Lead Opinion
The City of Los Angeles (the “City”) and the City’s Department of Water and Power (the “DWP”) (collectively, the “Defendants”) appeal from a grant of summary judgment to the plaintiff-employees on their Fair Labor Standards Act (“FLSA”) claim for overtime wages. The Defendants contend the employees are exempt from the overtime requirements of the FLSA because they are professional, executive or administrative employees who were at all times compensated on a salary basis. The employees do not dispute that their duties were executive, professional or administrative, but argue that they were not compensated in a manner consistent with a salary basis because they were subject to partial week suspensions for violations of rules unrelated to safety.
I. BACKGROUND REGULATIONS AND CASELAW
A. The Salary Basis Test
Under Wage and Hour Administration regulations, an employee is considered to be paid on a salary basis if his pay “is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C.F.R. § 541.118(a). The salaried status of an employee, however, is not affected by “penalties imposed in good faith for infractions of safety rules of major significance.” 29 C.F.R. § 541.118(a)(5). Nor does a suspension of a salaried employee for a full week change the salaried status, because the policy is “subject to the general rule that an employee need not be paid for any workweek in which he performs no work.” 29 C.F.R. § 541.118(a). Thus, a disciplinary suspension of less than a full workweek for rea
B. Auer v. Robbins
In Auer v. Robbins,
At the Court’s request, the Secretary of Labor filed an amicus brief regarding its interpretation of the salary basis regulation. Id. at 461,
In Auer, there had been only one actual deduction under what the Court called “unusual circumstances.” Id. at 462,
The employees here are governed by the Los Angeles City Civil Service Commission’s “Guide to Disciplinary Standards.” The guide lists various offenses and sets forth suggested actions for the first, second and third offenses. Suspensions are suggested for some offenses, including ones that are not related to violations of major safety rules. The guide does not require suspension for certain offenses and does not distinguish between salaried and hourly employees. On March 12,1998, the Mayor of Los Angeles issued a directive to the heads of all City departments, prohibiting the suspension of “any exempt employee, whose salary is above the time and one-half cap ... for less than a workweek, unless such discipline is related to a major violation of a safety rule.” Reviewing the City’s disciplinary guide in light of Auer, the district court concluded that there was not an employment policy which created a significant likelihood of disciplinary deductions. This ruling has not been appealed.
C. “Actual Practice”
The district court did, however, find that the first prong of Auer had been satisfied because both the City and the DWP had an “actual practice” of making improper disciplinary deductions. This ruling was based on the court’s conclusion that there had been eight impermissible suspensions by the City over a six-year period, and six by the DWP during the same time frame.
Our few decisions on the disciplinary suspension issue since Auer focus on the “policy” prong of Auer or dismiss the “actual practice” argument with little discussion. See, e.g., McGuire v. City of Portland,
Our recent case decision in Klem v. County of Santa Clara,
Relying on Klem and on yet another amicus brief filed by the Secretary, the Second Circuit has similarly noted that “there can be no bright-line test for determining what constitutes an ‘actual practice’ of making impermissible deductions,” stressing that the object of the inquiry must be “whether the employer’s practices reflect an ‘objective intention’ to pay its employees on a salaried basis.” Yourman v. Giuliani,
In some cases, the number of suspensions alone may be sufficient indicia of the employer’s intent to resolve the “actual practice” determination. For example, the number may be so small that there would be no way to say that the employer meant to treat an entire class of employees as hourly rather than salaried by virtue of one or two isolated suspensions. See Paresi v. City of Portland,
To determine whether the employees were entitled to summary judgment here, we must determine how many improper suspensions actually occurred and whether there were any extenuating circumstances surrounding such suspensions.
II. STANDARD OF REVIEW
A grant of summary judgment is reviewed de novo. Bagdadi v. Nazar,
III. THE CITY OF LOS ANGELES
A. Facts
The parties stipulated to the bulk of the material facts. The plaintiffs employed by the City were members of six different bargaining units, all of which were represented by the Engineers and Architects Association (“EAA”). There were over 5,500 employees in the six bargaining units, but only about 600 who were purportedly paid on a salary basis. Over a six-year time frame, the City imposed partial week disciplinary suspensions on nineteen employees who were members of the same EAA bargaining units as the plaintiffs. These nineteen employees were purportedly paid on a salary basis and thus did not receive time and a half for hours worked in excess of a normal workweek.
In opposition to the employees’ motion for summary judgment, the City provided an affidavit by the City’s administrative analyst, Royce Menkus. Menkus’s affidavit explains that he contacted various City departmental personnel officers to learn more about the stipulated suspensions, and the affidavit summarizes the results of his inquiries. According to Menkus’s declaration, nine of the suspended employees had actually been paid hourly at the time of their suspensions and received overtime compensation of 1.5 times their hourly rate. In addition, Menkus reported, one employee was suspended for violation of a major safety rule, another was subsequently reimbursed for the suspension, and yet another was salaried at the time of the suspension, but disciplined for an act which occurred while paid on an hourly basis.
The employees objected to the Menkus declaration, claiming that it lacked proper foundation and that the information contained in it was inadmissible under Federal Rules of Evidence 802, 901 and 1002. While not explicitly ruling on the employees’ objection, the district court did consider information from the declaration when ruling on the summary judgment motion.
The district court disregarded eleven of the nineteen disciplinary suspensions, finding they were consistent with the salary basis regulations because nine employees were paid on an hourly basis at the time they were suspended, one was suspended for a major safety violation, and one was suspended but later reimbursed. The
The parties then stipulated to the amount of overtime compensation due, but could not agree whether the employees were entitled to liquidated damages pursuant to 29 U.S.C. § 260. The employees moved for summary judgment on the liquidated damages claim, which the district court granted. The City appeals from both the liability and damages rulings.
B. Suspensions of More than a Week
The City argues that the district court improperly counted the suspensions of four employees who were suspended for more than a week. The City argues that it is only suspensions of less than a week that are problematic under the regulations.
The district court dismissed this argument as without merit, relying on the provision in the salary basis regulation which indicates that a salaried employee “must receive his full salary for any week in which he performs any work, without regard to the number of days or hours worked.” 29 C.F.R. § 541.118(a). Under the district court’s interpretation, if an employee were suspended from Monday to Friday of one week and Monday and Tuesday of the next week, the employee would perform work on Wednesday, Thursday and Friday of the second week and be entitled to full salary for the second week as a result.
Although we have never explicitly addressed the propriety of disciplinary suspensions of more than a week, we have suggested that only even-week suspensions comply with the salary basis test. See Stanley,
The Secretary does not consider unpaid disciplinary suspensions of a fall-week pay period to violate the salary basis rule, because the Secretary has adopted a general policy, reflected in 29 C.F.R. § 541.118(a), not to question the salaried status of an employee who receives no pay in a week in which the employee performs no work.
On the other hand, it is also easy to see where the City’s confusion might arise. Until now, no case has specifically addressed disciplinary suspensions of more than a full week. The cases which have addressed partial-week suspensions tout
The Secretary may have chosen suspensions of less than a week simply as an illustrative example to contrast against full-week suspensions. But it may also be that only those suspensions of less than a week are troubling to the Secretary. There are no other regulations pertaining to this issue; indeed, the entire “actual practice” concept has been developed by caselaw and aided by the briefing of the Secretary. See, e.g., Auer,
Although we agree with the district court that suspensions of more than a week run afoul of the salary basis test, we do not find the City’s position as wholly unreasonable as the district court believed it to be. It appears that the City believed these suspensions to be permissible under the FLSA,
If there were, as the district court concluded, only eight improper suspensions over six years, with fully half of those occurring as the result of an erroneous but not absurd interpretation of the law, we would be hesitant to agree with the district court that the employees were entitled to summary judgment on this issue. In fact, other circuits have upheld summary judgment in favor of the employer in somewhat similar circumstances. DiGiore,
The employees, however, contend that it was error for the district court to have considered the Menkus declaration, and that if the declaration were disregarded, the remaining stipulated facts would provide an alternative ground for affirming the grant of summary judgment in their favor. We therefore turn to the merits of their evidentiary objection to the declaration.
C. The Menkus Declaration
As noted above, the employees argued that the Menkus declaration lacked foundation and that the information it contained was inadmissible under Federal Rules of Evidence 802, 901 and 1002. To
The Menkus affidavit appears inadequate under Rule 56(e). Not made on personal knowledge, it did not set forth facts that would be admissible in evidence. It is clear from the affidavit that Menkus was not personally involved in any of the disciplinary suspensions, and that he did not personally review any business records containing information regarding such disciplinary suspensions. Menkus instead relied on information from (unsworn) departmental personnel officers, and the source of these officers’ information is unclear. Rather than set forth facts that would be admissible in evidence, the affidavit was instead based on inadmissible hearsay. Fed.R.Evid. 802. It was thus an abuse of discretion to consider the information contained in the Menkus declaration.
D. Actual Practice
It turns out that disregarding the Menkus declaration leads us to the same conclusion as the district court. Without it, we are left with the City’s stipulation that it suspended nineteen purportedly salaried employees for disciplinary reasons. Six of these suspensions were for more than a week.
E. Window of Correction
Although the City appealed the district court’s determination that it could not avail itself of the “window of correc
F. Liquidated Damages
The City also appeals the district court’s determination that the employees are entitled to liquidated damages. If an employer has violated the FLSA, the employees are entitled to liquidated damages unless the employer meets its burden of proving both that the employer acted in subjective good faith and that it had reasonable grounds for believing it was not violating the FLSA. 29 U.S.C. § 260; 29 C.F.R. § 790.22(b). The statute thus establishes a test with both subjective and objective components. Bratt v. County of Los Angeles,
We agree with the district court that the City did not present sufficient evidence to survive summary judgment on objective good faith. As noted above, a few suspensions were for more than one week, and these were perhaps the result of an erroneous but not completely unreasonable interpretation of the salary basis regulations and developing caselaw. The City, however, did not explain how or why it believed it was complying with the FLSA with respect to any of the remaining thirteen suspensions. Because the City did not show that a genuine issue existed with respect to the objective component, the district court properly awarded summary judgment to the employees on this issue.
IV. THE DWP
A. Facts
Seventeen plaintiffs were employed by the DWP. These plaintiffs were represented by the EAA in a single bargaining unit of “Supervisory Professionals.” There were approximately 100-200 employees in this bargaining unit with wages comparable to the plaintiffs’. The parties stipulated that the DWP had suspended three employees in the same bargaining unit for disciplinary violations. The DWP also employed management employees who were members of a different bargaining unit, and during the same time frame suspended four of these employees for various disciplinary violations.
The district court grouped both sets of employees, which resulted in a total of
B.Relevant Class of Employees
In reaching its determination that the DWP engaged in an “actual practice” of making improper disciplinary suspensions, the district court considered the suspensions of four DWP management employees, who were employees of a different rank and members of a different bargaining group than the plaintiffs. The DWP argues that it was error for the court to do so, as the managers were governed by a different collective bargaining agreement and because the “factors that govern the discipline of a manager are distinct from— and often more severe than — those that influence the discipline of a subordinate.”
The DWP’s argument, however, is also foreclosed by our decision in Klem. Klem involved two related groups of plaintiffs— nurses and managers — who were both purportedly salaried employees and both subject to the same disciplinary procedures pursuant to Santa Clara County Ordinance.
C. Safety Rule
One of the DWP managers was suspended for “violating safety rules, procedures, or accepted practices, which results in injury, disability, or death, interruption or degradation of electric or water services, or damage to equipment or property.” Although suspensions for violations of major safety rules are permissible under the salary basis test, 29 C.F.R. § 118(a)(5), the district court considered this suspension as improper because there was “no evidence the safety rule violated was one of major significance.”
The DWP contends it was error for the district court to have considered this suspension as improper, and we agree. On a motion for summary judgment, all inferences should have been drawn in favor of the DWP, the nonmoving party. Bagdadi,
D. Reimbursement
The employees contend that the district court improperly disregarded the suspension of one DWP employee because the employee was subsequently reimbursed. We agree.
The employee in question was suspended for three days for “requiring excessive supervision or instruction in performance of duties; failing to carry out assigned work adequately, directly or promptly; and unnecessarily disrupting the work of other employees.” The employee’s labor union then negotiated for a documented oral warning in lieu of an unpaid suspension. As the employees point out, the fact that the union was successful in reducing the penalty does not detract from the fact
E. Actual Practice
We are therefore left with seven total suspensions by the DWP, six of which violate the salary basis test. One of these six suspensions was for more than a week, which, as discussed in Section III.B. above, appears to have been the result of an erroneous legal interpretation. Three of the remaining five suspensions occurred prior to the mayor’s directive which prohibited suspensions of salaried employees for less than a workweek. Construing all these circumstances in favor of the DWP as the non-moving party, we cannot say that the employees would be entitled to judgment as a matter of law. A reasonable factfinder could infer from the facts and circumstances surrounding the suspensions that the improper suspensions “do not amount to a pattern or practice of violations demonstrating an intention not to pay employees on a salaried basis.” Klem,
V. CONCLUSION
The district court’s grant of summary judgment against the City on the liability issue is properly supported in the record. The district court also correctly determined that the City could not use the “window of correction” to remedy the improper suspensions and that the employees were entitled to liquidated damages.
In light of the circumstances surrounding the relatively few improper disciplinary suspensions imposed by the DWP over the course of several years, however, it was inappropriate to grant summary judgment in favor of the DWP employees. A reasonable factfinder could find that the DWP did not objectively intend to treat the employees as hourly instead of salaried. Summary judgment against the DWP is reversed on all issues.
AFFIRMED IN PART AND REVERSED IN PART. Each party to bear its own costs on appeal.
Notes
. We note that the mayor's directive in 1993, which was apparently an attempt to bring the City’s actions into conformity with the salary basis regulations, also only prohibited suspending salaried employees for "less than a workweek.”
.We also note that not only was the affidavit improper under Rule 56(e), but it actually purported to contradict stipulated facts. Although the City had already stipulated that the nineteen disciplined employees were paid on a salary basis and did not receive overtime, Menkus asserted in the declaration that nine of these were actually paid on an hourly basis when suspended. A parly cannot create a genuine issue of material fact to survive summaiy judgment by contradicting his earlier version of the facts. Radobenko v. Automated Equip. Corp.,
. Although in section III.B. above we discuss four suspensions of more than a week, there were in fact six stipulated suspensions of more than a week. The two additional suspensions had been disregarded by the district court for other reasons based on the Menkus declaration, and thus must now be considered.
. We consider the mayor’s directive to be significant because if the City continued to suspend purportedly salaried employees in violation of the directive, it is more likely that the City did not truly consider these employees to be salaried.
. This section provides:
The effect of making a deduction which is not permitted under these interpretations will depend upon the facts in the particular case. Where deductions are generally made when there is no work available, it indicates that there was no intention to pay the employee on a salary basis. In such a case the exemption would not be applicable to him during the entire period when such deductions were being made. On the other hand, where a deduction not permitted by these interpretations is inadvertent, or is made for reasons other than lack of work, the exemption will not be considered to have been lost if the employer reimburses the employee for such deductions and promises to comply in the future.
. The City contends that Klem conflicts with our earlier decision in Paresi,
Concurrence Opinion
I concur.
The reason that I write separately is that section III(B) is unnecessary to the opinion and should be deleted. In section III(C) and (D), we hold that the Menkus declaration is not competent evidence, and without it, the city failed to establish a genuine issue of fact.
The majority acknowledges that: (1) “we have never explicitly addressed” the issue of greater than a week suspensions;
It is a bad idea to decide what we do not have to decide in this important and difficult area. A panel majority should not reach out to make law that need not be made. And because the rule stated in section III(B) is, as the majority must and does concede, unnecessary to resolution of the case, it is dictum anyway.
. Maj. Op. at 418-19.
. Id. at 419.
. Id. at 417.
. Id.
. Id. at 417.
. Id. at 418.
. Id.