A federal appeals panel has overruled a lower court’s ruling to side with San Francisco municipal nurses in their overtime dispute with the government.
The Sept. 11 ruling from the U.S. Ninth Circuit Court of Appeals affects two cases in which four nurses sued the city and county of San Francisco, alleging Fair Labor Standards Act violations. The first case started in 2018, the second in 2020, and after certification as a collective action more than 350 plaintiffs opted into the litigation.
U.S. District Judge Richard Seeborg eventually granted summary judgment to the government, finding the nurses to be salaried employees exempt from collecting time-and-a-half wages for overtime work.
Judge David Hamilton, a U.S. Seventh Circuit Court of Appeals judge sitting by designation, wrote the panel’s opinion. Judge Morgan Christen concurred. Judge Carlos Bea partially concurred and also wrote a partial dissent.
According to Hamilton, the nurses work in public hospitals, jails and clinics. The city argued that although they routinely exceed 40 hours per week, the positions are “a bona fide professional capacity” exempt from FLSA overtime rules. In order to prevail, he explained, the city would need to show its staff nurses were paid on “a salary basis” at the time covered in the nurses’ complaint.
The city’s main evidence was the annual documentation and publication of compensation totals. The nurses said they were nonetheless paid on an hourly basis with those annual figures divided out based only on each hour worked. They further argued that evidence of occasional underpayment bolsters their position on entitlement to overtime wages whenever applicable.
“To determine whether employees are compensated on a salary basis, courts must look beyond conclusory language in contracts and similar documents such as the salary ordinance,” Hamilton wrote. “Courts must instead analyze how employees are actually paid.”
Although the panel said the payment system doesn’t “necessarily flunk the salary basis test” in terms of policy, “material factual questions remain in dispute” regarding practical application. To bolster their position, the nurses offered records showing they didn’t work “hours consistent with their full-time equivalencies in a significant number of pay periods.”
According to court records, each staff nursing position has a union-negotiated base salary. Once the San Francisco Board of Supervisors approves those amounts, it publishes the figures in the city’s salary ordinance. Then the city payroll department divides that salary into an hourly rate. Staff nurses can choose to work fewer than 40 hours per week and have their base compensation reduced accordingly. They also can earn additional pay by taking certain shifts that pay more, taking overtime shifts or claiming “per diem” shifts, which are open to non-city nurses but pay the staff nurses 125% of their base wage. The city can reduce compensation if a nurse takes off more time than they have accrued in the leave banks or if they are late without prior permission.
“All of these factors are taken into account when the city runs its payroll every two weeks,” Hamilton wrote. “The payroll process begins with supervisors reviewing each nurse’s work schedule and making adjustments to reflect additional hours worked or time taken off. The supervisors then submit the revised schedules to the payroll department.”
In sending the complaint back to federal district court, the majority said the most significant factual dispute was the nurses’ position they aren’t guaranteed the chance “to work the hours corresponding to their full-time equivalency every week.” The city said it reviewed more than 2,200 worker pay periods and found at least 72 where nurses were credited with fewer than they expected. That discrepancy could mean nurses don’t get a predetermined weekly compensation amount, and if that is true, they are not exempt from the FLSA requirement to pay overtime wages.
The city argued the FLSA allows government employers to make partial-day pay deductions without affecting the overtime exemption, whereas private employers can only deduct salaried pay in full-day increments. The panel agreed but said the law doesn’t “give public employers free rein to make pay deductions” and still gives the worker the right to earn their promised compensation.
Judge Bea’s dissent held only that the majority didn’t go far enough. Rather than remand for resolution of factual dispute, Bea said the parties’ motions for summary judgment made it clear the nurses aren’t salaries employees and would have remanded with instructions to enter summary judgment on their behalf.
Hamilton said the majority didn’t reach that conclusion out of deference to the legislative and procedural history that created public employer exemptions in order to allow governments to protect taxpayer resources by paying all employees only for time they actually worked.
The workers are represented by Weinberg Roger & Rosenfeld, of Los Angeles; and Prometheus Partners, of San Francisco.
The government was represented by Renne Public Law Group, of San Francisco.
Alex Barrett-Shorter, deputy press secretary for City Attorney David Chiu, said: “The city maintains that our staff nurses are salaried. Though we are disappointed with the Ninth Circuit’s conclusion, we believe further proceedings will confirm that judgment for the city is appropriate.”