UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-2135
REBECCA MCPHEE; KATIE SHOOK; IRIS TIRADO, individually and on behalf
of all other similarly situated individuals,
Plaintiffs - Appellants,
v.
LOWE’S HOME CENTERS, LLC,
Defendant - Appellee.
Appeal from the United States District Court for the Western District of North Carolina, at
Statesville. Kenneth D. Bell, District Judge. (5:20-cv-00010-KDB-DSC)
Submitted: June 3, 2021 Decided: June 17, 2021
Before AGEE and RICHARDSON, Circuit Judges, and SHEDD, Senior Circuit Judge.
Affirmed by unpublished per curiam opinion.
David R. Parker, SOMMERS SCHWARTZ PC, Southfield, Michigan, for Appellants.
Adam K. Doerr, ROBINSON, BRADSHAW & HINSON, P.A., Charlotte, North Carolina;
Jason C. Schwartz, Greta B. Williams, Molly T. Senger, Naima L. Farrell, Alex Bruhn,
GIBSON DUNN & CRUTCHER LLP, Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Appellants--non-exempt, hourly employees of Lowe’s—appeal from the district
court’s order adopting the report and recommendation of the magistrate judge and granting
Lowe’s motion to dismiss Appellants’ suit claiming inter alia violations of the Fair Labor
Standards Act (FLSA), 28 U.S.C. §§ 201-219. On appeal, Appellants argue that their
complaint properly stated claims that tax reform bonus payments and payments for hours
volunteered for third-party non-profits were wrongly excluded from their “regular rate” for
overtime purposes. We affirm.
I.
On or about February 1, 2018, Lowe’s publicly announced that it would pay a
one-time bonus of up to $1,000 to over 260,000 full- and part-time hourly employees in
response to recent federal tax-reform legislation. As reflected in a press release announcing
the bonus, “Lowe’s . . . award[ed] the one-time cash bonus to eligible full- and part-time
hourly employees across all its U.S. facilities.” Lowe’s paid the tax-reform bonus to its
hourly employees on February 16, 2018, 15 days after publicly announcing the bonus. The
amount each hourly employee received—ranging from $75 to $1,000—was determined
based on two factors: whether the employee was part-time or full-time and the number of
years he or she had worked for Lowe’s.
In 2016, Lowe’s implemented a Give Back Time policy that provided eligible
employees with paid leave to spend time volunteering with charitable organizations of their
choice. The policy states that employees have “eight (8) hours of Give Back Time to use
in [their] community so that [they] can make an impact in areas that are important to
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[them].” To be eligible for Give Back Time, employees must be active, regular, full-time
employees with one year of continuous service at Lowe’s. Lowe’s encourages employees
to use Give Back Time during their workweeks to volunteer with “any 501(c)(3) non-profit
organization” they select (subject to limited exceptions). Lowe’s compensates hourly
employees who use approved Give Back Time at 100% of their hourly base rate of pay,
but the policy expressly provides that Give Back Time is not used in calculating overtime
hours. Employees are not required to volunteer, and any employee that chooses to
volunteer is not required to volunteer for any specific charitable organization.
II.
We review de novo a district court’s dismissal for failure to state a claim, accepting
the complaint’s factual allegations as true and drawing all reasonable inferences in the
nonmoving party’s favor. Kensington Volunteer Fire Dep’t, Inc. v. Montgomery Cty., 684
F.3d 462, 467 (4th Cir. 2012); see Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss,
the complaint’s factual allegations “must be enough to raise a right to relief above the
speculative level,” with “enough facts to state a claim to relief that is plausible on its face.”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). Under this standard, bare
legal conclusions “are not entitled to the assumption of truth” and are insufficient to state
a claim. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Moreover, “[w]here a complaint
pleads facts that are merely consistent with a defendant’s liability, it stops short of the line
between possibility and plausibility of entitlement to relief.” Id. at 678 (internal quotation
marks omitted).
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The FLSA requires that employers compensate their employees who work in excess
of forty hours per week at a rate one and a half times the regular rate at which they are
employed. 29 U.S.C. § 207(a)(1). Pursuant to the plain text of the FLSA, the regular rate
“shall be deemed to include all remuneration for employment paid to, or on behalf of, the
employee.” 29 U.S.C. § 207(e). The statute includes a list of exceptions to this rule, see
§ 207(e)(1)-(e)(8), but the list of exceptions is exhaustive, the exceptions are to be
interpreted narrowly against the employer, and the employer bears the burden of showing
that an exception applies. O’Brien v. Town of Agawam, 350 F.3d 279, 294 (1st Cir. 2003).
III.
Appellants first argue that the tax reform bonus payment was wrongly excluded
from their regular rate. The district court held that the payments were properly excluded
as either gifts or discretionary bonuses. Among excludable payments are “sums paid as
gifts; payments in the nature of gifts made at Christmas time or on other special occasions,
as a reward for service, the amounts of which are not measured by or dependent on hours
worked, production, or efficiency.” 29 U.S.C. § 207(e)(1). If a payment is “geared to
wages and hours during the bonus period,” it is not considered a gift. Likewise, if a
payment is so substantial that “it can be assumed that employees consider it a part of the
wages for which they work,” the bonus is not a gift. 29 C.F.R. § 778.212(b). However,
special occasion bonuses (like a Christmas bonus) can be excluded even if “employees are
led to expect it and even though the amounts paid to different employees . . . vary with the
amount of the salary or regular hourly rate of such employees or according to the length of
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their service . . . so long as the amounts are not measured by or directly dependent upon
hours worked, production, or efficiency.” 29 C.F.R. § 778.212(c).
Discretionary bonuses are also excludable. 29 U.S.C. § 207(e)(3); 29 C.F.R.
§ 778.208. However, bonuses that are explicitly promised to employees must be included
in the employees’ regular rate. 29 C.F.R. § 778.211(b) (any bonus paid pursuant to contract
must be included). In order to be excluded, “the employer must retain discretion both as
to the fact of payment and as to the amount until a time quite close to the end of the period
for which the bonus is paid.” Id. “If the employer promises in advance to pay a bonus, he
has abandoned his discretion with regard to it.” Id.
The plain language of the statutes and regulations supports the district court’s
conclusion that the payments at issue were excludable as either gifts or discretionary
bonuses. The payments were given in honor of a special occasion (passage of tax reform),
they were not made pursuant to a contract or other agreement, they were not based upon
the hours or wages of the employees, and they were not so substantial as to have been relied
upon. Instead, the only requirement to receive the bonuses was being an employee of
Lowe’s, and the payments varied based only on years with the company and part- or
full-time status.
On appeal, Appellants argue first that the bonus payments were non-discretionary
retention bonuses, because Lowe’s announced the bonuses in order to induce employees to
remain with the company. See 29 C.F.R. § 778.211(c) (“[B]onuses contingent upon the
employee's continuing in employment until the time the payment is to be made . . . must
be included in the regular rate of pay). Appellants are essentially arguing that Lowe’s
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publicly announced the bonuses in order to retain its employees for the two weeks between
the announcement and the payment. However, Appellants have provided no reason why
this 2-week retention period in February 2018 would have been of importance to Lowe’s
or any other factual allegation supporting their assertion that these payments were retention
payments. Moreover, the time period of retention is too brief to construe the payment as a
longevity bonus. See U.S. Dep’t of Labor Opinion Letter, FLSA 2020-4, 2020 WL
1640073, at *3 (noting that requiring a year of continued employment after announcement
to receive bonus rendered the bonus a non-discretionary longevity payment, but requiring
only “a single pay period” of work to receive bonus did not transform discretionary
payment to non-discretionary). In any event, any “promise” by Lowe’s would only be
relevant to the determination of whether the bonuses were discretionary or non-
discretionary; an announcement of intent to pay a bonus “would not prevent the bonus from
being excludable as a gift.” Id. at n.2.
Next, Appellants assert that the payments were not “gifts,” because the passage of
tax reform is not a “special occasion.” We conclude that passage of tax reform constitutes
a special occasion in this instance, as it was a particularly noteworthy event. Moreover,
gifts are not required under the statute to be given on a “special occasion”; instead, the
statute simply states “sums paid as gifts” prior to giving the special occasion example. See
Moreau v. Klevenhagen, 956 F.2d 516, 521 (5th Cir. 1992) (holding that monthly payments
given for no other purposes than to reward service are gifts); see also Shiferaw v. Sunrise
Senior Living, No. LA cv13-02171-JAK, 2016 WL 6571270, *26-*27 (C.D. Cal. Mar. 21,
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2016) (finding long term service awards payable on anniversaries of hiring were excludable
as gifts). Accordingly, the district court properly dismissed this claim.
IV.
Appellants next contend that the district court improperly held that the payments to
them for hours worked pursuant to the Give Back Time program were excludable from the
calculation of Appellants’ hours for overtime purposes under 29 U.S.C. § 207(e)(2)
(excluding “payments made for occasional periods when no work is performed due to
vacation, holiday, illness, failure of the employer to provide sufficient work, or other
similar cause”). On appeal, Appellants assert that their volunteer hours were “work” and,
therefore, not excludable. In support, Appellants essentially contend that they pled that the
hours were work and that is sufficient to avoid dismissal.
The FLSA does not define “work.” Roy v. Cty. of Lexington, 141 F.3d 533, 544
(4th Cir. 1998). However, the Supreme Court has concluded that work is “physical or
mental exertion (whether burdensome or not) controlled or required by the employer and
pursued necessarily and primarily for the benefit of the employer and his business.”
Integrity Staffing Sols., Inc. v. Busk, 574 U.S. 27, 31 (2014). In other words, the “critical
question” in determining whether an activity constitutes work under the FLSA is whether
it “is spent predominantly for the employer’s benefit or for the employee’s.” Roy, 141 F.3d
at 544 (internal quotation marks and citation omitted).
Here, Appellants did not plead any facts tending to show that their volunteer work
for third-party non-profits was for the primary benefit of Lowe’s. Moreover, it is
undisputed that Lowe’s did not require participation in the Give Back Time program and
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that those who decided to participate chose their own non-profit, determined the number
of hours they would volunteer, and worked under the direction of the non-profit. In
addition, Appellants do not allege how Lowe’s benefitted from the program, and in any
event, the third-party non-profits were clearly the primary beneficiaries.
Further, the regulations note that an example of “other similar cause[s]” would be
“volunteering as a first responder,” “attending school activities,” and “donating . . . blood.”
29 C.F.R. § 778.218(d). And the Department of Labor has recently opined that “an
employee’s time spent participating in an employer’s optional volunteer program . . . does
not count as hours worked under the FLSA, so long as [the employer] does not unduly
pressure its employees to participate.” U.S. Dep’t of Labor Opinion Letter, FLSA 2019-2,
2019 WL 1225928, at *1-*2. In the face of this authority, Appellants’ bare contentions
that their service was “work” was insufficient to avoid dismissal.
Accordingly, we affirm. We dispense with oral argument because the facts and
legal contentions are adequately presented in the materials before this court and argument
would not aid the decisional process.
AFFIRMED
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