William WHEELER, II, an individual, and Robert J. Lomb, an individual, on behalf of themselves and other individuals similarly situated, Appellants v. HAMPTON TOWNSHIP.
No. 04-1728.
United States Court of Appeals, Third Circuit.
Argued Nov. 18, 2004. Feb. 24, 2005.
399 F.3d 238
IV.
Because our independеnt review of the $150,000 punitive damages award in light of the Gore/Campbell guideposts indicates that the award is not constitutionally excessive, we affirm the judgment of the District Court.
Suzanne B. Merrick (argued), Gaitens, Tucceri & Nicholas, P.C., Pittsburgh, for Appellees.
Before ROTH, SMITH, and BECKER, Circuit Judges.
OPINION OF THE COURT
SMITH, Circuit Judge.
This appeal arises out of a suit filed by the full-time police officers of Hampton Township, Pennsylvania to recover overtime pay under the Fair Labor Standards Act (“FLSA” or “the Act“).
I.
A.
The genesis of this dispute is a collective bargaining agreement (“CBA“) that established the terms of employment for the full-time police officers (“the Officers“) of Hampton Township from January 2000 through December 2003.2 While the parties agree on how the CBA calculates overtime, they sharply disagree over whether the CBA‘s calculation provides all the overtime required under the FLSA.
The CBA provides as follows: The Officers are entitled to a specified “basic annual salary,” which varies according to the
Overtime pay is provided under the CBA for work over eight hours in a single workday, and for work over 40 hours in a single workweek. Overtime pay rates are calculated by dividing the officers’ basic annual salary by 2,080 and multiplying the resulting figure by 1.5. To illustrate, a starting patrolman in 2000 earning $37,000 who worked 10 extrа hours (i.e., 50 total hours) in a given week would be entitled to $266.90 ($37,000/2,080 = $17.79 × 1.5 = $26.69 × 10 = $266.90) in overtime payments for that week.
The CBA provides two other broad categories of remuneration that are relevant to the present dispute. First, the CBA provides pay for certain non-working time (“non-work pay“), including
- 11 paid annual holidays (e.g., New Year‘s Day, Memorial Day, etc.),
- 2 paid annual personal days,
- paid annual vacations of varying length depending on seniority, and
- 1.5 paid sick days each month.
With the exception of vacations, which are to be paid at the “regular weekly rate,” a term that is not defined, the CBA does not explain what amounts the Officеrs are paid for these non-working days. Second, the CBA provides specified incentive/expense payments (“incentive/expense pay“), including:
- monthly longevity pay for senior officers,
- annual pay for educational attainment,
- increased hourly pay for shift commanders, and
- annual stipends for uniform replacement, maintenance, and cleaning.
In contrast to non-work pay, the CBA provides precise dollar figures for each category of incentive/expense pay. For example, an officer receiving a bachelor‘s degree from an accredited institution in a field directly related to the officer‘s responsibility receives an additional $250.00 per year.
B.
In their complaint, the Officers argued that the FLSA mandates that their basic annual salary be augmented before the base hourly rate is calculated for overtime purposes. Specifically, the Officers claimed that the CBA impermissibly took their basic annual salary alone, divided it by 2,080, and multiplied that figure by 1.5 to establish their overtime pay rate. Instead, according to the Officers, the CBA should have added the four items of incentive/expense pay to their basic annual salary, divided the sum by 2,080, and multiplied that (higher) figure by 1.5 to establish their overtime pay rate. The Officers sought tо recover the amount of overtime lost during the three years preceding the suit, interest on that amount, liquidated damages, attorneys’ fees, and costs.
The Township did not deny that the CBA established the overtime calculation described by the Officers. Rather, the Township argued that the Officers traded their right to have incentive/expense pay added to their basic annual salary in the CBA‘s overtime calculation in exchange for the inclusion of non-work pay, which is not required under the FLSA. According to the Township, because the value of the latter far outweighed the former, the basic annual salary (and, hence, the ultimate overtime rate) was inherently higher than
The District Court agreed with the Township. According to the Court, the focus of the FLSA‘s overtime compensation scheme “is on the total overtime compensation received by the employee,” not on whether the parties have complied with specific components of the FLSA. As support for this proposition, the Court cited Minizza v. Stone Container Corp., in which we stated that the “FLSA was not intended to emasculate the ability of labor and management to be creative in resolving labor disputes in a manner which is mutually beneficial ... to all parties involved in such negotiations.” 842 F.2d at 1463. To adopt the Officer‘s argument, the District Court stated, would be to stand in the way of “innovative collеctive bargaining,” obstruction forbidden in Minizza. The District Court held that “as long as the officers were compensated ‘at a rate of not less than one and one-half times the regular rate,’ they have not made out a statutory violation, regardless of the formula used by the employer (in negotiations with the union) to achieve that result.” (Emphasis in original.) According to the District Court, the Officers did not dispute that the CBA exceeded the FLSA‘s overall requirements for calculating overtime, and consequently they failed to state a claim for which relief could be granted.
II.
We review а decision granting a motion to dismiss for failure to state a claim de novo. Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 653 (3d Cir. 2003). “Dismissal for failure to state a claim is appropriate only if it ‘appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief.‘” Id. (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
A.
As this dispute turns on applying the FLSA to the CBA, we begin by laying out the controlling provisions of the statute. Under the FLSA, covered employers may not employ any employee “for a workweek longer than forty hours unless such employee receives compensation for his employment ... at a rate not less than one and one-half times the regular rate at which he is employed.”
In construing the foregoing provisions, the parties agree on much. The parties of course agree that the Officers must receive one-and-a-half times their “regular rate” of pay. They also agree that
1. 29 U.S.C. § 207(e)
The Township‘s argument for a credit founders on the text it cites to support its position. That provision,
The pivotal language is “shall not be deemed.”
None of these cases, or any other case we have found, holds that a labor agreement that indisputably adds non-work pay to the regular rate violates
The function of
The context of
29 U.S.C. § 207(h)
Where a credit is allowed, the statute says so. Seсtion 207 provides that employers may credit premium payments for work outside standard work periods against statutorily required overtime pay: “[e]xtra compensation paid as described in paragraphs (5), (6), and (7) of subsection (e) shall be creditable toward overtime compensation payable pursuant to this subsection.”
The Township does not qualify for the credit allowed under
Assuming that the Township could claim a credit under the FLSA for including non-work pay in the CBA‘s overtime calculation, we fail tо see where that calculation includes such pay. There is no question that the CBA‘s base hourly rate does not include incentive/expense pay. The CBA specifies the value of each of those items, which never appear in the CBA‘s overtime formula. At oral argument, the Township conceded that incentive/expense pay is remuneration that, if no offset is allowed, should be added to the CBA‘s basic annual salary to satisfy the FLSA‘s overtime calculation requirement.9 Thus, on the Officers’ side of the ledger, the CBA‘s overtime formula clearly does not include every augment required by the FLSA.
But our search for the Township‘s offsetting concession turns up nothing. According to the Township, the base hourly rate contains an augment representing non-work pay. The CBA nowhere specifies what the Officers are paid for non-working days. Along with the Officers, we assume such pay is folded into the Officers’ basic annual salary. Yet, we do not know what proportion of the basic annual salary non-work pay represents. The “basic annual salary” portion of the CBA‘s overtime formula is a black box. As we lack any means to “go behind the contract,” we are unwilling to assume that the CBA‘s base hourly rate adequately compensates the Officers, when that rate plainly does not include incentive/expense pay.
The other number for which the parties bargained in the CBA‘s overtime compensation formula, 2080, heightens our doubts that there is any offset in the CBA. As noted earlier, 2,080 is the number of hours by which the basic annual salary is divided to obtain the “base hourly rate” (the CBA‘s version of the FLSA‘s “regular rate“). Simple multiplication shows that 2,080 equals the number of working hours in a full, 52-week year of 40-hour weeks. If, as the Township claims, the CBA boosts the basiс annual salary to reflect non-work pay, choosing 2,080 as the divisor seems to negate that action in the ultimate overtime calculation. That is because the higher the divisor, the lower the ultimate overtime rate.10 A simple illustration may
4. Conclusion
The District Court approved the alleged offset in the CBA on the ground that economically beneficial bargaining between management and labor is to be encouraged. We reaffirm our dictum in Minizza, paraphrased by the District Court, that the “FLSA was not intended to limit [the] creativity of labor and management to make economically beneficial agreements.” But if that maxim werе limitless, the FLSA would be meaningless. The FLSA explains what credits employers may take for “extra compensation.” As the Township claims a credit where the Act does not support one, the District Court incorrectly granted the Township‘s motion to dismiss.
C.
We now consider which items of incentive/expense pay constitute “remuneration” that must be included in the CBA under the FLSA. Concluding that there was an offset, the District Court stopped short of that question. As we reverse the District Court‘s judgment, normally we would allow the District Court on remand to consider first that mixed question of law and fact. However, at oral argument the Township conceded that, in the absence of an offset, the FLSA requires that the incentive pay items sought by the Officers must be added to the CBA‘s basic annual salary in calculating the overtime. See also Appellee‘s Br. at 13 (stating that the Officers “relinquished the inclusion of the disputed categories of pay when they entered into the [CBA]“). The Township continues to dispute that the uniform allowance must be added to the basic annual salary, however. Accordingly, we hold that longevity pay, educational incentive pay, and senior officer pay must be added to the CBA‘s basic annual salary calculation. See Brooks, 185 F.3d at 136 (“The
III.
For the foregoing reasons, we will reverse the judgment of the District Court and remand for proceedings consistent with this opinion.
Notes
Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerсe or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, 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 of not less than one and one-half times the regular rate at which he is employed.
As used in this section the “regular rate” at which an employee is employed shall be deemed to include all remunerаtion for employment paid to, or on behalf of, the employee, but shall not be deemed to include—
. . . .
(2) payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause; reasonable payments for traveling expenses, or other expenses, incurred by an employee in furtherance of his employer‘s interests and properly reimbursable by the employer; and other similar payments to an employee which are not made as compensation for his hours of employment[.]
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 рrovided 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; or
(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.
[i]f an employee whose maximum hours standard is 40 hours was hired at a salary of $200 for a fixed workweek of 40 hours, his regular rate at the time of hiring was $5 per hour. If his workweek is later reduced to a fixed workweek of 35 hours while his salary remains the same, it is the fact that it now takes him only 35 hours to earn $200, so that he earns his salary at the average rate of $5.71 per hour. His regular rate thus becomes $5.71; it is no longer $5 an hour.