DANYELL THOMAS, INDIVIDUALLY AND ON BEHALF OF ALL OTHER EMPLOYEES SIMILARLY SITUATED, RASHAUN F. FRAZER, INDIVIDUALLY AND ON BEHALF OF ALL OTHER EMPLOYEES SIMILARLY SITUATED, ANDRAE WHALEY, INDIVIDUALLY AND ON BEHALF OF ALL OTHER EMPLOYEES SIMILARLY SITUATED, CHERYL A. STRYCHARZ, INDIVIDUALLY AND ON BEHALF OF ALL OTHER EMPLOYEES SIMILARLY SITUATED, DANIELLE BROWN, INDIVIDUALLY AND ON BEHALF OF ALL OTHER EMPLOYEES SIMILARLY SITUATED, Plаintiffs-Appellants, HECTOR CARABALLO, CUTHBERT BAPTISTE, ELIZABETH PADILLA, KARLA REYNOSA, BYRAN LAFOREST, ROBERT GUY DESIR, RADICA KUTWARU, ANDREW CERTOMA, VILLACRES BYRON, JOHN CUTAJAR, ALEXIS CARREE, ANTHONY ROLLOCK, JOSE ALBERTO CASSIA, LATIA DIAZ, LEROY CLARKE, TOMIKA M. BOYD, LOUISA PERRY, MARIA C. MAHAN, ELENI MIGLIS, Plaintiffs, v. BED BATH & BEYOND INC., Defendant-Appellee.
Docket No. 19-1647-cv
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
Decided: June 15, 2020
August Term 2019
(Submitted: April 14, 2020)
Before: CALABRESI, PARKER, and LIVINGSTON, Circuit Judges.
Appellants are employees of Appellee Bed Bath & Beyond (BBB). Prior to March 2015, BBB calculated appellants’ overtime compensation using the fluctuating workweek (FWW) method. Appellants contend that BBB was precluded from using the FWW method and that BBB therefore owes appellants compensation for unpaid overtime. We hold that appellants failed to demonstrate a genuine dispute of material fact regarding whether their wage payments were inconsistent with the FWW method. We therefore AFFIRM the district court‘s order granting BBB‘s motion for summary judgment and denying appellants’ motion for summary judgment.
JAMES E. MURPHY, Virginia & Ambinder, LLP, New York, NY, for Plaintiffs-Appellants.
JONATHAN L. SULDS, Greenberg Traurig, LLP, New York, NY (Justin F. Keith, Kelly M. Pesce, Greenberg Traurig, LLP, Boston, MA, on the brief), for Defendant-Appellee.
This dispute examines the limits of employers’ ability to calculate overtime compensation using the fluctuating workweek (FWW) method.
Appellаnts in this case allege that their employer was precluded from using the FWW method and consequently that the employer underpaid appellants for overtime work. Specifically, appellants assert three violations of the FWW method: (i) that they did not receive fixed and guaranteed weekly wages, (ii) that their schedules did not fluctuate above and below the FLSA non-overtime limit of 40 hours per week, and (iii) that employers using the FWW method may not permit employees who work on holidays or previously scheduled days off to shift their paid time off to later dates. We hold that appellants failed to demonstrate a genuine dispute of material fact regarding whether they received fixed and guaranteed weekly wages. We also hold that the FWW method does not require employees’ hours to fluctuate above and below 40 hours per week, and that BBB‘s practice of permitting employees to take days of paid time off on later dates after working on holidays or previously scheduled days off is consistent with the FWW method. We therefore AFFIRM the district court‘s order granting BBB‘s motion for summary judgment and denying appellants’ motion for summary judgment.
I. Factual and Legal Background
A.
Appellants are Department Managers (DMs) currently or formerly employed by appellee Bed Bath & Beyond (BBB), a home-goods retailer. Until March 2015, BBB calculated appellants’ overtime compensation using the fluctuating workweek (FWW) method. After March 2015, BBB switched to paying DMs overtime based on 150% of a non-FWW hourly rate.
The FWW method operates as follows: for non-exempt employees paid a fixed weekly salary,
(a) calculate the hourly “regular rate” for a given week by dividing a non-exempt employee‘s fixed weekly salary by the number of hours the employee actually worked during that week;
(b) divide the hourly “regular rate” for a given week in half; and
(c) pay non-exempt employees the fixed weekly rate, plus the hourly half-rate for each overtime hour. Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 580 (1942), superseded by statute on other grounds as stated in Trans World Airlines, Inc. v. Thurson, 469 U.S. 111, 128 n.22 (1985).
Each time BBB hired or promoted an appellant to the DM position, BBB provided that individual with documents explaining BBB‘s method for calculating overtime compensation. These documents included a Department Manager Acknowledgment form which stated:
At the time I was hired, I was told what my antiсipated weekly compensation will be and how it will be calculated.
I understand that my weekly compensation consists of two components: (1) a base weekly salary; and (2) an additional amount for all hours above 40 that I work during a week.
I understand that my base weekly salary is compensation for all hours I work in a week. I will get paid this base salary for each week I work, whether or not I work 40 hours in that week, subject to the Company‘s sick day and leave policies.
I further understand that I will be scheduled for no less than 47 hours per week, but that my actual hours worked will fluctuate depending on the needs of my store.
Thomas v. Bed Bath & Beyond, Inc., 309 F. Supp. 3d 121, 126 (S.D.N.Y. 2018). Similar documents that were provided to appellants at the time they were hired and on later dates also described this payment arrangement. Id.
BBB produced documents covering over 1,500 weeks during which appellants worked for BBB prior to March 2015. These documents reflect that “in almost every week at issue, the plaintiff DMs in fact either worked 40 or more hours, or, when annual or sick leave time taken that week was added to their actual hours worked, were credited with having worked 40 or more hours.” Id. at 127. During six weeks, however, appellants performed no work and received no pay. During six other weeks, appellants’ pay stubs reflected some but fewer than 40 hours of work or credited paid time off.1 These latter instances are central to this case, for they are also the only six instances in which appellants did not contemporaneously receivе full weekly salaries (apart from the six weeks with no work and no pay).
On occasion, BBB asked DMs to work on holidays or previously scheduled days off. When this happened, BBB would permit DMs to take paid time off on later dates.
B.
On October 18, 2016, appellants filed a complaint on behalf of DMs and Assistant Managers (AMs) employed by BBB in New York, New Jersey, and Connecticut. Appellants filed their second amended complaint, the operative complaint in this case, on June 28, 2017.
Appellants’ second amended complaint seeks overtime wages pursuant to the
On February 21, 2018, the district court (Engelmayer, J.) granted BBB‘s motion fоr summary judgment and denied appellants’ motion for summary judgment, both as to the DMs. Thomas, 309 F. Supp. 3d at 139. The AMs’ claims were subsequently settled. On May 6, 2019, the district court entered final judgment, and appellants (DMs) timely filed a notice of appeal on June 3, 2019.
C.
D.
This question of how to calculate “regular rates” generated a series of Supreme Court decisions in the 1940s. Of particular importance to the instant dispute are two of these opinions, issued on the same date in June 1942, which addressed the application of
In Overnight Motor Transportation Co. v. Missel, the Supreme Court faced the question of whether Congress possesses constitutional authority to impose overtime rules beyond requiring employers to pay the minimum wage for non-overtime hours and 150% of the minimum wage for overtime hours. 316 U.S. at 575-76. The Court held that Congress possessed such power and that the
Having determined that the employee in Missel was entitled to 150% of his “regular rate,” the Court neеded to calculate that rate. The employee received a “salary [of] $25.50 per week and thereafter $27.50.” Id. at 574. His timesheets “show[ed] an average workweek of 65 hours, with a maximum of 80” and reflected “wide fluctuations in the time required to complete his duties.” Id. Additionally, the district court in Missel observed that the employee “was paid his weekly salary regardless of absent time.” Missel v. Overnight Motor Transp. Co., 40 F. Supp. 174, 176 (D. Md. 1941).
The Supreme Court held that the employee‘s hourly “regular rate” for the purposes of
The Court‘s opinion in Missel thus recognized the following formula for determining the employee‘s proper
Where the number of hours an employee works in a week varies, that еmployee‘s “regular rate” will fluctuate week to week, and weeks with more hours will yield decreasing “regular rates.” The Missel Court reasoned that this result “is not an argument ... against this method of determining the regular rate” because
On the same date that the Supreme Court decided Missel, the Court also issued an opinion in Walling v. A. H. Belo Corp. (”Belo“), which like Missel involved the application of
The agreement accomplished this result by setting the employee‘s “basic rate of pay” at $0.67 per hour for non-overtime hours аnd setting the rate for overtime hours at “not less than one and one-half time such basic rate,” while also guaranteeing that the plaintiff “shall receive weekly, for regular time and for such overtime as the necessities of the business may demand, a sum not less than ... $40.” Id. at 628. The Court interpreted this provision as establishing—and requiring payment of—a fluctuating overtime rate of at least 150% of the “basic rate” for hours worked between 44 and 54 1/2 hours. Id. at 631-32. For example, “if an employee works 50 hours in a given week, ... his $40 wage consists of $29.48 for the first 44 hour[s] (44 [times] $.67) plus $10.52 for the remaining six hours.” Id. at 632.
The Court acknowledged that “when the employee works less than 54 1/2 hours during the week his pay is determined by the $40 guaranty” and that the “basic rate” and fluctuating overtime rate were in a sense “artificial[].” Id. at 632-33. However, the Court reasoned that “nothing in the [FLSA] forbids such fluctuation” and that Congress had not “provide[d] a rigid definition of ‘regular rate.‘” Id. at 632-34.
At the close of its opinion, the Court emphasized the security that weekly guarantees offer. As the Court explained,
[w]here the question is as close as this one, it is well to follow the Congressional lead and to afford the fullest possible scope to agreements among the individuals who are actually affected. This policy is based upon a common sense recognition of the special problems confronting employer and employee in businesses where the work hours fluctuate from week to week and from day to day. Many such employees value the security of a regular weekly income. They want to operate on a family budget, to make commitments for payments on homes and automobiles and insurance.
Id. at 635. In other words, according to the Court, the security of having a $40 weekly wage offset any diminution in overtime pay that what would become known as the FWW method might bring about.
Significantly, in the aftermath of Missel and Belo, the Supreme Court decided a series of cases involving the application of
These decisions culminated in Bay Ridge Operating Co. v. Aaron, in which the Court expressly tied Belo to the presence of a weekly guarantee. 334 U.S. 446, 462 (1948). The Court in Bay Ridge explained that where “guaranteed weekly wages were involved, we have reaffirmed [Belo] as a narrow precedent principally because of publiс reliance upon a congressional acceptance of the rule there announced.” Id.
E.
In 1968, the Department of Labor (DOL) issued an interpretive rule,
Subsection (a) explains how to apply the fluctuating workweek (FWW) method and why it is an application of, as opposed to an exception to,
An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay fоr whatever hours he is called upon to work in a workweek, whether few or many. Where there is a clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period, such a salary arrangement is permitted by the [FLSA] if the amount of the salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours he works is greatest, and if he receives extra compensation, in addition to such salary, for all overtime hours worked at a rate nоt less than one-half his regular rate of pay. Since the salary in such a situation is intended to compensate the employee at straight time rates for whatever hours are worked in the workweek, the regular rate of the employee will vary from week to week and is determined by dividing the number of hours worked in the workweek into the amount of the salary to obtain
the applicable hourly rate for the week. Payment for overtime hours at one-half such rate in addition to the salary satisfies the overtime pay requirement because such hours have already been compensated at the straight time regular rate, under the salary arrangement.
Subsection (b) applies the FWW method to a hypothetical employee who, over the course of four weeks, “works 40, 37.5, 50, and 48 hours.”
Subsection (c), reiterating much of the information contained in subsection (a), emphasizes the prerequisites for using FWW:
The “fluctuating workweek” method of overtime payment may not be used unless the salary is sufficiently large to assure that no workweek will be worked in which the employee‘s average hourly earnings from the salary fall below the minimum hourly wage rate applicable under the [FLSA], and unless the employee clearly understands that the salary covers whatever hours the job may demand in a particular workweek and the employer pays the salary even though the workweek is one in which a full schedule of hours is not worked. Typically, such salaries are paid to employees who do not customarily work a regular schedule of hours and are in amounts agreed on by the parties as adequate straight-time compensation for long workweeks as well as short ones, under the circumstances of the employment as a whole.
Where all the legal prerequisites for use of the “fluctuating workweek” method of overtime payment are present, the [FLSA], in requiring that “not less than” the prescribed premium of 50 percent for overtime hours worked be paid, does not prohibit paying more. On the other hand, where all the facts indicate that an employee is being paid for his overtime hours at a rate no greater than that which he receives for nonovertime hours, compliance with the [FLSA] cannot be rested on any application of the fluctuating workweek overtime formula.
The DOL has also published opinion letters considering the implications of FWW for time-off policies. Two opinion letters from May 1999 are representative. In the first, the DOL determined that “deductions may be made from vacation or sick leave banks because of absences for personal reasons or illness, as long as no deductions are made from an employee‘s salary,” even “where there is no paid leаve to substitute for employee absences.” Opinion Letter, Dep‘t of Labor, 1999 WL 1002399, at *2 (May 10, 1999). The second May 1999 letter allows that “disciplinary deductions, which do not cut into the required minimum wage or overtime compensation, may be made for willful absences or tardiness or for a situation such as an employee being sent home from work because of drunkenness.” Opinion Letter, Dep‘t of Labor, 1999 WL 1002415, at *2 (May 28, 1999); see also Opinion Letter, Dep‘t of Labor, 2006 WL 1488849, at *1 (May 12, 2006) (noting that, except for disciplinary actions, “an employer utilizing the fluctuating workweek method of payment may not make deductions from an employee‘s salary for absences occasioned by the employee“).
* * *
Congress, however, has not codified the FWW method in the
II. Application
A.
Appellants allege that Bed Bath & Beyond (BBB) did not pay them truly fixed weekly wages. In support of this allegation, appellants identify six instances in which an appellant‘s hours worked and
Out of the over 1,500 weeks’ worth of pay records submitted to the district court, these are also the only workweeks—excluding weeks in which no work was performed—in which appellants’ hours worked and credited paid time off totaled fewer than 40 hours. In a nutshell, therefore, appellants argue that they were not in fact recipients of weekly wage guarantees, because the only times their hours worked dropped below the FLSA non-overtime limit, BBB paid them an amount less than their supposedly fixed weekly wages.
The six weeks in question are as follows:
(a) Underpayment in three weeks which BBB claims resulted from “payroll errors.” Thomas, 309 F. Supp. 3d at 133. BBB issued payments rectifying two of these payroll errors prior to the date on which appellants filed their complaint. BBB rectified the third payroll error, which amounted to $50, on January 5, 2018.
(b) The fourth underpayment occurred in a week when an appellant received an amount less than that appellant‘s weekly rate because that appellant‘s last day of employment with BBB fell in the middle of a workweek. Id.
(c) The fifth underpayment involved BBB‘s payment to Appellant Reynosa for only 28.75 hours. Id. BBB and appellants agreеd that this reduction in pay resulted from unpaid vacation that Appellant Reynosa negotiated with BBB at the time she was hired. Id.
(d) The sixth and final underpayment occurred when BBB reduced Appellant Frazer‘s pay by one day on account of leave taken pursuant to the
Family and Medical Leave Act (FMLA) . Id. Appellant Frazer had been absent from work on FMLA leave throughout the entire previous week, and his absence continued through the Monday of the week in question. Id.
The Supreme Court decisions permitting the FWW method and the DOL‘s regulations thereafter make the existence of a fixed weekly wage guarantee for straight time pay a core prerequisite for the FWW method. Courts must therefore take seriously allegations that weekly rates were not in fact guaranteed. Both Missel and Belo involved weekly guarantees, and Belo included an extended discussion of the value of such guarantees. Missel, 316 U.S. at 580; Belo, 316 U.S. at 631-35. And the Supreme Court‘s later decisions applying
agreements lacking such guarantees further highlight the role that weekly guarantees played in Missel and Belo. E.g., Bay Ridge Operating Co., 334 U.S. at 462. Moreover,
While courts must take seriously allegations that employees have not received truly fixed weekly wages, such skepticism should be just that and nothing more, and we are satisfied that the district court proceeded appropriately in this case. BBB‘s correction, prior to the commencement of litigation, of the payroll errors responsible for two of the disputed weeks indicates that the three weeks involving payroll errors are not cause for alarm. Although BBB did not resolve the third week until after the district court issued its order, the amount ($50) was small relative to the appellants’ weekly wages. Similarly, the week in which an appellant‘s last day of employment fell in the middle of the week is of no concern. BBB had no obligation to pay appellants their wages for days after their employment ended.
The remaining two instances of alleged nonpayment of a fixed weekly wage require more attention. At first glance, BBB‘s agreement at the time of Appellant Reynosa‘s hiring to permit Appellant Reynosa to take unpaid vacation during negotiated periods of time may seem to flout the FWW method. Given BBB‘s active negotiation of this arrangement, it might even suggest the absence of an understanding that appellants’ weekly wages were guaranteed. And such an interpretation might perhaps be justified in a different context. But here, where BBB provided multiple written notices explaining the FWW method and where appellants do not identify any other instance of similar arrangements for unpaid vacation, the record cannot support an inference of actual absence of a fixed weekly wage.
Appellant Frazer‘s unpaid day while on FMLA leave is puzzling. The DOL has promulgated a regulation permitting employers using the FWW method to pay employees temporarily according to a different method when employees take time off from work pursuant to the FMLA.
The district court did not assess BBB‘s compliance with
As with Appellant Reynosa‘s negotiated unpaid vacation, however, we think the totality of facts in the instant case precludes an inference from this single day of possible underpayment that BBB did not generally pay appellants guaranteed weekly wages. This is especially true givеn that
We must, however, also view the six alleged instances of nonpayment of a fixed weekly wage together in the total context of the over 1,500 weeks’ worth of pay records submitted in the case before us. That the six weeks in which appellants received less than their weekly rates were—according to appellants—also the only weeks for which appellants’ actual hours worked and credited paid time off totaled fewer than 40 hours is perhaps appellants’ strongest argument. The essence of a guaranteed weekly wage is an employee‘s receipt of that wage for weeks with less than 40 hours of actual work. And BBB does not expressly identify any weeks during which an appellant received a full weekly rate where that appellant‘s actual hours worked and credited paid time off totaled fewer than 40 hours.
Nevertheless, we agree with the district court that appellants fall short of establishing a genuine dispute of material fact. With a different record, the absence of weeks with fewer than 40 hours of actual work and credited paid time off in which full pay was given might well weigh heavily in our analysis. Cf. Yourman v. Giuliani, 229 F.3d 124, 130 (2d Cir. 2000) (recognizing the relevance of many fact-intensive factors for evaluating allegedly impermissible pay deductions from salaried employees). Here, however, we view as salient that the two more puzzling instancеs of alleged underpayment bear no connection to each other or to the other four disputed weeks. And we also give weight to BBB‘s prompt correction prior to the initiation of litigation of the alleged payroll errors that led to underpayment. After the corrections, these do constitute instances of full payment when less than 40 hours were worked. Moreover, BBB‘s distribution of multiple clear documents explaining the FWW method to appellants counters any possible suggestion of hidden attempts to undercut a fixed weekly wage.
Given all these circumstances, we hold that appellants have failed to establish a genuine dispute of material fact as to whether appellants’ weekly wages were truly fixed and guaranteed.
B.
Appellants also challenge the district court‘s determination that the limited fluctuations in their weekly schedules did not preclude use of the FWW method. Appellants contend (a) that non-exempt employees’ weekly hours must both fall below and rise above the FLSA non-overtime limit of 40 hours with some frequency in order for employers to use the FWW method, and (b) that their weekly schedules did not fluctuate in this manner.6 The
Appellants’ argument is unavailing. Nothing in
The facts of Missel itself, moreover, contradict the notion that weeks with hours under the FLSA limit must balance weeks with hours over the FLSA limit. In Missel, the employee‘s timesheets “show[ed] an average workweek of 65 hours, with a maximum of 80.” 316 U.S. at 574. With an average workweek well above the then-prevailing non-overtime limit, it would have been impossible for the employee‘s weeks with fewer hours than the limit to “make up” for the longer weeks. And Missel expressly confronted the problem of decreasing marginal hourly rates and dismissed that objection. Id. at 580 (“It is true that the longer the hours the less the rate and the pay per hour. This is not an argument, however, against this method of determining the regular rate of employment for the week in question. Apart from the [FLSA] if there is a fixed weekly wage regardless of the length of the workweek, the longer the hours the less are the earnings per hour.“).
Likewise, although
Appellants cite a few cases in which courts have suggested that an employee‘s schedule must fluctuate both above and
Accordingly, we reject appellants’ argument and hold that the FWW method does not require weekly schedules to fluctuate above and below the FLSA non-overtime limit of 40 hours per week. So long as employees receive as compensation for straight time pay a weekly rate that is truly fixed and guaranteed, and so long as employers and employees come to a clear mutual understanding regarding thе FWW method, employers may calculate overtime using that method irrespective of whether the number of hours employees work each week fluctuates above and below the FLSA limit.8
C.
Appellants also argue that BBB‘s practice of permitting employees to take days of paid time off on later dates after working on holidays or previously scheduled days off is inconsistent with the FWW method.9 And some courts have held that hours-based bonuses or “shift differentials” are inconsistent with the FWW method because such amounts increase employees’ straight time pay, and
But even assuming arguendo that hours-based bonuses preclude use of the FWW mеthod, BBB‘s time-off policy did not involve any such bonuses. Under BBB‘s policy, if an employee worked during a holiday or on a previously scheduled day off, BBB would permit that employee to take a paid
Nothing in the FLSA, Missel, Belo, or
CONCLUSION
We hold that appellants failed to establish a genuine dispute of material fact regarding whether they received guaranteed weekly wages, that the FWW method of calculating overtime compensation does not require employees’ schedules to fluctuate above and below the FLSA non-overtime limit of 40 hours per week, and that BBB‘s policy of permitting employees to take days of paid time off on later dates after working on holidays or previously scheduled days off is consistent with the FWW method. We therefore AFFIRM the district court‘s grant of BBB‘s motion for summary judgment and its denial of appellants’ motion for summary judgment.