Litz v. Saint Consulting Group, Inc.

United States Court of Appeals
For the First Circuit

No. 13-2437

CRYSTAL LITZ, and all others similarly situated,

Plaintiffs, Appellants,

v.

THE SAINT CONSULTING GROUP, INC.; P. MICHAEL SAINT;
PATRICK F. FOX,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, Jr., U.S. District Judge]

Before

Torruella, Howard, and Kayatta,
Circuit Judges.

Shannon Liss-Riordan, with whom John E. Duke, Lichten & Liss-
Riordan, P.C., James B. Zouras, Ryan F. Stephan, and Stephan
Zouras, LLP were on brief, for appellants.
Sean P. O'Connor, with whom Robert P. Joy, Daniel S. Field,
and Morgan, Brown & Joy, LLP were on brief, for appellees.

November 4, 2014
 KAYATTA, Circuit Judge. Appellants Crystal Litz and

Amanda Payne ("plaintiffs") claim unpaid overtime wages for their

work as project managers for The Saint Consulting Group, Inc.

("Saint Consulting"). The district court concluded that plaintiffs

were "highly compensated employees" and thus exempt from the

overtime pay protections of the Fair Labor Standards Act ("FLSA").

29 U.S.C. § 213(a)(1); 29 C.F.R. § 541.601. For the following

reasons, we affirm.

I. Background

The relevant facts are not in dispute. Saint Consulting

is a Massachusetts corporation that provides political consulting

to land use campaigns across the country. P. Michael Saint is its

founder, CEO, chairman, and majority shareholder, and Patrick Fox

serves as its president. Litz joined Saint Consulting as a project

manager in 2005. Her relevant period of employment for this appeal

is from October 2009, when she returned to the project manager

position after a three-year stint as division manager, until her

employment with Saint Consulting ended in March 2010. Amanda Payne

worked as a project manager for Saint Consulting from June 2003

until October 2008.

The plaintiffs earned well over $100,000 per year as

project managers during the years at issue. For most weeks, their

earnings equaled the number of hours they billed to clients

multiplied by an hourly rate between $40 and $60. Project managers

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typically received $2,500 to $4,000 per week in gross pay, which

means that they typically worked more than 40 hours per week.

Saint Consulting did not pay its project managers at a higher,

overtime rate for hours worked beyond 40 hours per week. Saint

Consulting's compensation plan for the relevant time provided,

however, that "[a]ll project managers will . . . be guaranteed a

minimum weekly salary of $1,000 whether they bill any hours or

not." Therefore, if a project manager billed 10 hours at a $50

hourly rate, or $500, she would still receive $1,000 in pay for

that week. If she instead billed 60 hours, she would simply

receive $3,000, or 60 times $50. There is no dispute that Saint

Consulting always paid the $1,000 stipend1 when the value of a

project manager's billed hours did not exceed $1,000. Indeed,

Payne billed no hours during several weeks and still received

$1,000 per week, designated as "MINSAL" or "STIPEN" on her

paystubs.

1
The plaintiffs use the term "stipend," arguing that this is
consistent with Saint Consulting's usage. In this litigation,
Saint Consulting prefers the term "guaranteed minimum weekly
salary." This is a debate of no consequence, as the terms
"stipend" and "salary" are commonly viewed as synonyms for one
another, see, e.g., Roget's II: The New Thesaurus 861, 960 (3d ed.
1995), and some sources even define "stipend" as a "salary." See,
e.g., Black's Law Dictionary 1550 (9th ed. 2009) (defining
"stipend" as "[a] salary or other regular, periodic payment").
There is, moreover, no evidence that Saint Consulting sought to
communicate any particular technical meaning by usage of either
term. In any event, since the plaintiffs lost on summary judgment,
we will use their preferred term.

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 In September 2010, former project manager Leigh Mayo

filed suit against Saint Consulting in the Northern District of

Illinois for unpaid overtime compensation under the FLSA. See 29

U.S.C. § 207. Litz and Payne consented to join the action as party

plaintiffs in December 2010 and January 2011, respectively. Litz

became the representative plaintiff2 in March 2011 after Mayo

settled with Saint Consulting. Because none of the 36 other

project managers opted to join the lawsuit after receiving notice

of opt-in rights under 29 U.S.C. § 216(b), Litz and Payne were the

sole party plaintiffs.

With Mayo, an Illinois resident, out of the case, Saint

Consulting filed and the court granted an uncontested motion to

transfer venue to the District of Massachusetts. After the

transfer, the plaintiffs sought leave to file a second amended

complaint with a claim under the Massachusetts overtime statute.

See Mass. Gen. Laws ch. 151, § 1A. The district court denied their

motion, reasoning that the Massachusetts statute did not apply

because they did not allege that they or any other project manager

worked, resided, or had sufficient contact with Massachusetts.

Litz v. Saint Consulting Grp., Inc., No. 11–10693–GAO, 2012 WL

549057 (D. Mass. Feb. 17, 2012). Two years later, after both sides

filed motions for summary judgment, the plaintiffs asked the

2
29 U.S.C. § 216(b) allows collective actions commenced by
one or more plaintiffs as a representative, with other employees
allowed to opt in to the action by consent.

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district court to reconsider its denial of leave to add a claim

under Massachusetts overtime law. As support for their motion, the

plaintiffs pointed to a new decision by the Massachusetts Supreme

Judicial Court applying the Massachusetts independent contractor

statute to New York residents and workers, although, unlike here,

a written contract between the parties in that case contained an

express choice of Massachusetts law provision. Taylor v. Eastern

Connection Operating, Inc., 465 Mass. 191, 192 (2013). The

district court denied the plaintiffs' request.

The district court granted summary judgment on the FLSA

claim to Saint Consulting. The plaintiffs appeal from that

judgment, as well as from the denial of their motions to amend and

reconsider.3

II. Standard of Review

We review de novo the district court's grant of summary

judgment. Velázquez-Pérez v. Developers Diversified Realty Corp.,

753 F.3d 265, 270 (1st Cir. 2014). As the moving party, Saint

Consulting is entitled to summary judgment if it "shows that there

3
The plaintiffs' notice of appeal lacks any reference to the
district court's orders denying leave to amend their complaint and
for reconsideration. Though neither party raises the point, the
notice of appeal arguably fails to "designate the judgment, order,
or part thereof being appealed" with respect to these two orders.
Fed. R. App. P. 3(c)(1)(B). Nonetheless, "this rule is not
absolute . . . and we assume arguendo that we have jurisdiction to
resolve this claim of error." Nikitine v. Wilmington Trust Co.,
715 F.3d 388, 389 n.2 (1st Cir. 2013) (citations omitted).

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is no genuine dispute as to any material fact and [it] is entitled

to judgment as a matter of law." Fed. R. Civ. P. 56(a).

III. Analysis

A. The Plaintiffs' FLSA Claim

The FLSA requires employers to pay nonexempt employees at

a higher rate for hours worked beyond 40 hours in a week. 29

U.S.C. § 207(a)(1). The FLSA exempts from its overtime protection

"any employee employed in a bona fide executive, administrative, or

professional capacity." Id. § 213(a)(1). The FLSA implementing

regulations further provide that this exemption applies to "highly

compensated employees" who (1) "customarily and regularly perform[]

any one or more of the exempt duties or responsibilities of an

executive, administrative or professional employee"; (2) receive at

least $100,000 in total annual compensation; and (3) receive "at

least $455 per week paid on a salary or fee basis." 29 C.F.R.

§ 541.601(a), (b)(1). Saint Consulting argues, and the district

court agreed, that the plaintiffs satisfied these three

requirements. The plaintiffs concede that they satisfied the

duties requirement and earned well over $100,000 annually during

the relevant time period, but they argue that they were not paid

any amount "on a salary . . . basis."

This appeal therefore depends on whether Saint Consulting

paid the $1,000 stipend on a salary basis within the meaning of 29

C.F.R. § 541.602(a). The stipend was paid on a "salary basis" if

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it was (1) "a predetermined amount," (2) "constituting all or part

of the employee's compensation," and (3) "not subject to reduction

because of variation's in the quality or quantity of the work

performed." Id. § 541.602(a). There is no dispute that the

stipend was a predetermined amount of $1,000 per week. The

plaintiffs' arguments instead apply to the latter two requirements.

The plaintiffs first direct us to two communications from

Saint and Fox that, according to plaintiffs, show that the $1,000

stipend was "subject to reduction because of variations in the

. . . quantity of work performed." Id. The first is a lengthy

email from Saint instructing managers to document instances in

which a project manager refused assignments or available billable

hours outside of their geographic division. After reading the

email in its entirety, however, it is clear that Saint was trying

to make sure his company satisfied project managers who wanted to

make more than $100,000 per year, and not suggesting that the

company would reduce stipends.4 Notably, in that same email Saint

4
It appears that the amount of hours assigned to project
managers varied greatly, in part because some division managers did
not trust certain project managers. The pertinent parts of the
email read

Each of our project managers was told when they were
hired they could make $100,000 a year or more from billed
hours. . . . We need to do everything we can to insure
each and every project manager is getting as many hours
as they want, at least up to 45 or 50 a week. How is it
fair that some project managers get 75 or 80 hours to
bill week in and week out while other[s] get[] 25 or 30?

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explained that project managers had a minimum fixed cost to Saint

Consulting of "$72,000 a year ($1,000 a week minimum and

benefits)," which suggests that Saint did not consider it a

possibility to reduce the $52,000 per year in weekly stipend

payments.

The second communication, by contrast, does speak to the

possibility of not paying the stipend. It is a brief message from

Fox instructing managers that the "stipend is not to be used like

vacation time. If there are hours available for a project manager

to bill and they choose not to do the work, they need to use

vacation time. We will not pay the stipend in that situation.”

But the plaintiffs identify no instance where Saint Consulting

actually reduced or did not pay the stipend. Without any evidence

that Saint Consulting had an actual practice of reducing the $1,000

stipend for any project manager, and with an undisputed record

showing no project manager was paid less than the stipend amount,

. . .

I understand that some [project managers] who have
been offered . . . out-of-division hours in the past have
declined . . . . We need to document these offers and
responses.

. . .

I do not want to have any more debates with a
disgruntled employee whether they were offered hours and
refused or whether the division manager simply chose not
to assign them enough hours. Nor do I want to open us up
for charges of discrimination.

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this single email cannot demonstrate that plaintiffs' pay was

actually subject to improper deductions. See 29 C.F.R. §

541.603(a) & (b) (requiring "[a]n actual practice of making

improper deductions" for an employer to lose the exemption); see

also 69 Fed. Reg. 22,122-01, 22,181 (Apr. 23, 2004) ("[A]

corporate-wide policy permitting improper deductions is some

evidence that an employer has an actual practice of not paying

employees on a salary basis, but not sufficient evidence by itself

to cause the exemption to be lost if a manager has never used that

policy to make any actual deductions . . . ."). Even if Saint

Consulting did require project managers to use vacation time when

they rejected available hours, this would only show that the

project managers' vacation time, and not their salary, was subject

to deduction. See McBride v. Peak Wellness Ctr., Inc., 688 F.3d

698, 705-06 (10th Cir. 2012) (employer permissibly deducted

employee's accrued leave for partial day absences).

The plaintiffs also point to the paystubs generated by

Saint Consulting's payroll company. These paystubs show hours

times hourly rate, with no express reference to hourly pay. In

other words, if an employee earning $50 per hour works 21 hours,

the paystub reflects $50 times 21 as equaling gross pay of $1050.

The plaintiffs argue that for the exemption to apply, the paystub

formula need have been something like $1,000 + (# of hours -

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20)($50). In short, the plaintiffs contend that the "stipend" does

not exist except when hours times hourly rate falls below $1,000.

This argument elevates form over substance, and simply

ignores the economic reality of the guarantee. Under the paystub

formula, as backed by the undisputed guarantee, every single

project manager in every single possible situation would receive

exactly the same pay as under the more complicated formula that the

plaintiffs say Saint Consulting should have used. The fact that

the pay was usually--but not always--high enough to render the

guaranteed stipend unnecessary hardly means that the guarantee was

not "part of the employee's compensation." 29 C.F.R. § 541.602(a).

And since it was both "predetermined" and "not subject to reduction

because of variation's in the quality or quantity of the work

performed," it plainly qualifies as a payment on a "salary basis."

Id.; see Anani v. CVS RX Servs., Inc., 730 F.3d 146, 148 (2d Cir.

2013) (pharmacist qualified for highly compensated employee

exemption when he received a guaranteed $1,250 weekly salary and

significant additional compensation based on number of hours

worked); Hogan v. Allstate Ins. Co., 361 F.3d 621, 624 (11th Cir.

2004) (insurance agents were paid on salary basis when they

received a "monthly minimum compensation amount if their

compensation from net written premiums was less than the

guarantee").

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 Lastly, we need not reach the alternative argument to

which the plaintiffs devoted a significant portion of their opening

brief, contending that the separate "[m]inimum guarantee plus

extras" regulation of 29 C.F.R. § 541.604 required Saint

Consulting's stipend to be reasonably related to plaintiffs' actual

pay of more than $3,000 per week. Saint Consulting does not rely

on that exemption, and we see no reason why its requirements should

be grafted onto the materially different exemption on which Saint

Consulting relies. See Anani, 730 F.3d at 149 ("We perceive no

cogent reason why the requirements of C.F.R. § 541.604 must be met

by an employee meeting the requirements of C.F.R. § 541.601.").

The plaintiffs thus sensibly abandoned in their reply brief the

argument that section 541.604(b) applies to highly compensated

employees ("[p]laintiffs do not take a position on this issue").

In sum, because the undisputed evidence shows that Saint

Consulting paid its project managers on a salary basis within the

meaning of 29 C.F.R. § 541.602(a), and the parties agreed that they

received more than $100,000 per year for continuously performing

the duties of a professional employee, the project managers were

exempt as highly compensated employees under 29 C.F.R. § 541.601.

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B. Denial of Leave to Amend Complaint

The Massachusetts statute under which the plaintiffs

sought to bring a claim in their second amended complaint exempts

from its overtime protections "a bona fide executive, or

administrative or professional person . . . earning more than

eighty dollars per week." Mass. Gen. Laws ch. 151 § 1A(3). In

construing this exemption, Massachusetts looks to track federal

law. Goodrow v. Lane Bryant, Inc., 432 Mass. 165, 171 (2000)

(looking to FLSA regulations to interpret Massachusetts executive

employee exemption); see also Swift v. AutoZone, Inc., 441 Mass.

443, 447 (2004) ("[T]he overtime provisions under State law were

intended to be essentially identical to Federal law." (quotation

omitted)). Because our resolution of the plaintiffs' FLSA claim

would therefore dictate the failure of their Massachusetts claim,

see Cash v. Cycle Craft Co., 508 F.3d 680, 687 (1st Cir. 2007),

whether the district court should have allowed them to add such a

claim is a moot question.

IV. Conclusion

For the foregoing reasons, we conclude that the

plaintiffs were highly compensated employees exempt from the

overtime protections of the FLSA. We therefore affirm the district

court's grant of summary judgment in favor of Saint Consulting.

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