Court Opinion

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Opinions of the United
1997 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

6-9-1997

Balgowan v. State of NJ Dept of Transportation
Precedential or Non-Precedential:

Docket 95-5276

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Recommended Citation
"Balgowan v. State of NJ Dept of Transportation" (1997). 1997 Decisions. Paper 123.
http://digitalcommons.law.villanova.edu/thirdcircuit_1997/123

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Filed June 9, 1997

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 95-5276

RICHARD M. BALGOWAN; THOMAS M. BATZ; THOMAS
BETTEN; KARL L. BLUM; RAYMOND A. BURROUGHS;
DENNIS CARLSON; JOHN I. CORBO; MICHAEL D.
CRONIN; STEFFAN FRANKLIN; HERMAN J. KRIEG;
JOSEPH J. LAGULLO; CHESTER J. LYSZCZEK;
ALBERT M. MALATESTA; ARAM MARDEKIAN; IKE
MARDEKIAN; WILLIAM L. MUNCZINSKI; ALAN S. NASS;
THOMAS M. NORRIS; MALCOLM J. PALMER; JOHN C.
POWERS; FRANCIS F. REALINI; CARL G. REBBECK;
STANLEY F. RIPISH; EMIL H. ROESSLER; WAYNE A.
RUMSEY; RICHARD F. SPOERL; LAWRENCE A. SROKA;
JOHN W. STULTS; ROBERT L. SWAIN; DENNIS R.
SYMONS; JOHN B. TAYLOR, JR.; CHARLES A.
TERRITO, JR.; PETER W. TOMORY; ALFRED T.
WOODROW; DANIEL YACOVINO; CHARLES W. YOUNG;
RICHARD ZOLNOWSKI

Appellants

v.

STATE OF NEW JERSEY,
DEPARTMENT OF TRANSPORTATION

On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 93-cv-02209)

Argued January 22, 1996
(Opinion Filed: May 16, 1996;
Petition for Panel Rehearing Granted;
Opinion Vacated July 9, 1996)
Submitted: July 9, 1996
BEFORE: STAPLETON, COWEN and GARTH
Circuit Judges

(Filed June 9, 1997)

Steven P. Weissman
Weissman & Mintz
One Executive Drive
Suite 200
Somerset, New Jersey 08873
COUNSEL FOR APPELLANTS

Steven Sutkin
Office of New Jersey Attorney
General
Division of Law/Transportation
Richard J. Hughes Justice Complex
Trenton, New Jersey 08608

COUNSEL FOR APPELLEE

OPINION OF THE COURT

COWEN, Circuit Judge.

Plaintiff-appellants, thirty-six project engineers and one
supervising engineer (DOT engineers), filed this lawsuit
against the State of New Jersey, Department of
Transportation (State), in the United States District Court
for the District of New Jersey. The lawsuit seeks overtime
compensation under the Fair Labor Standards Act of 1938
(FLSA), 29 U.S.C. § 201 et seq. (1978). The DOT engineers
alleged that the State violated the FLSA by failing to pay
them "time and a half" for time worked in excess of 40
hours per week. The State responded that the DOT
engineers are exempt professionals under the "salary-basis"
test,1 promulgated by the United States Department of
_________________________________________________________________

1. An exempt professional under the salary-basis test is an employee
who is, in effect, an executive who is salaried and does not perform work
on an hourly basis. A non-exempt individual performs work on an hourly
basis and therefore qualifies for overtime compensation.

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Labor (DOL) and codified at 29 C.F.R. § 541.118, as
amended by 29 C.F.R. § 541.5d (1996). The DOT engineers
replied that because their wages are subject to reduction
under the DOT's disciplinary policy, they are hourly
workers and are not exempt under the DOL regulations.

The district court granted the State's motion for summary
judgment and dismissed the DOT engineers' complaint. It
held that the "salary-basis" test is not applicable to public
employees such as the DOT engineers and, even if it were
applicable, the engineers are exempt because the DOT has
never actually deducted pay under its disciplinary policy.

The DOT engineers appealed, and on May 16, 1996, we
affirmed in part, reversed in part, and remanded the case
with instructions to enter summary judgment in favor of
the DOT engineers awarding back-pay for overtime for the
period commencing September 6, 1991. We held that the
"salary-basis" test, as amended in September 1991, applies
to the DOT engineers. However, we further held that the
DOT engineers fail to satisfy the "salary-basis" test because
the DOT's disciplinary policy subjects them to reductions in
pay for non-safety related infractions.

On March 27, 1996, the United States Supreme Court
issued an opinion that abruptly changed the law regarding
Eleventh Amendment immunity. See Seminole Tribe of
Florida v. Florida, 116 S.Ct. 1114 (1996). Prior to Seminole,
the Supreme Court had held that Congress could abrogate
Eleventh Amendment immunity, subjecting states to private
causes of action. See Pennsylvania v. Union Gas Co., 491
U.S. 1, 109 S.Ct. 2273 (1989). Seminole overruled Union
Gas and held that the Commerce Clause did not invest
Congress with the authority to waive states' Eleventh
Amendment immunity and to create private causes of
action against states that had not consented to such suits.
116 S.Ct. at 1127-28, 1131-32.

The State filed a petition for rehearing, relying in part on
the Supreme Court's Seminole decision. By order dated July
9, 1996, we granted the State's petition for panel rehearing
and vacated our May 16, 1996 opinion. See Balgowan v.
State of New Jersey, Dept. of Transp., 84 F.3d 667 (3d Cir.
1996). We ordered rebriefing by the parties, addressing,

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among other issues, the State's claim that the Supreme
Court's decision in Seminole divested us of jurisdiction. On
September 23, 1996, the DOT engineers filed their opening
brief, and on November 22, 1996, the State filed its
responsive brief. The DOT engineers filed their reply brief
on December 31, 1996. On that same day the DOT
engineers filed a motion to amend their complaint in order
to add the DOT Commissioner as a defendant, and to
include a claim for prospective declaratory and injunctive
relief. The State objected to any such amendment.

I.

We first address the DOT engineers' motion to amend.
Federal Rule of Civil Procedure 21 provides that "[p]arties
may be dropped or added by order of the court on motion
of any party or of its own initiative at any stage of the
action and on such terms as are just." FED . R. CIV. P. 21.
"Although the Federal Rules of Civil Procedure strictly apply
only in the district courts, [FED. R. CIV. P. 1], the policies
informing Rule 21 may apply equally to the courts of
appeals." Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S.
826, 832, 109 S.Ct. 2218, 2223 (1989). Rule 21 and an
appellate power that "long predates the enactment of the
Federal Rules" have been relied upon by appellate courts to
both dismiss and add parties in order to maintain
jurisdiction and standing. Id. at 834, 109 S.Ct. at 2223
(allowing dismissal of non-diverse party on appeal); see also
Mullaney v. Anderson, 342 U.S. 415, 416-17, 72 S.Ct. 428,
429-30 (1952) (avoiding union's standing issue by granting
motion to add two of its members as parties on appeal);
Bhatla v. U.S. Capital Corp., 990 F.2d 780, 786 (3d Cir.
1993) (exercising court's discretion to dismiss action versus
non-diverse dispensable party so that case could proceed).
Resort to Rule 21 is appropriate where "requiring dismissal
after years of litigation would impose unnecessary and
wasteful burdens on the parties, judges, and other litigants
waiting for judicial attention." Newman-Green, 490 U.S. at
836, 109 S.Ct. at 2225 (citing Mullaney, 342 U.S. at 417,
72 S.Ct. at 430).

The State argues that we should deny the DOT engineers'
motion to amend the complaint because the engineers

                   4
"waited seven months before presenting their motion."
Appellee Br. in Opp'n. to Mot. to Amend Compl. at 11. It
also claims that there is a lack of "express statutory
authority to amend in the appellate court [and a]
constitutional and statutory bar on the DOT engineer[s']
proposed claims for prospective declaratory and injunctive
relief." Id. at 13. In light of the Federal Rules of Civil
Procedure, the relevant case law, the unexpected turn in
the law as a result of Seminole, and the availability of
declaratory relief, we do not find the State's arguments
persuasive.

First, as we have previously stated, FED. R. CIV. P. 21
provides that plaintiffs may be permitted to add parties at
any stage of the action, including in the court of appeals.
FED. R. CIV. P. 21. See also Newman-Green, 490 U.S. at
832-33, 109 S.Ct. at 2222; Bhatla, 990 F.2d at 786.
Second, given the change in the law effected by Seminole,
we would be hard-pressed to fault the engineers for not
having moved to amend the complaint sooner. Third, the
State has not identified any prejudice to it resulting from
the delay. See Newman-Green, 490 U.S. at 838, 109 S.Ct.
at 2225-26. Finally, as will be discussed below, the DOT
engineers are not precluded from seeking prospective
declaratory relief. See Ex Parte Young, 209 U.S. 123, 28
S.Ct. 441 (1908). See also Laskaris v. Thornburgh, 661 F.2d
23, 26 (3d Cir. 1981); Berman Enters., Inc. v. Jorling, 3 F.3d
602, 606-07 (2d Cir. 1993). Therefore, we grant the DOT
engineers' motion to amend the complaint.

II.

Now that we have permitted the DOT engineers' to amend
their complaint, we must determine whether we have
jurisdiction to address their claims. Under the teachings of
Seminole, we do not have jurisdiction over the DOT
engineers' claim against the State for monetary relief.
Seminole, 116 S.Ct. at 1127-28. However, by allowing the
DOT engineers to amend their complaint naming the DOT
Commissioner as an additional party and adding a claim
for prospective declaratory relief, we may retain jurisdiction
under the doctrine of Ex Parte Young, 209 U.S. 123, 128
S.Ct. 441 (1908). In Ex Parte Young, the Supreme Court

                    5
carved out an exception to Eleventh Amendment immunity
by permitting citizens to sue state officials when the
litigation seeks only prospective injunctive relief in order to
end continuing violations of federal law. Id. The Ex Parte
Young exception has been interpreted by courts to allow
suits against state officials for both prospective injunctive
and declaratory relief. See, e.g., Laskaris, 661 F.2d at 26;
Berman, 3 F.3d at 606-07; Roller v. Cavanaugh, 984 F.2d
120, 122 (4th Cir. 1993). Although Ex Parte Young's exact
wording allows suits for prospective injunctive relief, the
1908 opinion was issued well before declaratory relief was
available. See Steffel v. Thompson, 415 U.S. 452, 466, 94
S.Ct. 1209, 1219 (1974) (In 1934 Congress enacted the
Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, in
order "to provide a milder alternative to the injunction
remedy.") (quoting Perez v. Ledesma, 401 U.S. 82, 111, 91
S.Ct. 674, 690 (1971) (Brennan, J. concurring in part and
dissenting in part)).

Only the Secretary of Labor may initiate an action for
injunctive relief under the FLSA. See 29 U.S.C. § 211(a)
("Except as provided in section 212 of this title[child labor
provisions], the Administrator [Secretary of Labor]2 shall
bring all actions under section 217 of this title to restrain
violations of this chapter."); see also Lorillard v. Pons, 434
U.S. 575, 581, 98 S.Ct. 866, 870 (1978); Bowe v. Judson C.
Burns, Inc., 137 F.2d 37, 39 (3d Cir. 1943); Barrentine v.
Arkansas-Best Freight Sys., Inc., 750 F.2d 47, 51 (8th Cir.
1984). Since the Secretary of Labor is the only party
permitted to seek injunctive relief under the FLSA, and the
Secretary is not a party to this action, injunctive relief is
not available to the plaintiffs. However, private actions
brought by employees for declaratory relief are permissible.
See, e.g., Johns v. Stewart, 57 F.3d 1544, 1556 (10th Cir.
1995); Biggs v. Wilson, 828 F. Supp. 774, 779 (E.D. Ca.
1991), aff 'd, 1 F.3d 1537 (9th Cir. 1993). Therefore, we
find that we have jurisdiction to reach the merits of the
_________________________________________________________________

2. The functions of the Administrator of the Wage and Hour Division of
the Department of Labor, under the Act, were transferred to the
Secretary of Labor pursuant to the Reorganization Plan No. 6 of 1950,
§ 1, eff. May 24, 1950, 15 Fed.Reg. 3174, 64 Stat. 1263, as amended
Pub.L. 99-619, § 2(c)(1), Nov. 6, 1986, 100 Stat. 3491.

                    6
case and consider whether we can grant declaratory relief
to the plaintiffs.

III.

Having determined that the DOT engineers can amend
their complaint and that we can properly consider
declaratory relief, we now turn to the merits of the case. On
this rehearing, we reconsider the legal issue of whether the
DOT engineers are exempt from the overtime provisions of
the FLSA. We reexamine this issue in view of a recently
decided Supreme Court case, Auer v. Robbins, 117 S.Ct.
905 (1997). Auer, like the instant case, involves the
application of the FLSA professional exemption and the
Department of Labor's "salary-basis" test. The factual
situation in Auer is almost identical to the facts in the case
at bar. In Auer, police sergeants and lieutenants employed
by the City of St. Louis contended that they are "hourly"
employees under the DOL's "salary-basis" test because
their compensation is subject to deductions for disciplinary
violations. They argued that they are "subject to" such
deductions because "the Police Manual nominally subjects
all department employees to a range of disciplinary
sanctions that includes disciplinary deductions in pay, and
because a single sergeant was actually subjected to a
disciplinary deduction." Id. at 910.

The primary issue considered by the Supreme Court in
Auer was "whether. . . an employee's pay is `subject to'
disciplinary or other deductions whenever there exists a
theoretical possibility of such deductions, or rather only
when there is something more to suggest that the employee
is actually vulnerable to having his pay reduced." Id. Before
reaching this issue, however, the Court addressed the
police officers' claim that "the `no disciplinary deductions'
element of the salary-basis test is invalid for public-sector
employees." Id. at 909. It noted that "[t]he Secretary's view
that public employers are not so differently situated with
regard to disciplining their employees as to require
wholesale revision of his time-tested rule simply cannot be
said to be unreasonable." Id. The Court further held that
the officers' "complaints about the [Secretary of Labor's]

                    7
failure to amend the disciplinary-deduction rule cannot be
raised in the first instance in the present suit." Id. at 910.

Following the Supreme Court's decision in Auer, we must
sustain the Secretary of Labor's view and find that the "no
disciplinary deductions" element of the "salary-basis" test is
not invalid for public-sector employees. Also following Auer,
we will not permit the engineers to raise here for the first
time a claim that the Secretary of Labor has failed to
amend the disciplinary-deduction rule in violation of the
Administrative Procedure Act (APA), 5 U.S.C. § 706(2)(A)
(1996).

We now turn to the main issue in the case. In Auer, the
Supreme Court deferred to the Secretary of Labor's
interpretation of the disciplinary component of the "salary-
basis" test. The Court held that the police officers were
exempt from the overtime provisions. The Secretary of
Labor's interpretation, adopted by the Supreme Court,
states that exempt status will be denied only "when
employees are covered by a policy that permits disciplinary
or other deduction in pay `as a practical matter.' " Id. at
911. The interpretation by the Secretary of Labor further
provides that the "standard is met . . . if there is either an
actual practice of making such deduction or an
employment policy that creates a `significant likelihood' of
such deductions." Id. Finally, there must be "a clear and
particularized policy -- one which `effectively
communicates' that deductions will be made in specified
circumstances." Id.

In Auer, the Court found that because the Police Manual
nominally covered all department employees, it did not:

"effectively communicate" that pay deductions are an
anticipated form of punishment for employees in[the
police sergeants and lieutenants'] category . . .. If the
statement of available penalties applied solely to[the
sergeants and lieutenants], matters would be different;
but since it applies both to [them] and to employees
who are unquestionably not paid on a salary basis, the
expressed availability of disciplinary deductions may
have reference only to the latter.

                     8
Id. (emphasis omitted). The fact that one sergeant was
actually subjected to a disciplinary deduction did not alter
the Court's analysis.

Based on Auer, we conclude that the engineers in this
matter qualify for the professional exemption under the
FLSA. They are not realistically "subject to" reductions in
their pay. At the DOT, there is neither an actual practice of
making deductions, nor is there an "employment policy that
creates a `significant likelihood' of such deductions" as
required by the Supreme Court in Auer. Id.

The disciplinary policy in this case, like that in Auer,
applies to all DOT employees, not just the DOT engineers.
Pursuant to Auer, such a broad-based policy fails to
" `effectively communicate' that pay deductions are an
anticipated form of punishment" for the DOT engineers. Id.
Furthermore, the DOT's nonenforcement of its disciplinary
policy and the fact that no engineer has ever suffered a
reduction in pay under the policy, provide even stronger
evidence that the DOT's disciplinary policy is not one under
which there is a "significant likelihood" of deductions.

As a final note, the Supreme Court in Auer stated that
the salary test's "window of corrections," 29 C.F.R.
§ 541.118(a)(6), is available to preserve the exempt status of
employees who have been subjected to pay deductions
inconsistent with the salary-basis test. The Court
emphasized that the employer could reimburse employees
not only if the deductions were "inadverten[t]", but also if
they were "made for reasons other than lack of work." Auer,
117 S.Ct. at 912 (quoting 29 C.F.R. § 541.118(a)(6)
(alteration added)). Accordingly, if any DOT engineer's pay
had been docked, the "window of corrections" exemption
could have been used by the State to preserve that
engineer's exempt status.

IV.

We hold that the DOT engineers can amend their
complaint to name the DOT Commissioner as an additional
party and add a claim for prospective declaratory relief. We
further hold that we have jurisdiction to reach the merits of
the case and consider declaratory relief. Even though we

                    9
allowed an amendment to the complaint and would
normally order service to be made upon the DOT
Commissioner, because the engineers cannot succeed on
the merits under Auer, it would be futile to require service
and processing of the amended complaint. In assessing the
legal issues against the backdrop of Auer, we conclude that
the "salary-basis" test set forth in 29 C.F.R. § 541.118(a), as
amended by 29 C.F.R. § 541.5d, is valid as applied to
public employees such as the DOT engineers. Further, the
DOT engineers satisfy the salary test because the DOT's
disciplinary policy does not "permit[ ] disciplinary or other
deductions in pay `as a practical matter.' "

Hence, although the legal landscape has changed since
the district court held for the state in its order of March 27,
1995, and our analysis has accordingly been framed to
reflect the dictates of Seminole and Auer, the conclusion we
have reached is the same conclusion reached by the district
court. We will therefore affirm the order granting summary
judgment for the State.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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