Court Opinion

ID: 9474336
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:54:41.060169+00
Date Added: 2024-06-11T17:44:01.863903
License: Public Domain

BECKER, Circuit Judge,
dissenting.
I believe the majority has misapplied the Chevron test to this case. Unlike my colleagues, I find that application of the first and second prongs of the test weighs in favor of retroactive application of Garcia. In my view, only the third prong may favor non-retroactive application, but, in weighing the equities as the third prong requires, I do not find them definite or significant enough to tip the balance. Because I conclude that Garcia should be the governing law in this case, I respectfully dissent.
*952I.
As the majority has noted, the fact that the Supreme Court renders a decision overruling prior law is insufficient to satisfy the first part of the Chevron test. Rather, the party seeking nonretroactive application of the new decision must have relied on the prior law, and such reliance must have been reasonable. Where application of prior law has been erratic and inconsistent, a subsequent decision overruling that law cannot be said to have overruled clear past precedent on which the parties may reasonably have relied. See Smith v. City of Pittsburgh, 764 F.2d 188, 194 (3d Cir.1985); Perez v. Dana Corp., Parish Frame Div., 718 F.2d 581, 585 (3d Cir.1983).
Here, although the Supreme-Court’s decision in Garcia to overrule National League of Cities was hardly predictable, the application of the National League of Cities principle to cases involving state employees not specifically identified by the Court as performing traditional governmental functions had been quite erratic and inconsistent. Indeed, this inconsistency in application served as a primary reason for the Court’s decision to overrule National League of Cities.1 Id. 105 S.Ct. at 1016. The Court observed that under the traditional governmental function test set forth in National League of Cities and elaborated upon in Hodel v. West Virginia Surface Mining and Recl. Assoc., 452 U.S. 264, 101 S.Ct. 2352, 69 L.Ed.2d 1 (1981), courts had experienced insurmountable difficulties identifying those governmental functions that were traditional and those that were not and that, as a result, they had come to fundamentally inconsistent conclusions.
The majority is unmoved by the erratic-prior law on this point. It points to language in National League of Cities and subsequently promulgated Department of Labor regulations which explicitly consider “police protection” as a “traditional governmental function,” and concludes that the detectives were clearly excluded from coverage of the FLSA. Therefore, the majority concludes, the Port Authority’s reliance on National League of Cities (and the Department of Labor regulations) in denying overtime pay to the detectives was reasonable.
For me, the matter is not so simple. The Port Authority acts to a significant extent as a transit authority.2 Department of Labor regulations existing prior to the execution of the collective bargaining agreement at issue here specifically identified the operation of local mass transit systems as not being a traditional governmental function.3 *953Subsequent decisional law confirmed this position. See United Transportation Union v. Long Island R. Co., 455 U.S. 678, 686, 102 S.Ct. 1349, 1354, 71 L.Ed.2d 547 (1982); Kramer v. New Castle Area Transit Authority, 677 F.2d 308, 310 (3d Cir.1982), cert. denied, 459 U.S. 1146, 103 S.Ct. 786, 74 L.Ed.2d 993 (1983). The majority suggests that the Port Authority should be treated like a state or municipality, with its employees treated disparately according to their functions. While this approach is plausible, it is by no means self-evident, and there is no caselaw support for it. Thus there was no clear authority for the proposition that the detectives were excluded from FLSA coverage.
Moreover, although appellees are authorized to serve as law-enforcement officers by statutes of New York and New Jersey, they are employed by the Port Authority and not by the two states or any of their municipalities. As such, they perform some duties that would not be performed by policemen working directly for New York, New Jersey, or a municipality therein, including conducting character investigations of Port Authority employees, enforcing Port Authority regulations, and investigating complaints against Port Authority personnel. Thus, appellees are not necessarily the type of policemen that the Supreme Court intended to exclude from coverage of the FLSA by the National League of Cities decision.4
In view of the inconsistent prior law, see supra note 1, and the strong indication in the case law that transit workers were not covered, the Port Authority should have recognized the precariousness of its position that its detectives were exempt from FLSA coverage under National League of Cities jurisprudence. By failing to comply with the FLSA’s overtime requirements, the Authority was at risk that it might be found liable for overtime pay by a subsequent judicial determination that the detectives were covered, by the FLSA.
I conclude, therefore, that it was not reasonable for the Port Authority to have relied on the law as it existed prior to Garcia for the position that its police detectives were exempt from FLSA coverage. The first of the Chevron factors thus weighs in favor of the retroactive application of the Garcia decision.
II.
The second Chevron factor requires us to consider the prior history of the new rule in question, and its purpose and effect, to determine if retroactive application will further or retard its operation.
The majority’s analysis of the second prong of Chevron is limited to whether that retroactive application of the Garcia decision would discourage future adherence to the decision. I agree with the majority that, given the Supreme Court’s explicit ruling that no state employees are exempt from FLSA coverage, there is no reason to believe that states and municipalities will not comply in the future. This finding does not, however, exhaust the inquiry as to whether retroactive application of Garcia will retard or further the operation of that holding.
*954I believe that non-retroactive application of Garcia results in the unseemly spectacle of the court’s deciding this case under a pre-existing analytical framework that the Supreme Court has found to be unsound in principle and unworkable in practice.5 Garcia, 105 S.Ct. 1016. Thus, in Part IV of its opinion the majority is forced to apply an analysis that the Supreme Court has denigrated as “not faithful to the role of federalism in a democratic society” and “disserve[ing] principles of democratic self-governance.” Id. at 1015, 1016. Moreover, this court’s continued recognition of exemptions in the coverage of the FLSA that were created solely by the judicial branch and have since been invalidated would constitute an unjustifiable intrusion into the legislative branch’s authority and an unwarranted divergence from congressional intent.
For these reasons, I believe that retroactive application would further the operation of the new rule; the second prong of the Chevron test, therefore, also points strongly in the direction of retroactive application of Garcia.6
III.
Part III of the Chevron test requires consideration of any inequities that would result from retroactively applying the new law. First, the Port Authority argues that it relied in good faith on National League of Cities, as well as Department of Labor regulations, in maintaining its position that plaintiffs were not covered under the FLSA, and thus that it would be inequitable for the court to now enforce the FLSA retroactively. As I have explained, given the uncertainty of the pre-existing law, the Port Authority was at risk that the detectives might not be exempted from FLSA coverage; hence it would not be manifestly unjust if the Authority were found liable under the FLSA as a result of our directing the district court to apply Garcia in this case.7
*955Second, the Port Authority contends that a backpay award compensating appellees one and one-half times their regular hourly rate for past overtime hours is inappropriate because it would constitute a windfall. According to the Port Authority, the police detectives were paid 25% an hour more than other Port Authority police and accepted this premium in exchange for not receiving time and one-half for overtime, which was being paid to the other police. Thus, Port Authority maintains that retroactive application of Garcia would result in a financial windfall to the detectives. See Morrison, Inc. v. Donovan, 700 F.2d 1374, 1376 (11th Cir.1983). The detectives deny that their premium hourly rate of pay was made in lieu of overtime, asserting that this rate was greater than that of other Port Authority police because they performed extra duties.
It is thus unclear whether retroactive application of Garcia would result in a windfall (though the majority, without explanation, adopts the Port Authority’s position on this point). This poses no problem in any event because retroactive application of Garcia does not require that we stipulate the base hourly rate that the district court should use in determining a backpay award for overtime compensation if the Port Authority is found to be liable. Rather, I believe the district court should determine whether the detectives agreed to a higher hourly rate in lieu of time and one-half for overtime and, therefore, that the parties would have agreed to a different base pay had overtime been included in the wage package. The court would take such facts into account when determining the appropriate base rate with which to calculate overtime compensation. My proposed application of Garcia to this case, therefore, would not subject the Port Authority to an unjustly large assessment of damages and provide the detectives with a windfall.8
Finally, the majority believes that a lump-sum backpay award to the detectives for past overtime would be inequitable to the Port Authority. I recognize that the potential liability of Port Authority may be significant, and I do not consider this factor lightly. Nevertheless, the amount of such liability is highly speculative at this stage,9 and ought to be balanced against the inequities to workers occasioned by their lower wages, a situation resulting from the subsequently overturned National League of Cities holding. Moreover, my concern about Port Authority’s potential financial liability is tempered by the two-year limitations period for FLSA actions of this sort, see supra n. 6. Thus, the potential financial hardship imposed on the Port Authority is not definite or significant enough to tip the balance in favor of a non-retroactive application of Garcia.
IV.
I conclude, therefore, that application of the Chevron test dictates that the Supreme Court’s Garcia decision should serve as the governing law in this case. I would thus answer the district court’s certified ques*956tion by holding that the wage and hour provisions of the FLSA apply to the class of Port Authority employees consisting of police detectives represented by the plaintiffs.

. Compare Amersbach v. City of Cleveland, 598 F.2d 1033, 1037 (6th Cir.1979) (operation of an airport is traditional with Hughes Air Corp. v. Public Utilities Comm'n, 644 F.2d 1334, 1340 (9th Cir.1981) (regulation of air transportation is not traditional); compare Enrique Molina-Estrada v. Puerto Rico Hwy. Auth., 680 F.2d 841, 845 (1st Cir.1982) (building and maintaining public roads is traditional with Friends of the Earth v. Carey, 552 F.2d 25, 38 (2d Cir.) (regulating traffic on public roads is not traditional), cert. denied, 434 U.S. 902, 98 S.Ct. 296, 54 L.Ed.2d 188 (1977); compare N.L.R.B. v. Highview, Inc., 590 F.2d 174, 178 (5th Cir.1979) (operation a nursing home is traditional) with Bonnette v. California Health & Welfare Agency, 704 F.2d 1465, 1472 (9th Cir.1983) (provision of in-house domestic service for aged and handicapped is not traditional).

. In addition to operating bridges, tunnels, seaports, airports, and other facilities of transportation and commerce, the Port Authority operates a commuter railroad through its wholly owned subsidiary, the Port Authority Trans Hudson Corporation. See N.Y.Unconsol.Laws §§ 6603, 6612 (McKinney 1979); NJ.Stat.Ann. §§ 32:1-35.52, 32:1-35.61 (West 1963 & Supp.1985). Cf. 29 C.F.R. § 775.2:

.On December 21, 1979, the Administrator of the Wage and Hour Division of the Department of Labor promulgated regulations giving its interpretation of non-traditional governmental functions:
§ 775.2 Special enforcement policy concerning States and political subdivisions.
(a) On June 24, 1976, the United States Supreme Court ruled in National League of Cities, et al. v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed.2d 245 that the minimum wage and overtime compensation provisions of the Fair Labor standards Act (FLSA) are not constitutionally applicable to the integral operations of the States and their political subdivisions in areas of traditional governmental functions. Such areas include, among others, schools and hospitals, fire prevention, police protection, sanitation, public health, and *953parks and recreation. They do not include, amoung [sic] others, the operation of a railroad by a State. 426 U.S. at 854, n. 18, 96 S.Ct. at 2475 n. 18.
§ 775.3 Nontraditional functions of States and their political subdivisions.
(a) In the National League decision it was made clear that the operation of a railroad by a State or its political subdivision is not an integral operation in the area of traditional governmental functions. 426 U.S. 833, 854 n. 18, 96 S.Ct. 2465, 2475 n. 18.
(b) For the purpose of the notice referred to in § 775.2(b), the Administrator has determined that the following functions of a State or its political subdivisions are not traditional.... The date listed after each function is the date of original publication in the Federal Register ...
(3) Local mass transit systems December 21, 1979.
29 C.F.R. § 775.3 (1984).

. Given my view of the appropriate disposition of this case, I need not express an opinion on the other aspects of the majority's analysis in Part IV.

. It may seem as though this factor would always suggest retroactive application of a Court decision. That is not so: sometimes the Court overturns prior law as the result of changed circumstances rather than because the earlier decision was analytically unsound and unworkable.

. I disagree with the Port Authority’s argument that the retroactive application of Garcia might retard the purposes of the FLSA because huge lump-sum backpay awards resulting from retroactively applying FLSA wage and hour requirements would be inconsistent with Congress’s intent to impose the FLSA burden on states gradually. First, the Port Authority’s assertion that Congress intended to phase in FLSA coverage over state and local governments gradually is incorrect. The 1974 FLSA amendments specified that FLSA coverage over the employees of state and local governments begin immediately, as of May 1, 1974. H.Conf.Rep. No. 953, 93rd Cong., 2d Sess. 30, reprinted in 1974 U.S.Code Cong. & Ad.News 2811, 2867. Furthermore, retroactive application of Garcia so as to compel states to compensate workers for past work according to the provisions of the FLSA would not place any greater financial burden on the states than that which was originally contemplated by Congress. Indeed, because suits by state employees to enforce FLSA provisions are subject to a two-year statute of limitations, see 29 U.S.C. § 255(a) (1982), states can be potentially liable for backpay only for two years prior to the date the Garcia decision was rendered. (The Act also provides for a three-year statute of limitation for willful violations of the FLSA. See 29 U.S.C. § 255(a) (1982)). Congress, on the other hand, intended the FLSA’s overtime provision to apply to state employees beginning May 1, 1974. See Fair Labor Standards Amendments of 1974, Pub.L. No. 93-259 §§ 6, 29, 88 Stat. 55, 58-59, 76. Thus, retroactive application of Garcia to state employees' suits under the FLSA will result in a financial burden to states that is much less than what the states would have borne had they complied with the FLSA beginning in 1974 as Congress had intended.

.Under my view of the case, even if Garcia is applied retroactively, the Port Authority may still be able to avoid liability to the detectives under the FLSA by asserting the Portal-to-Portal Act good-faith defense. This defense is designed to protect from liability employers who acted in reliance on an interpretation of the law by a governmental agency, even if the agency’s interpretation is subsequently determined to be incorrect. Equal Employment Opportunity Comm’n v. Home Ins. Co., 672 F.2d 252, 263 (2d Cir.1982). An employer who relies in good faith upon a written administrative regulation, order, or ruling of the Administrator of the Wage and Hour Division of the Department of Labor will not be subject to liability for its failure to pay minimum wages or overtime compensation as required by the FLSA. See 29 U.S.C. § 259 (1982). My conclusion that the *955law was too unsettled to bar retroactive application does not decide the validity of a Portal-to-Portal defense. Thus, on my view, the Port Authority would be able to assert this defense on remand, and, if the district court found the existence of such good-faith reliance on Port Authority’s part, no FLSA liability would ensue.

. In a similar vein, I reject the Port Authority’s argument that, if it is found liable to the detectives for back overtime wages as a result of a retroactive application of Garcia,, it will also incur a liquidated damages penalty in an amount equal to the amount of back wages owed. I recognize that an employer found liable under the FLSA for unpaid overtime compensation is subject to a liquidated damages penalty in an amount equal to the amount of unpaid compensation. See 29 U.S.C. § 216(b) (1982). Nevertheless, the assessment of this penalty is discretionary. The district court may award no liquidated damages if an employer sufficiently demonstrates that it had reasonable grounds for believing that its actions did not violate the FLSA. See 29 U.S.C. § 260 (1982). Thus, even if found liable, the Port Authority would not necessarily be subject to a liquidated damages penalty.

. The parties have not been able to quantify with any degree of accuracy the amount of potential damages in this action because they conducted only limited discovery before the case was certified for an interlocutory appeal.