Court Opinion

ID: 4658420
Source: CourtListenerOpinion
Date Created: 2021-02-08 18:00:40.257264+00
Date Added: 2024-06-11T08:01:53.076981
License: Public Domain

FOR PUBLICATION

   UNITED STATES COURT OF APPEALS
        FOR THE NINTH CIRCUIT

 VERNA MAXWELL CLARKE, an                           No. 19-55784
 individual on behalf of herself and
 others similarly situated; LAURA                     D.C. No.
 WITTMANN, an individual on behalf                 2:16-cv-04132-
 of herself and others similarly                      DSF-KS
 situated,
                  Plaintiffs-Appellants,
                                                      OPINION
                      v.

 AMN SERVICES, LLC, DBA
 Nursechoice,
               Defendant-Appellee.

         Appeal from the United States District Court
            for the Central District of California
          Dale S. Fischer, District Judge, Presiding

              Argued and Submitted July 8, 2020
                    Pasadena, California

                      Filed February 8, 2021

    Before: Bobby R. Baldock, * Marsha S. Berzon, and
            Daniel P. Collins, Circuit Judges.

                    Opinion by Judge Berzon

    *
      The Honorable Bobby R. Baldock, United States Circuit Judge for
the U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
2                  CLARKE V. AMN SERVICES

                          SUMMARY **

                            Labor Law

    The panel reversed the district court’s summary
judgment in favor of the defendant and remanded in an
action under the Fair Labor Standards Act.

    When plaintiffs worked as clinicians for defendant AMN
Services, LLC, a healthcare staffing company, they were
paid both a designated hourly wage and an amount
denominated a weekly per diem benefit. On behalf of two
certified classes of employees who had worked for AMN at
facilities more than 50 miles away from their tax homes,
plaintiffs alleged that their weekly per diem benefits were
improperly excluded from their regular rate of pay under the
FLSA, thereby decreasing their wage rate for overtime
hours.

    The panel held that the per diem benefits functioned as
compensation for work rather than as reimbursement for
expenses incurred by traveling clinicians, and the benefits
were thus improperly excluded from plaintiffs’ regular rate
of pay for purposes of calculating overtime pay. The panel
relied on a combination of factors, including the tie of the
per diem deductions to shifts not worked regardless of the
reason for not working; a “banking hours” system; the
default payment of per diem on a weekly basis, including for
days not worked away from home, without regard to whether
any expenses were actually incurred on a given day; and the

    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
                CLARKE V. AMN SERVICES                     3

payment of per diem in the same amount, but as
acknowledged wages, to local clinicians who did not travel.

    The panel reversed the district court’s grant of summary
judgment and remanded for the district court to enter partial
summary judgment in plaintiffs’ favor as to whether the per
diem payments to class member employees should be
considered part of the employees’ rate of pay and to conduct
further proceedings.

                        COUNSEL

Kye D. Pawlenko (argued) and Matthew B. Hayes, Hayes
Pawlenko LLP, Pasadena, California, for Plaintiffs-
Appellants.

Sarah Kroll-Rosenbaum (argued), Kenneth D. Sulzer, and
Steven B. Katz, Constangy Brooks Smith & Prophete LLP,
Los Angeles, California, for Defendant-Appellee.

Margaret A. Grignon (argued) and Anne M. Grignon,
Grignon Law Firm LLP, Long Beach, California, for
Amicus Curiae

                        OPINION

BERZON, Circuit Judge:

    When Verna Clarke and Laura Wittmann (“Plaintiffs”)
worked as clinicians for AMN Services, LLC (“AMN”),
they were paid both a designated hourly wage and an amount
denominated a weekly per diem benefit. On behalf of two
certified classes of employees who have worked for AMN at
4                  CLARKE V. AMN SERVICES

facilities more than 50 miles away from their tax homes
(“traveling clinicians”), Clarke and Wittmann allege that
their weekly per diem benefits were improperly excluded
from their regular rate of pay under the Fair Labor Standards
Act (“FLSA”), 29 U.S.C. §§ 201–219, thereby decreasing
their wage rate for overtime hours.

    The FLSA generally prohibits an employer from
requiring an employee to work longer than forty hours in any
workweek unless the employer pays for the excess hours an
overtime wage of “not less than one and one-half times the
regular rate” to the employee. 29 U.S.C. § 207(a)(1). In
calculating the regular rate paid to the employee, the FLSA
excludes several categories of payments, including:

       [P]ayments made for occasional periods
       when no work is performed due to vacation,
       holiday, illness, failure of the employer to
       provide sufficient work, or other similar
       cause; reasonable payments for traveling
       expenses, or other expenses, incurred by an
       employee in the furtherance of his
       employer’s      interests    and    properly
       reimbursable by the employer; and other
       similar payments to an employee which are
       not made as compensation for his hours of
       employment.
Id. § 207(e)(2).

    Plaintiffs assert that the per diem payments AMN paid
them when they worked away from home operated as wages
and so should have been included in the calculation of
Plaintiffs’ regular rate of pay for purposes of overtime rate.
AMN avers that Plaintiffs’ per diem benefits were not wages
but, instead, reasonable reimbursement for work-related
                    CLARKE V. AMN SERVICES                              5

expenses incurred while traveling on assignment and were
therefore properly excluded under the FLSA from the
overtime rate calculation. 1 So the central inquiry in this case
is whether the per diem payments were properly excluded
from the regular rate. We hold the record establishes that the
contested benefits functioned as compensation for work
rather than as reimbursement for expenses incurred, and that
the per diem benefits were thus improperly excluded from
Plaintiffs’ regular rate of pay for purposes of calculating
overtime pay.

                                    I.

                                   A.

    AMN is a healthcare staffing company that places hourly
workers on short-term assignments throughout the United
States. 2 AMN pays clinicians a per diem amount that is, in

    1
      The Internal Revenue Service permits employers to pay per diems
and travel expenses from an “accountable plan.” Per diems so paid need
not be reported as wages and are tax-exempt. 26 C.F.R. § 1.62-2(c)(4).
Accountable plans must cover only expenses connected to the business
that are substantiated, either individually or by reasonably calculating a
per diem payment. Id. § 1.62-2(d). Accountable plans also require
employees to return amounts in excess of individually substantiated
expenses or, for per diem payments, amounts paid for days or miles of
travel not taken. Id. § 1.62-2(f).
    2
     The parties refer to the hourly healthcare workers employed by
AMN, including nurses and technicians, collectively as “clinicians,” so
we do as well.
6                  CLARKE V. AMN SERVICES

part, based on the federal Continental United States
(CONUS) reimbursement rates. 3

     The details of how the AMN per diem payments operate
are central to this case. According to AMN, the per diems
paid to traveling clinicians are provided to reimburse them
for the cost of meals, incidentals, and housing while working
away from home. 4 A traveling clinician is not required to
document her expenses to receive a per diem; she need only
sign an affirmation that her tax home is further than 50 miles
from her assigned facility. AMN treats traveling clinicians’
per diem payments as nontaxable income and excludes them
from the regular rate of pay. Plaintiffs assert that although
the per diems are not included as part of traveling clinicians’
regular hourly wage rate for calculating overtime, AMN
presents the combined value of a traveling clinician’s hourly
wages and per diem benefits as “weekly pay” when
recruiting clinicians.

    Although most clinicians are contracted to work only
three 12-hour shifts per week, the maximum weekly per
diem benefit compensates traveling clinicians for seven
days’ worth of expenses. If a clinician works the weekly
shifts required by her employment contract, she is paid the
maximum weekly per diem benefit. Clinicians do not receive
a higher per diem if they work extra hours or shifts beyond
the weekly minimum. Clinicians can, however, “bank

    3
      AMN uses the CONUS rates to determine the maximum amounts
of the weekly per diem payments. During the class period, AMN fixed
the meal and incidental per diem allowance at $245 per week, or $35 per
day, for all clinicians, which “did not exceed the applicable CONUS rate
for any assignment location at AMN.”
    4
      Traveling clinicians have the option of living in company-arranged
housing but most choose to receive a lodging per diem.
                 CLARKE V. AMN SERVICES                       7

hours” on days or weeks in which they work extra hours, and
later “offset missed shifts” if they have enough banked
hours.

    The AMN policy underlying the regular rate of pay issue
before us is the company’s practice of prorating traveling
clinicians’ per diem payments when they work fewer hours
or shifts than required by their employment contracts. Until
the end of 2014, the per diem payments were prorated based
on hours missed: for each hour a clinician failed to work,
AMN would deduct $18 from the weekly per diem benefits.
In 2015, AMN switched to a shift-based prorating system: if
a clinician contracted to work three shifts per week misses a
shift, “the per diem allowance . . . advanced to her the week
before [is] adjusted by one-third.” If a clinician works for
part but not all of the required hours in a shift, AMN will
round to the nearest shift. But if a clinician “works more than
one-half of each required shift, but still falls short of the
minimum required weekly hours . . . AMN may adjust the
per diem based on the proportionate number of shifts a
clinician did not work.” For example, if a clinician required
to work three 12-hour shifts per week works only three 8-
hour shifts, her per diem is reduced by one-third to account
for her missing the equivalent of one shift.

    AMN makes certain exceptions to this practice of
prorating per diem benefits. First, per diems are not reduced
if a clinician was prepared to work but the hospital cancels
her shift. Second, if a clinician works a scheduled shift but
does not, for any reason, work more than half the required
hours in the shift, the clinician’s per diem benefit will not be
prorated if the clinician has “a sufficient amount of banked
hours.” Per diem payments are prorated for all other time
missed, including for absences due to illness for which the
clinician receives paid sick leave.
8                  CLARKE V. AMN SERVICES

    Most of AMN’s employees are assigned to work at
facilities more than 50 miles away from their permanent
residences. But AMN also employs “local clinicians” who
work at facilities within 50 miles of their homes. Local
clinicians also receive per diems. For them, per diems are
included as part of their wages for both tax purposes and
calculation of their regular rate of pay for overtime purposes.
So local clinicians are paid at a higher hourly rate for
overtime hours than are travelling clinicians. AMN explains
that local clinicians’ per diems function as “an incentive for
working the minimum required hours.”

                                  B.

    Clarke and Wittmann worked as traveling clinicians for
AMN from January to April 2016 and December 2014 to
March 2015, respectively. Plaintiffs filed suit in state court
in May 2016; the case was subsequently removed to federal
court. The operative amended complaint, filed in December
2016, alleges claims for unpaid overtime under both the
California Labor Code and the FLSA, as well as other,
derivative state law claims. The parties agree that the same
standards apply to the federal and corresponding state law
claims. See California Division of Labor Standard
Enforcement,       DLSE      Enforcement        Policies   and
Interpretations Manual, § 49.1.2 (2019) (“In not defining
the term ‘regular rate of pay’, [California’s] Industrial
Welfare Commission has manifested its intent to adopt the
definition of ‘regular rate of pay’ set out in the [FLSA].”). 5

    5
      This opinion, for clarity, analyzes the regular rate of pay issue
under the FLSA, with the understanding that, except as noted, the same
analysis applies to the California Labor Code.
                   CLARKE V. AMN SERVICES                              9

    After the district court certified California-wide classes
for the state law claims and conditionally certified a
nationwide FLSA collective, 6 the parties filed cross motions
for summary judgment focusing on “the central question in
the case: whether certain per diem payments to class member
employees should be considered part of the employees’
‘regular rate’ and therefore considered when calculating
overtime pay rates.” The district court held that there were
no relevant material disputes of fact and granted summary
judgment in AMN’s favor on the FLSA and state unpaid
wages causes of action. We review the district court’s grant
of AMN’s motion for summary judgment de novo. Flores v.
City of San Gabriel, 824 F.3d 890, 897 (9th Cir. 2016).

                                  II.

    Generally, the regular rate of pay for FLSA purposes
includes “all remuneration for employment paid to, or on
behalf of, the employee.” 29 U.S.C. § 207(e). Non-exempt
employees who work more than 40 hours in a week must be
paid overtime for hours worked over 40 at an hourly rate of
at least one-and-a-half times their regular rate. Id.
§ 207(a)(1). 7 But the FLSA provides for exemptions,
allowing employers to exclude certain payments from the

     6
       The FLSA allows an employee to bring an action on behalf of
herself and “similarly situated” employees who file written consent
forms with the court to become parties to the action. 29 U.S.C. § 216(b);
see Smith v. T-Mobile USA Inc., 570 F.3d 1119, 1122–23 (9th Cir. 2009).

    7
       California law further provides that employees subject to the
state’s overtime law must be paid at least one-and-a-half times their
regular rate for any time worked over eight hours in a single day and any
hours on the seventh day of work in a single workweek. Cal. Lab. Code
§ 510.
10                 CLARKE V. AMN SERVICES

regular rate of pay and so from the rate of overtime pay. See
id. § 207(e)(2).

    FLSA exemptions are construed under “a fair (rather
than a ‘narrow’) interpretation.” Encino Motorcars, LLC v.
Navarro, 138 S. Ct. 1134, 1142 (2018). Determining what is
included in the regular rate of pay is a question that “cannot
be stipulated by the parties; instead, the rate must be
discerned from what actually happens under the governing
employment contract.” Newman v. Advanced Tech.
Innovation Corp., 749 F.3d 33, 37 (1st Cir. 2014) (quoting
O’Brien v. Town of Agawam, 350 F.3d 279, 294 (1st Cir.
2003)); see also 29 C.F.R. § 778.108. Here, AMN, as the
employer, bears the burden of establishing that its per diem
payments qualify as an exemption from the regular rate of
pay under the FLSA. Flores, 824 F.3d at 897 (internal
quotation marks omitted).

                                  A.

                                  i.

    We begin by considering how this Court has assessed
whether payments are excludable from the FLSA’s regular
rate of pay under § 207(e)(2). 8

    In Local 246 Utility Workers Union of Am. v. S. Cal.
Edison Co. (“Local 246”), an employer asserted that
supplemental payments designed to bring disabled workers’
wages to their pre-disability rates could be excluded from the
employees’ regular rate of pay under § 207(e)(2), as they are
“other similar payments to an employee which are not made

   8
     All references to statutory sections of the FLSA refer to the U.S.
Code, Title 29.
                 CLARKE V. AMN SERVICES                       11

as compensation for his hours of employment.” 83 F.3d 292,
296 (9th Cir. 1996). This Court disagreed, holding that the
payments could not be excluded from the regular rate of pay
because they operated as compensation. Id. at 295. Local 246
explained that because the “entire function of [the]
supplemental payments [was] to ensure that the workers
[were] paid for their . . . work at the rate that they used to be
paid for their pre-disability work,” the payments were
necessarily remuneration for employment and could not be
excluded from the regular rate. Id.

    Flores v. City of San Gabriel, relying on Local 246,
reiterated that determining whether a payment can be
excluded from the FLSA’s regular rate depends on whether
the payment “is properly characterized as compensation” for
work. 824 F.3d at 900. Flores concerned cash-in-lieu-of-
benefits payments, providing monthly payments to
employees who declined medical coverage through the
employer. We held those payments were not “other similar
payments to an employee which are not made as
compensation for his hours of employment” and so had to be
included in the calculation of workers’ regular rate of pay.
Id. at 898. Even though the payments were not tied to the
number of hours worked, we concluded, they were “not
similar to payments for non-working time or reimbursement
for expenses,” and so were not excludable under § 207(e)(2).
Id. at 900–01. Although Local 246 and Flores both involved
§ 207(e)(2)’s “other similar payments” clause, their
conclusion that a payment’s function controls whether the
payment is excludable from the regular rate under
§ 207(e)(2), applies here.

    In determining a payment’s function, the tie between
payments and time worked is relevant but not determinative
in assessing whether those payments are properly excludable
12              CLARKE V. AMN SERVICES

from the regular rate under § 207(e)(2). Payments not tied to
hours worked may function as compensation for work, see
Flores, 824 F.3d at 900. Still, whether payments increase,
decrease, or both based on time worked provides an
important indication as to whether the payments are
functioning as compensation rather than reimbursement.

    In the context of per diem payments in particular, the
function test requires a case-specific inquiry based on the
particular formula used for determining the amount of the
per diem. Along with the monetary relationship between
payment and hours, other relevant—but certainly not
dispositive—considerations include whether the payments
are made regardless of whether any costs are actually
incurred, and whether the employer requires any attestation
that costs were incurred by the employee, see pp. 5–6 & n.1,
supra. In some cases, the amount of the per diem payment
relative to the regular rate of pay may be relevant to whether
the purported per diem functions as compensation or
reimbursement. See, e.g., Gagnon v. United Technisource,
Inc., 607 F.3d 1036, 1041 (5th Cir. 2010). And the function
analysis may also consider whether the payments are
tethered specifically to days or periods spent away from
home or instead are paid without regard to whether the
employer is away from home.

                             ii.

    Applying the payment-function test from Flores and
Local 246 comports with out-of-circuit case law that has
addressed the reimbursement clause of § 207(e)(2), as well
as with guidance from the Department of Labor (“DOL”).
Every circuit to consider whether a payment scheme is
excludable from the FLSA’s regular rate as reimbursement
for work-related expenses has assessed how the payments
                CLARKE V. AMN SERVICES                     13

function, taking into account factors similar to those we have
indicated.

     In Newman v. Advanced Tech. Innovation Corp.,
749 F.3d 33 (1st Cir. 2014), for example, the First Circuit
focused on how a per diem functions to determine whether
it is excludable from the regular rate of pay even though the
amount of the per diem is based on federal reimbursement
rates. Id. at 40. The facts of Newman are similar to those
here. As here, the per diems in Newman were based on the
“relevant Internal Revenue Service Federal Travel
Reimbursement rate,” and the Newman district court held
that the per diems “reasonably approximated work-related
expenses.” Id. at 35–36. But in reversing the district court’s
approval of the exclusion of the per diem’s from the regular
rate of pay, Newman explained that the “animating concern
of the FLSA statutes . . . is to examine the substance of a
purported per diem payment and to ensure that it is actually
used to offset expenses an employee incurs due to time spent
away on the employer’s business. The goal is to pierce the
labels that parties affix to the payments and instead look to
the realities of the method of payment.” Id. at 39 (emphasis
added). Newman held that in reducing per diem payments
“for an early end to the work week, [the employer] based
those reductions on the exact number of hours worked in the
week,” and that payments based on total hours worked could
not be excluded from the FLSA’s regular rate of pay. Id. at
39–40.

    In Baouch v. Werner Enterprises, Inc., 908 F.3d 1108
(8th Cir. 2018), similarly, the Eighth Circuit held putative
expense payments to truck drivers based on miles driven
were properly considered part of the FLSA’s regular rate of
pay. Id. at 1116. Baouch explained that before evaluating
“whether the [p]ayments approximated actual expenses,” the
14              CLARKE V. AMN SERVICES

district court properly assessed “whether the [p]ayments
were reimbursements for expenses incurred solely for [the
employer’s] benefit or convenience.” Id. Because the
payments were tethered to the miles driven, a metric poorly
linked to whether the driver has to be away from home or
how long she needs to be away, the payments “function[ed]
as a wage rather than as true per diem reimbursement,” the
Eighth Circuit held, and so were properly included in the
FLSA’s regular rate of pay. Id.

    Baouch’s mode of analysis is especially relevant here. In
granting AMN’s motion for summary judgment, the district
court in this case, relying on the fact that the per diem
payments are based on federal rates and could reasonably be
expected adequately to reimburse clinicians for expenses
incurred while traveling on assignment, held that the per
diem payments do not change “from one based on
reimbursement of expenses to one tied to hours worked”
because they are reduced when clinicians miss a required
shift. But that analysis improperly makes the amount of the
payments—rather than how the payments function—
determinative. The fact that, for some employees, a weekly
per diem payment is in an amount that could reimburse an
employee’s expenses if they functioned as expense
payments is not enough—the payment can both be
reasonable in amount as reimbursement for an employee for
her expenses and still function as a wage.

    Gagnon v. United Technisource, Inc., 607 F.3d 1036 (5th
Cir. 2010), provides yet another—but more obvious—
example of per diem payments functioning as wages and so
improperly excluded from the FLSA’s regular rate of pay.
The employer in Gagnon artificially designated a portion of
its employee’s wages as a “per diem” and excluded those
payments from the regular rate as reimbursement for work-
                 CLARKE V. AMN SERVICES                     15

related expenses. Id. at 1042. The Fifth Circuit noted that the
per diem was paid at an hourly rate; that the per diem did not
reasonably approximate actual expenses; and that the court
could “conceive of no reason why a legitimate per diem
would vary by the hour and be capped at the forty-hour mark,
which not-so-coincidentally corresponds to the point at
which regular wages stop and the overtime rate applies.” Id.
at 1041–42. Gagnon therefore affirmed the district court’s
determination that the per diem payments were improperly
excluded from the regular rate of pay.

    In contrast, Sharp v. CGG Land (U.S.), Inc., 840 F.3d
1211, (10th Cir. 2016), involved per diems that did function
as reimbursement for work-related expenses and so were
properly excluded from the regular rate of pay. Sharp held
that a flat meal per diem, provided for each day an employee
was required to be away from home, was properly excluded
from the regular rate of pay. The per diem was not paid
“when employees worked from their home locations or when
food was provided at the remote locations.” 840 F.3d
at 1213. The Tenth Circuit noted that “employees received
the [per diem] payments only when [the employer] required
them to work away from home,” and that the parties
stipulated that the per diem payments were “a reasonable
meal allowance.” Id. at 1215. Because the per diems
functioned to reimburse expenses incurred while working
away from home, the payments were properly excluded
under § 207(e)(2).

    Finally, Department of Labor (“DOL”) interpretations of
§ 207(e)(2) also support assessing how payments operate to
determine if they are properly excluded from the FLSA’s
regular rate of pay. 29 C.F.R. § 778.224, effective as of
January 15, 2020, addresses § 207(e)(2)’s “Other similar
payments” clause and explains that excludable payments “do
16               CLARKE V. AMN SERVICES

not depend on the hours worked, services rendered . . . or
other criteria that depend on the quality or quantity of the
employee’s work.” 29 C.F.R. § 778.224(a). And the DOL’s
Field Operation Handbook (“FOH”) states:

       If the amount of per diem . . . is based upon
       and thus varies with the number of hours
       worked per day or week, such payments are a
       part of the regular rate. . . . [But] this does not
       preclude an employer from making
       proportionate payments for that part of a day
       that the employee is required to be away from
       home on the employer’s business. For
       example, if an employee returns to his/her
       home or employer’s place of business at
       noon, the payment of only one-half the
       established per diem rate for that particular
       day would not thereby be considered as
       payment for hours worked and could thus be
       excluded from the regular rate.

FOH § 32d05a(c). AMN argues that Baouch and Gagnon
erred by focusing on the first sentence of the guidance rather
than the second, which allows per diems to include partial
payments for time away from home. But the second sentence
permits an adjustment if the employee returns home or to the
employer’s place of business; it does not sanction an
adjustment based on time worked while the employee is
away from home on the employer’s business. So both parts
of the guidance are consistent in focusing on the substance
or function of payments as payments for expenses incurred
while away from home rather than on their form or label.

   Plaintiffs urge us to embrace the per se rule that “[p]er
diem payments that vary with the amount of work performed
                 CLARKE V. AMN SERVICES                     17

are part of the regular rate.” Baouch, 908 F.3d at 1116 (citing
Gagnon, 607 F.3d at 1041–42; Newman, 749 F.3d at 35–37).
But determining whether a per diem must be included in the
regular rate of pay is a case-specific inquiry that turns on
whether the payments function to reimburse employees for
expenses or instead operate to compensate employees for
hours worked. See Baouch, 908 F.3d at 1115. The fact that a
payment varies with hours worked is a relevant factor in that
determination, often a particularly relevant one. But, as we
next explain, we readil0y conclude that, taking into account
a number of factors, not solely their connection to hours
worked, the per diem payments here function as wages rather
than reimbursement for work-related expenses. We therefore
need not determine whether per diem payments that vary
with hours worked must always be included in the FLSA’s
regular rate.

                              B.

    Several features of AMN’s per diem payments make
evident that they function as remuneration for hours worked
rather than reimbursement for expenses.

    First, under AMN’s policies, the maximum weekly per
diem benefits compensate employees for seven days of
expenses. So AMN already pays clinicians a per diem for
days they are not working for AMN. Reimbursing traveling
clinicians for seven days of expenses even though most
clinicians only work three days a week is justifiable because
the clinicians are scheduled to work away from home for a
prolonged period and are not expected to travel back and
forth to their home base each week. See 29 C.F.R.
§ 778.217(b)(3). But it is also notable that AMN’s prorating
policy does not change depending on the clinician’s reason
for missing a shift. For example, under AMN’s policy, a
clinician too ill to work, and therefore not expected either to
18              CLARKE V. AMN SERVICES

work or to return to her tax home, would still be traveling
and incurring expenses on AMN’s behalf but would not
receive per diem payments. The through line here is that
AMN’s pro rata deductions from its per diem payments are
unconnected to whether the employee remains away from
home incurring expenses for AMN’s benefit. Instead, the
deductions connect the amount paid to the hours worked
while still away from home, thereby functioning as work
compensation rather than expense reimbursement.

    Second, clinicians are able to offset missed or
incomplete shifts with hours they have “banked” on days or
weeks in which they worked more than the minimum
required hours. There is no plausible connection between
working extra hours one week and incurring greater
expenses the next. AMN offers no explanation for why
“banked hours” should affect whether a clinician receives
the maximum per diem payment during a week she works
less than the minimum required hours. The only reason to
consider “banked hours” in calculating a weekly per diem
payment is to compensate employees for total hours worked,
rather than for reasonable expenses incurred on days spent
away from home for work.

    The “banking hours” system also undermines AMN’s
justification for prorating the per diem payments, which the
district court embraced in granting AMN’s motion for
summary judgment. The district court reasoned that because
a clinician does not incur expenses for the benefit of AMN
when she is not working, AMN properly prorates her weekly
per diem payment when she misses a shift to avoid
reimbursing her for “personal expenses.” But neither the
district court nor AMN explain how “banked hours”
accumulated on days for which a clinician was already paid
a per diem can transform a subsequent day that would have
                CLARKE V. AMN SERVICES                     19

been considered “personal” into a day for which AMN
should reimburse the clinician’s expenses.

    Finally, and perhaps most tellingly, AMN pays local
clinicians the same per diems it would if the clinicians were
traveling. AMN explains that, unlike the traveling clinicians’
per diems, which reimburse employees for expenses
incurred for AMN’s benefit, local clinicians’ per diems
function as wages and provide incentives for employees to
work the minimum required hours. The district court
acknowledged this feature of AMN’s per diem payments but
held that “the premise that non-traveling employees received
the same fixed per diem is disputed” and that, anyway, “what
other employees may or may not be paid does not change the
underlying fact that traveling employees are receiving per
diem payments that reasonably approximate travel costs
incurred for the benefit of the employer.”

    The district court erred for two reasons. For one thing,
the only disputed fact is whether local clinicians incurred
travel-related expenses, not whether they received per diem
payments. Whether local clinicians incur travel-related
expenses is not a material fact. AMN treats local clinicians
per diems as wages, not as reimbursement for any travel-
related expense. Additionally, that local clinicians receive
the same per diems they would if they were traveling even
though they do not incur the same expenses—such as
housing—is quite pertinent in evaluating the nature of the
putative per diem payments made to travelling clinicians.
AMN’s explanation for the payments made to local
clinicians—that providing per diems to local clinicians
encourages them to work the required hours—applies
equally to travelling clinicians, and confirms that the
payments do function as compensation—namely, as a bonus
for good work attendance. The comparison to local
20              CLARKE V. AMN SERVICES

clinicians’ payments is an exceedingly strong indication that
the per diem payments made to both groups of clinicians
function as compensation for labor.

    That both local and traveling clinicians receive per diems
also supports Plaintiffs’ assertion that these payments are
expected as part of a clinician’s pay package and so function
as supplemental wages. In Baouch, the Eighth Circuit
pointed to “seemingly obvious indicators that [the payments]
function[ed] as a wage,” including that the total pay of truck
drivers enrolled in the program that provided payments
based on miles driven was “suspiciously close to the taxable
wage paid to non-participants.” Id. at 1117.

    In sum, a combination of factors—the tie of the per diem
deductions to shifts not worked regardless of the reason for
not working; the “banking hours” system; the default
payment of per diem on a weekly basis, including for days
not worked away from home, without regard to whether any
expenses were actually incurred on a given day; and the
payment of per diem in the same amount, but as
acknowledged wages, to local clinicians who do not travel—
together indicate that the payments functioned as
compensation for hours worked.

                             III.

    AMN has failed to demonstrate that its per diems may be
excluded from the FLSA’s regular rate of pay under
§ 207(e)(2). We therefore REVERSE the district court’s
grant of summary judgment, and REMAND for the district
court to enter partial summary judgment in Plaintiffs’ favor
as to whether the per diem payments to class member
employees should be considered part of the employees’
regular rate of pay and to conduct further proceedings.