Service Employee Intern. Union Local 102 v. County of San Diego

• Decision Date: 05 October 1994
• Docket Number: No. 92-56249,92-56249
• Citation: 35 F.3d 483
• Parties: 129 Lab.Cas. P 33,165, 2 Wage & Hour Cas.2d (BNA) 545 SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 102; Probation Officers Association; Roslinda Arellanes; Teresa Ayala; Renee U. Bonner, et al., Plaintiffs-Appellees, v. COUNTY OF SAN DIEGO, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 483

35 F.3d 483

129 Lab.Cas. P 33,165, 2 Wage & Hour Cas.2d

(BNA) 545

SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 102; Probation

Officers Association; Roslinda Arellanes; Teresa

Ayala; Renee U. Bonner, et al., Plaintiffs-Appellees, v. COUNTY OF SAN DIEGO, Defendant-Appellant.

No. 92-56249.

United States Court of Appeals, Ninth Circuit.

Argued, Submission Deferred Nov. 5, 1993.

Resubmitted Sept. 22, 1994.

Decided Oct. 5, 1994.

Ian Fan, Deputy County Counsel, Miriam E. Brewster, Deputy County Counsel, San Diego, CA, for defendant-appellant.

Craig Becker, Service Employees Intern. Union, Los Angeles, CA, for plaintiffs-appellees.

Louise H. Renne, City Atty., Jonathan V. Holtzman, Special Asst. to City Atty., Arthur A. Hartinger, Deputy City Atty., San Francisco, CA, for amicus.

Appeal from the United States District Court for the Southern District of California.

Before: BROWNING, BEEZER and TROTT, Circuit Judges.

TROTT, Circuit Judge:

Employees of the County of San Diego sued the County of San Diego ("County"), claiming it failed to pay overtime compensation in accordance with the Fair Labor Standards Act ("FLSA"). 29 U.S.C. Secs. 201-219. The district court issued three orders granting partial summary judgment for plaintiffs. See Service Employees Int'l Union, Local 102 v. County of San Diego, 784 F.Supp. 1503 (S.D.Cal.1992). The court held that plaintiffs were not exempt from FLSA coverage and that, as a matter of law, plaintiffs were entitled to overtime compensation for on-site back-up duty. The County appeals, arguing the FLSA exemption should have precluded liability and that the employees' on-site stand-by time was not "work" as a matter of law.

We hold that the version of the "salary test" in existence prior to September 6, 1991 was invalid in its entirety as applied to the public sector. Thus, we reverse and remand to the district court for further proceedings consistent with this opinion.

I

County assistant deputy probation officers ("ADPOs"), nurses, and park rangers filed this suit against the County, claiming the County violated the FLSA by failing to pay them overtime for "on-site back-up duty," or "stand-by," time. The County defended by claiming plaintiffs were exempt from FLSA coverage.

The district court issued three orders granting partial summary judgment. On April 23, 1991, the court granted partial summary judgment for plaintiffs on their claim that ADPOs were eligible for overtime during their on-site back-up time. On February 11, 1992, the district court granted partial summary judgment concluding: 1) the three year statute of limitations applied because the County's violations were wilful; 2) the employees were entitled to liquidated damages; and 3) the County improperly exempted the ADPOs as salaried employees. On August 5, 1992, the court granted partial summary judgment, concluding: 1) liquidated damages and the three year statute of limitations should also apply to the nurses and park rangers; and 2) the court's holding in the April 1991 order should apply to nurses and park rangers.

II

The piecemeal nature in which this case was decided creates a jurisdictional question: whether the district court decision is final for purposes of 28 U.S.C. Sec. 1291. "Under the final judgment rule embodied in 28 U.S.C. Sec. 1291, parties may appeal only the final decisions of the district courts. A final judgment ... is a decision by the District Court that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Dannenberg v. Software Toolworks Inc., 16 F.3d 1073, 1074 (9th Cir.1994) (quotation omitted). Partial summary judgment is not an inherently final order, id.; Cheng v. Commissioner, 878 F.2d 306, 309 (9th Cir.1989), and the orders in the instant case are not final because the district court has not yet calculated damages.

The Supreme Court has held that the requirement of finality is to be given a practical construction. Gillespie v. United States Steel Corp., 379 U.S. 148, 152-53, 85 S.Ct. 308, 311-12, 13 L.Ed.2d 199 (1964). In In re Subpoena Served on the California Public Utilities Commission, 813 F.2d 1473, 1479-80 (9th Cir.1987), however, we observed that the "exercise of appellate jurisdiction in Gillespie was based upon the unique circumstances of the case" and noted that the decision should be applied "only sparingly." To satisfy the practical finality rule, the following factors must be satisfied:

(1) the [decision appealed] was a "marginally final order," (2) [which] "disposed of an unsettled issue of national significance," (3) review "implemented the same policy Congress sought to promote in Sec. 1292(b)," and (4) the finality issue was not presented to the [appellate court] until argument on the merits, thereby ensuring that policies of judicial economy would not be served by remanding the case with an important unresolved issue.

Id. at 1480 (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 477 n. 30, 98 S.Ct. 2454, 2462 n. 30, 57 L.Ed.2d 351 (1978)); accord Wabol v. Villacrusis, 958 F.2d 1450, 1454 (9th Cir.1990), cert. denied, --- U.S. ----, 113 S.Ct. 675, 121 L.Ed.2d 598 (1992).

The challenged orders are "marginally final" because the calculation of damages "will not affect the potentially dispositive and obviously central issue" in this case: whether the County employees were exempt from the FLSA. See Wabol, 958 F.2d at 1454. Moreover, deciding the merits will dispose of an unsettled issue of national significance. See id. at 1455. "Though the remaining [damages calculation] could eventually ascend to this court, this alone should not prevent our adjudication of important and potentially dispositive questions which have been fully briefed and argued." Id. Remanding would not promote judicial economy and would "therefore frustrate the very purpose of the final judgment rule." Id. Consequently, we have jurisdiction to consider this appeal.

III

Under the FLSA, employees must ordinarily be paid overtime compensation if they work more than forty hours in one week. 29 U.S.C. Sec. 207(a)(1). However, the FLSA exempts from its overtime rule "any employee employed in a bona fide executive, administrative, or professional capacity." 29 U.S.C. Sec. 213(a)(1). The County claims the employees who filed this case fall under this exemption.

"To fit within the overtime-exempt category for administrative or executive employees, an employee must meet both parts of a two-part test. The first part is a 'duties test.' The second part is a 'salary test.' " Barner v. City of Novato, 17 F.3d 1256, 1259-60 (9th Cir.1994) (citations omitted). At issue in the instant case is the salary test promulgated by the Department of Labor ("DOL") in 1954. In essence, such a test provides that, to qualify as an executive, administrator, or professional subject to the exemption, an employee must be compensated on a genuine salary basis. See 29 C.F.R. Sec. 541.118(a). Failure to satisfy the salary test alone ordinarily will result in the loss of the exemption. See Abshire v. County of Kern, 908 F.2d 483, 484-85 (9th Cir.1990), cert. denied, 498 U.S. 1068, 111 S.Ct. 785, 112 L.Ed.2d 848 (1991). The district court concluded that the County did not satisfy the salary test and therefore could not claim the executive or administrative exemption.

"An employee is compensated on a salary basis only if his compensation is not subject to reduction based on the 'quality or quantity of the work performed.' " ¹ Hurley v. Oregon, 27 F.3d 392, 394 (9th Cir.1994); see 29 C.F.R. Sec. 541.118(a). Exemptions to the FLSA are to be narrowly construed, and the employer bears the burden of proof to show "the employees fit 'plainly and unmistakenly within [the exemption's] terms.' " Abshire, 908 F.2d at 485-86.

The County argues for the first time on appeal that the history of the salary test indicates that the version of that test in existence prior to its revision in 1991 and 1992 by the Department of Labor should not apply to public employees, a claim that has not yet been addressed by this circuit. We generally will not consider an argument for the first time on appeal, except if "the issue on appeal is purely one of law that is both central to the case and important to the public." Yuckert v. Heckler, 774 F.2d 1365, 1367 (9th Cir.1985), rev'd on other grounds, 482 U.S. 137, 107 S.Ct. 2287, 96 L.Ed.2d 119 (1987). The D.C. Circuit refused to consider a similar issue for the first time on appeal in Kinney v. District of Columbia, 994 F.2d 6, 9-10 (D.C.Cir.1993). However, because "consideration of the issue will not require the parties to develop new facts" and the validity of the regulation "presents a significant question of general impact," we will consider the argument. See Yuckert, 774 F.2d at 1367.

The County contends that the regulation adopting the relevant "salary test" is invalid because it is contrary to the FLSA and congressional intent. The Administrative Procedure Act ("APA") reflects the familiar principle that courts reviewing agency action will "hold unlawful and set aside agency action, findings, and conclusions found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. Sec. 706(2)(A). In Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984), the Supreme Court further defined this test. It stated that if Congress has directly spoken to a precise question and the intent of Congress is clear, "the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Id. If the "statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 843, 104 S.Ct. at 2781. Thus, we must first determine whether Congress directly addressed whether the salary test should apply...