Martinez et al v. Refinery Terminal Fire Company

Filing 269

ORDER. The Court finds that RTFC willfully violated the FLSA by improperly implementing the FWW method of compensation and that the three-year statute of limitations applies. The Court further finds that for purposes of determining damages, the regu lar rate of pay is the total compensation received by the Pltff, including salary, ATW pay, and CO pay, divided by the total number of hours worked by the Pltff. In addition, the Court finds that the Pltffs are entitled to liquidated damages in an amount equal to the unpaid compensation due; mooting 258 Motion for Leave to File.(Signed by Judge Nelva Gonzales Ramos) Parties notified.(lcayce, 2)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
JOE DALE MARTINEZ, et al,
Plaintiffs,
VS.
REFINERY TERMINAL FIRE
COMPANY,
Defendant.

§
§
§
§ CIVIL ACTION NO. 2:11-CV-295
§
§
§
§
§
ORDER

Plaintiffs allege that Refinery Terminal Fire Company (RTFC) violated provisions
of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., and owes them back
wages. The Court previously determined that RTFC violated the FLSA when it made
improper deductions from employees’ salaries. Pending are the parties’ motions for the
determination of damages:

(1) RTFC’s motion for partial summary judgment for

determination of the regular rate (D.E. 235) and the responses and replies thereto (D.E.
244, 245, 250, 251) and (2) Plaintiffs’ motion for summary judgment on the proper
measure of damages (D.E. 237) and the responses and replies thereto (D.E. 248, 249,
257). Also pending is Plaintiffs’ motion to strike the unsworn expert reports of Patricia
Slate and Donald Deere (D.E. 255, 256) and RTFC’s response and motion to file sworn
declarations from Slate and Deere (D.E. 258). In addition, the parties have filed cross
motions for summary judgment on this issue of whether the FLSA violations were willful
(D.E. 234, 243, 249, 254, 258).

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The Court held a hearing on the motions to determine damages on November 14,
2014. At the hearing, the Court found that RTFC had not met its burden to show that the
pay for the additional time worked (ATW) and callout hours (CO) fell within the
exclusions set forth in 29 U.S.C. §§ 207(e)(5) & (6). The Court found that ATW & CO
pay was additional compensation for hours worked and was not an overtime premium
because such pay was received during regular hours worked as well as when the
employee had worked fewer than regular hours.
Based on this finding, the Court held that, in addition to RTFC violating the
fluctuating workweek (FWW) method of compensation by making improper deductions,
RTFC also violated it by improperly characterizing ATW and CO pay as overtime
premiums. As a result of this additional pay, the Plaintiffs’ salary varied with the number
of hours worked and thus was not fixed.
Consequently, the Court stated that in determining the regular rate of pay, the total
compensation would include the salary plus ATW and CO pay. The Court must now
address whether the total compensation will be divided by 40 hours, the scheduled hours
worked, or by all hours worked. After further review and as more fully discussed below,
the Court orders that the total compensation shall be divided by all hours worked to
determine the regular rate. Additionally, the Court finds that RTFC willfully violated the
FLSA which results in the three-year statute of limitations being applicable.
At the hearing, the Court denied RTFC’s motion to exclude the opinion and
testimony of Bryan Farrington (D.E. 236) and RTFC’s motion to exclude the opinion and
testimony of David L. Kern (D.E. 241). Because the Court has ruled in favor of the
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Plaintiffs on the issue of willfulness, the Court finds that Plaintiffs’ motion to strike the
reports of RTFC’s experts (D.E. 255, 256) and RTFC’s motion to file sworn declarations
of these experts (D.E. 258) are moot.
JURISDICTION AND VENUE
This court has jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1343. Venue is
proper in this court because a substantial part of the actions about which Plaintiffs
complain occurred in Nueces County, Texas, which is located in the Southern District of
Texas.
BACKGROUND
RTFC is a private not-for-profit company that provides firefighting and related
services to refineries and petrochemical facilities. The organization is owned by its
members, primarily petrochemical refineries, who pay an annual assessment for access to
fire protection. RTFC has a main station and five in-plant stations, four of which are
located in Corpus Christi and one which is located in Port Arthur, Texas. RTFC employs
more than 100 full-time firefighters and Plaintiffs are current and former employees of
RTFC.
Beginning in 2004, RTFC began using the FWW method to pay its employees and
continued to use that method until December 31, 2011, when it switched back to a
traditional method of paying an hourly wage plus time-and-a-half for overtime.
Plaintiffs’ hours fluctuated as they normally worked 24-hour shifts followed by 48-hour
periods when they were off, which resulted in their working forty-eight hours one week
and seventy-two hours the next week. In addition, Plaintiffs often worked more than the
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regular forty-eight or seventy-two hours in a workweek and the extra hours were
classified as “additional time worked” (ATW) or “callout” hours, depending on the duties
performed.

Also, Plaintiffs sometimes received a $50 lump sum payment if they

appeared to work within thirty minutes after being called when they were scheduled to be
off, described as “reporting pay”.
Plaintiffs filed this lawsuit on September 9, 2011. Several motions for partial
summary judgment have been filed and ruled upon by the Court. On January 15, 2014,
the Court granted a motion for partial summary judgment filed by Plaintiffs on the FWW
method when it found that RTFC had violated the FWW method by making improper
deductions from employees’ pay (Transcript of Hearing held Jan. 15, 2014, D.E. 196 at
51). The Court also found that lump sum “reporting pay” was properly excluded from
the regular rate of pay by RTFC under 29 C.F.R. § 778.222 (Id., D.E. 196 at 7-8). The
Court also ruled that the Motor Carrier Exemption did not apply to Plaintiffs (D.E. 192),
and that employees classified as Captains were subject to the Executive Exemption, with
the result that they were dismissed from the lawsuit (D.E. 198, 228). The remaining
Plaintiffs are proceeding via a collective action (D.E. 54, 228).
The issues addressed herein are (1) whether the FLSA violations by RTFC were
willful, and (2) the number of hours to be used for the denominator to determine the
regular rate of pay.

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APPLICABLE LAW AND ANALYSIS
I. Summary Judgment Standard
Summary judgment is proper if there is no genuine issue as to any material fact
and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P.
56(c). An issue is material if its resolution could affect the outcome of the action.
Daniels v. City of Arlington, 246 F.3d 500, 502 (5th Cir. 2001). The court must examine
“whether the evidence presents a sufficient disagreement to require submission to a jury
or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). In making this determination, the
court must consider the record as a whole by reviewing all pleadings, depositions,
affidavits and admissions on file, drawing all justifiable inferences in favor of the party
opposing the motions. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986). Generally, the court will not weigh the evidence or evaluate the credibility
of witnesses. Caboni v. General Motors Corp., 278 F.3d 448, 451 (5th Cir. 2002).
The movant bears the initial burden of showing the absence of a genuine issue of
material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant
demonstrates there is an absence of evidence to support the nonmovant’s case, the
nonmovant must come forward with specific facts showing that there is a genuine issue
for trial. See Matsushita, 475 U.S. at 587. To sustain this burden, the nonmovant cannot
rest on the mere allegations of the pleadings. See Celotex, 477 U.S. at 324; Caboni, 278
F.3d at 451; Fed.R.Civ.P. 56(e). After the nonmovant has been given an opportunity to
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raise a genuine factual issue, if no reasonable juror could find for the nonmovant,
summary judgment will be granted. Caboni, 278 F.3d at 451.
Where there are cross-motions for summary judgment, the party bearing the
burden of proof at trial must satisfy not only the initial burden of production on the
summary judgment motion by showing that there is no genuine issue of material fact, but
also the burden of persuasion on the claim itself by showing that it would be entitled to
judgment as a matter of law at trial. Provenza v. Gulf South Administrative Services, Inc.,
67 F.Supp.2d 617, 619 (M.D. La. 1999). Each motion must be considered separately
because each movant bears the burden of showing that no genuine issue of material fact
exists and that it is entitled to judgment as a matter of law. American Int’l Specialty
Lines Ins. Co. v. Rentech Steel LLC, 620 F.3d 558, 562 (5th Cir. 2012). If there is no
genuine issue of fact and one party is entitled to prevail as a matter of law, the court may
render summary judgment. Shaw Constructors v. ICF Kaiser Engineers, Inc., 395 F.3d
533, 539 (5th Cir. 2004).
The parties in this case agree that the issues have been fully briefed and all
relevant evidence is before the court. The parties have further stipulated that any issues
of fact will be tried by the Court without a jury. Accordingly, the Court may draw
inferences from the evidence. American Century Proprietary Holdings, Inc. v. American
Century Cas. Co., 295 F.App’x 630, 634 (5th Cir. 2008).
II. Willfulness
The Court has determined that RTFC violated the FLSA because of the improper
use of the FWW method of compensation. Specifically, the Court found that improper
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deductions from some of Plaintiffs’ salaries and the payment of ATW and CO pay
violated the FWW method and thus violated the FLSA. The issue of the willfulness of
the violations is relevant to whether a two-year or three-year statute of limitations applies.
29 U.S.C. § 255(a). If a defendant is found to have willfully violated the FLSA, it is
liable for violations in the three years preceding the filing of the lawsuit. If the violations
were not willful, the defendant is liable for violations in the two years preceding the
filing. Id.; Johnson v. Big Lots Stores, Inc., 604 F.Supp.2d 903, 923 (E.D. La. 2009).
The word “willful” “is generally understood to refer to conduct that is not merely
negligent.” McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988). It refers to
situations where an employer either knew or showed reckless disregard for the matter of
whether its conduct was prohibited by the statute. Id. (citing Trans World Airlines, Inc. v.
Thurston, 469 U.S. 111, 128 (1985)). Plaintiffs have the burden of showing willfulness.
Stokes v. BWXT Pantex, LLC, 424 F.App’x 324, 326 (5th Cir. 2011).
The Fifth Circuit found that an employer acted willfully when the evidence
showed that the employer had actual knowledge that it was violating the FLSA but
continued to do so. Singer v. City of Waco, 324 F.3d 813, 822 (5th Cir. 2003). Similarly,
the court found willfulness where evidence showed that an employer was put on notice
by the local wage and hour board that its practices violated the overtime law but
continued its practices without further investigation. Reich v. Bay, Inc., 23 F.3d 110, 117
(5th Cir. 1994); see also Carman v. Meritage Homes Corp., No. 4:11-CV-1824, 2014
WL 3919749 (S.D. Tex. Feb. 28, 2014) (evidence that employer told employees to not

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report all their hours worked coupled with citations to FLSA in employee handbook was
sufficient for factfinder to find willfulness).
Conversely, where an employer discussed minimum wage requirements with the
Texas Employment Commission and reviewed brochures and pamphlets prior to making
a compensation decision, the Fifth Circuit affirmed a district court’s conclusion that the
employer had not acted with reckless disregard that it was violating the FLSA. Mireles v.
Frio Foods, Inc., 899 F.2d 1407, 1416 (5th Cir. 1990). Nor was knowledge that a female
employee filed complaints about being paid less than her male counterparts enough to
make a finding that an employer knew or recklessly disregarded the fact that its pay scale
violated the FLSA.

Ikossi-Anastasiou v. Board of Supervisors of Louisiana State

University, 579 F.3d 546, 553 (5th Cir. 2009). Also, in Local 889, American Federation
of State, County and Municipal Employees v. Louisiana, 145 F.3d 280, 284 n. 2 (5th Cir.
1998), the court found that the fact that the State of Louisiana paid employees overtime
before it was legally required to do so weighed against a finding of willfulness on the
State’s failure to pay the same employees for a fifteen-minute roll call period every
morning. In Burns v. Blackhawk Management Corp., 494 F.Supp.2d 427, 436 (S.D.
Miss. 2007), a district court found that an employer did not act willfully in making a
decision about overtime because when an employee complained about his compensation,
the employer obtained and read a copy of the applicable regulation before determining
that the employee was exempt. The employer also asked another employee, who had a
law degree, to review the issue. In addition, the Department of Labor (DOL) ultimately
investigated the issue and reached the same conclusion as that reached by the employer.
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The court found that under these circumstances, any failure to pay overtime required by
the relevant regulation was not willful. Id.
Regarding the issue of improper deductions in this case, RTFC was aware of DOL
policies that an employer utilizing the FWW scheme of compensation may not make
deductions from an employee’s salary for absences occasioned by the employee, except
in situations of willful absences or tardiness or for infractions of major work rules. Even
in those circumstances, deductions cannot be made if they cut into the required minimum
wage or overtime compensation. See DOL Opinion Letter, FLSA2006-15, 2006 WL
1488849 (May 12, 2006). In particular, the opinion letter states that an employer “may
not make full day deductions from the salary of its fluctuating workweek employees
when the employee has exhausted his or her sick leave bank or has not yet earned enough
leave to cover the absence.” Id. at *1. It is undisputed that RTFC’s counsel provided a
copy of this letter to RTFC when the letter was published (Depo. of Keith Sieczkowski at
pp. 45-46; D.E. 234-1 at 2-3).
Despite the language of the opinion letter, RTFC described the following policy in
its handbook:
New Hires will begin accruing annual PTO [Paid Time Off] after their first
30 days of employment. New Hires, who have not completed their first
year of service and are therefore not eligible for annual PTO use, shall
nevertheless be authorized to use up to 24 hours of accrued annual PTO for
absences due to illness and/or injury. Any such annual PTO use will reduce
any annual PTO that may otherwise be available during the next year.
RTFC Employee Handbook at “Paid Time Off (PTO) Policy,” p. 2 (D.E. 147-2 at 59)
(emphasis in original). The policy does not specify what happens if an employee is sick
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or otherwise needs to use more than 24 hours of PTO during the first year of
employment. RTFC’s expert, Patricia Slate, pointed to one incident involving Plaintiff
Cody Brogue, a firefighter trainee at the time, who missed eight hours without pay in his
sixth week of work and before he had accrued any PTO (Report of Patricia Slate at p. 16;
D.E. 243-5 at 16; Payroll worksheet for Cody Brogue, D.E. 169-4 at 2).

Another

firefighter trainee also missed work and was not paid, apparently because he had already
exhausted his 24 hours of PTO (Slate Report at p. 16; D.E. 243-5 at 16; Payroll
worksheet for Marcus Collins, D.E. 169-4 at 6). RTFC presumably decided to not pay
these employees on the days they took off pursuant to its “new hire” policy, and the
failure to pay them was at the very least reckless, given the clear instruction from the
DOL on the issue. See also Brantley v. Inspectorate America Corp., 821 F.Supp.2d 879,
891 (S.D. Tex. 2011) (“Under the FWW, employers are not allowed to make deductions
to an employee’s fixed salary for sick leave or vacation leave, even if the employee has
not yet accrued sufficient leave to cover their absence.”)
Other firefighter trainees also missed work and were not paid (Payroll worksheets
of Jared Brannon, D.E. 169-4 at 4-5; Herman Contreras, Jr., D.E. 169-4 at 7; Christopher
Hoefel, D.E. 169-4 at 13; Arturo Lopez, D.E. 169-4 at 15; Jacob McDaniel, D.E. 169-4 at
19; Matthew Mitchell, D.E. 169-4 at 21; Matthew Rives, D.E. 169-4 at 24; Gabriel
Salinas, D.E. 169-4 at 26; Steven Sendejo, D.E. 169-4 at 27-28 and Justin Serna, D.E.
169-4 at 29). However, nothing in the evidence submitted by Plaintiffs indicates why
RTFC determined that the leave would be uncompensated. If RTFC did not compensate
the employees because they were ill or otherwise unable to come to work, the failure to
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compensate them would, as described above, be a willful violation of the FWW method
of compensation. Conversely, if the leave was uncompensated for another reason, either
because it was a willful, unexcused absence, or because the employee was suspended for
a day as a disciplinary measure, RTFC would not have committed a violation, willful or
otherwise. Brantley, 821 F.Supp.2d at 892. Plaintiffs, who have the burden of proof on
this issue, have not provided evidence from which the Court can conclude that RTFC
violated the FLSA with respect to these Plaintiffs or that if it did so, that it was a willful
violation.
Regarding other employees, Plaintiffs assert that RTFC willfully violated the
FLSA when it deducted from salaries of employees with insufficient PTO because they
missed work for a variety of non-willful reasons such as calling in sick, locking keys in a
car, going to a funeral, and when they were stranded and could not go to work because of
Hurricane Ike. Plaintiffs cite broadly to several multi-page exhibits which they claim
support their claim (See Plaintiffs’ Mot. for Sum. Jmt. On Willfulness at p. 7, n. 10; D.E.
234 at 7, citing D.E. 151-3, 169-4 and 169-5).
A review of the documents reveals that some of Plaintiffs’ allegations are
supported by the record and some are not. Plaintiffs Jason Flores, Arturo Lopez, David
Mireles, Anthony Mixon, and Juan Rodriguez all were suspended without pay for
violations of major work rules (D.E. 151-3 at 2-37). Such suspensions are allowed under
the FLSA statute and regulations, as long as the deductions do not cut into the required
minimum wage or overtime compensation. DOL Opinion Letter, FLSA2006-15, 2006
WL at *1 (D.E. 234-4 at 1). Brantley, 821 F.Supp.2d at 892. In addition, each of the
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suspensions was for one to two weeks. Under the FWW method, an employer is not
required to pay an employee for weeks in which no hours are worked. See DOL Opinion
Letter, 1991 WL 11648489 at *1 (Aug. 20, 1991) (no reductions may be made from
salary provided employee performs any work during the workweek) (emphasis added) and
Deposition of Bryan Farrington at 54-55 (D.E. 234-8 at 5).
Also, firefighters classified as “FF1” or “FF2” missed work and were not paid
(Payroll worksheets of Joe Gonzalez, D.E. 169-4 at 10; Paul H. Garza, D.E. 169-4 at 11;
Ryan Marshall, D.E. 169-4 at 18; Mark McKinley, D.E. 169-4 at 20; Christopher Don
Powell, D.E. 169-4 at 23; Jeremy Williams, D.E. 169-4 at 31). However, without an
explanation from Plaintiffs regarding why they were absent, the Court cannot conclude
that their pay was docked in violation of the FLSA.
The only violations apparent in D.E. 151-3 are the three occasions when RTFC did
not pay Adam Walton when he was out. On December 9, 2008, Walton missed work
because of an emergency, and on December 17, 2008 and December 16, 2010, he called
in sick. In the first two incidents, Walton did not have any PTO and it is unclear why he
was not paid the third time (D.E. 151-3 at 43, 45-46, 48, 50). These failures to pay him
were violations of the FLSA and given the clear statements by the DOL regarding
deductions for employees who have no PTO, the violations were willful.
Plaintiff Walton also was suspended without pay for twelve hours on October 21,
2008, following a violation of safety rules (D.E. 151-3 at 39-41). This is considered
suspension without pay for violation of a major work rule and thus was not a violation of
the FLSA.
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Regarding employees who were not paid when they missed work because of a
hurricane, Plaintiffs Matthew Rives, Thomas Bennett, and Marcus Collins did not work
at all during the workweek (D.E. 169-5 at 3, 9, 11) and it was not a violation of the FLSA
for RTFC to not have paid them for the days they missed. The other Plaintiffs who
missed work because of the hurricane, Justin Newcomb, Mario Rodriguez, Justin Serna,
Matthew Mitchell, Gordon Means, Jacob McDaniel, Matthew Burgos, Herman Contreras,
Jr., Thomas Cruz, Zachery Fritz, Grant Funderburg, and Christopher Hoefel, all worked
at least a few hours during the week of the hurricane (D.E. 169-5 at 2, 4, 5, 6, 7, 8, 10, 12,
13, 14, 15, 16). Given the clear directive by the DOL regarding other-than-willful
absences occasioned by employees, RTFC’s deduction for the hours missed because of a
hurricane was a willful violation of the FLSA.
Two employees, Steve Hogue and Fidencio Lopez, were not paid when they called
in sick (D.E. 169-5 at 17, 20). These were willful violations of the FLSA. Plaintiff
Marcos Munoz was not paid for 23.25 hours when he called in sick, apparently because
he had exhausted his PTO. However, because he did not work at all during the week,
failure to pay him did not result in a violation of the FLSA (D.E. 169-5 at 19).
Regarding the allegation that an employee was not paid when he missed work for
a funeral, the only reference to funeral leave was for Ruben Cortez when he missed work
on August 23, 2010 (D.E. 169-5 at 22). According to RTFC’s expert, Cortez missed his
very first day of work at RTFC because of the funeral, and employees paid under the
FWW method may be paid a pro rata share of their salary in their first and last weeks of
work (Slate report, D.E. 243-5 at 17) (citing the Field Operations Handbook at
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32b04b(c); Cortez Payroll Records, D.E. 169-4 at 9). Plaintiffs offered no evidence to
the contrary, and the Court finds that failure to pay Cortez that day was not a violation of
the FLSA, willful or otherwise.
Also, although Plaintiffs allege that an employee’s pay was docked when he was
late because he locked his keys in the car, Plaintiffs point to no evidence in the record to
support this assertion.

The only reference to keys being locked in a car was a

memorandum from Plaintiff Arturo Lopez explaining that he was late to work because he
had locked his keys in his car. There is a notation on the memorandum indicating that the
tardiness was excused (D.E. 243-3 at 4).
In sum, although all of Plaintiffs allegations regarding deductions are not
supported by the evidence in the record, Plaintiffs are correct that RTFC willfully
violated the FLSA by making some improper deductions from employee salaries on
several occasions. Thus, the three-year statute of limitations applies.
Because the Court has found that the FLSA violations based on improper
deductions were willful, the Court does not find it necessary to address whether the ATW
and CO payments were willful violations of the FLSA.
III. DAMAGES CALCULATION
A. Effect of FWW Violation
Plaintiffs argue that because RTFC violated the FWW compensation method, such
method no longer applies to any of the compensation received by them. They further
argue that if the FWW method does not apply, their salaries for the three years in
question must be recalculated using the non-FWW formula of dividing their total
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compensation for a workweek by forty hours to determine their regular rate of pay and
then calculating their overtime pay at time-and-a-half the regular rate for all hours over
forty and subtracting the amount of overtime they already received. This formula will
hereinafter be referred to as the “FLSA default formula.”
Plaintiffs cite, among other cases, this Court’s order denying summary judgment
in Gomez v. Crescent Services, LLC., No. 2:13-CV-130, 2014 WL 2593091 at *6 (S.D.
Tex. June 10, 2014), arguing that Gomez stands for the proposition that if an employee
proves a misuse of the FWW method, the employee is entitled to compensatory damages
as described above. However, the order in Gomez rested on a different set of facts and a
different criterion of the FWW method than are under consideration in this case. In
Gomez, the plaintiffs alleged that their fixed salary often failed to pay them minimum
wage because they worked too many hours. Id. at *3. Under the FWW method, the
employer must assure that the fixed salary is sufficient to provide compensation of not
less than minimum wage for every hour worked in the workweek.

29 C.F.R. §

778.114(c). The DOL has issued letters stating that the FWW pay plan fails if the salary
is not reasonably calculated to provide that the statutory minimum wage is paid for the
first forty hours of the week. Gomez at *4. After examining the letters and the opinion in
Cash v. Conn Appliances, Inc., 2 F.Supp.2d 884 (E.D. Tex. 1997), this Court stated the
following:
If an employee proves a misuse of the FWW method and a finding is made
that the employer regularly violated the minimum wage criterion, the
employee is entitled to compensatory damages equal to the difference
between the amount of overtime compensation owed when total
remuneration is divided by forty, the result is multiplied by 1.5, and that
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product is multiplied by the number of hours over forty; and the amount of
overtime compensation actually paid in each week the FWW method was
used.
Gomez at *6 (emphasis added) (citing Cash, 2 F.Supp.2d at 896).
Plaintiffs omit the italicized portion of the paragraph when they cite Gomez (D.E.
244 at 19), but it is an essential element of the decision. In Gomez, this Court looked to
the DOL letters which made clear that when compensation repeatedly fell below
minimum wage, the FWW method fails. Plaintiffs here do not argue that RTFC ever
failed to pay them minimum wage and Gomez does not stand for a broad mandate that
any misuse of the FWW method renders it inapplicable to a calculation of damages.
Several district courts have held that violating the FWW method by making
wrongful deductions means that all wages must be recalculated using the FLSA default
formula. In McCumber v. Eye Care Centers of America, Inc., No. Civ.A. 09-1000, 2011
WL 1542671 (M.D. La. April 20, 2011), the court addressed the employer’s motion
seeking a judgment that any wages found to be due the plaintiff be calculated using the
FWW method. Id. at 11. The employer argued that it was undisputed that the employee
was paid a fixed salary regardless of the number of hours he worked, but the court found
that on two occasions he had failed to work 80 hours in a two-week period and eight
hours of pay was deducted from his salary. Id. at 12. The court declined to apply the
FWW method to the case and instead held that any overtime found by the jury to be owed
to the employee would be calculated under the FLSA default formula. Id. See also Ayers
v. SGS Control Services, Inc., Nos. 03 Civ. 9078(RMB), 06 Civ. 7111(RMB), 2007 WL
3171342 (S.D.N.Y. Oct. 9, 2007) (violation of FWW results in fall back to FLSA default
16 / 23

formula) and Brumley v. Camin Cargo Control, Inc., No. 08-1798, 2010 WL 1644066
(D.N.J. Apr. 22, 2010) (followed Ayers, finding that FLSA default formula applies to
plaintiffs who have suffered FWW violation).
However, in Conne v. Speedee Cash of Mississippi, Inc., 246 F.Appx. 849, 851
(5th Cir. 2007),1 the court found that a single instance of a wrongful deduction would not
bar an employer from using the FWW method for calculating future pay. Also, in Cash,
2 F.Supp.2d at 884, the court first stated that if an employer violated the FWW clear
understanding criterion, the full schedule criterion, or both, damages would be calculated
using the FLSA default formula. Id. at 896. Notwithstanding that comment, the court
found that occasional docking of pay for illness for which no sick time was available did
not cause the FWW method of pay to be unavailable to the employer. Id. at 899, 906. In
addition, in Brantley, 821 F.Supp.2d at 889, 892-893, the court found that the employer
violated the FWW method by making impermissible salary deductions and also by
paying offshore, day-off, and holiday premiums. Nevertheless, the court did not find that
the FLSA default formula was applicable, but employed a different formula, dividing

1

Plaintiffs assert that unpublished opinions have no precedential value, citing Fifth Circuit Rule
47.5.4, which states that unpublished opinions issued on or after January 1, 1996 are not
precedent, except under the doctrine of res judicata, collateral estoppel or law of the case, but an
unpublished opinion may be cited pursuant to Fed. R. App. P. 32.1(a). Under Fed. R. App. P.
32.1, a court may not prohibit or restrict the citations of federal judicial opinions, orders,
judgments, or other written dispositions that have been designated as “unpublished” or “notprecedential” and issued on or after January 1, 2007. Those rules apply to procedures in the
Fifth Circuit Court of Appeals. Also, the Advisory Committee Notes state that the rule is
extremely limited and says nothing about what effect a court must give to one of its unpublished
opinions or the unpublished opinion of another court. Rather, the rule addresses only the citation
of federal judicial opinions that have been designated “unpublished” or “non-precedential.”
17 / 23

total compensation by the number of hours actually worked to determine the regular rate
of pay and amount of overtime due for hours worked over forty. Id. at 894-895.
Plaintiffs contend that not applying the FLSA default method would allow RTFC
to reap the benefit of a failed FWW plan and receive a windfall not intended under the
law. But the FLSA describes penalties for employers who violate the statute:
Any employer who violates the provisions of section 206 or section 207 of
this title shall be liable to the employee or employees in the amount of their
unpaid minimum wages, or their unpaid overtime compensation, as the case
may be, and in an additional equal amount as liquidated damages.
29 U.S.C. § 216(b). If an employer fails to follow the regulations with the result that it
fails to pay its employees properly under the statute, the employees’ remedy is to receive
the compensation to which they would have been entitled had the employer followed the
law. In addition, the statute provides for liquidated damages. Although the statute giving
employees the right to sue for unpaid overtime is compensatory, it is also an enforcement
provision. Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 709 (1945). “And not the least
effective aspect of this remedy is the possibility that an employer who gambles on
evading the Act will be liable for payment not only of the basic minimum originally due,
but also damages equal to the sum left unpaid.” Id.
Determining what amount of compensation Plaintiffs were entitled to under their
agreement with RTFC and assessing an equal amount of compensation as liquidated
damages will compensate Plaintiffs and act as a sanction against RTFC for its failure to
abide by FWW requirements. Accordingly, the Court declines to apply the FLSA default

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formula and instead orders the parties to calculate damages using the formula discussed
below.
B. Determining the Regular Rate
Overtime rates are calculated at one and one-half times an employee’s regular rate
of pay, or in the FWW context, at one-half the regular rate of pay. 29 U.S.C. § 207(a)(1);
29 C.F.R. §778.114. “Regular rate” is broadly defined as the hourly rate actually paid the
employee for “all remuneration for employment.” 29 U.S.C. § 207(e). “The ‘regular
rate’ becomes a mathematical computation once the parties have decided on the amount
of wages and the mode of payment, which is unaffected by any designation to the
contrary in the wage contract.” Gagnon v. United Technisource, Inc., 607 F.3d 1036,
1041 (5th Cir. 2010) (citing Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 441
(1948)).
As mentioned above, the Court determined at the hearing on November 14, 2014,
that for purposes of determining the hourly rate, all compensation received by Plaintiffs,
including salary and ATW and CO pay, would be included in the numerator. At issue is
whether 40 hours, the scheduled number of hours, or all hours worked in a week should
be used in the denominator.
Plaintiffs argue initially that the denominator should be forty, the number of hours
in the standard workweek.

However, Plaintiffs never worked a standard forty-hour

workweek and their argument is without support in the case law. Evidence in the record
shows that Plaintiffs worked an average of fifty-six hours per week, not counting ATW

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or CO hours. Therefore, the Court considers whether the denominator should be fifty-six
hours, or the actual number of hours worked in a given week.
The Brantley court stated that “[i]n order to determine the regular hourly rate of
pay, the Court must ascertain the number of hours per week the salary was ‘intended to
compensate.’ . . . This intended number of hours can be determined by examining what
happens under the employment contract, and may include non-overtime and overtime
hours.” Id. at 893 (citing 29 C.F.R. § 778.113(a) and Singer v. City of Waco, Tex., 324
F.3d 813, 824 (5th Cir. 2003)). Payroll records in Brantley showed that the number of
hours worked by employees varied greatly from week to week and frequently did not
correspond to a forty hour week, which weighed against calculating their pay based on a
forty-hour workweek. Id. at 893-894. In addition, the Brantley court found that even
though the employer violated the FWW’s requirements of a fixed salary and “clear
mutual understanding,” because it informed employees that it intended to pay them under
the FWW method, the employees were on notice that their non-overtime compensation
did not correspond to a forty hour workweek. Id. at 894.
In Singer, when the Fifth Circuit discussed the regular rate of pay for municipal
fire fighters, it determined that even though the firefighters had not been adequately
compensated, their paychecks were intended to compensate them for all of their regularly
scheduled non-overtime and overtime hours. Thus, the overtime and non-overtime hours
were included in the divisor when determining the regular rate. Singer, 324 F.3d at 824825. Similarly, in Urnikis-Negro v. American Family Property Services, Inc., 616 F.3d
665, 681 (7th Cir. 2010), the Seventh Circuit found that the starting point for calculating
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the regular rate of pay is deciding what number of hours the fixed weekly pay was
intended to compensate.
Payroll worksheets from a sample group of RTFC employees show that their hours
varied widely. For example, in records for Ryan Barbato for 2011, the number of hours
he worked in a two-week period ranged from 120 to 184 (Ex. 6 to Plaintiffs’ MSJ on the
Prop. Meas. Dmgs., D.E. 238 at 1-26). Like in Brantley, the variation in hours worked
weighs against using fifty-six hours as the denominator and weighs in favor of using the
actual number of hours worked.
Defendant presented evidence that it had an agreement with its employees
regarding compensation.

Documents signed by employees in 2004 explained the

standard FWW method of salary computation and the overtime premium:
It was explained that as of January 1, 2004, and, thereafter, I would be paid
a fixed salary for all hours worked and that I am entitled to additional halftime pay for any hours worked above 40 in any workweek. I understand
that my acceptance to such payment method is a condition of continued
employment with RTFC.
...
bi-monthly salary x 24 ÷ 52 = weekly salary
weekly salary ÷ hours worked = weekly hourly rate
weekly hourly rate ÷ 2 = half-time rate
half-time rate x hours worked over 40 = minimum FLSA overtime due
Under this payment method my hourly rate and overtime rate for any given
week will vary based on the actual number of hours worked.

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This explanation of computing my overtime provided above and during my
training, describes the minimum hourly rate and overtime payments
required. RTFC, however, has agreed to pay overtime at a fixed hourly rate
that is equal to or exceeds the required minimum half-time rate. At this
time, RTFC has agreed to pay overtime at a flat hourly rate in accordance
with the attached chart.
(Ex. C to Resp. to MPSJ; D.E. 157-4) (emphasis added). There was no chart attached to
the exhibit, but based on the language in the agreement and other evidence in the record,
it is assumed that the chart set out the overtime, ATW and CO rates.2
Based on the language in the document, it is clear that the salary was intended to
cover all hours worked. While RTFC ran afoul of the FWW method in its attempts to
characterize ATW and CO pay as overtime premiums and in making wrongful
deductions, that conclusion does not alter the fact that in the original agreement, the
notion that the salary was intended to cover all hours worked was unambiguous. Thus,
looking to Brantley, the Court concludes that when determining the regular rate, the
parties must use all hours worked as the denominator.
CONCLUSION
For the foregoing reasons, the Court finds that RTFC willfully violated the FLSA
by improperly implementing the FWW method of compensation and that the three-year
statute of limitations applies. The Court further finds that for purposes of determining
damages, the regular rate of pay is the total compensation received by a Plaintiff,
including salary, ATW pay, and CO pay, divided by the total number of hours worked by

2

See, e.g., Non-Exempt Salaried Pay Scale and Rate Structure, Eff. January 1, 2011 (Ex. C. to
First Amd. Compl., D.E. 10-3 at 1).
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the Plaintiff. In addition, the Court finds that Plaintiffs are entitled to liquidated damages
in an amount equal to the unpaid compensation due.

ORDERED this 16th day of December, 2014.

___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE

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