MEMORANDUM & ORDER
The named plaintiffs brought suit on behalf of themselves and others similarly situated against the City of Lowell (“the City”) for violating the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 207, by under-calculating the “regular rate” of pay used to determine overtime wages. Before the Court are the defendant’s motion for summary judgment as to damages and plaintiffs’ motion to amend the complaint.
I. Factual Background
This case involves a technical dispute with respect to the calсulation of overtime pay under the FLSA. All of the plaintiffs are or, at the time of the complaint, were employed by the City and members of the American Federation of State, County and Municipal Employees, AFL-CIO State Council 93, Local 1705. A collective bargaining agreement (“CBA”) sets forth the terms and conditions of the plaintiffs’ employment.
The CBA provides that employees may receive a $3.00 per hour augmentation to their pay for plowing snow, a 5% differential for working undesirable night shifts and a $150 weekly “standby” payment to employees at its Water Distribution System. The agreement also allows employees to earn overtime pay of one-and-one-half times their regular pay if they work in excess of eight hours in one day or forty hours in one week. The crux of this dispute concerns whether the three named pay augmentations should be included in the employees’ regular rate of pay for the purpose of calculating overtime wages and,
II. Procedural History
Plaintiffs filed their complaint on August 22, 2007 and filed an amended complaint two months later identifying 88 plaintiffs. In November, 2009, the parties filed cross-motions for summary judgment with respect to liability. The City then conceded that it had violated the FLSA by failing to include the snow plow stipend and shift differentials in the plaintiffs’ regular rate calculations.
In a Memorandum and Order (“M & 0”) on June 7, 2010, the Court found that the Water Department’s $150 standby stipend also should be included in the regular rate of pay in the weeks during which employees volunteered for standby duty.
Rudy v. City of Lowell,
On January 7, 2011, after two extensions of time, the City moved for summary judgment as to damages and the plaintiffs filed a memorandum addressing damages. Plaintiffs also moved to amend their complaint to add a сlaim for a violation of the Massachusetts Payment of Wages Law, Mass. Gen. Laws ch. 149, § 148. The parties have submitted timely oppositions to each others’ motions.
III. Motion for Summary Judgment
A. Summary Judgment Standard
The role of summary judgment is “to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.”
Mesnick v. Gen. Elec. Co.,
A fact is material if it “might affect the outcome of the suit under the governing law.”
Anderson v. Liberty Lobby, Inc.,
Once the moving party has satisfied its burden, the burden shifts to the non-moving party to set forth specific facts showing that there is a genuine, triable issue.
Celotex Corp. v. Catrett,
At this point, the parties do not dispute the facts or the defendant’s liability. All that remains for the Court to decide are questions of law relating to damages.
1. Offset Calculation
Section 207(h)(2) of the FLSA provides that
Extra compensation paid as described in paragraphs (5), (6), and (7) of subsection (e) of this section shall be creditable toward overtime compensation payable рursuant to this section.
29 U.S.C. § 207(h)(2). Only the “premium” portion of the contractual overtime rate (the extra one-half on top of the regular rate) may be used to offset the defendant’s statutory overtime liability.
O’Brien v. Town of Agawam,
Here, the CBA allows employees to treat certain non-work days such as vacation, sick and personal days as hours actually worked for the purpose of determining overtime hours. The City also pays some workers time and one-half for working on holidays. The parties do not dispute that the extra compensation provided for in the plaintiffs’ CBA falls within the compensation described in subsection (5), (6) and (7) and can be used to offset defendant’s underpayment, pursuant to § 207(h)(2).
The parties do dispute, however, whether premium compensation earned in one week can be used to offset an underpayment in a different wеek. Plaintiffs argue that their damages for unpaid overtime should be calculated on a workweek basis and that any offsets pursuant to § 207(h)(2) may only be attributed to the singular workweeks in which the premiums and overtime were earned. In other words, an underpayment one week cannot be offset by a premium payment made in a different week. The defendant contends, to the contrary, that it is entitled to a “cumulative offsеt”, consisting of all premium payments, against any FLSA overtime it owes, regardless of when the premium payments were earned or made.
The FLSA does not provide an explicit answer to this difference of interpretation and the United States Circuit Courts have taken divergent positions. Some courts have held that § 207(h) offsets should be calculated on a workweek basis.
Herman v. Fabri-Centers of Am., Inc.,
The First Circuit has not directly addressed this issue but other sessions in this District have. In
O’Brien v. Town of Agawam,
United States District Judge Michael A. Ponsor addressed facts analogous to those at bar and held that the employer could apply a cumulative offset.
Although the two cases in this District are directly analogous to this case, the Court disagrees with them with respect to their interpretation of the FLSA and of Lupien. A further analysis of the Lupien case, the purpose of the FLSA and its interpretation by the Department of Labor (“the DOL”) and the First Circuit’s language in O’Brien I all undermine the position adopted by the courts in O’Brien II and Murphy. Rather, they lead to the conclusion that § 207(h)(2) offsets should be calculated on a workweek basis for the following reasons:
1. This case is distinguishable from Lupien and other First Circuit case law indicates support for a workweek offset model. Lupien dealt with an application of § 207(o) (regulating the use of compensatory time), not § 207(h). In fact, § 207(h) is not referred to in that opinion. Furthermore, here, the employees were not given the option of taking comp time rather than overtime payments. Thus, there is no risk in our case, as there was in Lupien, that the plaintiffs will be compensated twice for the same hours. Thus, the Court concludes that the First Circuit’s decision in Lupien does not indicate how it would decide the question at bar.
More on point is the First Circuit’s discussion of § 207(h)(2) in O’Brien I, in which it stated that
The regulations specifically explain how to treat such mid-workweek contractual overtime payments under the Act: only the premium portion of the contractual overtime rate (thаt is, the amount in excess of the employee’s regular rate) is deemed “overtime” pay and may be offset against any statutory overtime liability in the same week.
O’Brien I,
2. The FLSA overtime requirement uses a single workweek as its basic unit of measurement.
Scott v. City of New York,
no employer shall employ any of his employees ... for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.
29 U.S.C. § 207(a)(1).
The focus on the unitary workweek is prevalent throughout § 207 and the DOL’s intеrpretation of that section. For example, 29 C.F.R. § 778.103 directs employers to calculate overtime liability on a weekly basis. Further, 29 C.F.R. § 778.104 provides that “[t]he Act takes a single workweek as its standard” and an employer cannot average the number of hours an employee worked in two weeks in order to avoid paying overtime:
[I]f an employee works 30 hours one week and 50 hours the next, he must receive overtime compensation for the overtime hours worked beyond the applicable maximum in the second week, even though the average number of hours worked in the 2 weeks is 40.
With regard to the exact issue before the Court, 29 C.F.R. § 778.202(c) explains that credits pursuant to § 207(h) may be given for overtime due “in that workweek”.
See Howard,
surplus overtime premium payments, which may be credited against overtime pay pursuant to section 7(h) of FLSA, may not be carried forward or applied retroactively to satisfy аn employer’s overtime pay obligation in future or past pay periods.
Letter from Herbert J. Cohen, Deputy Administrator, U.S. Dep’t of Labor, WH-526,
3. Overtime payments are intended to be paid as soon as is practicable. Although they are not entitled to deference by this Court, several of the DOL’s official interpretations of § 207 demonstrate the FLSA’s emphasis on ensuring that overtime payments are made soon after they are earned.
Howard,
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.
See also Nolan,
The reason for requiring employers to calculate and make overtime payments as soon as practicable is obvious: employees are entitled to know how much they will be paid and to prompt payment of what they have earned. As poignantly stated by the Seventh Circuit in
Howard v. City of Springfield,
if § 207(h)(2) were to permit a cumulative offset, employers could withhold overtime earnings in order to offset them against potential “short” weeks in the future.
In fact, this case uniquely illustrates why a workweek offset is appropriate: if the City had correctly calculated its overtime rate and applied the § 207(h)(2) offsets contemporaneously, it would not have been able to apply those offsets to obligations incurred one or two years later.
See id.
at 1148. The workweek method of calculating offsets most closely reproduces what thе parties would be entitled to had there been no error in the City’s initial computation of its overtime liability.
See Nolan,
4. The purpose of the FLSA, to protect workers from “excessive work hours and substandard wages”, is best served by the workweek offset model.
Howard,
The [overtime] requirement protects workers from the imposition of excessive hours by placing an immediate cost on the employer. If employers were allowed to bank credit for contractual overtime against future obligations to pay statutory overtime, it would place workers in the employer’s debt[.]
Id. In essence, it would require employees to work large blocks of overtime without premium compensation.
5. Finally, the arguments for applying a cumulative offset are unpersuasive. The City claims that a workweek offset will result in a windfall to the employees but that seems implausible given the fact that, if the City had been correctly calculating its overtime rate and applying the § 207(h)(2) offset at every pay period, the offset would have been applied only to the overtimе liability in that pay period. Moreover, the circuit court cases cited by the City do not provide support for a cumulative offset. In
Singer v. City of Waco,
In summary, the Court finds that the plaintiffs’ method of calculating damages is most compatible with both the language and purpose of the FLSA’s overtime requirements and the First Circuit’s undеrstanding of those requirements. As such, the plaintiffs’ damages for unpaid overtime should be calculated on a workweek basis and any offsets pursuant to § 207(h)(2) should be attributed only to the singular workweeks in which both premiums and overtime were earned. The Court concludes that only the premium portions of the extra payments, i.e. the extra one-half of the regular rate, may be used to offset the City’s overtime liability.
O’Brien II,
2. Liquidated Damages
Section 216(b) оf the FLSA provides that a plaintiff whose employer violated the FLSA is entitled to liquidated, or double, damages. 29 U.S.C. § 216(b). Liquidated damages are intended to serve as compensation for the delay in payment of wages owed to the plaintiff.
Lupien,
was in good faith and that he had reаsonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Aet[.]
29 U.S.C. § 260. Good faith is lacking where the defendant has failed to investigate potential liability or “inquire about the law’s requirements.”
Keeley v. Loomis Fargo & Co.,
The Court concludes that the City acted in good faith here. Apparently, the City made no inquiry into whether its payment practices were in compliance with the FLSA before the complaint was filed in this case and the City does not deny that it still has not adjusted its payroll practices in accordance with this Court’s June, 2010 M & O. Nevertheless, as this Court noted in that M & O, this case presents a statutory interpretation of first impression in the First Circuit. Until June, 2010, there was no First Circuit case law addressing
In the absence of guidance from other courts in this circuit, this Court relied on its own statutory interpretation and a number of non-controlling DOL Wage and Hour Division FLSA Opinion Letters. Thus, even if the City had solicited an opinion from informed counsel or from the DOL, it is unclear what advicе it would have received.
Moreover, there is a circuit split with respect to how § 207(h)(2) offsets are applied and the two district judges of this Court who have addressed the issue allowed the application of a cumulative offset. Thus, it was not unreasonable for the City to believe that the § 207(h)(2) offsets could be applied cumulatively to mitigate any miscalculation.
Finally, the complaint in this case constituted the first writtеn assertion that the City’s regular rate calculation violated the FLSA. In fact, the City had collectively bargained in good faith with the Union for a regular rate of pay that specifically included a Water Utility Compensation augmentation but not the 5% Night-Time Shift Differential, the $3 Snowplow Driver Stipend or the standby pay. When an employer’s decision is “made above board and justified in public”, such as during collective bargaining, the еmployer is more likely to be found to have acted in good faith because “[djouble damages are designed in part to compensate for concealed violations, which may escape scrutiny.”
Walton v. United Consumers Club, Inc.,
3. Willfulness and the Statute of Limitations
Plaintiffs claim that back pay for a minimum of three years before each plaintiff opted into this action is required by § 255(a) of the FLSA because the City’s violation was “willful”. 29 U.S.C. § 255(a). Section 255(a) provides for a two-year statute of limitations for FLSA actions unless the cause of action arises out of a willful violation, in which case the statute of limitations is three years. A violation is willful where the employer either “knew or showed reckless disregard for” whether its payment practices were in violation of the FLSA.
McLaughlin v. Richland Shoe Co.,
Generally, willfulness is a question of fact for the jury.
See Singer,
Defendant maintains that no damages for the snow plow stipend existed before May, 2006, because that is when the stipend was institutеd. Because the plaintiffs do not refute that assertion, the Court
IV. Motion for Leave to Amend the Complaint
Plaintiffs move to amend their complaint for a second time to add a claim for failure to make timely overtime payments, in violation of the Massachusetts Payment of Wages Law (Mass. Gen. Laws ch. 149, § 148). The defendant opposes that motion, arguing that adding an entirely new theory of liability and damages would “dramatically expand and prolong this action”. The defendant contends that the motion to amend was brought with a bad faith or dilatory motive.
A. Motion to Amend Standard
Under Fed.R.Civ.P. 15(a), leave to amend before trial will be freely given “when justice so requires”. Despite that liberal amendment policy, the Court may deny a motion for leave to amend if, among other reasons, amendment would result in undue delay or prejudice.
Foman v. Davis,
B. Application
The Court concludes that another amendment of the complaint at this stage of the litigation, more than three years after its inception, would result in undue delay. Liability has already been determined and the only issue left before the Court is damages. The plaintiffs provide no justifiable reason for the delay and none is readily apparent. Moreover, the proposed additional count is a state law claim that may, if plaintiffs choose, still be brought in state court.
ORDER
In accordance with the foregoing,
1)defendant’s motion for summary judgment (Docket No. 37) is, with respect to the absence of willfulness and the denial of liquidated damages, ALLOWED, but is, with respect to the cumulative offset calculation, DENIED;
2) plaintiffs’ motion to amend (Docket No. 43) is DENIED; and
3) the parties are directed to submit supplemental memoranda containing calculations of damages in accordance with this Order on or before March 22, 2011.
So ordered.