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BRENNAN v. NEW JERSEY

October 1, 1973

Peter J. Brennan, Secretary of Labor, Successor to James D. Hodgson, United States Department of Labor, Plaintiff,
v.
State Of New Jersey et al., Defendants


Barlow, D.J.


The opinion of the court was delivered by: BARLOW

This proceeding is brought by the Secretary of Labor pursuant to the provisions of § 17 of the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.A. § 217 (1961) (hereinafter referred to as the Act, or FLSA), wherein the Secretary seeks to enjoin violations of §§ 206, 207, and 215(a) (2) of the FLSA. There being no disputed issue of fact between the parties with regard to the alleged violations of § 207 of the Act, this case comes before the Court on partial cross-motions for summary judgment. Fed. R. Civ. P. 56.

 Defendants are the State of New Jersey and those State Hospitals named in the complaint. While states are normally exempt under the FLSA, such exemption was removed under the 1966 Amendments to the FLSA with respect to state employees in schools, hospitals and institutions. 29 U.S.C.A. S 203 (d).

 Pursuant to N.J.S.A. 52:14-17.13, *fn1" the State of New Jersey, through the defendant hospitals, has compensated hospital employees working overtime by means of a plan of compensatory time-off. Under this plan, employees are granted one and one-half hours compensatory time-off for every one hour of overtime worked. While such compensatory time-off may, if possible, be taken during the same week when earned, in practice the demands of these institutions make it impossible for employees to do so. Indeed, the State of New Jersey concedes that it is a practical impossibility for these hospitals to give compensatory time-off in the week in which it is earned without threatening the quality of medical and health services.

 The present dispute centers around the alleged failure of the defendants to comply with the provisions of § 7 of the FLSA regarding overtime compensation. Section 7 of the Act, in pertinent parts, provides as follows:

 Plaintiff argues that the defendants' practice of allowing employees to take compensatory time-off for overtime hours, as opposed to promptly paying their employees for overtime hours in cash, is violative of § 7 of the FLSA. We agree with the plaintiff.

 The Administrator of the Wage and Hour Division of the United States Department of Labor has issued two Opinion Letters interpreting § 7 of the Act. Opinion Letter No. 913 (December 27, 1968) states:

 
"An employer may not credit an employee with compensatory time (even at a time and one-half rate) for overtime earned which is to be taken at some mutually agreed upon later date subsequent to the end of the pay period in which the overtime was earned, rather than pay cash for the overtime as it is earned."

 The same interpretation is given by the Administrator in Opinion Letter No. 868 (October 18, 1968). Such administrative interpretations are to be given considerable weight in construing federal legislative acts. Idaho Sheet Metal Works v. Wirtz, 383 U.S. 190, 205, 15 L. Ed. 2d 694, 86 S. Ct. 737 (1966), reh. den., 383 U.S. 963, 86 S. Ct. 1219, 16 L. Ed. 2d 305 (1966).

 Section 531.27 of the Secretary of Labor's determinations and interpretations under the FLSA clearly states that overtime compensation is to be paid in cash or negotiable instruments payable at par. 29 C.F.R. 531.27 (1972). The only exception to the payment of cash overtime is set forth in § 3(m) of the Act, wherein the statute allows the employer to include "board, lodging, or other facilities" in computing the wage to be paid. 29 U.S.C.A. § 203(m). The term "other facilities" was not meant to include compensatory time. In Shultz v. Hinojosa, 432 F.2d 259, 267 (5th Cir. 1970), the Court held that the term "other facilities" should "be considered as being in pari materia with the preceding words 'board and lodging.'" Furthermore, the Department of Labor's interpretations define "other facilities" as "something like board or lodging ", and proceed to list examples such as meals, housing, tuition payments, merchandise available at company stores, fuel and transportation. 29 C.F.R. 531.32 (1972).

 In his Opinion Letter No. 913 (December 27, 1968), the Wage-Hour Administrator makes reference to what appears to be the sole exception to the general rule against the use of compensatory time:

 
"However, it is permissible for the employer employing one at a fixed salary for a fixed work-week to lay off the employee a sufficient number of hours during some other week or weeks of the pay period to offset the amount of overtime worked (i.e. at the time and one-half rate) so that the desired wage or salary for the pay period covers the total amount of compensation including overtime." (Emphasis added.)

 In fact, this is not really an exception to the rule of § 7 of the Act, but is in complete compliance therewith. For example, given a pay period of two weeks, with a fixed salary of $200.00 per week and a fixed workweek of forty hours, an employee works for fifty hours during the first week of the pay period. Under the above Opinion Letter, the employee may then work only twenty-five hours in the second week of the pay period (forty hours less time and one-half for the ten hours accrued overtime) while receiving his full gross pay of $400.00 at the end of the two-week pay ...


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