# United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 97-2647

___________ Lane A. Gaby; Lisa J. Gaby; * * Plaintiffs\Appellants, * * Appeal from the United States * District Court for the v. * District of Nebraska. * Omaha Home for Boys, a * non-profit corporation, * * Defendant\Appellee. * * * * James Wiley; Alvera L. Wiley; * * Plaintiffs/Appellants, * * v. * * Omaha Home for Boys, a * non-profit corporation, * * Defendant\Appellee. * * * * Robert Cork; Kathy Cork; * * Plaintiffs\Appellants, * * v. * * Omaha Home for Boys, a * non-profit corporation, * * Defendant\Appellee. * * *

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Joe D. Clapp; Gail A. Clapp; * * Plaintiffs\Appellants, * * v. * * Omaha Home for Boys, a * non-profit corporation, * * Defendant\Appellee. * * * * Boyd Eveland; Dianna Eveland; * * Plaintiffs\Appellants, * * v. * * Omaha Home for Boys, a * non-profit corporation, * * Defendant\Appellee. * * * * Jerry L. Hall;Beverly J. Hall; * * Plaintiffs\Appellants, * * v. * * Omaha Home for Boys, a * non-profit corporation, * * Defendant\Appellee. *

___________ Submitted: January 16, 1998 Filed: April 13, 1998

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### The Honorable Howard F. Sachs, United States District Judge 1 

### for the Western District of Missouri, sitting by designation.

The Honorable Thomas M. Shanahan, United States Distric t 2 

### Judge for the District of Nebraska. -3- Before RICHARD S. ARNOLD, Chief Judge, MORRIS SHEPPARD ARNOLD, Circui t Judge and SACHS, District Judge. 1

___________ SACHS, District Judge. Appellants, twelve individuals who were previously employed as "house parents" by the Omaha Home for Boys, appeal from an adverse decision of th e Unit ed States District Court for the District of Nebraska. Appellant s 2 alleged a violation of the Fair Labor Standards Act ("the Act"), 29 U.S.C. § 201 et seq . After a bench trial, the district court found in favor of the Omaha Home for Boys ("the Home").

I. Lane A. G aby, his wife, and five other couples were employed by the Home, a residential-type institution in which ei ght to twelve boys live in
a u nit with a set of house parents. The arrangement is known as "Th e Family Home Program." Sound patterns of behavior are taught and exemplified by the house par ents who live with, monitor and provide guidance for the youths.

In early 1992, the Home presented eight of the appellants with a n employment agreement. The remaining four appellants were hired later in 1992 and were also pr esented with a similar form of employment agreement. The central theme of the contract was set forth in the following paragraph taken from page two of the agreement:

For purposes of the Fair Labor Standards Act, particularl y Section 785.23 [sic], issued January 11, 1961, and amended in October 1, 1970, the parties agree that the usual work wee k which takes place withinsix (6) consecutive days, is 60 hours which each of the House Parents

### -4- wou ld work. This takes into consideration the personal tim e available to the House P arents, sleep time and other time when the House Parents are not involved in working with the yout h who are assigned to their residences.
The normal work week for house paren ts consisted of six days at work and three days off. During the six days at work, the house parents lived
an d ate all of their meals with the boys in the unit. The agreemen t provided for overtime payments for what was estimated to be the time when house par ents worked over forty hours during the six-day work week. I n effec t, the house parents thus received forty hours of regular pay an d twenty hours of time and a half pay during a nor mal week. Active work for ten hours each day was assumed to be required, o n the average, for each of the two house parents. The agreement also provided in paragraph 3 that "i n the event it would be necessary to work substantially more than those hour s in any particular wor k week because of an emergency or the unavailability of Alternative House Parents," overtime would ag ain be paid. Overtime pay was in fact allowed for each such day, again bas ed on an assumed ten hours of work activity.

Each of the plaintiffs brought suit under 29 U.S.C. § 216(b) whic h authorizes private li tigation for enforcement of the Act. The cases were consolidated. After a four day bench trial, the district judge found in favor of the Home.

II. The F air Labor Standards Act establishes a maximum number of wor k hours that employees may work without receiving overtime pay, an d "employers and employees may not, in general, make agreements to pay and receive less pay than the statute provides." Rudolph v. Metropolita n Airports Comm'n , 103 F.3d 677, 680 (8th Cir. 1996) (citing Barrentine v. Arkansas-Best Freight Sys. , 450 U.S. 728 (1981)). An exception to thi s general rule is set forth in the following regulation:

### -5- An employee who resides on his employer's premises on a permanent basis or for e xtended periods of time is not considered as working all the time he is on the premises. Ordi

narily, he may engage innormal private pursuits and thus have enough time for eating, sleeping, entertaining, and othe r periods of complete freedom from all duties when he may leave the pr emises for purposes of his own. It is, of course , difficu lt to determine the exact hours worked under thes e circumstances and any reasonable agreement of the p arties which tak es into consideration all of the pertinent facts will b e accepted. This rule would apply, for example, to t he pumper of a stripper well who resides on the premises of his employer and also to a telephone operator who has the switchboar d in her own home.

29 C.F.R. § 785.23.

The findi ngs of the district court are reviewed under a clear error standard. Estate of Davis by Ostenfeld v. Delo , 115 F.3d 1388, 1393 (8th Cir. 1997). "We will overturn a finding of fact only if it is no t supported by substantial evidence in the record, if the finding is based
on an erroneous view of the law, or if we are left with the definite and fir mconviction that an error has been made." Id. (citing Sawheny v
. Pioneer Hi-Bred Int'l, Inc. , 93 F.3d 1401, 1407-8 (8th Cir. 1996)).

III. Appella nts raise several issues for our review. Primarily , app ellants argue that the agreement form is unreasonable under the Fai r Labor Stan dards Act in that considerably more than a ten-hour day wa s requir ed for their work, and the agreements were coercively obtained

. Next, appellants contend that the district court erred in its finding s regarding overtime co mpensation for a seventh workday, and in its failure to apply the portion of the agreement allegedly requiring overtime pay for all overtime work.

A. Reasonableness under the Act The appellants contend that the agreement is unreasonable unde r 29 C.F.R. § 785.23. This Court has recently addressed a comparabl e situation in Rudolph v. Metropolitan Airports Comm'n ,

### Plaintiffs tend to concentrate criticism of estimates on the 3 

### time commitments necessary when the youths were not in schoo l, particularly during the summer mo nths. Defendant presented testimony that the number of boys in the residence generally decreasedduring the summer, that outside staff availability increased, and tha t other factors, such as later sleeping habits, tended to coun ter the impact of closing schools. In any event, the year-round ave rage of ten ho urs of active daily work for each of the two house parent s did not preclude a longer work day during certain days and months. -6- 103 F.3d 677 (8th Cir. 1996). In Rudolph , we were called upon to review
an applica tion of § 785.23 in the context of off-duty police officer s caring for dogs from the department's canine unit. Id. at 678-79. As wil l be noted below, portions of the Rudolph analysis apply in this case, and favor the Home.

Se ction 785.23 envisions some jobs in which the exact numbers o f hours worked are difficult to determine due to the employee residing on hi s employer' s premises. See 29 C.F.R. § 785.23; Rudolph , 103 F.3d at 681
. The relationship between the house parents and the Home is exactly the typ e of employ ment dealt with in § 785.23. The house parents lived at th e facil ity for extended periods of time. Testimony was presented to th e trial court that, wit h two house parents, one person was often sufficient to respon d to the occasional demand or problem. This allowed the othe r parent to "engage in normal private pursuits." 29 C.F.R. § 785.23. Thus it was possible to "cover" well over ten hours of activity a day

. Moreover, and most significantly, demands for at tention were intermittent, allowing private activities frequently and for extended periods during a 24-hour day.

The distr ict court concluded that the contract was reasonable under § 785.23. The judge heard substantial testimony that the estimated time to complete the work of house parent was sixty h ours per six-day week. He
rec eived evidence detailing the time requirements of various wor k activi ties and of the amount of "down time" or personal time available. 3 He was not required to accept testimony from every potential witness , espe ciallywhen the majority of the witnesses had an interest in th e outcome of the

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litigation. United States v. Fairchild , 122 F.3d 605, 613 (8th Cir. 1997) , cert. denied , U.S. , 118 S.Ct. 1086 (1998). We have reviewed the tra nscript and conclude that the testimony of the defense witnesses wa s knowledgeable, plausi ble, and in some respects more specific and arguably more realistic than the testimony presented by plaintiffs.

It is wor th observing that this Court has previously considered the overtime claims of house parents in a different context, with mixe d results. In Hultgrenv. County of Lancaster, Nebraska , 913 F.2d 498 (8th Cir. 1990), the Court affirmed a trial court ruling that "sleep time" coul d not be subtracted from compensable time of overnight relief workers a t residential facilities for the mentally retarded. In Hultgren there was proof of serious client behavioral problems that rarely allowed a n uninte rrupted night's sleep. There were also certain deficiencies i n sleeping accommodations. In Bouchard v. Regional Governing Board , 939 F.2 d 1323 (8th Cir. 1992), review of similar contentions resulted in appellate disallowance of all but one of the "sleep time" claims. Appellants here acknowled ge in their brief on appeal that they do not seek "payment fo r their sleep time, and specifically excluded sleep time from their testimon y concerning the number of hours for which they are seeking overtime pay." In other words, we do not have a claim alleging a right to 24 hours of pay during e ach of the "on duty" days of service. This concession is wel l advised, given the evidence here. Compare , Beas ton v. Scotland School for Veterans' Children , 693 F.Supp. 234 (M.D. Pa. 1988), aff'd , 869 F.2d 587 (3rd Cir. 1989), a case favoring the employer, cited without disapproval in Hultgren
. Appellants further claim that the agreements are voidable under a n economic d uress theory. Under this theory of contract law, the hous e parents argue that they should be returned to th e old salary system, which they foun d satisfactory. Testimony was heard at trial that some of th e employees not only di sagreed with the time estimates in the agreement but expressed that disagreement

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to administrators at the Home. Appellants argue that the position of hous e pare nt left them in a particularly vulnerable position. Many of th e appellant s did not maintain a residence outside of the Home. Given th e realitythat the appellants had no other residence, they argue that th e employm ent agreements were forced upon them and left them without an y bargaining position. The Home argues, however, that the appellants failed to establish the elements of economic duress.

Al though federal law is in question, it is sufficient to examin e Nebraska state law, as the parties do, for the s tandard concepts determining if a contract was entered into under economic duress. For presen t purposes we assume th at duress would be fatal to an employer's contention that its agreement with employees is a "reasonable agreement of the partie s . . ." as required by the regulation in question . The appellants cite two Nebraska cases. In First Data Resources, Inc. v. Omaha Steaks Intern. , Inc. , 307 N.W.2d 790 (Neb. 1981), the Nebraska S upreme Court held that "in order for an agreement to be voidable by reason of economic duress, it mus t not only have been ob tained by means of pressure brought to bear, but the result ing agreement must be unjust, unconscionable, or illegal." 30 7 N.W.2d at 793. The Nebraska Supreme Court further held that "'[t] o constitute duress, there must be an application of such pressure o r constraint as compels a man to go against his will, and takes away his fre e agency, destroying the power of refusing to comp ly with the unjust demands of another.'" Haumont v. Security State Bank , 3 74 N.W.2d 2, 6 (Neb. 1985) (quoting Buhrman v. International Harvester Co. , 150 N.W.2d 220, 223 (Neb. 1967)). A central issue in economic duress cases is whether the part y applying pressure is exercising a right that is legitimate ( i.e. raising pri ces, First Data Resources, Inc. , 307 N.W.2d at 792), or illegitimat e (threatening criminal prosecution, Haumont , 374 N.W.2d at 6). Nebraska la w on this subject appears to be conventional. Compare , Mirax Chemical Prods

. Corp. v. First Interstate Commercial Corp. , 950 F.2d 566, 570 (8th Cir

. 1991) (Wisconsin law).

### Our understanding is that one couple's initial joint salary 4 

### of $24,000 (plus room and board) was increased under the new system to produce income exceeding $35,000 in 1993 and over $38,000 i n 1994. Fringe benefits were calculated at over $7,000. Paragraph 3 provides in part that "both p arties agree that in 5 

### the event it would be necessary to work substantially more tha n those hours, . . . then in that event, when hours are worked over the base number, overtime shall be paid at the overtime rate agreed to heretofore." This language refers to extra days of work, as the full text of the sentence, excerpted earlier, clearly shows. -9- In this case, the stated purpose of the agreement was to comply with the Fair Labor Standards Act. There was evidence that the Home wa s uncert ain that the previous annual salary arrangement complied with th e Act. In signing the new contract, appellants did not experience a decreas e in compens ation and were not threatened with any illegal or illegitimate 4 pressure. Several of the house parents signed the agreement on numerous occasions. The district court found that there was no economic duress

. There was no error in that appraisal of the circumstances.

B. Overtime Compensation The secon d point raised by the appellants concerns the construction of th e overtime provisions. The trial court heard evidence that hous e parents were paid ove rtime when they were required to work past the sixth day because of some emergency or unavailability of replacements. Although
som e extra days could have required more than ten hours of work, som e seventh day activity may have required less. As previously stated, te n hours of active but intermittent work was a reasonable estimate, contractu

ally agreed to by the parties.

Ap pellants claim that paragraph 3 of the agreement should b e 5 construed to mean that the house parents should be compensated wit h overtime wages on eve ry day they worked in excess of ten hours and should be compensated for a full ten-hour day even whenthey may have worked less than ten hours. This contention is inherently unreasonable, given th e purpose of the regulation and the agree

### Co ntrary to plaintiffs' contention, discussion between th e 6 

### dis trict judge and counsel, as recorded in the transcript, show s that the claim for overtime during an extended work week was no t over looked. The somewhat cryptic statements in the opinio n regarding overtime compensation for extra days of work are a dequate for present purposes. -10- ment, as discussed in Rudolph , 103 F.3d at 681. The regulation authorizes reasonable agreements that will help "eliminate complicated, repetitious, and ha rd-to-resolve disputes about exactly how much" work activity i s required in a residential setting.

The contr act was reasonably construed when the district court found that the clear purpose of the agreement was to make estimates of reasonabl e time commitments of t he job. Just because the Home proposed the language of the agreement, the district court was not required to construe the term s unreasonably to satisfy appellants' claims.

As statedin appellants' brief, the Home would compensate the house parents for a full te n hours "without any regard for the actual number of hours." The trial court did not commit clear error by not ordering th e Home to compensate the house parents on a time-clock or time-sheet basis when e xtra days were worked under the "emergency" or "unavailability " provisions. Although the agreements referred to sixty hours of work in a six- day week, and did not expressly refer to ten-hour days, that wa s clearl y contemplated by the agreements and understood by the parties

. There was no evidence that the parties were in c ontroversy over this point until they consulted counsel and filed suit. The practical construction given to the agreement by the Home and acquiesced in by plaintiffs was bot h sensible and binding.
The Home applied the overtime provis ions in a reasonable manner, and the district court did not err in concluding that the requisite overtime compensation had been paid. 6

### We do not s uggest, however, that this case serves to legiti- 7 

### mi ze a standard ten-hour day theory for house-parent work
. Different circumstances may dictate different results, parti cularly in cases where, unlike the present one, claimants prepare an d present credible illustrative time sheets showing segments of work ac tivity by each house parent on typical days. In the presen t case, although neither side tried to justify its position a s lawyers routinely do in seekin g fee allowances, the district court could conclude that the defense witnesses offered the most s pecific and convincing estimates. -11- IV. The Omaha Home for Boys and the house parents made a reasonabl e agreement as to the amount of time normally required to perform the work of the house parents. Substantial evidence supports the trial judge' s findings. He was entitled to conclude that there was neither coercion nor

7 misapplication of the employment contracts. The decision of the district court is affirmed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT