## Facts

- The City of Columbia, Missouri employed firefighters and offered multiple pay-related programs, including a sick-leave buy-back program.
- Under the sick-leave buy-back program, firefighters with at least six months of accumulated sick leave could sell back up to 10 unused sick days per year for 75% of their regular hourly pay.
- The City excluded sick-leave buy-back payments from the “regular rate of pay” used to calculate overtime under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 207.
- Firefighters sued alleging the City violated the FLSA by failing to include certain payments in the regular rate, using an incorrect overtime hours ratio, and willfully violating the FLSA.
- While partial summary judgment was pending, the parties settled some pay-program disputes and the City revised its overtime hours-ratio policy.
- The district court held sick-leave buy-back payments must be included in the regular rate, held meal-allowance payments were excluded, and found no willful violation.
- After stipulated dismissals and entry of final judgment, the City appealed only the ruling requiring inclusion of sick-leave buy-back payments in the regular rate.

## Issues

1. Whether sick-leave buy-back payments must be included in the FLSA “regular rate” for overtime calculations or are excluded under 29 U.S.C. § 207(e).
2. Whether such payments qualify as excludable payments for “occasional periods when no work is performed” under § 207(e)(2).
3. Whether such payments qualify as excludable “discretionary bonuses” under § 207(e)(3).

## Decision

- The Eighth Circuit affirmed the judgment requiring inclusion of sick-leave buy-back payments in the regular rate.
- The court held the City failed to carry its burden to show a statutory exclusion applied.
- The court rejected characterization of the payments as § 207(e)(2) payments for time not worked because the payments were tied to non-use of sick leave and continued service.
- The court rejected characterization of the payments as § 207(e)(3) discretionary bonuses because the program was objective, formula-based, and non-discretionary.

## Legal Principles

- The FLSA “regular rate” generally includes all remuneration for employment; statutory exclusions in § 207(e) are limited and construed narrowly against the employer.
- Payments that reward non-use of leave and are triggered by continued employment and meeting objective thresholds are remuneration for employment, not payments for occasional periods of no work under § 207(e)(2).
- A payment is not a discretionary bonus under § 207(e)(3) when employees become entitled to it upon satisfying objective criteria and the amount is set by a formula.

## Conclusion

Because the sick-leave buy-back program provided predictable, formula-based compensation conditioned on continued service and non-use of leave, the payments were remuneration for employment and had to be included in the firefighters’ regular rate when computing FLSA overtime.


Acton v. City of Columbia, 436 F.3d 969 (8th Cir. 2006)