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Demos v. City of Indianapolis

August 30, 2002


Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 99-C-22--Sarah Evans Barker, Judge.

Before Rovner, Diane P. Wood, and Williams, Circuit Judges.

The opinion of the court was delivered by: Williams, Circuit Judge.


Plaintiffs Alan L. Demos and Ronald Graham brought suit against the City of Indianapolis and Mayor Bart Peterson (collectively "the City"), seeking unpaid overtime pay and vacation time credits allegedly due them under the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 ("the FLSA" or "the Act"). The plaintiffs claim that because the City's policies required that their pay be docked if they failed to work an eight-hour day, they were not salaried employees under the Act. Rejecting these arguments, the district court granted summary judgment to the City, holding that plaintiffs were salaried executive or administrative employees exempt from the FLSA, *fn1 and as government employees were subject to the Department of Labor's public accountability exception to its no-docking rule. We agree with the district court and affirm the judgment below.


This dispute began almost a decade ago, when the City of Indianapolis elected Mayor Stephen Goldsmith. *fn2 Goldsmith made aggressive changes to staffing and managing City government by eliminating employee positions in several of the City's major agencies and departments. In conjunction with these changes, employees classified as exempt from the Act were instructed to record no more than eight hours per day and forty hours per week in their time records--no matter the hours actually worked beyond that amount. Select salaried supervisors received additional pay for working extra hours; however, other salaried supervisors, including the plaintiffs, did not receive that additional pay. The City also implemented a policy of docking salaried employees if they worked less than a forty-hour week or less than eight hours per day. Under the City's policy, if an employee had a partial day absence, accrued benefit leave would have to cover that absence, or pay would be docked from the weekly salary.

As a result of reduced staffing by the City, Demos and Graham claim that they were required to routinely work more than forty hours per week and their supervisory duties "gradually diminished." Plaintiffs filed this action claiming that they were no longer exempt employees, and the City's failure to pay them overtime violated the Act. After significant discovery and motion practice, the City moved for summary judgment.

Initially, the district court granted summary judgment in part to the City, but found that it failed to provide sufficient undisputed facts regarding whether its employees were paid pursuant to principles of public accountability--and therefore whether it was permitted to dock a salaried employee's pay for time not worked. Demos v. City of Indianapolis, 126 F. Supp. 2d 548 (S.D. Ind. 2000). The district court later reconsidered and found that although the City initially failed to prove that it was entitled to the public accountability exception, the court could take judicial notice of various Indiana laws that, coupled with the previously admitted and undisputed evidence, demonstrated that the City proved that it was publicly accountable. *fn3 Demos and Graham appeal.


We review the district court's grant of summary judgment de novo. See Albiero v. City of Kankakee, 246 F.3d 927, 931-32 (7th Cir. 2001). When reviewing cases decided on summary judgment, we construe all facts and draw all reasonable inferences in the light most favorable to the nonmoving party--in this case the plaintiffs. See id. Applying these principles, we must decide whether the district court properly determined that: (1) notwithstanding its policy of docking employees for partial-day absences, the City meets the salary basis test because it pays its employees pursuant to principles of "public accountability" and (2) plaintiffs performed executive or administrative duties as defined by the regulations.

Pursuant to the FLSA, employees must be paid at least one and one-half the amount of their regular wages for work beyond forty hours per week or eight hours per day. Persons who are employed "in a bona fide executive, administrative, or professional capacity," however, are exempt from the Act's overtime provisions. 29 U.S.C. § 213(a)(1); see also 29 U.S.C. § 207(a)(1). The City claims that Demos and Graham are exempt under the Act, pursuant to a three-part regulation-based analysis commonly referred to as the "short test." See 29 C.F.R. §§ 541.119, 541.214, 541.315.

The short test has three elements: (a) the salary basis test, (b) the employee's classification as professional, administrative, or executive, and (c) the employee's duties test. See 29 C.F.R. §§ 541.1, 541.118; see also 29 C.F.R. §§ 541.2, 541.3. The plaintiffs claim that the City failed to prove each prong of the short test.

A. The Salary Basis Test

Under the short test's first prong, the City is required to prove that Demos and Graham were paid on a salary basis. Because Demos and Graham were paid more than $250 per week, the City must show that each plaintiff's salary was also: (a) a pre-determined amount constituting all or part of his compensation and (b) not subject to reduction because of variations or quantity of the work performed. See 29 C.F.R. ยง 541.118(a). The City bears the burden of proof here because the FLSA "is a remedial act and exemptions from its coverage are to be narrowly construed against employers." Klein ...

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