ALEXIS M. HERMAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. FABRI-CENTERS OF AMERICA, INC., Defendant-Appellee.
No. 01-3080
United States Court of Appeals for the Sixth Circuit
Argued: June 14, 2002; Decided and Filed: October 17, 2002
2002 FED App. 0363P (6th Cir.) | 308 F.3d 580
Before: SILER and CLAY, Circuit Judges; WILLIAMS, District Judge.
Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 98-00970—Paul R. Matia, Chief District Judge. RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206. File Name: 02a0363p.06. *The Honorable Glen M. Williams, Senior United States District Judge for the Western District of Virginia, sitting by designation.
ARGUED: Leif Jorgenson, UNITED STATES DEPARTMENT OF LABOR, OFFICE OF THE SOLICITOR, Washington, D.C., for Appellant. Keith L. Pryatel, KASTNER, WESTMAN & WILKINS, Akron, Ohio, for Appellee. ON BRIEF: Leif Jorgenson, Paul Frieden, UNITED STATES DEPARTMENT OF LABOR, OFFICE OF THE SOLICITOR, Washington, D.C., for Appellant. Keith L. Pryatel, Harley M. Kastner, KASTNER, WESTMAN & WILKINS, Akron, Ohio, for Appellee.
CLAY, J., delivered the opinion of the court. WILLIAMS, D. J. (p. 23), delivered a separate opinion concurring in the result. SILER, J. (pp. 24-25), delivered a separate dissenting opinion.
OPINION
CLAY, Circuit Judge. Plaintiff, Alexis M. Herman, former Secretary of Labor of the United States Department of Labor (“the Secretary“), appeals from the judgment ordering Defendant, Fabri-Centers of America, Inc. (“FCA“), to pay $431,948.58 for its violations of sections 7, 11(c), 15(a)(2) and 15(a)(5) of the Fair Labor Standards Act of 1938 (“the FLSA“),
BACKGROUND
A. Procedural History
On April 24, 1998, the Secretary brought this enforcement action under section 17 of the FLSA,
The parties then prepared and filed a joint stipulation of the facts on September 14, 1998. On October 2, 1998, the parties filed their respective motions for summary judgment under
B. Substantive History
The relevant facts are undisputed. FCA owns and operates various retail stores, principally under the names of Jo-Ann Fabrics and Crafts, Cloth World, New York Fabrics, and Jo-Ann, to sell fabrics, notions and crafts. It also operates a warehouse and distribution center for the retail sale of fabrics, crafts and notions at 5555 Darrow Road in Hudson, Ohio. Pursuant to the FLSA, FCA is an “enterprise engaged in commerce or the production of goods for commerce” under
The district court succinctly explained the nature of dispute as follows:
The gravamen of this action is FCA‘s calculation of overtime. Prior to renegotiating the collective bargaining agreement, overtime pay for FCA employees was based solely on their base rate of pay. Notwithstanding the other rates of pay available at FCA, all overtime hours were compensated at the lowest rate possible. It is undisputed, however, that FCA‘s compensation plan allowed employees to earn premiums in excess of FLSA standards. These premiums accrued regardless of whether employees worked overtime. Thus, the question at the heart of this matter is whether the premiums paid
under the plan offset any alleged shortcomings in calculating overtime pay.
Plaintiff, Alexis M. Herman, Secretary of Labor, United States Department of Labor (“DOL“), contends that the FLSA dictates that FCA incorporate all employee pay rates into the base rate (or regular rate) for overtime purposes. The DOL further contends that premiums earned by employees may only offset overtime due within the same workweek. In rebuttal, FCA argues that the premiums can offset the total overtime due. After spot investigations at FCA, the DOL brought this action on behalf of FCA employees to recover overtime compensation that is allegedly owed under the former compensation plan.
(J.A. at 18-19.)
Central to these questions was the compensation formula that FCA used to determine the wages of warehouse employees during the time period in dispute, April 1, 1996 to May 17, 1998.2 The warehouse employees (“the employees“) were represented by the United Steelworkers of America, ALF-CIO-CLC (Upholstery and Allied Industries Division), Local Union No. 48U.3 The employees were assigned a job code that represented their home base within the Hudson, Ohio warehouse where the employees were typically assigned to perform their work. Under the collective bargaining agreement, the employees were paid a “base rate” when working at their primary location or home job codes in the Hudson, Ohio warehouse. Their “regular pay” was
For employees who worked outside of their home job codes, their “regular pay” was determined by the higher of one of two formulas. Under the first formula, if the calculated “average rate” resulted in compensation that was greater than the employees’ non-home base hours multiplied by their hourly base rate plus “bonus pay,” then the employees were entitled to compensation based upon their non-home base hours worked multiplied by their calculated “average rate.” The employees’ “average rate” was calculated by dividing the employees’ aggregate earnings, including “overtime pay,” for a six-month period and dividing the aggregate amount by the aggregate number of hours worked by the employees, including overtime hours, for that six-month period. If the use of the “average rate” for the employees working outside of their home job code did not result in a higher figure, then their “regular pay” was determined by multiplying their hours worked times their hourly base rate plus “bonus pay.”
Under the second formula used for employees who performed work outside of their home job codes, the employees received “bonus pay.” FCA determined “bonus pay” by using either (1) the units of merchandise completed at each bonus tier multiplied by a set bonus rate for each such tier, or (2) special bonuses calculated by the job identification. If the “average rate” for employees working outside their home job code did not result in a higher figure, then the wage equaled the product of hours worked multiplied by the base rate plus any “bonus pay.” In other words, compensation equaled the number of hours worked times the base rate, to which “bonus pay” was added.
FCA‘s warehouse employees also were paid “overtime pay,” which was calculated by the aggregate “overtime” hours multiplied by 1.5 times their hourly base rates. Employees received overtime pay when they worked more than eight hours per day, or when they worked Saturdays after working forty hours during the work week. Employees were paid
As the district court recognized, FCA did not contest the threshold issue of whether it violated the FLSA by calculating overtime payments using only the employees’ base rate. As to this matter, the district court found that FCA violated the FLSA by failing to include the nondiscretionary bonuses, “average rate,” and other “shift differentials” as part of the “regular rate.” Thus, the district court held that the Secretary was entitled to a judgment as a matter of law on its claim that FCA‘s calculation of the “regular rate” for overtime purposes was in violation of the FLSA.
Instead, FCA‘s argument in the district court focused solely on whether it could credit the contract premiums paid to its employees against the overtime pay that was owed them. Specifically, FCA, in its cross-motion for summary judgment, sought to offset the overtime pay that was owed with the contract premiums that it had paid in excess of FLSA‘s requirements. In opposition, the Secretary claimed that under
In agreeing with FCA‘s argument, the district court, relying upon Abbey v. City of Jackson, 883 F. Supp. 181 (E.D. Mich. 1995), found that “[b]ased upon the plain language of § 207,
DISCUSSION
A. Issue and Standard of Review
The issue before this Court is whether FCA may use its contract premiums to offset overtime owed to its employees only within the same workweek as the missed overtime, as the Secretary contends, or against the total amount of overtime owed, as FCA maintains, under
In deciding this case, we are guided by the principles of statutory interpretation. When interpreting a statute, this Court must begin with its plain language, and may resort to a review of congressional intent or legislative history only when the language of the statute is not clear. In re Comshare, Inc., 183 F.3d 542, 549 (6th Cir. 1999) (citing Consumer Prod. Safety Comm‘n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980)). “Where the literal language of the statute does not conclusively reveal legislative intent, the courts must look beyond literal meaning, analyzing the provision in context with the whole.” In re Arnett, 731 F.2d 358, 361 (6th Cir. 1984) (citing Kokoszka v. Belford, 417 U.S. 642, 650 (1974)). Further, we note that the FLSA, as a statute designed to protect individual rights, is “remedial and humanitarian in purpose,” and “must not be interpreted or applied in a narrow, grudging manner.” Tennessee Coal, Iron & R. R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 597 (1944); see also Lambert v. Ackerley, 180 F.3d 997, 1003 (9th Cir. 1999).
Section 207(h) addresses extra compensation creditable toward overtime compensation as follows:
(1) Except as provided in paragraph (2), sums excluded from the regular rate pursuant to subsection (e) shall not be creditable toward wages required under section 6 or overtime compensation required under this section.
(2) Extra compensation paid as described in paragraphs (5), (6), and (7) of subsection (e) of this section shall be creditable toward overtime compensation payable pursuant to this section.
1. The legislative history of § 207(h)(2)
A review of the relevant legislative history tends to favor the Secretary‘s position that the statute should be interpreted to include a workweek or work period restriction. As the parties acknowledge,
As the parties acknowledge, the life of the “toward any premium compensation due” language of Public Law 177 was short-lived. Soon thereafter, Congress, through Public Law 81-393, passed extensive revisions of the FLSA, creating the present statutory language found at
It was considered unfair to require the inclusion of contractual premiums not required by the Act in the regular rate of pay for overtime purposes, thereby making the employer pay “overtime on overtime.” See Senate Rep. No. 402, 81st Cong., 2nd. Sess. (1949). It was also considered fair to employers to give them credit for certain contractual premiums they paid against the statutory overtime they might owe. Id. As described above, however, there can only be concomitant fairness to employees if the crediting permitted by section 7(h) is limited to the workweek in which the premiums are paid.
Plaintiff‘s Br. at 16-17.
In view of these revisions of the FLSA, the Secretary reasons that it makes sense to interpret the related enactment of section 7(h) to allow for crediting on that very same workweek basis since “the problem resulting from Bay Ridge, supra, which section 7(h)(2) was enacted to remedy, involved employees who routinely received a contractual premium and worked statutory overtime in the same week.” Plaintiff‘s Reply Br. at 4-5 (emphasis in original). In further support of its interpretation of
FCA has a completely different understanding of the Congressional response in 1949 to Bay Ridge. According to FCA, the Congressional debates confirmed the view that contract premium payments may be credited against any overtime compensation due under the Act. FCA argues that the present statutory language is merely “‘somewhat watered down from its predecessor “credited toward any premium,“’ and represents only a “minor shift in text.” Defendant‘s Br. at 21-22. On FCA‘s view, the present statutory language of
However, FCA‘s statutory construction of
FCA‘s explanation as to Congress’ linguistic intent falters in this respect because the term “payable” is not customarily understood to relate to future payments. “Payable” is defined in Black‘s Law Dictionary:
Capable of being paid; suitable to be paid; admitting or demanding payment; justly due; legally enforceable. A sum of money is said to be payable when a person is under an obligation to pay it. Payable may therefore signify an obligation to pay at a future time, but, when used without qualification, the term normally means that the debt is payable at once, as opposed to “owing.”
Black‘s Law Dictionary 1128 (6th ed. 1990) (emphasis added);6 see also Trujillo v. Cyprus Amax Mineral Co. Ret. Plan Comm., 203 F.3d 733, 737 (10th Cir. 2000) (noting that the term “payable” under the Employee Retirement Income Security Act means “[c]apable of being paid; suitable to be paid; admitting or demanding payment; justly due; legally enforceable“)(quoting Black‘s Law Dictionary 1128 (6th ed. 1990)); In re Ripley, 926 F.2d 440, 444 (5th Cir. 1991) (citing
2. The FLSA as a whole and its implementing regulations
An analysis of the FLSA as a whole and its implementing regulations also favors the Secretary‘s view that
In addition, the Department of Labor (“DOL“) regulations implementing the Act support prompt payment of overtime, suggesting that the premiums should be credited within the same workweek in which they were paid. Specifically, 29 C.F.R. § 778.106 provides in pertinent part:
The general rule is that overtime compensation earned in a particular workweek must be paid on the regular pay day for the period in which such workweek ends. When the correct amount of overtime compensation cannot be determined until some time after the regular pay period, however, the requirements of the Act will be satisfied if the employer pays the excess overtime compensation as soon after the regular pay period as is practicable. Payment may not be delayed for a period longer than is reasonably necessary for the employer to compute and arrange for payment of the amount due and in no event may payment be delayed beyond the next payday after such computation can be made.
29 C.F.R. § 778.106. See Reich v. Interstate Brands Corp., 57 F.3d 574, 576 (7th Cir. 1995) (noting the “general rule is that overtime compensation earned in a particular workweek must be paid on the regular pay day for the period in which such workweek ends“) (quoting 29 C.F.R. § 778.106); see also 29 C.F.R. § 778.103 (directing employers to pay overtime due on a weekly basis); 29 C.F.R. § 778.104 (stating that an employer cannot average the number of hours worked over two weeks in order to avoid paying overtime); 29 C.F.R. § 778.202(c) (finding that credits may be given for daily overtime “against the overtime compensation which is due under the statute for hours in excess of 40 in that workweek“).
Thus, while the plain language of
3. Case law interpreting § 207(h)(2)
Given the silence in the statute as to when overtime compensation may be credited and the lack of an implementing regulation on this precise issue, it is perhaps not surprising that divergent case law has arisen. One line of case law supports the Secretary‘s interpretation that premium credits allowed by
Notwithstanding, the case law supporting the Secretary‘s interpretation appears to be more persuasive. Specifically, as noted by the Seventh Circuit in Howard, allowing the employer to use premiums to offset the total liability is inconsistent with the language and purpose of the statute:
The credit provision must be read in the context of the statute as a whole, which is designed to protect workers
from the twin evils of excessive work hours and substandard wages. Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 739 (1981); Monahan v. County of Chesterfield, Va., 95 F.3d 1263, 1267 (4th Cir. 1996). Toward that end, the statute requires the payment of time and a half for overtime work. Courts have long interpreted the FLSA as requiring that those payments be timely made. Brooklyn Sav. Bank v. O‘Neil, 324 U.S. 697, 703-07 (1945); Rogers v. City of Troy, N.Y., 148 F.3d 52, 55 (2d Cir. 1998); Calderon v. Witvoet, 999 F.2d 1101, 1107 (7th Cir. 1993). Thus, the statute is violated even if the employer eventually pays the overtime amount that was due. See Rogers, 148 F.3d at 55. In fact, that requirement may not be waived, and “even the workers’ enthusiastic assent to deferred payment--a form of employer-held savings account--is ineffectual.” Calderon, 999 F.2d at 1107. That principle is also found at 29 C.F.R. § 778.106, which provides in relevant part: The general rule is that overtime compensation earned in a particular workweek must be paid on the regular pay day for the period in which such workweek ends. When the correct amount of the overtime compensation cannot be determined until some time after the regular pay period, however, the requirements of the FLSA will be satisfied if the employer pays the excess overtime compensation as soon after the regular pay period as is practicable. Payment may not be delayed for a period longer than is reasonably necessary for the employer to compute and arrange for payment of the amount due and in no event may payment be delayed beyond the next payday after such computation can be made.
Although that regulation is not entitled to deference, . . . it is nonetheless persuasive as it is consistent with the interpretation of the FLSA that the courts have reached. Therefore, under the statute, overtime generally must be calculated and paid on a pay period by pay period basis.
The City, however, advocates a method of payment that would allow it to pay its overtime obligations at a time far removed from when that overtime amount was due. That is inconsistent with the statutory requirement that overtime payments must be timely made.
In addition, the Ninth Circuit‘s opinion in Biggs v. Wilson, 1 F.3d 1537 (9th Cir. 1993) supports the Secretary‘s contention that its interpretation prevents possible abuses of the FLSA. In that case, the Ninth Circuit addressed the issue whether an employer‘s late payment of wages constituted a violation of the minimum wage requirement provision stated in
Further, as the Secretary points out, Roland Electric Co. v. Black, 163 F.2d 417 (4th Cir. 1947) supports the idea that the statutory provision in question should operate on a workweek or work period basis. In Roland, the Fourth Circuit,
Contrary to FCA‘s argument, the Secretary‘s interpretation of
Finally, we note that the Secretary‘s interpretation of
We wish to point out that surplus overtime premium payments, which may be credited against overtime pay pursuant to section 7(h) of [the] FLSA, may not be carried forward or applied retroactively to satisfy an employer‘s overtime pay obligation in future or past pay periods.
1985 WL 304329, at *3 (DOL Wage-Hour, December 23, 1985). The Secretary claims that this interpretation is consistent with previous Wage-Hour opinion letters, 66-69 CCH-WH ¶ 30,524 and ¶ 30,527, dated December 2 and December 20, 1966, expressing the view that the workweek or work period concept is the standard point of reference for interpreting the provisions of the FLSA.
We note the pertinent content of these opinion letters for illustrative purposes; we would hold as we do even in the absence of such opinion letters. The informative nature of these opinion letters which support the Secretary‘s interpretation of
CONCLUSION
Thus, for the forgoing reasons, we AFFIRM the district court‘s order finding that FCA was liable for the aggregate amount of $545,262.21 for its overtime liabilities under the FLSA. However, we REVERSE the district court‘s order
CONCURRENCE
WILLIAMS, Senior District Judge, concurring. I concur in the result set forth in Judge Clay‘s opinion. I write separately to say that I believe that this opinion correctly follows the rules of statutory interpretation. Also, I agree with the opinion of the Seventh Circuit in Howard v. City of Springfield, 274 F.3d 1141 (7th Cir. 2001). I am of the opinion that the fourth, fifth and sixth paragraphs of the Substantive History section of this opinion have no application in this case and, at most, are dictum, in which I do not concur.
With regard to Judge Siler‘s dissenting opinion, his position has merit. However, if the law is to be corrected it should be done so by Congress or the administrative agency and not by the Court.
DISSENT
SILER, Circuit Judge, dissenting. I respectfully dissent, not because the majority opinion is illogical in its conclusion that the premium credits allowed by
The majority opinion has analyzed the case law on this point. Thus, an employer in Illinois is restricted to premium credits within the same work period in which the premiums were paid. See Howard v. City of Springfield, 274 F.3d 1141, 1149 (7th Cir. 2001); Nolan v. City of Chicago, 125 F. Supp. 2d 324, 331-33 (N.D. Ill. 2000). On the other hand, a federal employer, a Georgia employer, or, previously, a Michigan employer, could receive premium credits over a greater period of time than the same work period. See Alexander v. United States, 32 F.3d 1571, 1577 (Fed. Cir. 1994); Kolheim v. Glynn County, 915 F.2d 1473, 1481 (11th Cir. 1990); Abbey v. City of Jackson, 883 F. Supp. 181, 186-87 (E.D. Mich. 1995). It is unfair for the Secretary of Labor to force an employer to pay the additional amount of $113, 313.63 when the statute does not so provide, no regulation has ever been promulgated on the subject, and employers in other states are allowed these premium credits. As Judge Manion states in his dissent in Howard, 274 F.3d at 1149: “Neither the provisions of
Both parties agree that FCA would be entitled to a credit of any premium pay. The issue is whether the premium pay credit is limited to the same time period. The Department of Labor has for more than ten years known that there was a dispute about the limitations of the premium credits, but it has chosen not to attempt to promulgate regulations which would
Notes
e) “Regular rate” defined
As used in this section the “regular rate” at which an employee is employed shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee, but shall not be deemed to include--
* * *
(5) extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because such hours are hours worked in excess of eight in a day or in excess of the maximum workweek applicable to such employee under subsection (a) of this section or in excess of the employee‘s normal working hours or regular working hours, as the case may be;
(6) extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in nonovertime hours on other days;
(7) extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the maximum workweek applicable to such employee under subsection (a) of this section, where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek[.]