CA Firefighters File FLSA Lawsuit Over Regular Rate Calculations

More than three dozen firefighters have filed an FLSA lawsuit against their employer, the City of Haywood, California alleging that the city improperly calculated their regular rate of pay in violation of the FLSA. The lawsuit was filed by thirty-seven named plaintiffs and other “similarly situated individuals.” This likely means that additional current and former firefighters will join in on the lawsuit over the next few months.

Claims related to the proper calculation of the regular rate remain the most common allegation in FLSA litigation involving fire departments and firefighters. Proper calculation of a firefighter’s regular rate is critical since all FLSA overtime must be paid at a rate of not less than time and one-half of that firefighter’s regular rate of pay. If an employer fails to include certain bonuses, stipends, or other forms of—what the FLSA calls —remuneration, in an employee’s regular rate of pay, that employee will be shorted on his or her overtime rate. Here the firefighters make two basic claims in the complaint.

The first is a relatively common allegation related to payments made directly to firefighters in lieu of accepting employer sponsored health care.  As a general rule, payments made directly to an employee for declining employer sponsored health care cannot be excluded from that employee’s regular rate of pay. By failing to include this additional remuneration in the firefighter’s regular rate, their overtime and FLSA compensatory time pay is shorted.

The second allegation is a little less common and is not the easiest concept to grasp. However, it is critical for any professional responsible for paying firefighters and other public safety professionals understand the rationale behind the firefighters’ argument. Here, the firefighters are challenging the calculations that the city uses to break down numerous lump sum wage augments into the firefighter’s regular rate of pay. Remember, the FLSA does not require employers to pay employees by the hour, however an employee’s regular rate is an hourly rate.

One of the biggest challenges in calculating a firefighter’s regular rate of pay lies with the fact that firefighters frequently receive numerous other forms of remuneration beyond a simple hourly wage or salary. Let’s use an easy example to clarify:

Pursuant to a collective bargaining agreement, Firefighter X receives the following stipends in addition to a weekly salary:

• Annual lump-sum longevity payment on his work anniversary,
• Annual lump-sum medic stipend every July 1,
• Monthly lump-sum payments for declining employer sponsored health care, and,
• An annual lump-sum payment equal to 2% of his salary for being bi-lingual.

The fact that this remuneration cannot be excluded from the firefighter’s regular rate of pay is the easy part of this analysis. The more challenging aspect of the above example is how to break down these various payments into the firefighter’s regular rate of pay. That calculation is the basis of the firefighters’ allegations.

Quoting from the firefighter’s complaint [citations omitted for ease of reading]:

• Defendant systematically undercompensated Plaintiffs by calculating their regular rate of pay using an “hourly” methodology rather than a “salary” methodology.
• While the regular rate under the FLSA is a rate per hour, the FLSA does not require employers to compensate employees on an hourly rate basis – earnings may be computed on a piece-rate, salary, commission, or other basis. However, for purposes of providing overtime compensation, an hourly rate must still be derived from the chosen method of compensation.
• Because Plaintiffs are employed on a salary basis, “the regular hourly rate of pay, on which time and a half must be paid, is computed by dividing the salary by the number of hours which the salary is intended to compensate.”
• Plaintiffs are either assigned to a 40-hour or 56-hour weekly schedule. Plaintiffs on a 56-hour schedule perform fire suppression duties and work 48 hours on duty followed by 96 hours off (commonly referred to as a “48/96” schedule).
• Plaintiffs assigned to a 56-hour schedule are subject to the partial overtime exemption pursuant to 29 U.S.C. section 207(k). They are entitled to FLSA overtime whenever they work more than 212 hours in a 28-day period.
• The number of hours intended to be compensated by a particular salary can be determined by reference to a collectively bargained agreement as well as the parties’ actual practices.
• Here, Firefighter Plaintiffs are compensated in the same manner as the firefighters in Aaron v. City of Witchita, wherein firefighters on 56-hour work week schedule were paid according to a collectively bargained base salary.
• In Aaron, the Tenth Circuit held that a collective bargaining agreement’s salary scheme that compensated firefighters for a set schedule that included some regularly scheduled overtime hours evidenced salary-based compensation and applied the section 778.113 methodology to determine the “regular rate.”
• The Salary Schedule reflects an effective, base hourly rate derived from the division of the salary by the number hours it is intended to compensate that changes based on the number of hours regularly assigned these Plaintiffs.
• The salaries received by Plaintiffs on a 56-hour schedule are intended to compensate them for 2,920 hours annually (i.e., the number of regularly scheduled hours in a year for a firefighter).
• The practical effect of the 48/96 schedule coupled with the 28-day work period adopted by Defendant leads to work periods in which Plaintiffs are scheduled to work either 216 hours or 240 hours.
• However, regardless of the number of hours in the work period, Plaintiffs receive the same pre-determined amount of compensation each pay period. Significantly, 216 hours and 240 hours are 4 and 28 hours above the statutory threshold of 212 hours for a 28-day work period respectively.
• Accordingly, Defendant pays Plaintiffs premium overtime compensation at half their respective regular rate for the regularly scheduled overtime because they have already been paid the straight time portion for those hours (i.e., 4 or 28) with their salary.
• All hours worked in excess of Plaintiffs’ regular schedules are paid at time and one-half (1.5) their base rate.
• Given that Plaintiffs are salaried employees Defendant is obligated to compensate them for unpaid wages accordingly (i.e., half the regular rate of pay for scheduled overtime hours, and one and one-half the regular rate of pay for non-scheduled overtime hours).
• Despite the plain contract language requiring a specified percentage increase in Plaintiffs’ salaries as remuneration for these incentives, Defendant only pays overtime on these incentives using a .5 multiplier.
• For example, if a Plaintiff’s base salary results in a base rate of $50/hr and receives a 5% education incentive, their regular rate of pay should be $52.50/hr ($50 + $2.50), and the overtime rate should be $78.75/hr ($52.50 x 1.5). The incentive payment should increase their overtime rate of pay by $3.75 per hour ($2.50 x 1.5). However, Defendant’s compensation practice calculates that incentive as increase the overtime rate of pay by only $1.25 per hour ($2.50 x .5). As a result, Defendant would systematically underpays the employee by $2.50 for each FLSA overtime hour worked.

As is standard in most FLSA litigation, the attorney’s representing the firefighters are seeking back wages [for the past 3 years], liquidated damages, and reasonable attorneys’ fees. We will be keeping a close eye on this one as it moves through the courts. Here is a copy of the complaint.

For folks that have been through the Advanced FLSA webinar: Calculating the Regular Rate for Firefighters and other First Responders, the arguments being raised by these firefighters should sound somewhat familiar. [Hint: Try and remember the last hypo that we analyze towards the conclusion of the webinar.]