JOSEPH DACAR, individually and for similarly situated people; JASON WHITELAW; DAVID TARDIFF, et al Plaintiffs - Cross-Appellees
SAYBOLT, L.P., Defendant-Appellee Cross-Appellant LYLE DEROCHE; FELTON RAVIA, Plaintiffs - Appellants Cross-Appellees
Appeals from the United States District Court for the
Southern District of Texas
DAVIS, JONES, and HIGGINSON, Circuit Judges.
fluctuating workweek ("FWW") method is one way of
calculating overtime compensation that satisfies the
requirements of the Fair Labor Standards Act
("FLSA"). See 29 C.F.R. § 778.114(a).
Saybolt LP, a petroleum products company, used the FWW method
to calculate overtime compensation for some of its oil and
gas inspectors who worked radically varying hours each week.
These inspectors also received incentive payments for working
less desirable hours during the workweek. A group of these
inspectors ("the plaintiffs"), sued Saybolt,
alleging that the incentive payments precluded use of the FWW
method and placed their employer in violation of the FLSA.
The plaintiffs claimed that Saybolt's violation was
district court held that Saybolt's payment scheme
violated the FLSA, but the violation was not willful. The
district court adopted the plaintiffs' model for
calculating damages after concluding that Saybolt was
judicially estopped from challenging this model. The district
court also awarded liquidated damages. We affirm the district
court's conclusions as to liability and willfulness,
reverse the district court's ruling on estoppel and its
calculation of damages, vacate the district court's order
on liquidated damages, and remand for reconsideration of the
liquidated damages award and for reconsideration of its
calculation of damages in accordance with this opinion and
entry of an appropriate judgment.
Saybolt's Payment Scheme and the FWW Method
FLSA requires that nonexempt employees receive an overtime
premium of not less than one and one-half times their
"regular rate of pay" for each hour worked over 40
hours in a given workweek. 29 U.S.C. § 207(a). Until
February 2012, Saybolt used two different methods to pay
overtime. Saybolt paid one group of inspectors ("the
non-FWW inspectors") using the FLSA's standard time
and one-half method. These inspectors earned one and one-half
times their "regular rate" for every hour worked
over 40. The "regular rate" for salaried employees
is simply the salary divided by the number of hours the
salary is intended to compensate. 29 C.F.R. §
778.113(a). A non-FWW inspector earning $600 for an intended
40-hour workweek would thus have a "regular rate"
of $15.00 per hour (the $600 base salary divided by 40
hours). The non-FWW inspector's "overtime rate"
would be one and one-half times the "regular
rate"-here, $22.50 per hour (one and one-half times the
$15.00 "regular rate"). Thus, in a workweek in
which the non-FWW inspector worked 60 hours (instead of the
intended 40 hours), the non-FWW inspector would receive the
$600 base salary plus a $450 overtime premium (20 overtime
hours times the $22.50 "overtime rate") for a total
weekly compensation of $1050.
second group of Saybolt inspectors ("the FWW
inspectors") received overtime compensation under the
FWW method. Federal regulations state that this method is
appropriate when an employee works hours that fluctuate from
week to week and the employee agrees that a fixed weekly
salary will constitute straight-time pay (i.e., non-overtime
pay) for all the hours worked in a week, however many or few.
See id. § 778.114(a). Accordingly, FWW
inspectors received the same weekly base salary, regardless
whether they worked 60 hours or only 20.
of overtime premiums under the FWW method is different from
the standard FLSA method in several respects. First, the
"regular rate" under the FWW method is determined
by dividing the weekly base salary by the total number of
hours an employee actually works during the week. This is an
application of the principle that the "regular
rate" equals the weekly salary divided by "the
number of hours which the salary is intended to
compensate." See id. § 778.113(a). In the
FWW context, "the salary is intended to compensate"
all hours an employee actually works. Because the hours
actually worked each week fluctuate, the "regular
rate" under the FWW method will fluctuate from week to
week as well. See id. § 778.114(a). As the
hours worked increase, the "regular rate" will
decrease. Therefore, assuming a $600 weekly base salary and
40 hours actually worked during the week, the FWW method
would yield a "regular rate" of $15.00 per hour
(the $600 base salary divided by 40 hours). But a 60-hour
workweek would yield a "regular rate" of $10.00 per
hour (the $600 base salary divided by 60
key difference under the FWW method is that the
"overtime rate" is one-half, instead of one and
one-half, times the "regular rate." See
id. The reason for this is, again, that the fixed weekly
salary is meant to compensate all hours worked, including
overtime hours. Before receiving an overtime premium, an
employee has already agreed to be compensated according to
the "regular rate" for every overtime hour worked.
See id. The employee need receive only an additional
one-half times the "regular rate" to satisfy the
FLSA's one and one-half times requirement. See
id. In a 60-hour workweek, then, an employee would
receive an "overtime rate" of $5.00 per hour (one
half times the $10 "regular rate"). The total
overtime premium would be $100 (20 overtime hours times the
$5.00 "overtime rate").
Saybolt's payment scheme, FWW inspectors were purportedly
paid overtime under the FWW method. But the company also paid
incentive payments for working on a scheduled day off
("day-off pay"), working at sea ("offshore
pay"), and working on a scheduled holiday ("holiday
pay"). Non-FWW inspectors were ineligible for these
incentives. When calculating the "regular rate,"
Saybolt added weekly incentive payments to the weekly base
salary. Therefore, if a FWW inspector had a weekly base
salary of $600, earned $150 in incentive payments, and worked
a 60-hour workweek, the "regular rate" for that
week would be $12.50 per hour ($600 base salary plus
incentive payments of $150 for a total of $750 divided by the
60 hours worked). The "overtime rate" would be
$6.25 per hour (one half times the $12.50 "regular
rate"), resulting in an overtime premium of $125 (20
overtime hours times the $6.25 "overtime rate").
The FWW inspector's total compensation for the 60hour
week would be $875 ($600 base salary plus $150 incentive pay
plus $125 overtime premium).
Saybolt's Legal Advice
communicated with outside counsel to assess whether the FWW
method allowed for additional incentive payments. In May
2009, Saybolt contacted attorney Robert Ivey. Ivey counseled
Saybolt that combining incentive payments with the FWW method
was a "potential issue." Ivey explained that
several district courts and the First Circuit had concluded
that paying hours-based premiums in addition to a weekly
salary precluded the use of the FWW method. But Ivey also
explained that the Fifth Circuit had not addressed the
question and that the Department of Labor ("DOL")
had issued proposed regulations in 2008 that would allow the
payment of incentives under the FWW method.
contacted Joseph Maddaloni, another outside attorney, in
January 2010. Saybolt forwarded Ivey's recommendation to
Maddaloni and said that it was "seeking a final opinion
and recommendation in order to bring closure to this pay
practice." Maddaloni said he disagreed with the court
decisions rejecting the use of incentive payments under the
FWW method. But Maddaloni conceded that the judges involved
were well respected and that a New Jersey district court
would likely find their reasoning persuasive. Maddaloni
concluded that "while I have always taken the position
that Saybolt's use and application of the FWW was
defensible, I am concerned that under the present state of
the law and the facts that may no longer hold true."
Maddaloni later testified that he had considered the law on
this issue to be unsettled.
Proceedings in the District Court
January 2010, Joseph Dacar, on behalf of Saybolt inspectors
paid under the FWW method, filed a collective action
complaint in the Eastern District of North Carolina. A year
later, the case was transferred to the Southern District of
Texas, and the plaintiffs filed an amended complaint,
alleging that (1) Saybolt did not comply with the
requirements for using the FWW method and (2) Saybolt
willfully violated the FLSA. The complaint also substituted
Lyle Deroche and Felton Ravia as named plaintiffs in place of
Dacar. The district court conditionally certified a
collective action in June 2011, and a total of 112 employees
and former employees opted into the case.
January 2013, the parties filed cross-motions for summary
judgment. Saybolt moved for partial summary judgment on the
issue of willfulness; the plaintiffs moved for summary
judgment on willfulness, liability, damage calculation, and
liquidated damages. In August 2014, the district court
granted Saybolt's motion and held that Saybolt's
violation, if any, was not willful. The plaintiffs moved for
December 2015, the district court denied the plaintiffs'
motion for reconsideration but granted, in part, their motion
for summary judgment. The district court held that Saybolt
had violated the FWW method because the plaintiffs were not
paid a "fixed salary," that liquidated damages were
appropriate, and that damages should not be offset by the
incentive payments the plaintiffs already received.
December 2016, the district court held a hearing on damages.
The district court asked the parties to brief any remaining
issues related to the damages calculation. Saybolt's
brief contended that the "regular rate" for
calculating overtime damages should be based on the
plaintiffs' hours actually worked-not on a 40-hour
workweek-and that overtime hours should be multiplied by one
half-not one and one-half-times that "regular
rate." The district court held that Saybolt was
judicially estopped from contesting the appropriate damages
model and ordered damages of $3, 020, 813.21 plus an equal
amount in liquidated damages.
plaintiffs timely appealed the district court's partial
grant of summary judgment on Saybolt's willfulness.
Saybolt cross-appealed the district court's summary
judgment on liability and damages.
district court's grant or denial of summary judgment is
reviewed de novo, applying the same standards as the district
court. Castellanos-Contreras v. Decatur Hotels, LLC,
622 F.3d 393, 397 (5th Cir. 2010) (en banc). The court views
all evidence in the light most favorable to the non-moving
party. Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986).
Summary judgment is appropriate only where there is no
genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. Bolton v. City
of Dallas, 472 F.3d 261, 263 (5th Cir. 2006).
district court's determination of judicial estoppel is
reviewed for abuse of discretion. See Love v. Tyson
Foods, Inc., 677 F.3d 258, 262 (5th Cir. 2012). A
court's imposition of liquidated damages is likewise
reviewed for abuse of discretion. See Singer v. City of
Waco, 324 F.3d 813, 823 (5th Cir. 2003). The correct
methodology for calculating the amount of overtime pay due is
a question of law, which is reviewed de novo. Black v.
SettlePou, P.C., 732 F.3d 492, 496 (5th Cir. 2013).
explained above, the FLSA generally requires that employees
be paid an overtime premium of one and one-half times the
"regular rate of pay" for all hours worked in
excess of the 40-hour workweek. 29 U.S.C. § 207(a)(1).
Although an employer may satisfy this requirement by ...