Settlement Between CA City and Firefighters Imminent Following 2018 FLSA Lawsuit Over Holiday Pay

A Federal Magistrate Judge has recommended the approval of a $350,000 settlement between the City of Merced and several dozen firefighters following a 2018 FLSA lawsuit. The firefighters alleged the city’s failure to include holiday “in-lieu” pay in their regular rate of pay violated the FLSA. The city continues to assert that it did not violate the FLSA, however in the interest of avoiding a costly and unpredictable legal battle agreed the settle the firefighters’ claims. The specifics of the settlement include $236,503.85 in damages to the fifty-seven firefighters and an additional $113,496.15 for their attorneys.  

Proper calculation of the regular rate of pay is critical since all FLSA overtime must be at least time and one-half of the employee’s regular rate. The FLSA requires virtually all the money an employee receives for his or her employment included in their regular rate of pay. Failure to include all remuneration in an employee’s regular rate will result in shortchanging his or her overtime rate.

As a general rule, when an employee receives compensation and a day off as a result of a holiday, that compensation can be excluded from the employee’s regular rate. For example, an 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. There is no need to include money attributable to this paid day off in the employee’s regular rate. This makes sense.

However, compare that example to a firefighter and his or her work hours. Does the fire station close down and allow all firefighters stay home for the holiday? Most do not. This is where many courts and the Department of Labor (DOL) have struggled with applying the FLSA’s general rules related to holiday pay to firefighters and other first responders. In fact, the DOL even re-drafted some very important regulations earlier this year in an effort to avoid lawsuits and litigation similar to this. For more on those changes click here.

Whether the new DOL holiday pay regulations would have impacted the court’s decision if the parties had opted for trial is unknown, however it was likely a factor that weighed heavily in the settlement negotiations.

Whether a firefighter’s holiday pay can be excluded from his or her regular rate is always a very hot topic at all of the FLSA for Fire Departments seminars. Unfortunately, due to public health concerns related to the COVID-19 pandemic combined with limitations on both travel and large gatherings we had to postpone our spring seminar into the fall. However, the uncertainty that we all face moving forward has us working overtime to come up with a workable solution. We are almost there. Standby for a big announcement in the next week or two regarding our plans to deliver the FLSA for Fire Departments seminar in an exciting and new format for the foreseeable future.

Here is a copy of the Magistrate’s order recommending approval of the settlement.