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The Code of Federal Regulations (CFR) at Title 29 Part 541 (29 CFR Part 541) defines employees who are exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA). The FLSA requires all non-exempt employees be paid at least the federal minimum wage for all hours worked and overtime pay at not less than time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. In general, non-exempt employees earn hourly wages while exempt employees are usually paid a fixed annual salary.
The FLSA pay requirements do not apply to exempt employees, which generally includes executive, administrative and professional employees who are engaged in the management of an agency or business who are compensated on a salary basis at a rate of not less than $684 per week. The primary duty of an exempt employee must be managing the enterprise or managing a customarily recognized department or subdivision of the enterprise, including the authority to hire, fire or recommend changes to the status of other employees. Management by exempt employees might also include, but is not limited to: directing the work of employees, determining the techniques to be used and apportioning work among employees. Moreover, the exempt employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent.
Title 29 Part 553 of the Code of Federal Regulations (29 CFR Part 553) describes the “Application of the Fair Labor Standards Act to Employees of State and Local Governments,” which would include public parks and recreation departments. In particular, Section 553.22 addresses “FLSA compensatory time” and “FLSA compensatory time off.” These FLSA compensatory time regulations, however, retain a complete exemption for “any employee employed in a bona fide executive, administrative, or professional capacity as those terms are defined and delimited in 29 CFR part 541.”
“Off the Books” Timecard System
In the case of Pearson v. Georgia, 2020 U.S. App. LEXIS 14909 (11th Cir. 5/11/2020), plaintiff Melinda Pearson was a parks and recreation supervisor and manager and, therefore, considered an exempt employee under the FLSA. Pearson and several other employees, however, had been allowed to earn and use compensatory time off under an informal, de facto timecard system within the parks and recreation department. This “off the books” operation was contrary to the City’s payroll department policy prohibiting compensatory time off for exempt employees. Pearson’s use of “comp time” proved problematic, causing her to be demoted and ultimately terminated from her job for violating the City’s payroll policies. In response, Pearson claimed the City’s adverse employment actions against her constituted sex discrimination in violation of federal civil rights law.
Pearson started working as a summer employee for the parks and recreation department in the City of Augusta, Georgia, in 1980. She was promoted several times. In 1992, Pearson became a special activities supervisor. During her time as a supervisor, she twice complained to the human resources department that, even though she was a supervisor, she was being forced to do manual labor in an attempt to make her “work out of her job.” Nothing came of her complaints.
In 1996, Pearson was promoted to operations manager in the parks and recreation department. Despite the promotion, she continued to have problems. One of those problems arose in 1999 from her attempt to use “comp time,” which is short for compensatory time, an alternative to overtime.
Under the comp time system, an employee who worked more than 40 hours in a pay week could bank those extra hours for later use as paid time off. Instead of receiving overtime pay in cash, the employees could take an equivalent number of paid hours off work later.
The City had a general policy of not allowing exempt employees — that is, salaried employees like Pearson who were exempt from the FLSA’s overtime requirements — to accrue or use comp time. Only those who were considered non-exempt employees under the FLSA were supposed to use comp time.
Despite the City’s policy, the human resources department had allowed Pearson to accrue and use comp time. However, in 1999, Pearson’s manager denied her request to use comp time on the grounds that she was an exempt employee. After Pearson complained, the human resources director wrote a letter to Pearson and her manager, stating that because she had already accrued comp time that was “in the payroll system,” there was “no other option other than to compensate her for her time,” meaning to let her use it for paid time off.
This letter did not specify if Pearson would be allowed to continue accruing comp time, although it did state that “exempt employees do not accrue compensatory time.” In a conversation they had at that time, the department director told Pearson that, unlike non-exempt employees, she could no longer report comp time on her official timecard.
Both exempt and non-exempt employees submitted weekly timecards to the City’s payroll department. Exempt employees indicated on their timecards only whether they had worked a full day or taken some sort of paid time off, like vacation or sick time. Non-exempt personnel, also known as hourly employees, recorded on their timecards the exact number of hours they had worked and also noted how many comp time hours they had accrued that week.
If a non-exempt employee wanted to use comp time, they would mark the timecard to show that they were not working and would write on the timecard the amount of comp time hours that employee wanted to use that day. The payroll department tracked comp time hours accrued by non-exempt employees, but did not track comp time for exempt employees who were not supposed to have any comp time.
Despite the City’s policy prohibiting comp time, the parks and recreation department had created a system that, to some extent, had allowed exempt employees to use comp time. Under this system, exempt employees would fill out a piece of paper each time they accrued comp time and place the paper in a binder on the assistant director’s desk. When they wanted to use accumulated comp time hours, the exempt employees would retrieve their comp time paper from the binder and submit it to their supervisor. The supervisor would then approve the exempt employees’ use of comp time to take off a day or some part of it.
This process in the parks and recreation department for approving comp time for exempt employees was not quite enough to make this off-the-books operation work. The City payroll department had to approve an employee’s timecard before a comp-time-consuming employee in the parks and recreation department could be paid. In the case of exempt employees, the City payroll department would not have approved payment for prohibited comp time as a substitute for hours worked on a day that the exempt employee actually took off.
With the approval of their managers, Pearson and the other exempt employees in the parks and recreation department, therefore, submitted timecards to the payroll department showing that they were working a full day, even when they were not working all or even part of that day, but were instead using comp time to be off. Under that informal, de facto system, the human resources and payroll departments had no record of any exempt employees, including Pearson, ever accruing and using comp time. It was under that informal system, Pearson, like other exempt employees in the parks and recreation department, kept track of and used her comp time. Throughout her employment in the department, Pearson’s managers continued to approve use of her accrued comp time for payment.
In 2005, Pearson complained that male managers were receiving extra pay for taking on extra work, but she was not. That year, she filed an EEOC (Equal Employment Opportunity Commission) sex discrimination charge against her manager and the City. In her sex discrimination claim, Pearson alleged that she was treated worse and paid less than the other managers — all of whom were men. Specifically, Pearson claimed all of the male managers had offices, while she had none. Moreover, Pearson claimed that all of the male managers could wear whatever they wanted, while she had to wear a uniform. The EEOC issued a “right to sue” letter, but Pearson decided not to sue at that time.
In 2008, Pearson contracted a serious infection that resulted in her undergoing 29 surgeries between 2008 and 2011. After each one of those surgeries, Pearson was out of work for at least a week, sometimes longer. In July 2011, Pearson had a severe flare up and was out of work until December 2011. During that time, she was placed on Family Medical Leave Act leave. Pearson was paid through mid-August (using her accrued vacation and sick leave), but after that her leave was unpaid.
Pearson called a parks and recreation administrative assistant who handled timecards for the department and asked to use some of her comp time to extend the paid portion of her leave. Pearson was told parks and recreation was “going to have to hold her time of comp until she returned.” Instead, Pearson was granted catastrophic leave, a program under which employees can donate time off to an employee in need of it. Catastrophic leave is available only to employees who have exhausted all other forms of paid leave, including comp time. Many of the employees under Pearson’s supervision donated their time off to her.
In December 2011, the City put out a new handbook explicitly providing that exempt employees could not accrue or use comp time. On December 8, 2011, Pearson signed a form acknowledging that she had received and had the opportunity to read the entire handbook.
Shortly after Pearson returned to work in December 2011, she experienced problems with her new manager, and she found some of the employees under her supervision to be insubordinate. In late December, Pearson told her manager that she was going to file a formal complaint against him. The manager granted Pearson’s request to take some “time off to cool down.” Pearson was out of work for four days, but she had exhausted most of her available time off as a result of her return to work from her extended leave of absence. Her only remaining time off was comp time. Pearson requested permission to use her comp time so she would not lose pay during those days that she would be out of work.
The parks and recreation director approved her request. In keeping with the practice of the parks and recreation department, Pearson submitted a timecard indicating that she had worked each of those four days. Pearson’s four-day leave of absence did not go unnoticed. In early 2012, the City’s human resources department began an investigation into her use of comp time. The interim director of human resources, who later became the interim director of the parks and recreation department, oversaw this investigation.
During the investigation, the director reviewed the parks and recreation payroll records and interviewed several employees, including Pearson and her supervisor. She also provided a written statement about the matter to the human resources department.
Following the investigation, the director concluded that Pearson’s December 2011 use of comp time was improper because she was an operations manager, an exempt employee, and was thus ineligible to accrue and use comp time under the City policy. As a result, the director then demoted Pearson from operations manager to maintenance worker on May 2, 2012, a demotion that came with a pay cut of about 50 percent. Pearson appealed this decision. Her demotion was reviewed and affirmed by the City’s administrator.
In May 2012, Pearson began working in the new position of maintenance worker to which she had been demoted. Although she complained that the work was hurting her back, her manager told her that she had to continue working without any assistance. By the end of the month, Pearson had reinjured her back and had to go on medical leave again. She remained on leave for more than eight months, until February 2013. At that point, Pearson had not been medically cleared to return to work, and she had exhausted all of the leave available to her, so the City terminated her employment.
Demotion Based on Sex Discrimination
In her lawsuit against the City and its employees in federal district court, Pearson claimed her demotion from operations manager to maintenance worker was the result of sex discrimination in violation of federal civil rights law, specifically Title VII and Section 1983.
Title VII of the Civil Rights Act of 1964 is a federal law that protects employees against discrimination based on certain specified characteristics: race, color, national origin, sex and religion. Under Title VII, an employer may not discriminate with regard to any term, condition, or privilege of employment.
The Civil Rights Act of 1871 is a federal statute, numbered 42 U.S.C. Section 1983, that allows people to sue the government for civil rights violations. It applies when someone acting “under color of” state level or local law has deprived a person of rights created by the U.S. Constitution or federal statutes.
The federal district court entered judgments in favor of the City and its employees on all of Pearson’s discrimination claims. Pearson appealed.
Disparate Treatment Claims
As described by the federal appeals court, in this particular instance, “the analysis of disparate treatment claims” under Title VII and Section 1983 would require Pearson to first establish the following prima facie case (i.e., allegation is sufficient on its face) to support a claim of sex discrimination:
(1) she belongs to a protected class, (2) she was subjected to an adverse employment action, (3) she was qualified to perform the job in question, and (4) that her employer treated “similarly situated” employees outside her class more favorably.
If plaintiff Pearson succeeded in making out a prima facie case of sex discrimination, then burden of proof would shift to the defendant City to “articulate a legitimate, nondiscriminatory reason for its actions.” If the City is able to do so, then Pearson would have to demonstrate that the City’s reason for its actions were “merely a pretext for unlawful discrimination.” In so doing, Pearson would then be able to persuade a judge or jury that “she has been the victim of intentional discrimination.”
In this particular instance, the federal appeals court noted: “The parties agree that Pearson satisfied the first three prongs of the prima facie case: she is a woman, she was demoted, and she was qualified to do her job.” The appeals court, however, found Pearson and the City had disagreed as to “whether Pearson satisfied the fourth prong by identifying a comparator who was sufficiently similarly situated to her who was treated differently.”
Similarly Situated Comparators
As noted by the federal appeals court: “A plaintiff must show that she and her comparators are similarly situated in all material respects.” Specifically, a “similarly situated comparator” in a sex discrimination claim must exhibit the following characteristics:
(1) engaged in the same basic conduct (or misconduct) as the plaintiff; (2) have been subject to the same employment policy, guideline, or rule as the plaintiff; (3) will ordinarily (although not invariably) have been under the jurisdiction of the same supervisor as the plaintiff; and (4) will share the plaintiff’s employment or disciplinary history.
In her sex discrimination claim, Pearson had identified five men as potential comparators for her sex discrimination claims. The appeals court noted four of these men, were “subject to the same employment policy, guideline, or rule as” Pearson and were “under the jurisdiction of the same supervisor” as Pearson. In particular, the court found these four men “were all managers and all exempt employees under the Fair Labor Standards Act, meaning that according to the City handbook they were not entitled to accrue or use comp time.”
Accordingly, the issue before the appeals court was “whether Pearson showed that any of those four men engaged in the same basic misconduct as she did.” Specifically, the court had to determine whether any of these men had been “accruing comp time as an exempt employee and using it by marking their timecards to show that they were working when they weren’t.” In support of her sex discrimination claim, the court found Pearson had “submitted evidence, in the form of deposition testimony and declarations, that those four men used comp time even though they were exempt employees.”
Moreover, the court found the acting director of human resources “would have known that at least some of the men were using comp time as exempt employees” because one of them “admitted doing so.” This employee’s admission came during an interview that the human resources manager conducted as part of the investigation into Pearson’s use of comp time. In addition, the appeals court found the acting director of human resources would have reviewed the investigation interview notes. Moreover, the court found the acting director would have known “human resources did not track comp time for exempt employees.”
As a result, the appeals court concluded a similarly situated male employee “could not have taken comp time without falsifying his timecard in the same manner Pearson did.” The court also found direct evidence in the record that another similarly situated male employee “had falsified a timecard in the same manner that Pearson did,” including “three falsified timecards” from this male employee.
Accordingly, the appeals court held Pearson had established a prima facie case of sex discrimination based upon evidence indicated these four male employees were “similarly situated in all material respects” to Pearson and her alleged comp time misconduct. To refute Pearson’s claim of sex discrimination, the burden of proof would then shift to the City to “articulate a legitimate, nondiscriminatory reason for its actions.”
As noted by the appeals court, the defendant City and its employees had claimed: “Pearson was demoted because she knew that she was not eligible for comp time as an exempt employee and she engaged in a process which resulted in falsified timecards in direct violation of City policy.”
In the opinion of the appeals court, the City’s response was not “a legitimate, non-discriminatory reason for Pearson’s termination,” because Pearson’s evidence demonstrated that her misconduct was her involvement in “a process which resulted in falsified timecards in direct violation of City policy” was “exactly what the comparators did.” Moreover, the court found evidence in a letter that Pearson “had been told in 1999 that she could use comp time even though she was an exempt employee.” Further, when she was on medical leave, Pearson had been told that the parks and recreation department was “going to have to hold her time of comp until she returned.” In the opinion of the appeals court, the clear implication of this evidence was that “the use of comp time was permitted — otherwise, why would the department hold it for her?”
Based upon this evidence, the appeals court concluded: “Pearson has raised a genuine issue of material fact as to whether the defendants’ articulated reason for demoting her” was a mere pretext in an attempt to rationalize and legitimize sex discrimination by the City. The appeals court, therefore, found the federal district court had erred in granting summary judgment to the City on Pearson’s Title VII and Section 1983 claims of sex discrimination. Accordingly, the federal appeals court ordered the federal district court to conduct a new trial to fully consider and resolve Pearson’s claims of sex discrimination against the City.
For more information, see: “Gender & Age Discrimination Claim in Park Promotion,” James C. Kozlowski, Parks & Recreation, Dec. 2019, Vol. 53, Iss. 12 and “Former Parks Director Claims Overtime Pay Under FLSA,” James C. Kozlowski, Parks & Recreation, Dec. 2018.
James C. Kozlowski, J.D., Ph.D., is an Attorney and Associate Professor in the School of Sport, Recreation and Tourism Management at George Mason University. Webpage with link to law review articles archive (1982 to present).