A group of New Mexico municipal workers sued their employer, charging that it was violating the Fair Labor Standards Act (FLSA) and underpaying them for overtime in a variety of ways. All the employees who sued were members of unions that had negotiated collective bargaining agreements with the city. They contended that their regular rate of pay was miscalculated, thereby shorting them on overtime pay.

What happened. Employees who sued the City of Albuquerque included police officers, firefighters, transit workers, clerical and technical workers, and others. They argued that the city calculated regular rates of pay wrongly in the following ways: It paid them the higher of compensation due under FLSA or bargaining agreement, used actual hours worked instead of the “normal workweek” as the divisor in finding a worker’s hourly regular rate, multiplied the regular rate by one-half instead of one and one-half, and took improper credits.

Additionally, under certain union agreements, employees could “sell” a minimum accrued amount of unused vacation or sick leave back to the city. And, the city included some add-on payments—such as for longevity, hazardous duty, and education—in calculating the regular rate of pay, but not the vacation and sick leave buy-backs.

A judge in federal district court heard the plaintiffs and the defense, ruling in favor of the city on all counts except the buy-backs. Both sides appealed to the 10th Circuit, which covers Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming.

What the court said. Appellate judges agreed with the district judge in siding with the defense on most of the plaintiffs’ claims. But when they turned to the buy-backs, they agreed only in part. Reasoning that since the Department of Labor recommends including attendance bonuses in the rate-of-pay calculation, they found a difference between the buy-backs of sick leave and vacation time.

Since sick leave is unexpected, and managers have not planned on how to cover for an employee who calls in sick, unused sick leave that the employer buys back is, in effect, an attendance bonus. Vacation leave, however, is planned in advance, and management arranges for coverage when someone will be out. So judges ruled that vacation that is bought back should not be part of the rate-of-pay calculation. Chavez et al. v. City of Albuquerque, Nos. 09-2274 and -2288 (2011).

Point to remember: Plaintiffs were wrong about the multiplication of regular rate by only one-half; judges pointed out that multiplying by one and one-half would have led to payment at two and one-half the regular rate.