Opinion ID: 2853488
Heading Depth: 2
Heading Rank: 2

Heading: annual leave buyback

Text: The Fair Labor Standards Act generally requires employers to pay time-and-a-half for overtime. The language used is “one and one-half times the regular rate at which he is employed.”36 One cannot multiply the “regular rate” by 1.5 without knowing what the “regular rate” is, and that can be a complicated question. The parties dispute whether the district court, which accepted the District’s exclusion of money paid for leave buybacks from the “regular rate,” got it right. The statute defines the “regular rate” to mean “all remuneration for employment,” subject to eight listed 34 29 U.S.C. § 203(y). 35 Integrity Staffing, 135 S. Ct. at 518 (quoting IBP, Inc. v. Alvarez, 546 U.S. 21, 42 (2005)) (internal quotation marks omitted). 36 29 U.S.C. § 207(a)(1) (emphasis added). BALESTRIERI V. MENLO PARK FIRE PROT. DIST. 17 exclusions and various qualifications.37 The one that matters here is the exclusion from the “regular rate” of “payments made for occasional periods when no work is performed due to vacation, holiday, illness . . . . and other similar payments to an employee which are not made as compensation for his hours of employment.”38 The regulations issued by the Department of Labor call such compensation “pay for certain idle hours,”39 and interpret the statute similarly to exclude vacation leave buybacks from the regular rate: (a) Sums payable whether employee works or not . . . . Suppose an employee who is entitled to such a paid idle holiday or paid vacation foregoes his holiday or vacation and performs work for the employer on the holiday or during the vacation period. If, under the terms of his employment, he is entitled to a certain sum as holiday or vacation pay, whether he works or not, and receives pay at his customary rate (or higher) in addition for each hour that he works on the holiday or vacation day, the certain sum allocable to holiday or vacation pay is still to be excluded from the regular rate. It is still not regarded as compensation for hours of work if he is otherwise compensated at his customary rate (or at a higher rate) for his work on such days. Since it is not compensation for work it 37 Id. § 207(e). 38 Id. § 207(e)(2). 39 29 C.F.R. § 778.218. 18 BALESTRIERI V. MENLO PARK FIRE PROT. DIST. may not be credited toward overtime compensation due under the Act . . . .40 The regulations do not discuss sick leave buybacks one way or the other. They do, however, interpret the statute not to exclude from the “regular rate” “promised bonuses” such as “attendance bonuses.”41 The firefighters argue that we should interpret buyback of sick leave as an attendance bonus, and count it in the regular rate. The Sixth Circuit rejects the firefighters’ view. Featsent v. City of Youngstown holds that payments for unused sick leave are “similar to payments made when no work is performed due to illness,” which the statute expressly excludes from the regular rate.42 But in some circumstances, the firefighters’ argument, that buybacks of sick leave amount to bonuses for attendance and should count as part of the regular rate, is supportable. The Department of Labor deemed sick leave buyback to be an includable promised bonus in an Opinion Letter, where the collective bargaining agreement provided that“[a]ll employees will be eligible for a stipend for perfect attendance.”43 The Department explained that under those facts, buybacks of sick leave should count as part of the 40 29 C.F.R. § 778.219. 41 Id. § 778.211. 42 70 F.3d 900, 905 (6th Cir. 1995). 43 U.S. Dep’t of Labor, Opinion Letter FLSA2009-19 at 4 (Jan. 16, 2009), available at http://www.dol.gov/WHD/opinion/FLSA/ 2009/2009_01_16_19_FLSA.pdf [hereinafter Opinion Letter]. BALESTRIERI V. MENLO PARK FIRE PROT. DIST. 19 “regular rate” “because the stipends are attendance bonuses,” and “perfect attendance stipends encourage employees not to use or abuse sick leave.”44 “Attendance bonuses” count as part of the “regular rate” under the Regulations. Likewise, the Eighth and Tenth Circuits have so determined, in the circumstances before them. A split decision in Acton v. City of Columbia holds that where sick leave buybacks were conditioned on several years of coming to work regularly, they functioned as a nondiscretionary reward for regular workplace attendance, so counted as part of the regular rate.45 Chavez v. City of Albuquerque holds that sick leave buybacks are generally in the nature of attendance bonuses, which count as part of the regular rate, because of employers’ incentives to reduce unscheduled leave that burdens an employer with finding a replacement.46 Both views are debatable. Buying back unused sick leave is not the same thing as allowing sick employees to stay home. And it is not reasonable to assume that employers generally want employees to come to work, sick or not. Some employers may perhaps just want warm bodies (perhaps overly warm if feverish) in the chairs, to avoid the nuisance of their absence. Other employers may prefer, though, to have sick employees stay home, to avoid errors they may make, illnesses they may spread to others at the workplace, and to be decent to their employees. There is no 44 Id. 45 436 F.3d 969, 978 (8th Cir. 2006). 46 630 F.3d 1300, 1309–10 (10th Cir. 2011). 20 BALESTRIERI V. MENLO PARK FIRE PROT. DIST. reason to assume that employers providing sick leave prefer that their employees not use it. We need not resolve this conflict among our sister circuits in this case because the firefighters cannot prevail under either standard. First, as noted above, Featsent expressly equates sick leave buyback with “payments made when no work is performed due to illness,” which are excluded from the regular rate under the statute’s plain language.47 This reasoning dooms the firefighters’ claim at the outset. Second, even under the rationale of the Opinion Letter, Acton, and Chavez, the firefighters cannot prevail because the District has melded sick leave and vacation leave together into undifferentiated “annual leave.” There is no buyback of sick leave as such, just a buyback of leave, once it accumulates to the point that it affects cash flow too much. And the District has no perfect attendance or even good attendance bonus built into the leave program. “The function of the Cashout,” the District states without contradiction, “is to mitigate the District’s liability for banked leave hours.” The notion of sick leave in this case arises from the way annual leave accumulates. The District calculates leave under a “Memorandum of Understanding” it and the firefighters adopted under a now-expired collective bargaining agreement. Their deal is that all firefighters receive “annual leave in lieu of separate vacation and sick leave.” The phrase “in lieu of” means the firefighters no longer get separate vacation leave and sick leave. The distinction between vacation leave and sick leave survives only in when the leave can be used, not how it is bought back. Firefighters can take sick leave when they get sick, but can use vacation leave only 47 70 F.3d at 905. BALESTRIERI V. MENLO PARK FIRE PROT. DIST. 21 in the year following accrual. They have to schedule their vacations, but, obviously, not their illnesses. For example, in 2007, a firefighter would accrue six hours per pay period under what used to be the “sick leave” schedule, and that six hours could be used in the same year, but the additional hours accumulated in 2007 under the old vacation leave schedule could not be used until 2008. Regardless of which of the old accrual schedules generated the hours, once usable, any leave can be used for vacation, not just illness. Thus what might have been accumulated under the old sick leave schedule can now be used to go fishing, not just to stay home with the flu. Though accumulated under the old “sick leave” schedule, no leave is “sick leave.” All the hours pour into the same pot, the only difference being that hours accumulated under the old vacation leave schedule get poured in the following year, and vacations should ordinarily be scheduled with the firefighter’s supervisor. The firefighters urge that because hours accumulated under the old vacation leave schedule do not pour into the unrestricted pot until the following year, buyback should be treated as a buyback of sick leave. We cannot see why, since however the hours in the unrestricted pot were earned, they get bought back once the pot exceeds 480 hours. The District does not even keep track of which of the old schedules generated which hours in the pot. The firefighters also urge that as a practical matter, the buybacks ought to be treated as buybacks of sick leave, because, as one fireman said in his declaration, the “vast majority” of firefighters take all the vacation they are entitled to during the year they may take it. That declaration does not establish a genuine issue of material fact, because the “vast majority” does not mean “all,” and the firefighters are not required to use all their unrestricted leave. 22 BALESTRIERI V. MENLO PARK FIRE PROT. DIST. Some may prefer vacation, some may prefer cash, and they can proceed however they like. Accordingly, we reject the firefighters’ contention that leave buyback should be included in the calculation of the regular rate. AFFIRMED.