Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-95-01245/USCOURTS-ca10-95-01245-0/pdf.json

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

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PUBLISH 

FILEDA ~h \Joited States Co~rt o_f :Pl' w 

Tenth Ctrcmt 

APR 2 3 1996 

UNITED STATES COURT OF APPEAL~ATR!CK FISHER 

Clcrt~ 

TENTH CIRCUIT 

C. KELLY CARPENTER, ET AL., 

Plaintiffs-Appellants, 

v. 

CITY & COUNTY OF DENVER, 

COLORADO, 

Defendant-Appellee. 

No. 95-1245 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 93-Z-2513) 

Thomas B. Buescher, Brauer, Buescher, Valentine, Goldhammer & Kelman, P.C., 

Denver, Colorado, for Plaintiffs-Appellants. 

Darlene M. Ebert, Assistant City Attorney (Daniel E. Muse, City Attorney, and Michelle 

M. Lucero, Assistant City Attorney, with her on the brief), Denver, Colorado, for 

Defendant-Appellee. 

Before PORFILIO, BARRETT, and LUCERO, Circuit Judges. 

PORFILIO, Circuit Judge. 

Appellate Case: 95-1245 Document: 01019279326 Date Filed: 04/23/1996 Page: 1 
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In this appeal, we are asked to decide whether plaintiffs, 

lieutenants, captains, and division chiefs in the Denver Police 

Department, are salaried employees exempt from the overtime 

requirement of the Fair Labor Standards Act (FLSA), 29 U.S.C. 

§ 207. This resolution pivots on our reading of 29 C.F.R. 

§ 541.118(a), which states an employee whose salary is "subject 

to reduction because of variations in the quality or quantity of 

the work performed," is not exempt from payment of overtime. 

Because we read the language of the regulation to mean what it 

says, that the possibility of reduction defeats salaried status, 

we conclude plaintiffs are not exempt from the FLSA's overtime 

requirement. We reverse. 

I . 

Generally, the FLSA requires all employers, including state 

and local governments, to pay their employees a minimum wage for 

a 40-hour work week. 29 U.S.C. § 206. Hours worked over the 40-

hour week must be compensated at an overtime rate of time and a 

half. 29 U.S.C. § 207. However, under 29 U.S.C. § 213(a) (1), 

payment of overtime does not apply to "any employee employed in a 

bona fide executive, administrative, or professional capacity 

" Congress delegated fleshing out this status to the 

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Department of Labor (DOL) , which devised a "short test" in 29 

C.F.R. § 541.1, providing: 

The term ~employee employed in a bona fide 

executive*** capacity ... shall mean any employee: 

(a) Whose primary duty consists of the management 

of the enterprise in which he is employed .... 

(b) Who customarily and regularly directs the 

work of two or more other employees therein; and 

(c) Who has the authority to hire or fire other 

employees or whose suggestions and recommendations as 

to the hiring or firing and as to the advancement and 

promotion or any other change of status of other 

employees will be given particular weight; and 

(d) Who customarily and regularly exercises 

discretionary powers; and 

(e) Who does not devote more than 20 percent 

of his hours of work in the workweek to activities 

which are not directly or closely related to the 

performance of the work described in paragraphs (a) 

through (d) ... ; and 

(f) Who is compensated for his services on a 

salary basis at a rate of not less than ... $250 per 

week ... and whose primary duty consists of the 

management of the enterprise in which the employee is 

employed or of a customarily recognized department or 

subdivision thereof, and includes the customary and 

regular direction of the work of two or more other 

employees therein, shall be deemed to meet all the 

requirements of this section. 

Because Congress expressly delegated supplying the definitions 

for its statutory scheme to DOL without accompanying guidance, 

the scope of our judicial review of those terms that constitute 

the exemption is quite narrow. Moreover, that review endows the 

agency's interpretation with substantial deference. 

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The employer bears the burden of showing "the employee fits 

'plainly and unmistakenly within the exemption's terms'- under 

both the 'salary' test and the 'duties' test." Aaron v. City o£ 

Wichita, Kan., 54 F.3d 652, 657 (lOth Cir.), cert. denied, 116 

S.Ct. 419 (1995), (quoting Reich v. State o£ Wyoming, 993 F.2d 

739, 741 (lOth Cir. 1993)). Narrowly construing the exemption 

furthers the congressional goal in the FLSA to provide broad 

federal employment protection "to the furthest reaches consistent 

with congressional direction." Mitchell v. Lublin, McGaughy & 

Assocs., 358 U.S. 207, 211 (1959). 

The Denver Revised Municipal Code reflects the FLSA design 

in§ 42-63(b), which provides that members of the classified 

service of the police department shall receive time and a half 

for overtime hours. However, § 42-63(b) (1) states: 

The provisions of this paragraph (b) shall not apply to 

police officers determined to be exempt from the Fair 

Labor Standards Act and who hold the rank of 

lieutenants of police, superintendent of radio 

engineers, division chief or captains of police, as 

fixed by Charter provision. 

Exempt employees receive straight.-time overtime compensation. 

The City classifies plaintiffs as falling within the executive 

exemption. 

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Challenging this status, plaintiffs sued the City for 

declaratory relief, contending they are not exempt from coverage 

of the FLSA overtime requirements and seeking back pay for each 

hour of overtime worked at time and a half for approximately 

three years from 1990 through 1993, in addition to liquidated 

damages authorized by the FLSA. Their complaint attacked their 

exempt status solely on the basis of the salary test, alleging 

the City's practice of fining certain plaintiffs for violations 

of minor safety rules and docking pay for military leave after 15 

days defeated its claim to the exemption. 1 The City responded 

the executive, administrative, and professional exemptions barred 

plaintiffs' claims. The parties filed cross-motions for summary 

judgment, each side offering countervailing affidavits, 

plaintiffs' showing their salaries were "subject to" reduction 

when they are disciplined; and the City's contending that while 

compensatory leave time may be deducted from a plaintiff's leave 

1

While the employer must satisfy both the duties test and 

the salary test, as noted, plaintiffs raised only the salary test 

in their complaint. Although plaintiffs do not concede the 

employer has satisfied the duties test and contend on appeal the 

district court failed to make factual findings about plaintiffs' 

duties, given the state of the record before us, the salary test 

remains dispositive. 

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bank, no actual deductions have ever been made from a plaintiff's 

salary. 

Finding no factual issues in dispute, the district court 

concluded plaintiffs are exempt employees, rejecting the Second, 

Seventh, and District of Columbia Circuits' interpretation of 

§ 541.118(a), and aligning itself with the Eighth, Eleventh, and 

Fifth Circuits which hold that absent an actual deduction from 

salary, the practice of offsetting leave with leave will not 

defeat an employee's exempt status. McDonnell v. City of Omaha, 

Nebraska, 999 F.2d 293, 297 (8th Cir. 1993), cert. denied, 114 

S.Ct. 1188 (1994); Atlanta Professional Firefighters Local 134 v. 

City of Atlanta, 920 F.2d 800, 805 (11th Cir. 1991); York v. 

Wichita Falls, 944 F.2d 236, 242 (5th Cir. 1991) (issue of 

material fact precluded granting summary judgment on whether fire 

captains were paid on a salaried basis). Notwithstanding, the 

district court opined perhaps the matter should be directed to 

this court and lobbed the issue onto our side of the net "to see 

which way they want to go on policy." 

Our return is conscribed by those portions of the pleadings, 

depositions, affidavits, and answers to interrogatories 

identified by the moving party which the nonmovant cannot 

overcome, Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986), to 

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establish the absence of a genuine issue of material fact. While 

the ultimate conclusion plaintiffs are not exempt employees is 

subject to our de novo review, the district court's factual 

findings are sheathed in the clearly erroneous standard. 

Department of Labor v. City of Sapulpa, Okla., 30 F.3d 1285, 1287 

(lOth Cir. 1994). The only material issue presented in this case 

is whether plaintiffs are paid on a salary basis as defined by 

DOL's regulations. Because our discussion of the administration 

of the City's disciplinary rules disposes of that issue, we need 

not address plaintiffs' other allegations about military leave 

and jury duty. 

II. 

As a baseline, a salaried employee must be compensated "at a 

rate of not less than $250 per week," 29 C.F.R. § 541.1(f), a 

predetermined amount from which deductions may not be made for 

jury duty or military leave, § 541.118(a) (4), although the 

employer may offset any monies received from those activities 

from salary without losing the exemption. Deductions may be 

allowed for absences of "a day or more for personal reasons, 

other than sickness or accident," § 541.118(a) (2), without 

affecting salaried status. Nor do "[p]enalties imposed in good 

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faith for infractions of safety rules of major significance," 

affect an employee's salaried status, § 541.118(a) (5), although 

"[s]afety rules of major significance include only those relating 

to the prevention of serious danger to the plant, or other 

employees, such as rules prohibiting smoking in explosive plants, 

oil refineries, and coal mines." § 541.118(a) (5). Moreover, any 

unpermitted deduction "will depend upon the facts in the 

particular case," a loss of the exemption not automatically 

necessitated. § 541.118(a) (6). Each of these permitted 

deductions preserves DOL's definition of salaried status, 29 

C.F.R. § 541.118(a), which states: 

An employee will be·considered to be paid "on a salary 

basis" within the meaning of the regulations if under 

his employment agreement he regularly receives each pay 

period on a weekly, or less frequent basis, a 

predetermined amount constituting all or part of his 

compensation, which amount is not subject to reduction 

because of variations in the quality or quantity of the 

work performed. Subject to the exceptions provided 

below, the employee must receive his full salary for 

any week in which he performs any work without regard 

to the number of days or hours worked. This policy is 

also subject to the general rule that an employee need 

not be paid for any workweek in which he performs no 

work. 

(emphasis and italics added) . It is the phrase, "subject to 

reduction" which the parties challenge, each citing those 

factual allegations which serve its partisan interpretation. 

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Plaintiffs maintain salaried employees are paid a fixed 

amount for doing a job. That is, they "are paid on a job 

function basis," in contrast to non-salaried employees "whose 

compensation depends on the number of hours they put in. The 

opposite of payment on a salary basis, then, is payment on an 

hourly basis," they state, quoting Hilbert v. District of 

Columbia, A Mun. Corp., 23 F.3d 429, 439 (D.C. Cir. 1994) (Mikva, 

J. dissenting). Consequently, plaintiffs contend the City's 

express policies on disciplinary infractions, military leave, and 

leave for jury duty, which require "fining" the employee by 

deducting leave days from their "leave banks" or other leave 

offsets, render their fixed salaries "subject to reduction" 

because ultimately these contingent deductions reflect the 

"quality or quantity" of the work performed. 

The City counters no plaintiff has had a reduction in salary 

as a consequence of any City policy or practice. Further, only a 

plaintiff's leave bank, the repository of all accumulated leave 

inuring to each plaintiff's position, is tapped, the City 

maintains; and, even then, only leave is offset against leave. 

In fact, the City argues, for Denver command officers who work 

more than the regularly assigned 152-hour schedule, the 

additional hours are more properly a "bonus fringe benefit 

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payment," not overtime hours triggering exemption scrutiny. The 

City relies on Aaron, 54 F.3d at 658, which it offers as 

dispositive of this Circuit's position on the "subject to" 

language in the salaried basis test. 

Aaron, however, did not adopt either line of Circuit 

reasoning. Instead, the court hinged its resolution to the 

prerequisite that even for "circuits requiring less than actual 

docking to preclude exemption, [they] require an express policy 

that an employee's actual pay will be reduced in the event that 

accrued leave is exhausted." Id. We write, therefore, on a 

clean slate, addressing the City's policies to decide, first, 

whether its disciplinary rules conform to DOL's directive, 

"safety rules of major significance;" and, second, whether the 

City's enforcement of these rules renders plaintiffs' salaries 

"subject to reduction." 

III. 

The Denver Code § 42-28 gives the manager of safety: 

the power to fine any police officer, member or 

employee for any misconduct or breach of discipline or 

violation of the rules and regulations of the police 

department and to collect the same or cause it to be 

withheld from any amount that is or may become due such 

person. 

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In addition, "All officers and members of the classified service 

of the police department shall be subject to such rules and 

regulations as shall be prescribed from time to time by the 

manager of safety and chief of police." The Denver Police 

Department Operations Manual catalogs an extensive list of rules 

spanning RR-105: 

Conduct Prejudicial: Officers shall not engage in 

conduct prejudicial to the good order and police 

discipline of the department or conduct unbecoming an 

officer which may not specifically be set forth in 

department rules; 

to RR-402: 

Careless Handling of Firear.ms: Officers shall not 

carelessly handle a firearm at any time. 2 

In his affidavit, James Collier, a captain in the Denver 

Police Department and from September 1991 to October 1992, the 

Chief of Police, stated many of these rules and regulations "do 

not deal with the safety of employees or the City's property," 

and identified portions of the Operations Manual which provide 

specific disciplinary penalties for infractions of the rules. He 

noted that during his tenure as Chief, "the preferred method of 

2

0ther rules of interest, to name only a few, are RR-112, 

Departing from the Truth; RR-134, Use of Tobacco Products by 

Certain Officers; RR-135, Maintenance of Fitness Level by 

Certain Officers; RR-202, Soliciting or Accepting a Bribe; and 

RR-306, Unnecessary Force in making arrests. 

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assessing disciplinary penalties [is] to fine a member with the 

loss of one or more days off." He explained, 

This method of disciplinary penalty is preferred by the 

Department because it does not have a negative impact 

on departmental manpower and is preferred by the 

officers because it does not directly reduce their 

paycheck during any pay period. Instead, what the 

officer can do at the officer's option, is work a day 

without receiving any compensation or forfeit an 

accrued day off so that the accrued day off cannot be 

used to take time off with pay in the future. 

Captain Collier added that occasionally officers were actually 

suspended from duty without pay and described a case in which he, 

with the Manager of Safety's approval, suspended plaintiff 

Lieutenant Dale Canine for 60 days for departing from the truth 

in violation of RR-112. Plaintiff Canine was then demoted to the 

rank of sergeant upon his return to work. 

Further, Captain Collier attested that each officer must 

keep track of all hours worked, receive authorization for 

additional hours, and seek approval by a supervisor for any 

absences. If the officer has leave time available, Captain 

Collier noted, the paycheck will reflect no deductions. However, 

if there is no available leave time, "the officer's pay will be 

reduced for the time absent." He asserted, while Chief of 

Police, he was never told the safety rules were to be read 

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restrictively to mean he could only suspend command officers for 

violation of safety rules of major significance. 

Aristedes W. Zavaras, Chief of Police from 1987 until 1991, 

stated in his affidavit he was never told about a restrictive 

reading of the City's safety provision and would "have opposed it 

because of my strong belief that maintaining order in the 

Department required at least uniform discipline across all ranks 

and, in some cases, potentially even higher discipline of higher 

ranking officers." He stated that during his tenure he suspended 

Lieutenant Buckley Stewart for violation of RR-105, conduct 

unbecoming an officer, which he "did not consider ... as 

implicating safety issues at all." He added, had Lieutenant 

Stewart not complied with the conditions of his suspension, he 

would then have suspended him without pay for three days. He 

further attested he did not recall imposing any suspensions on 

police command officers which caused a loss of salary. 

The record contains additional deposition testimony from 

managers of safety explaining the policy of "fining" officers for 

violations of departmental rules and the practice of satisfying 

the fine with leave or "save days." 3 Lieutenant Steven B. 

3

A "save day" is earned by working days off in earlier time 

(continued ... ) 

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Cooper, who is in charge of the Denver Police Department's 

Personnel Bureau, stated in his affidavit that by City ordinance 

the additional time command officers work is not considered 

"overtime" but compensatory time, and the City preferred its 

payment by the "allowance of time off," not cash. He stated, 

"[i]t is only at the discretion of the Chief of Police that 

salary at the rate of time and one-half can be paid for overtime 

required pursuant to Denver's ordinances." He stated that no 

command officer at the rank of lieutenant or above had lost pay 

as a .result of a disciplinary action for the violation of 

departmental rules and described how officers can flex their pay 

to avoid pairing time away with leave time in all instances. He 

further stated that officers exceeding the 15-day authorized time 

for military leave may use "accrued vacation, save days, 

compensatory time, or other appropriate leave." 

Although the plaintiffs rely on this record testimony to 

establish their predetermined salary has the potential to be 

reduced under terms not recognized by the DOL regulations, the 

City contends the same evidence illustrates that in actuality no 

\ ... continued) 

periods. 

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plaintiff's salary has been reduced as a consequence of the 

imposition of its disciplinary or military leave policies. The 

City extols the importance of maintaining the good and moral 

order of its police force, refashioning many of these good 

conduct rules to implicate public safety as its ultimate 

disciplinary mission. Nevertheless, it concedes if an officer is 

demoted because of an infraction of a disciplinary rule, the 

officer's salary is reduced. 

"Unfortunately, the FLSA regulations are not written to help 

promote discipline and public safety." Avery v. City of 

Talladega, Ala., 24 F.3d 1337, 1341 (11th Cir. 1994). In Avery, 

the City suspended two police lieutenants classified exempt from 

the overtime requirement, one for leaving the scene of a suicide 

and the other for using excessive force against an inmate. The 

Eleventh Circuit agreed with plaintiffs neither violation could 

be deemed an infraction of a safety rule of major significance. 

"That is how the regulations, which are concerned with the 

employer's property and the safety of fellow employees instead 

of with public safety, restrict the definition of 'safety rules 

of major significance.'" Id. The court observed, "Of course, 

the City may suspend employees without pay for other types of 

insubordination or misconduct, but the price for doing so is loss 

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of its ability to treat those employees as executive, 

administrative, or professional employees exempt from overtime 

pay." Id. 

We believe if we are to construe exceptions to the FLSA 

narrowly, giving substantial deference to DOL's interpretation of 

its own rules, International Ass'n of Fire Fighters, Local 2203 

v. West Adams Cty. Fire Protection Dist., 877 F.2d 814, 817 (lOth 

Cir. 1989), we must conclude the City's express policy on 

discipline does not conform to DOL's parameters. Its "safety 

rules," in fact, are more often rules of behavior involving an 

officer's daily conduct on the force. Because the rules fall 

short, the City's punishing an errant officer by removing leave 

time from the officer's leave repository creates the potential 

for reducing pay. When leave is exhausted, the record makes 

clear a plaintiff's salary is "subject to reduction." That is, 

then, the quality of the officer's work may ultimately reduce the 

predetermined amount of salary the officer receives. Reading the 

regulations narrowly, we cannot say that employee is salaried. 

Thus, we understand "subject to" in§ 541.118(a) to mean the 

possibility and not the actuality of a reduction in pay removes 

an employee from exempt status. Consequently, we reject the 

City's revision that plaintiffs remain salaried employees because 

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their salaries have not actually been reduced. We agree with the 

Seventh Circuit that "' [s]ubject to reduction' does not mean that 

a reduction was actually made. The plain meaning of the language 

suggests that it is enough that a deduction could have been made 

for an impermissible reason." Klein v. Rush-Presbyterian-St. 

Luke's Medical Ctr., 990 F.2d 279, 286 (7th Cir. 1993) . 4 

This reading comports with the general definition of a 

salaried employee's being paid a predetermined amount unaffected 

by quality or quantity of work. As the Ninth Circuit stated in 

Abshire v. County of Kern, 908 F.2d 483, 487 (9th Cir. 1990), 

cert. denied, 498 U.S. 1068 (1991), "[e]ither pay is fixed and 

immutable, and not subject to such deductions, or it is 

contingent." The regulations detail those specific instances 

4 In Klein v. Rush-Presbyterian-St. Luke's Medical Ctr., 990 

F.2d 279 (7th Cir. 1993), the hospital employer suspended a staff 

nurse for being rude, abrupt, and irritable to other staff 

members and a patient's visitor. The employer characterized this 

behavior as an unsafe nursing practice although she was also 

suspended for tardiness, rudeness, and personal appearance. 

Recognizing plaintiff's actions could not be cubby holed into the 

"safety rule of major significance" category, the Seventh Circuit 

rejected the employer's effort to exempt plaintiff from the 

FLSA's overtime provision. The court found that her suspensions, 

which included salary reductions, affected the quality or 

quantity of her work. "This is inconsistent with the 

regulation's requirement of a salaried employee for the FLSA 

exemption and inconsistent with the interpretation's definition 

of a salaried employee." Id. at 285. 

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permitting deductions from salary without a loss of the 

exemption, for example, § 541.118(a) (2) and (a) (3), and expressly 

limit discipline to "[p]enalties imposed in good faith for 

infractions of safety rules of major significance," 

§ 541.118(a) (5). DOL's illustration of this rule is 

straightforward: conduct that could cause serious danger of 

property loss to an employer's physical plant or harm to other 

employees. 

Surely, a police lieutenant's insubordination affects the 

quality of his work. However, it falls short of DOL's 

specification that quality implicates the essential reason for 

which the employee performs his job and quantity focuses on 

performing the job itself, not merely showing up. 5 Indeed, 

suspending an employee for three days or so for some sort of 

behavioral misconduct as this record reveals suggests "if an 

employer measures out discipline in the form of fractions of a 

weekly salary, the implication is that the employee is really 

s We do not address the no docking rules for partial day 

absences given DOL's amendment to § 541.118, 29 C.F.R. § 541.5d, 

which permits a public employer to offset certain partial day 

absences without jeopardizing the exempt status of its salaried 

employees. 

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being paid on an hourly basis." Mueller v. Reich, 54 F.3d 438, 

443 (7th Cir. 1995) . 

That the City has never, in fact, reduced a plaintiff's 

salary is not cognizable under§ 541.118(a). Its express policy 

in § 42-28 of the Denver Code authorizes the manager of safety 

"to collect ... or cause to be withheld from any amount that is 

or may become due such person." That is the actual policy 

whether it is administered that way or differently. Moreover, as 

the court noted in Michigan Ass'n o£ Gov. Emp. v. Michigan Dept. 

o£ Corr., 992 F.2d 82, 86 (6th Cir. 1993): 

First, this approach is more consistent with the 

regulatory language defining a salaried employee 

Second, focusing on the actual policy is more practical 

and realistic. Employees subject to reduction in pay 

will, of course, attempt to avoid those reductions by 

juggling schedules and sacrificing non-work 

opportunities. Simply because a reduction in pay has 

never been applied does not mean that the employee has 

not been affected by the policy subjecting the employee 

to pay reductions. 

Furthermore, although several affiants indicated plaintiffs 

receive sufficient leave to continually bank, neither plaintiffs 

nor the City asserted that is was impossible to exhaust the leave 

bank, which would require the City's personnel officer to reduce 

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an otherwise exempt employee's salary in conflict with that 

status. 6 

Consequently, if the City chooses to discipline a police 

lieutenant for inappropriate and offensive conduct, it may do so. 

That action, however, does not fit within DOL's definition of a 

"safety rule of major significance" and defeats the City's claim 

plaintiffs are salaried employees exempt from the payment of. 

overtime. Of course, the City may change or enforce its 

departmental rules to conform to the DOL regulation. That is a 

matter best left to the City. At present, however, the 

departmental rules do not constitute safety rules of major 

significance and scuttle its exemption claim. 

We, therefore, REVERSE the district court's grant of summary 

judgment and order the court to enter judgment in favor of 

plaintiffs. We REMAND for further proceedings on damages, 

including the possible availability of liquidated damages under 

the FLSA. 

6 We have no information in the record about what happens to 

the leave bank when plaintiff terminates his service to the 

police department. If, in fact, plaintiffs receive equivalent 

cash for the days stored, deducting days from that source would 

surely affect the ultimate salary received. 

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