After Issuing a Published Decision Rejecting DOL Guidance to Exclude HIL Pay from Overtime, District Court Approves Backpay Settlement for Richmond Firefighters

In a case of first impression, the federal District Court for the Northern District of California issued a published decision declining to follow a  Department of Labor (DOL) Regulation (29 C.F.R. section 778.219(a)(4)) enacted in December of 2019 to expressly exclude holiday in lieu (HIL) pay from the overtime rate. (Padilla v. City of Richmond. (N.D. Cal. 2020) 509 F.Supp.3d 1168.)  Because public safety employees must work their normal schedule regardless of holidays, they often receive extra pay instead of leave.  The DOL issued this Regulation to reverse a series of California district court decisions, and Padilla is the first and only decision addressing whether the courts must "defer" to or follow this DOL Regulation.  As a result, on April 28, 2022, the Court approved our FLSA collective action settlement totaling $464,520.51 for 85 Richmond firefighters claiming the City underpaid their overtime by excluding HIL pay.

 

On July 10, 2020 Mastagni Holstedt APC filed Padilla v. City of Richmond, seeking back pay for the underpayment of overtime. 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. Employers typically argue FLSA section 207(e)(2) excludes holiday-in-lieu payments. However, numerous California federal district courts, including cases handled by Mastagni Holstedt APC have determined section (e)(2) does not exclude holiday-in-lieu payments. 

The City filed a motion to dismiss Plaintiffs’ complaint based on the Department of Labor’s “firefighter example” which took effect January of 2020.  The International Municipal Lawyers Association had successfully requested the DOL issue a Regulation determining public safety employees' 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.” The new Regulation stated:

An employee is scheduled to work a set schedule of two 24–hour shifts on duty, followed by four 24–hour shifts off duty. This cycle repeats every six days. The employer recognizes ten holidays per year and provides employees with holiday pay for these days at amounts approximately equivalent to their normal earnings for a similar period of working time. Due to the cycle of the schedule, employees may be on duty during some recognized holidays and off duty during others, and due to the nature of their work, employees may be required to forgo a holiday if an emergency arises. In recognition of this fact, the employer provides the employees holiday pay regardless of whether the employee works on the holiday. If the employee works on the holiday, the employee will receive his or her regular salary in addition to the holiday pay. In these circumstances, the sum allocable to the holiday pay may be excluded from the regular rate. (29 C.F.R. section 778.219(a)(4))

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.  So called Chevron deference is a judicial doctrine wherein courts defer to administrative agency interpretations of ambiguous statutes and in some cases ambiguous interpretations of their own regulations.  The Supreme Court has increasing called into question this practice, scrutinizing whether an ambiguity actually exists, and if so still requiring the agency interpretation to be reasonable and persuasive.

Plaintiffs' counsel, David E. Mastagni successfully opposed the motion arguing the court should not simply defer to the new DOL regulation, which attempted to replace reasoned jurisprudence of the California district court with the then-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 example within the Regulation was not entitled to any deference because it conflicted with the Regulation it sought to exemplify.  

On December 23, 2020, Judge Phyllis J. Hamilton denied Defendant’s motion to dismiss reasoning that although 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 found that 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. 

This published decision can be cited by firefighters and peace officers throughout the United States to seek the inclusion of HIL pay in their Regular Rate of Pay used to calculate overtime.  In addition to protecting HIL pay, the decision also demonstrates that courts do not blindly defer to administrative regulations and guidance.  As Justice Gorsuch noted in Kisor v. Wilkie (2019) 139 S.Ct. 2400, 2441, “[a]gency personnel change over time, and an agency's policy priorities may shift dramatically from one presidential administration to another.”  Here, a change in the DOL administrations should not change the meaning of the FLSA.  Thankfully, the Court recognized the outcome-based Regulation was not entitled to deference. 

The inclusion of holiday pay in FLSA overtime is a complex issue which also requires close consideration of the governing labor contracts and pay practices.  The Richmond Firefighters appreciate the Court's thoroughness in examining these legal issues and the City's willingness to reach an amicable resolution after the Court ruled on the DOL Regulation. 

Federal District Court Issues Injunction Barring Warrantless Search of Officer's Cell Phone

In Turiano v. City of Phoenix (February 4, 2022), an Arizona District Court issued an injunction prohibiting the City from pursuing disciplinary proceedings against Officer Turiano based on his refusal to consent to a warrantless search of his personal cell phone.

The City initiated an investigation into the origin of challenge coin commemorating a protester being hit in the groin with by the officer's munition on one side and the other side noted the date and location of the event and stated "Make America Great Again One Nut at a Time."  In the course of the investigation into the origin of the coin, Officer Turiano was interrogated and ordered under threat of termination to grant consent to search his cell phone.

The officer objected and sought an injunction arguing the order unlawfully violated his Fourth Amendment rights.  The District Court applied the O'Connor v. Ortega standard, first determining that the officer possessed an expectation of privacy in his phone and that the employer's search was not reasonable.  The Court "easily" concluded he had a reasonable expectation of privacy, noting that the phone contains enormous amounts of deeply personal information unrelated to his employment, the City did not pay for the phone or the data plan, and the phone was not used for work purposes.  Moreover, the City's policies do not address the authority to search personal electronic devices unless used to conduct city business.

The Court also rejected the City's claim of a workplace exception to the Fourth Amendment.  The exception allows warrantless searches to investigate workplace misconduct, but is limited to areas and items that are related to work and generally within the employer's control.  The Court noted that this exception does not apply to searches of an employee's home, briefcase, medical records, personal safes, etc.  The Court concluded that a personal cell phone is not generally within the employer's control and not subject to the workplace exemption.  "Just as a public employer lacks authority to rummage through an employee's home for evidence of workplace misconduct without a warrant, so too an employer lacks authority to conduct a warrantless search of an employee's personal cell phone." 

The Court also rejected the City's assertion that it had reasonable suspicion that the phone contained evidence of misconduct, pointing out that the officer's involvement in the incident and related communications has no bearing on who created the coin.  Further, the Court refused to allow the City to search his phone for evidence of policy violations by other officers. The Court held some amount of individualized suspicion is required and the Officer's substantial privacy interests in the contents of his cell phone is afforded "the most stringent Fourth Amendment protection."

David E. Mastagni Testifies Against AB 2557, Stating it Would Tarnish Innocent Police Officers

On Tuesday, April 19, David E. Mastagni testified before the California Assembly against AB 2557, created by California State Representative, Mia Bonta. This appointed bill would make all law enforcement personal records public in any agency where a civilian oversight board has access to citizen complaint investigations, regardless of the nature of the allegations or whether they were sustained. The bill claims it would make police officers more accountable, however, the bill is not taking into account the risk of defamation, ridicule and harassment for innocent police officers due to the timing of released information before the officer is cleared. 

Although intended to create more transparency regarding law enforcement misconduct, AB 2557 would undo the more balanced approach of Sen. Skinner in SB 1421 and 16.  PORAC and other law enforcement stakeholders worked with Sen. Skinner so that under current legislation disciplinary investigations and records are only disclosed if serious misconduct has been sustained after opportunity for appeal.  AB 2557 would discard this legislative work and convert all personnel records, including investigations of disproven allegations and or minor misconduct, to public records in any jurisdiction with civilian oversight of the police disciplinary investigations. 

Civilian review boards depend upon access to the Internal Affairs investigations granted by the employing agency. They typically do not have the resources or staffing to conduct completely independent investigations. The citizen review board’s right to investigate, make findings and recommendations all exist through their nexus to the employing Agency, as the court's have held.  This Bill also seeks to expressly overturn Supreme Court precedent on personnel records. 

For example, Sacramento's Office of Public Safety Accountability (OPSA) has full access to every complaint received and investigated by IA, not just complaints OPSA receives. They review the findings and advise the department if they agree. OPSA then releases an annual report with summaries without names.  AB 2557 would make all of those investigations public records.

Moreover, since the law allow police agencies one year or in some cases more to complete investigations after receiving a complaint, under this Bill false, but still stigmatizing allegations would be disclosed several months before the prior to the completion of the investigation. Innocent officers would have their names tarnished and become subject to ridicule and harassment, even if ultimately cleared. This bill would usurp the balanced approach fashioned by Senator Skinner between the public’s need to know about serious misconduct and officers’ right to privacy, particularly as to unproven but still stigmatizing allegations.  

The Bill is also unnecessary, as Civilian review board findings, recommendations and investigations are already public records under S.B. 1421 and S.B. 16, where they involve sustained allegations of serious misconduct.

Civilian review of the disciplinary process is important to maintain public confidence in law enforcement.  Ironically, this Bill would likely harm transparency and public trust civilian review is intended to create by incentivizing agencies to block civilian oversight outright or severely limit access to Internal Affairs investigations.  

Several members of the Public safety committee echoed the concerns raised by Mr. Mastagni, particularly as to the disclosure of unproven allegations.  AB 2557 passed by the California Assembly on April 19 with a 5-2 vote, with a motion to be re-referred to the Judiciary Committee.  However, two of the Democratic votes to move the Bill forward to the Judiciary Committee expressed opposition to the Bill as drafted on a floor vote.

Watch David E. Mastagni testify against AB 2557.

Read more about AB 2557.

SB 278 Makes Employers Responsible For Pension Mistakes, Not Our First Responders

Peace officers, firefighters and other California public employees who serve our communities and risk their lives for our safety, can rest assured their pensions won’t be pulled from underneath them long after retirement. Kathleen Mastagni Storm, and Steven Welty, had the privilege of working on SB 278, which added Government (Gov.) Code section 20164.5 (Chapter 331, Statutes of 2021) effective January 1, 2022, to the Public Employees’ Retirement Law (PERL). 

SB 278 establishes provisions protecting CalPERS members from some of the adverse impacts of disallowed compensation items, as well as mitigating the effects of reduced retirements moving forward. Additionally, this bill establishes additional procedures within CalPERS to prevent future errors. 

Disallowed Compensation 

Under Gov. Code section 20164.5, disallowed compensation is compensation reported for a member by the state, a school employer, or a contracting agency that CalPERS subsequently determines is not in compliance with the California Public Employees’ Pension Reform Act of 2013 (PEPRA) (Article 4 [commencing with section 7522] of Chapter 21 of Division 7 of Title 1), Gov. Code section 20636 or 20636.1 of the PERL, or the administrative regulations of the system under California Code of Regulations (CCR), title 2, section 571 and 571.1. 

Overpayment and Penalty Obligations for Disallowed Compensation 

If a misapplication or miscalculation of retirement benefits occurs due to disallowed compensation and the conditions under subdivision (b)(3)(A) of Gov. Code section 20164.5 are met, the employer will be liable to pay CalPERS the full cost of any overpayment and pay the impacted retiree a portion of the actuarial equivalent of any reduced retirement benefit as a penalty. 

This provision defines disallowed compensation, stipulates what would occur if California Public Employees’ Retirement System (CalPERS) determines disallowed compensation has been reported, and identifies the impacts on the pension benefits of a retired member, survivor, or beneficiary. 

How the Bill Works 

PEPRA, took effect January 1, 2013 and eliminated certain compensation from calculation as part of an employee’s final compensation. This created an issue where members made contributions during their career into the system, that were later disallowed from counting as final highest compensation. This created a secondary issue—what happens with the contributions made on disallowed wage items? Do you get them back? And if so, how? For most employees, the value of the contributions made on later determined disallowed compensation items was negligible and not worth fighting over. But for others, the compensation made a significant difference. The employees then had to litigate whether the pay was properly disallowed and how to be reimbursed for their contributions. 

Now, SB 278 corrects and clarifies what happens. The contributions made on disallowed items are not lost for active members. Amongst other terms, the bill requires employees get credit against future contributions for contributions made on disallowed items. 

Here is an example of how the bill will work: 

You are retired and because of PEPRA, 5% of your retirement gets eliminated because certain compensation items get carved out. As a retiree on a fixed income, you suffer a real harm. You were promised an amount, made contributions on a certain amount, had been receiving it for xx years and then boom, the pension system does and audit and makes cuts. 

SB 278 mitigates the impact. 

The employing entity will be responsible for paying the overpayments back to CalPERS. The bill requires the employing entity to pay to the system the full cost of any overpayment of the prior paid benefit. 

In the example above, the employing entity has to pay the 5% that was determined to be disallowed and overpaid back to CalPERS. An actuarial evaluation will be done to determine the value of the 5% disallowed and what would have been paid through the retiree’s projected life. 20% of that actuarial amount will be a penalty imposed on the employing entity as a lump sum payout. Then, the employing entity will pay 90% of the lump sum to the retiree or survivor and 10% to CalPERS. The retiree will lose the 5% going forward, but they will get 90% of the lump sum payout penalty based off the actuarial. 

Why this is important: 

This is going to have state wide affects as many retirees will be affected by this legislation. This bill is important because the retirement system should not be allowed to benefit from contributions they were not entitled to. More importantly, dedicated employees that retired out and relied on what they were told their benefit would be and relied on receiving that amount, should not have the rug pulled out from under them. The lump sum, calculated as a percentage over the period of your life, is paid to compensate for part of the detrimental change. 

The bill also requires employing entities to submit memorandums of understanding (MOUS) to CalPERS. CalPERS then has to go through the items of compensation and make a determination if the items are allowable or not under PEPRA to eliminate surprises years down the road when retirees are living on a fixed income. 

While this bill only applies to CalPERS members, it is safe to anticipate similar legislation for 1937 Act retirement systems, like Sacramento County. This bill and the addition to the government code are also likely to be followed as persuasive authority if similar disputes arise in a ’37 Act jurisdiction. 

California Professional Firefighters sponsored this legislation and continue to work in partnership with peace officer associations and lobbyists to better working conditions and pension benefits for all public safety. 

Steven Welty has been a part of Mastagni Holstedt, APC, since 1998 and is a key player in our Labor Department. Steve handles all of our disability retirement cases. He routinely finds himself before the Office of Administrative Hearings and superior courts litigating allowable compensation and denied disability retirements. 

Kathleen Mastagni Storm is a managing partner at Mastagni Holstedt, APC. She regularly is privileged to draft and testify on public safety bills.

Malicious Prosecution Ruling Significantly Impacts Law Enforcement 1983 Liability

In 2014, Larry Thompson was living with his wife and newborn daughter. Thompson’s sister-in-law suffered from a mental illness and reported to 911 that Thompson was abusing his child. Officers showed up to Thompson’s home without a warrant, arrested him, and charged him with obstructing governmental administration and resisting arrest. Thompson was detained for two days. Meanwhile, EMTs took the baby to the hospital where medical professionals found no signs of abuse. The charges against Thompson were dismissed and no explanation was provided by the judge or prosecutor.

Thompson filed several claims alleging constitutional violations against the arresting officers including a Section 1983 claim for malicious prosecution. The lower courts held that they were required to follow precedent which established that a Section 1983 claim required a plaintiff had to show that he obtained a “favorable termination” of the underlying criminal prosecution. Lanning v. Glenn Falls, 908 F. 3d 19 (2018). In other words, Thompson had to show that his case was dismissed based on some indication of his innocence. Thompson was unable to do this as no explanation was provided to him and therefore unable to show a “favorable termination” and the case was dismissed. The US Supreme Court reviewed the case and reversed the decision of the lower courts.

The Supreme Court delivered the opinion in Thompson v. Clark which clarified how a Fourth Amendment claim under Section 1983 for malicious prosecution should be analyzed by the courts. 596 US_ (2022). Previously the courts had no clear-cut standard to find that a case ended in a “favorable termination.” Some Courts of Appeals required some indication that the plaintiff was innocent while others found that a favorable termination occurred as long as a criminal prosecution ended without a conviction.

In the ruling of Thompson, the Supreme Court clarified that an affirmative indication of innocence is not needed.  The Court held that Thompson’s showing that his criminal prosecution ended without a conviction is enough to find a “favorable termination” in a malicious prosecution claim.

This ruling will have a profound impact on law enforcement. Those in support of the rule argue that it fosters law enforcement accountability and ensures police officers are held accountable under the Fourth Amendment for false accusations. Arguments against the rule are that it will have a perverse effect for prosecutors who are put in a situation to see cases through to trial to avoid civil litigation. This will flood the court with meritless claims. On the other hand, if charges are dismissed it will affect police agencies who will have to spend their resources on endless civil litigation.

As a final takeaway, this ruling essentially reframes Section 1983 from being a way for a plaintiff to redress constitutional harms to a standard of which law enforcement must have a clear understanding. Law enforcement officers must be conscious of the implications of this new rule during the stages of investigation and arrest. Mistakes or misunderstandings which could previously be corrected with a dismissal of charges now create a pathway for individuals to sue officers who instigate baseless criminal charges. 

Jaywalking in California May Become More Popular Yet More Dangerous With AB 2147

In the 2021 California Legislative Session, the California State Legislature passed a bill that would have mostly decriminalized jaywalking in California and shifted the rights of way between cars and pedestrians on the streets.  (In our June 1, 2021 blog posting we discussed that bill and some of its potential consequences.)  That bill, Assembly Bill 1238, was vetoed by Governor Newsom in October 2021.

Now, Assembly Member Phil Ting has introduced Assembly Bill 2147, a new pro-jaywalking bill for the 2022 session.  This time, the focus of the bill is on police enforcement of portions of the California Vehicle Code pertaining to pedestrians.  Unlike last year’s AB 1238, the new AB 2147 mostly maintains the status quo on who has the right of way on the streets, but instead largely prohibits police from enforcing those rules.

AB 2147 muddies factual and legal issues regarding jaywalking and could effectively lead to a reduction of enforcement by mandating that “A peace officer […] shall not stop a pedestrian for a violation [of the Vehicle Code] unless a reasonably careful person would realize there is an immediate danger of a collision with a moving vehicle or other device moving exclusively by human power.”  Thus, a pedestrian who violates the Vehicle Code will argue that they should not be subject to a law enforcement stop or legal consequences as long as they claim that there was not an “imminent danger of collision.”  The existence or non-existence of an “immediate danger of collision” may be a difficult fact to prove, and unlike AB 1238 from last year, AB 2147 contains no definition of “immediate danger” to clarify the issue.

The potential reduction in enforcement stops anticipated by the drafters of AB 2147 may lead to more jaywalking, but more adversarial encounters with law enforcement and suspected jaywalkers regarding the issue of “immediate danger.” Another troubling outcome of this legislation, however, is a decrease in public safety and an increase in injuries and deaths to pedestrian jaywalkers, further taxing first responders with additional calls for service.  In the context of civil litigation, further questions arise, including whether persons or businesses would have a duty to prevent their invited customers from jaywalking due to the foreseeability that they will jaywalk.  Whether AB 2147 passes, and what its consequences would be, remain to be seen.