NEW FLSA Ruling for Mass Fire, Police: Include Most Differentials/Stipends in OT Rate; Pay OT for Town Details; Superior Officers May Be FLSA-Exempt; Calculate Damages

In the latest decision concerning the application of Fair Labor Standards Act to Massachusetts public safety officers, Judge Stearns of the U.S. District Court for the District of Massachusetts ruled on which payments must be added to the overtime rate; whether details performed for a public employer must be paid at the overtime rate; whether certain superior officers are exempt from the FLSA; and how the employer calculates the damages it owes for FLSA violations. The results, from a public safety union standpoint, were mixed. The case is Murphy v. Town of Natick, CA#04-11996-RGS (D.Mass. Sept. 25, 2007).

The FLSA guarantees that most employees, including public sector employees, receive 1.5 times their “regular rate” (or base pay) for hours actually worked beyond 40 in a 7-day pay period. Section 207(k) of the FLSA permits public safety employers to elect a different overtime threshold specifically for police and fire employees – the range is from 43-hours/7-days to 171-hours/28 days for police and 53 hours/7 days to 212 hours/28 days for fire fighters. This is commonly known as the §207(k) or §7(k) partial overtime exemption.

Most public safety unions have negotiated collective bargaining agreements that provide better overtime benefits than the FLSA, for instance in terms of hour rate, daily overtime, and minimum payments, under most circumstances. In limited situations, however, the FLSA provides a better benefit than the contract, and numerous unions have taken employers to court to obtain those statutory entitlements.

To summarize the rulings in Murphy v. Town of Natick:

First, the Court ruled that the federal overtime rate for police officers MUST include shift differentials, education incentive, assignment differentials, and community services, but not in-service training stipends. (Please note that these payments must be included only when the FLSA compels the payment of overtime and not necessarily when the union contract does. Normally, union contracts require overtime pay for many hours that are not deemed overtime-eligible by the FLSA and may use an overtime rate that does not include wage supplements.)

Second, the Court ruled that details for any town department, such as the recreation department, DPW, and the schools, are considered “hours worked” under the FLSA and must be paid at FLSA overtime rate (instead of the lesser detail rate) if they are worked beyond 40 hours. (If the detail rate is greater than the FLSA overtime rate, then the detail rate applies.)Judge Stearns’ decision has two highly controversial features involving the application of the FLSA to superior officers and the calculation of damages owed by the Town. First, Judge Stearns appeared to rule that superior officers are by definition exempt from the protections of the Fair Labor Standards Act. “Executive” employees are exempt from the entitlement to overtime under federal law and are defined as employees who a) are paid on a salary basis of at least $455 per week; b) have a primary duty of managing the workplace; c) customarily and regularly direct the work of two or more other employees; & d) have the authority to hire or fire other employees or whose suggestions and recommendations in this reqard “are given particular weight.”

Under regulations issued by the Department of Labor in 2004, this exemption does not apply to

police officers, detectives, deputy sheriffs, state troopers, highway patrol officers, investigators, inspectors, correctional officers, parole or probation officers, park rangers, fire fighters, paramedics, emergency medical technicians, ambulance personnel, rescue workers, hazardous materials workers and similar employees, regardless of rank or pay level, who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; preventing or detecting crimes; conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; detaining or supervising suspected and convicted criminals, including those on probation or parole; interviewing witnesses; interrogating and fingerprinting suspects; preparing investigative reports; or other similar work.

29 CFR 541.3 (emphasis added). Judge Stearns interpreted this regulation narrowly as applying only to officers in the “rank” of detective (detective, as most people know, is an assignment rather than a “rank”). This interpretation, to us, flies in the face of the regulation’s plain language, which already lists detectives and all other titles, and the purpose of the exemption. We interpret the regulation as protecting superior officers who engage in actual police work (such as a patrol supervisor or ranking detective) and exempting only those superior officers, if any, who primarily supervise other employees or handle administrative tasks.

The 2004 regulations also added a requirement that executive employees, to be exempt from the FLSA, must possess the authority to hire or fire employees or to effectively recommend such actions. In Natick, the Judge found that “superior officers play an influential role in the process by evaluating and interviewing new hire candidates as well as candidates for promotion.” In many other communities, superior officers play little, if any, role in personnel decisions and therefore may be protected by the FLSA.

In the second controversial aspect of the decision, Judge Stearns ruled that the Town may offset its liability by considering the amount of premium pay (in other words, the one-half of the regular rate paid in addition to the regular rate) it paid that exceeded the overtime due under the FLSA and was required by the union contract or some other requirement.. This is commonly known as the “premium offset.” Plaintiffs and union advocates argue that the Town may only offset its liability on a pay period-by-pay-period basis (For example, if the FLSA required Officer Smith to receive $50 more during Week A, but the contract required the Town to pay overtime premiums in excess of the FLSA of $30 for that week, the Town could reduce its liability to $20 for Week A. But if the Town paid excess premiums in Week B of $20, it could not use this excess payment to reduce its Week A liability to $0). Taking its cue from the latest chapter in O’Brien v. Town of Agawam case, another recent Massachusetts decision, Judge Stearns agreed with the Town that it may apply a credit “regardless of when the premiums were paid and when the overtime work occurred.”

Curiously, the issue of the §7(k) exemption did not arise in Murphy, because the Town conceded that it had not adopted any such exemption, thus supporting the ruling of the U.S. First Circuit Court of Appeals in O’Brien v. Town of Agawam that, at least in police departments with a ‘4 and 2’ schedule, a §7(k) exemption is not automatic. A Town must take affirmative steps adopt §7(k) in order to receive its benefits.

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