IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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 and fifteen other executive managers

(collectively hereinafter, plaintiffs) of Party City, a retail chain, to be

misclassified by their employer as exempt from the Fair Labor Standards Act

United States Court of Appeals

Fifth Circuit

F I L E D

August 16, 2013

Lyle W. Cayce

Clerk

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(FLSA), 29 U.S.C. § 201, et seq., the plaintiffs became eligible for an award of

overtime wages. Because the plaintiffs were paid a weekly salary, the trial court

had to compute their hourly rate of pay in order to award overtime damages. 

Disregarding the so-called “fluctuating workweek” (FWW) method of

determining overtime damages – a method established by precedent and

relevant federal regulations as applicable in this case – the district court,

presided over by a magistrate judge, instead determined overtime damages by

using the magistrate judge’s unorthodox preferred methodology.1 The plaintiffs’

employer, M. Patel Enterprises, Incorporated2(“Party City”), contends this

method of calculation was error, and we agree. We therefore REVERSE the

ruling of the district court, VACATE the amount of actual damages awarded to

plaintiffs as overtime and REMAND for recalculation. We further VACATE the

award of liquidated damages and the amount of attorneys’ fees and REMAND

for reconsideration.

I.

In this opinion, we will proceed as follows: First, we discuss the facts at

issue and the lower court proceedings leading to this appeal. Second, we

consider the standard of review and the specific employment arrangement

between the plaintiffs and Party City. Third, finding the district court’s factual

findings to be clearly erroneous, we sort through relevant FLSA background

principles and precedent, apply them to this case, and explain why they compel

the use of FWW in calculating the amount of overtime damages the plaintiffs are

due. Finally, we consider the plaintiffs’ cross appeal, as well as liquidated

damages and attorneys’ fees. 

1 The parties consented to proceed before a magistrate judge for all purposes. 28 U.S.C.

§ 636(c)(1); FED R. CIV. P. 73(a).

2 Defendant-Appellant M. Patel Enterprises was an Austin-area owner of a Party City

franchise of stores.

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Because the basic question here can get lost in the weeds of the

regulations, the arguments, and the methods of calculation, we state its

simplicity: How much overtime pay does Party City owe to its employees under

the FLSA? By proceeding along the course outlined above, we will determine the

proper method of calculation and remand to the district court for computation

of the proper amount.

II.

This suit arose in Austin, Texas, where the plaintiffs were employed as

executive managers (EMs) at Party City retail stores. The plaintiffs filed a

collective action under the FLSA in 2010. They alleged that Party City had

misclassified them as exempt from the overtime provisions of the FLSA. 

Furthermore, by paying them only a weekly salary that did not vary – even

when the plaintiffs had often worked weeks of irregular, consistently long

hours – Party City owed them overtime and additional hourly pay for such

workweeks. In due course, the case proceeded to jury trial, presided over by a

magistrate judge.3 On November 14, 2011, a jury found that Party City had

misclassified the plaintiffs as exempt from the FLSA and overtime pay; but the

jury also held that this FLSA violation was not willful. 

In this appeal, neither party contests Party City’s liability as found by the

jury. Instead, the appeal centers on the trial court’s error in calculating the

overtime damages. In motions for summary judgment before the magistrate

judge, the plaintiffs argued for the so-called “EZPawn” method4for calculating

3 The trial court had federal question jurisdiction under the FLSA, 29 U.S.C. § 201, et

seq., and 28 U.S.C. § 1331.

4 This method comes from In re EZPawn LP Fair Labor Standards Act Litig., 633 F.

Supp. 2d 395 (W.D. Tex. 2008), a decision written by the same magistrate judge that handled

this case. Generally speaking, this method computes an employee’s “regular rate” of pay, see

discussion infra, by dividing his weekly salary by 40, the number of hours in a standard

workweek. See, e.g., id. at 404 (providing an example of an overtime compensation calculation

utilizing a denominator of 40 in computing the regular rate). An overtime payment of 150%

3

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overtime damages, while Party City argued for the application of the FWW

method.5 The court denied each party’s motion for summary judgment. The

court held that “[d]etermining the proper overtime calculation method is a factdependent inquiry, and the facts [we]re in dispute . . . .” Ransom v. M. Patel

Enters., Inc., 825 F. Supp. 2d 799, 810 (W.D. Tex. 2011). The district court,

however, found that “the parties have stipulated regarding the number of hours

worked by the Plaintiffs and the salary each was paid during the relevant

period . . . [that] there are no issues to send to the jury on damages.” Id. The

case then proceeded to trial on liability only.

The jury, as previously noted, found that Party City had misclassified the

plaintiffs as exempt from the FLSA. With the jury’s determination of FLSA

liability in hand, the court then turned to its responsibility: the calculation of

damages. The court’s analysis of actual damages focused on two related

questions: first, determining plaintiffs’ “regular rate” of hourly pay and, second,

how that regular rate should be used to compute the overall amount due to

of the regular rate for all hours worked over 40 during the workweek is then awarded. Id.

5

29 C.F.R. § 778.114(a) provides an explanation of FWW:

An employee employed on a salary basis may have hours of work which

fluctuate from week to week and the salary may be paid him pursuant

to an understanding with his employer that he will receive such fixed

amount as straight time pay for whatever hours he is called upon to

work in a workweek, whether few or many . . . . Since the salary in such

a situation is intended to compensate the employee at straight time

rates for whatever hours are worked in the workweek, the regular rate

of the employee will vary from week to week and is determined by

dividing the number of hours worked in the workweek into the amount

of salary to obtain the applicable hourly rate for the week.

Id. The assumption of the FWW is that the weekly salary pays not just for the first 40 hours

worked at straight time pay, but also for all of the hours over 40 at straight time pay. This

means that the employee has received 100% of the straight time compensation for all of the

hours worked, and thus the only additional amount due is the 50% “overtime premium” for

hours over 40. See, e.g., Blackmon v. Brookshire Grocery Co., 835 F.2d 1135, 1139 (5th Cir.

1988).

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plaintiffs. With regard to the first question, the magistrate judge divided the

plaintiffs’ weekly salary by 55, the number of hours the magistrate judge found

that the weekly salary was “intended to compensate.” See 29 C.F.R. §

778.113(a). As for the second question, he noted that the FLSA in its plain

terms required that a non-exempt employee be paid one and one-half times his

or her regular rate for all hours worked over 40, see 29 U.S.C. § 207(a), and then,

proceeding from this premise, the magistrate judge devised his own formula,

saying:

Given the finding . . . that the weekly salary is properly viewed as

payment for 55 hours of work, this means that for the hours from

zero to 40, Plaintiffs have been paid all they are entitled to; for

hours over 40 and up to 55, they have been paid only the regular

rate; and for hours over 55, they have not been paid at all. For the

purpose of calculating damages, the Plaintiffs are therefore entitled

to one-half the regular rate for each hour worked over 40 up to 55,

and for all hours over 55, the Plaintiffs shall receive one and onehalf times their regular rate.

Ransom v. M. Patel Enters., Inc., 2012 WL 242788, *2 (W.D. Tex. January 25,

2012). The court then used such formula to calculate the actual damages to

which the plaintiffs were entitled. 

Finally, the court addressed the issue ofliquidated damages and attorneys’

fees. Finding that Party City had failed to show a good faith attempt to comply

with the overtime laws, the district court awarded liquidated damages in an

amount equal to the actual damages. It further ordered Party City to pay legal

fees.

In summary, when judgment was entered for 14 of the plaintiffs,6they

recovered (1) $66,250.20 in unpaid overtime, (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 suit originally involved 16 plaintiffs, two recovered nothing based on a

two-year statute of limitations for non-willful FLSA misclassifications. See 29 U.S.C. § 255(a).

5

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faith or reasonable, equal amounts as liquidated damages. The court also

awarded $331,880.00 in attorneys’ fees and $8,764.03 in costs and expenses. The

court entered final judgment on February 15, 2012, and both sides timely

appealed.

III.

Before we begin our analysis, we briefly turn to our standard of review. 

The primary issue on appeal – the trial court’s calculation of total unpaid

overtime – is a mixed question of law and fact. Here, the number of hours the

plaintiffs’ fixed salary was intended to compensate, from which an employee’s

“regular rate” of pay (salary ÷ hours), is a question of fact; once the regular rate

of hourly pay been determined, the appropriate methodology to determine the

total amount owed, a question of law, is then applied. For non-jury issues in a 

civil case, like the post-trial damage calculation proceeding here, this court

reviews conclusions of law de novo and findings of fact for clear error. See

Gabriel v. City of Plano, 202 F.3d 741, 745 (5th Cir. 2000); see also FED. R. CIV.

P. 52(a)(6) (stating that “findings of fact . . . must not be set aside unless clearly

erroneous”). When reviewing mixed questions of law and fact, this court

reverses only if the findings are based on a clearly erroneous view of the facts or

a misunderstanding of the law. Tokio Marine & 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 support it, the reviewing court on the

entire evidence is left with the definite and firm conviction 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 plaintiffs’ salary was

intended to compensate all hours worked, and that these hours would fluctuate. 

Consequently, the magistrate judge’s calculation – 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.

We now broach the most important issue in resolving this appeal – the

plaintiffs’ employment arrangement between them and their employer.7 Here,

the understood arrangement is not a written agreement that clearly lays out the

plaintiffs’ terms of employment, including the number of hours they were

required to work. The magistrate judge in calculating damages, however,

interpreted the parties’ mutual understanding to mean thatthe plaintiffs’ salary

compensated specifically for 55 hours per week. Yet the magistrate judge’s

expressed findings do not support such a view, and various parts of his opinion

indicate he ill-considered the purported 55-hour agreement in other ways as

well. In the following excerpt from his January 25, 2012 memorandum opinion

and order, he said:

Here, the evidence at trial demonstrates persuasively that the

parties did in fact discuss how many hours the weekly salary was

7 This matter is dispositive because the number of hours the plaintiffs worked each

week dictates the calculation of their regular rate of pay and thus determines the amount of

overtime damages the employer must pay. 

To determine an employee’s “regular rate” of pay, we start with the basic premise that

the FLSA requires overtime compensation be paid to employees who work for more than 40

hours in a week, and this determination is made on a week-by-week basis. See 29 U.S.C. §

207(a) (stating that “no employer shall employ any of his employees . . . for a workweek longer

than forty hours unless such employee receives compensation for his employment in excess of

[forty hours] at a rate not less than one and one-half times the regular rate at which he is

employed.”). The term “regular rate” is not defined by statute, but is defined by regulation.

See 29 C.F.R. § 778.109 (“The regular hourly rate of pay of an employee is determined by

dividing his total remuneration for employment . . . in any workweek by the total number of

hours actually worked by him in that workweek for which such compensation was paid.”)

(emphasis added); accord, Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 580 n.16

(1942) (stating that “[w]age divided by hours equals regular rate.”). This general rule,

however, is slightly modified when an employee is paid a specific weekly salary for a specified

number of hours – that is to say, a non-fluctuating workweek: the regular rate is then

calculated by “dividing the salary by the number of hours which the salary is intended to

compensate.” 29 C.F.R. § 778.113(a) (emphasis added). Thus, when an employee receives fixed

pay for a specific number of predetermined hours (say, 40), the regular rate equals pay divided

by that same number of hours, see id., but when he receives fixed pay for unspecified hours

that fluctuate week by week, the regular rate equals pay divided by all hours actually worked

in the workweek. See 29 C.F.R. § 778.114(a).

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intended to compensate. Almost all the Plaintiffs who testified

stated that when hired they were told they would work a minimum

of 55 hours per week. On the work schedules, the Plaintiffs were

ordinarily scheduled to work 55 hours each week. The Plaintiffs

testified that while they worked varying hours, in a normal week,

they worked about 55 hours.

Ransom v. M. Patel Enterprises, Inc., 2012 WL 242788, *2 (W.D. Tex., January

25, 2012) (emphasis added). 

Furthermore, the deposition testimony to which the plaintiffs look for

support fails to bolster the magistrate judge’s finding. In one example, Jodie

Herrera,Party City’s bookkeeper and unofficial office manager, testified thatthe

EMs at Party City “were expected to work 50 to 55 hours a week” (emphasis

added) and that Party City had said this “numerous times.” The plaintiffs and,

apparently, the magistrate judge, erroneously consider such testimony proof of

a standard 55-hour workweek, even though the testimony itself literally

suggests fluctuating hours (somewhere in the range of “50 to 55”). Other

testimony that the plaintiffs rely on follows this pattern. A former district

manager named Patti Tomasek, stated that the minimum hour requirement for

EMs was 55 hours. And in yet a further example, plaintiff Lori Hopmann

testified:

In the interview [for the position at Party City] I was told [I was

going to work] a minimum of 55 hours and typically that’s all it

would be. During Halloween, a couple of weeks would be over.

(Emphasis added.) The record is replete with statements from other employees

similar to Hopmann, Tomasek, and Herrera’s – that the minimum requirement

was around 50 or 55 hours but there would be weeks when employees would be

expected to work more. None of these statements establish that the EMs’ salary

was intended to compensate for a set 55-hour workweek. They simply suggest

that employees understood they would work “roughly” 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 that the magistrate judge’s finding does

not consider. Such testimony, in fact, clearly shows that employees knew their

hours would fluctuate and that their salary would not increase or decrease with

those fluctuations. For example, Ms. Hopmann, cited above, also testified that

her understanding was that her compensation was for any and all hours she

worked, not for 55 hours. At her deposition, she was asked:

Q. [Ms. Hopmann,] you knew when you were being hired that the

salary was going to cover the number of hours you worked,

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 to change from week to week,

right?

A. Yes.

(Emphasis added.) Similarly, Bonnie Kurz, a plaintiff, testified that she

understood that her salary was meant to compensate her for fluctuating hours:

Q. . . . [D]uring the time you were [working at Party City], the hours

fluctuated, correct?

A. They did, sir.

Q. And when you were applying for the job, you expected those

hours to fluctuate; is that right?

A. Yes, sir . . .

Q. In [your job application], there’s a question. It says “can you

work a flexible schedule where days and number of hours scheduled

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 testimony establish that the plaintiffs

understood that the hours would fluctuate but their weekly salary would not. 

Indeed, the record contains copies of the Party City employment application,

which the magistrate judge appears to have ignored entirely. The applications

state explicitly that “Party City stores . . . have extended business hours for

special events, store promotions, inventory, or holidays.” Applicants were asked

the question: “Can you work a flexible schedule where days and number of hours

scheduled is different each week?” (emphasis added).8 We fail to see how the

magistrate judge could have construed “flexible schedule” and “different number

of hours” to mean only and specifically “55.” Furthermore, our review of actual

weekly data reveals no more than a handful of times that any of the plaintiffs

worked a precise 55-hour week, and the workweek is more often 58 or 59 hours,

with hours occasionally falling well below 55. Thus, under either 29 C.F.R. §

778.113, which considers how many hours employees’ salary was intended to

compensate (here, all hours worked), or 29 C.F.R. § 778.114(a), which applies

FWW (and thus divides by all 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 by the number of hours the plaintiffs actually worked in a

given workweek. In sum, the magistrate judge clearly erred in finding as a fact

that the mutual understanding was for a workweek specifically and only for 55

hours; the workweek fluctuated and was intended to fluctuate. Only the salary

was fixed.

8

Indeed, no evidence showed that any employee had the understanding either that the

workweek was 55 hours, no more, no less, or that the salary was only for the first 55 hours of

work. Nor, as we have pointed out, was the magistrate judge able to make such a finding;

when his order is parsed, it even acknowledges that “[t]he Plaintiffs testified that . . . they

worked varying hours . . . .” Ransom, 2012 WL 242788 at *2 (emphasis added). 

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V.

Having determined that the magistrate judge clearly erred as to the terms

of plaintiffs’ employment, we now turn to relevant precedent. In particular,

three significant court decisions confirm that, under the specific facts of this

case, the magistrate judge’s 55-hour methodology was error and that, on

remand, the court should apply FWW: one Supreme Court decision, Overnight

Motor Transp. Co. v Missel, 316 U.S. 572; our own precedent, Blackmon v.

Brookshire Grocery Co., 835 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 provides the Supreme Court’s approach to a case like ours. In

Missel, the employee was paid a weekly wage for fluctuating hours; as with the

plaintiffs here, he received the same amount of compensation no matter how

many hours he worked. 316 U.S. at 574. Plaintiff-employee Missel brought suit,

alleging that he was entitled to overtime. The Court agreed, holding that

Missel’s weekly wage only compensated him straight-time pay for the hours he

worked and did not include an overtime premium due under the Act. Id. at 580. 

The Court concluded that the “regular” rate of hourly pay was the weekly salary

divided by the number of hours worked each week. Id.

Interpreting Missel to require a “fact specific inquiry” regarding damage

methodology, the magistrate judge found important the “facts that Missel . . .

had entered into a contract that Missel would work 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, there was an agreement

– and there is no authority that requires the agreement to be in writing. 

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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. Brookshire Grocery Co., which, like Missel, is controlling

authority for resolving this case, reaffirmed our circuit’s approach to the

computation of unpaid overtime.10

835 F.2d 1135. The plaintiffs in Blackmon

were meat market managers claiming they were entitled to overtime from their

employer, Brookshire. Id. at 1136. The managers were employed by Brookshire

with the understanding that they would be paid a fixed weekly salary and would

work whatever number of hours were required to get the job done: “Each was

aware that the fixed weekly compensation would not fluctuate with the hours

worked.” Id. at 1137. Eventually the managers became dissatisfied with the

irregular but consistently long hours and filed suit seeking overtime

compensation. Id. In the section of the opinion relevant to this case, we

explained the correct method of calculating unpaid overtime was FWW: first, to

compute the regular hourly rate, “divid[e] the actual hours worked each

workweek into the fixed salary.” Id. (emphasis added). Then, “[t]he overtime

payment for that week is [] determined by multiplying all hours over 40 in the

workweek by 1⁄2 the regular rate for that workweek.” Id. at 1139 (emphasis

added). 

9 See also Wage & Hour Div., U.S. Dep’t of Labor, Retroactive payment of overtime and

the fluctuating workweek method of payment, Opinion Letter FLSA 2009-3 (Jan. 14, 2009),

2009 WL 648995 (approving FWW to calculate the amount of overtime due to employees whose

hours fluctuated above and below a minimum hourly expectation each week).

10

In an earlier case, Warren-Bradshaw Drilling v. Hall, 124 F.2d 42, 44 (5th Cir. 1941),

we held that “if there is no agreement fixing the amount to be paid for regular and overtime

work, the regular rate, as to it, may properly be determined by dividing the total pay each

week by the total hours worked.” (Emphasis added.)

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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 well: FWW is the proper

method of calculating overtime when an employee like the Party City EMs here

are paid a weekly wage and are expected to work fluctuating hours. But

acknowledging that Blackmon “arguably controlled this case,” the magistrate

judge nevertheless refused to follow it on the ground that it was wrongly

decided. Cf. EZPawn, 633 F. Supp. 2d at 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 Seventh Circuit decision, further

demonstrates the propriety of applying FWW here. 616 F.3d 665. In 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 was owed, and thus appealed. Id. Although she and her

employer had never “discussed the number of hours she would be expected to

work when [the company] hired her,” the district court “found that she also

understood that her [fixed weekly] salary was to cover whatever time she was

called upon to work in a given week.” Id. at 667. The district court had based

its conclusion on § 778.114(a), see supra n.5. The Seventh Circuit considered §

778.114(a) to be a “dubious source of authority” that most certainly “is not a

remedial measure” and, as an interpretive bulletin, is entitled only to a “measure

of respect,” not full Chevron deference; nevertheless, the Seventh Circuit found

that the district court’s conclusion was independently supported by Missel. Id.

at 676, 678-79, 681. Because Urnikis-Negro’s wage was “intended to compensate

her not for 40 hours per week or some other fixed number of hours, but for any

and all hours that she worked in a given week . . . it is Missel which dictates how

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the regular rate of pay must be calculated . . . .” Id. at 681. Missel, as discussed

above, endorses FWW. 

In our view, the Seventh Circuit properly affirmed the FWW

determination of the regular rate of pay. The relevant facts of the plaintiffs’

employment in the present case are quite similar to the plaintiff’s in UrnikisNegro. There, as here, the testimony showed that the employee expected to work

some general number of roughly fixed hours; yet, after she was hired, the

employee often worked substantially more than that number of hours each week,

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, but they were also told that the number

would fluctuate from time to time. Moreover, the undisputed facts demonstrate

that they often worked more,11and sometimes significantly fewer hours.12 This

course of conduct, along with the parties’ initial understanding of the

employment arrangement, establishes that the plaintiffs here were to be paid a

fixed salary for the total number of hours they worked in a week. See Singer v.

City of Waco, Tex., 324 F.3d 813, 824-25 (5th Cir. 2003) (stating that “[w]e can

determine how many hours the salary is ‘intended to compensate’ by examining

what happens under the contract.”); see also, Urnikis-Negro, 616 F.3d at 681 n.8

(collecting cases suggesting that, in the absence of an explicit agreement, course

of conduct may be used to infer an agreement regarding the number of hours a

salary was intended to compensate).

11 For example, plaintiff Bonnie Kurz testified at her deposition that “[t]here was a lot

of times we went over 55 hours, yes, sir.” The record is replete with other, similar testimony.

12 The record contains charts of weekly hours worked by each plaintiff during the

relevant period. On Abigail Ransom’s chart, there are certain weeks in which she worked

44.8, 35.48, 34, and 38.97 hours, for example. Other employees’ charts contain similar

numbers.

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The magistrate judge, however, dismissed the authority of Urnikis-Negro

because the Seventh Circuit’s holding, in the magistrate judge’s opinion, was

“divorced from the facts” of that case. But as stated above, the relevant facts in

Urnikis-Negro are almost identical to those here, where employees regularly

worked more, and sometimes less, than some rough estimate of a fixed number

of hours. The magistrate judge’s dismissal of Urnikis-Negro is, therefore, error

because, inter alia, it fails to consider employees’ course of conduct.13

In sum, the magistrate judge’s dismissal of Missel, Blackmon, and UrnikisNegro is clear error. Because the magistrate judge calculated the plaintiffs’

regular rate of pay by dividing the weekly wage by 55, rather than by all hours

worked, we hold that his decision was based upon a clearly erroneous view of the

facts – that is, his view that the parties had a mutual understanding that the

workweek was for 55 hours. And because this infected the court’s damage

calculation, which did not properly apply the 50% overtime premium established

by FWW to all hours worked over 40 per week,14 we also hold that the court

simultaneously committed an error of law. Consequently, we vacate the court’s

award of actual damages.

VI.

13 At the summary judgment hearing in the present case,the magistrate judge admitted

his own error in failing to consider course of conduct of the parties as affirmation of a

fluctuating workweek, when he said: “So I don’t know of any case . . . where a court has said,

well the fact that [employee-plaintiffs] came to work [for defendant-employer] and understood

that – at least accepted implicit in their actions, that salary for whatever hours they worked

is not enough to show the kind of agreement that they need to have. I’m the only one who’s

done that. Makes me start to think, maybe I’ve got it wrong.”

14 After determining an employee’s “regular rate” of pay,the next step is the calculation

of the overall amount of unpaid overtime due. Under FWW, the employee is then “awarded

a premium of one-half of that rate for the overtime hours he worked that week.” UrnikisNegro, 616 F.3d at 678 (emphasis added); see also, Blackmon, 835 F.2d at 1139. The

magistrate judge’s calculation considered hours worked in excess of 55 to be uncompensated,

thus adding a premium of 150%, rather than only the 50% due under FWW, for hours over 55.

This was error. Stated differently, the magistrate judge erred by applying the premium of onehalf the regular rate only to hours 40 through 55, instead of all hours over 40.

15

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No. 12-50534

In their brief, on cross-appeal, the plaintiffs voiced one concern15

that

warrants further consideration: that Party City’s alleged failure on a number

of occasions to ensure payment of the minimum wage forecloses the use of FWW

in calculating unpaid overtime compensation. See Desmond v. PNGI Charles

Town Gaming, LLC, 630 F.3d 351, 355 (4th Cir. 2001) (relying on and

characterizing Urnikis-Negro as holding “when an employer and employee agree

that a fixed salary will constitute payment at the regular rate for all hours

worked and the rate is not lower than the minimum wage, [FWW applies]”)

(emphasis added); see also 29 C.F.R. § 778.114(c) (stating that “[FWW] may not

be used unless [the employee’s] salary is sufficiently large to assure that no

workweek will be worked in which the employee’s average hourly earnings from

the salary fall below the minimum hourly wage rate applicable under the

[FLSA] . . . .”). Our decision in Blackmon addresses this concern: while agreeing

that § 778.114 “is inapplicable if dividing the number of hours actually worked

into the fixed salary results in an hourly rate below the minimum 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 as the regular rate of pay for purposes of computing

overtime payments.” Id. (emphasis added). This conclusion rests on the

predicate that the FLSA only requires that the minimum wage be paid for

straight-time hours worked.

When the plaintiffs’ overtime is recalculated on remand, we have no

indication whether this problem will arise. Nevertheless, for any weeks in

which applying FWW results in payment of less than the minimum wage for

straight time pay, the regular hourly rate for unpaid hours of work is the

minimum wage itself. 

15 The plaintiffs “cross-appeal,” and yet, they devote only one footnote in their entire

appellate brief to the issue.

16

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VII.

Finally, we address the liquidated damages and attorneys’ fees awarded

by the magistrate judge. The FLSA, 29 U.S.C. § 216(b), allows for liquidated

damages to be awarded for FLSA violations in an amount “equal” to actual

damages.16Id. Because we have held that the district court erred in calculating

actual damages, see supra Part V, we also vacate the liquidated damage award

and remand for the district court to determine what amount, if any, of liquidated

damages remains appropriate. As for attorneys’ fees,17 we have held that “[t]he

most critical factor in determining an attorneys’ fee award is the ‘degree of

success obtained.” Romaguera v. Gegenheimer, 162 F.3d 893, 896 (5th Cir. 1998)

(quoting Hensley v. Eckerhart, 461 U.S. 424, 436 (1983)). Because the new

damages that will be awarded are relevant to plaintiffs’ overall success in

litigating this suit,18 we vacate the amount of the attorneys’ fee award and

remand for recalculation. See West v. Nabors Drilling USA, Inc., 330 F.3d 379,

395 (vacating attorneys’ fee award for reconsideration in the light of reversal of

16 The general rule is that the court should award the amount found for actual damages

as liquidated damages. Singer, 324 F.3d at 822-23. On remand, the district court may (but

is not required to) decline to award liquidated damages (or reduce the amount) if the court

concludes that the employer acted in good faith or had reasonable grounds to believe that its

actions complied with the FLSA. Id. at 823. It is the employer’s substantial burden to prove

good faith and reasonableness. Id. We leave the good faith determination and Party City’s

potential liability for liquidated damages up to the district court.

17 Under the FLSA, a district court may award reasonable attorney’s fees to the

prevailing party. 29 U.S.C. § 216(b). Multiplying the number of hours reasonably spent on

the case by an appropriate hourly rate in the community for such work, courts use the socalled “lodestar method.” Heidtman v. County of El Paso, 171 F.3d 1038, 1043 (5th Cir.1999).

There is a strong presumption that the lodestar amount is a reasonable fee, although a court

may decrease or enhance it based on the factors established in Johnson v. Georgia Highway

Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974). See also, Perdue v. Kenny A. ex rel. Winn,

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

18 See City of Riverside v. Rivera, 477 U.S. 561, 574 (1986) (stating “The amount of

damages a plaintiff recovers is certainly relevant to the amount of attorney’s fees to be

awarded [.]”).

17

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damage calculation); see also, Instone Travel Tech Marine & Offshore v. Int’l

Shipping Partners, Inc., 334 F.3d 423, 433 (5th Cir. 2003) (following reversal of

damage award, court remands for reconsideration of attorneys’ fees incurred on

appeal).

VIII.

In summary, we hold that the record evidence clearly shows that the

plaintiffs in this case were paid a fixed weekly salary and were expected to work

fluctuating weekly hours. Thus, the district court’s 55-hour method of

calculating unpaid overtime damages was error, because it miscomprehended

the employment arrangement and utilized a divisor of 55 in calculating

plaintiffs’ regular rate of pay rather than applying a divisor equal to the number

of all hours actually 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 opinion. We further VACATE the award of liquidated

damages and the amount of the attorneys’ fee award, and we REMAND for

reconsideration of those awards.19

REVERSED, VACATED, and

19 Reassignment of a case may be appropriate where "the original judge would

reasonably be expected upon remand to have substantial difficulty in putting out of his or her

mind previously-expressed views or findings determined to be erroneous or based on evidence

that must be rejected." League of United Latin Am. Citizens, Dist. 19 v. City of Boerne, 675

F.3d 433, 440 (5th Cir. 2012) (quoting In re DaimlerChrysler Corp., 294 F.3d 697, 701 (5th Cir.

2002) (citation and inset quotation marks omitted)). Here, there is some indication, from his

express statements and writings, that the magistrate judge is resistant to the law as set out

in this opinion. Because we take note of 28 U.S.C. § 636(c)(4), which states that "[t]he

[district] court may, for good cause shown on its own motion . . ., vacate a reference of a civil

matter to a magistrate judge . . . ," see Sanches v. Carrollton-Farmers Branch Indep. Sch. Dist.,

647 F.3d 156, 171 (5th Cir. 2011), we leave it up to the district judge to whom the case was

originally assigned to determine whether the magistrate judge is the appropriate judge to

handle the case on remand.

18

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REMANDED.

19

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