### I N THE UNI TED STATES COURT OF APPEALS FOR THE FI F TH CI RCUI T

No. 12-50534

ABIGAIL F. RANSOM, Individually and on Behalf of Others Similarly Situated; BONNIE KURZ, Individually and on Behalf of Others Similarly Situated; LORI A. HOPMANN, Individually and on Behalf of Others Similarly Situated; VERNON K. HENNEMAN, JR., Individually and on Behalf of Others Similarly Situated; DANIEL W. OWINGS, Individually and on Behalf of Others Similarly Situated,

Plaintiffs - Appellees Cross-Appellants

v. M. PATEL ENTERPRISES, INCORPORATED, doing business as Party City, doing business as Party Pig Superstore; MITESH M. PATEL; JAYMINI AMIN, also known as Jaymi Patel,

Defendants - Appellants Cross-Appellees

Appeals from the United States District Court for the Western District of Texas

Before REAVLEY, JOLLY, and SMITH, Circuit Judges. E. GRADY JOLLY, Circuit Judge: After a jury found Abigail F. Ransom a n d fifteen other executive managers (collectively hereinafter, p laintiffs) of P arty City, a retail c h a i n, to be misclassified by t heir employer as e x e m p t from the Fair Labor Standards Act U n i t e d S t a te s C o u r t o f A p p e al s

F i f t h C i rc u i t 

### F I L E D Aug ust 16, 2013 Ly l e W . Cay ce Clerk Case: 12-50534 Document: 00512344480 Page: 1 Date Filed: 08/16/2013No. 12-50534

(FLSA), 29 U.S.C. § 201, et s eq. , the plaintiff s b e came eligible for a n award of overtime wages. B ecause the plaintiffs were p aid a weekly salary, the t rial court had t o compute their h ourly rate of pay i n order to award overti m e d a m a g es. Disregarding the so-cal l e d “fluctuating w orkweek” (FWW) method of determining overtime damages – a method e stablished by preced e nt and relevant federal regulations as applicable in this case – the d i s t r ict court, presided over by a magistrate judge, instead determined overtime damages by using t he m a g i s trate judge’s u northodox preferred m ethodology. 1 The plaintiffs’ employer, M. Patel Enterp r ises, Incorporated 2 (“Party City”), contends this method o f calculation was error, a nd we agree
. We t herefore REVERSE the ruling o f the district court, VACATE t he amount o f actual damages awarded to plaintiffs as overtime and R EMAND for recalculation. We further V ACATE the award o f liquidated damages and the amount of attorneys’ fees and REMAND for reconsideration. I. In this opinion, we will proceed as follows: First, we discuss t h e facts at issue and the lower c ourt proceedings leading to this appeal. Second, we

co n s i d e r the standard of review and the specific employment arrangement between the plaintiffs a nd P arty City. Third, finding t he district court’s factual findings to be clearly erroneous, we sort t h rough r elevant FLSA background principles and precedent, apply them to t his case, and e xplain why t hey compel the use of FWW in c alculating the amount of overtime damages the plaintiffs are due. F inally, we consider the p laintiffs’ cro s s a p p e a l , a s well as liquidated damages and attorneys’ fees.

1 The p arties cons ented to p roceed bef ore a m agis trate jud ge f or all p urp os es
. 28 U

. S. C

. § 636( c) ( 1) ; F E D R. C I V

. P. 73( a)

.

2 D ef end ant- Ap p ellant M

. Patel Enterp ris es w as an Aus tin- area ow ner of a Party City f ranchis e of s tores

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Because the basic question here c an get lost i n t h e w e e d s of the regulations, the a rguments, and the methods of calculation, w e state its simplicity: How much overtime pay does Party C ity owe to its employees under the FLSA? By proceeding a long the course outlined above, we will determine the
proper method of c alculation and remand to the district court for computation of the proper amount. I I. This suit arose in Austin, Texas, where the plaintiff s w e r e e m ployed as executive managers ( EMs) a t Party City r etail stores. The p l aintiffs filed a collective action under the FLSA in 2010. They alleged that P arty C ity had misclassified them as exempt from the ove r t i m e provisions of the FLSA. Furthermore, by paying t h e m o n l y a weekly salary t hat did not vary – even when the plaintiffs ha d often worked weeks o f irregular, consistently long hours – Party City owed t h em overtime a nd additional hourly pay for such workweeks. In due course, the case proceeded to jury trial, presided over by a magistrate j u dge. 3 On November 14, 2011, a jury found that Party City had misclassified the plaintiffs as exempt from the FLSA and o vertime pay; but the jury also held that this FLSA violation was not willful. In this appeal, neither party contests Party City’s liability as f ound by the jury. Instead, the appeal centers on t he trial court’s error in calculating the overtime dam a g e s. In motions for summary judgment before t he magistrate judge, the plaintiffs argued for the so-called “ EZPawn ” method 4 for calculating

3 The trial court had f

ed eral ques tion juris d iction und er the FLSA, 29 U

. S. C

. § 201, et seq. , and 28 U

. S. C. § 1331.

4 This m ethod com es f rom In re EZPa w n LP Fa i r La bor Sta n d a r d s A c t Li t i g
. , 633 F. Sup p
. 2d 395 ( W. D

. T ex. 2008) , a decis ion written by the s am e m agis trate jud ge that hand led this cas e. G enerally s p eak ing, this m ethod com p utes an em p loyee’s “regular rate” of p ay, see d is cus s ion i nf

ra , by d ivid ing his w eek ly s alary by 40, t h e n u m b e r of hours in a s tand ard
w ork w eek

. See, e. g. , i d. at 404 ( p rovid ing an exam ple of an overtim e com pens ation calculation utilizing a d enom inator of 40 in com p uting the regular rate)

. An overtim e p aym ent of 150%
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overtime d amages, while Party C i ty argued for the application of the FWW method. 5 The court denied e ach party’s motion for summary j u d g m e n t. The
court held that “[d]etermining the proper overtime calculation method is a factdependent i n q u i r y , a n d the facts [we]re in dispute

. . . .” Ransom v. M. Patel E n t e rs., Inc. , 825 F

. Supp. 2d 799, 810 (W.D. Tex. 2011). The district co u r t , however, found that “the parties have stipulated regarding the number of hours worked b y the Plaintiffs and the salary each was paid during the relevant period

. . . [that] there are no issues to s end to the j ury o n damages.” Id

. The case then proceeded to trial on liability only. The jury, as previously noted, found that Party City had misclassified the plaintiff s a s e x empt from the FLSA. With t h e jury’s d etermination of FLSA liability in hand, the court then turned to its responsi b i l i t y : the calculation of damages. T he c ourt’s analysis o f a ctual damages f ocused on two related questions: first, d etermining plaintiffs’ “regular rate” of hourly pay and, second, how that regular r ate sh o u l d be used to c ompute t he overall amount due to

of the regular rate f

or all hours w ork ed over 40 d uring the w ork week is then aw ard ed

. Id

.

5 29 C. F .R. § 778. 114( a) provid es an exp lanation of FWW: An em p loyee em p loyed on a s alary bas is m ay have hours of w ork w hich f luctuate f

rom w eek to w eek and the s alary m ay be p aid him p urs uant to an und ers tand ing w ith his em ployer that he w ill recei ve such f ixed
a m o u n t as s traight tim e p ay f or w hatever hours he is called up o n t o w ork in a w ork w eek , w hether f ew or m any
. . . . Since the s alary in such
a s ituation is in t end ed to com p ens ate the em p loyee at s traight tim e rates f or whatever hours are w ork ed in the w ork w eek , the regular rate
o f t he em p loyee will vary f rom w eek to w eek and is determ ined b y d ivid ing the num ber of hours w ork ed in the w ork week into the am ount of s alary to obtain the ap p licable hourly rate f or the w eek

. Id

. The as s um p tion of the FWW is that the w eek ly s alary p ays not j us t f or the firs t 40 hours
w ork ed at s traight tim e p ay, but als o f or all of the hours o ve r 40 at s traight tim e p ay. This
m eans that the em p loyee has received 100% of the straight tim e com p ens ation for all of the hours work ed , and thus the only ad d itional am ount d ue is the 50% “overtim e prem ium ” f or hours over 40. See, e. g. , B l a ckm on v
. Brookshi re Grocery Co. , 8 3 5 F

. 2 d 1 1 3 5, 1139 ( 5th Cir. 1988)

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plaintiffs. With regard to the first q uestion, the magistrate judge divided the plaintiffs’ w eekly salary by 55, the number of hours the magistrate judge found that the w eekly s alary w as “intended to compensate.” See 2 9 C.F.R. § 778.113(a)

. As for the second question, he noted that the F L S A in i ts plain
terms required that a non-exempt employee be paid one and one-half times his

or her regular rate for a ll h ours worked over 40, see 29 U.S.C. § 207(a), and then, proceeding f

rom th i s p r emise, the magistrate judge devised his own formula, saying: Given the finding

. . . t h at the weekly salary is properly viewed as payment for 55 hours of work, this means that f o r t h e hours from
zero to 40, Plaintiff

s have been p aid a ll they a re entitled t o; for hours over 40 and up t o 55, they have been paid only the regular rate; and for hours o ver 55, they h ave not been paid at all. For t h e purpose of c alculating damages, the P laintiffs a re therefore entitled to one-half the regular rate for each hour worked over 40 up to 55, and f o r a l l hours over 55, the P l aintiffs shall r e ceive one and onehalf times their regular rate. Ransom v. M. Patel Enters., I nc. , 2012 WL 242788, * 2 (W. D

. T e x
. J anuary 25, 2012). The c ourt then us e d such formula to calculate the actual damages to which the plaintiffs were entitled. Finally, the court addressed the issu e o f l i q u i d a t e d d a m a g e s a n d a t t o rneys’ fees. Finding that Party City had failed to show a good faith a ttempt to comply with the overtime laws, the district court a warde d liquidated d amages in an amount equal to the actual damages. I t f urther ordered Party City to pay legal fees. I n s u m mary, when judgment was entered for 14 of the plaintiffs, 6 t h e y recovered (1) $66,250.20 in unpaid o vertime, (2) $1,267.92 in unpaid minimum
wages, and (3) because the court found Party City’s violations were not in good

6 Although the s uit originally involved 16 p laintif f s , tw o recovered nothing bas ed on a tw o- year s tatute of lim itations for non- w illf ul FLSA m is clas s if

ications

. S ee 29 U

. S. C. § 255( a)

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faith or rea s o n a b l e, equal amounts as liquidated damages. The court also

a w a r d ed $331,880.00 in attorneys’ f ees a nd $8,764.03 in costs and expenses. T h e court entered final judgment on February 1 5, 2012, and b oth sides timely appealed. III. Before w e b egin o ur a nalysis, we b riefly turn to our standard o f r e v i e w. The primary i s s u e o n appeal – the trial court’s calculation o f t otal unpaid overtime – is a mixed question of law and fact. Here, t h e number o f hours the plaintiffs’ fixed salary w a s i n t ended to compensate, from which an employee’s “regular rate” of pay (salary ÷ hours), is a question of fact; o nce t h e r egular rate of hourly pay been determined, t he appropriate methodology to determine the total amount owed, a question of law, is t hen applied. F or non-jury issues in a civil case, like the post-trial damage calculation p r oceedin g here, t his court reviews conclusions of l aw de novo and findings o f fact for c lear err o r
. See Gabriel v. City o f Plano , 202 F .3d 741, 7 45 (5th Cir. 2000); see also F E D

. R. C I V

. P. 52(a)(6) (stating that “ findings of fact

. . . must not be set aside unless clearly erroneous”). When reviewing m ixe d q u e s t i ons of law and fact, this court

reverses only if the findings are based o n a clearly erroneous view o f the facts or

a misundersta n d i n g o f t h e law. Tokio M arine & Fire Ins. Co., Ltd. v. FLORA MV , 235 F.3d 963, 966 ( 5th Cir. 2001). A factual finding is clearly erroneous when, although there may be evidence to s upport it, the reviewing court on the entire evidence i s left w ith the definite and firm c o nviction that a mistake has been committed. N.A.A.C.P. v. Fordice , 252 F.3d 361, 365 (5th Cir. 2001). As we discuss below, the overwhelming evidence shows that the p laintiffs’ salary was intended to compensate all hours worked, a nd that these hours would fluctuate. Consequently, the magistrate judge’s ca l c u l a t ion – which rejected the FWW method – was based on a misunderstanding of the law and a clearly erroneous view of the facts. See FLORA MV , 235 F.3d at 966.

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IV. W e n ow broach the most important issue in resolving this appeal – the plaintiffs’ employment arrangement between them and their employer. 7 Here, the u nderstood arrangement is not a written agreement that c learly lays out the plaintiffs’ t e r m s of employment, including the number of hours they were required to work. The magistrate judge in calculating damage s , h owever, interpreted t he parties’ mutual understanding to m ean tha t t h e p l a intiffs’ salary compensated specifically for 55 hours per week. Yet th e m agistrate judge’s expressed findings d o not support such a view, a nd various parts of his opinion indicate he ill-considered the purported 55-hour a greement in other ways as well. In the following excerpt from his January 2 5, 2012 memorandum opinion and order, he said: Here, the evidence at trial demonstrates persuasivel y that t h e parties d id in fact discuss how many hours th e weekly s alary was

7 This m atter is d is pos itive becaus e the n um ber of hours the p laintif f s w ork ed each
w eek d ictates the calculation of their regular rate of p ay and thus determ ines the am ount of overtim e dam ages the em p loyer m us t p ay. To d eterm ine an em p loyee’s “regular rate” of p ay, w e s tart w ith the bas ic p rem is e that the FLSA requires overtim e com p ens ation be paid to em ployees w ho w ork f or m ore than 40 hou r s in a w eek , and this d eterm ination is m ad e on a w eek

- by- week bas is

. See 29 U

. S. C. § 207( a) ( s tating that “no em p loyer s hall em p loy any of his em p loyees

. . . f or a work w eek longer than f orty hours unles s s uch em p loyee receives com p ens ation f or his em p loym ent in exces s of [ f o r t y hours ] at a rate not les s than one and one- half tim es the regular rate at whic h h e i s em p loyed

. ”)

. The term “regular rate” is not d ef ined by statute, but is d ef ined by regulation. S e e 2 9 C

. F. R. § 778. 109 ( “The regular hourly rate of p ay of an em p loyee is d eterm ine d b y d ivid ing his total rem uneration f or em p loym ent

. . . in any w ork w eek by the total num ber of hours a ctua l l

y w orked by him in that w ork w eek f or which s uc h c om p ens ation w as p aid

. ”) ( em p has is ad d ed ) ; accord , O v erni ght M otor T r a n s p
. Co. v
. M

issel , 316 U. S. 572, 580 n. 16 ( 1942) ( s tating that “[ w ]a g e d i v i d ed by hours equals regular rate. ”)

. This general rule, how ever, is s lightly m od if ied w hen an em p loyee is p aid a s pecif ic w eek ly s alary f

or a s p ecif

ied
num ber of h o u r s – that is to s ay, a non- f luctuating w ork w eek : the regular rate is then calc u l a t e d by “d ivid ing the s alary by the num ber of hours which the s alary is i ntended to
com p ensa t e
. ” 29 C. F. R. § 778. 113( a) ( em p has is ad d ed )

. Thus , w hen an em p loyee receives f ixed p ay for a s p ecif

ic num ber of p red eterm ined hours ( s ay, 40) , the regular rate equals pay d ivid ed by that s am e num ber o f h o u r s , see i d. , but w hen he receives f ixed p ay f

or uns p ecif

ied hours that f luctuate week by w eek , the regular rate equals p ay d ivid ed by all hours actually w ork ed in the w ork w eek

. See 29 C. F. R. § 778. 114( a)

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intended to compensate. Al m ost all t he Plaintiffs who testified stated that when h ired they were told t hey would work a minimum
o f 5 5 h ours per week. On the work schedules, the Plaintiffs were ordinarily scheduled to work 55 h o u r s e ach week. The Plaintiffs testified that while they worked varying hours , in a normal week, they worked about 55 hours. Ransom v. M. Patel Enterprises, I nc. , 2012 WL 242788, *2 (W.D. Tex., January 25, 2012) (emphasis added). Furthermore, the deposition testimony to which the plaintiffs look for support f

ails to b olster the magistrate judge’s finding. In one e xample, Jodie H e r r e r a , Party City’s bookkeeper and unofficial office manager, testified t h a t t h e E M s a t Party City “were expected to work 50 to 55 hours a week ” ( emphasi s added) and that Party City had said this “numerous times.” The plaintiffs and, apparently, t he magistrate judge, erroneously consider such t estimony proof of

a standard 55-hour workweek , e v e n though t he t estimony i tself literally suggests fluctuating hours (somewhere i n the r a n g e o f “50 to 55”). Other testimony that the plaintiffs rely on follows this p a t t e r n. A former district
manager named Patti Tomasek, stated that the minimum hour requirement for EMs was 55 hours. And i n y e t a f urther example, p laintiff L ori Hopmann testified: In the interview [for the position at P arty City] I was t o l d [ I was g o i n g to w ork] a minimum of 55 hours a nd typically that’s all it would be. During Halloween, a couple of weeks would be over

. (Emphasis added.) The record is replete with s tatements from other employees similar t o Hopmann, Tomasek, and Herrera’s – that the m inimum r equirement

was around 50 or 5 5 hours but there would be w eeks when employees would be expected to work more. None of these statements establish that the E Ms’ salary was intended to c ompensate for a set 55-hour workweek. They simply suggest that employees understood they would w ork “roughl y ” or “around” or a “minimum” of 55 hours, not that their salary was meant to compensate for that

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“estimate” of only 55 hours. In sum, the type of evidence the magistrate judge relied upon simply does not support a finding of a set 55-hour workweek. Additionally, there is testimony t h at the magistrate judge’s finding does
not c onsider. Such t estimony, in fact, clearly shows that e mployees knew their hours would fluctuate and that their salary would not increase or decrease with those fluctuations. F or example, M s. Hopmann, c ited above, also t estified that her u n d e r s t a n d ing was that her compensation w as for any and all hours she worked, not for 55 hours. At her deposition, she was asked: Q. [Ms. H opmann,] you knew w hen you were b eing hired that t h e s a l a r y was going to cover the number of hours you work e d , regardless of how many hours you worked that week, right? A. Yes. Q. Okay. And you’ve verified that on your application , have you not, that you knew the hours were going t o c hange from week to week, right? A. Yes. (Emphasis added.) Si m ilarly, Bonnie Kurz, a plaintiff, testified that she understood that h er s a lary w as meant to compensate her for fluctuating hours: Q.

. . . [D]uring the time you were [working at Party City], the h ours fluctuated, correct? A. They did, sir. Q. An d w h e n y ou w ere applying for t he job, you e xpected those hours to fluctuate; is that right? A. Yes, sir . . . Q. In [your job applica t i o n], there’s a question. It says “can you work a f lexible schedule where days a nd number o f hours s cheduled is different each week?” Did I read that correctly? A. Yes, sir. Q. And you circled yes? A. Yeah.

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Q. So you knew that when you applied for the job? A. Yes, sir. The excerpts above and similar te s t i m o ny establish that the plaintiffs unders t ood that the h ours would fluctuate but their weekly s a lary would not. Indeed, the record contains copies of the P arty C i t y employment application, which the magistrate judge appears to have ignored entirely. The applications
state e xplicitly that “ P arty City store s
. . . h ave extended business hours for special events, store promotions, inventory, or holidays. ” Applicants were asked the question: “Can you w ork a flexible schedule where days and number of hours

s c heduled is different each week ?” (emphasis added). 8 We fail to see h o w t h e magistrate judge could have c o n s t rued “flexible schedule” and “different number of hours” to mean only and specifically “55.” F urthermore, our r eview of actual weekly data reveals no more than a handful o f t i mes that any of the plaintiffs worked a precise 55-hour week, and the workweek is m ore often 58 or 59 hours, with hours occasionally f alling well below 55. T hus, under eit her 29 C .F.R. § 778.113, which considers how many hours e mployees’ salary w as intended t o compensate (here, all hours w orked), or 2 9 C.F.R. § 778.114(a), which applies FWW (and thus divides by a ll hours worked), the regular rate is not calculated by the divisor of 55 utilized by the magistrate judge. Instead, it is computed by dividing the salary b y t h e n umber of h ours the p laintiffs a c tually worked in a given workweek. In sum, t he magistrate judge clearly erred i n finding as a fact that the mutual understanding was for a workweek specifically and o nly for 55 hours; t he workweek fluctuated and was intended to fluctuate. Only the salary was fixed.

8 Ind eed , no evid ence s how ed that any em ployee had the und ers tand ing either that the
w ork w eek w as 55 hours , no m ore, no les s, or that the salary was only f or the f irs t 55 hours of
w ork

. Nor, as w e have p ointed out, w as the m agis trate jud ge able to m ak e s u c h a f i n d ing;
w hen his ord er is p ars ed , it even ack now le d g e s t h a t “ [ t] he Plaintif f s tes tif ied that

. . . they
w orked v a ryi ng hours

. . . . ” Ra nsom , 2012 WL 242788 at *2 ( em p has is ad ded )

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V. Having determined t hat the magistrate judge clearly erred as to t he terms of plaintiffs’ empl o y m e n t , w e now turn to relevant precedent. In particular, three significant court decisions confirm that, under the specific f a c ts of this
case, the magistrate judge’s 55-hour meth o dology was error and that, on remand, the court should a pply FWW: one Supreme Court d ecision, Overnight Motor Transp. Co. v Missel , 316 U.S. 572; our own precedent, Blackmon v. Brookshire Grocery C

o. , 8 35 F.2d 1135 (5th Cir. 1988); and an analogous recent Seventh Circuit opinion addressing similar facts, Urnikis-Negro v. Am. Family Prop. Servs. , 616 F.3d 665 (7th Cir. 2010). A. Missel provid e s t he Supreme Court’s approach t o a case l ike o urs. In Missel , the employee was p aid a weekly wage for fluctuating hours; as with the plai n t i f f s here, he received the s ame amount of compensation no matter how
many hours h e worked. 316 U.S. at 574. Plaintiff-employee Missel b rought suit, alleging that he was e n t i tled to overtime. The Court a greed, holding that Missel’s weekly wage only compensated him s traight-time pay f or the hours he worked and d id not i nclude an overtime premium due u nder the Act. Id

. at 580. The Court concluded that the “regular” rate of hourly p ay was the weekly salary divided by the number of hours worked each week. Id

. Interpreting Missel to r equire a “fact specific inquiry” regarding damage methodology, the magistrate judge found important the “ facts that Missel

. . . had entered into a contract that Missel would w ork a fluctuating workweek and that he worked under the agreement for several years.” Because there was no similar written agreement here, the magistrate judge said Missel did not require the use of FWW. This assumption was error. Although it is true that Party City and the plaintiffs actually signed no written agreement, t here was an agreement

– a nd there i s no authority that requires the agreement to be in writi ng.

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Moreover, the job application clearly indicates, in writing, that Party City employees understood their job included “flexible schedules” and “different hours” each week. 9 B. Blackmon v. B rookshire Grocery Co. , which, like M issel, is controlling authority for resolving this case, r eaffirmed o u r c ircuit’s approach to the computation of unpaid ove r time. 1 0 835 F.2d 1135. The plaintiffs in Blackmon

were m eat market managers claiming they were entitled to overtime from their employer, Brookshire. I d

. at 1136. The m anagers were e mployed by Brookshire with the understanding that they w ould be paid a fixed weekly salary a nd would work whatever number of hours were requi r e d t o get the job d one: “ Each was

aware t ha t t h e f

i x ed weekly c ompensation would not fluctuate with the hours worke d

. ” I

d

. a t 1 137. Eventually the managers became dissatisfied with the irregular but consistently long h ours and filed suit s eeking overtime compensation. Id

. In the section of the opinion relevant to this c a s e, we explained the c orrect method of calculating unpaid overtime w as FWW: first, to compute t he regular hourly r a t e , “divid[e] the actual hours worked each workweek into the fixed s a l a r y .” Id

. (emphasis a dded). Then, “ [t]he overtime payment for that week is [] determined by multiplying all hours over 40 in the workweek by 1⁄2 t he regular rate for that workweek.” I d

. a t 1139 (emphasis added).

9 See a l so Wage & H our D iv. , U

. S. D ep ’t of L abor, Retroa cti v e p a ym ent of ov erti m e a nd the f l uctua ti ng w o r k w e ek m ethod of p a ym ent , O p inion Letter FLSA 2009- 3 ( Jan. 14, 2009) , 2009 WL 648995 ( ap p roving FWW to calculate the am ount of overtim e d ue to em p loyees w hos e hours f luctuated above and below a m inim um hourly exp ectation each w eek ).

1 0 I n an earlier cas e, Wa rren- Bra dsha w D ri l l i ng v
. H a l l , 124 F. 2d 42, 44 ( 5th Cir. 1941) , w e held that “if there is no agreem ent f ixing the am ount to be p aid f or regular and overtim e w ork , the regular rate, as to it, m ay pro p e r l y be determ ined by d ivid ing the total p ay each
w eek by the tota l hours w orked. ” ( Em p has is ad d ed

. )
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Thus, Blackmon and Missel reflect the same instruction for this panel and,

one would think, for the instant magistrate judge as w ell: F W W i s the proper method of calculating overtime when an employee like the Party City EMs here

a r e p aid a weekly wage and are e xpected to work fluctuating hou r s
. B u t ackn o w l e dging that Blackmon “arguably controlled t h is case,” the magistrate judge nevertheless refused to f ollo w i t o n the ground that it was wrongly decided. Cf. EZPawn , 633 F. Supp. 2d a t 406 (the same magistrate judge calling Blackmon “fundamentally flawed”). We should say, we find this an uncommon reason for the magistrate judge not to follow binding precedent. C. Finally, Urnikis-Negro , a recent S eventh Circuit d ecision, further demonstrates the propriety of applying F WW h ere. 616 F.3d 665. I n that 2010 case, the female plaintiff prevailed in her FLSA misclassification suit and was awarded overtime but was unhappy with the district court’s calculation of the
amount of pay she w as o wed, an d t h u s appealed. I d

. Although she and her employer had never “d i s c u s sed the number of hours she would be expected to work w h e n [ t h e c ompany] hired her,” the district court “found that she also understood that her [fixed weekly] salary was to cover whatever ti m e s h e w a s called upon to work in a given week.” Id

. at 667. The d istrict court had based its conclusion on § 778.114(a), see supra n.5. The Seventh Circuit considered § 778.114(a) to be a “dubious s ource of authority” that most ce rtainly “is not a remedial measure” and, a s an interpretive bulletin, is entitled o nly to a “ m e a s u r e of respect,” not full Chevron deference; nevertheless, the Seventh Circuit found that the district court’s conclusion was independently supported by Missel

. I d

. at 6 76, 678-79, 6 81. B ecause Urnikis-Negro’s w age was “in t e n ded to compensate her not for 40 hours p er week or some o ther fixed number of hours, but for any and all h ours that she worked in a given week

. . . it is Missel which dictates how

13 Case: 12-50534 Document: 00512344480 Page: 13 Date Filed: 08/16/2013No. 12-50534

the regular rate o f pay must be calculated

. . . .” Id

. at 681. M issel , as discussed above, endorses FWW. In our view, the Seventh Circuit p r operly affirmed the FWW determination of the regular rate of pay. The relevant f acts of the p l a i n t i f

f s’ employment in the present c ase are quite similar to the p laintiff’s in UrnikisNegro. T here, as h ere, the testimony showed t hat the employee expected to work

some g ene r a l n umber of roughly fixed hours; y et, after s he was hired, the employee o ften worked substantially more than that n umber o f hours e a c h w e ek, and she was always paid only her fixed weekly wage. Id

. at 680. The case before

us fits this precedent. As outlined above, the EMs at Party City were told that the workweek was “around” 55 hours, b ut they were also t old that the number would fluctuate from time to time. Moreover, the undisputed facts demonstrate that they often w orked more, 1 1 and sometimes significantly f ewer hours. 1 2 This

course o f condu c t, a long with the p arties’ initial understanding of the employment arrangement, establishes that the plaintiffs here were to be paid a fixed salary f

or the total number of hours they worked in a week. S ee Singer v. City of Waco, T

ex. , 324 F.3d 813, 824-25 (5th C ir. 2003) (stating that “[w]e can determine how many hours the salary i s ‘intended to compensate’ by examining what happens under t he contract.”); see a lso , U rnikis-Negro, 616 F.3d a t 681 n.8 (collecting cases suggesting that, in the absence of a n explicit agreement, course of conduct may be used to infer an agreement regarding the number of hours a salary was intended to compensate).

1 1 For exam p le, p laintif f Bonnie K urz tes tif

ied at her d ep os ition that “[ t] here w as a lot of tim es w e w ent over 55 hours , y es , s ir. ” The record is rep lete w ith other, s im ilar tes tim ony.

1 2 The record contains charts of week ly hour s w o r k e d by each p laintif f d uring the relevant p eriod

. O n Abigail Rans om ’s chart, there are c e r t a i n w eek s in w hich s he w ork ed 44. 8, 35. 48, 34, and 38. 97 hours , f or exam p le. O ther em p loyees ’ c h a r t s c o ntain s im ilar
num bers

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The magistrate judge, h owever, dismissed the a uthority of Urnikis-Negro because the Seventh Circuit’s holding, in the magistrate j u d g e ’ s opinion, was “divorced from the facts” of that case. But a s stated above, t h e relevant facts in Urnikis-Negro a re almost identical t o t h ose here, where employees regularly worked more, and sometimes less, than some rough estimate of a fixed number of hours. The magistrate j udge’s dismissal o f U rnikis-Negro is, therefore, error because, inter alia, it fails to consider employees’ course of conduct. 1 3 In sum, the magistrate j u d g e ’ s d i s m i s s a l o f M i s s e l , Blackmon , and UrnikisN e g r o is clear e rror. Because the magistrate j udge calculated the plaint i f f s ’ regular r ate of pay by dividing the weekly wage by 55, rather t han by all hours worked, we hold that h is d ecision was based upon a c learly erroneous view of the facts – that is, his view that t h e p a r t i e s had a mutual u nderstanding that the workweek was for 5 5 hours. And because t h is infected t h e c o u r t’s damage calculation, which did not p r o p erly apply the 50% o vertime premium established by FWW to a ll hours worked over 40 per week, 1 4 we also hold that the court simultaneously committed an error of l a w. Consequently, we vacate the court’s award of actual damages. VI.

1 3 At the s um mary jud gm en t h e aring in the pres ent cas e, the m agis trate j ud g e ad m itted his ow n error in f

ailing to cons id er cours e of cond uct of the p arties as af f irm ati on of a f luctuating w ork w eek , w hen he s aid : “So I d on’t k now of any cas e
. . . w here a court has s aid , w ell the f

act that [ em p loyee- p laintif f s ] cam e to w ork [ f

or d ef end ant- em p loyer] and und ers tood that – at leas t accep ted im p licit in their actions , that s alary f or whatever hours they w ork ed is not enough to s how the k ind of agreem ent that they need to have. I ’m the only one w ho’s d one that

. Mak es m e s tart to think , m aybe I’ve got it w rong. ”

1 4 A f ter d eterm ining an em p loyee’s “regular rate” of pay, the next s tep is the calculation of the overall am ount of unp aid overtim e d ue. U nd er FWW, the em p loyee is then “aw ard ed
a p r e m i u m of one- ha l f of that rate f

or the overtim e hours he w ork ed that w eek

. ” U rni ki sN egro , 616 F. 3d at 678 ( em p h a s is ad ded ) ; see al so , Bl a ckm on , 835 F. 2d at 1139. T he
m agis trate jud ge’s calculation cons id ered hours work ed in exces s of 55 to be uncom p ens ated , thus ad d ing a p rem ium of 150% , rather than only the 50% due und er FWW, f or hours over 55. This w as error. Stated dif f erently, the m agis trate jud ge erred by ap p lying the p rem ium of oneha l f the regular rate only to hours 40 through 55, ins tead of a l l hours over 40

. 15 Case: 12-50534 Document: 00512344480 Page: 15 Date Filed: 08/16/2013No. 12-50534

In their b rief, o n cross-appeal, the p laintiffs voiced one c oncern 1 5 that
warrants further consideration: that P a r t y City’s a lleged failure o n a number of occasions to ensure payment of the minimum wage forecloses t he use of FWW in calcul a t i n g unpaid o vertime compensation. See Desmond v. PNGI Charles Town Gaming, LLC , 630 F.3 d 3 5 1 , 3 5 5 ( 4th Cir. 2001) (relying on and characterizing Ur n i k is-Negro as h olding “when an employer and e mployee agree that a fixed salary will co n s t i t u t e payment a t the regular rate f or all hours worked and the rate is not l ower than the minimum wage , [FW W a pplies]”) (emphasis added); see also 29 C.F.R. § 778.114(c) (stating t h at “[FWW] may not be used unless [the employee’s] s a l a r y i s s ufficiently large to assure that no workweek will be worked in which the employee’s average hourly earnings from the salary fall below the m i nimum hourly wage rate app l i c able under the [FLSA]

. . . .”). Our decision i n Blackmon addresses this concern: while agreeing that § 7 78.114 “is inapplicable if dividing t h e n umber of hours a ctually worked into the fixed salary results in an hour l y rate below the m inimum established by [the FLSA],” 835 F.2d at 1138 n.1, Blackmon nonetheless also provided the appropriate solution: “ In such instance, the minimum wage must be paid and that minimum serves a s the regular rate o f pay for purposes of computing overtime p ayments.” Id

. (emphasis a dded). T his conclusion rests on t h e predicate that the FLSA only r equires that the m i n i m u m wage be paid for straight-time hours worked. When the plaintiffs’ overtime is recalculat e d o n r emand, we have no indication whether this problem will arise. Ne v e r t h e l e s s, for any w eeks in which applying FWW results in payment o f less than the minimum wage for straight time pay, t he r egular hourly rate for unpaid hours of w o r k i s the minimum wage itself.

15 The p laintif

fs “cros s - ap p eal, ” and yet, they d evote only one f ootnote in the i r e n t i r e ap p ellate brief to the is s ue. 16 Case: 12-50534 Document: 00512344480 Page: 16 Date Filed: 08/16/2013No. 12-50534
VII. Finally, we address the liquidated damages and attorneys’ fees awarded by the magistrate j u d g e
. The FLSA, 29 U.S.C. § 2 16(b), allows for liquidated damages t o be awarded for FLSA vio l a t ions in an amount “equal” to actual damages. 1 6 Id

. Because we have held that t he district court erred i n calculating actual d amages, see supra Part V, we also vacate the liquidated damage award and remand for the district c ourt to determine w hat amount, if any, of liquidated damages remains appropriate. As for a ttorneys’ fees, 1 7 we have held that “[t]he
most critical factor in determining an attorneys’ fee award i s the ‘degree of

success obtained.” Romaguera v. Gegenheimer , 162 F.3d 893, 8 96 (5th Cir. 1998) (quoting H

e n sley v. Eckerhart , 461 U.S. 424, 4 36 ( 1983)). Because t he new damages th at w ill b e awarded are relevant to p laintiffs’ overall success in litigating this s uit, 1 8 we vacate the amount of the attorneys’ fee award and remand f

or r ecalculation. See West v. Nabors D rilling USA, Inc. , 3 30 F.3d 379, 395 (vacating attorneys’ fee award for reconsideration in the light of reversal of

1 6 The general rule is that the court s hould aw ard the am ount f ound f or actual d am ages as liquid ated d am ages
. S i nger , 324 F. 3d at 822- 23. O n rem and , the d is trict court m ay ( but is not requ i r e d to) d ecline to aw ard liquid ated d am ages ( or red uce the am ount) if the court conclud es that the em p loyer acted in good f aith or had reas onable ground s to believe that its actions com p lied w ith the FLSA. Id

. at 823. It is the em p loyer’s subs tantial burd en to p rove good f aith and reas onablenes s. Id

. We leave the good f aith d eterm ination and Party City’s p otential liability f

or liquid ated d am ages up to the dis trict court.

1 7 U nd er the FLSA, a d is trict court m ay aw ard reas onable attorney’s fees to the p revailing p arty. 29 U

. S. C. § 216( b)

. M ultip lying the num ber of hours reas onably s p ent on the cas e by an a p p r o p riate hourly rate in the com m unity f or s uch w ork , courts us e the s ocalled “lod es tar m ethod

. ” H ei dtm a n v
. County of E l Pa so , 171 F. 3d 1038, 1043 ( 5th Cir. 1999)

. There is a s trong p res um p tion that the lod es tar am ount is a reas onable f ee, although a court
m ay d ecreas e or enhance it bas ed on the f actors es tablis hed in Johnson v
. G eorgi a H i ghw a y Exp ress, Inc. , 488 F. 2d 714, 717- 19 ( 5th Cir. 1974)

. See a l so , Perdue v
. Kenny A

. ex rel

. Wi nn , 130 S. Ct. 1662, 1673 ( 2010)

.

1 8 See Ci ty of R i v e r s i d e v
. Ri v era , 477 U

. S. 561, 574 (1986) ( s tating “The am ount of d am age s a p laintif

f recovers is certainly relevant to the am ount of attorney’s f ees to be
aw ard ed [

. ] ”)

. 17 Case: 12-50534 Document: 00512344480 Page: 17 Date Filed: 08/16/2013No. 12-50534

damage calculation ) ; s e e also , Instone Travel T ech Marine & Offshore v. Int’l Shipping P

artners, Inc

. , 334 F.3d 423, 433 (5th Cir. 2003) (following reversal of damage a ward, court remands for reconsideration of attorneys’ f ees incurred on appeal )

. V III. In summary, we hold t h a t t h e record evidence c learly shows that the plaintiffs in this case w ere paid a fixed weekly salary and were expected to work fluctuating weekly hours. Thus, t he district court’s 55-ho u r m e thod of calculating unpaid overtime damag e s w a s error, because it miscomprehended the employment arrangement and utilized a divisor of 55 in calc u l a ting plaintiffs’ regular rate of pay rather than applying a divisor equal to the number of all hou r s a c t u a lly worked in such workweek. Consequently, the amount of damages awarded is erroneous. We REVERSE the ruling of the district court, VACATE the amount of actual damages and REMAND for recalculation as instructed in this o p inion. We further V ACATE the a ward of liquidated damages and the amount o f the attorneys’ fee award, and w e REMAND for reconsideration of those awards. 1 9 REVERSED, VACATED, and

1 9 Reas s ignm ent of a cas e m ay be ap prop riate w h e r e " t he original jud ge w ould
reas onably be exp ected up on rem and to have s ubs tantial d if f iculty in p utting out of his or her
m ind p revious ly- exp res s ed view s or f ind ings d eterm ined to be erroneous or bas ed on evid ence that m us t be rejected

. " Lea gue of U

ni ted La t i n A m
. Ci t i z ens, D i st. 19 v. C i ty of Boerne , 675 F. 3d 433, 440 ( 5th Cir. 2012) ( quoting In re D a im lerChrysl er Corp

. , 294 F .3d 697, 701 ( 5th Cir. 2002) (citation and ins et quotation m ark s om itted ) ). H ere, there is s om e ind ication, f rom his exp res s s tatem ents and w ritings , that the magis trate jud ge is res is tant to the law as s et out in this op inion. Becaus e w e tak e n o t e o f 28 U

. S. C. § 636( c) ( 4) , which s tates that "[ t] he [ d is trict] court may, f

or good caus e s how n on its ow n m otion

. . . , vacate a ref erence of a civil
m atter to a m agis trate jud ge
. . . , " see Sa nches v
. Ca rrol l t on- Fa rm ers B ra nch Indep

. Sch. D i st. , 647 F. 3d 156, 171 ( 5th C ir. 2011) , w e leave it up to the d is trict j ud g e to w hom the cas e w as originally as s igned to determ ine w hether the m agis trate j ud g e is the ap p rop riate jud ge to hand le the cas e on rem and

.

18 Case: 12-50534 Document: 00512344480 Page: 18 Date Filed: 08/16/2013No. 12-50534
REMANDED.

19 Case: 12-50534 Document: 00512344480 Page: 19 Date Filed: 08/16/2013