Court Opinion

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Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

2-24-2005

Wheeler v. Hampton Twp
Precedential or Non-Precedential: Precedential

Docket No. 04-1728

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                                         PRECEDENTIAL

  IN THE UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT

                    Case No: 04-1728

        WILLIAM WHEELER, II, an individual,
    and ROBERT J. LOMB, an individual, on behalf
  of themselves and other individuals similarly situated,

                         Appellants

                               v.

                HAMPTON TOWNSHIP,

                   _______________

    On appeal from the United States District Court
        for the Western District of Pennsylvania
              District Court No. 03-cv-00976
Chief District Judge: The Honorable Donetta W. Ambrose
                     _______________

               Argued November 18, 2004
                   _______________

 Before: ROTH, SMITH, and BECKER, Circuit Judges
                 (Filed: February 24, 2005)
                   __________________

Counsel:     Robert A. Eberle (Argued)
             Joseph S. Pass
             Jubelirer, Pass & Intrieri, P.C.
             219 Fort Pitt Boulevard
             Pittsburgh, PA 15222
             Attorney for Appellants

             Suzanne B. Merrick (argued)
             Gaitens, Tucceri & Nicholas, P.C.
             519 Court Place
             Pittsburgh, PA 15219
             Attorneys for Appellees

                   ___________________

                OPINION OF THE COURT
                 ____________________

SMITH, Circuit Judge.

       This appeal arises out of a suit filed by the full-time
police officers of Hampton Township, Pennsylvania to recover
overtime pay under the Fair Labor Standards Act (“FLSA” or
“the Act”). 29 U.S.C. §§ 201-19 (2004). The officers contend
that the Township’s method of calculating overtime
shortchanged them under the FLSA, even though they agreed to

                              2
that method in a collective bargaining agreement. The
Township argues that, while the officers bargained away in the
agreement one of their rights under the FLSA, the Township
overcompensated the officers by bargaining away a more
valuable right under the FLSA and thus offset the Township’s
liability under the Act. The District Court upheld the
Township’s position, holding that the collective bargaining
agreement satisfies the overall requirements of the FLSA, even
though it contains concessions by both parties not envisioned in
the Act. We conclude that the FLSA does not support applying
the Township’s alleged concession as an offset, and therefore
we will reverse the judgment of the District Court.1

  1
    We have jurisdiction in this case under 28 U.S.C. § 1291, as
the District Court’s grant of Defendants’ motion to dismiss was
a final decision. The District Court had jurisdiction pursuant to
29 U.S.C. § 216(b), which establishes a private right of action
against a covered employer to recover unpaid overtime
compensation, and provides federal court jurisdiction over such
actions. Under Garcia v. San Antonio Metropolitan Transit
Authority, this provision covers local governments. 469 U.S.
528 (1985) (cited in Brooks v. Ridgefield Park, 185 F.3d 130,
134 (3d Cir. 1999)).

                               3
                               I.

                              A.

        The genesis of this dispute is a collective bargaining
agreement (“CBA”) that established the terms of employment
for the full-time police officers (“the Officers”) of Hampton
Township from January 2000 through December 2003.2 While
the parties agree on how the CBA calculates overtime, they
sharply disagree over whether the CBA’s calculation provides
all the overtime required under the FLSA.

       The CBA provides as follows. The Officers are entitled
to a specified “basic annual salary,” which varies according to
the officers’ rank, and annual percentage raises to that salary.
For example, a starting patrolman under the CBA received a
basic annual salary of approximately $37,000 in 2000, $38,000
in 2001, and $39,000 in 2002. A normal workweek under the
CBA is five consecutive days in any seven day period, and a
normal work day lasts eight consecutive hours in any 24-hour
period.

       Overtime pay is provided under the CBA for work over
eight hours in a single workday, and for work over 40 hours in
a single workweek. Overtime pay rates are calculated by
dividing the officers’ basic annual salary by 2,080 and

  2
   The original agreement lasted from January 1, 2000 through
December 31, 2002; before it expired the parties extended the
agreement through December 2003.

                               4
multiplying the resulting figure by 1.5. To illustrate, a starting
patrolman in 2000 earning $37,000 who worked 10 extra hours
(i.e., 50 total hours) in a given week would be entitled to
$266.90 ($37,000/2,080 = $17.79 x 1.5 = $26.69 x 10 =
$266.90) in overtime payments for that week.

       The CBA provides two other broad categories of
remuneration that are relevant to the present dispute. First, the
CBA provides pay for certain non-working time (“non-work
pay”), including

              •       11 paid annual holidays (e.g., New Year’s
                      Day, Memorial Day, etc.),

              •       2 paid annual personal days,

              •       paid annual vacations of varying length
                      depending on seniority, and

              •       1.5 paid sick days each month.

With the exception of vacations, which are to be paid at the
“regular weekly rate,” a term that is not defined, the CBA does
not explain what amounts the Officers are paid for these non-
working days.       Second, the CBA provides specified
incentive/expense payments (“incentive/expense pay”),
including:

              •       monthly longevity pay for senior officers,

              •       annual pay for educational attainment,

              •       increased     hou rly   pay     for   s hift

                                5
                      commanders, and

              •       annual stipends for uniform replacement,
                      maintenance, and cleaning.

In contrast to non-work pay, the CBA provides precise dollar
figures for each category of incentive/expense pay. For
example, an officer receiving a bachelor’s degree from an
accredited institution in a field directly related to the officer’s
responsibility receives an additional $250.00 per year.

                                B.

        In their complaint, the Officers argued that the FLSA
mandates that their basic annual salary be augmented before the
base hourly rate is calculated for overtime purposes.
Specifically, the Officers claimed that the CBA impermissibly
took their basic annual salary alone, divided it by 2,080, and
multiplied that figure by 1.5 to establish their overtime pay rate.
Instead, according to the Officers, the CBA should have added
the four items of incentive/expense pay to their basic annual
salary, divided the sum by 2,080, and multiplied that (higher)
figure by 1.5 to establish their overtime pay rate. The Officers
sought to recover the amount of overtime lost during the three
years preceding the suit, interest on that amount, liquidated
damages, attorneys’ fees, and costs.

       The Township did not deny that the CBA established the
overtime calculation described by the Officers. Rather, the
Township argued that the Officers traded their right to have
incentive/expense pay added to their basic annual salary in the

                                6
CBA’s overtime calculation in exchange for the inclusion of
non-work pay, which is not required under the FLSA.
According to the Township, because the value of the latter far
outweighed the former, the basic annual salary (and, hence, the
ultimate overtime rate) was inherently higher than it otherwise
would have been – indeed, higher than if non-work pay had
been excluded from the calculus and incentive/expense pay had
been included. “Hampton Township and the Police department
have negotiated a method of calculating overtime rate of pay
which exceeds the minimum legal rate established under the
FLSA,” the Township concluded. (Emphasis in original.)

       The District Court agreed with the Township. According
to the Court, the focus of the FLSA’s overtime compensation
scheme “is on the total overtime compensation received by the
employee,” not on whether the parties have complied with
specific components of the FLSA. As support for this
proposition, the Court cited Minizza v. Stone Container
Corporation, in which we stated that the “FLSA was not
intended to emasculate the ability of labor and management to
be creative in resolving labor disputes in a manner which is
mutually beneficial . . . to all parties involved in such
negotiations.” 842 F.2d 1456, 1463 (3d Cir. 1988). To adopt
the Officer’s argument, the District Court stated, would be to
stand in the way of “innovative collective bargaining,”
obstruction forbidden in Minizza. The District Court held that
“as long as the officers were compensated ‘at a rate of not less
than one and one-half times the regular rate,’ they have not
made out a statutory violation, regardless of the formula used by

                               7
the employer (in negotiations with the union) to achieve that
result.” (Emphasis in original.) According to the District Court,
the Officers did not dispute that the CBA exceeded the FLSA’s
overall requirements for calculating overtime, and consequently
they failed to state a claim for which relief could be granted.

                                 II.

        We review a decision granting a motion to dismiss for
failure to state a claim de novo. Worldcom, Inc. v. Graphnet,
Inc., 343 F.3d 651, 653 (3d Cir. 2003). “Dismissal for failure to
state a claim is appropriate only if it ‘appears beyond doubt that
plaintiff can prove no set of facts in support of his claim which
would entitle him to relief.’” Id. (quoting Conley v. Gibson, 355
U.S. 41, 45-46 (1957)).

                                  A.

       As this dispute turns on applying the FLSA to the CBA,
we begin by laying out the controlling provisions of the statute.
Under the FLSA, covered employers may not employ any
employee “for a workweek longer than forty hours unless such
employee receives compensation for his employment . . . at a
rate not less than one and one-half times the regular rate at
which he is employed.” 29 U.S.C. § 207(a)(1).3 In turn, “the

  3
      In full, § 207(a)(1) provides:

         Except as otherwise provided in this section, no
         employer shall employ any of his employees who in any

                                  8
‘regular rate’ at which an employee is employed shall be deemed
to include all remuneration for employment paid to, or on behalf
of, the employee, but shall not be deemed to include . . .
payments made for occasional periods when no work is
performed due to vacation, holiday, illness . . . and other similar
payments to an employee which are not made as compensation
for his hours of employment.” 29 U.S.C. § 207(e)(2).4

         workweek is engaged in commerce or in the production
         of goods for commerce, or is employed in an enterprise
         engaged in commerce or in the production of goods for
         commerce, for a workweek longer than forty hours
         unless such employee receives compensation for his
         employment in excess of the hours above specified at a
         rate of not less than one and one-half times the regular
         rate at which he is employed.
  4
      In full, § 207(e)(2) provides:

         As used in this section the “regular rate” at which an
         employee is employed shall be deemed to include all
         remuneration for employment paid to, or on behalf of,
         the employee, but shall not be deemed to include–
               ....

                 (2) payments 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

                                  9
       In construing the foregoing provisions, the parties agree
on much. The parties of course agree that the Officers must
receive one-and-a-half times their “regular rate” of pay. They
also agree that § 207(e) establishes that the regular rate “shall
not be deemed to include” non-work pay, but that the regular
rate “shall be deemed to include” all remuneration, including
incentive/expense pay. Still further, the parties agree that the
CBA’s version of the “regular rate” – what it calls the “base
hourly rate” – does not include incentive/expense pay,5 and that
non-work pay comprises some portion of the CBA’s base hourly
rate. The disagreement in this case is whether the FLSA allows
the Township to offset the exclusion of incentive/expense pay
from the base hourly rate with a “credit” for including non-work
pay in the base hourly rate. According to the Township, it

              expenses, incurred by an employee in 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[.]
   5
    At oral argument, the Township conceded that longevity,
educational attainment, and shift commander pay were
“remuneration” under § 207(e), and the Township’s brief
concedes that the CBA did not include those items in, or add
those items to, the basic annual salary for purposes of overtime
calculations. The Township avers that under the Code of
Federal Regulations uniform pay does not count as remuneration
for purposes of overtime calculations, however.

                               10
deserves such a credit because the base hourly rate includes non-
work pay even though § 207(e) states that the regular rate “shall
not be deemed to include” such pay. The District Court agreed.6

       1. 29 U.S.C. § 207(e)

        The Township’s argument for a credit founders on the
text it cites to support its position. That provision, § 207(e),
states that an employee’s “regular rate” of pay “shall not be
deemed to include . . . payments made for occasional periods
when no work is performed . . . and similar payments.” 29
U.S.C. § 207(e)(2). According to the Township, if it followed
that provision to the letter, the Officers would get less overtime
pay than they do under the CBA. We agree that, under §
207(e)(2), the Township did not have to agree to a CBA that
included non-work pay in its regular rate. Assuming, as do the
parties, that such pay already is included in the CBA, however,
we disagree that under § 207(e)(2) the Township does not have
to include non-work pay in its regular rate. The CBA requires

  6
   Additionally, as we have noted, the District Court concluded
that the Officers “do not appear to contest that the Township has
exceeded the minimum requirements for calculating overtime as
a whole.” That conclusion was in error. As their brief in
opposition in the District Court, their brief on appeal, and their
counsel’s statements before us at oral argument make plain, the
gravamen of the Officers’ case was, and is, that the CBA fails
to provide the minimum amount of overtime required by the
FLSA.

                               11
the Township to do so, and § 207(e) nowhere suggests that we
should relieve the Township of that obligation.

       The pivotal language is “shall not be deemed.” 29 U.S.C.
§ 207(e)(2). Consistently, we and our sister circuits have
applied that phrase to mean that employees seeking unpaid
overtime may not under the FLSA require that non-work pay be
added to the regular rate. In Minizza, for example, we held that
lump sum payments provided under a collective bargaining
agreement did not have to be added to the agreement’s regular
rate because they were an incentive to conclude a labor
agreement, not compensation for services rendered. 842 F.2d at
1463. Likewise, the Sixth Circuit held that bonuses for the
absence of medical claims and the non-use of sick leave did not
have to be added to the regular rate because they were not
compensation for services. See Featsent v. City of Youngstown,
70 F.3d 900, 905 (6th Cir. 1995). Recently, the Ninth Circuit
held that payments for lunch periods, when employees did not
work, were not compensation for hours worked and thus
properly were excluded from the regular rate. Ballaris v.
Wacker Siltronic Corp., 370 F.3d 901, 909 (9th Cir. 2004).

        None of these cases, or any other case we have found,
holds that a labor agreement that indisputably adds non-work
pay to the regular rate violates § 207(e), or that § 207(e)
supports a credit against other statutory obligations. We suspect
that is for good reason: the plain text of the statute undercuts
both of those constructions. Both constructions call for action
by the Court, while the text calls for inaction. Section 207(e)

                               12
does not say “shall be deemed not to include,” but “shall not be
deemed to include.” 29 U.S.C. § 207(e). The difference in
meaning between those two statements is immense. The former
requires court intervention in the face of a labor agreement
already containing non-work pay augments to the regular rate.
The latter signals court passivity in the face of such an
agreement.

       The function of § 207(e)(2) is to forbid this Court from
deeming that the CBA include non-work pay. We will follow
that injunction, for the parties agree that the CBA already
contains non-work pay in the regular rate. There is thus nothing
for this Court to “deem.” The deed is already done by the
parties’ own hands. Nothing in § 207(e) suggests that the Court
should undo it. Consequently, we see no textual reason to
“credit” the Township for including such pay in its regular rate.

       The context of § 207(e)(2) confirms our reading of that
provision. There is no cause of action for employers in the
FLSA. See generally 29 U.S.C. § 216(b) (“Any employer who
violates the provisions . . . of this title shall be liable to the
employee[s] affected in the amount of their . . . unpaid overtime
compensation . . . .”). Once an employer agrees to pay a given
amount of overtime pay, the employer may not sue to recover
excess pay under the statute. The FLSA is a shield for
employers, not a sword. That undoubtedly is one reason why
the Township did not file a counterclaim in this case for paying
too much overtime. Such a move might have been impolitic; it
certainly would have lacked any basis in the Act. Likewise,
while § 207(e) protects the Township from having to include
non-work pay in the regular rate, it does not authorize the
Township now to require such augments to be stripped out, or
to take a credit for including such augments. The Township
asks us to use § 207(e)’s “shall not be deemed” language as an

                               13
offensive weapon to eviscerate the requirements of that section’s
“shall be deemed” language. As that reading of § 207(e) runs
counter to the defensive litigation posture required of employers
under the FLSA, we decline to adopt it.

         2. 29 U.S.C. § 207(h)

       Where a credit is allowed, the statute says so. Section
207 provides that employers may credit premium payments for
work outside standard work periods against statutorily required
overtime pay: “[e]xtra compensation paid as described in
paragraphs (5), (6), and (7) of subsection (e) shall be creditable
toward overtime compensation payable pursuant to this
subsection.” 29 U.S.C. § 207(h)(2). “Extra compensation” is
pay at a “premium rate” for hours worked. See 29 U.S.C. §
207(e)(5)-(7). 7 Such “extra compensation” is a kind of overtime

  7
      In full, § 207(e)(5)-(7) provide:

                 As used in this section the “regular rate” at which
                 an employee is employed shall be deemed to
                 include all remuneration for employment paid to,
                 or on behalf of, the employee, but shall not be
                 deemed to include–

                 ...

                 (5) extra compensation provided by a premium
                 rate paid for certain hours worked by the
                 employee in any day or workweek because such
                 hours are hours worked in excess of eight in a day
                 or in excess of the maximum workweek
                 applicable to such employee under subsection (a)
                 of this section or in excess of the employee’s
                 normal working hours or regular working hours,

                                 14
compensation, and thus need not be added to the regular rate.
Likewise, such compensation may be credited against the Act’s
required overtime pay. See Herman v. Fabri-Centers of Am.,
308 F.3d 580, 587 (6th Cir. 2002) (explaining that Congress
“considered it unfair to require the inclusion of contractual
premiums not required by the Act in the [regular rate], thereby
making the employer pay ‘overtime on overtime’” and “fair to
employers to give them a credit for certain contractual premiums

              as the case may be;

              (6) extra compensation provided by a premium
              rate paid for work by the employee on Saturdays,
              Sundays, holidays, or regular days of rest, or on
              the sixth or seventh day of the workweek, where
              such premium rate is not less than one and one-
              half times the rate established in good faith for
              like work performed in nonovertime hours on
              other days; or

              (7) extra compensation provided by a premium
              rate paid to the employee, in pursuance of an
              applicable employment contract or collective
              bargaining agreement, for work outside of the
              hours established in good faith by the contract or
              agreement as the basic, normal, or regular
              workday (not exceeding eight hours) or workweek
              (not exceeding the maximum workweek
              applicable to such employee under subsection (a)
              of this section[)], where such premium rate is not
              less than one and one-half times the rate
              established in good faith by the contract or
              agreement for like work performed during such
              workday or workweek.

                              15
paid against the statutory overtime they might owe”).

       The Township does not qualify for the credit allowed
under § 207(h)(2) because it does not claim to have provided in
the CBA extra pay for hours worked. See 29 U.S.C. §
207(e)(5)-(7). Moreover, the Township does not seek the kind
of dollar-for-dollar credit for premium pay described in §
207(e)(5), (6), and (7). See Howard v. City of Springfield, 274
F.3d 1141, 1147 (7th Cir. 2001) (holding, inter alia, that
premium payments for days off may be used as dollar-for-dollar
offsets of overtime liability); Alexander v. United States, 32
F.3d 1571, 1575 n.4 (Fed. Cir. 1994) (“[t]he term ‘creditable’
means that the [employer] can deduct premium pay excluded
from the regular rate under 29 U.S.C. § 207(e)(5)-(7) from the
FLSA overtime pay”). Rather, the Township seeks a credit for
allegedly including non-work pay – presumably at a non-
premium rate – in the CBA’s basic annual salary. The FLSA
does not provide for such an offset. 8

   8
    Another provision of § 207(h) could be read to forbid the
credit the Township seeks. Section 207(h)(1) states that sums
excluded from the regular rate pursuant to subsection (e) shall
not be creditable toward . . . overtime compensation required
under this section.” 29 U.S.C. § 207(h)(1). We think that
provision is inapplicable to the present dispute, however, as it,
too, appears to ban dollar-for-dollar set-offs. See Ballaris, 370
F.3d at 913 (“[T]he use of paid lunch compensation to offset
wages or overtime compensation due for hours worked is in
direct violation of the express provisions of section 7(h).”);
Dunlop v. Gray-Goto, Inc., 528 F.2d 792, 794 (10th Cir. 1976)
(holding under section 7(h) that fringe benefits including “paid
vacations, six holidays with pay each year, [and] biannual
bonuses” could not be “credited against” FLSA-required
overtime compensation); 29 C.F.R. § 778.216 (“since [non-

                               16
         3. Locating the Offset

        Assuming that the Township could claim a credit under
the FLSA for including non-work pay in the CBA’s overtime
calculation, we fail to see where that calculation includes such
pay. There is no question that the CBA’s base hourly rate does
not include incentive/expense pay. The CBA specifies the value
of each of those items, which never appear in the CBA’s
overtime formula. At oral argument, the Township conceded
that incentive/expense pay is remuneration that, if no offset is
allowed, should be added to the CBA’s basic annual salary to
satisfy the FLSA’s overtime calculation requirement. 9 Thus, on
the Officers’ side of the ledger, the CBA’s overtime formula
clearly does not include every augment required by the FLSA.

       But our search for the Township’s offsetting concession
turns up nothing. According to the Township, the base hourly
rate contains an augment representing non-work pay. The CBA
nowhere specifies what the Officers are paid for non-working

work] payments are not made as compensation for the
employee’s hours worked in any workweek, no part of such
payments can be credited toward overtime compensation due
under the Act.”).
        Notwithstanding its use of the term “credit” in its brief,
the Township does not truly claim a credit, in the sense of a set-
off, for paying the Officers for non-work time. That surely
would be double-counting forbidden by § 207(h)(1) under the
authorities just cited. Instead, the Township argues that non-
work pay enhanced the basic annual salary, raising the overall
rate of overtime compensation. Though we decide the case on
other grounds, we note here our doubt that § 207(h)(1) speaks to
that type of “credit.”
  9
      See Section II. C., below.

                                   17
days. Along with the Officers, we assume such pay is folded
into the Officers’ basic annual salary. Yet, we do not know
what proportion of the basic annual salary non-work pay
represents. The “basic annual salary” portion of the CBA’s
overtime formula is a black box. As we lack any means to “go
behind the contract,” we are unwilling to assume that the CBA’s
base hourly rate adequately compensates the Officers, when that
rate plainly does not include incentive/expense pay.

       The other number for which the parties bargained in the
CBA’s overtime compensation formula, 2080, heightens our
doubts that there is any offset in the CBA. As noted earlier,
2,080 is the number of hours by which the basic annual salary is
divided to obtain the “base hourly rate” (the CBA’s version of
the FLSA’s “regular rate”). Simple multiplication shows that
2,080 equals the number of working hours in a full, 52-week
year of 40-hour weeks. If, as the Township claims, the CBA
boosts the basic annual salary to reflect non-work pay, choosing
2,080 as the divisor seems to negate that action in the ultimate
overtime calculation. That is because the higher the divisor, the
lower the ultimate overtime rate.10 A simple illustration may

  10
     This result is supported by the regulations, which provide
that in deriving an hourly rate from a salary, you must divide the
salary “by the number of hours which the salary is intended to
compensate,” 29 C.F.R. § 778.113 (a) (emphasis added), or, in
the case of monthly salaries, “by the number of working days in
the month.” Id. at § 778.113 (b). (emphasis added). See also
149 Madison Ave. Corp. v. Asselta, 331 U.S. 199 (1947)
(invalidating a regular rate derived based on a fixed number of
hours, rather than the actual hours scheduled to be worked). So
if the Township is correct that officers are not scheduled to work
during their vacation times, then those hours are not properly
part of the denominator.

                               18
clarify this point. Let us assume that the Officers’ basic annual
salary was $100, and that the number of annual hours chosen for
the divisor was 10. Under the FLSA, the Officers’ overtime rate
would be $15 per hour ($100/10 = 10 x 1.5 = $15). Now let us
assume the same basic annual salary of $100, but that the
number of annual hours chosen for the divisor was 20. Under
the FLSA, the Officers’ overtime rate using those numbers
would be $7.50 per hour ($100/20 = 5 x 1.5 = $7.50). In short,
what the Township purports to have given by raising the basic
annual salary for non-work pay, it seems to have taken away by
raising the number of hours chosen for the divisor to reflect a
full working year.11

         4. Conclusion

     The District Court approved the alleged offset in the
CBA on the ground that economically beneficial bargaining

    11
     Other regulations promulgated under the FLSA further
endorse this reasoning, providing that:

         [i]f an employee whose maximum hours standard is 40
         hours was hired at a salary of $200 for a fixed workweek
         of 40 hours, his regular rate at the time of hiring was $5
         per hour. If his workweek is later reduced to a fixed
         workweek of 35 hours while his salary remains the same,
         it is the fact that it now takes him only 35 hours to earn
         $200, so that he earns his salary at the average rate of
         $5.71 per hour. His regular rate thus becomes $5.71; it
         is no longer $5 an hour.

29 C.F.R. § 778.322. While in the present case the work week
was “reduced” ex ante, rather than ex post, the lesson remains
the same: the fewer the hours counted in the workweek, the
higher the regular rate, and vice versa.

                                19
between management and labor is to be encouraged. We
reaffirm our dictum in Minizza, paraphrased by the District
Court, that the “FLSA was not intended to limit [the] creativity
of labor and management to make economically beneficial
agreements.” But if that maxim were limitless, the FLSA would
be meaningless. The FLSA explains what credits employers
may take for “extra compensation.” As the Township claims a
credit where the Act does not support one, the District Court
incorrectly granted the Township’s motion to dismiss.

                              C.

       We now consider which items of incentive/expense pay
constitute “remuneration” that must be included in the CBA
under the FLSA. Concluding that there was an offset, the
District Court stopped short of that question. As we reverse the
District Court’s judgment, normally we would allow the District
Court on remand to consider first that mixed question of law and
fact. However, at oral argument the Township conceded that, in
the absence of an offset, the FLSA requires that the incentive
pay items sought by the Officers must be added to the CBA’s
basic annual salary in calculating the overtime. See also
Appellee’s Br. at 13 (stating that the Officers “relinquished the
inclusion of the disputed categories of pay when they entered
into the [CBA]”). The Township continues to dispute that the
uniform allowance must be added to the basic annual salary,
however. Accordingly, we hold that longevity pay, educational
incentive pay, and senior officer pay must be added to the
CBA’s basic annual salary calculation. See Brooks, 185 F.3d at
136 (“The nonwaivable nature of the provisions of the FLSA is
well-settled, even if obtained by negotiations for a collective

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bargaining agreement.”).12 We leave it to the District Court to
determine the precise amounts owed for each of these items, and
whether the FLSA requires that the CBA’s basic annual salary
include the annual uniform allowance.13

                               III.

        For the foregoing reasons, we will reverse the judgment
of the District Court and remand for proceedings consistent with
this opinion.

  12
     In cases interpreting the FLSA, longevity and educational
incentive pay have been required to be included in the regular
rate in calculating overtime payments. See O’Brien v. Town of
Agawam, 350 F.3d 279, 296-97 (1st Cir. 2003) (longevity and
educational incentive pay); Featsent, 70 F.3d at 906 (same).
Because of the Township’s express concession that senior
officer pay should be included in the overtime calculation
(absent an offset), we decline to remand that question to the
District Court. As explained above, we hold that such pay must
be included.
   13
     To aid the District Court’s consideration, and because on
appeal the parties alluded to this regulation without citation, we
note without comment that 29 U.S.C. § 778.218 states that
“[p]ayment by way of reimbursement for the following types of
expenses will not be regarded as part of the employee’s regular
rate: (2) The actual or reasonably approximate amount expended
by an employee in purchasing, laundering or repairing uniforms
or special clothing which his employer requires him to wear.”

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