Wheeler v. Hampton Tp.

• Decision Date: 24 February 2005
• Docket Number: No. 04-1728.,04-1728.
• Citation: 399 F.3d 238
• Parties: William WHEELER, II, an individual, and Robert J. Lomb, an individual, on behalf of themselves and other individuals similarly situated, Appellants, v. HAMPTON TOWNSHIP.
• Court: U.S. Court of Appeals — Third Circuit

399 F.3d 238

William WHEELER, II, an individual, and Robert J. Lomb, an individual, on behalf of themselves and other individuals similarly situated, Appellants, v. HAMPTON TOWNSHIP.

No. 04-1728.

United States Court of Appeals, Third Circuit.

Argued November 18, 2004.

February 24, 2005.

COPYRIGHT MATERIAL OMITTED

Robert A. Eberle (Argued), Joseph S. Pass, Jubelirer, Pass & Intrieri, P.C., Pittsburgh, for Appellants.

Suzanne B. Merrick (argued), Gaitens, Tucceri & Nicholas, P.C., Pittsburgh, for Appellees.

Before ROTH, SMITH, and BECKER, Circuit Judges.

OPINION OF THE COURT

SMITH, Circuit Judge.

This appeal arises out of a suit filed by the full-time police officers of Hampton Township, Pennsylvania to recover overtime pay under the Fair Labor Standards Act ("FLSA" or "the Act"). 29 U.S.C. §§ 201-19 (2004). The officers contend that the Township's method of calculating overtime shortchanged them under the FLSA, even though they agreed to that method in a collective bargaining agreement. The Township argues that, while the officers bargained away in the agreement one of their rights under the FLSA, the Township overcompensated the officers by bargaining away a more valuable right under the FLSA and thus offset the Township's liability under the Act. The District Court upheld the Township's position, holding that the collective bargaining agreement satisfies the overall requirements of the FLSA, even though it contains concessions by both parties not envisioned in the Act. We conclude that the FLSA does not support applying the Township's alleged concession as an offset, and therefore we will reverse the judgment of the District Court.¹

I.

A.

The genesis of this dispute is a collective bargaining agreement ("CBA") that established the terms of employment for the full-time police officers ("the Officers") of Hampton Township from January 2000 through December 2003.² While the parties agree on how the CBA calculates overtime, they sharply disagree over whether the CBA's calculation provides all the overtime required under the FLSA.

The CBA provides as follows. The Officers are entitled to a specified "basic annual salary," which varies according to the officers' rank, and annual percentage raises to that salary. For example, a starting patrolman under the CBA received a basic annual salary of approximately $37,000 in 2000, $38,000 in 2001, and $39,000 in 2002. A normal workweek under the CBA is five consecutive days in any seven day period, and a normal work day lasts eight consecutive hours in any 24-hour period.

Overtime pay is provided under the CBA for work over eight hours in a single workday, and for work over 40 hours in a single workweek. Overtime pay rates are calculated by dividing the officers' basic annual salary by 2,080 and multiplying the resulting figure by 1.5. To illustrate, a starting patrolman in 2000 earning $37,000 who worked 10 extra hours (i.e., 50 total hours) in a given week would be entitled to $266.90 ($37,000/2,080 = $17.79 × 1.5 = $26.69 × 10 = $266.90) in overtime payments for that week.

The CBA provides two other broad categories of remuneration that are relevant to the present dispute. First, the CBA provides pay for certain non-working time ("non-work pay"), including

• 11 paid annual holidays (e.g., New Year's Day, Memorial Day, etc.),

• 2 paid annual personal days,

• paid annual vacations of varying length depending on seniority, and

• 1.5 paid sick days each month.

With the exception of vacations, which are to be paid at the "regular weekly rate," a term that is not defined, the CBA does not explain what amounts the Officers are paid for these non-working days. Second, the CBA provides specified incentive/expense payments ("incentive/expense pay"), including:

• monthly longevity pay for senior officers,

• annual pay for educational attainment,

• increased hourly pay for shift commanders, and

• annual stipends for uniform replacement, maintenance, and cleaning.

In contrast to non-work pay, the CBA provides precise dollar figures for each category of incentive/expense pay. For example, an officer receiving a bachelor's degree from an accredited institution in a field directly related to the officer's responsibility receives an additional $250.00 per year.

B.

In their complaint, the Officers argued that the FLSA mandates that their basic annual salary be augmented before the base hourly rate is calculated for overtime purposes. Specifically, the Officers claimed that the CBA impermissibly took their basic annual salary alone, divided it by 2,080, and multiplied that figure by 1.5 to establish their overtime pay rate. Instead, according to the Officers, the CBA should have added the four items of incentive/expense pay to their basic annual salary, divided the sum by 2,080, and multiplied that (higher) figure by 1.5 to establish their overtime pay rate. The Officers sought to recover the amount of overtime lost during the three years preceding the suit, interest on that amount, liquidated damages, attorneys' fees, and costs.

The Township did not deny that the CBA established the overtime calculation described by the Officers. Rather, the Township argued that the Officers traded their right to have incentive/expense pay added to their basic annual salary in the CBA's overtime calculation in exchange for the inclusion of non-work pay, which is not required under the FLSA. According to the Township, because the value of the latter far outweighed the former, the basic annual salary (and, hence, the ultimate overtime rate) was inherently higher than it otherwise would have been — indeed, higher than if non-work pay had been excluded from the calculus and incentive/expense pay had been included. "Hampton Township and the Police department have negotiated a method of calculating overtime rate of pay which exceeds the minimum legal rate established under the FLSA," the Township concluded. (Emphasis in original.)

The District Court agreed with the Township. According to the Court, the focus of the FLSA's overtime compensation scheme "is on the total overtime compensation received by the employee," not on whether the parties have complied with specific components of the FLSA. As support for this proposition, the Court cited Minizza v. Stone Container Corporation, in which we stated that the "FLSA was not intended to emasculate the ability of labor and management to be creative in resolving labor disputes in a manner which is mutually beneficial ... to all parties involved in such negotiations." 842 F.2d 1456, 1463 (3d Cir.1988). To adopt the Officer's argument, the District Court stated, would be to stand in the way of "innovative collective bargaining," obstruction forbidden in Minizza. The District Court held that "as long as the officers were compensated `at a rate of not less than one and one-half times the regular rate,' they have not made out a statutory violation, regardless of the formula used by the employer (in negotiations with the union) to achieve that result." (Emphasis in original.) According to the District Court, the Officers did not dispute that the CBA exceeded the FLSA's overall requirements for calculating overtime, and consequently they failed to state a claim for which relief could be granted.

II.

We review a decision granting a motion to dismiss for failure to state a claim de novo. Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 653 (3d Cir.2003). "Dismissal for failure to state a claim is appropriate only if it `appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id. (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

A.

As this dispute turns on applying the FLSA to the CBA, we begin by laying out the controlling provisions of the statute. Under the FLSA, covered employers may not employ any employee "for a workweek longer than forty hours unless such employee receives compensation for his employment ... at a rate not less than one and one-half times the regular rate at which he is employed." 29 U.S.C. § 207(a)(1).³ In turn, "the `regular rate' at which an employee is employed shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee, but shall not be deemed to include ... payments made for occasional periods when no work is performed due to vacation, holiday, illness ... and other similar payments to an employee which are not made as compensation for his hours of employment." 29 U.S.C. § 207(e)(2).⁴

In construing the foregoing provisions, the parties agree on much. The parties of course agree that the Officers must receive one-and-a-half times their "regular rate" of pay. They also agree that § 207(e) establishes that the regular rate "shall not be deemed to include" non-work pay, but that the regular rate "shall be deemed to include" all remuneration, including incentive/expense pay. Still further, the parties agree that the CBA's version of the "regular rate" — what it calls the "base hourly rate" — does not include incentive/expense pay,⁵ and that non-work pay comprises some portion of the CBA's base hourly rate. The disagreement in this case is whether the FLSA allows the Township to offset the exclusion of incentive/expense pay from the base hourly rate with a "credit" for including non-work pay in the base hourly rate. According to the Township, it deserves such a credit because the base hourly rate includes non-work pay even though § 207(e) states that the regular rate "shall not be deemed to include" such pay. The District Court agreed.⁶

1. 29 U.S.C. § 207(e)

The Township's argument for a credit founders on the text it cites to support its position. That provision, § 207(e), states that an employee's "regular rate" of pay "shall not be deemed to include ... payments made for occasional periods when no work is performed ... and similar payments." 29 U.S.C. § 207(e)(2). According to the...