Verna Clarke v. Amn Services, LLC
987 F.3d 848
9th Cir.2021Background:
- Plaintiffs Clarke and Wittmann are traveling clinicians placed by AMN Services who received both an hourly wage and a weekly per diem when assigned more than 50 miles from their tax homes.
- AMN treated traveling clinicians’ per diems as nontaxable reimbursements (based on federal CONUS rates) and excluded them from the FLSA regular-rate calculation; local clinicians received identical per diems but AMN treated those as taxable wages included in the regular rate.
- Per diems required only an employee affirmation that their tax home was >50 miles away; no expense receipts were required; per diems were capped at a weekly amount that covered seven days while most clinicians typically worked three 12-hour shifts.
- AMN prorated per diems when clinicians missed required shifts (originally by hours, later by shifts), allowed clinicians to ‘‘bank’’ extra hours to offset missed shifts, and made limited exceptions (e.g., canceled shifts).
- Plaintiffs sued for unpaid overtime under the FLSA and California law; the district court granted summary judgment for AMN, but the Ninth Circuit reversed, holding the record shows the per diems functioned as compensation, not expense reimbursement.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AMN’s per diems can be excluded from the FLSA regular rate under 29 U.S.C. § 207(e)(2) | Per diems are effectively wages and should be included in the regular rate | Per diems are reasonable reimbursements for travel-related meals, lodging, and incidentals and thus excludable | Per diems functioned as compensation, not reimbursement, and must be included in the regular rate |
| Whether tying per diem reductions to missed shifts/hours makes them wages | Tie to shifts/hours shows payments vary with work and thus compensate labor | Prorating avoids paying for personal days and does not transform reimbursement into wages | Prorating regardless of reason for absence and use of banked hours shows the payments are tied to hours worked and operate as wages |
| Significance of paying identical per diems to non‑traveling (local) clinicians | Identical payments treated as wages for local clinicians shows the per diem functions as pay for all clinicians | Local clinicians’ treatment is an incentive design choice and not dispositive for travelers | Paying identical amounts and treating local per diems as wages strongly indicates the per diems function as compensation for travelers too |
| Whether using CONUS rates or lack of receipts supports exclusion | CONUS-based amounts reasonably approximate expenses and thus qualify as reimbursements | No substantiation required; amount alone shouldn’t determine function | Amounts or reliance on CONUS rates are not dispositive; the substance/function of the payments controls, and here the payments function as wages |
Key Cases Cited
- Local 246 Utility Workers Union of Am. v. S. Cal. Edison Co., 83 F.3d 292 (9th Cir. 1996) (payments whose entire function is to ensure workers receive prior wage levels are compensation and not excludable)
- Flores v. City of San Gabriel, 824 F.3d 890 (9th Cir. 2016) (cash-in-lieu payments were compensation and must be included in the regular rate)
- Newman v. Advanced Tech. Innovation Corp., 749 F.3d 33 (1st Cir. 2014) (pierce labels; per diem reductions tied to hours worked indicate payments function as wages)
- Gagnon v. United Technisource, Inc., 607 F.3d 1036 (5th Cir. 2010) (per diem paid at an hourly rate and capped at forty hours functioned as wages)
- Baouch v. Werner Enterprises, Inc., 908 F.3d 1108 (8th Cir. 2018) (payments tied to miles driven functioned as wages and were includable)
- Sharp v. CGG Land (U.S.), Inc., 840 F.3d 1211 (10th Cir. 2016) (flat per diem paid only for days required to be away from home functioned as reimbursement and was excludable)
- Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018) (FLSA exemptions are construed under a fair, not narrow, interpretation)