Fred Crenshaw, Plaintiff-appellee, v. Quarles Drilling Corporation, Defendant-appellant, 798 F.2d 1345 (10th Cir. 1986)

Fred Crenshaw brought this action against his former employer, the Quarles Drilling Corporation (Quarles), alleging violations of the overtime provisions of the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201-219. Quarles is an oil and gas contractor with mobile drilling units at sites throughout the western United States. Crenshaw was hired by Quarles as a drilling equipment mechanic on September 16, 1980. Crenshaw and Quarles agreed that Crenshaw would be responsible for routine maintenance and emergency repairs of Quarles' drilling equipment located at various sites. Crenshaw was provided with a company truck equipped with a tool carrier and a mobile telephone to travel to these sites. The parties agreed that Crenshaw would be paid a biweekly gross salary of $1,707.69, a figure which was subsequently raised to $1,793.08 on April 10, 1981. In 1983, Crenshaw filed this suit for overtime compensation, liquidated damages, attorneys' fees, and costs for the period from September 16, 1980 to June 30, 1981, and from October 1, 1981 to April 30, 1983.

The district court awarded Crenshaw $34,082.85 in overtime compensation and an equal amount in liquidated damages. Quarles appeals the determination that a Belo contract was in effect between the parties, the selection of the three-year statute of limitations, the award of liquidated damages, and the district court's calculation of the number of hours worked by Crenshaw. For the reasons set forth below, we affirm in part and reverse in part and remand for further proceedings consistent with this opinion.

The FLSA provides:

Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.

29 U.S.C. § 207(a) (1). This general rule does not apply when the elements of Sec. 207(f) of the FLSA, governing so-called Belo contracts, are present.¹  At trial, Quarles argued that a Belo contract was in effect. R. Vol. I, pp. 36-37. The district court held that there was a Belo contract and the Sec. 207(f) exception applied. R. Vol. I, p. 67. On appeal, Quarles now argues that there was no Belo contract.

At the outset, we acknowledge the general rule against allowing a party to argue a legal position on appeal contrary to that argued at trial. 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure Sec. 4477 (1981). This is an equitable prohibition, Richardson v. Turner, 716 F.2d 1059, 1061 n. 2 (4th Cir. 1983), that we will not apply when "exceptional cases or particular circumstances" demand that we consider a question of law raised on appeal. Cf. Hormel v. Helvering, 312 U.S. 552, 557, 61 S. Ct. 719, 721, 722, 85 L. Ed. 1037 (1941). In the present case, we are presented with the unusual situation where both parties argued at trial that a Belo contract existed. The applicability of the Belo contract exception was a crucial issue at trial that was argued extensively by both parties. Therefore, this is not an instance where the issue was not raised below. Crenshaw is not now prejudiced by being asked to address a question that was not considered at trial. Crenshaw argued at trial that a Belo contract had been established, and he makes the same argument on appeal. Under these particular circumstances, we do not find it equitable to apply the rule against inconsistent positions.

The elements of the Sec. 207(f) exception were described in Donovan v. Brown Equipment and Service Tools, Inc., 666 F.2d 148, 153 (5th Cir. 1982):

First, the duties of the employee must "necessitate irregular hours of work." 29 U.S.C. § 207(f). Second, the employee must be employed pursuant to a bona fide individual contract or collective bargaining agreement. Id. Third, that contract must "specif [y] a regular rate of pay" for hours up to forty and one and one-half times that rate for hours over forty. Id. at Sec. 207(f) (1). Finally, the contract must provide a weekly pay guarantee for not more than sixty hours, based on the specified rates. Id. at Sec. 207(f) (2).

An employment agreement comes within the Sec. 207(f) exception only if each of the elements is present in a particular case. Brown, 666 F.2d at 153. Two of the elements are in dispute here.

A Belo contract must specify a "regular rate of pay." 29 U.S.C. § 207(f). The Supreme Court has interpreted "regular rate" of pay to mean "the hourly rate actually paid for the normal, non-overtime workweek." Walling v. Helmerich and Payne, Inc., 323 U.S. 37, 40, 65 S. Ct. 11, 40, 89 L. Ed. 29 (1944). We applied this definition in Triple "AAA" Company, Inc. v. Wirtz, 378 F.2d 884 (10th Cir.), cert. denied, 389 U.S. 959, 88 S. Ct. 338, 19 L. Ed. 2d 364 (1967). In Triple "AAA", an employer argued that the semi-monthly salary paid to its employees had provided compensation at a specified hourly rate that included overtime compensation for hours in excess of forty hours per week. We rejected this argument as "nothing more than after-the-fact computations," concluding that "an underlying agreement ... relating to the regular rate is crucial when an employer pays a flat monthly salary for an average work week of more than forty hours." Id. at 886-87. Accord Brennan v. Elmer's Disposal Service, Inc., 510 F.2d 84, 87 (9th Cir. 1975); Nunn's Battery & Electric Co. v. Goldberg, 298 F.2d 516, 519 (5th Cir. 1962).

At trial, Crenshaw insisted that he did not know the number of hours upon which his salary was based. R. Vol. II, pp. 58-59. The chief mechanic, however, who had hired Crenshaw to work for Quarles testified that he had told Crenshaw that his salary would be based on a sixty-hour work week. R. Vol. II, pp. 98-99. The district court resolved this factual dispute by adopting Quarles' assertion that the parties had agreed to a sixty-hour work week based on forty hours at a regular hourly rate and twenty hours at one and one-half times the regular rate. R. Def. Ex. 2, p. 5. We find support for this determination in the record and do not find it to be clearly erroneous.

The employment agreement here comes within the Sec. 207(f) exception only if there are "irregular hours of work." Crenshaw's work hours fluctuated substantially during the period under consideration.²  Fluctuating hours, however, are not necessarily "irregular hours."

" [T]he term, 'irregular hours of work,' does not mean merely a fluctuating long workweek, consisting only or mostly of variations in the hours required over forty. For hours to be considered irregular within the meaning of section 7(f), they must, in a significant number of weeks, fluctuate both below forty hours per week as well as above."

Brown, 666 F.2d at 154 (emphasis added). Accord Donovan v. Tierra Vista, Inc., 796 F.2d 1259 (10th Cir. 1986); Donovan v. McKissick Products Co., 719 F.2d 350 (10th Cir. 1983), cert. denied, 467 U.S. 1215, 104 S. Ct. 2657, 81 L. Ed. 2d 363.³  Before the Sec. 207(f) exception applies, we must conclude as a matter of law that there were a "significant" number of weeks during which Crenshaw worked fewer than forty hours. Cf. Brown, 666 F.2d at 154.

The district court did not consider the number of weeks in which Crenshaw worked fewer than forty hours. The parties stipulated before trial that their employment agreement anticipated that the number of hours Crenshaw would work "would by necessity fluctuate from week to week." R. Vol. I, p. 19. The district court apparently believed that this satisfied the "irregular hours" requirement of Sec. 207(f). Although both parties argued at trial that a Belo contract was in effect, neither party sought to prove the "irregular hours" element necessary to find a Belo contract under Sec. 207(f). The district court erred in holding that Sec. 207(f) applied without considering whether Crenshaw had in fact worked "irregular hours" during the course of his employment by Quarles.

The number of hours that Crenshaw worked each week is included in the record because that information was needed to calculate the amount of overtime compensation due. The record, therefore, allows us to resolve this legal question of whether Crenshaw worked "irregular hours" within the meaning of Sec. 207(f). We have determined that there were only eight weeks in which Crenshaw worked fewer than forty hours out of a total of 119 weeks of work, or 6.7% of the total.⁴  This is similar to the 6.9% figure found not to be "significant" in Brown. 666 F.2d at 154. We hold that the number of weeks that Crenshaw worked fewer than forty hours is not sufficient to satisfy the requirement of "irregular hours" in the Sec. 207(f) exception and thus this employment agreement is not a Belo contract. Quarles is therefore liable under Sec. 207(a) for overtime compensation due to Crenshaw. We remand to the district court for a determination of the amount of overtime compensation owed to Crenshaw pursuant to the method described in Triple "AAA", 378 F.2d at 887.⁵ 

We are also presented with several challenges to the decision of the district court regarding the number of hours for which compensation is due.

A two-year statute of limitations is generally applicable to actions to recover unpaid overtime compensation under the FLSA. 29 U.S.C. § 255(a). A three-year statute of limitations applies when a "willful violation" of the Act has occurred. Id. We have held that "a violation is willful if the employer knew or should have known of an appreciable possibility that the employees involved were covered by the Act." Donovan v. M & M Wrecker Service, Inc., 733 F.2d 83, 85 (10th Cir. 1984). See also McKissick Products Co., 719 F.2d at 354 (citations omitted) (a violation is willful if "the employer knew that the Act was 'in the picture' and was aware of the Act's possible application to his employees").⁶ 

The district court concluded that Quarles should have been aware of the appreciable possibility that the overtime provisions of the FLSA applied to Quarles' employees. The record supports this finding. William Morton, the tax manager for Quarles, testified that he believed Crenshaw should have been paid overtime compensation for any hours worked above sixty hours in a particular week. Def. Ex. 2, p. 17; see R. Vol. I, p. 64. Crenshaw was required to provide time records for Quarles throughout much of the period in question. R. Vol. I, p. 64. These time records showed that Crenshaw frequently worked more than sixty hours in a week. R. Vol. III, Pl. Ex. 57. Therefore, Quarles should have known that it owed overtime compensation to Crenshaw. Failure to pay such compensation was a willful violation of the statute, so the district court correctly applied the three-year statute of limitations under 29 U.S.C. § 255(a).

The time that Crenshaw spent traveling to his job sites was included by the district court in calculating the time for which overtime compensation is due. The Portal-to-Portal Act (codified at 29 U.S.C. §§ 216 [b], 251-262) excludes from overtime compensation time spent "traveling to and from the actual place of performance of the principal activity" of an employee and time spent in "activities which are preliminary or postliminary" to the principal activity. 29 U.S.C. § 254(a). This section has been interpreted not to prohibit overtime compensation when active duties are performed during travel time. D A & S Oil Well Servicing, Inc. v. Mitchell, 262 F.2d 552 (10th Cir. 1958); 29 C.F.R. Sec. 790.7(d). In D A & S, we held that employees who transported equipment needed to service producing oil wells must be compensated for their travel time. We emphasized that each case involving compensation for travel time "must be decided upon its peculiar facts." D A & S Oil Well Servicing, Inc., 262 F.2d at 554-55. We added, however, that "employees who transport equipment without which well servicing could not be done, are performing an activity which is so closely related to the work which they and the other employees perform, that it must be considered an integral and indispensable part of their principal activities." Id. at 555. See Steiner v. Mitchell, 350 U.S. 247, 256, 76 S. Ct. 330, 335, 100 L. Ed. 267 (1956) (adopting the "integral and indispensable" standard).

The district court here found that travel was an indispensable part of Crenshaw's job. We agree. Quarles provided Crenshaw with a specially equipped truck containing many of the tools that he needed to service drilling rigs scattered across several states. We hold that the district court did not abuse its discretion in finding that time spent travelling to and from drill sites in this truck was compensable under the FLSA.

The district court included meal periods in calculating the time for which overtime compensation is due. The Portal-to-Portal Act does not affect meal periods during the work day because it only applies to activities which take place either before or after a complete work day. 29 U.S.C. § 254. The administrative interpretation of the Act correctly recognizes that 29 U.S.C. § 254 "plays no part in determining whether ... a [meal] period ... is or is not compensable." 29 C.F.R. Sec. 790.6(b). The evidence suggests that Crenshaw often ate hurriedly due to the nature of his work. See e.g., R. Vol. II, p. 46. Under the circumstances in this case, we find that meal periods were properly included in the determination of hours worked.

The district court's findings of fact indicate that Crenshaw worked between 40 and 48 hours per week from the last week of September, 1980 until approximately December 1, 1980. R. Vol. I, pp. 64-65. The district court's conclusions of law, however, state that Crenshaw worked 72 hours per week between September 16, 1980 and January 9, 1981. R. Vol. I, p. 69. The two determinations are irreconcilable. We remand for a decision regarding the number of hours Crenshaw worked between the last week of September, 1980 and December 1, 1980.

The FLSA provides for an award of liquidated damages in an amount equal to unpaid overtime compensation. 29 U.S.C. § 216(b). The only instance where a court may exercise discretion in not awarding liquidated damages is when an employer shows that its action was in good faith and that it had reasonable grounds for believing the failure to pay overtime compensation was not a violation of the FLSA. 29 U.S.C. § 260.⁷  The district court concluded that Quarles had not met its burden of demonstrating good faith. See Sinclair v. Automobile Club of Oklahoma, Inc., 733 F.2d 726, 730 (10th Cir. 1984). Quarles apparently believed that it was not in violation of the FLSA because it thought that its employment agreements came within the Sec. 207(f) exception to the overtime requirements. But a misunderstanding of the requirements of the Act is not a reasonable ground under Sec. 260. See Sinclair, 733 F.2d at 730. We hold that the district court did not abuse its discretion in awarding liquidated damages. We remand, however, for a recalculation of the amount of liquidated damages in light of the recalculation of the amount of overtime compensation due.

AFFIRMED IN PART; REVERSED IN PART AND REMANDED.