United States District Court, M.D. Pennsylvania
R. ALEXANDER ACOSTA,  Plaintiff,
BRISTOL EXCAVATING, INC., et al., Defendants.
KAROLINE MEHALCHICK, UNITED STATES MAGISTRATE JUDGE.
of the three pending motions for summary judgment requires
the Court to determine whether an employer must include
bonuses accrued by employees in the regular rate of pay for
work the employees performed for a third-party, where the
third-party set the standards for earning the bonus, and paid
the bonus to the employer, who then paid the employees. In an
apparent matter of first impression, the Court finds that
bonuses originating from and determined exclusively by a
third-party must be included in the regular rate of pay of an
employee, where the employer sacrifices discretion over fact
and amount and agrees to pay bonuses designed to incentivize
employees into working harder. Accordingly, Plaintiff's
motion for summary judgment (Doc. 19) is
GRANTED, and Defendants' motions for
summary judgment (Doc. 22; Doc. 23) are DENIED.
Bristol Excavating, Inc. is an excavation contractor,
incorporated and engaging in business in the Commonwealth of
Pennsylvania. Defendant Calvin Bristol is the owner and sole
shareholder of Bristol Excavating. Bristol Excavating entered
into a master service agreement with Talisman Energy Inc.
(“Talisman”), whereupon Bristol Excavating would
provide “mix off” services at Talisman's
drilling sites, to be rendered by Bristol employees.
point around when Bristol employees began work at Talisman
sites, the employees learned of a Talisman bonus program
after discussions with non-Bristol employees. Talisman had a
bonus program available to workers at its drilling sites,
offering bonuses earned based on safety, efficiency, and
completion of work. Bristol's employees spoke with
Krystle Bristol, then business manager of Bristol Excavating,
and she spoke with Talisman about the bonus program and the
requirements for Bristol employees to participate. Per her
discussions with Talisman, Krystle Bristol learned that mix
off operators were indeed eligible for the Talisman bonus
employees were then informed of the three available bonuses.
The safety bonus was attained if there were no accidents or
injuries during the job. The AFE bonus was attained for
completing a hole faster than Talisman expected. The
pacesetter bonus was attained also for efficiency, with the
government describing the requirement as drilling a hole
“faster than a specified amount of time” and
Bristol characterizing the criteria as “drilling deeper
on any given day than Talisman had anticipated.” (Doc.
19-1, ¶ 17; Doc. 22-2, ¶ 29). Mix off operators
knew the terms for earning each bonus.
retained sole discretion in determining whether or not the
requirements for a bonus had been met. Once Talisman
determined a particular bonus was earned, Talisman would
email Bristol, who would then issue an invoice to Talisman
for the amount of the bonus. Talisman would approve the
amount cited on the invoice, and Bristol issued payment.
Bristol also deducted taxes and fees prior to issuing a check
to the employees. This check was issued separately from
employee paychecks. Upon Krystle Bristol's departure,
this process was outsourced to the accounting firm LaBarr
& LaBarr, who continued issuing a separate check for the
bonuses and not including the amount in the calculation of
the employee's regular rate of pay. Over the course of
this working relationship, Talisman changed the amount of the
bonus at its leisure. At no point did the contract between
the two include a provision on the bonuses.
22, 2016, then-acting Secretary of Labor Thomas E. Perez
brought this suit against Bristol Excavating and Calvin
Bristol. (Doc. 1). In the complaint, the Secretary argued
that Defendants' failure to include the bonus payments in
the employees' regular rate of pay violated the Fair
Labor Standards Act of 1938, codified at 29 U.S.C. §
201, et seq. (Doc. 1). The Secretary sought back
wage compensation for each of the harmed employees and
liquidated damages in an amount equal to the amount of back
wages. (Doc. 1). Defendants answered on September 20, 2016,
arguing that they did not have to include the bonuses in the
regular rate of pay for overtime purposes because the bonuses
were “discretionary gifts” from a customer and
remuneration promised by Bristol. (Doc. 5; Doc. 6).
parties consented to proceed before the undersigned on
November 7, 2016. On March 24, 2017, the parties filed their
respective motions for summary judgment, reinforcing their
positions on interpreting § 207 under the facts
presented. (Doc. 19; Doc. 22; Doc. 23). The parties
participated in oral argument in support of their motions on
August 14, 2017. Fully briefed, the motions are now ripe for
Standard of Review
Rule 56 of the Federal Rules of Civil Procedure, summary
judgment should be granted only if “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a). A
fact is “material” only if it might affect the
outcome of the case. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A dispute of material
fact is “genuine” only if the evidence “is
such that a reasonable jury could return a verdict for the
non-moving party.” Anderson, 477 U.S. at 248.
In deciding a summary judgment motion, all inferences
“should be drawn in the light most favorable to the
non-moving party, and where the non-moving party's
evidence contradicts the movant's, then the
non-movant's must be taken as true.” Pastore v.
Bell Tel. Co. of Pa., 24 F.3d 508, 512 (3d Cir. 1994).
federal court should grant summary judgment “if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a
matter of law.” Farrell v. Planters Lifesavers
Co., 206 F.3d 271, 278 (3d Cir. 2000). In making this
determination, “a court must view the facts in the
light most favorable to the nonmoving party and draw all
inferences in that party's favor.” Armbruster
v. Unisys Corp., 32 F.3d 768, 777 (3d Cir. 1994). The
Court need not accept mere conclusory allegations, whether
they are made in the complaint or a sworn statement.
Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871,
888 (1990). In deciding a motion for summary judgment, the
court's function is not to make credibility
determinations, weigh evidence, or draw inferences from the
facts. Anderson, 477 U.S. at 249. Rather, the court
must simply “determine whether there is a genuine issue
for trial.” Anderson, 477 U.S. at 249.
touched upon above, the key dispute is how the bonus
arrangement between Bristol, Bristol's employees, and
Talisman fits under § 207 of the Fair Labor
Standards Act. Namely, the dispute centers upon whether
these bonuses should have been included in the regular rate
of pay of Bristol's employees, thus increasing the total
compensation owed for overtime. Under § 207(a)(1):
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).
term “regular rate” is defined as “all
remuneration for employment paid to, or on behalf of, the
employee, ” with eight enumerated exceptions. 29 U.S.C.
§ 207(e). These exceptions are narrowly construed and
the employer bears the burden of establishing the
applicability of an exception. Minizza v. Stone Container
Corp. Corrugated Container Div. E. Plant., 842 F.2d
1426, 1459 (3d Cir. 1988) (citations omitted). Three of these
exceptions have been discussed either in briefs or at oral
argument: bonus payments as gifts; payments made for
occasional periods when no work is performed; and payments
paid for services, without prior agreement, where
discretionary payment in fact and amount is retained by the
employer. See U.S.C. §§ 207(e)(1)-(3). Incentive
bonuses are generally considered part of an employee's
regular rate for overtime purposes. See Walling
v. Harnischfeger Corp., 325 U.S. 427, 431 (1945).
Applicability of § 207(e) Exceptions
rate” for the purposes of calculating overtime is not
all-inclusive. Regular rate is not deemed to include:
“sums paid as gifts…;” or “payments
made for occasional periods when no work is
performed[.]” 29 U.S.C. § 207(e)(1)-(2). Both of
these arguments have been touched upon in the ...