Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-03985/USCOURTS-ca8-04-03985-0/pdf.json

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

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-3985

___________

Chris N. Acton; Boyd J. Arends; *

Chris N. Babich; Tim Bach; Greg *

Bacon; Anthony Bannister; Arnold J. *

Bazat; Alan Beard; Mark E. Blakemore; *

Bruce Britt; Mark Brunstrom; K. P. *

Bullard; James E. Bullard; Eric T. *

Caszatt; Brian Clifford; Justin M. *

Collins; Daniel J. Comegys; Darrin W. *

Arends; Rusty Bradley; Ron Cook; *

Frank Kirby Crow; Keith E. Dothage; *

Gary R. Drewing, II; Delwyn Duncan; *

Kyle Fansler; Kurt Fansler; Ron M. *

Fisher; Travis Floyd; Steven D. Forrest; *

Brad Frazier; Scott D. Frew; Andrew * Appeal from the United States

Gray; Tracy Gray; George F. Gregory; * District Court for the

David Hanks; Eric D. Hartman; Aaron * Western District of Missouri.

Hasheider; Antonio Hickam; John R. *

Hiley; Michael Holz; Cameron House; *

Greg Hrdina; Matt Hudson; Billy Hurt; *

John Igleheart; Robert Joseph Innes; *

James Jones; Jennifer Kamp; James E. *

Kandlik; Jeremy A. Kuhlmann; Carol *

Lexow; Dennis Long; Richard Martin; *

Shawn McCouom; Daniel J. McGavock;*

Jan B. McCrary; Brenda M. McGruder; *

Matthew Meinert; Rodger W. *

Mertensmeyer; William Morris; Robert *

Loren Muellet; Thomas G. Ogden; *

Douglas W. Oncken; Michael Orth; *

Eric T. Pooler; John Purves; David H. *

Richerson; Dennis G. Rohr; Brint *

Roush; Danny O. Sandker; Jon Adam *

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Sapp; Brian S. Smith; Rachel L. Smith; *

Deborah L. Sorrell; Willam A. Stafford; *

Jeffrey Strawn; Daniel K. Sturgeon; *

Christopher Sturm; Michael G. Sutton; *

Timothy Taylor; Coline E. Tegerdine; *

J. Thacker; Eric William Thiessen; *

Doug Thoma; Kevin R. Thompson; *

Wade Thompson; Brian K. Tilman; *

Rolando Tobar; Lisa A. Rodd; Gary *

L. Warren, Jr.; Brian A. Wasson; Ladon *

Lee Whitaker; Tandall Elwin White; *

David C. Williamson; Tony Willits; *

Marc Wright; Donald R. Zielinski; *

John Wood; Richard Douglas; Mark W. *

Poole, *

*

Plaintiffs-Appellees, *

*

v. *

*

City of Columbia, Missouri, *

*

Defendant-Appellant. *

___________

Submitted: October 14, 2005

Filed: February 8, 2006 

___________

Before LOKEN, Chief Judge, LAY and BENTON, Circuit Judges.

___________

LAY, Circuit Judge.

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1

The Honorable Nanette K. Laughrey, United States District Judge for the

Western District of Missouri.

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I. BACKGROUND

Chris N. Acton and ninety-nine current and former firefighters (the

“firefighters”) employed by the City of Columbia, Missouri (the “City”) brought suit

against the City for failing to include a series of payments in the firefighters’ regular

rate of pay, in violation of 28 U.S.C. § 207(e) (the Fair Labor Standards Act or

“FLSA”). 

The firefighters subsequently moved for partial summary judgment, specifically

alleging that monies earned under the City’s sick leave buy-back, step-up pay, meal

allowance, and standby programs should be included in their regular rate of pay. The

firefighters also alleged the City willfully violated the FLSA and used an incorrect

hours ratio to determine when the firefighters become eligible for overtime pay under

the FLSA. The City did not file a cross-motion for summary judgment. 

While the firefighters’ motion for partial summary judgment was pending, the

parties entered into a settlement agreement on the firefighters’ longevity pay, step-up

pay, and standby pay claims. During this interim period, the City also changed its

hours ratio policy to comport with the requirements set forth in the firefighters’

motion for partial summary judgment. 

Regarding the firefighters’ outstanding claims, the district court1

 subsequently

granted the firefighters’ motion in part, ruling that sick leave buy-back monies should

be included in the firefighters’ regular rate of pay. However, the district court also

denied the firefighters’ motion in part, ruling that monies received under the City’s

meal allowance program were excluded from the regular rate. Finally, the district

court found no evidence that the City willfully violated the FLSA.

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2

Under § 1292, federal courts of appeal may exercise jurisdiction over an

interlocutory order that involves the denial of an injunction, or where the district court

has certified a controlling issue of law. 28 U.S.C. § 1292(a)(1), (b). Under Rule 54(b)

of the Federal Rules of Civil Procedure, federal courts of appeal also maintain

jurisdiction over summary judgment rulings that do not dispose of an entire case, but

where the district court nonetheless states that there is no just reason for delay and

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After entry of the district court’s ruling, the parties filed a stipulation for

dismissal on the claims addressed in the settlement agreement. The parties further

stipulated that final judgment should be entered on the claims adjudicated in the

district court’s order. 

The district court then entered final judgment on the settled claims, and each

was dismissed with prejudice. The district court also referenced its prior order

granting in part and denying in part the firefighters’ motion for partial summary

judgment. 

The City now appeals the district court’s grant of summary judgment to the

firefighters, arguing that monies paid under its sick leave buy-back program should

not be included in the firefighters’ regular rate of pay. 

II. APPELLATE JURISDICTION

At oral argument this court raised the issue of jurisdiction. We hold that the

facts of this case present a rare instance where we may exercise jurisdiction to hear an

appeal from an order that was granted in part and denied in part. 

The jurisdiction of federal courts of appeal is generally limited to appeals taken

from “final decisions of the district courts.” 28 U.S.C. § 1291. Certain exceptions to

the final judgment rule exist, as set forth in 28 U.S.C. § 1292, Rule 54(b) of the

Federal Rules of Civil Procedure, and under the collateral order doctrine.2

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expressly directs entry of final judgment. Fed. R. Civ. P. 54(b). Finally, under the

narrow, judicially-created collateral order doctrine, federal appeals courts may also

exercise jurisdiction over interlocutory orders involving “decisions that are

conclusive, that resolve important questions separate from the merits, and that are

effectively unreviewable on appeal from the final judgment.” Reinholdson v.

Minnesota, 346 F.3d 847, 849 (8th Cir. 2003) (internal citations omitted). 

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Reinholdson v. Minnesota, 346 F.3d 847, 849 (8th Cir. 2003). None of these

exceptions, however, are applicable to the facts of this case, and our analysis therefore

turns on whether the district court’s order constitutes a final decision for purposes of

§ 1291. Id. 

For an order to be final, it must “‘end[] the litigation on the merits and leave

nothing for the court to do but execute the judgment.’” Id. (quoting Cunningham v.

Hamilton County, 527 U.S. 198, 204 (1999)). Moreover, a final order must “‘reflect

some clear and unequivocal manifestation by the trial court of its belief that the

decision made, so far as the [trial court] is concerned, is the end of the case.’” Id.

(quoting Goodwin v. United States, 67 F.3d 149, 151 (8th Cir. 1995)) (internal

citations omitted).

We first note that an order denying summary judgment to one party coupled

with an order granting summary judgment to the same party on a different claim does

not normally constitute a final decision under § 1291 because all the claims in the case

are not yet resolved. See Catlin v. United States, 324 U.S. 229, 233 (1945). The trial

court’s denial of summary judgment as to one claim establishes that fact issues still

remain for resolution at trial. Commodity Futures Trading Comm’n v. Morse, 762

F.2d 60, 63 (8th Cir. 1985) (“Denial of summary judgment . . . simply indicates that

genuine fact issues exist [for trial].”). This denial, in turn, renders the entire order

interlocutory, thereby precluding appellate review under § 1291. See Helm Fin. Corp.

v. MNVA R.R., Inc., 212 F.3d 1076, 1079 (8th Cir. 2000) (“In general, denials of

summary judgment are interlocutory and thus not immediately appealable.”). 

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3

Similarly, if the firefighters had voluntarily dismissed their meal allowance and

willfulness claims, this dismissal would have rendered the district court’s order

unquestionably final. See Chrysler Motors Corp. v. Thomas Auto Co., 939 F.2d 538,

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Here, however, when the district court granted the firefighters’ motion for

partial summary judgment on the sick leave buy-back claim and denied the

firefighters’ motion on the meal allowance and willfulness claims, it noted that no

genuine issues of material fact existed regarding any of the firefighters’ claims. 

Specifically, in the portion of its order denying summary judgment, the district

court cited Department of Labor regulations to support its conclusion that monies

earned under the City’s per diem meal allotment program should not be included in

the firefighters’ regular rate of pay. Similarly, the district court found no evidence to

support the firefighters’ contention that the City willfully violated the FLSA. In sum,

the district court made no reference to any factual disputes that required resolution at

trial in either of its summary judgment denials. Indeed, footnote number one of the

district court’s order expressly notes that, “[t]here is no dispute about the facts of this

case.” Acton v. City of Columbia, No. 03-4159-CV-NKL, 2004 WL 2152297, at *1

(W.D. Mo. Sept. 10, 2004).

Courts have long struggled to decide precisely which orders qualify as “final”

for purposes of § 1291. Gillespie v. United States Steel Corp., 379 U.S. 148, 152

(1964). The determination as to whether an order is final is often far from clear and,

in these instances, we are guided by the accepted rule that the requirement of finality

under § 1291 be given a “practical rather than technical construction.” Cohen v.

Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949); see also Arendt v. United

Power Ass’n, 635 F.2d 755, 756 (8th Cir. 1980). 

To this end, we have no doubt that, had the City filed a cross-motion for

summary judgment on the meal allowance and willfulness claims, the district court

would have granted this motion.3

 This conclusion is based on the district court’s legal

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540 (8th Cir. 1991) (holding that appellant’s voluntary dismissal of the remainder of

his claims transformed a grant of a motion for partial summary judgment into a final

order). 

4

Although extension of jurisdiction in this case will resolve whether sick leave

buy-back monies should be included in the firefighters’ regular rate of pay, the

parties’ settlement agreement limits the effect of our ruling. Therefore, the true

purpose of this appeal is to determine whether the City, in the future, must include

sick leave buy-back monies in the regular rates’ of pay of its other employees. 

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analysis and subsequent rulings as matters of law, as well as the district court’s

express determination that no genuine issues of material fact were implicated in any

of the three claims before the court. We therefore recognize the part of the district

court’s order denying summary judgment to be, in sum and substance, a grant of

summary judgment to the City. See Helm Fin. Corp., 212 F.3d at 1080 (stating that

a denial of summary judgment as a matter of law, coupled with a voluntary dismissal

of all remaining claims, “in effect made the denial of summary judgment a final

judgment for purposes of appeal”). Moreover, the analysis utilized, and ultimate legal

conclusions drawn, by the district court in its order provide the requisite “clear and

unequivocal manifestation” of the court’s intent to dispose of the claims on the merits

given the absence of any factual dispute. 

We recognize that, when making the determination as to whether an order is

final in the practical rather than technical sense, courts must balance “the

inconvenience and costs of piecemeal review on the one hand [against] the danger of

denying justice on the other.” Gillespie, 379 U.S. 152-53 (internal citations omitted).

In this case, however, there is no danger of piecemeal review that would inhibit us

from extending jurisdiction. The firefighters’ outstanding claims were resolved before

the district court’s order was issued. Thus, adjudication of this appeal will dispose of

this litigation.4

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5

A district court maintains the discretion to grant a non-moving party summary

judgment, even where the nonmovant does not file a cross-motion for summary

judgment. Burlington N. R.R. Co. v. Omaha Pub. Power Dist., 888 F.2d 1228, 1231

n.3 (8th Cir. 1989).

6

We do, however, reject the parties’ attempts to consent to finality. First, the

parties requested that the district court enter final judgment over its order granting in

part and denying in part the firefighters’ motion for partial summary judgment. Then,

the parties expressly conceded the issue of appellate jurisdiction in their respective

briefs. Litigants themselves cannot consent to the jurisdiction of the courts. Orsini

v. Wallace, 913 F.2d 474, 479 (8th Cir. 1990) (“[P]arties cannot consent to subject

matter jurisdiction [] because extending consent to its ‘inevitable conclusion’ will

eliminate civil jurisdiction from the federal courts, a result that is likely

unconstitutional.”). 

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We see no compelling reason not to extend jurisdiction over this appeal simply

because the district court failed to expressly state that it was granting the City

summary judgment on the firefighters’ meal allowance and willfulness claims, where

every indication suggests the district court intended to do just this.5

 A contrary

decision would force the City to file a motion for summary judgment that would

surely be granted and possibly appealed once again, thereby further burdening our

system with unnecessary litigation and wasting judicial resources. See Barnes v.

Bosley, 790 F.2d 718, 720 (8th Cir. 1986) (taking into consideration “the considerable

savings in judicial resources” when determining if an order is final under § 1291).6

Further, the firefighters are not prejudiced by this ruling. We base this

conclusion on the firefighters’ failure to contest the issue of appellate jurisdiction in

their brief, as well as their express concession that this court maintained jurisdiction

to hear the City’s appeal. Simply, the firefighters made an informed and calculated

decision not to appeal the district court’s denials of summary judgment even though

they recognized an appeal to be within this court’s jurisdiction. This fact alleviates

any concern that our extension of appellate jurisdiction in this instance would

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otherwise preclude the firefighters from filing an appeal under the belief that the

district court’s order was interlocutory under § 1291. 

The facts of this case compel the conclusion that the district court’s order was

final under § 1291. The record shows the district court adjudicated the firefighters’

meal allowance and willfulness claims given the absence of a genuine dispute of

material fact and, as such, the order denying summary judgment on these claims also

constituted a grant of summary judgment to the City. This, coupled with the district

court’s grant of summary judgment to the firefighters on the sick leave buy-back

claim, renders the order a final decision for purposes of § 1291. Accordingly, we have

jurisdiction to hear the merits of the City’s appeal. 

III. STANDARD OF REVIEW

We review a district court’s grant of summary judgment de novo, applying the

same standards set forth by the district court. McLaughlin v. Esselte Pendaflex Corp.,

50 F.3d 507, 510 (8th Cir. 1995). Summary judgment is proper “if the pleadings,

answers to interrogatories, and admissions on file, together with the affidavits, if any,

show that there is no genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56 (c). The facts in this

case are undisputed. Our review is therefore limited to matters of law, which we

review de novo. Wal-Mart Stores, Inc. v. Alexander & Alexander, 855 F.2d 1326,

1330 (8th Cir. 1988).

IV. SICK LEAVE BUY-BACK

Under the City’s sick leave buy-back program, firefighters who work twentyfour hour work shifts during the course of one year accumulate ten days of sick leave.

Firefighters who fail to use their sick leave are entitled to “sell back” any of the ten

unused sick days to the City in exchange for a lump sum payment equal to 75% their

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The FLSA requires employers to pay covered employees time and one-half

their regular rate of pay for each hour worked in excess of forty hours per workweek.

29 U.S.C. § 207(a)(1). 

8

In 1985, the United States Supreme Court ruled the FLSA could be

constitutionally extended to regulate state and local governments. Garcia v. San

Antonio Metro. Transit. Auth., 469 U.S. 528, 557 (1985). In response, Congress

amended the FLSA to give all public employers until April 15, 1986, to comply with

the Act. Fair Labor Standards Act Amendments of 1985, Pub. L. No. 99-150, § 2(c),

99 Stat. 787, 788. Since this time, the FLSA has been applied to the conduct of state

and local government.

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regular hourly pay, provided the firefighter has amassed at least six months sick leave.

The firefighters contend that all monies received from the sale of sick leave should be

included in their regular rate of pay. The regular rate of pay calculation is critical

because it provides the base point from which the firefighters’ overtime compensation

is calculated.7

 

A. The Fair Labor Standards Act

Section 207(e) of the FLSA provides, in relevant part, that “all remuneration

for employment paid to, or on behalf of, the employee” must be included in the

employee’s regular rate of pay, provided such remuneration is not prohibited by one

of eight statutory exclusions listed under § 207(e)(1)-(8). 29 U.S.C. § 207(e). There

is a statutory presumption “that remuneration in any form is included in the regular

rate calculation. The burden is on the employer to establish that the remuneration in

question falls under an exception.” Madison v. Res. for Human Dev. Inc., 233 F.3d

175, 187 (3d Cir. 2000). Under the FLSA, all employers, including public agencies,

are covered by the Act.8

 29 U.S.C. § 203(d), (x). Therefore the City, as a municipal

entity, is subject to the requirements of the FLSA. 

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9

The firefighters also cite regulation § 778.211 and a Department of Labor

opinion letter to support their position that sick leave buy-back monies should be

included in their regular rate of pay. See 29 C.F.R. § 778.211; Opinion Letter from

Herbert J. Cohen, Deputy Administrator, U.S. Department of Labor (Feb. 24, 1986).

Under regulation § 778.211, attendance bonuses and bonuses announced to induce

employees to work more steadily or efficiently must be included in the employee’s

regular rate of pay. However, we need not address whether sick leave buy-back

monies are tantamount to an attendance bonus per se, or a bonus announced to induce

employees to work more steadily or efficiently, because these requirements are

extraneous to § 207. Under § 207, we need only consider two factors. First, we must

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Before beginning our analysis, we must clarify a preliminary matter of statutory

construction under the FLSA that has been a point of confusion between the parties.

First, the City argues sick leave buy-back monies do not constitute remuneration for

employment. Next, the City contends sick leave buy-back monies are also excluded

under § 207(e)(2) because they “are not made as compensation for [the employee’s]

hours of employment.” Id. However, the language “not made as compensation for

[the employee’s] hours of employment” posited in § 207(e)(2) is but a mere rearticulation of the “remuneration for employment” requirement set forth in the

preambulary language of § 207(e). Section 207(e)(2), properly understood, operates

not as a separate basis for exclusion, but instead clarifies the types of payments that

do not constitute remuneration for employment for purposes of § 207. Therefore, we

treat the City’s “remuneration for employment” and § 207(e)(2) arguments under the

same mode of analysis. Finally, because both provisions modify one other, we must

necessarily consider the express requirements of § 207(e)(2) and the federal

regulations interpreting it when determining if sick leave buy-back monies constitute

remuneration for employment.

1. Remuneration for Employment. 

Regulation § 29 C.F.R. § 778.223 provides the touchstone for our inquiry

because it addresses the scope of § 207(e)(2).9

 Specifically, regulation § 778.223

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determine whether sick leave buy-back monies constitute remuneration for

employment. If so, we must then decide whether sick leave buy-back monies are

nevertheless excluded by one or more of the statutory exceptions enumerated under

§ 207(e)(1)-(8). 29 U.S.C. § 207. 

10 We also note that sick leave buy-back monies do not resemble any of the

payments expressly excluded under § 207(e)(2). See 29 C.F.R. § 778.224(a) (noting

that payments excluded from the regular rate under § 207(e)(2) must “be ‘similar’ in

character to the payments specifically described” in (e)(2)). Sick leave buy-back

monies, in contrast to § 207(e)(2) payments, are awarded to employees for coming to

work consistently, not for work that was never performed. 

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addresses whether monies paid to employees for remaining on call are excluded from

the regular rate under § 207(e)(2). The regulation concludes that monies paid to

employees to remain on call, while not related to “any specific hours of work,” are

nevertheless awarded as “compensation for performing a duty involved in the

employee’s job” – namely, the employee’s willingness and commitment to work

unscheduled hours if requested. See 29 C.F.R. § 778.223. The plain language of the

regulation makes clear that all monies paid as compensation for either a general or

specific work-related duty should be included in the regular rate. The critical question

before this court is whether sick leave buy-back monies compensate the firefighters

for some specific or general duty of employment. 

In order to qualify for sick leave buy-back payments, firefighters must come to

work regularly for a period of several years in order to amass the requisite six month

sick leave reserve. Then, the firefighters must also accrue additional sick leave in the

present year in order to be eligible for buy-back. Thus, the primary effect of the buyback program is to encourage firefighters to come to work regularly over a significant

period of their employment tenure. We recognize consistent workplace attendance to

be a general duty of employment and, therefore, rule that sick leave buy-back monies

constitute remuneration for employment.10

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The City sets forth three primary arguments to support its conclusion that sick

leave buy-back payments are not remuneration for employment. First, the City argues

its buy-back program was intended to promote two objectives unrelated to employee

compensation. On the one hand, the sick leave buy-back program was intended to

provide firefighters with a form of short-term disability insurance because the City

does not have a disability policy covering employee illness or disability lasting six

months or less. The sick leave buy-back program, with its six-month accrued sick

leave requirement, was devised as a mechanism for employees to self-insure against

personal illness or disability. Alternatively, the City argues its sick leave buy-back

program discourages employees from treating sick leave as another form of vacation

or personal leave because the program creates a money incentive for employees to

accrue, but not use, their sick leave. 

These arguments are not compelling. Even if the sick leave buy-back program

was intended to provide employees with a form of short-term disability insurance and

to discourage misuse of sick leave, one plain effect of the program is to reward regular

workplace attendance through a non-discretionary, year-end, lump sum payment. The

City’s proffered justifications do not change the undisputed fact that the firefighters

are plainly rewarded for regularly showing up for work over a period of years. 

Second, the City also cites 29 C.F.R § 825.125, a Department of Labor opinion

letter, and a decision from a federal district court in the Northern District of Illinois

to support its claim that bonuses awarded for perfect attendance do not require

performance by the employee, but rather contemplate the absence of occurrences. 29

C.F.R. § 825.215 (“Bonuses for perfect attendance and safety do not require

performance by the employee but rather contemplate the absence of occurrences.”);

Opinion Letter from Maria Echaveste, Administrator, U.S. Department of Labor (Mar.

21, 1994) (“Bonuses premised on ‘perfect attendance’ or ‘perfect safety’ are rewards

not for work or production, but for compliance with rules.”); Dierlam v. Wesley

Jessen Corp., 222 F. Supp. 2d. 1052, 1057 (N.D. Ill. 2002) (noting that a bonus that

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11The City also cites the Third Circuit’s decision in Minizza v. Stone Container

Corp., 842 F.2d 1456, 1461 (3d Cir. 1988), to support its claim that sick leave buyback monies do not constitute remuneration for employment. However, Minizza

addressed a fundamentally different payment program. The Minizza court was

confronted with the issue of whether lump sum payments awarded to induce

employees to ratify a collective bargaining agreement should be excluded under

§ 207(e)(2). Because the “remuneration for employment” determination is a highly

fact-intensive question that focuses narrowly on the specific operation of the program

at issue, the Third Circuit’s Minizza decision does not help instruct our analysis

because that case considered a wholly distinguishable payment program.

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does not require its recipient to meet production goals or quality standards “simply

contemplates the non-occurrence of an event – [the recipient’s] absence from work”).

However, none of these three authorities address the applicability of § 207.

Instead, each confronts the issue of whether an employee is entitled to a bonus for

good attendance upon returning to work under the Family Medical Leave Act. The

City’s attempt to cite language taken out of context from authorities interpreting

another federal statute in no way binds us in this case. See Arnott v. Mataya, 995 F.2d

121, 124 n.4 (8th Cir. 1993) (stating that an argument based on language that was

“taken out of context” from other inapplicable cases was not persuasive). To the

extent the City uses these authorities to argue that consistent workplace attendance

does not “require performance by the employee,” we flatly disagree. We believe

consistent workplace attendance does require performance. In the modern workplace,

regular and prompt workplace attendance is a valued commodity, one for which the

City appropriately rewards its employees. 

Finally, the City cites the Sixth Circuit’s decision in Featsent v. City of

Youngstown, 70 F.2d 1456, 1461 (6th Cir. 1995), to support its argument that sick

leave buy-back monies do not constitute remuneration for employment.11 In Featsent,

the Sixth Circuit ruled that monies paid to employees who did not submit medical

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12Under the program at issue in Featsent, employees accrue sick leave at a rate

of one and one-quarter days per month of employment. Featsent, 70 F.3d at 902 n.4.

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claims and failed to use accrued sick leave12 were excluded from the regular rate of

pay under § 207(e)(2) because such payments are “unrelated to the [employee’s]

compensation for services and hours of service.” Featsent, 70 F.3d at 905.

We decline to follow the Sixth Circuit’s decision in Featsent. The Featsent

court failed to articulate any basis for its reasoning. The court did not distinguish

regulation § 778.223 in reaching its conclusion, nor did it recognize and explain how

payments awarded to an employee for not using accrued sick leave, which necessarily

requires employees to work more days than they are required, is not tantamount to

payment for services rendered. Because we are unpersuaded by the Sixth Circuit’s

analysis, we reject its conclusion.

2. Statutory Exceptions.

The second part of our inquiry asks whether sick leave buy-back payments are

excluded by of one of the eight statutory exceptions listed under § 207(e). The City’s

appeal relies exclusively on § 207(e)(2), which we have already addressed. Although

the City cites no other basis for exclusion in its brief, this court, at oral argument, first

raised the issue of whether § 207(e)(5) excludes sick leave buy-back payments from

the regular rate. The dissent contends that sick leave payments should be excluded

under § 207(e)(5). We now address this issue. 

Section 207(e)(5) provides:

[E]xtra compensation provided by a premium rate paid for certain hours

worked by the employee in any day or workweek because such hours are

hours worked in excess of eight in a day or in excess of the maximum

workweek applicable to such employee under subsection (a) or in excess

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13We note it is impossible, in the practical sense, to determine the specific days

a given Firefighter would have worked, but decided not to, in order to preserve his

eligibility for buy-back payments. This further supports the conclusion that buy-back

payments are not attributable to specific days or hours worked.

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of the employee’s normal working hours or regular working hours, as the

case may be[.]

Id.

The dissent argues sick leave monies should be excluded under § 207(e)(5)

because they constitute premium payments for specific hours worked. This analysis

fails for several reasons. First, sick leave monies are not paid for specific hours

worked. Instead, these payments compensate employees for a record of consistent

attendance over the course of several years, not simply for working days during a

given year they are otherwise entitled to take off.

Second, in order for payments to be excluded under § 207(e)(5), they must be

“paid for certain hours worked by the employee in any day or workweek because such

hours are hours worked in excess of eight in a day or in excess of the maximum

[required in a] workweek.” Id. Even assuming, as the dissent does, that sick leave

buy-back payments are paid in sole recognition for the specific days a firefighter

chooses to work instead of calling in sick,13 there is still no basis to exclude such

payments under § 207(e)(5). Section 207(e)(5), by its own terms, limits its

applicability to payments made for certain hours worked in excess of the employee’s

normal daily or weekly schedule. Under the dissent’s approach, buy-back payments

are, at best, premium payments for working normally scheduled hours. 

 

Finally, § 207(e)(5) plainly excludes only “premium” payments – that is,

payments no less than one and one-third the employee’s regular rate. See 29 C.F.R.

§ 778.308(b). The dissent creatively “compounds” sick leave buy-back payments,

which are awarded at the sub-premium rate of 75% the firefighters’ hourly wage, with

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the firefighters’ base hourly wage. This ignores the fact that the premium payments

themselves must be at least one and one-third the employee’s hourly rate. See id. Be

this as it may, the dissent’s approach, taken to its logical conclusion, yields unsettling

results. Under the dissent’s theory, all extra monies paid to employees for specific

hours worked may be “compounded” with the employee’s regular hourly rate and

excluded under § 207(e)(5), in contravention of the express requirements of 29 C.F.R.

§ 778.207(b). See 29 C.F.R. § 778.207(b) (stating that non-overtime premiums for

specific hours worked, such as nightshift differentials and hazard pay, must be

included in the regular rate). Therefore, we rule that § 207(e)(5) does not exclude sick

leave buy-back payments from the regular rate of pay. 

IV. CONCLUSION

The authority of federal regulation § 778.223, coupled with the statutory

presumption favoring the inclusion of all monies in the regular rate of pay, mandate

that lump sum payments awarded under the City’s sick leave buy-back program be

included in the firefighters’ regular rate of pay. As such, we affirm the district court’s

grant of summary judgment. 

LOKEN, Chief Judge, dissenting.

I respectfully dissent. I believe that the only circuit court to consider the issue

correctly concluded that compensation paid under a sick leave buy-back program such

as the City of Columbia’s should be excluded from the FLSA’s definition of “regular

rate.” Featsent v. City of Youngstown, 70 F.3d 900 (6th Cir. 1995). 

Sick leave buy-back payments admittedly do not fit comfortably within the

exclusion in 29 U.S.C. § 207(e)(2) for “payments made for occasional periods when

no work is performed.” But the court is wrong to suggest that such payments “are not

related to specific duties or hours worked.” In my view, sick leave buy-back

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14Unlike the exclusion in § 207(e)(2) for payments for hours not worked,

compensation excluded from the employee’s regular rate under subsections (e)(5)-

(e)(7) “shall be creditable toward overtime compensation payable pursuant to this

section.” § 207(h). The record on appeal does not reveal what impact, if any, that

difference would have in this case. I would leave that question for the district court

to resolve on remand. 

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payments are functionally equivalent to premium overtime pay that is expressly

excluded from an employee’s regular rate. Like overtime, and unlike true attendance

bonuses, these payments relate to specific hours worked -- the days that the employee

chose to work rather than to use paid sick leave. 

As the Supreme Court said in the FLSA’s formative years, “[t]o permit

overtime premium to enter into the computation of the regular rate would be to allow

overtime premium on overtime premium -- a pyramiding that Congress could not have

intended.” Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 464 (1948). This

principle was codified in 1949. See 29 U.S.C. §§ 207(e)(5)-(e)(7). If sick leave buyback payments fit awkwardly under § 207(e)(2) because they relate to hours worked,

rather than to hours not worked, these payments are squarely within the purview of

the three exclusions found in subsections (e)(5)-(e)(7) that apply to “extra

compensation provided by a premium rate paid for certain hours worked.”14 

Section 207(e)(5) excludes “extra compensation provided by a premium rate

paid for certain hours worked . . . because such hours are hours worked . . . in excess

of the employee’s . . . regular working hours.” A firefighter who works one or more

paid sick leave days has worked in excess of his “regular working hours.” If

otherwise eligible under the City’s program, he may sell unused sick leave to bring

his total pay for sick leave hours worked up to 175% of his regular rate. The related

exclusion in § 207(e)(6) applies to “extra compensation provided by a premium rate

paid for work by the employee on . . . regular days of rest” if the premium rate is not

less than one and one-half times the regular rate. These exclusions were intended to

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prevent the pyramiding of “overtime on overtime.” They have been applied to a

variety of overtime compensation programs. See Alexander v. United States, 32 F.3d

1571, 1577 (Fed. Cir. 1994); Brock v. Two “R” Drilling Co., Inc., 772 F.2d 1199,

1201-02 (5th Cir. 1985); Brennan v. Valley Towing Co., Inc., 515 F.2d 100, 109-10

(9th Cir. 1975).

In response, the court asserts that sick leave buy-back payments are not

compensation at a premium rate. This ignores economic reality. The City agreed to

pay the plaintiff firefighters for ten days of sick leave each year. If sick leave is used,

the City must pay another employee to do the work, presumably at a rate at least equal

to the regular rate of the firefighter on sick leave. If the firefighter instead works,

leaving his sick leave unused, the City through the buy-back program pays, on top of

the regular rate already paid, a premium equal to 75% of the firefighter’s regular rate.

Thus, for those days worked, the firefighter is paid 175% of his regular rate. This

premium is greater than and functionally no different than the premium the FLSA

requires employers to pay for overtime work -- not less than one and one-half times

(150%) the employee’s regular rate. See 29 U.S.C. § 207(a). And like overtime, extra

compensation paid for unused sick leave is offset by the employer not incurring the

expense of hiring additional workers or paying other employees to fill in.

It may make little difference whether the City’s sick leave buy-back payments

are excluded from a firefighter’s regular rate under § 207(e)(2) because they are

“similar to payments made when no work is performed due to illness,” Featsent, 70

F.3d at 905, or under §§ 207(e)(5) or (6) as overtime compensation paid at a premium

rate. But the contrary decision of the district court and this court to include those

payments in the regular rate both distorts FLSA principles and discourages use of a

creative overtime payment device that benefits both employers and employees. I

respectfully dissent from this decision.

______________________________

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