Chao v. Gotham Registry, No. 06-2432 (2d Cir. 2008)
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06-2432-cv C hao v. G otham Registry 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT _______________ August Term, 2006 (Argued March 1, 2007 Decided January 24, 2008) Docket No. 06-2432-cv _______________ Elaine L. Chao, Secretary of Labor, Plaintiff-Appellant, v. Gotham Registry, Inc., Gotham Per Diem, Inc., Defendants-Appellees. _______________ Before: JACOBS, Chief Judge, CARDAMONE, and SOTOMAYOR, Circuit Judges. _______________ Plaintiff Elaine L. Chao, Secretary of Labor, appeals from an order dated March 20, 2006 of the United States District Court for the Southern District of New York (Stanton, J.) denying her petition for adjudication of civil contempt against defendant Gotham Registry, Inc., and its president, Caroline Barrett. Affirmed. Chief Judge Jacobs concurs in a separate opinion. _______________ 1 2 3 4 5 6 7 8 9 10 11 12 _______________ MARIA VAN BUREN, Washington, D.C. (Howard M. Radzely, Solicitor of Labor, Steven J. Mandel, Associate Solicitor, Paul L. Frieden, U.S. Department of Labor, Office of the Solicitor, Washington, D.C., of counsel), for Plaintiff-Appellant. STEVEN KAPUSTIN, Blue Bell, Pennsylvania (Barry A. Furman, Kaplin, Stewart, Meloff, Reiter & Stein, P.C., Blue Bell, Pennsylvania, of counsel), for Defendant-Appellee. _______________ 1 2 CARDAMONE, Circuit Judge: In 1937 America was in the depths of a depression and 3 employment was scarce. President Franklin Roosevelt introduced 4 a measure to address this problem in a bill that became the Fair 5 Labor Standards Act. 6 underpaid and reduce the hours of the overworked or, as stated 7 in the Presidential message accompanying the proposed 8 legislation, to obtain "a fair day's pay for a fair day's work." 9 81 Cong. Rec. 4983 (1937) (message of President Roosevelt). The bill aimed to raise the pay of the 10 Today, things are different, particularly in the nursing 11 profession where there are not enough nurses to meet the demand 12 for their services. 13 overtime to compensate for it precipitated the instant action. 14 The litigation before us was initiated in 1992 in the This shortage and the frequent resort to 15 United States District Court for the Southern District of New 16 York before Judge Louis L. Stanton by the Secretary of Labor 17 against defendants Gotham Registry, Inc. and its affiliate 18 Gotham Per Diem, Inc. 19 the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (FLSA or 20 Act), and resulted on June 6, 1994 in a consent judgment against 21 Gotham, requiring it to pay its nurses time and one-half wages 22 for overtime in compliance with the Act. 23 plaintiff Elaine L. Chao, the current Secretary of Labor 24 (Secretary or plaintiff), filed a petition for adjudication of 25 civil contempt against Gotham Registry, Inc. and its president, 26 Caroline Barrett (collectively, Gotham, employer or staffing Suit was brought under the provisions of 2 On December 29, 2004 1 agency), for their alleged failure to abide by the terms of the 2 consent judgment. 3 Gotham to pay back wages plus interest from January 1, 1999 4 through the present. 5 response and counterclaim to the petition denying any violation 6 of the consent decree and requesting the district court to 7 vacate the decree's injunctive provision because of changed 8 circumstances. 9 The Secretary sought an order requiring On January 19, 2005 Gotham filed a Judge Stanton, who had maintained jurisdiction over this 10 matter since its inception, conducted an evidentiary hearing on 11 March 20, 2006. 12 for judgment in its favor pursuant to Fed. R. Civ. P. 52(c). 13 Judge Stanton granted that motion from the bench and held Gotham 14 not in contempt of the consent judgment. 15 March 23, 2006 the district court denied the Secretary's 16 petition. At the close of plaintiff's case, Gotham moved From this order the Secretary appeals. 17 18 In an order entered BACKGROUND We turn to the facts. A typical Gotham placement begins 19 when one of its client hospitals requests a nurse to fill a 20 temporary vacancy or to support hospital personnel during a peak 21 period. 22 register, and the nurse who accepts the position reports 23 directly to the hospital. 24 out on daily time sheets, which are compiled and reviewed by the 25 hospital and forwarded to Gotham each week. 26 permitted to go on hospital premises to verify the nurse's hours Gotham then offers the assignment to a nurse on its The nurse is required to sign in and 3 Gotham is not 1 or otherwise supervise his or her performance. 2 pays Gotham an hourly fee multiplied by the number of hours 3 worked by the nurse and Gotham pays most of this money to the 4 nurse. 5 The hospital Until the early 1990s, Gotham did not pay its nurses 6 overtime wages for hours worked in excess of 40 hours in any 7 workweek because it viewed the nurses as independent 8 contractors. 9 enforcement action in 1992 against the staffing agency asserting After the Department of Labor commenced an 10 that its practice of paying nurses straight-time wages for 11 overtime hours violated the Act, Gotham consented to treat the 12 nurses on its register as employees for purposes of the Act. 13 Specifically, the 1994 consent judgment included a prospective 14 injunction requiring Gotham to comply with 29 U.S.C. § 207(a) by 15 paying its nurses time and one-half wages for time worked over 16 40 hours in any week. 17 As Gotham's clients do not pay Gotham a premium for 18 overtime hours in all cases, Gotham's promise to abide by the 19 Act quickly proved expensive. 20 the staffing agency adopted a policy designed to check 21 unauthorized overtime or, failing that, insulate itself from 22 claims for time and one-half compensation for unauthorized 23 hours. 24 completed by its nurses and reads: 25 advance and receive authorization from GOTHAM for any shift or 26 partial shift that will bring your total hours to more than 40 After seeking advice of counsel, Gotham's overtime policy is printed on the time sheets 4 "You must notify GOTHAM in 1 hours in any given week. 2 paid overtime rates for those hours." 3 If you fail to do so you will not be In the course of their assignments at client hospitals, 4 Gotham nurses are sometimes asked to work overtime by hospital 5 staff. 6 occasion contact Gotham first to request approval in compliance 7 with Gotham's rule. 8 nurse is guaranteed premium wages for any resulting overtime. 9 But three out of four approval requests are denied. Nurses who agree to work an unscheduled shift will on If Gotham authorizes an assignment, the At other 10 times, nurses accept unscheduled shifts without obtaining the 11 staffing agency's approval. 12 overtime for the preceding week, Gotham attempts to negotiate 13 with the hospital to procure an enhanced fee for the overtime 14 hours already worked. 15 percent of the time -- it pays the nurse time and one-half wages 16 for the unauthorized overtime hours. 17 receives straight-time wages for the extra hours worked. 18 When these nurses report their If Gotham succeeds -- as it does ten Otherwise, the nurse It is this scenario that gives rise to the Secretary's 19 contention that Gotham's overtime practices violate 29 U.S.C. 20 § 207(a) and, by extension, the 1994 consent judgment. 21 plaintiff's petition seeks back wages in excess of $100,000 plus 22 pre-judgment interest for the period from January 1999 through 23 June 2002 and calls for an accounting of Gotham's wage 24 obligations from 2002 to the present. 25 March 2006, Judge Stanton granted Gotham's motion for judgment 26 based on partial findings at the conclusion of the Secretary's 5 The After a one-day trial in 1 case. 2 contempt. 3 concerning record-keeping violations and Gotham's counterclaim 4 to dissolve the injunction, but neither of these latter two 5 rulings have been appealed. 6 He denied the Secretary's petition to hold defendants in The district court also denied the Secretary's claim The Secretary challenges that portion of the district 7 court's March 20, 2006 judgment that denies her petition for 8 civil contempt against Gotham. 9 unauthorized hours did not constitute work under the Act or, if That court believed the 10 these were working hours, the legal question was too much in 11 doubt to warrant civil contempt. 12 presents us with two questions: 13 overtime practices violate the Act; and second, if so, whether 14 the violation provides an adequate basis for civil contempt. On this appeal the Secretary first, whether Gotham's 15 We think the trial court erred in labeling the nurses' 16 overtime hours as anything other than work and answer the first 17 question in the affirmative. 18 acted on a reasonable interpretation of then unsettled law, we 19 answer the second question in the negative, and affirm the 20 district court's judgment on the alternative ground that the 21 Secretary did not meet her burden to prove contempt. 22 23 24 But because we believe Gotham DISCUSSION I Standard of Review We review the denial of a petition for civil contempt under 25 the abuse of discretion standard. 26 Labor, 47 F.3d 485, 490 (2d Cir. 1995). 6 Dunn v. N.Y. State Dep't of While we uphold the 1 district court's factual findings unless they are clearly 2 erroneous, the ultimate legal question of whether an employee is 3 entitled to overtime pay under the FLSA is subject to plenary 4 review. 5 U.S. 728, 743 (1981); Holzapfel v. Town of Newburgh, 145 F.3d 6 516, 521 (2d Cir. 1998). 7 principle of law relied on by the district court in making a 8 discretionary determination, we review de novo its choice and 9 interpretation of such principles. 10 380 F.3d 133, 137 (2d Cir. 2004). 11 12 See Barrentine v. Arkansas-Best Freight Sys., Inc., 450 II Further, where a party challenges a Scalisi v. Fund Asset Mgmt., Violation of the Act's Overtime Provisions Our first question is whether Gotham's failure to pay time 13 and one-half wages to its nurses for unauthorized overtime 14 violated the Act's overtime provisions. 15 "no employer shall employ any of his employees . . . for a 16 workweek longer than forty hours unless such employee receives 17 compensation for his employment in excess of the hours above 18 specified at a rate not less than one and one-half times the 19 regular rate at which he is employed." 20 The Act provides that 29 U.S.C. § 207(a)(1). "Employ" is defined in the Act as including "to suffer or 21 permit to work," 29 U.S.C. § 203(g), but Congress did not define 22 the word "work." 23 (2005). 24 cases describes work as exertion or loss of an employee's time 25 that is (1) controlled or required by an employer, (2) pursued 26 necessarily and primarily for the employer's benefit, and (3) if See IBP, Inc. v. Alvarez, 546 U.S. 21, 25 The broad meaning that has emerged from Supreme Court 7 1 performed outside the scheduled work time, an integral and 2 indispensable part of the employee's principal activities. 3 Holzapfel, 145 F.3d at 522; see Tenn. Coal, Iron & R.R. Co. v. 4 Muscoda Local No. 123, 321 U.S. 590, 598 (1944); see also Armour 5 & Co. v. Wantock, 323 U.S. 126, 133 (1944) (clarifying that 6 exertion is not required to satisfy definition of work); Steiner 7 v. Mitchell, 350 U.S. 247, 252-53 (1956) (addressing exertion 8 outside of scheduled working time). 9 The Supreme Court has explained that the Act's overtime 10 provisions were aimed not only at raising wages but also at 11 limiting hours. 12 572, 576-78 (1942). 13 designed to remedy the "evil of overwork" by ensuring workers 14 were adequately compensated for long hours, as well as by 15 applying financial pressure on employers to reduce overtime. 16 Id. at 577-78; see also United States v. Rosenwasser, 323 U.S. 17 360, 361 (1944). 18 humanitarian goals, the Supreme Court consistently has 19 interpreted the Act liberally and afforded its protections 20 exceptionally broad coverage. 21 Found. v. Sec'y of Labor, 471 U.S. 290, 296 (1985); Rosenwasser, 22 323 U.S. at 362, 363 & n.3; Tenn. Coal, 321 U.S. at 597 ("Such a 23 statute must not be interpreted or applied in a narrow, grudging 24 manner."). 25 A. Overnight Motor Transp. Co. v. Missel, 316 U.S. In other words, these provisions were In service of the statute's remedial and See, e.g., Tony & Susan Alamo The Unauthorized Overtime Is Work 8 1 Gotham argues it neither benefits from nor controls the 2 nurses' unauthorized overtime and, accordingly, such time does 3 not constitute work under the Tennessee Coal test (as extended 4 in subsequent cases and elaborated in Holzapfel). 5 321 U.S. at 598; Holzapfel, 145 F.3d at 522. 6 support for this proposition in the trial court's findings that 7 (1) Gotham lacks primary control over the nurses' performance of 8 unscheduled shifts; (2) the decision to engage in overtime is 9 made by nurses and hospitals acting in furtherance of their own 10 interests; (3) the income generated by these unauthorized hours 11 is offset by the administrative burdens of operating Gotham's 12 overtime arrangement; and (4) Gotham does not desire the 13 overtime to be performed. 14 these factual findings, the legal conclusion drawn from them -- 15 that the nurses' overtime is not work under the Act -- we think 16 is wrong. 17 Tenn. Coal, Gotham seeks Although we detect no clear error in Whether a nurse is working a morning, afternoon or night 18 shift in emergency care, an operating room, or on a hospital 19 floor, the overtime hours are indistinguishable from the 20 straight-time hours. 21 fungible. 22 at the hospitals' request, often continue doing the same kind of 23 work they were doing on their regular shifts. 24 we believe the district judge mischaracterized the Act when he 25 commented that the extra or overtime work is not "work" under 26 the statute. Such work from the nurses' standpoint is Work is work, after all. 9 Nurses who work overtime, In that respect 1 As a threshold matter, application of the Tennessee Coal 2 test to the facts of this case is something of a red herring. 3 Contrary to the district court's belief, the Supreme Court's 4 definition (with roots in Webster's Dictionary, see Tenn. Coal, 5 321 U.S. at 598 n.11) does not purport to establish a "special 6 meaning" for work, but simply to guide the courts in applying 7 the word as it is commonly used and understood, id. at 598. 8 Further, if an activity fails the Tennessee Coal test, we 9 understand that result to mean the activity is not work and is 10 not compensable. 11 of overtime at least entitled the nurses to compensation at a 12 regular rate of pay. 13 overtime belongs to a new category of exertion, call it quasi- 14 work, that was not contemplated by the drafters of the Act and 15 is subject to its own compensation rules. 16 Here, no party disputes that the performance What Gotham implies is that the nurses' Gotham conceded in the 1994 consent judgment and again in 17 its appellate brief that it "employs" its nurses for purposes of 18 the Act. 19 activities as work within the meaning of the Act follows from 20 this concession. 21 "employ" to include suffering or permitting work). 22 significant, therefore, that there seems to be no distinction 23 between the exertion of Gotham's nurses during unauthorized and 24 authorized hours. 25 Tennessee Coal test is applied to ascertain whether an activity 26 that is markedly different from an employee's primary activities The classification of the nurses' regularly scheduled See, e.g., 29 U.S.C. § 203(g) (defining It is In the typical case, by contrast, the 10 1 may yet qualify as work. See, e.g., Tenn. Coal, 321 U.S. at 592 2 (travel time to ore mines); Holzapfel, 145 F.3d at 519 (dog 3 grooming and care by K-9 police officers); Leone v. Mobil Oil 4 Corp., 523 F.2d 1153, 1154 (D.C. Cir. 1975) (accompaniment of 5 federal occupational safety investigators during plant 6 inspection). 7 Turning to the specific elements of the test for purposes 8 of the case at hand, the staffing agency's contention that the 9 overtime is not work because it does not benefit Gotham is 10 unpersuasive. It is plain that if Gotham were not bound to 11 comply with the Act and instead paid its nurses straight-time 12 wages for overtime without administrative inconvenience, all 13 hours clocked by the nurses would satisfy the benefit prong of 14 the Tennessee Coal test. 15 Gotham's benefit the costs of its attempted adherence to federal 16 law that the nurses' overtime ceases to benefit Gotham. 17 Gotham finds itself in a situation that we suppose quite common 18 in the business world in which the revenues gained from overtime 19 fall short of the costs incurred. 20 unprofitable labor is not work under the Act leads us to a 21 number of untenable conclusions; most pertinent here, an 22 employer would be permitted to avoid the Act whenever the 23 overtime provisions threaten success in achieving Congress' goal 24 of curtailing overtime by bringing its cost above its benefit to 25 the employer. It is only by subtracting from 11 Hence, Gotham's implication that 1 Gotham also insists that it lacks the degree of control 2 over the nurses' unauthorized shifts contemplated in the 3 definition of work. 4 permitted to supervise its nurses on hospital grounds at any 5 time, including regular scheduled shifts, and possesses no less 6 control over a nurse's activities during unauthorized shifts 7 than at other times. 8 by Gotham relates to the decision -- reached by the hospital and 9 nurse without Gotham's participation -- that unauthorized work We note, however, that Gotham is not The only discernible difference suggested 10 be performed. Gotham's limited control over a nurse's decision 11 to work overtime does not change the nature of the exertion that 12 follows and thus does not bear on whether such exertion is work. 13 Such circumstances may be relevant to the separate question 14 whether Gotham suffered or permitted such work, the inquiry to 15 which we now turn. 16 B. The Suffer or Permit Standard 17 Gotham is liable for the nurses' compensation for the 18 overtime hours only if it employed the nurses during this time, 19 that is, if it suffered or permitted the nurses to work. 20 U.S.C. § 203(g). 21 22 1. See 29 Gotham's Knowledge It is clear an employer's actual or imputed knowledge that 23 an employee is working is a necessary condition to finding the 24 employer suffers or permits that work. 25 145 F.3d at 524; Davis v. Food Lion, 792 F.2d 1274, 1276 (4th 26 Cir. 1986); Forrester v. Roth's I.G.A. Foodliner, Inc., 646 F.2d 12 See, e.g., Holzapfel, 1 413, 414 (9th Cir. 1981) (explaining that knowledge affords 2 employer the opportunity to comply with the Act). 3 Information that Gotham's nurses regularly worked overtime 4 was communicated to Gotham each week on the nurses' time sheets. 5 Gotham's insistence that it acquired its knowledge only after 6 the fact misses the point. 7 employer's knowledge need arise concurrently with the 8 performance of overtime, for good reason. 9 provisions apply to work performed off premises, outside of the 10 employer's view and sometimes at odd hours, where an employer's 11 concurrent knowledge of an employee's labor is not the norm. 12 See 29 C.F.R. § 785.12. 13 example, to require a K-9 officer to report to his supervisor 14 before and after grooming his dog. 15 524; see also Reich v. Dep't of Conservation & Natural Res., 28 16 F.3d 1076, 1079-80, 1084 (11th Cir. 1994) (requiring overtime be 17 paid to officers who worked in field and often at night with 18 infrequent contact with supervisors). 19 of concurrent knowledge would allow employers to escape their 20 obligations under the Act by purposefully eschewing knowledge as 21 to when such work was performed. 22 We have never suggested that an The Act's overtime It would appear impractical, for See Holzapfel, 145 F.3d at Moreover, a requirement We regard Gotham's knowledge as sufficient to afford it the 23 opportunity to comply with the Act. See Forrester, 646 F.2d at 24 414. 25 and who does not desire the work be done, has a duty to make 26 every effort to prevent its performance. An employer who has knowledge that an employee is working, 13 Reich v. Stewart, 121 1 F.3d 400, 407 (8th Cir. 1997); Forrester, 646 F.2d at 414 ("An 2 employer who is armed with this knowledge cannot stand idly by 3 and allow an employee to perform overtime work without proper 4 compensation . . . ."); Mumbower v. Callicott, 526 F.2d 1183, 5 1188 (8th Cir. 1975) ("The employer who wishes no such work to 6 be done has a duty to see it is not performed."); 29 C.F.R. 7 § 785.13. 8 requested the overtime be performed or does not desire the 9 employee to work, or where the employee fails to report his This duty arises even where the employer has not 10 overtime hours. 11 274 F.3d 706, 718 (2d Cir. 2001); Holzapfel, 145 F.3d at 524; 29 12 C.F.R. §§ 785.11-.12. 13 2. See Kosakow v. New Rochelle Radiology Assocs., Gotham's Rule Against Unauthorized Overtime 14 Gotham endeavored to reduce unwanted overtime by 15 promulgating a rule requiring its employees to obtain prior 16 approval for any work that would result in overtime and 17 informing them that, absent such approval, they would be paid 18 straight-time wages for the ensuing overtime. 19 with the Secretary's interpretation of Gotham's rule as one that 20 disclaims liability for unauthorized overtime without barring 21 its performance outright. 22 the rule serves as both a prohibition and a warning as to the 23 consequence of its violation. 24 We do not agree A straightforward reading indicates Whether Gotham's pre-approval rule satisfied its legal 25 obligation to prevent unwanted overtime involves a question of 26 first impression in this Circuit, complicated by Gotham's 14 1 limited control over the nurses. Our starting point is the 2 Department of Labor (Department) regulation addressing such 3 rules. 4 5 6 7 8 9 10 11 12 13 In all such cases it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. . . . The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so. 29 C.F.R. § 785.13 (emphasis added); accord Reich v. Dep't of 14 Conservation, 28 F.3d at 1084; Wirtz v. Bledsoe, 365 F.2d 277, 15 278 (10th Cir. 1966) ("It has long been established that the 16 purpose of the [FLSA] cannot be frustrated by an employer's 17 instructions or even a contract not to work overtime."). 18 Although courts are responsible for final decisions concerning 19 interpretation of the Act, see 29 C.F.R. § 785.2; A.B. 20 Kirschbaum Co. v. Walling, 316 U.S. 517, 523 (1942), the 21 Department's explanations bearing on the meaning of "suffer or 22 permit" and "work" in §§ 785.11-.13 are entitled to our respect. 23 Cf. Kavanagh v. Grand Union Co., 192 F.3d 269, 272 (2d Cir. 24 1999). 25 Department's expertise on interpretive questions that are 26 essential to the administration of the Act. 27 Walton, 535 U.S. 212, 222 (2002); Leary v. United States, 395 28 U.S. 6, 25 (1969). The long-standing regulations in Part 785 reflect the Cf. Barnhart v. 29 In Reich v. Dep't of Conservation, the Eleventh Circuit 30 adopted the position laid out in 29 C.F.R. § 785.13 and held 15 1 liable an employer that, like Gotham, had limited concurrent 2 control over its employees' work schedules. 3 The case involved a state agency charged with enforcing game and 4 fish laws, which employed enforcement officers posted throughout 5 the state. 6 answer citizen complaints around the clock, worked from home 7 under minimal supervision. 8 promulgated a rule forbidding officers to work more than 40 9 hours per week, but had actual and constructive knowledge that 10 some officers continued to work overtime without reporting the 11 extra hours. 12 the agency could not avoid overtime compensation simply by 13 adopting a policy against overtime and issuing periodic 14 warnings. 15 Id. at 1078. 28 F.3d at 1083-84. The officers, whose job it was to Id. at 1078-79. Id. at 1079-80. The state agency The Eleventh Circuit concluded Id. at 1084. Gotham's efforts to distinguish Reich v. Dep't of 16 Conservation do not convince us. The staffing agency points out 17 that the majority of employees involved in the Eleventh 18 Circuit's case were unable to perform their duties within a 40 19 hour workweek, id. at 1081 & n.12, while Gotham nurses can 20 fulfill their obligations -- at least to Gotham -- without 21 incurring overtime. 22 instead to follow Lindow v. United States, 738 F.2d 1057, 1061- 23 62 & n.3 (9th Cir. 1984), where the Ninth Circuit held an 24 employer may insulate itself from overtime claims by notifying 25 its employees that overtime is not expected, so long as the Given this difference, Gotham urges us 16 1 employees can complete their duties within regular hours and are 2 under no pressure to perform overtime. 3 In Lindow, employees of the Army Corps of Engineers were in 4 the habit of arriving fifteen minutes early to exchange 5 information with their colleagues working the earlier shift, 6 review the log book, drink coffee, and socialize. 7 1061. 8 working time. 9 informing its employees that they were not required to arrive Id. at 1059, A portion of this time was classified by the court as Id. at 1059-61. The Corps issued a letter 10 early, but some employees continued to do so. 11 The Ninth Circuit held that the letter relieved the Corps of 12 liability for overtime compensation because the Corps did not 13 require or pressure the employees to work overtime and the work 14 could have been performed during regular hours. 15 n.3. 16 Id. at 1060-61. Id. at 1061 & In the instant case, the district court found the 17 unauthorized shifts were controlled and required by the 18 hospitals and by the employees. 19 the nurses do not on occasion work overtime because they feel 20 unable to satisfactorily perform their duties to hospital 21 supervisors or patients within their scheduled hours. 22 plain that Lindow's rationale does not extend to employees whose 23 jobs require them on occasion to work beyond regular hours, 24 whether the requirement is enforced by the employer or inherent 25 in the nature of the work. It is not obvious to us that See id. 17 It is 1 Even setting aside this concern and assuming that the 2 nurses elect to work overtime without any compulsion to do so, 3 we decline to follow Lindow. 4 rejected the argument that an employer may avoid its obligations 5 under the Act upon proof that its employees voluntarily engage 6 in inadequately compensated work. 7 Found., 471 U.S. at 302 ("[T]he purposes of the Act require that 8 it be applied even to those who would decline its 9 protections."); Barrentine, 450 U.S. at 740. First, the Supreme Court has See Tony & Susan Alamo More generally, as 10 the Eleventh Circuit recognized in Reich v. Dep't of 11 Conservation, "[t]he reason an employee continues to work beyond 12 his shift is immaterial; if the employer knows or has reason to 13 believe that the employee continues to work, the additional 14 hours must be counted." 15 § 785.11). 16 employer has knowledge of a worker's overtime activities and 17 that those activities constitute work under the Act, liability 18 does not turn on whether the employee agreed to work overtime 19 voluntarily or under duress. 20 28 F.3d at 1082 (citing 29 C.F.R. In other words, once it is established that an Second, Lindow's holding was premised on the finding that 21 the duties carried out during overtime could have been completed 22 within the regular workday. 23 explained that this fact alone does not excuse an employer from 24 the FLSA's overtime provisions. 25 addition, the scenario presented to us differs from Lindow 26 inasmuch as the nurses who were asked to work overtime provided 738 F.2d at 1061. We previously Holzapfel, 145 F.3d at 522. 18 In 1 services in addition to those performed during their regular 2 hours and so by definition were unable to complete their work 3 within those regular hours. 4 provisions in this case would put to Gotham and its client 5 hospitals the choice to either pay a premium for overtime or 6 engage other nurses to provide the additional services. 7 choice -- which was not implicated in Lindow where the Corps 8 presumably could have barred overtime without altering its 9 demand for labor or budget -- plays an important role in the Application of the Act's overtime This 10 FLSA's incentive structure to reduce overtime, spread employment 11 and compensate workers for the burden of long hours. 12 Missel, 316 U.S. at 577-78. 13 See We are of course aware that the conditions prevailing in 14 the present market for nurses in the United States influence the 15 options open to Gotham and its client hospitals. 16 identified nothing in these conditions to recommend carving an 17 exception to the Act's overtime provisions, however, and will 18 not ask nurses to shoulder the burden of the nation's nursing 19 shortage by denying them their rights under the Act. 20 reading, the FLSA presumes that employers, not employees, are in 21 the best position to address the evils of overwork and underpay. 22 This presumption is no less true in the nursing profession than 23 in any other. 24 employees cannot waive the overtime protections granted them in 25 the FLSA without nullifying the Act's purposes and setting aside We have On our Finally, the Supreme Court instructs that 19 1 the legislative goals it wanted effectuated. 2 U.S. at 740. 3 4 3. Barrentine, 450 Gotham's Duty to Prevent Unwanted Overtime In an ordinary employer-employee relationship, management 5 is believed to have ready access to a panoply of practical 6 measures to induce compliance with its formal rule against 7 overtime. 8 who is armed with knowledge has the power to prevent work it 9 does not wish performed. In such cases, a presumption arises that an employer Where this presumption holds, an 10 employer who knows of an employee's work may be held to suffer 11 or permit that work. 12 why several cases and Department regulations seem to treat an 13 employer's knowledge as not only necessary, but also sufficient, 14 to establish its liability under the Act. 15 §§ 785.11-.12; Holzapfel, 145 F.3d at 524; Doe v. United States, 16 372 F.3d 1347, 1360-61 (Fed. Cir. 2004) (collecting cases). 17 We suppose that this presumption explains See, e.g., 29 C.F.R. Gotham seeks to rebut this presumption on the basis that 18 its power to control the nurses is severely constrained by the 19 nature of its business and the labor market in which it deals. 20 Gotham portrays its role as nothing more than an employment 21 agency matching the requirements of hospitals with the 22 qualifications of nurses and maintains that it has no ability to 23 control nurses who violate its rule. 24 We recognize that Gotham does not have at its disposal all 25 the instruments of control available to ordinary employers. 26 That said, the law does not require Gotham to follow any 20 1 particular course to forestall unwanted work, but instead to 2 adopt all possible measures to achieve the desired result. 3 28 C.F.R. § 785.13. 4 every effort to prevent the nurses' unauthorized overtime: 5 example, it did not explain why it could not keep a daily, 6 unverified tally of its nurses' hours and reassign shifts later 7 in the week that would result in overtime; or refuse to assign 8 any shifts to nurses who habitually disregard Gotham's overtime 9 rule. See Gotham has not persuaded us that it made for Notably, Gotham admitted at trial that a nurse who 10 disregards its pre-approval rule faces no adverse consequences 11 beyond straight-time wages for the ensuing overtime, while one 12 who disregards Gotham's other policies is subject to contractual 13 penalties. 14 overtime, it could discipline nurses who violate the rule. 15 could also entirely disavow overtime hours, announcing a policy 16 that it does not, under any circumstances, employ a nurse for 17 more than 40 hours in a week. 18 not be billed to the hospital and would not result in any 19 compensation for the nurse (as opposed to the current policy of 20 regular pay). 21 advance with the hospitals to charge a higher fee when nurses 22 are working overtime, thus shifting the decision to those best 23 placed to judge when overtime is cost-effective and avoiding the 24 need for an anti-overtime policy to begin with. 25 26 If Gotham were serious about preventing unauthorized It Any hours over the limit would Alternatively, Gotham could simply contract in We confess we are skeptical whether an employer with full knowledge respecting the activities of its employees ever lacks 21 1 power, at the end of the day, to require those it retains to 2 comply with company rules that implicate federal law. 3 any event has not overcome the presumption here that it 4 possessed such power. 5 permitted the nurses' overtime and, by failing to compensate 6 them in accordance with 29 U.S.C. § 207(a), violated the Act and 7 the 1994 consent judgment. 8 III 9 Gotham in It follows that Gotham suffered or Denial of Petition for Contempt Affirmed We turn now to whether that violation subjects Gotham to 10 being held in contempt. A federal court has the authority to 11 punish contempt of a consent decree. 12 Bhd. of Teamsters, 899 F.2d 143, 146 (2d Cir. 1990). 13 the judicial power of contempt is circumscribed and "[t]he 14 failure to meet the strict requirements of an order does not 15 necessarily subject a party to a holding of contempt." 16 F.3d at 490. 17 plaintiff establishes (1) the decree was clear and unambiguous, 18 and (2) the proof of non-compliance is clear and convincing. 19 Id. 20 plaintiff must also prove that (3) the defendant has not been 21 reasonably diligent and energetic in attempting to comply. 22 of New York v. Local 28, Sheet Metal Workers' Int'l Ass'n, 170 23 F.3d 279, 283 (2d Cir. 1999); Dunn, 47 F.3d at 490; see also 24 Levin v. Tiber Holding Corp., 277 F.3d 243, 250 (2d Cir. 2002) 25 (noting plaintiff's burden of proof). 26 the district court's determination that the unauthorized work United States v. Int'l However, Dunn, 47 A party may be held in civil contempt only where a Although the defendant's conduct need not be willful, a 22 City While we disagreed with 1 was not compensable as overtime, we now affirm its alternative 2 holding that the Secretary did not carry her burden to prove 3 contempt. 4 A. The Decree Was Ambiguous with Respect to Gotham's Conduct 5 The Supreme Court has cautioned that contempt is a powerful 6 weapon under any circumstance and, when founded on a decree that 7 the defendant could not comprehend, it can be a ruinous one. 8 Int'l Longshoremen's Ass'n v. Phil. Marine Trade Ass'n, 389 U.S. 9 64, 76 (1967). To ensure fair notice to the defendant, the 10 decree underlying contempt must be sufficiently clear to allow 11 the party to whom it is addressed to ascertain precisely what it 12 can and cannot do. 13 1058 (2d Cir. 1995); N.Y. State Nat'l Org. for Women v. Terry, 14 886 F.2d 1339, 1351-52 (2d Cir. 1989); see also Fed. R. Civ. P. 15 65(d) (requiring injunctive orders to be "specific in terms" and 16 "describe in reasonable detail . . . the act or acts sought to 17 be restrained"); Phil. Marine, 389 U.S. at 74-76 (reversing 18 contempt based on injunctive decree that did not satisfy the 19 specificity and clarity requirements set forth in Rule 65); 20 Int'l Bhd. of Teamsters, 899 F.2d at 146. 21 King v. Allied Vision Ltd., 65 F.3d 1051, We agree with the Secretary that the incorporation into the 22 consent judgment of certain provisions of the FLSA does not, by 23 itself, render the decree ambiguous. 24 Paper Co., 336 U.S. 187, 191-92 (1949). 25 clarity, however, is not whether the decree is clear in some 26 general sense, but whether it unambiguously proscribes the 23 McComb v. Jacksonville The proper measure of 1 challenged conduct. Perez v. Dansbury Hosp., 347 F.3d 419, 424 2 (2d Cir. 2003). 3 relied on by the party seeking contempt is ambiguous in its 4 application to the challenged conduct, contempt will not lie. 5 See, e.g., Rajah Auto Supply Co. v. Grossman, 207 F. 84 (2d Cir. 6 1913) (per curiam) (affirming denial of contempt motion where 7 plaintiff's case was too doubtful on the facts and the law to 8 warrant contempt); United States ex rel. IRS v. Norton, 717 F.2d 9 767, 774 (3d Cir. 1983) ("[A]ny ambiguity in the law should be If, as we believe to be the case here, the law 10 resolved in favor of the party charged with contempt."); Project 11 B.A.S.I.C. v. Kemp, 947 F.2d 11, 16 (1st Cir. 1991) (stating 12 prudential rule that ambiguities in court orders should be read 13 in light favorable to party charged with contempt); cf. Vertex 14 Distrib. v. Falcon Foam Plastics, Inc., 689 F.2d 885, 889 (9th 15 Cir. 1982) (explaining that party should not be held in contempt 16 if his actions appear based on a good faith and reasonable 17 interpretation of the order). 18 It should be apparent that the novel question addressed 19 above, whether employees must be paid overtime wages for work 20 that their employer has prohibited and does not desire, was not 21 the subject of an obvious answer. 22 Secretary brought its petition for contempt to the district 23 court, there was a substantial question as to the legality of 24 Gotham's overtime arrangement and "fair ground of doubt as to 25 the wrongfulness of the defendant's conduct." 24 On the contrary, when the Cal. Artificial 1 Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885); King, 65 2 F.3d at 1058. 3 From another angle, it seems unreasonable that Gotham be 4 required, on pain of contempt, to arrive at a correct answer to 5 such a difficult question of first impression. 6 of Am. v. Cable Radio Tube Corp., 66 F.2d 778, 782-83 (2d Cir. 7 1933) (noting potential unfairness to defendant where contempt 8 proceedings used to resolve substantial dispute); United States 9 v. Acetturo, 842 F.2d 1408, 1416 n.4 (3d Cir. 1988) (suggesting See Radio Corp. 10 trial court consider relief from contempt in circumstances of 11 case of first impression). 12 Formula Int'l, Inc., 594 F. Supp. 617, 623 (C.D. Cal. 1984) 13 (issuing contempt order despite novel nature of underlying legal 14 issue after finding defendant's alleged interpretation was a 15 "mere pretext" to avoid an injunction). 16 17 B. But cf. Apple Computer, Inc. v. Gotham Was Reasonably Diligent in Attempting to Comply Additionally, Gotham's efforts to comply with the consent 18 judgment were adequate to warrant relief from contempt. We have 19 noted already that the staffing agency's legal obligations were 20 difficult to discern and its managerial role vis-à -vis the 21 nurses made compliance more challenging than would be the case 22 in an ordinary employment context. 23 (affirming trial court's denial of petition for contempt where 24 situation faced by defendant was complex and largely outside its 25 control). 26 counsel before adopting its overtime policy; it made its nurses See Dunn, 47 F.3d at 490 Against that backdrop, Gotham sought the advice of 25 1 aware of the rule; it discouraged its nurses from accepting 2 overtime shifts without seeking prior approval and discouraged 3 its clients from offering those shifts; and, when its 4 instructions were disregarded, it negotiated with the hospitals 5 to procure an overtime premium retrospectively. 6 steps did not exhaust all means available to Gotham to ensure 7 that overtime was not performed (and thus were inadequate to 8 satisfy the strict standards for compliance with the Act), they 9 are evidence of Gotham's diligent and energetic efforts to 10 11 While these comply in a reasonable manner with the 1994 consent judgment. Consequently, we conclude the district court acted within 12 its discretion in declining to impose contempt under a decree 13 that did not, at the relevant time, unambiguously proscribe 14 Gotham's actions and, one, moreover, with which the employer 15 attempted to comply in a reasonable manner. 16 CONCLUSION 17 For these reasons, the judgment of the district court 18 denying the Secretary's petition for civil contempt is affirmed. 19 20 21 22 23 24 25 26 26 1 DENNIS JACOBS, Chief Judge, concurring in part and 2 concurring in the judgment: 3 4 The district court entered a consent decree requiring 5 Gotham Registry, a staffing agency for healthcare 6 professionals, to comply with the overtime requirements of 7 the Fair Labor Standards Act ( FLSA ) for nurses it 8 employ[s]. 9 whether we should affirm the ruling by the district court, The only question presented on this appeal is 10 which is presumed to know its own injunction, that Gotham is 11 not in contempt. 12 Tax Svcs., Inc., 359 F.3d 699, 705 (4th Cir. 2004). 13 See JTH Tax, Inc. v. H & R Block Eastern The majority agrees that Gotham is not in contempt. I 14 concur in that result, because it is obvious to me that 15 Gotham was not in violation of the FLSA when it refused to 16 pay overtime to employees whom it forbid to work overtime, 17 and (when they violated their employer s instructions) were 18 not acting as employees under the relevant Tennessee Coal 19 test. 20 that Gotham s practice violates the FLSA--though Gotham 21 could not be expected to know this until so advised by the 22 majority s ambitious, consequential and dubious rulings. 23 24 I cannot sign the majority opinion because it holds The correct test for whether Gotham must pay overtime is set out in Tennessee Coal: whether the work was 27 1 controlled or required by the employer and pursued 2 necessarily and primarily for the benefit of the employer 3 and his business. 4 Local No. 123, 321 U.S. 590, 598 (1944). 5 recites the test, duly records the district court s findings 6 as to each prong, and concedes that we detect no clear 7 error in these factual findings . . . . 8 supra. 9 transcend the question presented and gratuitously answer an Tenn. Coal, Iron & RR. Co. v. Muscoda The majority Maj. Op. at 9, It would seem that if this Court were going to 10 underlying question (Were the nurses acting as employees 11 when they did what the employer forbid?), it might content 12 itself with the formulation of the Supreme Court and 13 findings of an experienced district judge. 14 justification offered by the majority opinion is that 15 application of the Tennessee Coal test to the facts of this 16 case is something of a red herring. 17 I do not find this ichthyological approach useful. 18 The Maj. Op. at 10, supra. Tennessee Coal prescribes a two-part definition of 19 work under the FLSA: an employee s efforts (1) must be 20 controlled or required by the employer and (2) pursued 21 necessarily and primarily for the benefit of the employer 22 and his business. 23 added). Tenn. Coal, 321 U.S. at 598 (emphasis 28 1 As to control: the district court found that Gotham 2 lacked control over the nurses performance of unscheduled 3 shifts, that nurses and hospitals decide whether overtime 4 will be performed based on their own interests, and that 5 Gotham does not desire the performance of overtime. 6 Though conceding that a nurse s decision to work overtime is 7 unauthorized work that is reached by the hospital and 8 nurse without Gotham s participation, Maj. Op. at 12, 9 supra, the majority argues that such limited control [sic] Q.E.D. 10 . . . does not change the nature of the exertion that 11 follows and thus does not bear on whether such exertion is 12 work. 13 because the necessary analytical tools are readily available 14 in Tennessee Coal and in Labor Department regulations. Id. This is an extreme simplification -and useless, 15 The applicable regulation requires that an employer 16 exercise its control and see that the work is not performed 17 if it does not want it to be performed : 18 promulgation of a rule against such work is not enough. 19 C.F.R. § 785.13. 20 Gotham s preauthorization rule bars the performance of 21 unauthorized overtime and refuses compensation at overtime 22 rates for such unauthorized hours. 23 insufficient unless it is applied and enforced. 24 has enforced this rule conscientiously, as the findings of [t]he mere 29 To this we owe Chevron deference. 29 Of course a rule is But Gotham 1 the district court confirm: 75 percent of preauthorization 2 requests are turned down, and unauthorized overtime shifts 3 are reimbursed at the overtime rate only on the rare 4 occasions (about ten percent of the time) when Gotham 5 persuades the hospital to agree retroactively to an overtime 6 rate. 7 measures. 8 nurses are professionals in great demand who can (and often 9 do) work for multiple staffing agencies: Gotham should not be pressed to more oppressive Suspension would be ineffective because the there are at least 10 25 in competition with Gotham in the New York area alone. 11 Gotham should not be required to rely on undercover agents 12 to obtain advance knowledge of an unauthorized overtime 13 shift, or on enforcers to drag nurses from the bedside of 14 the sick. 15 Cir. 1986) (holding that if required work could be performed 16 within 40 hours, and if the employer enforced its 40-hour 17 rule, employer lacked actual or constructive knowledge of 18 the overtime work). 19 therefore neither controlled nor required by Gotham. See Davis v. Food Lion, 792 F.2d 1274, 1277 (4th The nurses overtime efforts are 20 As to the second Tennessee Coal consideration--whether 21 the activity is pursued necessarily and primarily for the 22 employer s benefit--the Secretary has demonstrated no error 23 in the trial court s finding that the additional shifts do 24 not necessarily benefit Gotham. 30 The district court found 1 that the documented administrative costs alone would wipe 2 out any remaining profit if Gotham were to pay an overtime 3 rate on shifts reimbursed at a straight-time rate. 4 finding is amply supported by the record: 5 testified that unauthorized overtime triggers additional 6 costs such as time spent tracking, confirming, and 7 negotiating rates for overtime hours with hospitals. 8 wonder Gotham forbids overtime. 9 shifts are pursued necessarily and primarily for Gotham s 10 11 This Gotham s CEO No It cannot be said that such benefit. Under Tennessee Coal, the shifts in question were not 12 performed in Gotham s employ within the meaning of the 13 FLSA, and Gotham therefore did not violate the consent 14 decree. 15 under Tennessee Coal, the majority announces the tautology 16 that [w]ork is work, after all. 17 In lieu of undertaking the prescribed analysis Maj. Op. at 9, supra. The majority complains that Gotham has not persuaded 18 us that it made every effort to prevent the nurses 19 unauthorized overtime, Maj. Op. at 21, supra (emphasis 20 added), and goes on to speculate as to how Gotham might 21 (within the law) effectively stop it. 22 majority cites Gotham s supposed failure to explain (though 23 never asked) why it could not keep a daily, unverified 24 tally of its nurses hours and reassign shifts later in the 31 For example, the 1 week that would result in overtime. Maj. Op. at 20, supra. 2 I do not understand this formulation and I would be 3 surprised if Gotham or the nurses did. 4 majority ignores the fact that nurses often work for more 5 than one agency. 6 supposed failure to explain why it does not refuse to 7 assign any shifts to nurses who habitually disregard 8 Gotham s overtime rule. 9 words, Gotham could fire them. Moreover, the The majority also taxes Gotham for its Maj. Op. at 20, supra. Perhaps: In other maybe an employer 10 can discipline an employee for habitually staying in the 11 operating room or on a ward. 12 know, and the reason I don t know is because this argument 13 has not been made to us and has not been briefed by the 14 parties and input has not been solicited from the members of 15 the nursing profession who have the largest stake in this 16 question. 17 know either, for the same reasons. 18 I say maybe because I don t I am compelled to add that the majority does not The majority next posits that Gotham could simply 19 contract in advance with the hospitals to charge a higher 20 fee when nurses are working overtime. 21 supra. 22 what happens when a nurse working for Gotham works at more 23 than one hospital or when a nurse works at one or more 24 hospitals for multiple agencies. Maj. Op. at 21, That of course begs the (not simple ) question of 32 1 Finally, the majority opinion says that an agency can 2 entirely disavow overtime hours, announcing a policy that 3 it does not, under any circumstances, employ a nurse for 4 more than 40 hours in a week. 5 the majority holds that an employer can enforce its overtime 6 restriction by paying the employee nothing at all for such 7 hours. 8 problem and ensure that a staffing agency can comply with 9 the labor laws (at least those applicable in the Second That may be. Maj. Op. at 21, supra. Thus And this certainly will solve Gotham s 10 Circuit) and avoid contempt. But this holding may come as a 11 surprise to the Secretary of Labor. 12 the position of every party; as the majority concedes, no 13 party disputes that the performance of overtime entitled the 14 nurses to compensation at the regular rate of pay at least. 15 Maj. Op. at 10, supra. 16 appellate panel should affirm the denial of contempt without 17 reaching and deciding large underlying questions of labor 18 law. 19 dollars per overtime hour worked. 20 member I am drawn into a critique of the majority s 21 unnecessary analysis, I would not decide that question on 22 this appeal because we lack the benefit of input from the 23 parties (and amici) and we lack findings by a district judge 24 made on the basis of a developed record. And it runs counter to My strong view is that this Maybe a staffing agency can and should pay nurses zero 33 But though as a panel- 1 The majority opinion affirms the denial of the contempt 2 motion, on the ground of the then unsettled law prevailing 3 when Judge Stanton made his ruling. 4 I agree that the law was then unsettled (though I think it 5 is little good we have now done in that department). 6 obvious that the agency system in which Gotham and many 7 nurses operate is a preferred market mechanism of a 8 profession whose services are much in demand. 9 has upended the way in which many nurses elect to make a Maj. Op. at 6, supra. It is The majority 10 living. Nurses evidently have the bargaining power to sell 11 their services to individual hospitals without becoming 12 employees, without joining unions, and without submitting 13 themselves to the work schedules of wage slaves. 14 nurses use agencies to create for themselves the freedom and 15 profit opportunities available to other professionals whose 16 services are in great demand. 17 unsettles these market arrangements. In short, The majority opinion 34
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