1997 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-9-1997

Balgowan v. State of NJ Dept of Transportation

Precedential or Non-Precedential:

Docket 95-5276

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Recommended Citation

"Balgowan v. State of NJ Dept of Transportation" (1997). 1997 Decisions. Paper 123.

http://digitalcommons.law.villanova.edu/thirdcircuit_1997/123
Filed June 9, 1997 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 95-5276 

RICHARD M. BALGOWAN; THOMAS M. BATZ; THOMAS 

BETTEN; KARL L. BLUM; RAYMOND A. BURROUGHS; 

DENNIS CARLSON; JOHN I. CORBO; MICHAEL D. 

CRONIN; STEFFAN FRANKLIN; HERMAN J. KRIEG; 

JOSEPH J. LAGULLO; CHESTER J. LYSZCZEK; 

ALBERT M. MALATESTA; ARAM MARDEKIAN; IKE 

MARDEKIAN; WILLIAM L. MUNCZINSKI; ALAN S. NASS; 

THOMAS M. NORRIS; MALCOLM J. PALMER; JOHN C. 

POWERS; FRANCIS F. REALINI; CARL G. REBBECK; 

STANLEY F. RIPISH; EMIL H. ROESSLER; WAYNE A. 

RUMSEY; RICHARD F. SPOERL; LAWRENCE A. SROKA; 

JOHN W. STULTS; ROBERT L. SWAIN; DENNIS R. 

SYMONS; JOHN B. TAYLOR, JR.; CHARLES A. 

TERRITO, JR.; PETER W. TOMORY; ALFRED T. 

WOODROW; DANIEL YACOVINO; CHARLES W. YOUNG; 

RICHARD ZOLNOWSKI 

Appellants 

v. 

STATE OF NEW JERSEY, 

DEPARTMENT OF TRANSPORTATION 

On Appeal from the United States District Court 

for the District of New Jersey 

(D.C. No. 93-cv-02209) 

Argued January 22, 1996 

(Opinion Filed: May 16, 1996; 

Petition for Panel Rehearing Granted; 

Opinion Vacated July 9, 1996) 

Submitted: July 9, 1996 
BEFORE: STAPLETON, COWEN and GARTH 

Circuit Judges

(Filed June 9, 1997) 

Steven P. Weissman 

Weissman & Mintz 

One Executive Drive 

Suite 200 

Somerset, New Jersey 08873 

 COUNSEL FOR APPELLANTS 

Steven Sutkin 

Office of New Jersey Attorney 

 General 

Division of Law/Transportation 

Richard J. Hughes Justice Complex 

Trenton, New Jersey 08608 

 COUNSEL FOR APPELLEE 

OPINION OF THE COURT 

COWEN, Circuit Judge. 

Plaintiff-appellants, thirty-six project engineers and one 

supervising engineer (DOT engineers), filed this lawsuit 

against the State of New Jersey, Department of 

Transportation (State), in the United States District Court 

for the District of New Jersey. The lawsuit seeks overtime 

compensation under the Fair Labor Standards Act of 1938 

(FLSA), 29 U.S.C. § 201 et seq. (1978). The DOT engineers 

alleged that the State violated the FLSA by failing to pay 

them "time and a half" for time worked in excess of 40 

hours per week. The State responded that the DOT 

engineers are exempt professionals under the "salary-basis" 

test,1 promulgated by the United States Department of 

_________________________________________________________________ 

1. An exempt professional under the salary-basis test is an employee 

who is, in effect, an executive who is salaried and does not perform work 

on an hourly basis. A non-exempt individual performs work on an hourly 

basis and therefore qualifies for overtime compensation. 

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Labor (DOL) and codified at 29 C.F.R. § 541.118, as

amended by 29 C.F.R. § 541.5d (1996). The DOT engineers 

replied that because their wages are subject to reduction 

under the DOT's disciplinary policy, they are hourly 

workers and are not exempt under the DOL regulations. 

The district court granted the State's motion for summary 

judgment and dismissed the DOT engineers' complaint. It 

held that the "salary-basis" test is not applicable to public 

employees such as the DOT engineers and, even if it were 

applicable, the engineers are exempt because the DOT has 

never actually deducted pay under its disciplinary policy. 

The DOT engineers appealed, and on May 16, 1996, we

affirmed in part, reversed in part, and remanded the case 

with instructions to enter summary judgment in favor of 

the DOT engineers awarding back-pay for overtime for the 

period commencing September 6, 1991. We held that the 

"salary-basis" test, as amended in September 1991, applies 

to the DOT engineers. However, we further held that the 

DOT engineers fail to satisfy the "salary-basis" test because 

the DOT's disciplinary policy subjects them to reductions in 

pay for non-safety related infractions. 

On March 27, 1996, the United States Supreme Court 

issued an opinion that abruptly changed the law regarding 

Eleventh Amendment immunity. See Seminole Tribe of

Florida v. Florida, 116 S.Ct. 1114 (1996). Prior to Seminole, 

the Supreme Court had held that Congress could abrogate 

Eleventh Amendment immunity, subjecting states to private 

causes of action. See Pennsylvania v. Union Gas Co., 491 

U.S. 1, 109 S.Ct. 2273 (1989). Seminole overruled Union

Gas and held that the Commerce Clause did not invest 

Congress with the authority to waive states' Eleventh 

Amendment immunity and to create private causes of 

action against states that had not consented to such suits. 

116 S.Ct. at 1127-28, 1131-32. 

The State filed a petition for rehearing, relying in part on 

the Supreme Court's Seminole decision. By order dated July 

9, 1996, we granted the State's petition for panel rehearing 

and vacated our May 16, 1996 opinion. See Balgowan v.

State of New Jersey, Dept. of Transp., 84 F.3d 667 (3d Cir. 

1996). We ordered rebriefing by the parties, addressing, 

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among other issues, the State's claim that the Supreme 

Court's decision in Seminole divested us of jurisdiction. On 

September 23, 1996, the DOT engineers filed their opening 

brief, and on November 22, 1996, the State filed its 

responsive brief. The DOT engineers filed their reply brief 

on December 31, 1996. On that same day the DOT 

engineers filed a motion to amend their complaint in order 

to add the DOT Commissioner as a defendant, and to 

include a claim for prospective declaratory and injunctive 

relief. The State objected to any such amendment. 

I.

We first address the DOT engineers' motion to amend. 

Federal Rule of Civil Procedure 21 provides that "[p]arties 

may be dropped or added by order of the court on motion 

of any party or of its own initiative at any stage of the 

action and on such terms as are just." FED . R. CIV. P. 21. 

"Although the Federal Rules of Civil Procedure strictly apply 

only in the district courts, [FED. R. CIV. P. 1], the policies 

informing Rule 21 may apply equally to the courts of 

appeals." Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 

826, 832, 109 S.Ct. 2218, 2223 (1989). Rule 21 and an 

appellate power that "long predates the enactment of the 

Federal Rules" have been relied upon by appellate courts to 

both dismiss and add parties in order to maintain 

jurisdiction and standing. Id. at 834, 109 S.Ct. at 2223 

(allowing dismissal of non-diverse party on appeal); see also

Mullaney v. Anderson, 342 U.S. 415, 416-17, 72 S.Ct. 428, 

429-30 (1952) (avoiding union's standing issue by granting 

motion to add two of its members as parties on appeal); 

Bhatla v. U.S. Capital Corp., 990 F.2d 780, 786 (3d Cir. 

1993) (exercising court's discretion to dismiss action versus 

non-diverse dispensable party so that case could proceed). 

Resort to Rule 21 is appropriate where "requiring dismissal 

after years of litigation would impose unnecessary and 

wasteful burdens on the parties, judges, and other litigants 

waiting for judicial attention." Newman-Green, 490 U.S. at 

836, 109 S.Ct. at 2225 (citing Mullaney, 342 U.S. at 417, 

72 S.Ct. at 430). 

The State argues that we should deny the DOT engineers' 

motion to amend the complaint because the engineers

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"waited seven months before presenting their motion." 

Appellee Br. in Opp'n. to Mot. to Amend Compl. at 11. It 

also claims that there is a lack of "express statutory 

authority to amend in the appellate court [and a] 

constitutional and statutory bar on the DOT engineer[s'] 

proposed claims for prospective declaratory and injunctive 

relief." Id. at 13. In light of the Federal Rules of Civil 

Procedure, the relevant case law, the unexpected turn in 

the law as a result of Seminole, and the availability of 

declaratory relief, we do not find the State's arguments 

persuasive. 

First, as we have previously stated, FED. R. CIV. P. 21 

provides that plaintiffs may be permitted to add parties at 

any stage of the action, including in the court of appeals. 

FED. R. CIV. P. 21. See also Newman-Green, 490 U.S. at 

832-33, 109 S.Ct. at 2222; Bhatla, 990 F.2d at 786. 

Second, given the change in the law effected by Seminole, 

we would be hard-pressed to fault the engineers for not 

having moved to amend the complaint sooner. Third, the 

State has not identified any prejudice to it resulting from 

the delay. See Newman-Green, 490 U.S. at 838, 109 S.Ct. 

at 2225-26. Finally, as will be discussed below, the DOT 

engineers are not precluded from seeking prospective 

declaratory relief. See Ex Parte Young, 209 U.S. 123, 28 

S.Ct. 441 (1908). See also Laskaris v. Thornburgh, 661 F.2d 

23, 26 (3d Cir. 1981); Berman Enters., Inc. v. Jorling, 3 F.3d 

602, 606-07 (2d Cir. 1993). Therefore, we grant the DOT 

engineers' motion to amend the complaint. 

II. 

Now that we have permitted the DOT engineers' to amend 

their complaint, we must determine whether we have 

jurisdiction to address their claims. Under the teachings of 

Seminole, we do not have jurisdiction over the DOT 

engineers' claim against the State for monetary relief. 

Seminole, 116 S.Ct. at 1127-28. However, by allowing the 

DOT engineers to amend their complaint naming the DOT 

Commissioner as an additional party and adding a claim 

for prospective declaratory relief, we may retain jurisdiction 

under the doctrine of Ex Parte Young, 209 U.S. 123, 128 

S.Ct. 441 (1908). In Ex Parte Young, the Supreme Court 

 5 
carved out an exception to Eleventh Amendment immunity 

by permitting citizens to sue state officials when the 

litigation seeks only prospective injunctive relief in order to 

end continuing violations of federal law. Id. The Ex Parte

Young exception has been interpreted by courts to allow 

suits against state officials for both prospective injunctive 

and declaratory relief. See, e.g., Laskaris, 661 F.2d at 26; 

Berman, 3 F.3d at 606-07; Roller v. Cavanaugh, 984 F.2d 

120, 122 (4th Cir. 1993). Although Ex Parte Young's exact 

wording allows suits for prospective injunctive relief, the 

1908 opinion was issued well before declaratory relief was 

available. See Steffel v. Thompson, 415 U.S. 452, 466, 94 

S.Ct. 1209, 1219 (1974) (In 1934 Congress enacted the 

Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, in 

order "to provide a milder alternative to the injunction 

remedy.") (quoting Perez v. Ledesma, 401 U.S. 82, 111, 91 

S.Ct. 674, 690 (1971) (Brennan, J. concurring in part and 

dissenting in part)). 

Only the Secretary of Labor may initiate an action for 

injunctive relief under the FLSA. See 29 U.S.C. § 211(a) 

("Except as provided in section 212 of this title[child labor 

provisions], the Administrator [Secretary of Labor]2 shall 

bring all actions under section 217 of this title to restrain 

violations of this chapter."); see also Lorillard v. Pons, 434 

U.S. 575, 581, 98 S.Ct. 866, 870 (1978); Bowe v. Judson C.

Burns, Inc., 137 F.2d 37, 39 (3d Cir. 1943); Barrentine v.

Arkansas-Best Freight Sys., Inc., 750 F.2d 47, 51 (8th Cir. 

1984). Since the Secretary of Labor is the only party 

permitted to seek injunctive relief under the FLSA, and the 

Secretary is not a party to this action, injunctive relief is 

not available to the plaintiffs. However, private actions 

brought by employees for declaratory relief are permissible. 

See, e.g., Johns v. Stewart, 57 F.3d 1544, 1556 (10th Cir. 

1995); Biggs v. Wilson, 828 F. Supp. 774, 779 (E.D. Ca. 

1991), aff 'd, 1 F.3d 1537 (9th Cir. 1993). Therefore, we 

find that we have jurisdiction to reach the merits of the 

_________________________________________________________________ 

2. The functions of the Administrator of the Wage and Hour Division of 

the Department of Labor, under the Act, were transferred to the 

Secretary of Labor pursuant to the Reorganization Plan No. 6 of 1950, 

§ 1, eff. May 24, 1950, 15 Fed.Reg. 3174, 64 Stat. 1263, as amended 

Pub.L. 99-619, § 2(c)(1), Nov. 6, 1986, 100 Stat. 3491. 

 6 
case and consider whether we can grant declaratory relief 

to the plaintiffs. 

III. 

Having determined that the DOT engineers can amend 

their complaint and that we can properly consider 

declaratory relief, we now turn to the merits of the case. On 

this rehearing, we reconsider the legal issue of whether the 

DOT engineers are exempt from the overtime provisions of 

the FLSA. We reexamine this issue in view of a recently 

decided Supreme Court case, Auer v. Robbins, 117 S.Ct. 

905 (1997). Auer, like the instant case, involves the 

application of the FLSA professional exemption and the 

Department of Labor's "salary-basis" test. The factual 

situation in Auer is almost identical to the facts in the case 

at bar. In Auer, police sergeants and lieutenants employed 

by the City of St. Louis contended that they are "hourly" 

employees under the DOL's "salary-basis" test because 

their compensation is subject to deductions for disciplinary 

violations. They argued that they are "subject to" such 

deductions because "the Police Manual nominally subjects 

all department employees to a range of disciplinary

sanctions that includes disciplinary deductions in pay, and 

because a single sergeant was actually subjected to a 

disciplinary deduction." Id. at 910. 

The primary issue considered by the Supreme Court in 

Auer was "whether. . . an employee's pay is `subject to' 

disciplinary or other deductions whenever there exists a 

theoretical possibility of such deductions, or rather only 

when there is something more to suggest that the employee 

is actually vulnerable to having his pay reduced." Id. Before 

reaching this issue, however, the Court addressed the 

police officers' claim that "the `no disciplinary deductions' 

element of the salary-basis test is invalid for public-sector 

employees." Id. at 909. It noted that "[t]he Secretary's view 

that public employers are not so differently situated with 

regard to disciplining their employees as to require 

wholesale revision of his time-tested rule simply cannot be 

said to be unreasonable." Id. The Court further held that 

the officers' "complaints about the [Secretary of Labor's] 

 7 
failure to amend the disciplinary-deduction rule cannot be 

raised in the first instance in the present suit." Id. at 910. 

Following the Supreme Court's decision in Auer, we must 

sustain the Secretary of Labor's view and find that the "no 

disciplinary deductions" element of the "salary-basis" test is 

not invalid for public-sector employees. Also following Auer, 

we will not permit the engineers to raise here for the first 

time a claim that the Secretary of Labor has failed to 

amend the disciplinary-deduction rule in violation of the 

Administrative Procedure Act (APA), 5 U.S.C. § 706(2)(A) 

(1996). 

We now turn to the main issue in the case. In Auer, the 

Supreme Court deferred to the Secretary of Labor's 

interpretation of the disciplinary component of the "salarybasis" test. The Court held that the police officers were 

exempt from the overtime provisions. The Secretary of 

Labor's interpretation, adopted by the Supreme Court, 

states that exempt status will be denied only "when

employees are covered by a policy that permits disciplinary 

or other deduction in pay `as a practical matter.' " Id. at 

911. The interpretation by the Secretary of Labor further 

provides that the "standard is met . . . if there is either an 

actual practice of making such deduction or an 

employment policy that creates a `significant likelihood' of 

such deductions." Id. Finally, there must be "a clear and 

particularized policy -- one which `effectively 

communicates' that deductions will be made in specified 

circumstances." Id. 

In Auer, the Court found that because the Police Manual 

nominally covered all department employees, it did not: 

"effectively communicate" that pay deductions are an 

anticipated form of punishment for employees in[the

police sergeants and lieutenants'] category . . .. If the 

statement of available penalties applied solely to[the 

sergeants and lieutenants], matters would be different; 

but since it applies both to [them] and to employees 

who are unquestionably not paid on a salary basis, the 

expressed availability of disciplinary deductions may 

have reference only to the latter. 

 8 
Id. (emphasis omitted). The fact that one sergeant was 

actually subjected to a disciplinary deduction did not alter 

the Court's analysis. 

Based on Auer, we conclude that the engineers in this 

matter qualify for the professional exemption under the 

FLSA. They are not realistically "subject to" reductions in 

their pay. At the DOT, there is neither an actual practice of 

making deductions, nor is there an "employment policy that 

creates a `significant likelihood' of such deductions" as 

required by the Supreme Court in Auer. Id. 

The disciplinary policy in this case, like that in Auer, 

applies to all DOT employees, not just the DOT engineers. 

Pursuant to Auer, such a broad-based policy fails to 

" `effectively communicate' that pay deductions are an 

anticipated form of punishment" for the DOT engineers. Id. 

Furthermore, the DOT's nonenforcement of its disciplinary 

policy and the fact that no engineer has ever suffered a 

reduction in pay under the policy, provide even stronger 

evidence that the DOT's disciplinary policy is not one under 

which there is a "significant likelihood" of deductions. 

As a final note, the Supreme Court in Auer stated that 

the salary test's "window of corrections," 29 C.F.R. 

§ 541.118(a)(6), is available to preserve the exempt status of 

employees who have been subjected to pay deductions

inconsistent with the salary-basis test. The Court 

emphasized that the employer could reimburse employees 

not only if the deductions were "inadverten[t]", but also if 

they were "made for reasons other than lack of work." Auer, 

117 S.Ct. at 912 (quoting 29 C.F.R. § 541.118(a)(6)

(alteration added)). Accordingly, if any DOT engineer's pay 

had been docked, the "window of corrections" exemption 

could have been used by the State to preserve that 

engineer's exempt status. 

IV. 

We hold that the DOT engineers can amend their 

complaint to name the DOT Commissioner as an additional 

party and add a claim for prospective declaratory relief. We 

further hold that we have jurisdiction to reach the merits of 

the case and consider declaratory relief. Even though we 

 9 
allowed an amendment to the complaint and would 

normally order service to be made upon the DOT 

Commissioner, because the engineers cannot succeed on 

the merits under Auer, it would be futile to require service 

and processing of the amended complaint. In assessing the 

legal issues against the backdrop of Auer, we conclude that 

the "salary-basis" test set forth in 29 C.F.R. § 541.118(a), as 

amended by 29 C.F.R. § 541.5d, is valid as applied to 

public employees such as the DOT engineers. Further, the 

DOT engineers satisfy the salary test because the DOT's 

disciplinary policy does not "permit[ ] disciplinary or other 

deductions in pay `as a practical matter.' " 

Hence, although the legal landscape has changed since 

the district court held for the state in its order of March 27, 

1995, and our analysis has accordingly been framed to 

reflect the dictates of Seminole and Auer, the conclusion we 

have reached is the same conclusion reached by the district 

court. We will therefore affirm the order granting summary 

judgment for the State. 

A True Copy: 

Teste: 

Clerk of the United States Court of Appeals

for the Third Circuit

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