Watch David E. Mastagni's Oral Argument in the Ninth Circuit Court of Appeals on Behalf of Ventura County Deputies and Firefighters

In Anthony Sanders, et al. v. County of Ventura, current and former members of the Ventura County Deputy Sheriffs’ Association (“DSA”) and the Ventura County Professional Firefighters’ Association (“PFA”) filed an FLSA lawsuit challenging the County's unlawful pay practice of imposing an involuntary deduction from the earnings of employees who waive health insurance in order to defray the benefit costs of other employees.  The suit alleges the fee constitutes an illegal kickback of wages.  The County unilaterally imposed this "Opt-out Fee", which subsumes most of the Flexible Benefit Allowance (“Allowance”) paid to the Plaintiffs as income. 

On August 22, 2023, David E. Mastagni argued this case before the Ninth Circuit Court of Appeals. This appeal seeks reversal of the district court’s error in granting the County's cross-motion for summary judgment/adjudication based entirely upon its finding that the involved Flexible Benefits Plans were “bona fide” and the County’s cash-in-lieu payments were “incidental.”  The bona fide dispute is not dispositive of the claims raised in Plaintiffs/Appellants’ lawsuit. 

The County admitted that the opt-out fee is first paid to Plaintiff as gross income within the meaning of I.R.C. § 61 and reflected in Plaintiffs’ paystubs as earnings. David argued that because the full Allowance is paid directly to Plaintiffs prior to the deduction of an “Opt-out Fee”, the fee cannot be excluded from the regular rate of pay. In short, plaintiffs contend direct payments to employees who waive health insurance, the opt out fee cannot be excluded from the employee’s “regular rate of pay” pursuant to 29 U.S.C. § 207(e)(4). Flores v. City of San Gabriel, 824 F.3d 890, 901-02 (9th Cir. 2016), cert. denied, 137 S. Ct. 2117 (2017).  

However, this action is primarily a dispute over whether the fee constitutes an unlawful deduction for which Plaintiffs are entitled to restitution.  Because the FLSA involves overtime claims, the suit seeks restitution by alleging no overtime can be deemed paid until these Opt-out Fee deductions are repaid.  The FLSA also prohibits deductions unless they are voluntary and the employer derives no benefit from the deduction.  Here, Plaintiffs contend the deductions are involuntary and benefit the County by defraying its labor costs.  Finally, the FLSA requires overtime rates to be calculated on a pre-deduction basis. 29 C.F.R. § 531.37(b). 

Watch the oral arguments below:

Mastagni Holstedt Partner Joins PERB Advisory Committee

Kathleen N. Mastagni Storm, a partner in our Labor and Employment Department, has been asked to join the Public Employment Relations Board’s (PERB) Advisory Committee for its Panel of Neutrals Listing.

PERB is a quasi-judicial administrative agency that administers and enforces collective bargaining statutes like the Meyers-Milias-Brown Act (MMBA) and resolves claims of unfair labor practices. PERB also oversees the factfinding process, which involves a three-person panel that hears evidence on negotiation issues in dispute and provides findings of fact and recommendations for settlement. This process is similar to interest arbitration proceedings in that the panel can conduct investigations and hold hearings, but it is non-binding.

PERB’s Advisory Committee for its Panel of Neutrals Listing reviews and provides feedback on applications from those wishing to join PERB’s list of neutral factfinders. The Advisory Committee is composed of both union and management representatives. Kathleen, a well-known union advocate at PERB, will have the opportunity to provide labor’s perspective on those seeking to serve as factfinders with PERB. Once approved, the factfinder may be chosen to serve on a factfinding panel.

Kathleen is honored PERB asked her to participate on the Advisory Committee and looks forward to being involved in the process and assisting in growing the list of neutrals with expertise and experience in labor law.