881 F.3d 285
4th Cir.2018Background
- Balbed worked as an innkeeper for Eden Park Guest House from July 2015 to January 2016 under a written agreement: $800/month cash plus a room, utilities, laundry, and breakfast in exchange for front‑desk, cleaning, breakfast service, and other duties.
- The written schedule expressly allocated 29 hours/week for breakfast and cleaning but left unspecified time for nightly check‑ins (4:00 p.m.–9:30 p.m., as needed) and other duties (phones, reservations, emails, social media).
- Balbed sued claiming Eden Park failed to pay minimum and overtime wages under the FLSA, Maryland law, and Montgomery County law; the district court granted summary judgment for Eden Park.
- Eden Park argued the parties’ agreement was a “reasonable agreement” under 29 C.F.R. § 785.23 (live‑in employees) and that lodging and other in‑kind benefits could be credited toward wages.
- The Fourth Circuit reversed: it held § 785.23 does not excuse compliance with § 203(m) rules governing valuation and recordkeeping for in‑kind wages, and remanded for factual findings about the reasonable value of lodging, adequacy of records (or acceptable reconstruction), and whether the contract’s hours were reasonable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 785.23 permits ignoring § 203(m) requirements for in‑kind wage credits | Balbed: § 785.23 does not displace § 203(m); employer must satisfy § 203(m) valuation and recordkeeping | Eden Park: a "reasonable agreement" under § 785.23 eliminates need to follow § 203(m) rules | Court: § 785.23 governs hours only; it does not excuse compliance with § 203(m) valuation/recordkeeping requirements — employer must meet § 203(m) rules |
| Whether Eden Park adequately valued lodging and other in‑kind compensation | Balbed: Eden Park failed to keep required contemporaneous records and thus cannot claim the lodging credit | Eden Park: lodging value can be based on market/guest rates and thus shows wages met minimums | Court: employer must use § 203(m) methods (reasonable cost or fair value, no profit), provide records; reconstructed records may be accepted if reasonable; remand to determine value and record sufficiency |
| Whether the written agreement was a "reasonable agreement" re: hours under § 785.23 | Balbed: contract may undercount hours — additional duties and on‑call check‑in hours could make 29 hrs/week unreasonable | Eden Park: contract requires only 29 hours/week; on its face reasonable | Court: reasonableness is a factual inquiry; remand for findings whether employee was "engaged to wait" (work time) during check‑in hours and whether 29 hours reasonably covered all duties |
| Whether failure to comply with FLSA resolution disposes of state/local claims | Balbed: state/local claims survive even if § 785.23 applies | Eden Park: state claims preempted or resolved by federal analysis | Court: Expresses no view — remands for district court to consider state/local claims after FLSA factual findings |
Key Cases Cited
- Donovan v. New Floridian Hotel, Inc., 676 F.2d 468 (11th Cir. 1982) (employer bears burden to prove reasonable costs of meals/lodging; failure to prove costs is fatal to claimed credit)
- Garofolo v. Donald B. Heslep Assocs., 405 F.3d 194 (4th Cir. 2005) (§ 785.23 agreements binding if reasonable in light of all pertinent facts)
- Leever v. Carson City, 360 F.3d 1014 (9th Cir. 2004) (reasonableness of live‑in agreements judged by all facts and circumstances)
- Brock v. City of Cincinnati, 236 F.3d 793 (6th Cir. 2001) (§ 785.23 agreements valid if within broad zone of reasonableness)
- Skidmore v. Swift & Co., 323 U.S. 134 (1944) (distinguishing being "engaged to wait" vs. "waiting to be engaged" as FLSA work‑time inquiry)
- IBP, Inc. v. Alvarez, 546 U.S. 21 (2005) (hours worked includes time performing tasks for employer or waiting to perform tasks)
- Kelly v. Hines‑Rinaldi Funeral Home, Inc., 847 F.2d 147 (4th Cir. 1988) (application of Skidmore test to on‑site overnight employment)