California City Quickly Settles FLSA Dispute with Former Fire Department Employees

The City of Upland, California has settled an unusual FLSA lawsuit filed by thirty-nine former firefighters, flight medics, and flight nurses (plaintiffs). Claims for unpaid or underpaid overtime from current and former employees are more or less the norm today, however this case is rather unique since all thirty-nine plaintiffs no longer work for the City of Upland or the Upland Fire Department. A little digging revealed the City of Upland opted to end providing fire service to its citizens several years ago. According to the Daily Bulletin, the entire Upland Fire Department, including fire stations, equipment, employees, and even liabilities were annexed by the San Bernardino County Fire Department in the summer of 2017.

Here is more on the initial annexation from the Daily Bulletin:

Upland gets OK to disband fire department, annex to San Bernardino County Fire Department

One year after Upland fire annexation, city says it’s saving money, but litigation looms

Despite this annexation, the city was still liable to pay its employees properly leading up to the county’s eventual take-over.

The crux of the plaintiff’s complaint involved alleged FLSA regular rate violations. In particular, the city’s failure to include certain wage augments in the plaintiffs’ regular rate. The FLSA requires virtually all the money an employee is paid included in his or her regular rate. Proper calculation of the regular rate is critical since all FLSA overtime must be paid at a rate of at least time-and-one-half of the employee’s regular rate. Very often employers utilize an employee’s base hourly rate to calculate the overtime rate of pay. However, the FLSA requires that all remuneration be included in the regular rate of pay.

Specifically, the plaintiffs made two basic claims:

• First, the city failed to include money paid directly to employees in lieu of receiving employer sponsored medical benefits in the regular rate.
• Second, the city failed to include holiday pay in the regular rate.

In 2016, The U.S. Ninth Circuit Court of Appeals ruled, for the first time, that money paid directly to employees in lieu of receiving employer sponsored health benefits must be included in the employee’s regular rate of pay. Very often employers are surprised to learn this money must be included in an employee’s regular rate. There have been numerous FLSA lawsuits and settlements, similar to this over the last three years. In the end, the city agreed to fully settle claims related to cash in-lieu of healthcare for the plaintiffs that received that benefit.  

Next, the plaintiffs claimed their holiday pay should also be included in the regular rate of pay. As a general rule, the FLSA and Department of Labor (DOL) regulations allow employers to exclude most forms of holiday pay from employees’ regular rate of pay. However, whether holiday pay can be rightfully excluded from the regular rate requires a fact-based inquiry. Just labeling compensation as holiday pay does not guarantee it can be excluded from the regular rate. There are several key factors that need to be examined to ultimately determine whether holiday pay must be included in the regular rate. For more on holiday pay and the regular rate:

The Regular Rate, FLSA, and Firefighters Part III

In the end, the city and plaintiffs agreed to settle all claims related to the complaint for a total of $137,788.66. A total amount of $100,860.58 is allocated for the thirty-nine plaintiffs. The plaintiffs will each receive differing amounts [ranging from a high of $7,648.13 to a low of only $12.61] under the settlement based on their individual claims of back wages. The remaining $36,926.08 is allocated for the plaintiffs’ attorneys’ fees.

Regular rate violations—like this—continue to be the leading cause of FLSA lawsuits in the fire service today.  

Here is a copy of the complaint and settlement documents.