OPINION
NORTON, District Judge:
This is a case brought by Plaintiffs-Appellees, a group of police officers employed by Defendant-Appellant Chesterfield County, Virginia ("County"), for back pay compensation under the Fair Labor Standards Act
We disagree with the lower court that summary judgment for Plaintiffs was appropriate. Instead, after reviewing the record and the FLSA, we believe that summary judgment should have been granted for the employer County. We find that fundamental to determining the validity of an employee's straight time claim under the FLSA is a determination by the trier of fact of the terms of the employee's express or implied employment agreement. If the employee has been paid for all nonovertime hours at a lawful rate pursuant to an employment agreement to which that employee has impliedly or expressly agreed, and the employee has also been paid at a lawful rate for all overtime hours, then the employee does not have a claim for an hourly compensation dispute under the FLSA. Additionally, we disagree with the lower court that the FLSA is the proper vehicle to pursue back pay for straight time in pay cycles in which an employee has worked no overtime and has been paid at least minimum wage for all hours worked. Considering the evidence in the record with respect to the terms of Appellees' employment agreements in conjunction with the FLSA's express remedies and historical purpose, we reverse the judgment of the lower court and instead grant summary judgment for Defendant-Appellant.
I.
We review the district court's grant of summary judgment de novo. Miller v. FDIC, 906 F.2d 972, 974 (4th Cir.1990). In reviewing a district court's grant of summary judgment, the "appellate court is required to apply the same test the district court should have utilized initially." Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977). All evidence must be viewed in the light most favorable to the nonmoving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 123-24 (4th Cir. 1990). "[W]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, disposition by summary judgment is appropriate." Teamsters Joint Council No. 83 v. CenTra, Inc., 947 F.2d 115, 119 (4th Cir.1991). Further, "when an appeal from a denial of summary judgment is raised in tandem with an appeal of an order granting a cross-motion for summary judgment, we have jurisdiction to review the propriety of the denial of summary judgment by the district court." Sacred Heart Medical Ctr. v. Sullivan, 958 F.2d 537, 543 (3d Cir.1992) (citing Nazay v. Miller, 949 F.2d 1323, 1328 (3d Cir.1991)). "In addition, where, as here, the facts are uncontroverted, we are free to enter an order directing summary judgment in favor of the appellant." Id. at 543 (citing Nazay, 949 F.2d at 1328).
II.
This case was brought by twelve
Each officer is paid an annual salary that the County converts to a biweekly paycheck equal to a non-fluctuating base amount of 1/26th of his annual salary. The County converts their annual salaries to an hourly rate solely to determine the officers' applicable overtime rate. All advertisements placed by the County for job openings solicited applicants for salaried positions. Applicants are also informed of their potential compensation in terms of an annual salary during the interview process. The officers are listed in the Chesterfield County personnel manual as FLSA nonexempt
The officers regularly work hours above the normally scheduled 135 hours, and the County has paid overtime at a rate equal to time and a half for all hours worked in excess of the 147 hour overtime threshold. Additionally, the County pays the officers overtime for all call-outs, extra shifts, court appearances, and special assignments during off duty hours even if the officers have not reached the overtime threshold during a pay cycle. There are numerous times when the officers worked more than the regularly scheduled 135 hours, but did not exceed the 147 hour overtime threshold.
At issue in this action is back pay at a straight time rate for any of the hours worked "in the gap" during cycles in which the police officers have worked in excess of the regularly scheduled period.
By ruling in favor of Plaintiffs' summary judgment motion, the lower court held that the County was liable under the FLSA for both Claim 1 "overtime gap time" and Claim 2 "pure gap time." We disagree with the district court's interpretation of the applicability of the FLSA under the circumstances of this case. Today we attempt to place some common sense limitations on claims for straight time brought pursuant to the FLSA.
III.
As noted by the district court, the FLSA has been termed the "minimum wage/maximum hour law." Monahan v. Chesterfield County, Va., Civil No. 3:94CV844, at 4 (E.D.Va., Apr. 4, 1995) (hereinafter "Order"), J.A. 93. "The two central
Id. at 578, 62 S.Ct. at 1220 (quoting 81 Cong. Rec. 4983, 75th Cong., 1st Sess. (1937)); see Mullins v. Howard County, Md., 730 F.Supp. 667, 672 (D.Md.1990). "The substantive sections of the FLSA, narrowly focusing on minimum wage rates and maximum working hours, bear out its limited purposes." Lyon, 45 F.3d at 764. Made applicable to state and municipal governments by the Supreme Court's landmark decision in Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985), the FLSA promulgates specific minimum wage and maximum hour requirements. Section 206 of the FLSA mandates the hourly minimum wage due to all employees whereas section 207 delineates maximum work hour limitations. 29 U.S.C. §§ 206-207. Section 207 requires that an employer pay overtime at a rate of one and a half times an employee's regular rate for all hours worked in excess of forty per week. 29 U.S.C. § 207(a)(1). Recognizing the unique nature of the work performed by police officers and firefighters, Congress provided a partial exemption to the FLSA's overtime requirements for public agency employers. Id. § 207(k). However, it is well settled that "`[e]xemptions from or exceptions to the Act's requirements are to be narrowly construed against the employer asserting them.'" Johnson v. City of Columbia, S.C., 949 F.2d 127, 129-30 (4th Cir.1991) (quoting Donovan v. Brown Equip. & Serv. Tools, Inc., 666 F.2d 148, 153 (5th Cir.1982)). Further, the "FLSA should be given a broad reading, in favor of coverage. It is a remedial statute that `has been construed liberally to apply to the furthest reaches consistent with congressional direction.'" Kelley v. Alamo, 964 F.2d 747, 749-50 (8th Cir.1992) (quoting Mitchell v. Lublin, McGaughy & Assocs., 358 U.S. 207, 211, 79 S.Ct. 260, 264, 3 L.Ed.2d 243 (1959)). Even in light of the broad interpretation given to the FLSA's remedial provisions and the narrowness of its exceptions, we believe the statute's use in this case to be far beyond that intended by its original congressional drafters and many of today's applicable Department of Labor regulations and interpretations. Additionally, its attempted use in this case represents a major expansion of federal jurisdiction in an area that is more appropriate for state court adjudication under state employment and contract law.
IV.
Historically, the majority of FLSA claims in federal court are employee claims for minimum wage and maximum hour violations, but recently employees have been adding on claims for straight time under the auspices of the FLSA. There are not many recent cases addressing this straight time or "gap time" pay issue; however, two cases, both originating before the same judge in the District Court for the District of Kansas, appear to provide the most recent interpretations of
In early 1991, the issue of straight time pay under the FLSA was addressed by Lamon v. City of Shawnee, Kan., 754 F.Supp. 1518 (D.Kan.1991) (hereinafter "Lamon I"), aff'd in part, rev'd in part, vacated in part, 972 F.2d 1145 (10th Cir.1992) (hereinafter "Lamon II"), cert. denied, 507 U.S. 972, 113 S.Ct. 1414, 122 L.Ed.2d 785 (1993). Lamon I was an FLSA case brought by a group of Shawnee, Kansas, police officers. Id. at 1521-21. Lamon I came before the court on the issue of damages under the FLSA subsequent to a jury trial in which the jury found "that defendant had established a 28-day work period which partially exempts defendant from paying overtime compensation at a rate of one and one-half times plaintiffs' regular hourly wages for hours worked from 160 to 171 per 28-day work period." Id. at 1520; see 29 C.F.R. § 553.230. The plaintiff police officers worked an 8 ½ hour shift, but were not compensated for their thirty minute meal period within that shift unless they were called to duty. Lamon II, 972 F.2d at 1148. However, even though under the 28-day/171 hour cycle, the City was only obligated to pay overtime for hours worked in excess of 171, "the City ... abided by the practice of paying overtime for all work, excluding uninterrupted meal periods, in excess of forty hours per week, or 160 hours per 28 days." Id. at 1148. With respect to the uncompensated meal time,
Id. at 1521 (footnote omitted). Therefore, as a result of the jury's determination, the Lamon I court held that plaintiffs were entitled to compensation for meal time under the FLSA. Id. The court then had to determine the rate of back pay for these unpaid meal periods. Plaintiffs argued that the unpaid meal hours should be paid at an overtime rate. On the other hand, the City claimed that because these unpaid meal hours did not total more than ten hours per 28-day cycle and since the City had properly compensated plaintiffs at an overtime rate for all hours over 171, any hours between 160 and 171 were compensable only at minimum wage. See id.; 972 F.2d at 1155. Because the compensable meal hours, when added to all other hours worked in a cycle, did not exceed the 171 hour overtime threshold, the court found that the City was liable for an amount equal to the unpaid meal hours at plaintiff's regular hourly rate. Lamon II, 972 F.2d at 1149. The court noted the City's contention that there was no requirement under the FLSA to pay for the hours between 160 and 171 per pay cycle, but rejected this argument explaining in footnote one of the Lamon I opinion:
Id. at 1521 n. 1.
In 1992 both parties in Lamon I appealed, resulting in a written opinion of the Tenth Circuit Court of Appeals in Lamon II, 972 F.2d 1145. One of the appellate issues was "the proper calculation of mealtime compensation." Id. at 1155 & n. 4. Although the jury found these meal periods were compensable and the district court determined they were compensable at the regular rate, defendant argued that the hours between 160 and 171 were not compensable under the FLSA when the 171 hour threshold was not exceeded, Lamon I, 754 F.Supp. at 1520, but if compensable, that minimum wage was the proper rate. Lamon II, 972 F.2d at 1155. The Tenth Circuit affirmed the lower court on the meal time rate issue stating that "the trial court correctly calculated the rate at which Plaintiffs would be compensated for mealtimes, if adjudged compensable." Id. at 1159 (emphasis added). The court explained:
Id. at 1155 (emphasis added). In affirming that the regular rate was the proper rate of compensation for the meal periods, the Tenth Circuit cited to footnote one in the Lamon I opinion. In so doing, the Tenth Circuit was simply following labor regulations that require all hours worked up to the overtime threshold, including compensable meal time hours, be paid at the regular rate. See 29 C.F.R. §§ 553.221, -223. It is clear to us that the decisive issue in the Lamon II affirmance, which indirectly addressed straight time gap pay, was the jury's verdict that the City had not complied with the meal time exemption of 29 C.F.R. § 553.223 and the court's damages determination of the rate by which to compensate plaintiffs for meal time. In other words, as we read the Lamon cases, they did not specifically address straight time claims under the FLSA, but rather addressed the compensable rate of back pay for meal time which "fell in the gap" between 160 and 171 hours during a 28-day cycle.
In 1994 the same judge who heard Lamon I also presided over another Kansas case brought under the FLSA by approximately 401 law enforcement plaintiffs. Schmitt v. Kansas, 844 F.Supp. 1449, 1451 (D.Kan.1994)
Addressing the straight time claims for periods with no overtime first, the Schmitt I court noted the State's position as follows:
Id. at 1457 (emphasis added) (footnotes omitted).
In pertinent part, the Letter Ruling provides as follows:
Id. at 1457 (quoting DOL Letter Ruling, unnumbered, Oct. 22, 1987 (hereinafter "1987 DOL Letter Ruling")) (emphasis added). In addition to the case law supporting the general rule and the 1987 DOL Letter Ruling, the court recognized that 29 C.F.R. § 778.322 also supported the State's position.
Id. at 1458 (emphasis added). Judge Saffels noted a similarity between the issues presented in Lamon and Schmitt and stated: "Accordingly, plaintiffs argue that, like the employees in Lamon, they are entitled to be compensated at their regular rate for all hours worked between 160 and 171...." Id. at 1458. The Schmitt I court made this determination although recognizing in a footnote that the basis of the Lamon I decision was compensation for unpaid meal time at the regular rate. The court noted:
Id. at 1458 n. 10 (emphasis added). The Schmitt I court denied the State's motion for summary judgment because the State was unable to provide controlling authority contrary to the Lamon II holding which the court thought, as Tenth Circuit authority, was "good law and relevant." Id. at 1459. Therefore, although Judge Saffels saw these cases to be factually similar, there is clearly a basic difference between the Lamon meal time, which fell in the gap, and the Schmitt pure gap time claim.
With respect to straight time for periods in which plaintiffs worked overtime, the Schmitt I court also denied the State's motion for summary judgment. Id. at 1459-60. In so doing, the court found 29 C.F.R. § 778.315 and 29 C.F.R. § 778.317 to be "directly on point." Id. at 1460. The court stated: "In these two regulations, the Administrator explains that an employer has not paid overtime in accordance with FLSA unless the employer has paid the employee at her regular rate for all straight time worked in that period." Id. at 1459. The Schmitt I court ultimately denied both parties' motions for summary judgment on the straight time claims finding that there was a genuine issue of material fact as to whether plaintiffs' monthly salary compensated them for all nonovertime hours per period or just for those hours worked up to 160. Id. at 1460-61.
After a denial of both parties' summary judgment motions, the Schmitt I case proceeded to a nonjury trial in which the State ultimately prevailed. Schmitt v. Kansas, 864 F.Supp. 1051 (D.Kan.1994) ("Schmitt II"). Although noting his displeasure with the ultimate result because he felt that the State had not "treated the plaintiffs fairly" as law enforcement officers, Judge Saffels reluctantly found that the State's 28-day compensation plan was "within the law." Id. at 1052-53. As in Schmitt I, the Schmitt II opinion again recognized that plaintiffs' straight time claim was "contrary not only to the discussion found in 29 C.F.R. § 778.322, but also to a considerable body of additional authority." Id. at 1062 (footnotes omitted).
In summary, we see the Lamon cases as standing for the proposition that meal time hours must meet the requirements of 29 C.F.R. § 553.223 to be exempted from pay, and if they are nonexempt and have not been properly paid, they must be paid at a regular rate if the total meal time hours do not exceed the overtime threshold of the applicable pay cycle. We do not believe, by affirming the lower court on the meal time rate of payment issue, that the Tenth Circuit in Lamon II unequivocally stated that employees can make out a viable claim for pure gap time under the FLSA. Most importantly, we believe that Schmitt II stands for the proposition that to the extent that there can exist a straight time claim under the FLSA, the court must first determine the terms of the employment agreement. If there is no minimum wage or maximum hour violation, there is also no claim under the FLSA for straight time gap pay if employees have been properly compensated by salary for all nonovertime hours in accordance with the employment terms to which they have either expressly or impliedly agreed. With these cases in mind, we now turn to the appeal at hand.
V.
We find that based on the evidence in the record, the employees in this case were properly compensated by an annual salary for all nonovertime hours for which they either expressly or impliedly agreed to work. Because we are hearing this appeal on cross-motions for summary judgment, we reverse the district court's ruling in favor of Plaintiffs on Claim 1 and Claim 2 and instead grant summary judgment in favor of Defendant-Appellant with respect to both Claims.
In granting summary judgment for Plaintiffs on Claim 1, overtime gap time, the district court relied on the official interpretations promulgated by the Department of Labor, in particular 29 C.F.R. § 778.315 and 29 C.F.R. § 778.317.
In this case, we believe that there was more than ample evidence in the record for the court to determine the terms of Plaintiffs' employment agreements and that those terms as a matter of law did not violate the FLSA. The overwhelming evidence leads to but one conclusion: these officers knew they worked on a salaried basis and knew or should have known that their salary was intended to compensate them for all hours worked up to the overtime threshold.
In determining Plaintiffs should be compensated for gap time when overtime hours were worked during a pay cycle, the district court first looked to 29 C.F.R. § 778.315. This interpretation expressly requires that in order to determine overtime compensation, one must first look to the employment agreement to determine whether the employer has first paid all straight time due under the agreement. It states:
§ 778.315 (emphasis added). Therefore, under 778.315, if (1) all straight time compensation due to the employee for nonovertime hours under the express or implied employment agreement or applicable statute has been paid and (2) the employee has been compensated at a rate of at least time and a half for all hours worked in excess of the maximum allowed, the employer has acted in compliance with the FLSA. In this case, we find that the County complied with this regulation. In fact, the County had a pay structure that not only complied with the FLSA, but was also very beneficial to the officers because it even exceeded the compensation system required by the FLSA.
First, considering the evidence in the record concerning the terms of the employment agreement, Defendant presented the affidavit of the Chesterfield County Chief of Police, Joseph E. Pittman, who served as the Chief for over nineteen years and had been employed in the County Police Department since 1957. Pittman Aff. ¶ 1, J.A. 44. Referring to the County's "Classification and Compensation Plan, Fiscal Year 1994-1995," he testified that the officers are "classified by the County as non-exempt salaried employees." Id. ¶ 2. He further stated that the annual salary paid to Plaintiffs "is intended to apply to all hours worked up to the FLSA overtime threshold." Id. ¶ 3. Additionally,
J.A. 53-54 (emphasis added). Under this policy, if overtime is paid for all hours worked in excess of a set threshold, the only reasonable inference is that the salary paid to the officers compensated them for all hours worked up to that overtime threshold.
The Chesterfield County Police Department's Human Resources Administrator, John McLenagen, presented an affidavit in which he stated:
McLenagen Aff. ¶¶ 2-3, J.A. 58. Attached to McLenagen's affidavit are copies of five separate classified ads from 1992 to 1995, all of which advertise openings in the County Police Department, solicit applicants and describe the benefits of and qualifications for the jobs. In each ad, the compensation is listed in terms of an annual salary ranging from $23,455 to $24,628. McLenagen's affidavit provides support to the proposition that any applicant responding to the advertisements knew or should have known that the County police officer position was a salaried position.
In spite of this evidence, Appellees repeatedly claim that the County never specifically told them the number of hours for which their salary was intended to compensate. For example, Appellees' Brief states:
Id. at 286 (citations omitted) (citing Bodie v. City of Columbia, S.C., 934 F.2d 561, 566 (4th Cir.1991), and Johnson v. City of Columbia, S.C., 949 F.2d 127, 131 (4th Cir.1991)). Although there were no written contracts between the officers and the County, there clearly existed an employment agreement. Further, we do not believe that there needs to be any written contract, state law, regulation or statute, nor any collective bargaining agreement to reveal what is obvious from the terms of the written County Policy in addition to the parties' conduct. The County hired and consistently paid the officers a salary and told them the hourly threshold during the work cycle that they would begin receiving overtime. The officers knew their compensation in terms of an annual salary, they accepted a biweekly check for the same non-fluctuating base amount every two weeks, they repeatedly worked hours above and below the normally scheduled 135 hours per pay cycle, and they were always paid overtime after 147 hours. We believe that the well-educated and intelligent men and women serving as law enforcement officers today, including those in Chesterfield County, are clearly capable of comprehending the material terms of their employment. Further, we do not find that the FLSA places the burden on the employer to hold an employee's hand and specifically tell him or her that the salary "fully compensates him or her up to the overtime threshold," if that fact can be easily gleaned from employment policies, practices, and procedures.
Looking to the hourly pay system the County utilized, it complied with the applicable labor regulations and was even financially beneficial to the officers in numerous respects. The labor regulation that lists the maximum hours for work periods for law enforcement officers states:
______________________________________________
Maximum hours standards
Work period (days) Law enforcement
______________________________________________
28............. 171
27............. 165
26............. 159
25............. 153
24 ............. 147
29 C.F.R. § 553.230 (emphasis added). The County complied with this regulation by paying the officers overtime for all hours worked in excess of 147 in each 24-day cycle. Not
J.A. 67 n. 1.
In spite of the County's compliance with the maximum hour mandates of the FLSA, Plaintiffs contend in Claim 1 that because the County regularly scheduled them for 135 hours per cycle, instead of the 147 maximum allowed, their salary only compensated them for those 135 hours and that they are therefore due the gap compensation when overtime hours were worked. This argument seems counter-intuitive and rather absurd for several reasons. First, if the County had scheduled the officers for all hours up to the 147 hour threshold per cycle, Plaintiffs would not be before us today because there would be no "gap time" issue, but the officers would be working three to twelve more hours per pay cycle
Not only did the County comply with the FLSA's maximum hour mandates, but it also complied with its minimum wage and overtime calculation provisions. The County paid the officers a salary that converted to a regular hourly rate well in excess of the statutory minimum wage. From 1991 to 1994, the converted hourly wage of Plaintiffs varied between $10.01 per hour and $16.09 per hour. Powers' Aff., J.A. 32. The County's method of determining the overtime or premium rate paid to the officers did not
Again, the officers put forth an argument that is contrary to their best financial interests in attacking the County's calculation of their overtime rate. They implicitly argue that the County should have used a higher divisor equal to the annual number of 2,234 threshold hours.
We think manipulating the math to create such an inference is a stretch at best. More plausible and quite logical is that the County used the base number of 2,080 hours per year because this number reflects an employee working 40 hours of straight time per week and the FLSA is based on an overtime compensation scheme for hours worked in excess of 40 per week. We note other municipalities have used the 2,080 hour divisor without impunity under similar circumstances. See e.g., Schmitt II, 864 F.Supp. at 1055, 1057 & nn. 8-9. Therefore, we do not believe that use of the 2,080 divisor was in any way violative of the law nor could rationally lead to an adverse inference that the agreed upon salary was intended to compensate the officers for an amount of hours below the threshold.
In deciding Plaintiffs were due straight time compensation for Claim 1 overtime gap time hours, the district court also relied on 29 C.F.R. § 778.317, which specifically addresses "Agreements not to pay for certain nonovertime hours." There is no evidence in the record that leads us to believe that this interpretation even applies. The interpretation states:
29 C.F.R. § 778.317. In this case, we find no express or implied agreement not to compensate the officers for the gap hours. Rather, the County's contention that the agreement was that the salary compensated the officers for all hours worked up to the threshold is fully supported by the record. The fact that the officers were regularly scheduled for less than the threshold does not indicate that there was any agreement not to compensate them for the gap hours, but instead is more likely indicative of County policy not to schedule them for all hours for which they were already being compensated thereby providing a three to twelve hour buffer per cycle before overtime compensation must be paid. Payment plans that comply with the FLSA, but yet are designed with the flexibility inherent to the law enforcement exemption to explicitly avoid the incurment of overtime hours are not unlawful. Adams v. City of McMinnville, 890 F.2d 836, 839-40 (6th Cir.1989) (finding lawful a reduction in firefighters' work hours to avoid payment of overtime made in response to legitimate budgetary restraints). But see Walling v. Helmerich & Payne, 323 U.S. 37, 42, 65 S.Ct. 11, 14, 89 L.Ed. 29 (1944) (finding unlawful sham changes in employment scheduling and wages made simply to avoid the FLSA's mandates). "The FLSA guarantees that premium compensation will be paid to employees who work overtime hours. But it does not guarantee employees that they will be able to work overtime hours in order to receive premium pay." Id. at 840; see Blackie v. State of Maine, 75 F.3d 716, 723 (1st Cir.1996); York v. City of Wichita Falls, 48 F.3d 919, 920-21 (5th Cir.1995). "Section 207k gives employers of fire protection and law enforcement personnel greater leeway in structuring wage and time calculations." Lamon II, 972 F.2d at 1153.
The lower court also indicated, by citation only, a reliance on 29 C.F.R. § 778.322 which addresses "Reducing the fixed workweek for which a salary is paid." Order at 7, J.A. 96. Again, we find that this interpretation provides Plaintiffs no support, because there is no evidence to indicate that there was any understanding of the parties that Plaintiffs' work schedule was reduced from one fixed hourly work cycle to another fixed hourly work cycle. Section 778.322 in part states:
29 C.F.R. § 778.322 (emphasis added).
There is no evidence in the record indicating that the officers were hired for any fixed hourly "work period"
Having concluded that summary judgment for Plaintiffs on Claim 1 overtime gap time was inappropriate, we find that summary judgment should be granted instead for the County. The evidence of the employment agreements leads to only one rational conclusion—that Plaintiffs were properly paid an annual salary to which they either expressly or impliedly agreed and they worked under an employment agreement which in no way violated the FLSA.
VI.
We now turn to Plaintiffs' Claim 2 for "pure gap time." We also find that there is no cause of action under the FLSA for pure gap time when there is no evidence of a minimum wage or maximum hour violation by the employer. Again, because we are hearing this appeal on cross-motions for summary judgment, we reverse the district court's ruling in favor of Plaintiffs on Claim 2 and instead grant summary judgment in favor of Defendant-Appellant.
The lower court erroneously relied on 29 C.F.R. § 778.114 and Lamon I & II in rendering its decision on pure gap time pay. First, we do not believe that 29 C.F.R. part 778, which specifically deals with "Overtime Compensation," and in particular "Subpart B — The Overtime Pay Requirements," which contains section 778.114, are even applicable when there is no overtime compensation at issue. See 29 C.F.R. § 778.1 ("This part 778 constitutes the official interpretation of the Department of Labor with respect to the meaning and the application of the maximum hours and overtime pay requirements contained in section 7 of the Act."). Although the guidance these sections provide for determining situations in which overtime must be paid are instructive, if no overtime was worked during a pay period, these overtime interpretations cannot provide a basis for a straight time claim.
In this case, the officers contend that their salary only compensated them for the 135 regularly scheduled hours whereas the County contends the agreed upon salary compensated the officers for all hours up to the 147 hour threshold. Regardless of which way this contractual dispute is resolved, we see no FLSA violation under either circumstance. Logically, in pay periods without overtime, there can be no violation of section 207 which regulates overtime payment. Further, it is undisputed that all Appellees have been compensated well in excess of the statutory minimum wage for all hours worked; therefore, there can be no violation of section 206. Finding no violation of section 206 and no violation of section 207, we conclude that there can be no violation of the FLSA for failure to pay such pure gap time claims. Although we might agree with the sentiments of the district judge and that of Judge Saffels in Schmitt II that law enforcement officers throughout this nation perform a crucial and often thankless job for woefully inadequate salaries, so too do many people believe that public school teachers, nurses, sanitation department workers and air traffic controllers perform similar demanding and important jobs for likewise inadequate salaries. But, we do not believe a pure gap time remedy can be derived under the auspices of FLSA when such a remedy does not exist under the law. Even though the financial terms of an employee's agreement may not be as lucrative as the employee desires, parties should be free to negotiate those terms without government interference as long as the agreed upon terms do not violate the minimum wage/maximum hour requirements of the FLSA. See Walling, 323 U.S. at 42, 65 S.Ct. at 14.
Although one of the County's contentions below was that it was operating in compliance with the fluctuating workweek exemption of section 778.114 and the district court looked to this section in analyzing the officers' straight time claims, we do not agree that this section has any application to straight time claims when no overtime has been worked. Section 778.114 provides for a fluctuating workweek method of overtime compensation in which an employee, with hours that fluctuate from week to week, can be paid a salary that serves as compensation for all straight time hours worked during a week whether few or many. 29 C.F.R. § 778.114(a). Utilizing the mathematical payment structure provided under this method of overtime compensation, the more the employee works and the more overtime the employee logs, the less he or she is paid for each additional hour of overtime. See § 778.114(b). Further, because the salary is intended to compensate the employee for all hours worked during the week, the employer is obligated to pay overtime at a rate of only half the employee's regular rate as opposed
Having looked to this section, the district court took the "clear mutual understanding" test, which an employer must prove to utilize the fluctuating workweek method of overtime payment, and imposed it as a burden on the County with respect to pure gap time claims when there was not any overtime issue. The court stated: "Thus, the crux of the instant matter is whether or not the parties had a clear mutual understanding that an officer's salary is fashioned to compensate all hours worked up to the overtime threshold." Order at 14, J.A. 103. In fact, we see nothing in the regulations, interpretations or the FLSA law that requires an employer to demonstrate that there exists a clear mutual understanding with respect to the number of nonovertime hours for which an employee's salary is designed to compensate if no overtime is worked. That issue is simply one of contract law. Rather, section 778.114 places the burden on the employer to demonstrate the existence of such a clear mutual understanding when the employer attempts to utilize the fluctuating work week method of payment which is an exemption to the strict overtime requirements of the FLSA and which results in the salaried employee receiving half time overtime rather than time and a half overtime.
In addition to erroneously relying on section 778.114, the district court also adopted the reasoning in Lamon I, finding the commentary in the opinion's footnote one to be persuasive. Order at 16-17, J.A. 105-06 (citing Lamon I, 754 F.Supp. at 1521 n. 1). The lower court stated:
Order at 17, J.A. at 106 (emphasis added). We obviously agree that employees should be compensated for all hours due them under the terms of their employment agreement. The primary purpose of 29 U.S.C. § 207(k) is to provide a public employer with a partial exemption from the normal requirement that overtime pay is due after a forty hour work week. If the terms of the employment agreement are such that a paycheck compensates the employee for all hours worked up to the overtime threshold, and the employer pays the employee the agreed upon amount, the employee has in fact received straight time pay for all nonovertime hours. If the employee has not worked any overtime and has received an hourly wage equal to or in excess of the statutory minimum wage, there can be no FLSA violation. If the same employee has worked overtime and has been paid properly for all overtime hours worked, then again there has been no FLSA violation.Further, we believe the lower court's reliance on Lamon I was misplaced because,
We believe our interpretation is consistent with not only the remedial purposes and historical intent of the FLSA, but also with a long history of FLSA case law, the current labor regulations and interpretations, and the 1987 DOL Letter Ruling. As noted in Schmitt I & II, there is a considerable body of case law that supports our conclusion, including the 1969 opinion of this Court in Blankenship v. Thurston Motor Lines, Inc., 415 F.2d 1193, 1198 & n. 6 (citing United States v. Klinghoffer, 285 F.2d 487 (2d Cir. 1960)). Schmitt I, 844 F.Supp. at 1457 n. 6; Schmitt II, 864 F.Supp. at 1062 n. 18. Additionally, we find rather persuasive the recent opinion in Arnold v. Arkansas, 910 F.Supp. 1385 (E.D.Ark.1995), in which the court held that a pure gap time claim had no basis in federal court because there was no FLSA violation under the circumstances. Similar to the facts at hand, facing the Arnold court were claims for overtime gap time and pure gap time, id. at 1393 n. 32, and the plaintiff employees had been properly compensated for all overtime hours. Id. at 1391 & n. 36. The court recognized that the "two central themes of the FLSA are its minimum wage and overtime requirements." Id. at 1392. Addressing the pure gap time claim, the Arnold court noted that "the relief afforded an employee aggrieved by a violation of section 206 or 207 is limited to `their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional amount equal as liquidated damages.'" Id. at 1393 (quoting 29 U.S.C. § 216(b)) (emphasis added). The court went on to note that 29 U.S.C. § 215 lists the "prohibited acts" under the FLSA to be violations of section 206's minimum wage law, section 207's maximum hours law, section 212's child labor law and section 211(c) pertaining to record keeping requirements and regulations issued regarding apprentices and impaired employees. Id. The court ultimately concluded that "Plaintiffs' claim for straight time pay when no overtime was
As further recognized by Schmitt I & II, we believe the current DOL interpretations of the FLSA are supportive of our position. In fact, we do not believe that section 778.322 could be more supportive of the County's position. Section 778.322 presents an example of an employee, originally hired for a fixed forty-hour workweek at a $200 per week salary, whose workweek is later reduced pursuant to an understanding of the parties to thirty-five hours per week, thereby increasing his regular rate from the original $5.00 per hour to $5.71 per hour. Although such an employee is due payment at his regular rate for hours between 35 and 40 when he also works overtime, section 778.322 emphatically states that in weeks in which the employee works no overtime "only the provisions of section 6 of the Act, requiring the payment of not less than the applicable minimum wage for each hour worked, apply so that the employee's right to receive $5.71 is enforceable only under his contract." § 778.322 (emphasis added). Therefore, for any cycles including gap hours in which no overtime has been worked and the County has paid more than the applicable minimum wage, under 778.322, the officers' claim to gap time compensation is enforceable only under their employment agreement.
Section 778.323, which immediately follows section 778.322, further amplifies the example provided in 778.322. Section 778.323 discusses the effect if a salary is for a "variable workweek" and again highlights the fact that a basic understanding of the terms of an employment agreement is step one in determining any FLSA claim. It states:
29 C.F.R. § 778.323 (1995) (emphasis added). Under this section, we believe that even if the officers maintain that their hourly work requirement was reduced to 135 hours per cycle, it is very reasonable for the County to simultaneously maintain that, even with such reduction, the express or implied terms of the officers' employment agreements were that the salary compensated them for all hours worked up to 147 in light of the continued acceptance of their paychecks. Additionally, we find that the "variable workweek" contemplated in section 778.323 is entirely different from the "fluctuating workweek" method of overtime payment provided in section 778.114 because as is evident from the example in section 778.323, the variable workweek employee is still being paid time and a half overtime as opposed to the half-time overtime provided in 778.114. As such, section 778.323 does not mention nor require the employer to demonstrate the existence of a "clear mutual understanding" as required under the fluctuating workweek method of payment.
Finally, we find additional support in the 1987 DOL Letter Ruling quoted in Schmitt II above. "While opinion letters are not binding on the courts, they do constitute `a body of experienced and informed judgment' which have been `given considerable and in some cases decisive weight.'" Schultz v.
1987 DOL Letter Ruling. As applied to this case, whether the officers' salaries compensated them for a minimum of 135 hours or a maximum of 147 hours, it is undisputed they received at least the minimum wage for all hours worked. Therefore, in accordance with the DOL Letter Ruling, the officers have been properly compensated under the FLSA.
Having looked to the case law, the legislative intent in enacting the FLSA and the current DOL regulations and interpretations, we feel that the greater weight of authority, along with common sense, supports the position that we reach with respect to pure gap time claims. We therefore reverse the ruling of the district court on this issue and instead grant summary judgment for the County.
VII.
In conclusion, although we recognize the importance of the FLSA's broad protections, we believe that freedom of contract between an employer and an employee is one of the precepts of the free market economy upon which this nation was founded. In evaluating a potential straight time claim, the trier of fact must look to the terms of the employment agreement and determine those terms based on the evidence of the implied or express agreement between the parties. That agreement can be determined by a written contract as well as by the everyday employment practices of the parties. As in this case, we do not believe that employees can feign ignorance of employment terms when their actions simultaneously demonstrate otherwise. For there to be an overtime gap time cause of action under the FLSA, a violation of section 206 or 207 of the Act must first exist. If the employee has been properly paid at or above minimum wage for all nonovertime hours under the terms of the employment agreement and at a proper overtime rate for all overtime hours, then the employees must look to contract law for relief concerning any disagreements about the number of hours for which his or her salary was intended to compensate. Simply put, if the terms of the employment agreement do not violate the FLSA, freedom of contract prevails.
Absent a minimum wage/maximum hour violation, we find no remedy under the FLSA for pure gap time claims. Our ruling precludes an employee from invoking the jurisdiction of federal court on a pure gap time claim allegedly under the FLSA when there is no minimum wage/maximum hour violation. We further believe this ruling is consistent with the cautious and guarded invocation of federal jurisdiction. American Fire & Cas. Co. v. Finn, 341 U.S. 6, 17, 71 S.Ct. 534, 541-42, 95 L.Ed. 702 (1951). Based on our analysis of the record, we believe summary judgment for Plaintiffs was inappropriate. We reverse the judgment of the lower court and grant summary judgment for the County.
REVERSED.
FootNotes
Monahan Aff. ¶ 3, J.A. 42.
Comment
User Comments