117 F.4th 1070
9th Cir.2024Background
- The case concerns whether staff nurses employed by the City and County of San Francisco are entitled to overtime pay under the Fair Labor Standards Act (FLSA) or are exempt as salaried, bona fide professional employees.
- The City set annual salaries for nurses through negotiation and published salary ordinances, but calculated actual pay by dividing the annual salary into an hourly rate and paying only for hours worked.
- Nurses could work full or part-time and receive supplemental pay for overtime, per diem shifts, or shift differentials, but their base compensation could be reduced for unexcused absences or if leave time was exceeded.
- The plaintiffs alleged that compensation was not on a true salary basis, and that improper pay deductions had occurred.
- The district court granted summary judgment for the City, holding the nurses were salaried under the published ordinance, and thus exempt from overtime requirements.
- Plaintiffs appealed, arguing that the City’s actual pay practices did not meet the FLSA salary basis test.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are staff nurses paid on a 'salary basis' and thus exempt from overtime under FLSA? | Nurses are paid hourly and compensation varies with hours worked, not predetermined salary. | Annual compensation is predetermined, and published in the salary ordinance, thus meeting salary basis test. | The ordinance alone isn't dispositive; factual questions remain about actual pay practices and adherence to salary basis. |
| Does the City's system of hourly accounting for public employees satisfy the FLSA's 'salary basis' requirement? | Hourly-based system fails salary basis test as pay varies with hours rather than a fixed amount. | Hourly accounting is permissible for public employers under 'public accountability' principle and relevant regulations. | The City must do more than show a lawful ordinance; actual practice and opportunity for full compensation must be demonstrated. |
| Did the City make improper deductions from staff nurses' pay, losing the exemption? | Evidence shows at least 72 pay periods with less than full-time equivalency hours credited, suggesting improper deductions. | Any discrepancies were either justified, isolated, or corrected through internal procedures. | There are material disputes regarding whether deductions were proper, precluding summary judgment. |
| Can the City rely on the 'window of correction' for any improper deductions? | No evidence City reimbursed nurses for all improper deductions; correction window inapplicable. | Correction process works and errors are fixed when found. | No evidence of reimbursement for all discrepancies; thus, summary judgment inappropriate. |
Key Cases Cited
- Helix Energy Solutions Group, Inc. v. Hewitt, 598 U.S. 39 (2023) (clarifies salary basis test and distinction between hourly/daily and weekly compensation under FLSA)
- Encino Motorcars, LLC v. Navarro, 584 U.S. 79 (2018) (FLSA exemptions to be given fair, not narrow, construction)
- Auer v. Robbins, 519 U.S. 452 (1997) (isolated improper deduction does not show actual practice and does not lose exemption)
- Garcia v. San Antonio Metro. Transit Authority, 469 U.S. 528 (1985) (expanded FLSA application to public employees)
- McGuire v. City of Portland, 159 F.3d 460 (9th Cir. 1998) (municipal use of hourly systems may comply with salary basis test, subject to FLSA regulation)