In re Texas Ezpawn Fair Labor Standards Act Lit.

633 F.Supp.2d 395

In re TEXAS EZPAWN FAIR LABOR STANDARDS ACT LITIGATION.

1:07-cv-00553-AWA

United States District Court, W.D. Texas, Austin Division.

June 18, 2008.

GENERAL ORDER

ANDREW W. AUSTIN, United States Magistrate Judge.

Before the Court are Defendant's Motion for Partial Summary Judgment on the Calculation of Damages, if Any, filed on March 4, 2008 ("Motion"), Plaintiffs' Response in Opposition to Defendant's Partial Motion for Summary Judgment on the Calculation of Damages, if Any, filed on March 31, 2008 ("Response"), Plaintiff's Objections to Defendant's Summary Judgment Evidence, filed on March 31, 2008 Defendant's Reply to Plaintiff's Response to Defendant's Motion for Partial Summary Judgment on the Calculation of Damages, if Any, filed on April 8, 2008 ("Reply"), Defendant's Objections to Plaintiff's Summary Judgement Evidence, filed on April 8, 2008, and Defendant's Response to Plaintiff's Objections to Defendant's Summary Judgment Evidence, filed on April 8, 2008. The foregoing pleadings were filed in each of the cases identified in the attached Appendix.

I. BACKGROUND

The cases identified in the attached Appendix are Fair Labor Standards Act ("FLSA") cases involving allegations that Defendant Texas EZPawn, L.P. ("EZPawn") improperly classified employees and failed to pay them overtime compensation as required by the FLSA. EZPawn is the owner and operator of more than 100 retail pawn and short-term loan establishments throughout Texas. Plaintiffs are former assistant store managers who claim they were improperly classified as exempt employees under the FLSA and not compensated for hours worked in excess of forty per week as required by 29 U.S.C. § 207(a)(1). EZPawn claims Plaintiffs were properly classified as exempt and are not entitled to any overtime compensation.

EZPawn seeks partial summary judgment concerning the proper method of calculating damages. EZPawn argues that the appropriate method of calculating damages in misclassification cases such as those presently before the Court is the fluctuating workweek method found at 29 C.F.R. § 778.114. According to EZPawn, the United States Court of Appeals for the Fifth Circuit's decision in Blackmon v. Brookshire Grocery Company requires that, in the event Plaintiffs establish liability, they are only entitled to half of their hourly rate of pay for each hour worked over forty. See Blackmon v. Brookshire Grocery Co., 835 F.2d 1135, 1138 (5th Cir. 1988).

In response, Plaintiffs make three arguments. First, Plaintiffs argue EZPawn waived its argument that the fluctuating workweek method of calculating damages applies in this case because it was not pled in Defendant's initial responsive pleading as required by Rule 8. Second, they argue the fluctuating workweek method of calculating damages is not applicable as a matter of law. Third, Plaintiffs argue fact issues preclude summary judgment. Having considered the Motion, Response, Reply, and oral argument of the parties, the Court is of the opinion that the fluctuating workweek method of calculating damages is not applicable to the cases identified in the attached Appendix, and that Defendant's Motion should therefore be denied.¹

II. ANALYSIS

A. Summary Judgment Standard

Under Federal Rule of Civil Procedure 56, a motion for summary judgment should be granted "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). "Where the unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate." Flath v. Garrison Pub. Sch. Dist. No. 51, 82 F.3d 244, 246 (8th Cir.1996) (internal quotations omitted). "An issue is material if its resolution could affect the outcome of the action." Commerce and Indus. Ins. Co. v. Grinnell Corp., 280 F.3d 566, 570 (5th Cir.2002) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). In deciding whether a fact issue exists, the court "must view the facts and the inferences to be drawn therefrom in the light most favorable to the nonmoving party." Id.

"[T]he nonmovant must respond to the motion for summary judgment by setting forth particular facts indicating that there is a genuine issue for trial." Caboni v. Gen. Motors Corp., 278 F.3d 448, 451 (5th Cir.2002). The nonmovant may not rely on mere allegations in the pleadings. Id. Unsupported allegations or affidavit or deposition testimony setting forth ultimate or conclusory facts and conclusions of law are insufficient to defeat a proper motion for summary judgment. Duffy v. Leading Edge Prods., Inc., 44 F.3d 308, 312 (5th Cir.1995). Rather, the nonmoving party must set forth specific facts showing the existence of a "genuine" issue concerning every essential component of its case. Lusk v. Foxmeyer Health Corp., 129 F.3d 773, 777 (5th Cir.1997). The standard of review "is not merely whether there is a sufficient factual dispute to permit the case to go forward, but whether a rational trier of fact could find for the non-moving party based upon the record before the court." James v. Sadler, 909 F.2d 834, 837 (5th Cir.1990) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).

B. Fluctuating Workweek Pleading Requirements

Federal Rule of Civil Procedure 8 requires that a party state any affirmative defense or avoidance in a responsive pleading. FED. R. CIV. P. 8(a). Plaintiffs argue that EZPawn has waived the fluctuating workweek "defense" because it failed to timely raise the defense in its initial responsive pleading as required by Rule 8 of the Federal Rules of Civil Procedure. According to Plaintiffs, the fluctuating workweek is a defense that must be timely pled because it is a method by which an employer may avoid paying damages for unpaid overtime. In response, EZPawn argues that the fluctuating workweek is not an affirmative defense, but rather a method of calculating damages, the application of which is a matter of law for the Court to decide.

The Court agrees with EZPawn that the damage theory is not an affirmative defense required to be pled by Rule 8. See Hopkins v. Tex. Mast Climbers, L.L.C., No. Civ. A. H-04-1884, 2005 WL 3435033, at *7 (S.D.Tex. Dec. 14, 2005) (noting that the fluctuating workweek is not a defense or exemption to the FLSA, but rather an interpretive bulletin addressing a permissible payment scheme under the FLSA). Even if Rule 8 required EZPawn to affirmatively plead the damage methodology, there is no waiver of a defense when a defendant raises the issue at a "pragmatically sufficient time" and the plaintiff is not prejudiced in responding. Lucas v. United States, 807 F.2d 414, 418 (5th Cir.1986). Here, the issue of whether the fluctuating workweek method of calculating damages applies to this case was raised sufficiently early so as to avoid any unfair surprise. Plaintiffs have made no showing of prejudice due to the absence of an allegation in EZPawn's responsive pleadings that the method applies in this case. They have had ample time to address the issue in response to EZPawn's Motion and during oral argument. Moreover, as EZPawn correctly points out in footnote eight of its Reply, Plaintiffs' counsel has been on notice of EZPawn's position regarding the fluctuating workweek method of calculating damages since at least September 26, 2007. Therefore, Plaintiffs' waiver argument is without merit.

C. The Fluctuating Workweek Method of Calculating Overtime Pay

The FLSA requires that non-exempt employees be paid at least one and one-half times their regular rate of pay for all hours over forty worked during a particular week. 29 U.S.C. § 207(a). In 1968 the Department of Labor issued a bulletin interpreting this section of the Act to address the payment of overtime to salaried employees "who do not customarily work a regular schedule of hours." 29 C.F.R. § 778.114(c). The bulletin was issued in response to two Supreme Court cases that had addressed payment of overtime to employees who had fluctuating hours from week to week, and who wished to receive a predictable, flat rate of pay. See Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942); Walling v. A.H. Belo Corp., 316 U.S. 624, 62 S.Ct. 1223, 86 L.Ed. 1716 (1942). Neither of these cases concerned a misclassified employee, but rather both involved non-exempt workers who employers were paying on a salary basis.² In resolving the confusion that lingered after the decisions, the Department of Labor adopted an interpretation of § 207(a) consistent with the Missel decision. O'Brien v. Town of Agawam, 350 F.3d 279, 287 n. 15 (1st Cir.2003) (noting that § 778.114 represents the Secretary of Labor's implementation of Overnight Motor Transport Company v. Missel).³ The relevant portions of the bulletin provide:

(a) An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many. Where there is a clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period, such a salary arrangement is permitted by the Act if the amount of the salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours he works is greatest, and if he receives extra compensation, in addition to such salary, for all overtime hours worked at a rate not...