Flores v. City of San Gabriel

Ninth Circuit Victory for Employees of San Gabriel, and potentially all of California. 

A major victory for Employees obtained in Ninth Circuit Court of Appeal Published Opinion, Flores v. City of San Gabriel, (14-56421 / 14-56514). The Ninth Circuit Court of Appeal on June 2, 2016, issued a published decision that should positively impact the overtime rates of hourly employees of San Gabriel.  

Under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., (“FLSA”) an employee must be paid overtime at one and one-half times the “regular rate” of pay. The “regular rate” is usually higher than just the base hourly wage, as it includes, subject to certain narrow exceptions, “…all remuneration for employment paid to, or on behalf of, the employee….”  

At the City of San Gabriel, employees could opt out of City health benefits and choose to receive instead, additional taxable wages on their paycheck. A group of City of San Gabriel police officers sued the City arguing that the City was violating the FLSA by failing to include in the regular rate of pay calculation those additional wages “cash-in-lieu” of benefits payments.  

Represented by CASTILLO HARPER attorney Joseph N. Bolander, the Plaintiffs did not argue that there was anything improper about offering cash-in-lieu of benefits. The issue, instead, was that the “cash” part, even if paid in-lieu of benefits, is still compensation that should be included in the regular rate calculation, which would mean an increased overtime rate. The District Court ruled for the employees on this issue and the City appealed. Thirteen of the employees then cross-appealed aspects of the District Court’s ruling that limited damages.  

The Ninth Circuit Court of Appeal, in a published decision of first impression, agreed with CH attorney Joseph Bolander and the District Court, ruling that cash-in-lieu of benefit payments must be included in the regular rate of pay.  The Ninth Circuit also ruled that because the City’s benefit plan was not a “bona fide” plan under the FLSA due to the high percentage of wage payments made from it, the actual value of those benefits even for employees who did not take the cash option had to be included in the regular pay rate. The Ninth Circuit also reversed the District Court in favor of the employees on several significant issues, ordering that the employees were entitled to liquidated damages, and an additional year on the statute of limitations because the City ‘s violation was willful and was not shown by the City to have been a good faith mistake. A resounding win for the Plaintiffs, CASTILLO HARPER, APC and hopefully employees everywhere. 

The amount of overtime the City will ultimately have to pay as a result of this victory will be nominal.  However, because the City chose to force the matter to civil court, the damages will be much more then if they would have seen this was the right thing to do from the beginning. 


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