Case: 09-20098 Document: 00511124146 Page: 1 Date Filed: 05/27/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 27, 2010
No. 09-20098 Lyle W. Cayce
Clerk
TIMOTHY S GAGNON,
Plaintiff - Counter Defendant -
Appellee,
v.
UNITED TECHNISOURCE INC; AIS TECH SERVICES INC,
Defendants - Counter Claimants -
Appellants.
Appeal from the United States District Court
for the Southern District of Texas
Before HIGGINBOTHAM, GARZA, and PRADO, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
This is an appeal from the district court’s judgment awarding Timothy
Gagnon backpay, liquidated damages, and attorney’s fees and costs under the
Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201)19, against United
Technisource, Inc. (UTI) and AIS Tech Services, Inc. (AIS).
I
Gagnon is a skilled craftsman with many years experience in prepping and
painting the exterior and interior of aircrafts. When Gagnon began working for
UTI, he executed a contract in which UTI agreed to pay Gagnon $5.50 per hour
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for “straight time” and $20.00 per hour for overtime.1 Although the record
indicates differing hourly wage rates for aircraft painters in the area and at the
time in which Gagnon was working,2 none are remotely close to the $5.50 per
hour that the UTI/AIS contracts 3 established as Gagnon’s “straight time” wage.
In addition to his straight time wage, UTI also agreed to pay Gagnon $12.50 for
every hour he worked each week up to forty hours per week or a maximum of
$500.00. The contract referred to this additional hourly pay as “per diem.”
About a year after he began working for UTI/AIS, Gagnon received a
memo that notified him of a “raise in all pay.” The memo noted that “[w]e are
pleased to announce that our client [Wing Aviation] has authorized a $1.00 per
hour raise in all pay starting this pay check.” To effectuate the raise, however,
Gagnon was not given an increase in his “straight time” pay rate of $5.50 per
hour. Rather, he received a $1.00 raise in his hourly per diem for all hours
worked under forty each week and a $1.00 increase in his overtime rate. The
record does not indicate that this increase in hourly per diem was based on any
reasonably approximated increase in Gagnon’s expenses.
1
Although Gagnon contracted with and was paid by UTI and its successor AIS, the
relevant work was performed at Wing Aviation, LLC’s facilities. UTI/AIS were staffing
companies that matched workers with facilities that needed them.
2
Gagnon testified that he inquired about a similar job in Kerrville, Texas that paid only
$13 per hour. The U.S. Department of Labor Wage and Hour Division lists $18.32 as the
minimum hourly wage rate for aircraft painters at the relevant time and area of Texas.
Gagnon also testified that he discussed working directly for Wing Aviation, the company to
which UTI and AIS subcontracted his services, and was offered $20.00 per hour to do so. He
also testified that other aircraft painters in his facility earned as much as $24 per hour.
3
Gagnon initially signed a contract with UTI. He later signed a contract that was
identical in all relevant respects with AIS, UTI’s successor.
2
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Eventually, Gagnon filed suit against UTI/AIS and Wing Aviation,4
claiming violations of the Americans with Disabilities Act (ADA), the Family and
Medical Leave Act (FMLA), and the FLSA. All three Defendants answered and
UTI/AIS filed a counterclaim alleging breach of contract and fraud against
Gagnon. UTI/AIS contended that Gagnon breached the employment contract
and committed fraud by failing to notify UTI/AIS when he moved from a city 280
miles from the Wing Aviation facility to one only nine miles away, and by
continuing to receive per diem pay after the move.
Defendants moved for summary judgment on all claims. The district court
granted summary judgment to Defendants on the ADA and FMLA claims,5 and
found in Gagnon’s favor on the FLSA overtime claim. The district court held
that “the per diem allowance is to be included in Gagnon’s regular rate of pay,”
and ordered Defendants to “recalculate Gagnon’s rate of pay, determine the
credit that is due based on his relocation, and submit same to Gagnon and the
Court for review.” The district court did not address UTI/AIS’s counterclaim.
In response to the court’s order, Defendants filed a calculation that
excluded “the per diem allowance improperly received . . . during and after
October 2005” when Gagnon moved closer to Wing Aviation’s facility, and that
included a request that the district court order Gagnon to pay $8,150.49 for “the
per diem improperly received . . . during and after October 2005.” Gagnon filed
numerous responsive pleadings as well as his own motion for entry of judgment
and for liquidated damages that sought back overtime pay of $4,266.82. Gagnon
also moved for attorney’s fees and costs.
4
After the court entered its summary judgment order, the parties agreed to voluntarily
dismiss Wing Aviation in exchange for UTI/AIS stipulating that they would “pay [Gagnon’s]
FLSA claims, including payment of back wages and attorney’s fees, if any, the court has
determined.”
5
Gagnon has not appealed the district court’s judgment on his ADA and FMLA claims.
3
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The district court denied UTI/AIS’s motion and request, finding “them to
be contrary to the Court Memorandum Opinion and rulings from the bench.”
After considering the motions and all competent evidence offered by the parties,
the district court entered judgment awarding Gagnon back pay of $4,266.82 and,
finding UTI/AIS’s violations willful, liquidated damages of $4,266.82. Over
UTI/AIS’s objections, the district court also awarded Gagnon $55,908 in
attorney’s fees and $3,568.57 in costs. This appeal followed.
II
We review the district court’s grant of summary judgment de novo.
Ackermann v. Wyeth Pharmaceuticals, 526 F.3d 203, 207 (5th Cir. 2008).
Summary judgment is proper when there is an absence of genuine issues of
material fact and one party is entitled to judgment as a matter of law. Thurman
v. Sears, Roebuck & Co., 952 F.2d 128, 131 (5th Cir. 1992). Thus, “[t]he
appropriate inquiry is ‘whether the evidence presents a sufficient disagreement
to require submission to a [factfinder] or whether it is so one-sided that one
party must prevail as a matter of law.’” Septimus v. University of Houston, 399
F.3d 601, 609 (5th Cir. 2005) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 251)52 (1986)).
A
UTI/AIS argue that their payment scheme does not violate the FLSA
because the FLSA only requires employers to pay overtime at a rate of time and
a half, and UTI/AIS paid Gagnon overtime at a rate more than three times his
base pay. UTI/AIS also argue that Gagnon’s per diem reasonably approximated
his reimbursable expenses and should therefore be excluded from the
determination of Gagnon’s regular rate for the purposes of overtime pay.
According to UTI/AIS, “[i]t cannot be argued . . . [that] the per diem was a ploy
to avoid paying Gagnon overtime compensation.” We disagree.
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The FLSA requires that non-exempt employees who work more than forty
hours in a work week must be paid one and one-half times their “regular rate”
of pay. 29 U.S.C. § 207(a)(1). The FLSA broadly defines “regular rate” as the
hourly rate actually paid the employee for “all remuneration for employment.”
29 U.S.C. § 207(e); see also Walling v. Helmerich & Payne, Inc., 323 U.S. 37, 42
(1944). “The regular rate by its very nature must reflect all payments which the
parties have agreed shall be received regularly during the workweek, exclusive
of overtime payments.” Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 461
(1948). The “regular rate” becomes a mathematical computation once the parties
have decided on the amount of wages and the mode of payment, which is
unaffected by any designation to the contrary in the wage contract. Id. The
“regular rate” is not an arbitrary label))it is an actual fact. Id.
Here, UTI/AIS have tried to avoid paying Gagnon a higher “regular rate”
by artificially designating a portion of Gagnon’s wages as “straight time” and a
portion as “per diem.” Although per diem can be excluded from an employee’s
regular rate, 29 U.S.C. § 207(e)(2); see also 29 C.F.R. § 778.217(b), the “‘regular
rate’ of pay . . . cannot be left to a declaration by the parties as to what is to be
treated as the regular rate for an employee; it must be drawn from what
happens under the employment contract.” 29 C.F.R. § 778.108 (citing Bay Ridge
Operating Co., 334 U.S. at 465). The Department of Labor has recognized that
when, as here, the amount of per diem varies with the amount of hours worked,
the per diem payments are part of the regular rate in their entirety.6
6
In its Field Operation Handbook, the Department of Labor states that “if the amount
of per diem or other subsistence payment is based upon and thus varies with the number of
hours worked per day or week, such payments are part of the regular rate in their entirety.”
Although the Handbook does not bind our analysis, we can and do consider its persuasive
effect. See Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944) (“[T]he rulings, interpretations
and opinions of the [agency], while not controlling upon the courts by reason of their authority,
do constitute a body of experience and informed judgment to which courts and litigants may
properly resort for guidance.”).
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Furthermore, we are suspicious of UTI/AIS’s claims that Gagnon’s
employment contracts were not a scheme to avoid paying overtime. It is difficult
to believe that a skilled craftsman would accept a wage so close to the minimum
wage when the prevailing wage for similarly skilled craftsmen was
approximately three times the minimum wage. We are similarly troubled by the
fact that the combined “straight time” and “per diem” hourly rates
approximately match the prevailing wage for aircraft painters. Further, it is
suspect that a “raise in all pay” was effectuated by increasing the hourly “per
diem” rate rather than the “straight time” rate. Finally, we can conceive of no
reason why a legitimate per diem would vary by the hour and be capped at the
forty-hour mark,7 which not-so-coincidentally corresponds to the point at which
regular wages stop and the overtime rate applies.
We find this case analogous to other cases in which employers have sought
to artificially lower an employee’s regular rate by mischaracterizing a portion of
it as a bonus or where employees were paid low “straight rates” for the first hour
or two worked—usually set around minimum wage—after which they earned
one and one half times the straight rate, and were consequently paid no
premium for their actual overtime work. See Walling v. Youngerman-Reynolds
Hardwood Co., 325 U.S. 419, 425 (1945); see also 29 C.F.R. § 778.502.
We hold that Gagnon’s hourly per diem allowances of $12.50 and $13.50
were part of his hourly “remuneration for employment” and must be considered
in his regular rate for the purpose of determining overtime pay due under the
7
UTI/AIS’s post hoc attempt to demonstrate the reasonableness of the “weekly” per
diem mischaracterizes the reality of the contract. UTI/AIS did not contract to pay Gagnon an
additional $500–$540 a week; they contracted to pay Gagnon an additional $12.50–$13.50 per
hour, which could not exceed $500–$540 per week. Consequently, if Gagnon worked fewer
than forty hours per week, his per diem, based on the terms of his contract, would be lower
than $500 per week, even though his living expenses would almost certainly not change.
Given this and the dearth of evidence connecting Gagnon’s per diem amount to his actual
expenses, we, like the district court, “cannot conclude, from the evidence presented, that
Gagnon’s per diem allowance was reasonably approximate to his actual expenses.”
6
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FLSA. Helmerich & Payne, 323 U.S. at 42. Accordingly, we affirm the district
court’s determination that UTI/AIS violated the FLSA by not including Gagnon’s
per diem in their calculation of his regular rate.
B
Having concluded that the hourly per diem is part of Gagnon’s base pay,
we turn to UTI/AIS’s contract and fraud counterclaims. UTI/AIS argue that
Gagnon breached the employment agreements by not reporting that he moved
closer to the work site and by continuing to receive per diem when he lived less
than ten miles from the work site. The district court did not address UTI/AIS’s
counterclaims. Although our conclusion that the hourly per diem wages must
be included in base pay would seem to eviscerate these claims, our precedent
suggests that such claims should not be addressed in a FLSA action. See
Brennan v. Heard, 491 F.2d 1, 4 (5th Cir. 1974), rev’d on other grounds,
McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988) (noting that the only
function of the federal judiciary under the FLSA “is to assure to the employees
of a covered company a minimum level of wages” and holding that “[a]rguments
and disputations over claims against those wages are foreign to the genesis,
history, interpretation, and philosophy of the Act.”). Accordingly, we find no
error in the district court’s decision not to address UTI/AIS’s counterclaims.
C
UTI/AIS argue that the district court erred in finding a willful violation of
the FLSA. UTI/AIS argue that “the employment agreements between Gagnon
and UTI and AIS were not a deliberate scheme to evade FLSA’s overtime
requirements,” and that because Gagnon did not give UTI/AIS enough
information about his address change or how much he required in per diem,
“neither UTI nor AIS had the opportunity to comply with the FLSA, and could
not therefore have willfully violated the statute with respect to Gagnon.”
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The district court’s conclusion that UTI/AIS acted willfully “is a finding of
fact not to be set aside unless found to be clearly erroneous.” Reich v. Tiller
Helicopter Services Inc., 8 F.3d 1018, 1036 (5th Cir. 1993). “A finding is ‘clearly
erroneous’ when although there is evidence to support it, the reviewing court on
the entire evidence is left with the definite and firm conviction that a mistake
has been committed.” United States v. U. S. Gypsum Co., 333 U.S. 364, 395
(1948). We see no clear error in the district court’s finding that the violation was
willful.
D
UTI/AIS also seek an offset in an amount equal to the damages which they
incurred because Gagnon breached his contractual obligation to notify UTI/AIS
of his address change. They cite Singer v. City of Waco, 324 F.3d 813, 828 n.9
(5th Cir. 2003), for the proposition that “an offset is permissible in an FLSA case
unless the result would be a sub-minimum wage.”
Initially, we note our hesitancy to address this claim as it essentially
reiterates the same contract counterclaim that we found inappropriate in a
FLSA action. Despite this hesitancy, we nonetheless address the claim because
we have previously held that offsets are permissible in FLSA actions, see id., and
it is plausible that the offset claim seeks to prevent unjust enrichment rather
than enforce the terms of the contract.
While Singer does allow offsets, it is distinguishable from this case, as it
dealt with an offset that occurred because the city had already paid a large
portion of the back overtime pay due to the workers. Id. at 828. The Singer
court specifically stated that the offset “simply acknowledged that the City
already paid the bulk of its overtime obligations.” Id. In this case, we have
concluded that Gagnon’s per diem was part of his “regular rate.” Since the
money that the employment contracts labeled as per diem was actually part of
Gagnon’s regular rate rather than reimbursement for his work-related expenses,
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it did not depend on where he lived. The “per diem” that Gagnon received after
he moved closer to the Wing Aviation facility was simply regular rate wages to
which he was entitled. Accordingly, in paying the per diem, UTI/AIS did not pay
Gagnon any additional sums that could be characterized as advanced or
inappropriate amounts subject to an offset against the overtime owed to him.
This same reasoning also disposes of UTI/AIS’s argument that the per diem that
Gagnon received after he moved to within ten miles of the work site should be
excluded when calculating his overtime pay.
E
UTI/AIS also argue that the attorney’s fee award was excessive. They
argue that both the factual finding as to amount and the decision not to reduce
the amount based on the Johnson 8 factors were erroneous.
The FLSA provides that reasonable attorney’s fees and costs are penalties
that shall be awarded to the employee. 29 U.S.C. § 216(b). We “review the
district court’s award of attorney’s fees for abuse of discretion and its factual
findings for clear error.” Singer, 324 F.3d at 829.
The documentation supporting a factual finding regarding the amount of
attorney’s fees must be sufficient for the court to verify that the applicant has
met its burden of establishing an entitlement to a specific award. Louisiana
Power & Light Co. v. Kellstrom, 50 F.3d 319, 324 (5th Cir. 1995). “[C]ourts
customarily require the applicant to produce contemporaneous billing records
or other sufficient documentation so that the district court can fulfill its duty to
examine the application for noncompensable hours,” but “[f]ailing to provide
contemporaneous billing statements does not preclude an award of fees per se,
as long as the evidence produced is adequate to determine reasonable hours.”
8
Johnson v. Ga. Highway Express, Inc., 488 F.2d 714, 717) 19 (5th Cir. 1974), overruled
on other grounds, Blanchard v. Bergeron, 489 U.S. 87 (1989).
9
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Id. at 325. Although Gagnon has not produced contemporaneous billing records,
he has produced very detailed invoices and affidavits that describe the time
Gagnon’s attorney spent on the various claims. Having looked through the
invoices and affidavits, we see no evidence of the clear error required to disturb
the district court’s finding of the lodestar amount. See U. S. Gypsum Co., 333
U.S. at 395 (declining to reverse factual finding absent “the definite and firm
conviction that a mistake has been committed”).
Having concluded that the factual determination of amount was not clear
error, we turn to whether the district court abused its discretion in not reducing
the lodestar calculation based on the Johnson factors.9 In this case, the district
court failed to provide any indication that it considered them at all. See Migis
v. Pearl Vision, 135 F.3d 1041, 1047 (5th Cir. 1998). Arguably, the district
court’s award of the exact amount requested by Gagnon could be interpreted as
acceptance of the analysis of Johnson factors found in Gagnon’s motion for
attorney’s fees. See United States v. Evans, 587 F.3d 667, 673 (5th Cir. 2009)
(assuming that the district court considered 18 U.S.C. § 3553(a) factors
presented to it in briefing even though they were not specifically discussed in
ruling). Here, however, where the fee award was more than six times greater
than the amount of relief awarded to Gagnon, we cannot simply assume that the
district court considered the Johnson factors. See Migis, 135 F.3d at 1047)48;
Saizan v. Delta Concrete Products Co., 448 F.3d 795, 800 (5th Cir. 2006).
9
The Johnson factors include: “(1) the time and labor required for the litigation; (2) the
novelty and difficulty of the questions presented; (3) the skill required to perform the legal
services properly; (4) the preclusion of other employment by the attorney due to acceptance
of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations
imposed by the client or the circumstances; (8) the amount involved and the result obtained;
(9) the experience, reputation and ability of the attorneys; (10) the ‘undesirability’ of the case;
(11) the nature and length of the professional relationship with the client; and (12) awards in
similar cases.” Migis v. Pearl Vision, 135 F.3d 1041, 1047 (5th Cir. 1998)
10
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To be clear, this conclusion in no way implies that the attorney’s fee
award, if justified by a proper explanation, would be an abuse of discretion. It
simply indicates that, without any factual findings, it is impossible to determine
whether the district court “sufficiently considered the appropriate criteria.”
Saizan, 448 F.3d at 800 (internal quotation marks omitted). Because we cannot
properly evaluate the district court’s decision, we must vacate the attorney’s fee
award and remand to the district court for consideration of the Johnson factors.
We also note that there remains the question of attorney’s fees for this
appeal. “An additional fee to compensate counsel for their services in connection
with the appeal can be awarded in a [FLSA] case when the appellate court
considers such an award appropriate.” Montalvo v. Tower Life Building, 426
F.2d 1135, 1150 (5th Cir. 1970) (listing cases). We consider such an award
appropriate in this case and instruct the district court to include these fees in its
determination.
F
Finally, UTI/AIS argue that the district court abused its discretion in
awarding costs that are not authorized by 28 U.S.C. § 1920. Specifically,
UTI/AIS argue that the district court should not have awarded costs for (1)
private process servers ) $177.50; (2) AT&T teleconference ) $32.64; (3) a
private investigator ) $250.00; (4) Fairway Deliver Services ) $6.87; (5) postage
) $81.82; (6) FLSA book ) $291.99; (7) Lexis-Nexis ) $850.77; (8) Secretary of
State ) $20.50; and (9) Pacer ) $ 4.87, and that the copying costs were not
properly justified. “An award of costs is reviewed for abuse of discretion.” Mota
v. University of Texas Houston Health Science Center, 261 F.3d 512, 529 (5th Cir.
2001). The “Supreme Court has indicated that federal courts may only award
those costs articulated in section 1920 absent explicit statutory or contractual
authorization to the contrary.” Cook Children’s Medical Center v. The New
England PPO Plan of General Consolidation Management Inc., 491 F.3d 266,
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274 (5th Cir. 2007) (internal quotation marks omitted). The district court did
not mention any other statutory or contractual authorization for the costs or
explain its decision to award the challenged costs. Thus, we have no basis for
determining whether some or all of the challenged costs might fall within the
costs-award provision of the FLSA, see 29 U.S.C. § 216(b), or be authorized by
some other rationale. See, e.g., Kurtis A. Kemper, Annotation, Recovery of
Computer-Assisted Research Costs as Part of or in Addition to Attorney’s Fees
Under Federal Fee-Shifting Statutes, 28 A.L.R. F ED. 2d 397 (2008). Additionally,
although § 1920 provides that copying costs can be recovered when copies are
obtained for use in the case, the district court made no factual findings as to
whether the copies were “necessarily obtained for use in the case.” See Fogleman
v. ARAMCO, 920 F.2d 278, 286 (5th Cir. 1991). Without a proper basis for
evaluating the district court’s award of costs, we cannot determine whether the
court abused its discretion. Accordingly, we must vacate the cost award and
remand for further proceedings.
III
In conclusion, we affirm the district court’s grant of summary judgment
in favor of Gagnon. We agree that the per diem pay must be included in
Gagnon’s regular rate, that UTI/AIS’s contract and fraud claims cannot be
brought as counterclaims in a FLSA action, and that UTI/AIS is not entitled to
any offset for per diem paid after Gagnon moved closer to the Wing Aviation
facility. Furthermore, we see no clear error in the district court’s determination
that the FLSA violation was willful. We do, however, vacate the award of
attorney’s fees and costs. We remand the attorney’s fees and costs
determinations to the district court in order for the court to provide additional
explanation for its awards and with specific instructions to include time spent
on this appeal in determining the amount of fees.
AFFIRMED in part, VACATED in part, and REMANDED.
12