Court Opinion

ID: 9486712
Source: CourtListenerOpinion
Date Created: 2023-08-05 11:57:01.728369+00
Date Added: 2024-06-11T17:51:53.062962
License: Public Domain

KAREN LeCRAFT HENDERSON, Circuit Judge,
concurring in part and dissenting in part:
I join the portion of the majority opinion reversing the district court’s judgment as it relates to the period after September 6,1991; the majority does not go far enough, however, for I would reverse the district court outright.
On September 6, 1991, the Department of Labor (DOL) promulgated a rule, effective immediately, making the no-docking rule no longer applicable to determine whether public sector employees are “salaried employees” within the meaning of the exemption for executive, administrative or professional employees (executive exemption).1 See Final Rule, 57 Fed.Reg. at 37672 (the 1991 rule). The majority interprets the 1991 rule as dispositive: before September 6, 1991, the executive exemption was unavailable to the District of Columbia (District) because it docked the pay of its employees for absences of less than one day; after September 6, 1991, the executive exemption is available to the District because the no-docking rule no longer stands as an obstacle. The majority declines to consider the District’s argument that the no-docking rule is invalid as applied to public sector employees, irrespective of the 1991 rule, concluding that the District waived the argument by failing to raise it below. Because I believe the District did challenge the validity of the no-docking rule before the district court, I disagree.
In at least one of its filings below, the District argued that, although the regulation making the no-docking rule inapplicable to public sector employees did not become effective until September 6, 1991,
this Court can and should carefully consider the Department’s comments in determining the application of the previous regulation to the public employees in this case prior to September 6, 1991. This Court must then conclude ... that the existence of a public pay system that provides for the deduction of pay when all leave is exhausted for absences of less than a day is insufficient to defeat an otherwise qualified exemption under 29 U.S.C. § 213(a)(1).
Amended Memorandum of Points and Authorities in Support of Defendant District of Columbia’s Cross-Motion for Summary Judgment at 12 (emphasis added). I would hold that this language put both the plaintiffs and the trial court on sufficient notice that the District contested the applicability of the no-docking rule to public sector employees, whether they be generally “subject to” it or merely docked for actual absences, without confining its argument to the effective date of the 1991 regulation. Accordingly, I believe that the validity vel non of the no-*435docking rule as applied to public sector employees is appropriately before us.
I would hold the no-docking rule invalid as applied to public sector employees. The DOL promulgated the no-docking rule in 1954 based on its research revealing that an employee whose pay was docked for an absence of less than one day usually did not meet the other requirements to fall within the executive exemption. See Final Rule, 57 Fed.Reg. at 37666, 37672. The DOL investigated only the private sector, however, because the FLSA did not apply to public sector employees at that time. Although docking a private sector employee’s pay may indicate that the employee is not an executive, administrative or professional employee, that inference is not appropriately made with regard to a public sector employee because of the different rationale used to support docking in the public employment context.
As a matter of public policy, a public sector employee is subject to pay docking for any absence. See generally Final Rule, 57 Fed. Reg. at 37672 (“[Prevailing public sector pay systems operating under statute, ordinance, regulation, or other established public policy requir[e] all employees, including otherwise-exempt managers and executives, to use accrued leave time or incur a reduction in pay for any absences from work.”). The docking is rooted in the principle of public accountability, that is, “governmental employees should not be paid for time not worked due to the need to be accountable to the taxpayers for the expenditure of public funds.” Final Rule, 57 Fed.Reg. at 37672. The circumstance that motivated the DOL’s promulgation of the no-docking rule, that an employee whose pay is docked for an absence of less than one day will not ordinarily meet the other requirements to qualify as an executive, does not necessarily exist in public sector employment. The docking of a private sector employee’s pay indicates that the employee is in essence “punching the clock” while at work. An employee who must strictly account for his hours is unlikely to have primary duties that are executive, administrative or professional in nature, as required by the exemption. See 29 C.F.R. § 541.1(e)(2). That conclusion cannot be drawn regarding a public sector employee whose pay is docked based on public accountability — if the need to be accountable to the public results in the docking of a government employee’s pay, even those at the highest levels of the government hierarchy, those whose duties are unquestionably executive in nature, may see their pay docked. Because docking a public sector employee’s pay for an absence of less than one day does not indicate one way or the other that the employee does not otherwise satisfy the requirements of the executive exemption, it cannot validly gauge whether the employee fits the exemption. Therefore, the no-docking rule should not render the exemption unavailable to the District before September 6, 1991.
The question then becomes whether the ground used by the district court for its grant of summary judgment to the plaintiffs, that is, the plaintiffs’ receipt of overtime compensation calculated on an hourly basis, renders the exemption unavailable to the District, before September 6, 1991. I would hold that it does not. The DOL regulation states that “additional compensation besides the salary is not inconsistent with the salary basis of payment.” 29 C.F.R. § 541.118(b). At least two circuits have interpreted section 541.118(b) to mean that employees can be considered salaried even though they receive overtime compensation calculated on an hourly basis. See Hartman v. Arlington County, 720 F.Supp. 1227, 1229 (E.D.Va.1989), aff'd, 903 F.2d 290 (4th Cir.1990) (overtime compensation calculated on an hourly basis is “expressly permitted by § 541.118(b) and does not defeat the executive exemption”); York v. Wichita Falls, Texas, 944 F.2d 236, 242 (5th Cir.1991) (“Paying an hourly rate for each hour worked beyond the regular schedule does not defeat the executive exemption.”); see also Fair Labor Standards Handbook for States, Local Governments and Schools (DOL’s Field Operations Handbook) at 21 (May 1987) (payment of additional compensation calculated on an hourly basis does not destroy employee’s salaried status). But see Thomas v. County of Fairfax, 758 F.Supp. 353, 360 (E.D.Va.1991). I agree with those two circuits.
Although section 541.118(b) does not expressly refer to hourly overtime compensa*436tion as a form of permissible additional compensation, the regulation does include three examples of allowable additional compensation, the third of which manifests, at least to me, that overtime compensation calculated on an hourly basis should not preclude the exemption’s applicability. It declares that an employee who is guaranteed a minimum salary but is also paid for extra days or shifts worked is nonetheless considered paid on a salary basis. 29 C.F.R. § 541.118(b).2 Extra pay for additional days' or shifts worked is equivalent to extra pay for additional hours worked. Accordingly, I believe that the plaintiffs’ receipt of hourly overtime compensation does not preclude the District from invoking the executive exemption.
I join the majority in reversing the district court for the period after September 6,1991. I would also reverse the district court as to the earlier period as well, however, because I believe that neither the no-docking rule nor the plaintiffs’ receipt of hourly overtime compensation rendered the executive exemption unavailable to the District then.

. The 1991 rule provides:
An employee of a public agency who otherwise meets the requirements of § 541.1, 541.2, or 541.3 shall not be disqualified from exemption on the basis that such employee is paid according to a pay system established by a statute, ordinance, or regulation, or by a policy or practice established pursuant to principles
of public accountability, under which the employee accrues personal leave and sick leave and which requires the public agency employee's pay to be reduced or such employee to be placed on leave without pay for absences for personal reasons or because of illness or injury of less than one workday....
29 C.F.R. § 541.5d.

. 29 C.F.R. § 541.118(b) provides:
It should be noted that the salary may consist of a predetermined amount constituting all or part of the employee’s compensation. In other words, additional compensation besides the salary is not inconsistent with the salary basis of payment.... Another type of situation in which the requirement will be met is that of an employee paid on a daily or shift basis, if the employment arrangement includes a provision that the employee will receive not less than the amount specified in the regulations in any week in which the employee performs any work.