Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 86 C 1607 -- James B. Zagel, Judge.
Coffey, Easterbrook, and Kanne, Circuit Judges.
In Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528, 554, 105 S. Ct. 1005, 1019, 83 L. Ed. 2d 1016 (1985), the Supreme Court overruled National League of Cities v. Usery, 426 U.S. 833, 96 S. Ct. 2465, 49 L. Ed. 2d 245 (1976)*fn1 and held that the minimum wage and overtime provisions of the Fair Labor Standards Act ("FLSA") applied to all state and municipal employees including those performing services classified as traditional government functions. Public entities providing schools, hospitals, fire prevention, police protection, sanitation, public health, and parks and recreation were no longer exempt from FLSA liability. To ameliorate the financial transition caused by Garcia, Congress enacted the Fair Labor Standards Act Amendments of 1985. The 1985 Amendments expressly eliminated retroactive liability for functions categorized as "traditional." The 1985 Amendments also provided a one-year grace period during which the states and their political subdivisions could not be held liable for minimum wage and overtime compensation violations by employees newly brought under the protection of those provisions of the Act by reason of the Garcia decision.
On February 14, 1986, Dorothy Bester representing a class of Chicago Transit Authority ("CTA") employees filed a cause of action against the CTA seeking to recover unpaid wages and unpaid overtime compensation. Specifically, the complaint alleged that CTA's repeated failure to compensate employees at a rate of time and one-half for all hours over 40 hours per week during the years of 1983 through 1986 violated the minimum wage and overtime pay provisions of the Fair Labor Standards Act.
The Chicago Transit Authority is a statutorily created, tax-exempt municipal corporation which operates a public mass transit system in the City of Chicago. The CTA moved for summary judgment arguing under the 1985 Amendments that it was a governmental entity entitled to immunity from FLSA liability for any alleged violation occurring before April 15, 1986.
Applying the test announced in National League of Cities, the district court held that neither the CTA's historical development nor the general industry history qualified the CTA for the exemption from liability under the minimum wage and overtime provisions of the FLSA. The district judge denied the CTA's motion for summary judgment and held, as a matter of law, that the operation of mass transit by the CTA was not a traditional government function. 676 F. Supp. 833. Upon the CTA's request and pursuant to 28 U.S.C. § 1292(b), Judge Zagel certified the issue raised in the summary judgment order for interlocutory review and we accepted the appeal.*fn2
We agree with the district court that the correct legal analysis in this case is the traditional government function test*fn3 and, we find that the CTA does not perform a traditional government function. Therefore the CTA is subject to Sections 203 and 213(b)(7) of the FLSA.
We begin our analysis with an examination of the provisions added to the Fair Labor Standards Act by the 1985 Amendments and the regulatory scheme under which the Act is applied.
Section 2(c)(1) of the 1985 Amendments dealing with liability and deferred payment states:
No State, political subdivision of a State, or interstate governmental agency shall be liable under section 16 of the Fair Labor Standards Act of 1938 [29 U.S.C. § 216] for a violation of section 6 . . ., 7 . . . of such Act [29 U.S.C. §§ 206 and 207] occurring before April 15, 1986, with respect to any employee of the State, political subdivision, or agency who would not have been covered by such Act under the Secretary of Labor's special enforcement policy on January 1, 1985, and published in sections 775.2 and 775.4 of title 29 of the Code of Federal Regulations.
Fair Labor Standards Amendments of 1985, Pub.L. No. 99-150, Sec. 2(c)(1), 99 Stat. 788-89 (1985) (amending 29 U.S.C. § 216) (set out as a note under 29 U.S.C. § 216 (supp. 1989)) (emphasis supplied). Sections 775.2 and 775.4 referred to in the 1985 Amendments were an attempt by the Labor Department to clarify what functions of state and local government fell under the "traditional government function" rubric for the purpose of determining FLSA liability. The ...