Schilling, Eric et al v. Pga Inc.

Brief in Support of 85 Motion for Summary Judgment

W.D. Wis.May 22, 2017

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN ______________________________________________________________________________ Eric Schilling Blaine Krohn Erik Sinclair On behalf of themselves and all others similarly situated Plaintiffs v. Case No. 16-CV-202 PGA Inc. Defendant. ______________________________________________________________________________ MEMORANDUM OF LAW IN SUPPORT OF THE PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT ______________________________________________________________________________ I. Introduction. This case primarily addresses two aspects of PGA’s methodology for computing overtime pay owed to its employees: Its exclusion of the cash fringe payment from the computation of the Plaintiffs’ rate of overtime pay, and its policy of computing overtime pay using the rate for the type of work performed during overtime hours, rather than the often higher average straight time wage rate earned by the employee during the workweek. The first of two overtime computation policies is a clear violation of both the FLSA and Wisconsin law: The FLSA applies to hours worked by employees on Wisconsin prevailing wage projects, for which the Plaintiffs would receive a cash fringe payment. Because the cash fringe payment is remuneration for the employees’ hours of employment, and do not fall within any of the exemptions from overtime payment outlined in §207(e), the cash fringe payment must be Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 1 of 28 2 included in the computation of FLSA overtime pay. Similarly, under Wisconsin law the cash fringe payment is remuneration payable to the employee for personal services, and is therefore wages that must be included in the overtime pay computation. Because the cash fringe payment is clearly a straight time cash payment made by the employer to the employee, it must also be counted in the calculation of prevailing wage overtime pay under DWD §290.05. Unlike the FLSA no provision of Wisconsin law authorizes the employer to, by agreement with its employee, pay its employee overtime pay computed at 1.5 times the rate for the same work when performed during non-overtime hours, rather than 1.5 times the employee’s regular rate, i.e. his average wage rate earned during the workweek. As this Court has already held in the case of Wicke v. L & C Insulation, 2014 U.S. Dist. Lexis 89193 *34-36 (W.D. WI. 2014), Wisconsin requires computing overtime pay using the employees’ average wage rate. Finally, while Plaintiff Schilling and Krohn were always paid at the rate of $18.10 total package per hour, the rate for a subjourney sheetmetal worker, for a large portion of their period of employment they performed the work of drilling holes through concrete and sweeping, which was General Laborers’ work that should have been paid at $34.88 per hour. Schilling and Krohn are additionally entitled to the General Laborer rate for all hours worked, during workweeks when they spent at least 85% of their work time performing General Laborer work. II. Argument. I. The Plaintiffs are Entitled to Summary Judgment. When appropriate, summary judgment is a favored means of final disposition of lawsuits without the need for evidentiary hearings. See Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Celotex Corp. v. Catrett, 477 U.S. 317 (1986). “The court may grant summary judgment ‘if the Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 2 of 28 3 pleadings, depositions, answers to interrogatories, and admission on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law.’” Fed. R. Civ. P. 56(c). In determining whether there are any genuine issues of material fact, “Factual disputes that are irrelevant or unnecessary will not be counted.” Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 250 (1986). Only disputed facts which are “outcome determinative” serve to preclude the entry of summary judgment. Id. The party opposing the motion must “affirmatively demonstrate with specific factual allegations that a genuine issue of material fact exists and requires trial.” Morgan v. Harris Trust & Savings Bank of Chicago, 867 F. 2d 1023, 1026 (7th Cir. 1989); see also Fitzpatrick v. Catholic Bishop, 916 F. 2d 1254, 1256 (7th Cir. 1990). In this case, the nature and application of PGA’s overtime computation policies are beyond dispute. PGA has admitted to excluding the cash fringe from its computation fo employee overtime pay, and that by agreement with its employees it would compute overtime pay at 1.5 times the rate for the same work when performed during non-overtime hours. (PFOF, ¶8, 23) The legality of these undisputed uniform policies present questions of law. Similarly, PGA has admitted that it has no way to reconstruct the types of work that Schilling and Krohn performed for it on a week to week basis. (PFOF ¶47- 49) Whether Schilling and Krohn are entitled to be paid at the General Laborers rate, based on their undisputed account of the types of work that they performed for PGA, present a question of law appropriate for summary judgment. II. The Cash Fringe Must be Included in the Computation of Overtime Pay. a. Relevant Facts. Prevailing wage determinations issued by the Wisconsin Department of Workforce Development contain, for each trade, separate columns for the hourly basic rate of pay, the fringe Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 3 of 28 4 benefit rate, and the total of the hourly basic rate of pay and the fringe benefit rate. (PFOF, ¶4) PGA provides some fringe benefits to its employees such as health insurance and 401(k), and would compute the hourly value of employer contributions for fringe benefits by dividing the annual cost of the contributions by 2,080 hours. (PFOF, ¶5) Typically, the hourly value of fringe benefits paid by PGA on behalf of its employees is lower than the fringe benefit rate shown on the prevailing wage determination, so that PGA would pay to its employees the difference between the two values in cash, which it would refer to as the cash fringe. (PFOF, ¶6-7) For every hour of overtime worked on a prevailing wage project PGA would pay to its employees (including journeymen, apprentices, and subjourneypersons) 1.5 times the hourly basic rate shown on the prevailing wage determination plus the cash fringe, rather than 1.5 times both the hourly basic rate of pay and the cash fringe. (PFOF, ¶8) PGA pays a cash fringe to its employees only for their actual hours of work on prevailing wage projects; so that employees would not receive cash fringe payments for paid vacation or holiday hours. (PFOF, ¶9) Whereas PGA would pay its bona fide fringe benefit contributions to a fund administrator, the cash fringe payments are made to the employee on his check, without any restrictions on how the employee can use the cash payments. (PFOF, ¶10) The cash fringe payments are always paid when the employee receives a lower rate for actual fringe benefits, when compared to the fringe benefit rate shown on the prevailing wage determination for the project and his trade, and always equal the difference between the two rates. (PFOF, ¶11) When appropriate the cash fringe is paid for any hours worked by the employee on prevailing wage projects, rather than only for overtime hours of work. (PFOF, ¶12) PGA would withhold federal income taxes, state income taxes, and employment taxes from the cash fringe payments that it Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 4 of 28 5 made to its employees. (PFOF, ¶13) PGA would include the cash fringe payments on the employees’ W-2s under the category of wages, tips, or other compensation. (PFOF, ¶21) PGA is generally aware of the Fair Labor Standards Act, and that under the FLSA the overtime premium should equal one half of the employees’ regular rate of pay. (PFOF, ¶14) PGA knows, for example, that if an employee’s straight time wage rate on a non-prevailing wage project is $20 per hour, he is entitled to $30 per hour for overtime hours worked, even though a portion of his $20 straight time wages was deducted as an after-tax wage deduction. (PFOF, ¶15) PGA has not done anything to investigate whether not paying a overtime premium on the cash fringe payment complies with the FLSA, aside from having one employee attend a trade association meeting during which the subject of prevailing wage overtime was addressed. (PFOF, ¶16) During that presentation PGA was told that prevailing wage overtime pay equal wage rate at 1.5 times plus straight time fringes, but did not receive any assurance that the described method for computing prevailing wage overtime pay would comply with the FLSA. (PFOF, ¶17) No one has ever told PGA that it need not comply with the FLSA on Wisconsin prevailing wage projects. (PFOF, ¶18) Nor has PGA ever investigated whether the Wisconsin Department of Workforce Development has any responsibility to administer the FLSA. (PFOF, ¶19) The DWD has never told PGA that complying with DWD requirements would also constitute compliance with the FLSA. (PFOF, ¶20) b. The Cash Fringe Payment Must be Included in Computing the Regular Rate Under the FLSA. The FLSA contains a savings clause providing that: No provision of this chapter or of any order thereunder shall excuse noncompliance with any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter or Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 5 of 28 6 a maximum workweek lower than the maximum workweek established under this chapter. See 29 U.S.C. §218. The employer is therefore required to comply with both the FLSA, and with other federal or state laws that establish a more labor protective standard concerning minimum pay or maximum hours. Applying the policy behind the Savings Clause, courts have consistently held that employees working on projects subject to other federal wage statutes are also protected by the FLSA. Powell v. U.S. Cartridge Co., 339 U.S. 497, 517-519 (1950) (Employees who are subject to the Walsh-Healey Act are also protected by the FLSA); Grochowski v. Phoenix Cosntr., Ypsilon Constr. Corp., 318 F. 3d 80, 87 (2nd Cir. 2003) (Employees working on projects covered by Davis Bacon Act entitled to FLSA overtime pay based on the regular rate actually paid to them for hours worked). In Powell, the Supreme Court held that because the savings clause of the FLSA disclosed Congressional awareness that more than one federal law may apply to the same employment, the employer must comply with both laws by satisfying the higher of the two laws’ requirements. See 339 U.S. at 518-519. Because 29 U.S.C. §218 treats federal laws other than the FLSA and state laws in a parallel manner, it equally demonstrates Congressional awareness that the same work may be subject to both the FLSA and a state law. Therefore, when work is subject to both the FLSA and a state law, the employer must comply with the higher of the two requirements in order to comply with both. Sobczak v. AWL Indus., 540 F. Supp. 2d 354, 360-361 (E.D. N.Y. 2007) (If employees can establish that they are entitled to additional wages under state prevailing wage laws, they can sue for additional FLSA overtime pay computed using prevailing wages that they should have received). The FLSA’s many exemptions do not contain one that would exempt hours worked from the FLSA because they were worked on prevailing wage projects. Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 6 of 28 7 Under 29 U.S.C. §207(e) all remuneration paid to the Plaintiffs by PGA for employment must be included in computing the Plaintiffs’ regular rate for overtime pay unless it falls within one of the exemptions recognized by §207(e). The cash fringe payments, which are only paid to employees for their actual hours of work on prevailing wage projects, are clearly a form of remuneration for the employees’ employment. (PFOF, ¶9) PGA recognizes that the cash fringe payments that it pays to the employees are a form of wages, rather than a genuine employer fringe benefit contribution, by withholding taxes from the payments. (PFOF, ¶14) See 26 U.S.C. §3401(a) (Define wages, from which taxes should be withheld, to include all remuneration paid to employees for services performed by the employee for the employer). None of the exemptions from the regular rate computation, which can be found in §207(e), even arguably apply: The §207(e)(4) exemption for fringe benefit contributions does not apply when the cash fringe is paid to the employees in cash, rather than contributed to a trustee or other third party who would owe fiduciary responsibilities toward the payment. (PFOF, ¶10) Flores v. City of San Gabriel, 824 F. 3d 890, 901 (9th Cir. 2016). Because there are no restrictions on how the employees can use the cash fringe payments (PFOF, ¶10), the payments also fail the §207(e)(4) requirement that an eligible contribution must be for the purpose of providing old-age, retirement, life, accident, health insurance, or similar benefits. See 29 C.F.R. §778.215(2); Bonner v. Metro. Sec. Serv., 2011 U.S. Dist. Lexis 26251 *10-12 (W.D. TX. 2011); Barnes v. Akal Sec. Inc., 2005 U.S. Dist. Lexis 12268 *8 (D. Kan. 2005). (Both holding payments of cash without restrictions for how the cash can be used are not for the primary purpose of providing bona fide fringe benefits). Similarly, §207(e) (1) and (2) do not apply when the cash fringe payments are paid for actual hours worked on prevailing wage projects, rather than constitute gifts, payments for hours not worked, or expense reimbursements. (PFOF, ¶9) Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 7 of 28 8 §207(e)(3) does not apply when PGA does not reserve any discretion on either whether, or the amount of cash fringe payments; but instead always pay a cash fringe when the employee’s fringe benefit rate is lower than the full fringe benefit rate shown on the prevailing wage determination for the applicable project and trade, in an amount always equal to the difference between the two rates. (PFOF, ¶11) §207(e)(5) to (7) do not apply when the cash fringe payments can be paid for any hours worked during the workweek, such as between 9 a.m. and 10 a.m. on Monday, rather than only during overtime hours or regular days of rest. (PFOF, ¶12) To the extent Wisconsin prevailing wage laws can be interpreted to authorize excluding the cash fringe payment from computing the regular rate (an interpretation that the Plaintiffs will vigorously dispute below), Wisconsin’s prevailing wage laws would be preempted by, and cannot prevent the enforcement of the FLSA. Winfield v. Babylon Beauty Sch. of Smithtown Inc., 89 F. Supp. 3d 556, 573 (E.D. N.Y. 2015) (State law preempted to extent it can be interpreted to prevent payment of wages required by the FLSA); De Keyser v. Thyssenkrupp Waupaca Inc., 589 F. Supp. 2d 1026, 1031 (E.D. WI. 2008) (FLSA preempts state laws that require lower minimum wages or longer maximum hours). Indeed, DWD §290.05 requires payment of overtime pay at least equal to the standards it prescribes, so that it would not violate §290.05 for the FLSA to impose a higher requirement upon employers. c. PGA’s Violations of the FLSA Were Willful. The most recent case for determining and applying the standard for determining whether an employer’s violation of the FLSA is willful is Flores, 824 F. 3d at 906-907. In Flores, the Ninth Circuit found on summary judgment, and as a matter of law the employer’s violation of the FLSA to be willful when the employer was aware of the FLSA’s general requirements, but did not undertake any affirmative steps to look into, or otherwise ensure that its policy of Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 8 of 28 9 excluding cash fringe payments from the regular rate computation complied with the FLSA. In Flores, the Court also held that the employer cannot rely on the absence of controlling authority as the sole basis for avoiding a finding of a willful violation. See 824 F. 3d at 907. See also Montana v. JTK Restoration, 2015 U.S. Dist. Lexis 122920 *8-9 (E.D. WI. 2015); Hardrick v. Airway Freight Sys., 63 F. Supp. 2d 898, 904 (N.D. IL. 1999). (Both finding employer violations of the FLSA to be willful when the employer was generally aware that it had to pay overtime pay for hours worked over 40 hours per week, but failed to investigate or consult with an attorney on whether its payroll policy complied with the law). These cases are consistent with the more general principle that an employer’s violation of the FLSA is willful when it displays a reckless disregard for the settled interpretation of the FLSA. Calderon v. Witvoet, 999 F. 2d 1101, 1108 (7th Cir. 1993). Reckless disregard of the FLSA is defined as failure to make adequate inquiry as to whether conduct complied with the FLSA. 5 C.F.R. §551.104. In this case, PGA was aware that under the FLSA, it was generally required to pay overtime pay equal to ½ of the employees’ regular rate of pay. (PFOF, ¶14) The settled interpretation of the FLSA is that all remuneration for employment must be included in the regular rate, outside of exemptions that clearly do not apply to cash payments to the employees for their hours worked. 29 U.S.C. §207(e). PGA demonstrates its awareness that the cash fringe payments are remuneration for employment, just like wages, by treating the cash fringe payments just like wages in many ways: It pays the monies to the employees in cash, and without any restrictions as to how the employees can spend the payments. It withholds income and employment taxes from the cash fringe payments. (PFOF, ¶13) It also includes the cash fringe payments in the employees’ W-2 under the category of Wages, Tips, or other Compensation. (PFOF, ¶21) Indeed, there are no differences between how PGA classifies and Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 9 of 28 10 treats wages and cash fringe payments, with the exception that it would include wages, but exclude the cash fringe payments, in computing its employees’ overtime pay. PGA’s disregard of the FLSA is willful, unless it made an adequate inquiry as to whether the FLSA authorizes its treatment of wages and cash fringe payments differently with respect to the computation of overtime pay, but alike in all other meaningful aspects. While the DWD admittedly established a rule that would authorize excluding the cash fringe from computing employee overtime pay, PGA never investigated whether the DWD rule would excuse it from complying with the FLSA requirement that all remuneration payable for employment (Except for exemptions that clearly do not apply to the cash fringe payments) must be included in computing overtime pay: No one ever told PGA that it need not comply with the FLSA on Wisconsin prevailing wage projects. (PFOF, ¶18) Nor has PGA ever investigated whether the Wisconsin Department of Workforce Development has any responsibility to administer the FLSA. (PFOF, ¶19) The DWD has also never told PGA that complying with its requirements would also constitute compliance with the FLSA. (PFOF, ¶20) Had PGA searched for DWD publications referencing overtime pay, it would have come across a publication entitled Wisconsin Hours of Work and Overtime Law, which referred the reader to the U.S. Department of Labor on questions concerning the FLSA. (Ho Dec. Ex. 2, pg. 9). The U.S. Department of Labor, not the DWD, is responsible for determining and enforcing the requirements of the FLSA. PGA indeed openly admits that it never investigated whether not paying the overtime premium on the portion of the employees’ cash remuneration for employment, which it chose to label a cash fringe, complied with the FLSA, aside from attending one presentation that it alleges covered the subject. (PFOF ¶17) In fact, that one presentation that PGA did attend did not cover the subject of whether excluding the cash fringe from computing overtime pay complied with the Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 10 of 28 11 FLSA. Indeed, said presentation advised listeners that there are exceptions under the Davis- Bacon act (let alone of the FLSA), from its purported rule that the cash fringe payments can be excluded from computing overtime pay. (PFOF, ¶17) A law complying employer, having heard that the described method of computing overtime pay does not meet all federal law requirements, would have conducted further inquiries into whether the presentation’s described method for computing overtime pay complied with federal law. Just like the employer in Flores, PGA’s violation of the FLSA was willful when it was generally aware of FLSA’s requirements, but failed to conduct any investigation to determine whether the DWD’s contrary rule with respect to Wisconsin law also authorized it to not comply with the FLSA. d. PGA’s Exclusion of the Cash Fringe From the Regular Rate Computation Violated Wisconsin Law. Under DWD §274.03, overtime pay must equal 1.5 times the employee’s regular rate of pay. The regular rate of pay is computed by dividing the employee’s total hours worked for a pay period into the total regular wages paid to the employee during said paid period. Wicke v. L & C Insulation, 2014 U.S. Dist. Lexis 89193 *34-36 (W.D. WI. 2014), citing Kuhnert v. Advanced Laser Machining Inc., 2011 WI App 23 ¶14-15; 331 Wis. 2d 625. Wages in turn is broadly defined by Wis. Stat. §109.01(3) as all remuneration payable to the employee for personal services rendered. The DWD itself defines the regular rate to include all remuneration paid to or on behalf of the employee such as commissions, non-discretionary bonuses, premium pay, and piece work incentives. (Ho Dec. Ex. 2, pg. 6) Because PGA only pays employees the cash fringe for their actual hours of work on a Wisconsin prevailing wage project, and the employees’ work on the prevailing wage projects Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 11 of 28 12 clearly constitutes personal services for PGA, the cash fringe payments are clearly remuneration payable to the employee for personal services rendered. Just like cash wages, which are indisputably remuneration paid for personal services rendered, the cash fringe payments are earned for the exact same hours worked (since employees earn both cash wages and cash fringe payments for each hour worked on prevailing wage projects, see PFOF ¶55), paid to the employees in cash, can be spent by the employee for any purpose (including purchasing cigarettes, for example) without any restrictions, are paid only after income and employment taxes have been withheld, and are reported on the employees’ W-2 form as wage income. The tern “regular rate” as used in DWD §274.03 is the same term used by the overtime provisions of the FLSA. See 29 U.S.C. §207(a) and (e). There is no reason why the term “regular” rate should be interpreted differently under Wisconsin law when compared to the FLSA. The cash fringe therefore must be included in computing the regular rate under Wisconsin law, for the same reasons why it must be included in computing the regular rate under the FLSA. Because the regular rate is an actual fact rather than an artificial label chosen by the parties, PGA cannot avoid paying overtime pay to its employees by labeling a portion of its employees’ wages as a cash fringe payment. Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 461 (1948). The cash fringe just like wages must be included in the regular rate. Wisconsin prevailing wage laws, contrary to the DWD’s interpretation, also requires including cash fringe payments in computing the regular rate. DWD §290.05 provides: In no event can the rate upon which the overtime premium is calculated be less than the amount determined by the department as the hourly basic rate of pay. Nor can the rate upon which the overtime premium is calculated be less than the straight time cash payment made to the laborer, worker, mechanic or truck driver or be less than the employee's normal hourly basic rate of pay, if it is higher. Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 12 of 28 13 Prevailing wage overtime pay therefore must equal at least 1.5 times the highest of three rates: The hourly basic rate of pay, the employee’s rate of pay for non-prevailing wage projects, or the straight time cash payment made to the employee for work on the prevailing wage project. Notably the regulation uses the phrase “straight time cash payment”, rather than ‘straight time cash wage payment”, so that all straight time cash payments from the employer must be included in the regular rate computation whether labeled by the employer as a wage or as a cash fringe. Because the employer can always label the difference between the full cash wage paid to the employee and the hourly basic rate of pay as the cash fringe, if the cash fringe can be excluded from the “straight time cash payment”, then the “straight time cash payment” can never be higher than the hourly basic rate of pay. Such an interpretation that would render the phrase “straight time cash payment” duplicative and meaningless should be avoided. In re Erickson, 63 B.R. 632, 635 (W.D. WI. 1986). The straight time cash payment means the full amount of cash paid to the employee, rather than the hourly basic rate of pay. Rather than wrestle with how its policy choice of authorizing employers to exclude the cash fringe from the regular rate computation complies with §290.05’s requirement that prevailing wage overtime be computed using the straight time cash payment to the extent higher than the hourly basic rate of pay, the DWD has instead written the term “straight time cash payment” out of §290.05. Its publications instead state that overtime pay must be computed using the hourly basic rate of pay or the employee’s normal rate of pay on non-prevailing wage projects, whichever is higher. (PFOF, ¶22) A Wisconsin agency’s interpretation of a regulation, which pursuant to Wis. Stat. Chapter 227 subchapter II must be approved by the Wisconsin legislature prior to implementation, cannot be inconsistent with the plain language of the regulation. DaimlerChrysler v. Labor & Indus. Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 13 of 28 14 Review Comm., 2007 WI 15 ¶15, 299 Wis. 2d 1 (Agency interpretation of own regulation is only controlling if the interpretation is reasonable, and consistent with the regulation’s intended purpose). The requirement of legislature approval would be meaningless if an agency can ignore the regulation the legislature approved in the name of good public policy. If the DWD believes it should encourage the cash payment of prevailing wages by authorizing employers to label a portion of the cash payment as a cash fringe, and to exclude said labeled cash fringe from computing overtime pay, the amendment to §290.05 must be proposed to, and approved by the legislature, and cannot be adopted by the DWD on its own without the legislature’s approval. PGA’s policy of excluding the cash fringe from computing its employees’ regular rate of pay therefore violated both DWD §§274.03 and 290.05; for both of which violations the Plaintiffs may bring a claim for civil relief: German v. Wisconsin DOT, 2000 WI 62, 235 Wis. 2d 576 (violations of DWD §274 can be redressed through a lawsuit brought pursuant to Wis. Stat. §109.03(5)); Wis. Stat. §66.0903(11) (Authorizing private right of action for violations of Wisconsin prevailing wage laws). III. PGA’s Policy of Paying Overtime Pay Computed Using the Rate for the Same Work When Performed During Non-overtime Hours Violated Wisconsin Law. While PGA claims that it sometimes would use a blended rate to pay overtime pay, it also admits that pursuant to agreement with its employees it would compute overtime pay using the rate for the same work when performed during non-overtime hours. (PFOF ¶23) The Plaintiffs have identified numerous examples of PGA computing overtime pay as 1.5 times the straight time wage rate for the work performed during overtime hours, rather than 1.5 times the average straight time wage rate earned by the employee during the workweek. (PFOF, ¶24) Whether Wisconsin law permits employers to reach agreement with employees to compute overtime pay Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 14 of 28 15 using the rate for the type of work performed by the employee during overtime hours, as an exception from the regular rule that overtime pay must be computed using the employees’ regular rate, is a question of law ripe for the Court’s decision. This Court has already decided that, pursuant to DWD §274.03, overtime pay must be computed using the average wage rate earned by the employee during the workweek. Wicke, 2014 U.S. Dist. Lexis 89193 *34-36. The Court found as a matter of law that Wisconsin requires the employer to calculate an overtime rate of pay equal to the employee’s hours worked during a pay period divided into his regular pay for said pay period, rather than use the rate for the type of work the employee performed during overtime hours, to compute overtime pay. See Id. The Court’s 2014 decision in Wicke is supported by developments in Wisconsin law subsequent to Wicke’s issuance; which further recognized that Courts should give effect to differences between the FLSA and Wisconsin law when interpreting Wisconsin law. In UFCW Local 1473 v. Hormel Foods Corp., 2016 WI 13 ¶76, 367 Wis. 2d 131, the Wisconsin Supreme Court recognized that because there is no counterpart in Wisconsin law to §203(o), Seventh Circuit precedents holding that employees can bargain away their right to be paid for their donning and doffing time are not applicable to how donning and doffing time should be compensated under Wisconsin law. See also Weissman v. Tyson Prepared Foods, 2013 WI App 109 ¶48-49, 350 Wis. 2d 380 (Federal court authority decided based upon terms of federal law that cannot be found in DWD’s regulations does not apply to Wisconsin law). As explicitly recognized by the FLSA’s savings clause, states are free to enact wage and hour protections for employees that are more labor protective than those provided by the FLSA. Spoerle v. Kraft Foods Global, 614 F. 3d 427, 429 (7th Cir. 2010). Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 15 of 28 16 When interpreting Wisconsin’s law on how to compute the regular rate for overtime pay the Court should thus give effect to both similarities and differences between the FLSA and Wisconsin law. The two are the same in setting the presumption that overtime compensation must equal 1.5 times the employee’s regular rate of pay. Compare 29 U.S.C. §207(1) with DWD §274.03. The regular rate must equal the average straight time wage rate earned by the employee during the workweek. See 29 C.F.R. §778.115; Kuhnert, 2011 WI App 23 ¶14-15. Wisconsin law then departs from the FLSA on whether the presumption of using the regular rate to compute overtime pay can be rebutted by agreement between the employer and its employees: Whereas 29 U.S.C. §207(g)(2) authorizes giving effect to such agreements, no parallel provision to §207(g)(2) exists in Wisconsin’s overtime pay regulations. Moreover, the scope of application of §207(g)(2) is clearly set by the introductory paragraph of §207(g) as: No employer shall be deemed to have violated Subsection (a) of this Section by… In other words, §207(g)(2) only limits the employer’s obligation to pay overtime pay under §207(a) of the FLSA, and has no application to the employer’s obligation to pay overtime pay under state laws that may set higher labor standards. See also Spoerle, 427 F. 3d at 629. (Section 203(o) of the FLSA only exempts the employer from paying overtime pay required by the FLSA, and therefore does not limit the application of the FLSA’s Savings Clause that authorizes states to enact laws that set higher labor standards). Wisconsin is therefore free to require its employers to compute overtime pay using the average regular wage rate earned by the employee during the workweek without recognizing a private agreement exception. Nor can PGA secure exemption from the application of Wisconsin law by arguing that factual disputes remain on whether employees consented to receive overtime pay computed using the rate of pay for the type of work that they performed during overtime Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 16 of 28 17 hours. Spoerle, 427 F. 3d at 630 (Wisconsin law requires for private agreements to be ignored, to the extent that they set wages lower than those required by law). PGA’s method of computing overtime pay, during workweeks when it employees were paid at more than one rate, thus violated Wisconsin law. For example, during the week of July 20th -26th of 2015 Erik Sinclair was credited by PGA as having worked 31 hours of straight time as a General Laborer, 9 hours of straight time as a Sheetmetal Worker, and 8 hours of overtime as a General Laborer. (PFOF ¶25) The blended straight time rate rate for the week including 39 hours as a General Laborer at $24.21 per hour, and 9 hours as a sheetmetal worker at $28.05 per hour was $24.93 per hour. Even assuming the cash fringe can be excluded from computing overtime pay, for each of his overtime hours worked Sinclair should have received 1.5 times the blended rate of $24.93 per hour plus the applicable cash fringe, rather than 1.5 times the General Laborer rate of $24.21 plus the applicable cash fringe. Nor can PGA successfully argue that it did not underpay its employees, because there were other workweeks when the employee’s pay rate for the type of work performed during overtime hours was higher than his average straight time wage rate earned during the workweek. PGA employees can only be paid more than one wage rate during the same week when they worked on prevailing wage projects during said workweek, i.e. when they were paid both the shop rate and a prevailing wage rate, or multiple prevailing wage rates for working during the same week. (PFOF ¶26) Because PGA would never pay its employees below their shop rates, the employee’s pay rate for the type of work performed during overtime hours worked can be higher than his average straight time wage rate earned during the workweek, only when he worked overtime on a prevailing wage project. Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 17 of 28 18 To comply with the requirements of §290.05, PGA must pay to its employees 1.5 times the higher of the straight time cash payment or the hourly basic rate of pay for the prevailing wage project for their overtime work on the prevailing wage project. When both DWD §274.03 and §290.05 apply to the same overtime hour worked, the employer must comply with the higher of the two requirements in order to comply with both laws. Powell, 339 U.S. at 519. To comply with both DWD §§274.03 and 290.05 PGA must use a blended rate to compute overtime when that blended rate for the week is higher than the rate for the type of work during overtime hours; and use the rate for the type of prevailing wage during overtime hours, when said prevailing wage rate is higher than the blended rate for the week. As a result, any “overpayments” are required by DWD §290.05, and cannot be used to offset PGA’s failure to pay overtime pay required by §274.03 during other overtime hours worked. Moreover, even if some payment can be construed as an overpayment rather than a payment required by DWD §290.05, PGA cannot rely upon overpayments during one pay period to offset underpayments during other pay periods. Howard v. City of Springfield, 274 F. 3d 1141, 1147-1148 (7th Cir. 2001). The Plaintiffs would still be entitled to summary judgment for pay periods during which using the rate for the type of work performed during overtime hours to compute overtime pay resulted in an underpayment of overtime pay, such as for example the pay period for Sinclair discussed above. IV. Schilling and Krohn Are Entitled to the General Laborers’ Rate of Pay for Their Concrete Cutting and Related Work; Along with Sweeping Work. a. Relevant Facts. Both Schilling and Krohn worked for a total of 12 weeks at the Debot Hall Project for PGA Inc. (PFOF ¶3) During the first seven weeks that the two Plaintiffs worked on the project, Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 18 of 28 19 they spent the majority of their time drilling holes through concrete floors, or performing other work supporting their own concrete cutting work, so that pipes for a heating and air conditioning system could be installed through the holes that they drilled. (PFOF ¶4) For concrete cutting through floors at the beginning of each day each employee would pick up a core drill, a stand, a vacuum, and a water pump; along with a garbage can to pick up the water and debris generated by the concrete cutting; and a box that the core drill would be stored in. (PFOF ¶28) Each employee would also check to make sure that there was a usable bit in the core drill, before transporting everything except the garbage can to the first room that they would drill holes in, and positioning the garbage can on the floor below, and directly under the work area. (PFOF ¶29) Upon arrival at the work area the employee would fill up the water pump with water, and then determine where to drill the holes by either looking for circles drawn on the floor, or by checking the blueprint if no circles were drawn. (PFOF ¶30) The employee would then position the garbage can on the floor below, so that it can collect the water and concrete that would fall as the employee drilled through the concrete floor. (PFOF ¶31) The employee would then: (a) connect both the vacuum and the core drill to the stand; (b) turn on the vacuum to connect the stand to the floor; and (c) turn on the water pump, so that there would be a steady flow of water through the drill bit as he used the core drill to drill through the concrete floor. (PFOF ¶32) The employee would move the equipment and the garbage can from hole to hole, and room to room, as the work progressed throughout the day. (PFOF ¶33) The next room for the employees’ work may be on the other side of the building, or on a different floor. (PFOF ¶34) Throughout the day the employee may also have to perform other activities to enable them to continue with the hole drilling work, including filling the water pump with water, Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 19 of 28 20 removing concrete stuck in the drill bit, changing drill bits, and dumping out the concrete and/or water in the garbage can. (PFOF ¶35) At the end of the day the employees generally could leave the garbage can where it was, but had to return the core drill, stand, vacuum, water pump, and box back to their proper storage locations. The water pump would be emptied before it was returned to storage. (PFOF ¶36) In addition to drilling holes through Concrete floors, the Plaintiffs also drilled holes through walls so that pipes could be installed through the drilled holes. (PFOF ¶37) The wall drilling was the same as the floor drilling in that employees would drill through concrete; but would be different in that employees would have to physically hold the drill in their hands to drill holes through the wall, and would not use water. The employees would still have to sometimes check the blue print for the proper location of the holes, carry the drill and box from hole to hole, remove concrete stuck in the drill bit, change the drill bit, gather up any garbage generated by their wall drilling, dump out the garbage, and return the drill and box back to the proper storage locations. (PFOF ¶38) Both Schilling and Krohn also drilled holes through concrete in the basements; which was the same as the wall drilling except for two things: Water was used to drill in the basement, and the drill would be mounted, and did not need to be held by hand for basement drilling. (PFOF ¶39) During the first seven weeks that Schilling worked on the Debot Hall Project, he spent at least 90% of his work time either drilling holes through the floor, walls, or in the basement, or performing preparatory and concluding work supporting his own drilling work, with the exception of the two days when he did sweeping work. (PFOF ¶40) For the two days of sweeping work, each contractor working on the project, including PGA, had to contribute two employees to perform sweeping work throughout the jobsite. The sweeping work that Schilling Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 20 of 28 21 performed, using a broom, had nothing to do with pipefitting work performed by PGA sheetmetal workers. (PFOF ¶41) While Schilling only occasionally performed pipe carrying and connecting work during his first seven weeks of working at the Debot Hall project, following those weeks Schilling spent far more time carrying and connecting pipes, and performing other work to assist other PGA sheetmetal workers. (PFOF ¶42) During the final 5 weeks that Schilling worked at Debot Hall he spent between 30 hours and 40 hours either drilling holes through concrete walls, drilling holes in the basement, or performing set-up and clean-up work for my work of drilling holes through concrete walls or in the basement; out of a total of 232.5 hours that he worked on the project during those weeks. (PFOF ¶43) During the seven or more weeks that Krohn drilled holes through concrete floors at the Debot Hall project, he spent at least 95% of his work time drilling holes through the floor, walls, or in the basement, or performing preparatory and concluding work supporting his own drilling work. (PFOF ¶44) There was a period of one to one and a half weeks, which to the best of Krohn’s recollection occurred right after floor drilling concluded, during which Krohn spent at least 90% of his work time each week either drilling holes through walls, or performing preparatory and clean-up work in support of his own hole drilling work. (PFOF ¶45) During the other weeks that Krohn worked at Debot Hall he still spent 30 hours per week either drilling holes through walls or in the basement, or performing preparatory and clean-up work in support of his own concrete cutting work. (PFOF ¶46) The notice of deposition for the Rule 30(b)(6) deposition of PGA Inc. stated, as one of the topics for the deposition, “Types of work performed for you by Blake (Blaine) Krohn and Eric Schilling, as well as the number of hours spent performing each type of work.” (PFOF ¶47) During its deposition, PGA admitted that its records would not show who, or how many Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 21 of 28 22 individual employees drilled holes at the Debot Hall Project. (PFOF ¶48) When PGA’s corporate representative asked its supervisor on the project what work Schilling and Krohn performed on the project, the supervisor’s response was that he could not recall what Schilling and Krohn did on a day to day basis, or on a week to week basis. (PFOF ¶49) While Schilling and Krohn worked at Debot Hall, they suspected that they were underpaid for their concrete cutting work, so they made a point of keeping track of what work they performed. (PFOF ¶50) PGA believes that the hole drilling work would probably fall in the General Labor classification. (PFOF ¶56) For all of their work on the Debot Hall Project the Plaintiffs received the straight time pay rate of $18.10 per hour, including $11.15 per hour designated as wages, and $6.95 per hour designated as cash fringe payments. (PFOF ¶51) According to the prevailing wage determination for the project, the total package hourly rate for a General Laborer working on the project is $34.88 per hour. (PFOF ¶52) b. The Plaintiffs are Entitled to the General Laborer Rate for Their Concrete cutting Work. Wisconsin law defines subjourneypersons as workers who primarily work under and assist a skilled trades employee by frequently using the tools of a specific trade. DWD §290.01(20). The DWD’s Dictionary of Occupational Classifications defines a General Laborer, on the other hand, as someone who performs unskilled or semi-skilled tasks but does not regularly and routinely assist a worker in any other classification by using the tools normally associated with that worker’s classification. (Ho Dec. Ex. 4, under Primary Purpose) The same description contains examples of General Laborers performing work that supports the work of other trades, such as mixing and delivering mortar for use by a bricklayer or plasterer, and Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 22 of 28 23 unloading and delivering materials from the stockpile to the point of installation. (Id., Typical Duties, ¶1) What distinguishes a General Laborer from a subjourneyperson is that the General Laborer, unlike the subjourneyperson, does not regularly use the tools of a skilled trade while assisting the work of the skilled tradesmen. Just like PGA admitted during its deposition, cutting holes through concrete is General Laborer work using General Laborer tools. The DWD defines the General Laborer as one who operates rock and concrete drills, and would operate equipment to burn holes through concrete. (Ho Dec. Ex. 4, Typical Duties, ¶¶1, 4) A sheetmetal worker, on the other hand, is engaged in fabricating, assembling, installing, and repairing sheetmetal products and equipment. (Ho Dec. Ex. 5) The Occupational Dictionary’s definition of a sheetmetal worker does not include any reference to drilling holes through concrete, or using concrete drills. Using a concrete drill to cut holes through concrete is clearly General Laborers’ work using General Laborer tools, i.e. a rock or concrete drill. Sweeping using a broom is similarly General Laborer work using General Laborer tools, when the Occupational Dictionary lists sweeping and cleaning as one of the primary purposes of a General Laborer. (Ho Dec. Ex. 4, under Primary Purpose) PGA, like all other Wisconsin contractors, would need to fill out a Request to Employ Subjourneypersons Form, ERD Form #10880 whenever it wishes to employ subjourneypersons on a prevailing wage project. (PFOF ¶53) Completing the form requires PGA to sign a certification that states: I understand that this request is ONLY applicable to the project and job classification(s) listed above and that subjourney employees primarily work under the direction of and assist a skilled trade employee by frequently using the tools of a skilled trade and will NOT regularly perform the duties of a general laborer, heavy equipment operator or truck driver. If the subjourney employee regularly performs the work of a different trade or occupation, he/she will be compensated for such work at the applicable journeyperson prevailing wage rate. I agree to Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 23 of 28 24 compensate subjourney employees in strict accordance with the directions received from the DWD. PFOF ¶54. A subjourneysheetmetal worker who regularly performs the work of a General Laborer by frequently using the tools of a General Laborer should be paid at the applicable journeyperson prevailing wage rate for said General Laborer work. Schilling and Krohn’s concrete cutting and sweeping work was General Laborer work using General Laborer tools (i.e. a concrete drill). During some weeks they performed concrete cutting and sweeping work during at least 90% of their work times, so that under any definition of “regularly” they regularly performed the work of a General Laborer by regularly using General Laborer tools. As PGA certified to the DWD by signing the Request to Employ Subjourneyperson Form, Schilling and Krohn should be compensated at the applicable Journeyman General Laborer wage rate for concrete cutting and sweeping. (PFOF ¶54). See also DWD §290.03(a) (Type of work done for the most similar trade or classification, and not a previously assigned occupational title, determines the minimum payable prevailing wage rate). c. The Same General Laborer Wage Rate is Applicable to All Other Work Performed by Schilling and Krohn During Workweeks When they Were Primarily Engaged in Cutting Holes Through Concrete. DWD §290.03(3) provides that when an employee performs work in more than one trade classification on a prevailing wage project during a workweek, he shall be cross-classified and compensated for work performed in each classification, unless his work performed at a lower paid classification is incidental. Further elaborating, the DWD Prevailing Wage Questions and Answers Publication for 2012 states, in response to a question about whether a worker can be classified in more than one trade or occupation, that cross-classification is only to be used when the duties performed by each classification are separate and distinct. (Ho Dec. Ex. 7) Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 24 of 28 25 Work performed by Schilling and Krohn such as gathering, moving around, and putting away their own concrete cutting equipment, reading blueprints, putting water into the water pump, positioning and moving the garbage can, changing drill bits, removing stuck concrete from drill bits, and dumping out waste materials were all in support of their own concrete cutting work, and therefore are not separate and distinct from their concrete cutting work. Because the rules for cross classification (i.e. paying work performed in different trades at different rates) do not apply when the work in different trades by the employee are related rather than separate and distinct, Schilling and Krohn must be paid at the General Laborer rate for all of their preparatory and cleanup activities in support of their own concrete cutting work. The DWD’s interpretation of its own regulation that cross classification only applies when work performed is separate and distinct, as stated in the 2012 Questions and Answers on the Prevailing Wage, is controlling unless the interpretation is inconsistent with the language of the regulation, or is clearly erroneous. State v. Harenda Enterp., 2008 WI 16 ¶37; 307 Wis. 2d 604. Unlike its interpretation of whether the cash fringe can be excluded from the overtime rate computation, which violated the plain language of DWD §290.05, the DWD’s interpretation of its own regulation on cross classification is not inconsistent with the language of the regulation. Allowing cross classification on related work would impractically require employees to painstakingly keep track of work that arguably belong to different trades that they perform on the project; would encourage contractors to narrowly define the circumstances under which employees are paid at the appropriate rate for a skilled trade rather than at the General Laborer rate, and would discourage employees from pursuing apprenticeships in the skilled trades by decreasing the number of hours that journeymen would receive pay at the higher skilled trades’ Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 25 of 28 26 rates. The DWD’s rule that only separate and distinct work can be cross-classified and paid at a different rate is thus reasonable, and should be deferred to by the Court. During the first 7 weeks for Schilling and the first 8 weeks for Krohn on the Debot Hall Project, they spent at least 90% of their work time either cutting holes through concrete, performing preparatory and cleanup activities in support of their own concrete cutting work, or sweeping. Any pipe carrying and connecting work that they performed was incidental to their primary General Laborer work under DWD §290.01(10m), which defines incidental work as work performed in a classification other than the employee’s primary classification, paid at a lower rate, and performed for 15% or less of work time during a given workweek. Any subjourney sheetmetal work performed by Schilling and Krohn during the first part of their employment at Debot Hall meets all three requirements: Subjourneysheetmetal work was not their primarily classification during the time period when they spent 90% of their work time or more performing concrete cutting and related work. (PFOF ¶40, 41, 44) Subjourney sheetmetal work is paid at a total package rate of $18.10 per hour, a full $16.78 per hour lower than the Journeyman General Laborer rate. (PFOF ¶51-52) Schilling and Krohn performed sheetmetal helper work less than 10% of time, well below the 15% maximum for incidential work. (PFOF ¶40, 41, 44) Pursuant to DWD §290.03(3) Incidental work shall be compensated at the higher primary classification prevailing wage rate; which in the case of Schilling and Krohn was the General Laborer rate. Schilling is therefore entitled to the General Laborer rate for all hours worked during his first 7 weeks of working at the Debot Hall Project, while Krohn is entitled to the General Laborer rate for all hours worked during his first 8 weeks of working at the Debot Hall Project. Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 26 of 28 27 d. During the Remaining Work Weeks Schilling and Krohn are Entitled to the General Laborer Rate for All Concrete Cutting and Supporting Work Performed. During their remaining and final workweeks at the Debot Hall project for PGA, Schilling spent a total of 30-40 hours performing concrete cutting and supporting work, while Krohn would spend 30 hours per week performing concrete cutting and supporting work. (PFOF ¶43, 46) As stated in DWD’s Request to Employ Subjourneypersons Form, subjourneypersons who regularly perform the work of a General Laborer must be paid at the rate of a General Laborer for such work. While the word “regularly” is not defined in any regulations or available DWD publications, the DWD regulations evidence a clear policy choice to pay employees at the applicable higher paid classification for all work performed in said classification. For example, DWD §290.03 states that incidental work can be paid at the rate for the non-primary classification, only if that non-primary classification is higher paid than the employee’s regular classification. In other words, a journeyman General Laborer who occasionally performs the work of a Sheetmetal Worker would be entitled to the Sheetmetal Worker rate for all such work performed even if incidental; while a journeyman sheetmetal worker is still entitled to the sheetmetal rate for incidental work performed in the lower paid General Laborer classification. Similarly, the term “regularly” as used in the Request to Employ Subjourneypersons form should be narrowly interpreted, so that subjourneypersons who do perform General Laborer work can be paid at the higher General Laborer rates for such work. See by analogy 29 C.F.R. §776.25 (FLSA applies to employees who regularly perform covered work, though said covered work is only a small part of the employee’s job duties). For Krohn, who spent 30 hours per week performing work related to concrete cutting, such concrete cutting and supporting work is clearly a regular part of his job duties. Similarly, Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 27 of 28 28 Schilling spent between 30-40 hours during a time period of about five weeks performing concrete cutting and supporting work; so that concrete cutting remained a regular part of his job duties. Indeed, so long as PGA continued to need to install pipes through walls and in basements, it needed General Laborers such as Schilling to drill holes through concrete to make the installation work possible. For both Schilling and Krohn their concrete cutting and related work remained a regular part of their job duties, so that for such work they were entitled to the General Laborer rate, even during workweeks when they no longer spent 90% or more of their work time performing concrete cutting and related work. V. Conclusion. For the above stated reasons, the Plaintiffs are entitled to summary judgment on both of their claims challenging PGA’s method of computing overtime pay, as well as their claim for prevailing wage misclassification. Dated this 22nd day of May, 2017. s/Yingtao Ho YINGTAO HO Wisconsin State Bar No. 1045418 The Previant Law Firm, s.c. 310 W. Wisconsin Avenue, Suite 100MW Milwaukee, WI 53203 Phone 414/271-4500 Fax 414/271-6308 yh@previant.com Attorneys for Plaintiffs Case: 3:16-cv-00202-wmc Document #: 96 Filed: 05/22/17 Page 28 of 28