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. e du/thir dc ir c uit_1997/123Filed 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, 1996BEFORE: 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 la wsuit against the State of New Jersey, Department of Transportation (State), in the United States Distri ct Court for the District of New Jersey. The lawsuit seeks o vertime 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 "salar y-basis" test,1 promulgated by the United States Department of

___________________________________________________ ______________

1. An exempt professional under the salary-basis te st 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 perform s work on an hourly basis and therefore qualifies for overtime compensa tion.

2Labor (DOL) and codified at 29 C.F.R. § 541.118, as

amended by 29 C.F.R. § 541.5d (1996). The DOT engin eers replied that because their wages are subject to red uction under the DOT's disciplinary policy, they are hourl y workers and are not exempt under the DOL regulation s.

The district court granted the State's motion for s ummary 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 DO T 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 th e case with instructions to enter summary judgment in favo r of the DOT engineers awarding back-pay for overtime fo r the period commencing September 6, 1991. We held that t he "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" te st because the DOT's disciplinary policy subjects them to redu ctions in pay for non-safety related infractions.

On March 27, 1996, the United States Supreme Court issued an opinion that abruptly changed the law reg arding 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 abro gate Eleventh Amendment immunity, subjecting states to p rivate 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' Eleven th Amendment immunity and to create private causes of action against states that had not consented to suc h suits. 116 S.Ct. at 1127-28, 1131-32.

The State filed a petition for rehearing, relying i n 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, addres sing,

3among other issues, the State's claim that the Supr eme

Court's decision in Seminole divested us of jurisdiction. On September 23, 1996, the DOT engineers filed their o pening brief, and on November 22, 1996, the State filed it s responsive brief. The DOT engineers filed their rep ly brief on December 31, 1996. On that same day the DOT engineers filed a motion to amend their complaint i n order to add the DOT Commissioner as a defendant, and to include a claim for prospective declaratory and inj unctive 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 mo tion 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 stri ctly apply only in the district courts, [FED. R. CIV. P. 1], t he policies informing Rule 21 may apply equally to the courts o f 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 o f the Federal Rules" have been relied upon by appellate c ourts 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 g ranting motion to add two of its members as parties on appe al); Bhatla v. U.S. Capital Corp. , 990 F.2d 780, 786 (3d Cir. 1993) (exercising court's discretion to dismiss act ion versus non-diverse dispensable party so that case could pr oceed). Resort to Rule 21 is appropriate where "requiring d ismissal 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 engine ers' motion to amend the complaint because the engineers

4"waited seven months before presenting their motion ."

Appellee Br. in Opp'n. to Mot. to Amend Compl. at 1 1. It also claims that there is a lack of "express statut ory authority to amend in the appellate court [and a] constitutional and statutory bar on the DOT enginee r[s'] proposed claims for prospective declaratory and inj unctive
relief." Id . at 13. In light of the Federal Rules of Civil Procedure, the relevant case law, the unexpected tu rn in
the law as a result of Seminole , and the availability of declaratory relief, we do not find the State's argu ments persuasive.

First, as we have previously stated, FED. R. CIV. P . 21 provides that plaintiffs may be permitted to add pa rties 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 Sem inole

, 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 result ing from the delay. See Newman-Green , 490 U.S. at 838, 109 S.Ct. at 2225-26. Finally, as will be discussed below, th e DOT engineers are not precluded from seeking prospectiv e 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. Jorl ing , 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 am end their complaint, we must determine whether we have jurisdiction to address their claims. Under the tea chings of
Seminole , we do not have jurisdiction over the DOT engineers' claim against the State for monetary rel ief.
Seminole , 116 S.Ct. at 1127-28. However, by allowing the DOT engineers to amend their complaint naming the D OT Commissioner as an additional party and adding a cl aim for prospective declaratory relief, we may retain j urisdiction under the doctrine of Ex Parte Young , 209 U.S. 123, 128 S.Ct. 441 (1908). In Ex Parte Young , the Supreme Court

5carved out an exception to Eleventh Amendment immun ity

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 rel ief, the 1908 opinion was issued well before declaratory rel ief was available. See Steffel v. Thompson , 415 U.S. 452, 466, 94 S.Ct. 1209, 1219 (1974) (In 1934 Congress enacted t he Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, i n order "to provide a milder alternative to the injun ction remedy.") (quoting Perez v. Ledesma , 401 U.S. 82, 111, 91 S.Ct. 674, 690 (1971) (Brennan, J. concurring in pa rt 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[c hild labor provisions], the Administrator [Secretary of Labor] 2 shall bring all actions under section 217 of this title t o restrain violations of this chapter."); see also Lorillard v . Pons , 434 U.S. 575, 581, 98 S.Ct. 866, 870 (1978); Bowe v. Ju dson 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 par ty 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 a ctions brought by employees for declaratory relief are per missible. 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 a nd Hour Division of the Department of Labor, under the Act, were transf erred to the Secretary of Labor pursuant to the Reorganization P lan 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. 3 491.

6case 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 th e case. On this rehearing, we reconsider the legal issue of wh ether the DOT engineers are exempt from the overtime provisio ns of
the FLSA. We reexamine this issue in view of a rece ntly 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 fact ual
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 "h ourly" employees under the DOL's "salary-basis" test becau se their compensation is subject to deductions for dis ciplinary violations. They argued that they are "subject to" such deductions because "the Police Manual nominally sub jects 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 i n Auer was "whether. . . an employee's pay is `subject to ' disciplinary or other deductions whenever there exi sts a theoretical possibility of such deductions, or rath er only when there is something more to suggest that the em ployee is actually vulnerable to having his pay reduced." Id . Before reaching this issue, however, the Court addressed t he police officers' claim that "the `no disciplinary d eductions' element of the salary-basis test is invalid for pub lic-sector employees." Id . at 909. It noted that "[t]he Secretary's view that public employers are not so differently situat ed with regard to disciplining their employees as to requir e wholesale revision of his time-tested rule simply c annot be
said to be unreasonable." Id . The Court further held that the officers' "complaints about the [Secretary of L abor's]

7failure to amend the disciplinary-deduction rule ca nnot 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-bas is" test is not invalid for public-sector employees. Also follo wing 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 officer s were exempt from the overtime provisions. The Secretary of Labor's interpretation, adopted by the Supreme Cour t, states that exempt status will be denied only "when employees are covered by a policy that permits disc iplinary or other deduction in pay `as a practical matter.' " Id . at 911. The interpretation by the Secretary of Labor f urther provides that the "standard is met . . . if there i s either an actual practice of making such deduction or an employment policy that creates a `significant likel ihood' of
such deductions." Id . Finally, there must be "a clear and particularized policy -- one which `effectively communicates' that deductions will be made in speci fied
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 a n 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 differ ent; but since it applies both to [them] and to employee s who are unquestionably not paid on a salary basis, the expressed availability of disciplinary deductions m ay have reference only to the latter.

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

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" reduc tions in their pay. At the DOT, there is neither an actual p ractice of making deductions, nor is there an "employment poli cy that creates a `significant likelihood' of such deductio ns" 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 engi neers. Pursuant to Auer , such a broad-based policy fails to " `effectively communicate' that pay deductions are an anticipated form of punishment" for the DOT enginee rs. Id

. Furthermore, the DOT's nonenforcement of its discip linary policy and the fact that no engineer has ever suffe red a reduction in pay under the policy, provide even str onger evidence that the DOT's disciplinary policy is not one under which there is a "significant likelihood" of deduct ions.

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 exemp t status of employees who have been subjected to pay deductions inconsistent with the salary-basis test. The Court emphasized that the employer could reimburse employ ees not only if the deductions were "inadverten[t]", bu t 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 engine er's pay had been docked, the "window of corrections" exempt ion 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 additi onal party and add a claim for prospective declaratory r elief. We further hold that we have jurisdiction to reach the merits of the case and consider declaratory relief. Even thou gh we

9allowed 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 assessi ng the legal issues against the backdrop of Auer , we conclude that the "salary-basis" test set forth in 29 C.F.R. § 54 1.118(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 D OT's disciplinary policy does not "permit[ ] disciplinar y or other deductions in pay `as a practical matter.' "

Hence, although the legal landscape has changed sin ce 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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