Court Opinion

ID: 4160346
Source: CourtListenerOpinion
Date Created: 2017-04-13 21:00:51.3073+00
Date Added: 2024-06-11T14:23:49.220185
License: Public Domain

Case: 16-13745        Date Filed: 04/13/2017      Page: 1 of 9

                                                                                   [PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                              ________________________

                                     No. 16-13745
                               ________________________

                          D.C. Docket No. 1:15-cv-22732-MGC

SEAN FREIXA,
on behalf of himself and others similarly situated,

                                                                    Plaintiff-Appellant,
                                             versus

PRESTIGE CRUISE SERVICES, LLC,
a Delaware Limited Liability Company,
PRESTIGE CRUISE HOLDINGS, INC.,
a Foreign Corporation, et al.

                                                                    Defendant-Appellee.

                               ________________________

                      Appeal from the United States District Court
                          for the Southern District of Florida
                             _______________________

                                       (April 13, 2017)

Before WILLIAM PRYOR and MARTIN, Circuit Judges, and DUFFEY, * District
Judge.

*
 Honorable William S. Duffey, Jr., United States District Judge for the Northern District of
Georgia, sitting by designation.
              Case: 16-13745     Date Filed: 04/13/2017   Page: 2 of 9

WILLIAM PRYOR, Circuit Judge:

      This appeal requires us to decide whether, in calculating an employee’s

hourly rate of pay to determine if he is exempt from federal overtime laws, a

district court may allocate the employee’s commissions to hours worked outside

the periods in which the commissions were earned. Sean Freixa sued a former

employer, Prestige Cruise Services, LLC, for overtime pay. Federal law required

the district court to calculate Freixa’s hourly rate of pay on a week-to-week basis

to determine whether Freixa was exempt from federal overtime laws. 29 U.S.C.

§ 207(i). Because part of Freixa’s remuneration included commission payments

that were computed and earned monthly, the district court concluded that it was

“not possible or practicable” to determine exactly how much Freixa earned in

commissions in each individual week, 29 C.F.R. § 778.120. It instead divided

Freixa’s entire remuneration for the year he worked across every hour in every

week he worked that year. That calculation produced an average hourly rate above

the exemption threshold, so the district court awarded summary judgment in favor

of the cruise service. But federal law bars allocating a commission payment across

weeks that fall outside the period in which the payment was earned. Id. We reverse

and remand.

                                          2
              Case: 16-13745    Date Filed: 04/13/2017   Page: 3 of 9

                               I. BACKGROUND

      From December 7, 2013, to December 19, 2014, Sean Freixa sold cruises for

Prestige Cruise Services, LLC. Freixa received a fixed salary of $500 per week

plus commissions. He earned over $70,000 in total compensation during his

employment, sixty-three percent of which he received in commissions.

      The cruise service calculated commissions monthly and disbursed payments

of the commissions the following month. To calculate the commissions due for

each month, the cruise service assessed the sum of all bookings an employee

completed in the month and subtracted bookings the employee completed in

previous months that were cancelled in the current month. The cruise service then

multiplied the gross number of bookings by a percentage that changed

progressively. An employee with three or fewer gross bookings received no

commissions, but an employee with four, five, or six received a commission of

1.25 percent on each booking. For example, Freixa earned almost $9,000 in

commissions on March 28, 2014, for work performed between February 1 and

February 28, 2014. But he received no commission payments for work performed

in July and November.

      Freixa sued the cruise service for overtime pay and alleged that his

compensation in certain weeks fell below $10.88 per hour, the minimum amount

an employee must receive to be exempt from federal overtime requirements,

                                         3
               Case: 16-13745     Date Filed: 04/13/2017    Page: 4 of 9

§§ 206(a)(1)(C), 207(i). Both parties moved for summary judgment. The parties

agreed that Freixa worked an average of sixty hours per week during his

employment, but they disagreed about the number of hours he worked in any

individual week.

      The district court acknowledged that the law generally requires calculating

the regular rate of pay on a week-to-week basis but found it difficult to determine

the exact weeks during which Freixa earned commissions. So the district court

invoked a federal regulation that permits use of a different “reasonable and

equitable method” of calculation “[i]f it is not possible or practicable to allocate the

commission among the workweeks of the period in proportion to the amount of

commission actually earned or reasonably presumed to be earned each week.” 29

C.F.R. § 778.120. The district court then divided Freixa’s entire remuneration for

the year across every hour in every week he worked—assuming sixty hours per

week—and arrived at an average hourly rate of $23.45. Because that rate exceeded

the exemption threshold of $10.88 per hour, the district court awarded summary

judgment in favor of the cruise service.

                          II. STANDARDS OF REVIEW

      “This Court reviews de novo summary judgment rulings and draws all

inferences and reviews all evidence in the light most favorable to the non-moving

party.” Craig v. Floyd Cty., 643 F.3d 1306, 1309 (11th Cir. 2011) (quoting Moton

                                           4
              Case: 16-13745     Date Filed: 04/13/2017    Page: 5 of 9

v. Cowart, 631 F.3d 1337, 1341 (11th Cir. 2001)). “Summary judgment is

appropriate ‘if the movant shows that there is no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law.’” Id. (quoting Fed.

R. Civ. P. 56(a)). We review the interpretation of a statute or regulation de novo.

United States v. Hoffman-Vaile, 568 F.3d 1335, 1340 (11th Cir. 2009) (statute);

Stansell v. Revolutionary Armed Forces of Colom., 771 F.3d 713, 733 (11th Cir.

2014) (regulation).

                                 III. DISCUSSION

      The Fair Labor Standards Act requires employers to pay overtime

compensation to employees who work more than forty hours in a single week. 29

U.S.C. § 207(a)(1). The Act relieves an employer of this requirement for any

employee of a retail or service establishment “if (1) the regular rate of pay of such

employee is in excess of one and one-half times the minimum hourly rate

applicable to him . . . , and (2) more than half of his compensation for a

representative period (not less than one month) represents commissions on goods

and services.” § 207(i). The “regular rate of pay” includes commissions, not only

salary. § 207(e); 29 C.F.R. § 778.117.

      The parties dispute whether the district court used an acceptable method to

calculate Freixa’s regular rate of pay. We conclude that it did not. The district

                                          5
              Case: 16-13745     Date Filed: 04/13/2017    Page: 6 of 9

court invoked, but misapplied, a regulatory exception to the general rule about

calculating overtime pay.

      A district court ordinarily may not allocate compensation or hours across

multiple weeks. For example, a district court may not hold that an employee who

worked thirty hours in one week and fifty in another is exempt from overtime laws

because he averaged forty hours per week. 29 C.F.R. § 778.104. Instead, it must

calculate both compensation and hours for each individual week because “[t]he Act

takes a single workweek as its standard.” See id.; see also § 779.419(b)

(establishing that courts should look to chapter 29, part 778 to “comput[e] the

regular rate for purposes of the Act”). That is, the Act contemplates the

employment of a person “for a workweek.” 29 U.S.C. § 207(i) (emphasis added).

And we have held that “[t]he regular rate [of pay] is determined by dividing the . . .

total compensation during the workweek by the number of hours worked.”

Klinedinst v. Swift Invs., Inc, 260 F.3d 1251, 1256 (11th Cir. 2001) (emphasis

added) (citing C.F.R. § 779.419(b) (“[The regular rate of pay] is a rate per hour,

computed for the particular workweek . . . .”)).

      The district court invoked a regulatory exception to the general rule for

calculating overtime pay because Freixa earned commissions monthly instead of

weekly. That regulatory exception permits a district court to allocate commission

payments across multiple weeks: “If it is not possible or practicable to allocate the

                                          6
              Case: 16-13745     Date Filed: 04/13/2017    Page: 7 of 9

commission among the workweeks of the period in proportion to the amount of

commission actually earned or reasonably presumed to be earned each week,” a

district court must adopt “some other reasonable and equitable method” to

calculate the hourly rate. § 778.120. The cruise service argues that the district court

correctly calculated Freixa’s regular rate of pay under this exception because of the

difficulty of allocating monthly commissions over individual weeks, but that

difficulty does not mean that the district court could allocate Freixa’s commissions

earned in one computation period to another computation period.

      Although the computation structure for Freixa’s commissions makes it

impracticable or impossible to determine any particular week in which he earned

commissions, the district court misapplied the regulatory exception for allocating

commissions. When commissions are computed monthly, a district court may not

allocate commissions earned in one month across weeks worked in other months.

Federal regulations instead limit a district court to allocating commissions across

weeks within the time period in which the commissions were earned. One

regulation provides that “it is necessary, as a general rule, that the commission be

apportioned back over the workweeks of the period during which it was earned.”

§ 778.119 (emphasis added). And section 778.120 provides that a district court that

is unable to allocate commissions to workweeks “in proportion to the amount of

commission actually earned or reasonably presumed to be earned each week” must

                                           7
              Case: 16-13745    Date Filed: 04/13/2017   Page: 8 of 9

adopt “some other reasonable and equitable method” to “allocate the commission

among the workweeks of the period.” Id. (emphasis added).

      Although these regulations use the term “period,” the context makes clear

that “period” means “computation period,” which, for Freixa, refers to each month

of his employment, not the whole year he worked. Section 778.120 uses the phrase

“computation period” eight times, id., and uses the term interchangeably with

“period,” so we construe the terms to carry the same meaning. See Antonin Scalia

& Bryan Garner, Reading Law: The Interpretation of Legal Texts 170 (2012) (“A

word or phrase is presumed to bear the same meaning throughout a text . . . .”).

Section 778.120 limits the district court to allocating monthly commissions only

among the “workweeks of the [computation] period”—that is, each particular

month.

      The two examples of “reasonable and equitable method[s]” listed in the

regulation further illustrate that a commission payment can be allocated only

across the weeks that comprise the computation period for that particular payment.

Section 778.120 provides that a district court may “[a]ssume that the employee

earned an equal amount of commission in each week of the commission

computation period.” § 778.120(a). A district court may also “assume that the

employee earned an equal amount of commission in each hour that he worked

during the commission computation period” if some facts “make it inappropriate to

                                         8
              Case: 16-13745     Date Filed: 04/13/2017   Page: 9 of 9

assume equal commission earnings for each workweek.” § 778.120(b). But the

regulation nowhere suggests that a district court may allocate commissions across

hours worked in weeks outside the relevant computation period.

      The district court erred when it allocated commissions earned in one month

across weeks worked in other months. Each commission payment that Freixa

received reflected “commissions that were earned” within a single month. Under

section 778.120, the district court could allocate commissions earned in January,

for example, across weeks worked in January, but not across weeks worked from

February through December.

      Because the district court may allocate commissions across only the weeks

in the period (in this case, the month) in which the commissions were earned, this

case presents a genuine dispute about a material fact. The parties agreed that Freixa

averaged sixty hours per week over the course of his employment but disagreed

about the number of hours Freixa worked in any individual week or computation

period, so the record permits no summary judgment.

                               IV. CONCLUSION

      We REVERSE the judgment in favor of Prestige Cruise Services, LLC, and

REMAND for further proceedings.

                                          9