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Hills v. Entergy Operations, Incorporated

United States Court of Appeals, Fifth Circuit

August 4, 2017

NATHAN HILLS, III; DOUGLAS LUKE, JR., Plaintiffs - Appellants
v.
ENTERGY OPERATIONS, INCORPORATED, incorrectly named as Entergy Louisiana, L.L.C. d/b/a Entergy Louisiana, Incorporated, Defendant-Appellee

         Appeal from the United States District Court for the Eastern District of Louisiana

          Before HIGGINBOTHAM, SMITH, and HAYNES, Circuit Judges.

          PATRICK E. HIGGINBOTHAM, Circuit Judge:

         This is a Fair Labor Standards Act ("FLSA") case in which the plaintiffs allege that they were misclassified as exempt from the overtime pay rule and seek backpay. The district court entered summary judgment that, assuming that the plaintiffs were found misclassified, their regular rate of pay would be calculated pursuant to the fluctuating workweek method for the purpose of determining the backpay owed to them. Concluding that the judgment was premature, we reverse.

          I

         The FLSA guarantees to all covered employees who work more than forty hours in one week overtime pay at a rate of 1.5 times their regular pay rate.[1]However, certain types of employees are exempt from this guarantee, for example, "executive, administrative, or professional" employees.[2] If an employer has hired an employee on the premise that she is exempt from the overtime pay guarantee, and she works overtime hours, but she believes herself "misclassified, " then she may bring a misclassification action under the FLSA.[3] If the court agrees that the employee is not, in fact, subject to an FLSA exemption, then she is entitled to backpay to compensate the overtime hours she worked without benefiting from an overtime rate. The instant lawsuit is such a misclassification action.

         The plaintiffs here are nineteen employees or former employees of the defendant, Entergy Operations, Inc. ("EOI"), which operates a nuclear power plant near Killona, Louisiana. Federal law requires nuclear power plants to be staffed with a well-trained security force. EOI had previously staffed its Killona plant with security personnel from a private security contractor called Wackenhut. All of the plaintiffs are former Wackenhut security contractors. In 2009, EOI chose to move its security force in-house, so it made full-time job offers to many of the Wackenhut contractors who had been filling the role, including each of the plaintiffs. These job offers were all premised on the plaintiffs' being exempt from the FLSA's overtime guarantee. They accepted the jobs and became "security shift supervisors" at EOI's Killona plant.

         Thereafter, the plaintiffs came to believe their exempt classification wrong, so they brought this misclassification action, seeking backpay for allegedly underpaid overtime hours. The parties cross-moved for summary judgment on the classification issue, the plaintiffs seeking judgment that they were wrongly classified as exempt, and EOI seeking a judgment that the plaintiffs were correctly classified as exempt pursuant to the administrative exemption. The district court denied both of those motions, finding a genuine dispute whether the plaintiffs' positions met the standard for being considered "administrative." The misclassification issue has yet to be decided, and it is not before us.

         Rather, we review two partial summary-judgment rulings of the district court relating to the calculation of backpay if the plaintiffs are ultimately found misclassified at trial. First, the court entered summary judgment that the fluctuating workweek method would apply to calculate the plaintiffs' regular rate of pay for the purpose of determining their proper overtime rate of pay.[4]Second, the court entered summary judgment that any backpay awarded to each plaintiff would be offset by the amount of discretionary bonuses each was paid. In a typical case, these interlocutory rulings would not be appealable with the case still pending in the district court.[5] But here, the two remedy-related rulings described had the combined effect of reducing below zero the maximum possible recovery of two of the plaintiffs. Specifically, the application of the fluctuating workweek method to their claims resulted in recoveries low enough to be offset entirely by the application of the bonus offsets. The district court dismissed the two as presenting no justiciable case or controversy and entered final judgment against them. They appealed that final judgment, complaining of the two remedy-related rulings that nullified their recoveries, and became the appellants here-Nathan Hills, III, and Douglas Luke, Jr. The district court stayed proceedings as to the seventeen remaining plaintiffs pending the outcome of this appeal. Hills and Luke ask us to reverse the fluctuating-workweek-method and bonus-offset summary judgments, reverse the final dismissals as to them, and remand their revived claims to be reinstated in the lawsuit.

         II

         We review a district court's grant of summary judgment de novo, applying the same standard as the district court.[6] Summary judgment may be affirmed for any reason raised to the district court and supported by the record, and we are not bound by the grounds articulated by the district court.[7] "The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[8] "When considering a motion for summary judgment, the court views all facts and evidence in the light most favorable to the non-moving party."[9]

         III

         We first consider whether the fluctuating workweek method applies to the calculation of the plaintiffs' regular rate of pay, which would in turn determine their overtime rate of pay and overall backpay compensation. Because of the posture of this case, we assume for the purpose of this issue that the plaintiffs were misclassified and are owed overtime backpay; the question is how to compute that remedy.

         A

         The backpay owed to a successful misclassification plaintiff is the extra pay that she should have received for working overtime hours at 1.5 times her regular rate of pay. The court's preliminary task, therefore, is to determine the employee's regular rate of pay. "Calculation of the correct 'regular rate' is the linchpin of the FLSA overtime requirement"[10]-an often tricky calculation that the Supreme Court has called "perplexing."[11] The Wage and Hour Division of the Department of Labor attempts to assist with its guidance and examples in the Code of Federal Regulations that this court and others often rely on.[12]

         The conceptual complexity posed here lies in converting salaried employees' salaries into regular hourly rates of pay for the purpose of determining proper overtime pay. Overtime is computed in terms of an hourly rate, so when an employee is compensated by salary or other basis, the compensation must be converted to an hourly rate.[13] In general, this "is computed by dividing the salary by the number of hours which the salary is intended to compensate"[14]-referred to as the "fixed" or "standard" method of calculating a salaried employee's regular hourly rate of pay.[15]

          However, for many salary relationships, there is no fixed number of hours that the employee is expected to work each week. Many, if not most, salaries are intended to compensate however many hours the job demands in a particular week, with the salary not increasing just because a particular week is onerous. The theory is that employees agree to this arrangement because, in return, the employer cannot reduce the salary when a different week happens to be light.[16] When an employee has agreed to this arrangement, her workweek is said to "fluctuate, " so her regular rate of pay is determined by the "fluctuating workweek method."[17] Under this method, the regular rate of pay is determined by examining each week individually and dividing the salary paid by the number of hours actually worked (because the salary was intended to compensate whatever number of hours that happened to be).[18] The employee's regular hourly rate thus varies from week to week, so her proper overtime compensation similarly varies from week to week.[19]

         "The question of whether an employer and employee agreed to a fixed weekly wage for fluctuating hours is a question of fact."[20]

The parties' initial understanding of the employment arrangement as well as the parties' conduct during the period of employment must both be taken into account in determining whether the parties agreed that the employee would receive a fixed salary as compensation for all hours ...

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