Opinion ID: 200756
Heading Depth: 3
Heading Rank: 2

Heading: Longevity Pay

Text: 58 The officers are also entitled to have their contractual longevity pay included in their regular rate. Such longevity payments do not appear to fall within the literal terms of any of the statutory exclusions in § 207(e); if that is so, they must be included. See 29 C.F.R. § 778.200(c) ([A]ll remuneration for employment paid to employees which does not fall within one of these seven exclusionary clauses must be added into the total compensation received by the employee before his regular hourly rate of pay is determined.). Indeed, the annual longevity payment is essentially a form of bonus. See § 778.208 (bonus payments, for purposes of the FLSA, are payments made in addition to the regular earnings of an employee). Bonuses that are explicitly promised to employees — as the longevity payments are in the CBA — must be included in the employees' regular rate. § 207(e)(3); § 778.211 (any bonus paid pursuant to a contract must be included in the regular rate). 59 In a closely analogous case, the Sixth Circuit held that police officers' longevity payments must be included in their FLSA regular rate because they are by definition compensation for the length of service. See Featsent v. City of Youngstown, 70 F.3d 900, 905 (6th Cir.1995). The Fifth Circuit has rejected this argument on the ground that longevity pay may constitute a discretionary gift excludable under § 207(e)(2), but in so holding, the court distinguished longevity payments that are promised to employees in a collective bargaining agreement. See Moreau v. Klevenhagen, 956 F.2d 516, 521 (5th Cir.1992). Either way, the longevity payments here must be included in appellants' regular rate. 60 The Town argues that longevity pay is properly excluded for two reasons: (1) because it is only paid on an annual basis; and (2) because it does not constitute compensation for hours worked. The first argument is without merit: the regulations expressly contemplate retroactive calculation of overtime to accommodate compensation not given on a weekly basis, see, e.g., § 778.209 (methods of including bonuses in regular rate), and courts have had little difficulty handling such calculations when they arise, see, e.g., Reich v. Interstate Brands Corp., 57 F.3d 574, 575-76 (7th Cir.1995) (explaining how to incorporate an annual lump-sum payment into an employee's regular rate). 61 The Town's second argument is more problematic in light of this court's suggestion in Plumley v. Southern Container, Inc., 303 F.3d 364 (1st Cir.2002), that § 207(e) reflects Congress's focus on hours actually worked in the service and at the gain of the employer. Id. at 370. Plumley, however, should not be read for the proposition that § 207(e)'s definition of regular rate incorporates only compensation that is literally paid on an hourly basis. The regulations provide to the contrary, see, e.g., § 778.207(b) (providing that under § 207(e), lump sum premiums which are paid without regard to the number of hours worked ... must be included in the regular rate), and courts have consistently rejected such a hard rule, see, e.g., Interstate Brands, 57 F.3d at 578 (not all lump-sum payments can be excluded from the regular rate calculation). Accordingly, we hold that the Town must include the officers' contractually guaranteed longevity pay in their FLSA regular rate.