165 F. Supp. 3d 742
E.D. Wis.2016Background
- Three City of Sheboygan employees (DPW and Police) sued as a putative class asserting FLSA overtime and Wisconsin wage‑claim (Ch. 109) violations; cross‑motions for summary judgment were filed.
- In 2012–2014 the City adopted a performance evaluation program for non‑represented employees that produced merit/incentive increases; amounts above a job maximum were paid as lump‑sum "over‑the‑scale" bonuses at the anniversary payroll date.
- The City offered an HRA (2012–2013) that reimbursed employees for medical expenses via a third‑party administrator; employees also paid 10% of health premium costs set by consultants.
- The City transferred surplus health plan funds into worker‑compensation reserves in certain years; employees’ benefits were not reduced by those transfers.
- Plaintiffs sought inclusion of over‑the‑scale bonuses, HRA reimbursements, education bonuses, and opt‑out payments in the FLSA regular‑rate; they also alleged improper wage deductions under Wis. Stat. § 102.16(3).
- The City defended on the merits and argued Wisconsin’s governmental notice‑of‑claim statute (§ 893.80) bars the state claims and (it argued) should bar the whole suit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Wis. Stat. § 893.80 bars the state wage‑claim (Ch. 109) action | § 893.80 should not bar Ch. 109 claims or collective claims; Ch. 109 procedures (DWD audits) conflict with notice requirement | § 893.80 requires written notice within 120 days to sue a municipality; failure to comply bars Ch. 109 claims | Ch. 109 claims are barred by § 893.80; notice requirement applies and does not conflict with Ch. 109 (state claims dismissed) |
| Whether over‑the‑scale lump‑sum bonuses must be included in FLSA regular rate | Bonuses are effectively promised and tied to objective evaluation criteria and thus are part of regular rate | Bonuses are discretionary, uncertain, and not tied to hours so excludable under § 7(e)(3) | Bonuses are not purely discretionary; tied to objective criteria and routinely paid; must be included in the regular rate (plaintiffs entitled to summary judgment on these FLSA claims) |
| Whether HRA medical reimbursements are excludable from regular rate as employer contributions or as expense reimbursements | City: HRA functions like employer contribution under § 7(e)(4) or falls within reimbursement exception § 7(e)(2) | Reimbursements are not irrevocable contributions to a trustee; payments benefit employees personally | HRA reimbursements do not meet § 7(e)(4) and are personal to employees; they must be included in the regular rate |
| Remaining remedies and scope | Plaintiffs seek damages and classwide relief | City contests willfulness and amount; argues notice bar to state claims and other defenses | Court granted FLSA summary judgment on inclusion issues (bonuses, HRA, education and opt‑out pay); damages and willfulness of 2012 payments remain for trial; § 893.80 bars the state law claims |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Felder v. Casey, 487 U.S. 131 (federal courts may hear civil rights claims despite state notice prerequisites)
- E‑Z Roll Off, LLC v. County of Oneida, 335 Wis.2d 720 (Wis. 2011) (three‑factor test whether a statute is exempt from § 893.80 notice requirements)
- Cleveland v. City of Los Angeles, 420 F.3d 981 (9th Cir. 2005) (scope of FLSA regular‑rate exclusions)
- Wang v. Chinese Daily News, Inc., 435 F. Supp. 2d 1042 (C.D. Cal. 2006) (incentive/bonus payments tied to objective criteria may create an implied bonus contract includable in regular rate)