Nick Hurston//July 24, 2023
Nick Hurston//July 24, 2023//
Ten Alexandria fire department battalion chiefs who claimed they were owed overtime under the Fair Labor Standards Act, or FLSA, saw their claim snuffed out by the Eastern District of Virginia.
The City of Alexandria insisted that the chiefs were guaranteed salaries as highly compensated employees, or HCEs, and exempt from the FLSA.
Senior U.S. District Judge Claude M. Hilton agreed.
“Because at least some of the duties that Plaintiffs perform are administrative and executive in nature, and they otherwise qualify for HCE status, the Court finds that the Battalion Chiefs are exempt from the FLSA,” Hilton wrote.
The opinion is Kelly, et al. v. The City of Alexandria (VLW 023-3-333).
David F. Dabbs of McGuireWoods, who represented the city, said his first impression of the case was that it was a “relatively straightforward application” of relevant regulations.
He said the U.S. Supreme Court’s recent holding in Helix Energy Solutions Group, Inc. v. Hewitt made his clients’ case and confirmed that they were doing things right.
“After the Supreme Court decided in Helix that an employer must pass the reasonable relationship test of § 604(b) with highly compensated employees, we found ourselves in the happy position of already passing that test,” he explained.
The plaintiffs appealed on July 12. Attorneys for the fire chiefs declined to comment pending the outcome of their appeal to the 4th U.S. Circuit Court of Appeals.
Ten fire department battalion chiefs alleged that the City of Alexandria didn’t pay them overtime from 2019 to 2022. They filed suit under the FLSA and sought additional damages under the Virginia Wage Payment Act and Virginia Overtime Wage Act.
During their employment, the chiefs cycled between operational and administrative roles. In command of four to five firehouses with several employees, operational chiefs work an average of 112 hours of work every two weeks, but they are guaranteed to be paid for 106 hours regardless.
In the event they worked fewer than 106 hours, the city would ensure a minimum pay either by deducting from paid leave or any hours worked above 106 in the next pay period.
By contrast, administrative chiefs were always scheduled 40 hours per week and paid an hourly rate for a minimum of 80 hours each pay period.
Both parties moved for summary judgment. The chiefs argued that only the issue of damages needed to be resolved at trial. The city claimed the plaintiffs were exempt from overtime under the FLSA because of their compensation structure and the nature of their work duties.
The court ordered supplemental briefing after the U.S. Supreme Court issued Helix earlier this year.
“To qualify as a HCE … an employee must be paid on a salary basis, meet certain annual compensation thresholds and ‘regularly and customarily perform’ just ‘one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee,’” Hilton explained.
The judge noted that federal regulations provided two alternative tests to determine whether the plaintiffs were paid on a salary basis.
“Under § 541.602(a), employees are paid on a salary basis when they ‘receive the full salary for any week in which they perform any work without regard to the number of days or hours worked,’” he wrote.
The Supreme Court explained in Helix that the “full salary must be a predetermined amount whose calculation is independent of the number of days or hours worked,” Hilton said. If the amount is “always a function” of calculating the days or hours worked, then it fails under 602(a).
Alternatively, the salary basis test under § 541-604(b) allows for earnings to be calculated “on an hourly, daily, or shift basis so long as they are additionally provided ‘a guarantee of weekly payment approximating what the employee usually earns,’” Hilton said.
Under § 604(b), the court must first confirm that the guaranteed portion of the plaintiffs’ income was at least $684 per week and then decide whether that guarantee bore a reasonable relationship to the amount actually earned in a typical week.
While § 602(a) is limited to weekly-rate employees, Hilton said it doesn’t overlap with § 604(b) which addresses daily- and hourly-rate employees and imposes additional requirements.
Here, the judge found that the plaintiffs were hourly-rate employees that satisfied § 604(b)’s salary basis test.
“[I]t cannot be said Plaintiffs received the full salary for work in any week without regard to the number of hours they worked, because their pay for those weeks with overtime hours was always directly a function of those hours worked,” Hilton wrote. “In this sense, plaintiffs are best characterized as hourly-rate workers.”
But he pointed out that the Supreme Court has made clear that “hourly-rate workers can still be paid on a salary basis under § 604(b) so long as they 1) also receive a weekly guarantee of at least $684 and 2) that guarantee bears a reasonable relationship to their actual earnings in a normal scheduled workweek.”
According to payroll records, the judge found that the plaintiffs received sufficient weekly guarantees that exceeded the $684 weekly minimum.
The plaintiffs said their guarantees were provided on an hourly basis because the city’s computation multiplied their guaranteed hours by hourly rates.
But Hilton said those calculations weren’t an actual function of the hours worked by the plaintiffs, who were paid regardless of the hours they worked.
“Thus, the situation here is distinct from Helix, where the employee’s pay was completely determined by the number of days worked in a week,” he noted.
The judge found a reasonable relationship between the city’s guarantees and actual earnings in a normal scheduled workweek based on a ratio used by the Department of Labor. The plaintiffs miscalculated by including overtime pay when determining actual earnings in a typical week.
“But that approach ignores § 604(b)’s language which limits actual earnings in a typical week to what is earned in a ‘normal scheduled workweek,’ which should exclude pay for non-scheduled work hours,” Hilton explained.
The plaintiffs also insisted that their hourly minimums weren’t guarantees because they weren’t explicitly promised in any contract.
Hilton was unpersuaded.
“[W]hether a guarantee exists or not depends on if an employer has a practice of subjecting their employees to improper salary deductions based on the quality or quantity of their work,” the judge said.
Also, Hilton said the plaintiffs bore the burden of offering proof of a practice of improper reductions. That didn’t happen here.
“Because of the paucity of evidence here, no reasonable jury could conclude Plaintiffs were subject to a practice of improper deductions,” he said. “Therefore, the Court finds the City did in fact provide guarantees of 106 and 80 hours worth of pay to Plaintiffs every biweekly pay period.”