Nos. 1537, 1772, Docket Nos. 95-7561, 95-7610XAP.
Argued: May 1, 1996.
Decided: May 31, 1996.
Timothy J. O'Shaughnessy, Office of the Corporation Counsel, New York, N.Y., (Paul A. Crotty, Corporation Counsel, Kristin M. Helmers, Office of the Corporation Counsel, New York, N.Y.; on the brief), for defendants-appellants-cross-appellees.
Edward M. Scher, Asst. Atty. Gen., Albany, N.Y. (Dennis C. Vacco, N.Y. State Atty. Gen., Victoria A. Graffeo, Peter H. Schiff, Office of the N.Y. State Atty. Gen., Albany, N.Y., on the brief), for amici curiae State of New York.
Joan Stern Kiok, New York, N.Y. (Robert N. Felix, New York, N.Y., on the brief), for plaintiffs-appellees-cross-appellants.
(James E. Doyle, Atty. Gen., Richard Briles Moriarty, Asst. Atty. Gen., Wisconsin Dept. of Justice, Madison, WI, submitted a brief for amicus curiae State of Wisconsin).
(Arthur A. Hartinger, Liebert, Cassidy Frierson, San Francisco, Cal., Louise H. Renne, Jonathan V. Holtzman, Darren W. Lee, City Atty's. Office, San Francisco, Cal., submitted a brief for amici curiae National League of Cities, et al.).
(Richard Schoolman, Brooklyn, N.Y., submitted a brief for amicus curiae New York City Transit Authority).
(Richard E. Casagrande, Lisa M. King, Albany, N.Y., submitted a brief for amicus curiae New York State Public Employees Federation, AFL-CIO).
Appeal from the United States District Court for the Southern District of New York.
Before: NEWMAN, Chief Judge, FEINBERG and OAKES, Circuit Judges.
This appeal presents an issue that continues to divide the federal courts: how to apply in the public sector the Department of Labor's "salary basis" test, which is used to determine whether employees are managers and consequently not covered by the wage and overtime provisions of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §(s) 201-219 (1994). Some courts have ruled that the "salary basis" test is not met and employees are therefore protected by FLSA requirements where their pay is subject to reduction, even if no reduction has occurred. See Carpenter v. City County of Denver, ___ F.3d ___, ___ (10th Cir. 1996); Bankston v. State of Illinois, 60 F.3d 1249, 1253 (7th Cir. 1995); Barner v. City of Novato, 17 F.3d 1256, 1262 (9th Cir. 1994); Kinney v. District of Columbia, 994 F.2d 6, 11 (D.C. Cir. 1993); Michigan Association of Governmental Employees v. Michigan Dep't of Corrections, 992 F.2d 82, 86 (6th Cir. 1993). Other courts have ruled that the "salary basis" test is met and employees are therefore exempt from FLSA protections as long as no deductions from compensation have been made. See Auer v. Robbins, 65 F.3d 702, 711 (8th Cir.), petition for cert. filed, 64 U.S.L.W. 3428 (Dec. 7, 1995); McDonnell v. City of Omaha, 999 F.2d 293, 297 (8th Cir. 1993), cert. denied, 114 S. Ct. 1188 (1994); Atlanta Professional Firefighters Union v. City of Atlanta, 920 F.2d 800, 805 (11th Cir. 1991).
Appellants, the Mayor of New York City, the City's Board of Education, and its Health and Hospital Corp. (collectively, "the City"), appeal from the May 12, 1995, judgment of the District Court for the Southern District of New York (Loretta A. Preska, Judge), granting relief in the form of overtime pay under the FLSA to appellees, 435 of the City's supervisory employees ("the employees"). The City contends that the "salary basis" test, as applied to public employers, is irrational and violates the Administrative Procedure Act, 5 U.S.C. §(s) 551-596 (1994), and also violates the Tenth Amendment. Alternatively, the City claims that its employees are not "subject to" reduction in pay, a criterion of the "salary basis" test, because (with one small exception), no reductions in pay have actually occurred. The City also claims a defense of good faith under the Portal-to-Portal Act, 29 U.S.C. §(s) 259 (1994). The employees cross-appeal from that portion of the judgment that denied them straight time pay for hours worked between 35 and 40 hours per week.
In a thorough and thoughtful opinion, the District Court ruled that the City's express policies concerning deductions for discipline, court attendance, and temporary military leave placed the employees outside the managerial exemption. The District Court also reasoned that the employees were "subject to" pay reductions based on the express policies, and therefore that the City was liable to all employees in that classification, whether or not the policies had actually been applied. Finally, the District Court rejected the City's contention that the "salary basis" test, as applied, violates the Tenth Amendment and the Administrative Procedure Act, and also rejected the defense of good faith. Yourman v. Dinkins, 826 F. Supp. 736 (S.D.N.Y. 1993).
On the employees' cross-appeal, the District Court found in a separate opinion that the employees were not entitled to "gap time" pay because the parties' employment agreement contemplated that the employees' salary would compensate for all hours worked up to the overtime threshold, with a minimum of 35 hours per week. Yourman v. Dinkins, 865 F. Supp. 154 (S.D.N.Y. 1994).
Though the issues raised are important, no purpose would be served by adding further discussion to the dispute, already fully aired in the conflicting decisions cited above. We agree with the conclusions reached by Judge Preska in her comprehensive opinions, and leave the ultimate resolution of the statutory dispute to the Supreme Court or the Congress.
As to both the City's appeal and the employees' cross-appeal, we affirm on the opinions of the District Court.