The Sacramento Metro Fire District (district) has reached a settlement with a group of more than 500 current and former fire department employees following alleged FLSA violations. The settlement, which was approved by the U.S. District Court for the Eastern District of California requires the district to pay a total of $1,376,827.22 to 534 current and former firefighters, EMTs, engineers, and support staff (firefighters).
The original complaint, which was filed by one district employee in April 2017, contained allegations the district failed to include all remuneration in firefighter’s (and other district employees) regular rate of pay for FLSA overtime purposes. The FLSA requires virtually all the money an employee receives for working included in the regular rate of pay. Proper calculation of the regular rate is critical, since all FLSA overtime must be at least time and one-half of the regular rate. Failing to include all remuneration in an employee’s regular rate will result in short-changing that employee’s overtime rate.
Specifically, the complaint alleged the district failed to include money paid directly to firefighters (and other district employees) for declining employer sponsored medical benefits and holiday pay for firefighters assigned to 24-hour shifts (holiday-in-lieu pay) in the regular rate of pay in violation of the FLSA. Whether either of these payments need to be included in the regular rate requires a fact-based inquiry.
While a settlement of over $1 million is certainly significant, it appears the attorneys’ that represented both the district and the firefighters worked diligently to produce a rather quick and reasonable settlement in light of the facts.
The district almost certainly faced liability for failing to include cash paid to firefighters in-lieu of receiving employer-sponsored medical benefits in the regular rate. In fact, the district altered pay practices to include these payments in the firefighters’ regular rate in February 2018. The only real question remaining on this issue related to the amount of damages and attorneys’ fees the prevailing firefighters would receive.
However, there is a genuine question as to whether holiday-in-lieu pay must be included in the regular rate. Generally speaking, holiday pay can be excluded from the regular rate. But this typically applies to money received for a scheduled day-off from work due to a holiday. For example:
The office is closed on July 4. All employees receive a day’s pay and are not required to work that day. It is a holiday. (No need to include this holiday pay in the employee’s regular rate. The employee did not work due to a holiday.)
Compare the above example to firefighters and other emergency service workers that may receive holiday in lieu pay. Firefighters do not receive the day off because it is a holiday. When a firefighter has a day off on a holiday, it is due to his or her schedule, not due to the holiday itself.
There is no one-size fits all bright-line rule when it comes to holiday pay and the regular rate. Whether the firefighters here would have prevailed on this issue is not certain by any means. It would be highly dependent on the specific facts and likely require a great deal of litigation. It appears this uncertainty was reflected in the terms of the settlement.
Here are the Key Terms of the Settlement:
- The parties have agreed to settle the matter for a total sum of $1,376,827.22, which “includes all amounts to be paid by Defendant to Plaintiffs, attorneys’ fees and costs inclusive, to resolve this matter.”
- Defendant will pay back overtime pay due to cash-in-lieu recipients (payments made for declining employer-sponsored medical benefits) for the period from April 20, 2014 until January 2018 using the more generous overtime practices set forth in plaintiffs’ MOUs, as opposed to what is required under the FLSA.
- Defendant will pay two years of back overtime pay due to holiday-in-lieu recipients using the definition of overtime set forth in plaintiffs’ MOUs, as opposed to what is required under the FLSA.
- Defendant will incorporate holiday-in-lieu pay into its overtime calculation using a methodology that will more than meet its minimum FLSA obligations, effective March 2018 and until at least January 2021.
- Defendant will pay plaintiff Tracey Valentine $1,000 in recognition of her appointment as collective action representative.
- Of the total settlement amount, $275,165.44 is allocated to plaintiffs’ counsel for attorneys’ fees and costs, which represents approximately 20 percent of the total settlement amount.
- The parties agree that relevant provisions in plaintiffs’ MOUs related to overtime will remain in full force and effect until January 2021.
- Plaintiffs agree to release all overtime claims against defendant under any legal theory relating to or arising from this action, including but not limited to breach of contract and the FLSA, and agree to dismiss the Valentine lawsuit with prejudice and to effectuate dismissal of their pending overtime grievance with prejudice.
Here is a copy of the court-approved settlement: