Acton v. City Of Columbia, Missouri
436 F.3d 969, 2006 U.S. App. LEXIS 3005, 11 Wage & Hour Cas.2d (BNA) 359 (2006)
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Rule of Law:
Under the Fair Labor Standards Act (FLSA), lump sum payments made to employees under a sick leave buy-back program that incentivize consistent workplace attendance are considered 'remuneration for employment' and must be included in the 'regular rate of pay' for overtime calculation, as they do not typically fall under statutory exclusions for premium payments.
Facts:
- The City of Columbia, Missouri (the "City") employs Chris N. Acton and ninety-nine other current and former firefighters.
- The City maintains a sick leave buy-back program where firefighters working twenty-four hour shifts accumulate ten days of sick leave annually.
- Firefighters who do not use their sick leave are permitted to sell back any of the ten unused sick days to the City.
- The buy-back payment is a lump sum equal to 75% of their regular hourly pay for each day sold back.
- To be eligible for the buy-back program, a firefighter must have previously amassed at least six months of sick leave.
- The City also provided meal allowances, longevity pay, step-up pay, and standby pay to its firefighters.
Procedural Posture:
- Chris N. Acton and ninety-nine other current and former firefighters (the "firefighters") sued the City of Columbia, Missouri (the "City") in federal district court (Western District of Missouri) for violations of the Fair Labor Standards Act (FLSA), alleging the City failed to include various payments in their regular rate of pay.
- The firefighters moved for partial summary judgment, seeking rulings that monies from sick leave buy-back, step-up pay, meal allowance, and standby programs should be included in their regular rate, and that the City willfully violated the FLSA and used an incorrect hours ratio.
- While the motion was pending, the parties entered a settlement agreement regarding claims for longevity pay, step-up pay, and standby pay.
- The City also changed its hours ratio policy to comply with the firefighters' motion.
- The district court granted the firefighters' motion in part, ruling that sick leave buy-back monies should be included in the regular rate of pay.
- The district court denied the firefighters' motion in part, ruling that meal allowance monies were excluded and finding no evidence of willful FLSA violation by the City.
- Following the district court's ruling, the parties filed a stipulation for dismissal of the settled claims and requested final judgment on the adjudicated claims.
- The district court then entered final judgment, dismissing the settled claims with prejudice and referencing its prior order.
- The City appealed the district court's grant of summary judgment concerning the sick leave buy-back program to the United States Court of Appeals for the Eighth Circuit.
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Issue:
Does the Fair Labor Standards Act require a city to include payments made to firefighters under a sick leave buy-back program, which reward consistent attendance, in their 'regular rate of pay' for overtime calculation?
Opinions:
Majority - Lay
Yes, the Fair Labor Standards Act requires the City to include payments made to firefighters under its sick leave buy-back program in their regular rate of pay. Section 207(e) of the FLSA broadly mandates that 'all remuneration for employment paid to, or on behalf of, the employee' be included in the regular rate, unless specifically excluded by one of eight statutory exceptions. There is a strong statutory presumption in favor of inclusion, placing the burden on the employer to prove an exclusion applies. Regulation § 778.223 clarifies that monies paid as compensation for either a general or specific work-related duty, even if not tied to 'specific hours of work,' must be included. The sick leave buy-back program's primary effect is to encourage firefighters to maintain regular workplace attendance over years to accumulate sick leave and then not use it. The court recognizes consistent workplace attendance as a general duty of employment, making these payments 'remuneration for employment.' The City's arguments that the program serves as short-term disability insurance or discourages sick leave misuse do not alter its undisputed effect of rewarding regular attendance. Furthermore, the court rejected the City's reliance on interpretations from the Family Medical Leave Act and explicitly declined to follow the Sixth Circuit's decision in Featsent v. City of Youngstown, finding its reasoning unarticulated and unpersuasive regarding the application of § 778.223. The payments do not qualify for exclusion under § 207(e)(5) as premium payments because they are not for 'certain hours worked' in excess of normal schedules, nor are they premium rates (i.e., at least one and one-third the regular rate); rather, they are 75% of the regular hourly pay, and 'compounding' them with the base wage to meet the premium threshold would contradict established regulations.
Dissenting - Loken
No, compensation paid under a sick leave buy-back program should be excluded from the FLSA's definition of 'regular rate' because these payments are functionally equivalent to premium overtime pay. While sick leave buy-back payments may not fit perfectly under the § 207(e)(2) exclusion for payments made when no work is performed, they directly relate to specific hours worked—namely, the days an employee chose to work instead of using paid sick leave. This type of payment should be considered within the scope of the three exclusions found in subsections (e)(5)-(e)(7), which apply to 'extra compensation provided by a premium rate paid for certain hours worked.' Specifically, § 207(e)(5) excludes 'extra compensation provided by a premium rate paid for certain hours worked... because such hours are hours worked... in excess of the employee's... regular working hours.' A firefighter who works a day they could have taken as sick leave is working 'in excess of his 'regular working hours'' in a practical sense. When the 75% buy-back payment is added to the regular rate already paid for that day, the firefighter effectively receives 175% of his regular rate, which is a premium rate and greater than the FLSA's statutory overtime premium of 150%. This structure is similar to overtime compensation, where extra pay is provided for additional work, and excluding it prevents the undesirable 'pyramiding' of overtime on overtime, a principle codified in the FLSA. The Sixth Circuit in Featsent v. City of Youngstown correctly concluded that such payments should be excluded.
Analysis:
This case is significant for clarifying the Eighth Circuit's interpretation of 'remuneration for employment' and statutory exclusions under FLSA Section 207(e), particularly regarding employer incentive programs designed to reduce sick leave usage. The court's rejection of the Sixth Circuit's approach in Featsent v. City of Youngstown creates a circuit split, indicating differing judicial philosophies on balancing employer flexibility with employee overtime protection under the FLSA. This split could lead to inconsistent application of the law across jurisdictions, potentially prompting forum shopping or future intervention by the Supreme Court to resolve the disagreement. The ruling reinforces that courts will critically examine the practical effect of payment programs, not just the employer's stated intent, when determining whether they must be included in the regular rate, thereby broadly expanding the base for overtime calculation for many public and private sector employees.
