, does not use the FLSA's formula to compensate police officers at the rank of lieutenant and above for their overtime work. Depending on the circumstances, for each hour of overtime work these officers receive either one hour of compensatory time off or one hour's pay at their implicit hourly rate (their annual base pay divided by 2,080). See D.C.Code Secs. 4-405, 4-1104. Seeking application of the FLSA's formula instead, police captains and lieutenants filed this suit in federal district court on December 6, 1990. The court rejected the District's argument that the officers are exempt from the FLSA's overtime requirements as "executive, administrative, or professional" employees, and so granted summary judgment for the plaintiffs. Because it determined that the applicable statute of limitations was two years, the court awarded them relief for the period from December 6, 1988 to the date of the order. Hilbert v. District of Columbia, 784 F.Supp. 922, motion denied, 788 F.Supp. 597 (D.D.C.1992).

The appeal from this judgment has divided the panel. Chief Judge Mikva would affirm the judgment for essentially the reasons given by the district court. Judge Henderson and I reject those reasons in the portion of this opinion labeled "A", in which I speak for both of us. But in portion "B", which reflects only my own views and not those of Judge Henderson, I find an alternative ground on which to affirm the judgment for the period from December 6, 1988 to September 6, 1991. The net result is that the district court's judgment is affirmed in part and reversed in part.

A

The FLSA's overtime requirements do not cover people employed in an "executive administrative, or professional capacity ... as such terms are defined and delimited from time to time by regulations of the Secretary [of Labor]". 29 U.S.C. Sec. 213(a)(1). The parties agree that this exemption is available to the District only if the officers' jobs satisfy two requirements: their duties must be of a certain type, and they must be paid "on a salary basis". See 29 CFR Secs. 541.1-541.3. To satisfy the latter requirement, generally, "the employee must receive his full salary for any week in which he performs any work without regard to the number of days or hours worked." 29 CFR Sec. 541.118(a). This general rule, however, is subject to some exceptions, including one that allows employers to deduct pay "when the employee absents himself from work for a day or more for personal reasons, other than sickness or accident". Id. Sec. 541.118(a)(2) (emphasis added). ¹

The converse of this exception--that employees are not considered salaried if their pay is subject to reduction for absences of less than a day--is known as the "no-docking" rule, and it has applied ever since the first regulatory definition of payment "on a salary basis". See 19 Fed.Reg. 4405-06 (July 17, 1954). After Congress extended the FLSA to the public sector, the Department of Labor preserved this definition, which draws no distinction between private and public employment.

Soon after Garcia, however, the Department's Wage and Hour Division expressed concern about the interaction between this definition and the widespread laws that, in the interest of accountability, forbid payment to public employees for hours not actually worked. Under the conventional no-docking rule, employees subject to these laws could never qualify for the "executive, administrative, or professional" exemption. Worried about this outcome, the Wage and Hour Administrator decided not to enforce the no-docking rule with respect to public employees subject to docking under laws adopted before April 15, 1986. See Letter Ruling, Department of Labor, Wage and Hour Division (Jan. 9, 1987), reprinted in Notice of Final Rule, 57 Fed.Reg. 37666, 37668 (Aug. 19, 1992).

This remedy still left state and local governments exposed to the threat of private lawsuits. Accordingly, on September 6, 1991 the Department issued an "interim final rule" superseding the no-docking rule for most public employees. Citing the need "to stem any accrual of additional liability to State and local governments", the Department found good cause to issue the rule without prior notice and comment and to make it immediately effective. See 56 Fed.Reg. 45824, 45825 (Sept. 6, 1991). The Department later modified the rule slightly in response to comments. See 57 Fed.Reg. 37666 (Aug. 19, 1992), codified at 29 CFR Sec. 541.5d.

If the no-docking rule was valid as applied to the public sector before September 6, 1991, then the District loses with respect to that period. See Kinney v. District of Columbia, 994 F.2d 6, 10-11 (D.C.Cir.1993) (analyzing pay system that covers captains and lieutenants in the District's fire department). On appeal, therefore, the District asserts that the no-docking rule was not valid as applied to the public sector. Because Judge Henderson and I disagree about whether the District preserved this argument for appeal, this opinion defers consideration of that issue. But assuming the validity of the "interim final rule" of September 6, 1991, ² the no-docking rule does not stand in the District's way for the period after that date. Since Judge Henderson and I join in rejecting the district court's reasoning, we therefore reverse its judgment with respect to this later period and remand for resolution of such issues as remain in dispute.

The district court based its judgment on the theory that no one who receives hourly overtime is paid "on a salary basis". This theory has some appeal. Though it has been rejected in the Fourth and Fifth Circuits, see York v. City of Wichita Falls, 944 F.2d 236, 242 (5th Cir.1991); Hartman v. Arlington County, 720 F.Supp. 1227, 1229 (E.D.Va.1989), aff'd,903 F.2d 290 (4th Cir.1990), dicta in other circuits have endorsed it. SeeAbshire v. County of Kern, 908 F.2d 483, 486-87 (9th Cir.1990); Brock v. Claridge Hotel & Casino, 846 F.2d 180, 184-85 (3d Cir.1988). ³ The underlying logic, as we said in Kinney, is that "[p]ayment on salary basis is thought to identify executive, administrative, and professional personnel precisely because it indicates employees who are given discretion in managing their time and their activities and ... are not answerable merely for the number of hours worked...." Kinney, 994 F.2d at 11.

Even before September 6, 1991, however, there were difficulties with automatic denial of executive status for employees receiving hourly overtime. The Secretary's regulations focus chiefly on whether an employee's pay is subject to impermissible deductions, not on how any extra pay is computed. According to the regulations, an employee who receives, every two weeks, a "predetermined amount" (his biweekly base pay) that "constitut[es] ... part of his compensation" and is subject only to permissible deductions "will be considered to be paid 'on a salary basis' ". 29 CFR Sec. 541.118(a) (emphasis added). Indeed, in a subsection headed "Minimum guarantee plus extras", the regulations specifically note that "additional compensation besides the salary is not inconsistent with the salary basis of payment." Id. Sec. 541.118(b).

On the other hand, the regulations make clear that "extras" defeat salaried status when employers use them for the purpose of circumventing the regulatory requirements. See id. And two of the three examples of permissible "extras" offered by the regulations involve sales commissions, which are easily distinguishable from hourly overtime.

As Judge Henderson discusses in her separate opinion, the third example is much harder to distinguish. Apparently based on McReynolds v. Pocahontas Corp., 192 F.2d 301 (4th Cir.1951), it declares that an employee will be considered salaried even though he is paid per shift...