With Christmas a few days away, Plaintiff and President of
the Richmond Firefighters Association, I.A.F.F., Local 188, Luis Padilla, won a
motion to dismiss its complaint based on the City of Richmond’s failure to
include “holiday-in-lieu” payments in the regular rate of pay under the Fair
Labor Standards Act (FLSA). The Mastagni firm filed Padilla v. City of Richmond, 4:20-cv-04597-PJH (N.D. Cal.) on July 10, 2020, seeking back pay for the underpayment of overtime.
Our law enforcement and firefighter clients know all too well that they won’t have every holiday off with their families. Public safety services are required every day of the year. This means that if your schedule lands on a holiday, you are required to work. To compensate employees for these schedules, public agencies and their unions often negotiate “holiday-in-lieu” pay.
Plaintiffs’ complaint asserted the City was required to
include their holiday-in-lieu payments in the “regular rate of pay” for the
purposes of overtime payment. Generally, all compensation is included in the
regular rate, unless subject to one of the FLSA’s exclusions. Employers
typically argue FLSA section 207(e)(2) excludes holiday-in-lieu payments.
Section (e)(2) provides that “payments made for occasional periods when no work
is performed due to … holiday” may be excluded from the regular rate.
Numerous California federal district courts, including cases handled by the Mastagni law firm, have determined section
(e)(2) does not exclude holiday-in-lieu payments. However, the Department of
Labor (DOL) cursorily stated it disagreed with these well-reasoned opinions
when it issued amendments to its regulations, effective January 2020.
The DOL issued notice that it intended to amend its
regulations essentially codifying the Ninth Circuit’s ruling in Baletrieri
v. Menlo Park Fire Protection District that held cash-outs of leave banks
can be excluded from the regular rate of pay. The International Municipal
Lawyers Association (IMLA) seized the opportunity to pitch its policy request
and asked the DOL determine firefighters’ holiday-in-lieu payments are excluded
from the regular rate notwithstanding the district court decisions to the
contrary. With almost no analysis, the DOL adopted IMLA’s proposed language and
added an example that holiday-in-lieu payments made to firefighters working a
48/96 schedule can be excluded – “firefighter example.”
Based on the new “firefighter example,” the City filed a
motion to dismiss Plaintiffs’ complaint on September 22, 2020 arguing the court
must defer to the DOL.
Plaintiffs ‘counsel, David E. Mastagni and Tashayla Billington,
successfully opposed the motion through briefing and oral argument before Judge
Hamilton in the Northern District. Plaintiffs argued the court should not simply defer to the new DOL regulation, which attempted to replace reasoned jurisprudence of the California district court with this DOL administration's policy preferences. Plaintiffs argued the rule-making process was defective due to lack of notice, and that the exclusion found in
section 207(e)(2) of the FLSA unambiguous did not permit Defendant to
exclude the payments. Plaintiffs further asserted that even if the statute was
ambiguous, the firefighter rule was not entitled to any deference because it conflicted with the regulation it sought to exemplify.
On December 23, 2020, Judge Hamilton denied Defendant’s
motion to dismiss. While the court found section 207(e)(2)’s language was
ambiguous, the “firefighter example” was only entitled to deference to the
extent it had the “power to persuade.” The court reasoned the “firefighter
example” was not persuasive because it contradicts section 207(e)(2)’s
requirement the payment is “made for occasional periods when no work is
performed.” Similarly, the “firefighter example” conflicts with the regulation,
which requires employees be “entitled” to paid leave and “forgo” the use of the
leave. As Plaintiffs argued, firefighters can never forgo the use of leave they
are not entitled to.
This ruling represents a significant victory for public safety employees nationwide and warning against reliance on the DOL’s arbitrary “firefighter example” to exclude holiday-in-lieu payments from the regular rate of pay under the FLSA.
