Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_15-cv-02263/USCOURTS-cand-4_15-cv-02263-9/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:201 Fair Labor Standards Act

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UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

VICTOR BOYCE, 

Plaintiff, 

v. 

INDEPENDENT BREWERS UNITED 

CORPORATION, ET AL., 

Defendants. 

Case No. 15-cv-02263-YGR 

ORDER REGARDING THE PROPER MEASURE 

OF DAMAGES

Re: Dkt. No. 96, 97 

Plaintiff Victor Boyce brings this action against defendants Independent Brewers United 

Corporation and North American Breweries, Inc. in connection with his employment at their 

brewery facility in Berkeley, California, for alleged violations of the Fair Labor Standards Act 

(“FLSA”), 29 U.S.C. section 207(a)(1). Plaintiff contends he was improperly denied overtime pay 

as a result of defendants’ misclassification of him as an exempt employee during the relevant time 

under the FLSA, 29 U.S.C. section 213. Based thereon, plaintiff seeks overtime pay for actual 

hours worked during the relevant time, liquidated damages, and attorney fees. 

On September 27, 2016, the parties entered into a stipulated request asking the Court to 

rule on the proper method to measure plaintiff’s damages to further settlement discussions prior to 

trial. (Dkt. No. 90.) The Court granted such request. (Dkt. No. 91.) Now before the Court are 

the parties’ cross-motions for summary judgment as to the proper method for calculating 

plaintiff’s damages should he ultimately succeed. (Dkt. Nos. 96, 97.) Defendants contend the 

“Fluctuating Workweek” (the “FWW”) calculation is the appropriate measure of damages for 

overtime pay in this case. Plaintiff seeks the contrary finding, namely that the Court should apply 

the conventional one and one-half times calculation for overtime wages. 

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Having carefully reviewed the pleadings and the papers submitted,1 and for the reasons set 

forth more fully below, the Court DENIES defendants’ motion and GRANTS plaintiff’s motion.2

I. BACKGROUND

Plaintiff initiated this action against defendants on May 20, 2015. On September 29, 2015, 

defendants filed a motion for summary judgment, requesting that the Court find plaintiff was 

properly classified as exempt from the FLSA’s overtime requirements because of his managerial 

position. (Dkt. No. 33.) More specifically, defendants argued that plaintiff was properly 

classified as exempt from the overtime requirements as an “employee in a bona fide executive . . . 

capacity” during the relevant claim period. 29 U.S.C. § 213(a)(1). The hearing on this motion 

was held on January 26, 2016. (Dkt. No. 55.) On February 1, 2016, the Court issued its order 

denying defendants’ motion for summary judgment. (Dkt. No. 56.) The Court found that it 

needed to conduct the analysis “upon a more comprehensive record of factual testimony” to 

determine whether plaintiff was properly classified as “exempt” during the relevant time period. 

(Id.) Should the Court determine that plaintiff is not exempt from the FLSA, plaintiff may be 

entitled to damages, including wages for hours worked in excess of forty hours per week. 

On September 27, 2016, the parties requested that the Court rule on the proper measure of 

damages, should plaintiff ultimately succeed. (Dkt. No. 90.) Defendants argue that such measure 

should be based on the FWW method, which allows employers to pay employees 50% of an 

employee’s regular wage rate for each overtime hour worked in certain fee arrangements. (Dkt. 

No. 97.) Plaintiff submits the conventional statutory method pursuant to 29 U.S.C. section 

207(a)—i.e., overtime as one and one half the regular rate—applies instead. (Dkt. No. 96.) 

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 This matter was set for hearing on November 15, 2016. The Court vacated the hearing 

and notified the parties that it would reset the hearing for a later date. However, the Court finds 

that a hearing on these motions is unnecessary and issues the following order without oral 

arguments. See Fed. R. Civ. P. 78. 

2

 Because of the manner in which this issue was briefed, the Court emphasizes that such 

ruling is limited only to the calculation of damages during the time periods in which the Court 

finds plaintiff was actually misclassified, if any. The Court can conceive of situations in which 

the nature of plaintiff’s work shifted during the time period at issue in this action, such that he may 

have been properly classified at some points but not others. Such issues shall be reserved for trial. 

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II. DISCUSSION

A. The Fair Labor Standards Act and the Fluctuating Work Week 

In 1938, Congress enacted the FLSA to eliminate “labor conditions detrimental to the 

maintenance of the minimum standard of living necessary for health, efficiency, and general wellbeing.” 29 U.S.C. § 202(a). To that end, the FLSA requires employers to pay overtime 

compensation for hours worked longer than forty hours per week “at a rate not less than one and 

one-half times the regular rate at which he is employed.” 29 U.S.C. § 207(a). The “employee’s 

‘regular rate’ is ‘the hourly rate that the employer pays the employee for the normal, nonovertime 

forty-hour workweek.” Zulewski v. Hershey Co., No. 11-CV-5117-KAW, 2013 WL 633402, at *1 

(N.D. Cal. Feb. 20, 2013) (citation omitted). 

In Overnight Motor Transport Co. v. Missel, 316 U.S. 572 (1942), the Supreme Court held 

that employers can provide an alternative overtime compensation for employees who are paid a 

“fixed weekly wage regardless of the length of the work,” now referred to as the FWW method. 

Id. at 580. In Missel, only four years after the passage of the FLSA, the Supreme Court was 

tasked with determining the application of the FLSA to an employee working irregular hours for a 

fixed weekly wage. Id. at 574. There, the petitioner contended that the FLSA allowed employers 

and employees to “contract for a fixed weekly wage . . . restricted only by the requirement that the 

wages should comply with the minimum wage schedule of the [FLSA], with overtime pay at time 

and a half that minimum.” Id. at 575. Thus, petitioner argued, because the wage paid to the 

employee was sufficient to cover both the weekly wage and wages equal to time and a half of the 

minimum wage, the petitioner had complied with the requisites of the FLSA. Id. To the contrary, 

the Supreme Court held that the FLSA required “payment for overtime at time and a half the 

regular pay, where that pay is above the minimum, as well as where the regular pay is at the 

minimum.” Id. at 578 (emphasis supplied). 

The Supreme Court further found “[n]o problem . . . in assimilating the computation of 

overtime for employees under contract for a fixed weekly wage for regular contract hours which 

are the actual hours worked, to similar computation for employees on hourly rates.” Id. 

Specifically: 

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Where the employment contract is for a weekly wage with variable or fluctuating 

hours the same method of computation produced the regular rate for each week. 

As that rate is on an hourly basis, it is regular in the statutory sense inasmuch as 

the rate per hour does not vary for the entire week, though week by week the 

regular rate varies with the number of hours worked. It is true that the longer the 

hours the less the rate and the pay per hour. This is not an argument, however, 

against this method of determining the regular rate of employment for the week in 

question. Apart from the [FLSA] if there is a fixed weekly wage regardless of the 

length of the workweek, the longer the hours the less are the earnings per hour. 

Id. In such situations, the Supreme Court noted such agreements needed to contain a “provision 

for additional pay in the event the hours worked required minimum compensation greater than the 

fixed wage” and that employers could avoid violating the FLSA if compensation covered “both 

base pay and fifty per cent additional for the hours actually worked over the statutory maximum.” 

Id.

In 1968, the Department of Labor promulgated 29 C.F.R. section 778.114, an interpretive 

rule intended to codify the Supreme Court’s decision in Missel. See Russell v. Wells Fargo & Co., 

672 F. Supp. 2d 1008, 1011–12 (N.D. Cal. 2009). The rule offers a more detailed explanation of 

the FWW method and explains when it may be used. In pertinent part, the rule provides: 

An employee employed on a salary basis may have hours of work which fluctuate 

from week to week and the salary may be paid him pursuant to an understanding 

with his employer that he will receive such fixed amount as straight time pay for 

whatever hours he is called upon to work in a workweek, whether few or many. 

Where there is a clear mutual understanding of the parties that the fixed salary is 

compensation (apart from overtime premiums) for the hours worked each 

workweek, whatever their number, rather than for working 40 hour or some other 

fixed weekly work period, such a salary arrangement is permitted by the Act if the 

amount of the salary is sufficient to provide compensation to the employee at a 

rate not less than the applicable minimum wage rate for every hour worked in 

those work weeks in which the number of hours he works is greatest, and if he 

receives extra compensation, in addition to such salary, for all overtime hours 

worked at a rate not less than one-half his regular rate of pay. Since the salary in 

such a situation is intended to compensate the employee at straight time rates for 

whatever hours are worked in the workweek, the regular rate of the employee will 

vary from week to week and is determined by dividing the number of hours 

worked in the workweek into the amount of the salary to obtain the applicable 

hourly rate for the week. Payment for overtime hours at one-half such rate in 

addition to the salary satisfies the overtime pay requirement because such hours 

have already been compensated at the straight time regular rate, under the salary 

arrangement. 

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29 C.F.R. § 778.114.3 Thus, according to the interpretive rule, the FWW method can be employed 

where there is a “clear mutual understanding” between the parties that the “fixed salary is 

compensation (apart from overtime premiums) for the hours worked each workweek.” Id.; see 

also Zulewski, 2013 WL 633402, at *2. Additionally, the rule requires that any such overtime 

premiums be paid contemporaneously with regular pay. 29 C.F.R. § 778.114(c). 

Defendants argue that such a method is the proper measure of damages for the case at bar 

based on the Supreme Court’s decision in Missel. Plaintiff, on the other hand, urges that such is 

inappropriate in a misclassification case because there could have been no “clear mutual 

understanding” between the parties and overtime premiums would not have been paid 

contemporaneously with regular pay. The federal courts are divided as to whether the FWW 

method can be applied retroactively to misclassification cases such as this, and the Ninth Circuit 

has yet to address the issue directly.4 The Court thus proceeds with an analysis of the extant case 

law to determine the appropriate method for measuring damages here. 

B. Applicability of FWW to Misclassification Cases 

The First, Fourth, Fifth, Seventh, Tenth, and Eleventh Circuits have considered the 

question and found that FWW may be used to calculate damages where employees were 

misclassified as exempt from the FLSA. District courts in the Second and Ninth Circuits are split 

on the issue. See Banford v. Entergy Nuclear Ops., Inc., 649 F. App’x 89, 91 (2d Cir. 2016) (not 

holding either way but acknowledging that the circuits identified have applied the FWW method 

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 Defendant argues that such an interpretive rule is not binding. However, as the court in 

Russell found, because the rules are the DOL’s “long-standing interpretation of the FLSA, the 

Court accords them respect, as required by Skidmore v. Swift & Co., 323 U.S. 134 (1994).” 

Russell, 672 F. Supp. 2d at 1011 n.1. 

4

 Defendants cite General Electric Co. v. Porter, 208 F.2d 805 (9th Cir. 1953) arguing that 

it provides binding authority on the applicability of FWW to misclassification cases. However, 

Porter predates 29 C.F.R. section 778.114, and therefore, the Ninth Circuit had no occasion to 

consider the impact of such interpretative rule on the use of FWW in situations analogous to the 

case at hand. Additionally, there, petitioners did not challenge the “correctness of the method used 

by the trial court” but rather argued that their “employment was not at a fixed monthly wage” 

because they had never agreed to such. Id. at 812. Thus, the Ninth Circuit was not asked to 

determine whether FWW was the proper method in a misclassification case. 

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and noting that the district courts within the Second Circuit are split on the issue).5 The Court 

joins its sister courts in the Northern District of California and other Second and Ninth Circuit 

districts in finding that the FWW method of calculating damages is not applicable in 

misclassification cases: 

Some circuit courts have approved the use of FWW based on 29 C.F.R. section 778.114. 

For instance, in Clements v. Serco, Inc., 530 F.3d 1224 (10th Cir. 2008), the Tenth Circuit 

explained that section 778.114 requires only that the employers and the employees have a “clear 

mutual understanding” that while the “employee’s hours may vary, his or her base salary will not.” 

Id. at 1230. It does not, the Tenth Circuit states, require that the parties agree on how “overtime 

premiums would be calculated.” Id.; see also Valerio v. Putnam Assocs. Inc., 173 F.3d 35, 38–40 

(1st Cir. 1999); Blackmon v. Brookshire Grocery Co., 835 F.2d 1135, 1138–39 (5th Cir. 2013). 

Such interpretation of the rule, however, appears to ignore its full text. The rule provides 

that the employees have a “clear mutual understanding . . . that the fixed salary is compensation 

(apart from overtime premiums) for the hours worked each workweek.” 29 C.F.R. § 778.114. In 

a misclassification case, the parties entered into an agreement on the presumption that the 

employee was not entitled to any overtime premiums and, therefore, there could not have been any 

clear mutual understanding that the compensation being provided did not include such premiums. 

As the court in Zulewski explained, if the employees were “found to be misclassified as exempt 

employees, the inquiry regarding whether individual [employees] ‘consented’ to a FWW is 

improper because when employees are misclassified, they have unwittingly agreed to forego their 

entitlement to overtime—a right which cannot be waived.” Zulewski, 2013 WL 633402, at *5; see 

also Russell, 672 F. Supp.2d at 1014; Blotzer v. L-3 Comm’cs Corp., No. 11-CV-274-TUC-JGZ, 

2012 WL 6086931, at *10 (D. Ariz. Dec. 6, 2012). Additionally, section 778.114 requires that 

payment of overtime be contemporaneous with regular pay, which could never be satisfied in a 

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 In Banford, the Second Circuit held that the evidence supported the jury’s verdict that 

“no plaintiff agreed to a fixed weekly salary covering unlimited hours, making it unnecessary to 

apply the FWW method.” Id. Here, the parties do not dispute the nature of plaintiff’s 

employment agreement, but rather only whether he was misclassified as exempt from the FLSA’s 

overtime requirements. 

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misclassification case. See Russell, 672 F. Supp. 2d at 1014.6 Notably, other circuits have called 

into question the reasoning underlying these cases. For instance, in Urnikis-Negro v. American 

Family Property Services, 616 F.3d 665 (7th Cir. 2010), although ultimately applying the FWW 

calculation on other grounds, the Seventh Circuit held that 29 C.F.R. section 778.114 was not 

applicable to misclassification cases noting that the rule “is forward looking.” Id. at 677. Thus, 

the Court finds that application of the FWW method in misclassification cases cannot be justified 

on the basis of 29 U.S.C. section 778.114. 

Other circuit courts, like the Seventh Circuit in Urnikis-Negro, have instead held that the 

FWW method can be used retroactively in misclassification cases on the basis of the Supreme 

Court’s decision in Missel. Specifically, the Seventh Circuit explained that Missel applied because 

the district court “unequivocally determined that [plaintiff’s] wage was intended to compensate 

her not for 40 hours per week or some other fixed number of hours, but for any and all hours that 

she worked in a given week.” Id. at 681 (emphasis in original). Thus, the Seventh Circuit held 

that under Missel, the appropriate method for calculating damages is the FWW method. Id.; see 

also Ransom v. M. Patel Enters., Inc., 734 F.3d 377, 384–87 (5th Cir. 2013); Lamonica v. Safe 

Hurricane Shutters, Inc., 711 F.3d 1299, 1311 (11th Cir. 2013); Desmond v. PNGI Charles Town 

Gaming, L.L.C., 630 F.3d 351, 354–57 (4th Cir. 2011) (approving use of Missel without 

disavowing use of section 778.14). 

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 Furthermore, the cases supporting the use of section 778.114 to justify application of the 

FWW method in misclassification cases do not provide any sound reason for doing so. The courts 

in Clements and Valerio both rely on the Fourth Circuit’s decision in Bailey v. Georgetown, 94 

F.3d 152 (4th Cir. 1996) in finding that 29 C.F.R. section 778.114 can apply to misclassification 

cases. Bailey, however, did not address remedial payments to misclassified employees. Id. at 

153–54. Rather, it involved a challenge from properly classified non-exempt employees who 

argued that their employer improperly applied the FWW method rather than the conventional 

overtime calculation. Id. at 156–57. Neither Clements nor Valerio explain why Bailey’s analysis 

is applicable in a misclassification case such as this. See also Russell, 672 F. Supp. 2d at 1015 

(discussing Bailey, Clements, and Valerio). The Fifth Circuit in Blackmon provides no discussion 

whatsoever, and just assumes without explanation that 29 C.F.R. section 778.114 applies. 

Blackmon, 835 F.2d at 1138–39. 

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The Court respectfully disagrees with such a reading, and none of these cases is binding on 

this Court.7 As discussed above, the Supreme Court in Missel did not address the applicability of 

the FWW method to misclassification cases such as this. Rather, Missel’s central holding was that 

the “act was designed to require payment for overtime at time and a half the regular pay, where 

that pay is above the minimum, as well as where the regular pay is at the minimum.” Missel, 316 

U.S. at 578. Missel further held that in situations where the employment contract is “for a weekly 

wage with variable or fluctuating hours,” the regular rate of pay is calculated by dividing the 

employee’s wage by the number of hours actually worked each week. Id. at 579–80. In 

connection with this discussion, Missel stated that parties can, under the FLSA, agree to a certain 

compensation structure in which the employee receives a fixed weekly wage for regular contract 

hours worked and “fifty per cent additional for the hours actually worked over the statutory 

maximum.” Missel, 316 U.S. at 581. In other words, Missel held only that such an agreement 

would not violate the FLSA. As the court in Russell explained: 

[Missel] stated that an employer and employee could legally agree, in certain 

circumstances, to a compensation arrangement where the employee would be paid 

a flat weekly rate for fluctuating hours. However, to satisfy [the FLSA], the 

agreement must contain a provision for overtime pay and the wage must be 

sufficient to satisfy minimum wage requirements and offer a premium of at least 

‘fifty per cent for the hours actually worked over the statutory maximum.’ 

Russell, 672 F. Supp. 2d at 1011 (citing Missel, 316 U.S. at 581). Thus, such an arrangement can 

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 Additionally, several of the cases that applied the FWW method on the basis of Missel

are distinguishable from the case at bar. In Urnikis-Negro, for instance, the employee was a real 

estate appraiser, whose job was “task-oriented” and whose “hours were likely to fluctuate with the 

volume of the firm’s appraisal business.” Urnikis-Negro, 616 F.3d at 667–68. In Ransom, 

applicants for the job at issue were specifically asked whether they could work a “flexible 

schedule” where “days and number of hours scheduled is different each week.” Ransom, 734 F.3d 

at 383. By contrast, there is no dispute that plaintiff here was expected to be at work no less than 

forty hours in any regular workweek, and the week-to-week variation comparatively minimal. See 

Blotzer, 2012 WL 6086931, at *12 (“The FWW was intended to apply to ‘fluctuating’ work 

schedules, i.e. schedules in which an employee endures long hours some weeks but enjoys the 

benefit of short hours in other weeks, all at the same rate of pay.”). 

The Eleventh Circuit in Lamonica was faced with a distinct issue. There, the jury had 

issued a verdict in favor of plaintiffs, and found that the FWW method did not apply. Defendants 

appealed challenging the district court’s failure to instruct the jury on the FWW method. 

Lamonica, 711 F.3d at 1311. The Eleventh Circuit there held that because the “jury instructions 

actually given allowed the jury to effectively apply the fluctuating workweek method, [it] cannot 

conclude that Appellants were prejudiced by the refusal to give more specific instructions.” Id. 

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only be by agreement between the employer and the employee, and otherwise, the default 

requirements of the FLSA would apply. See Missel, 316 U.S. at 580 n.16 (“Wage divided by 

hours equals regular rate. Time and a half regular rate for hours employed beyond statutory 

maximum equals compensation for overtime hours.”). Such a reading of Missel is consistent with 

the text of 29 C.F.R. section 778.114, which provides that the Act permits alternative 

compensation agreements “if the amount of the salary is sufficient to provide compensation to the 

employee at a rate not less than the applicable minimum wage rate for every hour worked in those 

workweeks in which the number of hours he works is greatest, and if he receives extra 

compensation, in addition to such salary, for all overtime hours worked at a rate not less than onehalf his regular rate of pay.” In the misclassification context, however, no such agreement could 

have existed. See Wallace v. Countrywide Home Loans Inc., No. 08-CV-1463-JST, 2013 WL 

1944458, at *7 (C.D. Cal. Apr. 29, 2013); Russell, 672 F. Supp. 2d at 1014. Thus, there would be 

no occasion to apply the FWW method in the first place. 

Other courts have similarly found that the FWW method simply cannot logically apply in 

misclassification cases because an agreement between the parties to calculate overtime premiums 

in such a manner would not have existed. See, e.g., Costello v. Home Depot USA, Inc., 944 F. 

Supp. 2d 199, 207–08 (D. Conn. 2013); Wallace, 2013 WL 1944458, at *7; Hasan v. GPM 

Investments, LLC, 896 F. Supp. 2d 145, 149–50 (D. Conn. 2012); Blotzer, 2012 WL 6086931, at 

*9–12; Zulewski, 2013 WL 633402, at *5; Russell, 672 F. Supp. 2d at 1014; Scott v. OTS Inc., No. 

02-CV-1950-AJB, 2006 WL 870369, at *13 (N.D. Ga. Mar. 31, 2006); Cowan v. Treetop Enters., 

163 F. Supp. 2d 930, 942 (M.D. Tenn. 2001); Rainey v. Am. Forest & Paper Ass’n, Inc., 26 F. 

Supp. 2d 82, 99–102 (D.D.C. 1998). The cases cited by defendants presume that the “employees 

possessed a clear understanding that their fixed compensation—which did not provide for 

overtime premiums—was for all hours worked.” Zulewski, 2013 WL 633402, at *4. However, 

such a “clear understanding” cannot exist where the agreement is based on the false premise that 

the employee is not entitled to any overtime. The court in Blotzer found similarly: “In a 

misclassification case, at least one of the parties initiated employment with the belief that the 

employee was exempt from the FLSA, paid on a salary basis, and therefore not entitled to 

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overtime. . . . The parties do not have a ‘clear, mutual understanding’ that a fixed salary will be 

paid for ‘fluctuating hours, apart from overtime premiums’ because the parties have not 

contemplated overtime pay.” Blotzer, 2012 WL 6086931, at *10. 

Moreover, as several courts have noted, if defendants’ position here were adopted, “an 

employer, after being held liable for FLSA violations, would be able unilaterally to choose to pay 

employees their unpaid overtime premium under the more employer-friendly of the two 

calculation methods.” Russell, 672 F. Supp. 2d at 1014. “Given the remedial purpose of the 

FLSA, it would be incongruous to allow employees, who have been illegally deprived of overtime 

pay, to be shortchanged further by an employer who opts for the discount accommodation 

intended for a different situation.” Id.; see also Zulewski, 2013 WL 633402, at *5 (noting that 

retroactive application of the FWW method “incentivizes employers to misclassify their 

employees by minimizing damages in the unlikely event that they are sued”). Such a result would 

violate the very spirit of what the FLSA intended to achieve. 

Accordingly, the Court finds that the proper measure of damages here is the conventional 

method, calculating overtime wages as one and one-half of the employee’s regular rate. 29 U.S.C. 

§ 207(a) (requiring that employers pay employees at a rate “not less than one and one-half times 

the regular rate at which” employee is employed for hours worked in excess of forty hours). 

III. CONCLUSION

For the foregoing reasons, the Court GRANTS plaintiff’s motion and DENIES defendants’ 

cross-motion. The proper measure of damages, if any, in this action would be one and one-half of 

plaintiff’s regular rate, should the Court ultimately determine that he is not exempt. 

Trial in this matter shall be set in the spring of 2017. A trial setting conference shall occur 

on Monday, January 9, 2017 at 2:00 p.m. Updated case management statements, including trial 

calendars, shall be filed timely. 

This Order terminates Docket Number 97. 

IT IS SO ORDERED. 

Dated: December 12, 2016 ______________________________________ 

 YVONNE GONZALEZ ROGERS

 UNITED STATES DISTRICT COURT JUDGE

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