Balgowan v. State of NJ Dept of Transportation , 115 F.3d 214 ( 1997 )


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  •                                                                                                                            Opinions of the United
    1997 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    6-9-1997
    Balgowan v. State of NJ Dept of Transportation
    Precedential or Non-Precedential:
    Docket 95-5276
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    Recommended Citation
    "Balgowan v. State of NJ Dept of Transportation" (1997). 1997 Decisions. Paper 123.
    http://digitalcommons.law.villanova.edu/thirdcircuit_1997/123
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    Filed June 9, 1997
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    No. 95-5276
    RICHARD M. BALGOWAN; THOMAS M. BATZ; THOMAS
    BETTEN; KARL L. BLUM; RAYMOND A. BURROUGHS;
    DENNIS CARLSON; JOHN I. CORBO; MICHAEL D.
    CRONIN; STEFFAN FRANKLIN; HERMAN J. KRIEG;
    JOSEPH J. LAGULLO; CHESTER J. LYSZCZEK;
    ALBERT M. MALATESTA; ARAM MARDEKIAN; IKE
    MARDEKIAN; WILLIAM L. MUNCZINSKI; ALAN S. NASS;
    THOMAS M. NORRIS; MALCOLM J. PALMER; JOHN C.
    POWERS; FRANCIS F. REALINI; CARL G. REBBECK;
    STANLEY F. RIPISH; EMIL H. ROESSLER; WAYNE A.
    RUMSEY; RICHARD F. SPOERL; LAWRENCE A. SROKA;
    JOHN W. STULTS; ROBERT L. SWAIN; DENNIS R.
    SYMONS; JOHN B. TAYLOR, JR.; CHARLES A.
    TERRITO, JR.; PETER W. TOMORY; ALFRED T.
    WOODROW; DANIEL YACOVINO; CHARLES W. YOUNG;
    RICHARD ZOLNOWSKI
    Appellants
    v.
    STATE OF NEW JERSEY,
    DEPARTMENT OF TRANSPORTATION
    On Appeal from the United States District Court
    for the District of New Jersey
    (D.C. No. 93-cv-02209)
    Argued January 22, 1996
    (Opinion Filed: May 16, 1996;
    Petition for Panel Rehearing Granted;
    Opinion Vacated July 9, 1996)
    Submitted: July 9, 1996
    BEFORE: STAPLETON, COWEN and GARTH
    Circuit Judges
    (Filed June 9, 1997)
    Steven P. Weissman
    Weissman & Mintz
    One Executive Drive
    Suite 200
    Somerset, New Jersey 08873
    COUNSEL FOR APPELLANTS
    Steven Sutkin
    Office of New Jersey Attorney
    General
    Division of Law/Transportation
    Richard J. Hughes Justice Complex
    Trenton, New Jersey 08608
    COUNSEL FOR APPELLEE
    OPINION OF THE COURT
    COWEN, Circuit Judge.
    Plaintiff-appellants, thirty-six project engineers and one
    supervising engineer (DOT engineers), filed this lawsuit
    against the State of New Jersey, Department of
    Transportation (State), in the United States District Court
    for the District of New Jersey. The lawsuit seeks overtime
    compensation under the Fair Labor Standards Act of 1938
    (FLSA), 
    29 U.S.C. § 201
     et seq. (1978). The DOT engineers
    alleged that the State violated the FLSA by failing to pay
    them "time and a half" for time worked in excess of 40
    hours per week. The State responded that the DOT
    engineers are exempt professionals under the "salary-basis"
    test,1 promulgated by the United States Department of
    _________________________________________________________________
    1. An exempt professional under the salary-basis test is an employee
    who is, in effect, an executive who is salaried and does not perform work
    on an hourly basis. A non-exempt individual performs work on an hourly
    basis and therefore qualifies for overtime compensation.
    2
    Labor (DOL) and codified at 
    29 C.F.R. § 541.118
    , as
    amended by 
    29 C.F.R. § 541
    .5d (1996). The DOT engineers
    replied that because their wages are subject to reduction
    under the DOT's disciplinary policy, they are hourly
    workers and are not exempt under the DOL regulations.
    The district court granted the State's motion for summary
    judgment and dismissed the DOT engineers' complaint. It
    held that the "salary-basis" test is not applicable to public
    employees such as the DOT engineers and, even if it were
    applicable, the engineers are exempt because the DOT has
    never actually deducted pay under its disciplinary policy.
    The DOT engineers appealed, and on May 16, 1996, we
    affirmed in part, reversed in part, and remanded the case
    with instructions to enter summary judgment in favor of
    the DOT engineers awarding back-pay for overtime for the
    period commencing September 6, 1991. We held that the
    "salary-basis" test, as amended in September 1991, applies
    to the DOT engineers. However, we further held that the
    DOT engineers fail to satisfy the "salary-basis" test because
    the DOT's disciplinary policy subjects them to reductions in
    pay for non-safety related infractions.
    On March 27, 1996, the United States Supreme Court
    issued an opinion that abruptly changed the law regarding
    Eleventh Amendment immunity. See Seminole Tribe of
    Florida v. Florida, 
    116 S.Ct. 1114
     (1996). Prior to Seminole,
    the Supreme Court had held that Congress could abrogate
    Eleventh Amendment immunity, subjecting states to private
    causes of action. See Pennsylvania v. Union Gas Co., 
    491 U.S. 1
    , 
    109 S.Ct. 2273
     (1989). Seminole overruled Union
    Gas and held that the Commerce Clause did not invest
    Congress with the authority to waive states' Eleventh
    Amendment immunity and to create private causes of
    action against states that had not consented to such suits.
    
    116 S.Ct. at 1127-28, 1131-32
    .
    The State filed a petition for rehearing, relying in part on
    the Supreme Court's Seminole decision. By order dated July
    9, 1996, we granted the State's petition for panel rehearing
    and vacated our May 16, 1996 opinion. See Balgowan v.
    State of New Jersey, Dept. of Transp., 
    84 F.3d 667
     (3d Cir.
    1996). We ordered rebriefing by the parties, addressing,
    3
    among other issues, the State's claim that the Supreme
    Court's decision in Seminole divested us of jurisdiction. On
    September 23, 1996, the DOT engineers filed their opening
    brief, and on November 22, 1996, the State filed its
    responsive brief. The DOT engineers filed their reply brief
    on December 31, 1996. On that same day the DOT
    engineers filed a motion to amend their complaint in order
    to add the DOT Commissioner as a defendant, and to
    include a claim for prospective declaratory and injunctive
    relief. The State objected to any such amendment.
    I.
    We first address the DOT engineers' motion to amend.
    Federal Rule of Civil Procedure 21 provides that "[p]arties
    may be dropped or added by order of the court on motion
    of any party or of its own initiative at any stage of the
    action and on such terms as are just." FED . R. CIV. P. 21.
    "Although the Federal Rules of Civil Procedure strictly apply
    only in the district courts, [FED. R. CIV. P. 1], the policies
    informing Rule 21 may apply equally to the courts of
    appeals." Newman-Green, Inc. v. Alfonzo-Larrain, 
    490 U.S. 826
    , 832, 
    109 S.Ct. 2218
    , 2223 (1989). Rule 21 and an
    appellate power that "long predates the enactment of the
    Federal Rules" have been relied upon by appellate courts to
    both dismiss and add parties in order to maintain
    jurisdiction and standing. 
    Id. at 834
    , 109 S.Ct. at 2223
    (allowing dismissal of non-diverse party on appeal); see also
    Mullaney v. Anderson, 
    342 U.S. 415
    , 416-17, 
    72 S.Ct. 428
    ,
    429-30 (1952) (avoiding union's standing issue by granting
    motion to add two of its members as parties on appeal);
    Bhatla v. U.S. Capital Corp., 
    990 F.2d 780
    , 786 (3d Cir.
    1993) (exercising court's discretion to dismiss action versus
    non-diverse dispensable party so that case could proceed).
    Resort to Rule 21 is appropriate where "requiring dismissal
    after years of litigation would impose unnecessary and
    wasteful burdens on the parties, judges, and other litigants
    waiting for judicial attention." Newman-Green, 
    490 U.S. at 836
    , 109 S.Ct. at 2225 (citing Mullaney, 
    342 U.S. at 417
    ,
    
    72 S.Ct. at 430
    ).
    The State argues that we should deny the DOT engineers'
    motion to amend the complaint because the engineers
    4
    "waited seven months before presenting their motion."
    Appellee Br. in Opp'n. to Mot. to Amend Compl. at 11. It
    also claims that there is a lack of "express statutory
    authority to amend in the appellate court [and a]
    constitutional and statutory bar on the DOT engineer[s']
    proposed claims for prospective declaratory and injunctive
    relief." Id. at 13. In light of the Federal Rules of Civil
    Procedure, the relevant case law, the unexpected turn in
    the law as a result of Seminole, and the availability of
    declaratory relief, we do not find the State's arguments
    persuasive.
    First, as we have previously stated, FED. R. CIV. P. 21
    provides that plaintiffs may be permitted to add parties at
    any stage of the action, including in the court of appeals.
    FED. R. CIV. P. 21. See also Newman-Green, 
    490 U.S. at 832-33
    , 109 S.Ct. at 2222; Bhatla, 
    990 F.2d at 786
    .
    Second, given the change in the law effected by Seminole,
    we would be hard-pressed to fault the engineers for not
    having moved to amend the complaint sooner. Third, the
    State has not identified any prejudice to it resulting from
    the delay. See Newman-Green, 
    490 U.S. at 838
    , 109 S.Ct.
    at 2225-26. Finally, as will be discussed below, the DOT
    engineers are not precluded from seeking prospective
    declaratory relief. See Ex Parte Young, 
    209 U.S. 123
    , 
    28 S.Ct. 441
     (1908). See also Laskaris v. Thornburgh, 
    661 F.2d 23
    , 26 (3d Cir. 1981); Berman Enters., Inc. v. Jorling, 
    3 F.3d 602
    , 606-07 (2d Cir. 1993). Therefore, we grant the DOT
    engineers' motion to amend the complaint.
    II.
    Now that we have permitted the DOT engineers' to amend
    their complaint, we must determine whether we have
    jurisdiction to address their claims. Under the teachings of
    Seminole, we do not have jurisdiction over the DOT
    engineers' claim against the State for monetary relief.
    Seminole, 
    116 S.Ct. at 1127-28
    . However, by allowing the
    DOT engineers to amend their complaint naming the DOT
    Commissioner as an additional party and adding a claim
    for prospective declaratory relief, we may retain jurisdiction
    under the doctrine of Ex Parte Young, 
    209 U.S. 123
    , 
    128 S.Ct. 441
     (1908). In Ex Parte Young, the Supreme Court
    5
    carved out an exception to Eleventh Amendment immunity
    by permitting citizens to sue state officials when the
    litigation seeks only prospective injunctive relief in order to
    end continuing violations of federal law. 
    Id.
     The Ex Parte
    Young exception has been interpreted by courts to allow
    suits against state officials for both prospective injunctive
    and declaratory relief. See, e.g., Laskaris, 
    661 F.2d at 26
    ;
    Berman, 
    3 F.3d at 606-07
    ; Roller v. Cavanaugh, 
    984 F.2d 120
    , 122 (4th Cir. 1993). Although Ex Parte Young's exact
    wording allows suits for prospective injunctive relief, the
    1908 opinion was issued well before declaratory relief was
    available. See Steffel v. Thompson, 
    415 U.S. 452
    , 466, 
    94 S.Ct. 1209
    , 1219 (1974) (In 1934 Congress enacted the
    Declaratory Judgment Act, 
    28 U.S.C. §§ 2201-2202
    , in
    order "to provide a milder alternative to the injunction
    remedy.") (quoting Perez v. Ledesma, 
    401 U.S. 82
    , 111, 
    91 S.Ct. 674
    , 690 (1971) (Brennan, J. concurring in part and
    dissenting in part)).
    Only the Secretary of Labor may initiate an action for
    injunctive relief under the FLSA. See 
    29 U.S.C. § 211
    (a)
    ("Except as provided in section 212 of this title[child labor
    provisions], the Administrator [Secretary of Labor]2 shall
    bring all actions under section 217 of this title to restrain
    violations of this chapter."); see also Lorillard v. Pons, 
    434 U.S. 575
    , 581, 
    98 S.Ct. 866
    , 870 (1978); Bowe v. Judson C.
    Burns, Inc., 
    137 F.2d 37
    , 39 (3d Cir. 1943); Barrentine v.
    Arkansas-Best Freight Sys., Inc., 
    750 F.2d 47
    , 51 (8th Cir.
    1984). Since the Secretary of Labor is the only party
    permitted to seek injunctive relief under the FLSA, and the
    Secretary is not a party to this action, injunctive relief is
    not available to the plaintiffs. However, private actions
    brought by employees for declaratory relief are permissible.
    See, e.g., Johns v. Stewart, 
    57 F.3d 1544
    , 1556 (10th Cir.
    1995); Biggs v. Wilson, 
    828 F. Supp. 774
    , 779 (E.D. Ca.
    1991), aff 'd, 
    1 F.3d 1537
     (9th Cir. 1993). Therefore, we
    find that we have jurisdiction to reach the merits of the
    _________________________________________________________________
    2. The functions of the Administrator of the Wage and Hour Division of
    the Department of Labor, under the Act, were transferred to the
    Secretary of Labor pursuant to the Reorganization Plan No. 6 of 1950,
    § 1, eff. May 24, 1950, 15 Fed.Reg. 3174, 
    64 Stat. 1263
    , as amended
    Pub.L. 99-619, § 2(c)(1), Nov. 6, 1986, 
    100 Stat. 3491
    .
    6
    case and consider whether we can grant declaratory relief
    to the plaintiffs.
    III.
    Having determined that the DOT engineers can amend
    their complaint and that we can properly consider
    declaratory relief, we now turn to the merits of the case. On
    this rehearing, we reconsider the legal issue of whether the
    DOT engineers are exempt from the overtime provisions of
    the FLSA. We reexamine this issue in view of a recently
    decided Supreme Court case, Auer v. Robbins, 
    117 S.Ct. 905
     (1997). Auer, like the instant case, involves the
    application of the FLSA professional exemption and the
    Department of Labor's "salary-basis" test. The factual
    situation in Auer is almost identical to the facts in the case
    at bar. In Auer, police sergeants and lieutenants employed
    by the City of St. Louis contended that they are "hourly"
    employees under the DOL's "salary-basis" test because
    their compensation is subject to deductions for disciplinary
    violations. They argued that they are "subject to" such
    deductions because "the Police Manual nominally subjects
    all department employees to a range of disciplinary
    sanctions that includes disciplinary deductions in pay, and
    because a single sergeant was actually subjected to a
    disciplinary deduction." 
    Id. at 910
    .
    The primary issue considered by the Supreme Court in
    Auer was "whether. . . an employee's pay is ``subject to'
    disciplinary or other deductions whenever there exists a
    theoretical possibility of such deductions, or rather only
    when there is something more to suggest that the employee
    is actually vulnerable to having his pay reduced." 
    Id.
     Before
    reaching this issue, however, the Court addressed the
    police officers' claim that "the ``no disciplinary deductions'
    element of the salary-basis test is invalid for public-sector
    employees." 
    Id. at 909
    . It noted that "[t]he Secretary's view
    that public employers are not so differently situated with
    regard to disciplining their employees as to require
    wholesale revision of his time-tested rule simply cannot be
    said to be unreasonable." 
    Id.
     The Court further held that
    the officers' "complaints about the [Secretary of Labor's]
    7
    failure to amend the disciplinary-deduction rule cannot be
    raised in the first instance in the present suit." 
    Id. at 910
    .
    Following the Supreme Court's decision in Auer, we must
    sustain the Secretary of Labor's view and find that the "no
    disciplinary deductions" element of the "salary-basis" test is
    not invalid for public-sector employees. Also following Auer,
    we will not permit the engineers to raise here for the first
    time a claim that the Secretary of Labor has failed to
    amend the disciplinary-deduction rule in violation of the
    Administrative Procedure Act (APA), 
    5 U.S.C. § 706
    (2)(A)
    (1996).
    We now turn to the main issue in the case. In Auer, the
    Supreme Court deferred to the Secretary of Labor's
    interpretation of the disciplinary component of the "salary-
    basis" test. The Court held that the police officers were
    exempt from the overtime provisions. The Secretary of
    Labor's interpretation, adopted by the Supreme Court,
    states that exempt status will be denied only "when
    employees are covered by a policy that permits disciplinary
    or other deduction in pay ``as a practical matter.' " 
    Id. at 911
    . The interpretation by the Secretary of Labor further
    provides that the "standard is met . . . if there is either an
    actual practice of making such deduction or an
    employment policy that creates a ``significant likelihood' of
    such deductions." 
    Id.
     Finally, there must be "a clear and
    particularized policy -- one which ``effectively
    communicates' that deductions will be made in specified
    circumstances." 
    Id.
    In Auer, the Court found that because the Police Manual
    nominally covered all department employees, it did not:
    "effectively communicate" that pay deductions are an
    anticipated form of punishment for employees in[the
    police sergeants and lieutenants'] category . . .. If the
    statement of available penalties applied solely to[the
    sergeants and lieutenants], matters would be different;
    but since it applies both to [them] and to employees
    who are unquestionably not paid on a salary basis, the
    expressed availability of disciplinary deductions may
    have reference only to the latter.
    8
    
    Id.
     (emphasis omitted). The fact that one sergeant was
    actually subjected to a disciplinary deduction did not alter
    the Court's analysis.
    Based on Auer, we conclude that the engineers in this
    matter qualify for the professional exemption under the
    FLSA. They are not realistically "subject to" reductions in
    their pay. At the DOT, there is neither an actual practice of
    making deductions, nor is there an "employment policy that
    creates a ``significant likelihood' of such deductions" as
    required by the Supreme Court in Auer. 
    Id.
    The disciplinary policy in this case, like that in Auer,
    applies to all DOT employees, not just the DOT engineers.
    Pursuant to Auer, such a broad-based policy fails to
    " ``effectively communicate' that pay deductions are an
    anticipated form of punishment" for the DOT engineers. 
    Id.
    Furthermore, the DOT's nonenforcement of its disciplinary
    policy and the fact that no engineer has ever suffered a
    reduction in pay under the policy, provide even stronger
    evidence that the DOT's disciplinary policy is not one under
    which there is a "significant likelihood" of deductions.
    As a final note, the Supreme Court in Auer stated that
    the salary test's "window of corrections," 
    29 C.F.R. § 541.118
    (a)(6), is available to preserve the exempt status of
    employees who have been subjected to pay deductions
    inconsistent with the salary-basis test. The Court
    emphasized that the employer could reimburse employees
    not only if the deductions were "inadverten[t]", but also if
    they were "made for reasons other than lack of work." Auer,
    
    117 S.Ct. at 912
     (quoting 
    29 C.F.R. § 541.118
    (a)(6)
    (alteration added)). Accordingly, if any DOT engineer's pay
    had been docked, the "window of corrections" exemption
    could have been used by the State to preserve that
    engineer's exempt status.
    IV.
    We hold that the DOT engineers can amend their
    complaint to name the DOT Commissioner as an additional
    party and add a claim for prospective declaratory relief. We
    further hold that we have jurisdiction to reach the merits of
    the case and consider declaratory relief. Even though we
    9
    allowed an amendment to the complaint and would
    normally order service to be made upon the DOT
    Commissioner, because the engineers cannot succeed on
    the merits under Auer, it would be futile to require service
    and processing of the amended complaint. In assessing the
    legal issues against the backdrop of Auer, we conclude that
    the "salary-basis" test set forth in 
    29 C.F.R. § 541.118
    (a), as
    amended by 
    29 C.F.R. § 541
    .5d, is valid as applied to
    public employees such as the DOT engineers. Further, the
    DOT engineers satisfy the salary test because the DOT's
    disciplinary policy does not "permit[ ] disciplinary or other
    deductions in pay ``as a practical matter.' "
    Hence, although the legal landscape has changed since
    the district court held for the state in its order of March 27,
    1995, and our analysis has accordingly been framed to
    reflect the dictates of Seminole and Auer, the conclusion we
    have reached is the same conclusion reached by the district
    court. We will therefore affirm the order granting summary
    judgment for the State.
    A True Copy:
    Teste:
    Clerk of the United States Court of Appeals
    for the Third Circuit
    10