F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JAN 5 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
B.N. SPRADLING; B.C. DOW; J.D.
FELLINGER; L.M. LAMB; ROBERT L.
MCCLARY; PHILIP MORGANS;
EDGAR LEON WILSON; F.L. COOK;
D.R. GRANT; THOMAS E. HOLLAND;
ROBERT E. NANTZ; BILLY JOE
GEIER; KEN LORTON; EDDIE BELL;
HARRY L. BAKER; CHARLES
FRANKLIN WILLCOX; C. RIDGE
KAYSER; RODNEY MITCHELL;
ROGER SHARP; DONALD M.
WHITLEY,
Plaintiffs-Appellants,
v. No. 98-5204
CITY OF TULSA, a municipal
corporation,
Defendant-Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
(D.C. No. 97-CV-552-E)
Mark W. Schilling of Riggs, Abney, Neal, Turpen, Orbison & Lewis, Tulsa, Oklahoma,
for Plaintiffs-Appellants.
Larry V. Simmons and Ellen Hinchee, Tulsa, Oklahoma, for Defendant-Appellee.
Before BALDOCK, REAVLEY,* and BRORBY, Circuit Judges.**
BALDOCK, Circuit Judge.
Plaintiffs, present and retired District Chiefs of Defendant City of Tulsa’s fire
department, brought suit for overtime compensation pursuant to § 207 of the Fair Labor
Standards Act (FLSA) for the period March 30, 1995 through June 30, 1997. See 29
U.S.C. §§ 201-219. Defendant claims Plaintiffs were not entitled to overtime pay
because they came within the exemption for “bona fide executive, administrative, or
professional” employees provided by § 213(a)(1). The district court granted summary
judgment in favor of Defendant and Plaintiffs appeal. We exercise jurisdiction under 28
U.S.C. § 1291.
We review de novo the district court’s grant of summary judgment, applying the
same standard as the district court under Fed. R. Civ. P. 56(c). See Simms v. Oklahoma
ex rel. Dep’t of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th
Cir.), cert. denied, 120 S. Ct. 53 (1999). Summary judgment is appropriate where no
genuine issues of material fact exist and the moving party is entitled to judgment as a
*
The Honorable Thomas M. Reavley, United States Circuit Judge for the United
States Court of Appeals for the Fifth Circuit, sitting by designation.
**
After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(a)(2)(c); 10th Cir. 34.1(G). The case is therefore
ordered submitted without oral argument.
2
matter of law. Fed. R. Civ. P. 56(c). Applying this standard, we affirm.
I.
Under the FLSA, an employer must pay an employee overtime compensation for
all hours worked by the employee in a given week in excess of forty hours. 29 U.S.C.
§ 207(a)(1). The FLSA provides an exemption from overtime compensation for any
employee employed in a “bona fide executive, administrative, or professional capacity” as
defined by the Secretary of Labor. 29 U.S.C. § 213(a)(1). The Department of Labor
regulations provide that an employee is executive, administrative, or professional if the
employer demonstrates that the employee (1) is paid on a salary basis, (2) at a rate of not
less than $250 per week, and (3) that the employee meets the “duties test.” 29 C.F.R.
§§ 541.1, 541.2, and 541.3; see Aaron v. City of Wichita, Kansas, 54 F.3d 652, 657-58
(10th Cir. 1995). The parties agree that Plaintiffs meet the “duties test” and are
compensated in an amount exceeding $250 per week. They dispute whether Plaintiffs
meet the “salary basis test” for exemption. The Department of Labor regulations provide
that an employee is considered to be paid “on a salary basis” if he “regularly receives
each pay period on a weekly, or less frequent basis, a predetermined amount constituting
all or part of his compensation, which amount is not subject to reduction because of
variations in the quality or quantity of the work performed.” 29 C.F.R. § 541.118(a).
Plaintiffs argue their pay was “subject to reduction” for reasons inconsistent with
payment on a salary basis. Plaintiffs claim their pay was “subject to reduction” because,
3
under the terms of Defendant’s written policy, their pay could be reduced as a form of
discipline. Defendant’s policy, which applied to Plaintiffs as well as other, non-salary
employees, created a possibility of salary reductions for absences of less than one day.
Further, Plaintiffs allege instances of actual deductions. Defendant, on the other hand,
claims that the policy did not effectively communicate that pay deductions were an
anticipated form of punishment for employees in Plaintiffs’ position. Further, Defendant
denies that any deductions actually occurred.
In 1992, the District Chiefs filed a lawsuit seeking overtime compensation. The
district court resolved the case in favor of the District Chiefs, and we affirmed the district
court in Spradling v. City of Tulsa, 95 F.3d 1492 (10th Cir. 1996) (Spradling I).
Defendant satisfied the judgment of Spradling I, which covered overtime compensation
for hours worked through March 30, 1995. Defendant did not, however, pay the District
Chiefs overtime as it accrued after March 30, 1995. Plaintiffs in the current suit seek
overtime compensation for hours worked from March 31, 1995 through June 30, 1997,
after which a collective bargaining agreement addressing the issue became effective.1
Plaintiffs argue that the doctrines of collateral estoppel and res judicata dictate the
same result reached in Spradling I. Defendant claims that a recent Supreme Court case,
Auer v. Robbins, 519 U.S. 452 (1997), changed the applicable law, rendering application
1
Plaintiffs in the current suit include individuals promoted to District Chief
during the pendency of Spradling I and after its conclusion.
4
of either res judicata or collateral estoppel inappropriate. The district court granted
Defendant’s motion for summary judgment, concluding that “Auer changed the law in the
Tenth Circuit and hence changes the result reached in Spradling I.” We agree.
According to the law of collateral estoppel, “once a court has decided an issue of
fact or law necessary to its judgment, that decision may preclude relitigation of the issue
in a suit on a different cause of action involving a party to the first case.” Allen v.
McCurry, 449 U.S. 90, 94 (1980); see also Meredith v. Beech Aircraft Corp., 18 F.3d
890, 895 (10th Cir. 1994) (quoting Ashe v. Swenson, 397 U.S. 436, 443 (1970))
(collateral estoppel applies to prevent relitigation by the same parties in any future lawsuit
of an issue of ultimate fact that has once been determined by a valid and final judgment).
The doctrines of collateral estoppel and res judicata, however, apply only in cases where
controlling facts and law remain unchanged. Commissioner v. Sunnen, 333 U.S. 591,
599-600 (1948). Consequently, res judicata and collateral estoppel are inapplicable
where, between the first and second suits, an intervening change in the law or
modification of significant facts create new legal conditions. Id. The Supreme Court
decision in Auer constitutes an intervening change in the law sufficient to render
collateral estoppel and res judicata inapplicable to the present case. See, eg., Community
Hospital v. Sullivan, 986 F.2d 357, 360 (10th Cir. 1993) (refusing to apply collateral
estoppel following change in facts and law).
II.
5
In Auer, the Supreme Court resolved a split among the circuits on the meaning of
the phrase “subject to” as used in the salary basis test. The plaintiffs in Auer, sergeants
employed by the St. Louis Police Department, brought suit against members of the St.
Louis Board of Police Commissioners seeking overtime pay under the FLSA. Auer, 519
U.S. at 455. The defendants claimed the sergeants were exempt pursuant to § 213(a)(1).
The Supreme Court held the salary basis test denies exempt status when employees are
covered by a policy that permits disciplinary or other deductions in pay “as a practical
matter.” Id. at 461. The standard is met “if there is either an actual practice of making
such deductions or an employment policy that creates a ‘significant likelihood’ of such
deductions.” Id. While the standard does not require a showing of actual deductions, “in
their absence it requires a clear and particularized policy--one which ‘effectively
communicates’ that deductions will be made in specified circumstances.” Id.
The Court noted that the police manual listed fifty-eight possible rule violations as
well as the range of penalties for each violation. Id. at 461-62. The manual nominally
covered all department employees and some of the specified penalties involved
disciplinary deductions in pay. Id. Relying on the Secretary of Labor’s interpretation of
the applicable regulation, 29 C.F.R. § 541.118(a), the Court stated,
Under the Secretary’s view, that is not enough to render petitioners’ pay
“subject to” disciplinary deductions within the meaning of the salary-basis
test. This is so because the manual does not “effectively communicate” that
pay deductions are an anticipated form of punishment for employees in
petitioners’ category, since it is perfectly possible to give full effect to every
aspect of the manual without drawing any inference of that sort. If the
6
statement of available penalties applied solely to petitioners, matters would
be different; but since it applies both to petitioners and to employees who
are unquestionably not paid on a salary basis, the expressed availability of
disciplinary deductions may have reference only to the latter. No clear
inference can be drawn as to the likelihood of a sanction’s being applied to
employees such as petitioners.
Id. at 462.
We construed a similar employment manual in Carpenter v. City & County of
Denver, 115 F.3d 765 (10th Cir. 1997), decided on remand from the Supreme Court for
further consideration in light of Auer. In Carpenter, lieutenants, captains, and division
chiefs in the police department sought overtime compensation under FLSA. Because the
department manual applied to all members of classified service, we concluded that the
manual did not “effectively communicate” that the statement of available penalties
applied only to the plaintiffs seeking overtime compensation. Id. at 767. Further, we
noted that the record did not contain “evidence of disciplinary or other deductions in pay
either as an actual practice or ‘an employment policy that creates a “substantial
likelihood” of such deductions.’” Id. (quoting Auer, 519 U.S. at 461).
The written policy in the present case similarly applies to both Plaintiffs and other
employees who are not paid on a salary basis. Therefore, Defendant’s express policy
does not “effectively communicate that pay deductions are an anticipated form of
punishment for employees in [Plaintiffs’] category . . . .” Auer, 519 U.S. at 462. Rather,
“[n]o clear inference can be drawn as to the likelihood of a sanction’s being applied to
7
employees such as [Plaintiffs].” Id.
Further, while the record in Carpenter contained two cases of alleged deductions,
we noted that “the [Supreme] Court specifically recognized that such one time deductions
under unusual circumstances will not oust exempt status and may be remedied under 29
C.F.R. § 541.118(a)(6).” Id. In Spradling I, the district court found “uncontroverted
evidence that Plaintiffs have been disciplined, on more than one occasion, by a reduction
in pay . . . .” Spradling I, 95 F.3d at 1503. This finding alone, however, does not
necessarily satisfy the “subject to reduction” standard set forth in Auer. The actual
instances of pay reduction must amount to an actual practice of making such deductions.
Auer, 519 U.S. at 461. One-time deductions in pay under unusual circumstances are
insufficient to satisfy the “subject to reduction” standard. See id. at 463-64. Here,
Plaintiffs admit that none of them had “ever been absent from the work place due to a
disciplinary action, and therefore, ha[d] never had his pay reduced as a result thereof.”
Moreover, Plaintiffs admit that “[s]ince the FLSA became applicable to the City in 1986,
no employee of the City holding the rank of District Chief has ever had his pay reduced
for being absent from the work place due to any reason other than violations of a major
safety rule.” Accordingly, Defendant did not maintain an actual practice of making such
deductions. We therefore hold Plaintiffs are exempt from the overtime requirements of
the FLSA.
AFFIRMED.
8