Barnett v. City of San Jose

Background

The plaintiffs are firefighters employed by the City of San Jose. They alleged that the City failed to pay all overtime required by the Fair Labor Standards Act (FLSA), which requires premium pay for covered hours worked above the statutory threshold. For these firefighters, the threshold was more than 212 hours in a 28-day work period.

The City paid the firefighters under a collective bargaining agreement called the Memorandum of Agreement (MOA). The MOA provided biweekly salaries based on 112 hours, contractual overtime at 1.5 times the base hourly rate for certain extra unscheduled hours, and additional payments for skills, training, holiday work, and similar matters. The City used a software program to compare MOA compensation with the amount it calculated as due under the FLSA. If the MOA amount was lower, the City paid an FLSA overtime adjustment.

The dispute arose when a firefighter worked fewer than 212 scheduled hours because of sick or vacation time but worked enough extra unscheduled hours to exceed 212 total hours. The City treated all contractual overtime paid for those extra hours as credit toward its FLSA obligation. The plaintiffs argued that only the additional 0.5-times premium above their regular rate could be credited.

Findings on the FLSA regular rate

Judge Donato found that the plaintiffs were salaried employees for purposes of calculating the FLSA regular rate. Their biweekly salary was intended to compensate 112 hours, so the salary component of the regular rate was calculated by dividing the biweekly salary by 112.

The Court also found that specified add-on payments were salary enhancements that had to be included in the FLSA regular rate. Because the firefighters were scheduled for 56 hours per week, the proper fixed divisor for add-on payments covering a 28-day period was 224. The Court therefore approved the formula of the base hourly rate plus total add-on payments for the work period divided by 224.

The City argued that add-on payments should instead be divided by the hours actually worked and relied on several authorities. The Court rejected those arguments, finding that the cited authorities did not require the City’s preferred calculation and that the add-on payments were not production bonuses or other payments that should be treated differently merely because they were paid in lump sums.

Crediting contractual overtime

The Court held that the City could not credit the full amount of contractual overtime paid for hours below the FLSA’s 212-hour threshold against the FLSA premium owed for hours above that threshold. Under the Court’s interpretation, only the additional 0.5-times contractual overtime premium could be credited. The base hourly compensation for those hours could not also be used to reduce the separate FLSA overtime premium obligation.

The Court used David R. Barnett’s July 16 to August 12, 2017, work period as an example. Barnett worked 409 total hours, including 217 extra unscheduled hours. The Court determined that 197 of those extra hours qualified for FLSA overtime and that, using the proper fixed divisor, Barnett’s FLSA regular rate was $61.51. The Court found that treating all contractual overtime paid for 20 hours below the statutory threshold as credit would eliminate an FLSA shortfall that resulted when only the 0.5-times premium was creditable.

Remedy

The Court found that the plaintiffs were entitled to declarations stating that the City should use the fixed-divisor method for the similarly structured MOA and that, in a work period containing contractual overtime hours below the 212-hour threshold, the City could credit only the 0.5-times premium rather than the full contractual overtime amount.

The Court determined that the applicable statute of limitations was two years for all plaintiffs because the plaintiffs introduced no evidence showing that the City’s violations were willful. The Court also awarded liquidated damages equal to the amount of back pay owed to plaintiffs who were unlawfully underpaid because the City did not introduce evidence of good faith and reasonable grounds for its conduct.

The Court did not calculate the individual damages amounts itself. Instead, it directed the parties to jointly determine the amounts consistently with the order and file a proposed payment report by March 3, 2025, including the damages figures for each plaintiff.