Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division.
No. IP 91-785-C Sarah Evans Barker, Chief Judge.
Before CUMMINGS, COFFEY, and DIANE P. WOOD, Circuit Judges.
DIANE P. WOOD, Circuit Judge.
In Auer v. Robbins, 117 S.Ct. 905 (1997), the Supreme Court upheld the Secretary of Labor's "salary basis" test for determining an employee's exempt status from the overtime requirements of the Fair Labor Standards Act 9 (FLSA), 29 U.S.C. sec. 201 et seq., as it applied to public-sector employees. In so doing, the Court applied the interpretative principles of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), to the questions before it. Our case presents slightly different questions about the applicability of the "salary basis" test to public employees, but we conclude that it is governed by Auer. This means that plaintiff David Bowman was not exempt from the FLSA during the time he worked as an officer for the Indianapolis Police Department. We therefore reverse the district court's holding that Bowman was not entitled to overtime pay under the FLSA.
Bowman became a member of the Police Department in October 1963. By the time the FLSA became applicable to public employees, as a result of the Supreme Court's decision in Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 (1985), he had risen to the rank of field lieutenant; he later became a field captain. In response to Garcia, on April 17, 1986, the Police Department issued General Order 20.03, which proclaimed that "[i]n accordance with their job duties, employees in the ranks of sergeant, lieutenant, and captain are exempt from coverage under the FLSA as executives or administrators, as those terms are defined under the Act." The consequence of this order for Bowman and the other listed officers was that they received no overtime compensation for hours worked beyond the normal 40-hour work week. Bowman alleged, and the Police Department does not contest at this point, that he regularly worked more than 40 hours each week with the full knowledge of his superiors.
Since 1972, Bowman had also moonlighted as an executive security officer. Prior to January 1988, this had not caused any problems, but in that month Bowman's supervisor initiated an internal affairs investigation to see if Bowman was working on that job during hours when he was being paid to work for the Police Department. In response to the inquiry, Bowman argued that his pay could not legally be based on which particular hours he worked, because he had been classified as an "executive or administrative" employee and he was, under the General Order, an exempt employee for FLSA purposes. The Police Department was unconvinced. At the conclusion of the investigation in March 1988, it suspended Bowman without pay for six months for neglect of duty, substandard performance, and violation of rules and regulations. Bowman alleges that he was never advised of any such deficiencies in his work: the Department never told him what duty he had neglected, there was no "performance standard," and no one told him until his later trial that he had violated the General Order quoted above.
Not content with the suspension, the Police Department also referred its concerns to the county prosecutor, who indicted Bowman for theft, attempted theft, and official misconduct. The criminal charges alleged that Bowman had been working as a security provider at the same time that he had been claiming and receiving compensation from the Police Department. Less than a month after his indictment, Bowman completed his six-month suspension and returned to work. He was reassigned to the position of coordinator at the Municipal Garage, where he worked from September 1988 until he left the Police Department a little less than a year later. On July 18, 1989, he was convicted of one count of theft and four counts of official misconduct. See generally Bowman v. State, 573 N.E.2d 910 (Ind. Ct. App. 1991). His resignation followed within a month.
In July 1991, Bowman filed suit against the City of Indianapolis, its mayor, and various members of the Police Department (collectively, the City). His complaint, as amended, alleged that he was not an exempt employee under the FLSA and that he was therefore entitled to overtime compensation. The complaint also charged that the City and the police chief had committed fraud by misrepresenting to him that he was an exempt employee. Had that misrepresentation not been made, he claimed, he would not have taken the outside work that led to both the administrative and the criminal proceedings against him.
Both parties moved for summary judgment, and on November 22, 1994, the district court issued its first opinion. It looked first to the regulations issued by the Department of Labor to decide whether Bowman was exempt. The FLSA itself says that individuals are exempt if they are employed in a "bona fide executive, administrative, or professional capacity . . . as such terms are defined and delimited from time to time by regulations of the Secretary . . . ." 29 U.S.C. sec. 213(a)(1). Under the regulations the Department has passed, an employee must satisfy both a "duties test" and a "salary test" in order to be considered exempt from the overtime requirements. See generally 29 C.F.R. sec. 541.1 et seq. For the time period that remains at issue in the case-- from April 1986 until Bowman's assignment to the Municipal Garage in September 1988--the district court found that it was undisputed that Bowman's position satisfied the "duties test." Bowman v. City of Indianapolis, 885 F. Supp. 1152, 1155 (S.D. Ind. 1994) (Bowman I). (Indeed, that remains uncontested to this day, and we therefore do not mention it further in this opinion.) The court also found that, if it were to apply the salary test, Bowman would qualify as a non-exempt employee. Id. at 1156. Because it concluded that the salary test was inapplicable to public sector employees, however, the court ultimately granted the City's motion for summary judgment on Bowman's remaining FLSA claims. Id. at 1157. It also granted summary judgment for the City on his fraud claim, on the ground that any misrepresentation that might have occurred was one of law. Id. at 1159. The court found that the statements (about his exempt status) alleged to be misrepresentations were not necessarily false, and that in any event misrepresentations of law are generally not actionable in Indiana. Id. at 1158-59.
After this court decided in Mueller v. Reich, 54 F.3d 438 (7th Cir. 1995), that the regulation establishing the salary test "is valid, period" in the context of a public employee case, id. at 442, Bowman moved for reconsideration. Recognizing its obligation to follow Mueller, the district court vacated its partial summary judgment for the City. Bowman v. City of Indianapolis, 892 F. Supp. 212, 213 (S.D. Ind. 1995) (Bowman II). This was not, however, the end of the pretrial maneuvers. Bowman filed another "limited" motion for reconsideration, and the City filed an "amended" second motion for summary judgment. The court denied Bowman's motion as moot, but it once again granted the City's motion. It rejected the City's argument that the salary basis regulation was invalid as an unwarranted invasion of state sovereignty under Article IV, sec. 4 of the U.S. Constitution (the Guarantee Clause), and the argument that it violated the Commerce Clause. Nonetheless, the court found that the regulation was arbitrary and capricious, as the Administrative Procedure Act, 5 U.S.C. sec. 706(2)(A), uses the term. It conceded ...