N.J. Transit Policemen's Benevolent Association Local 304 v. New Jersey Transit Corporation ( 1987 )

OPINION OF THE COURT

STAPLETON, Circuit Judge.

This case presents a question of statutory interpretation. Did a savings clause subjecting New Jersey Transit Corporation (N.J. Transit) to “applicable laws of the United States related to ... dealings between employees and employers” preserve its exemption from the overtime rules of the Fair Labor Standards Act (FLSA)? The district court found, based on the “plain language” of the statute, that it did not. We conclude that the statute, when read with an eye to its purpose and to the regulatory scheme in existence at the time of its enactment, evidences an intent to preserve the FLSA overtime exemption.

I.

N.J. Transit, an instrumentality of the State of New Jersey that operates commuter rail service, was sued by New Jersey Transit Policemen’s Benevolent Association, Local 304 (Local 304), for failure to comply with the provision of the Fair Labor Standards Act that requires employers to pay employees one and one-half times their regular wage for hours worked in excess of forty per week. 29 U.S.C. § 207(a) (1982). N.J. Transit moved to dismiss this claim, asserting that its employees fell within one of the categorical exemptions from the overtime rules listed in Section 213(b). The relevant provision exempts:

any employee of an employer engaged in the operation of a common carrier by rail and subject to the provisions of subchap-ter I of chapter 105 of title 49 [Part I of the Interstate Commerce Act]

29 U.S.C. § 213(b)(2) (1982).

In response to the motion to dismiss, Local 304 pointed out that N.J. Transit was not currently subject to the provisions of Interstate Commerce Act (ICA) and argued that it was accordingly not entitled to the exemption provided by Section 213(b)(2) of the FLSA. While N.J. Transit acknowledged that it was not now subject to Interstate Commerce Commission (ICC) regulation, it insisted that the 1976 statute removing commuter railroads such as N.J. Transit from the jurisdiction of the ICC included a savings clause which preserved their overtime exemption. This 1976 statute, now codified as amended at 49 U.S.C. § 10504, reads in relevant part as follows:

(b) The Interstate Commerce Commission does not have jurisdiction under this subtitle over rail mass transportation provided by a local public body if—

(1) the Commission would have jurisdiction but for this section; and

(2) the fares of the local public body, or its authority to apply to the Commission for changes in those fares, is subject to the approval or disapproval of the chief executive officer of the State in which the transportation is provided.

(c) Notwithstanding subsection (b) of this section, a local body, described in subsection (b), is subject to applicable laws of the United States related to—

(1) safety;

(2) the representation of employees for collective bargaining; and

(3) employment retirement, annuity, and unemployment systems or other provisions related to dealings between employees and employers.

49 U.S.C. § 10504 (1982). The parties agree that N.J. Transit satisfies the conditions for the Section 10504(b) exemption from ICC regulation. They disagree only with respect to the effect of the Section 10504(c) savings clause.

The district court denied N.J. Transit’s motion to dismiss holding that the Section 10504(c) savings clause did not preserve the Section 213(b)(2) overtime exemption. It also determined that the order denying N.J. Transit’s motion to dismiss involved “a controlling question of law as to which there is substantial ground for difference of opinion and [that] an immediate appeal from the order may advance the ultimate termination of the litigation.” App. at 4. This court granted N.J. Transit’s petition for appeal of the statutory construction question pursuant to 28 U.S.C. § 1292(b). Accordingly, the only issue before us is whether the Section 213(b)(2) overtime exemption is preserved by the Section 10504(c) savings clause. Our review of questions of statutory interpretation is plenary.

II.

“Where, as here, resolution of a question of federal law turns on a statute and the intention of Congress, we look first to the statutory language and then to the legislative history if statutory language is unclear.” Blum v. Stenson, 465 U.S. 886, 896, 104 S.Ct. 1541, 1548, 79 L.Ed.2d 891 (1984). In seeking to discern Congressional intent from the legislative text, a court must be mindful of the statute’s object and policy and must read the disputed provision in the context of the entire statute and the provisions of related statutes. Richards v. United States, 369 U.S. 1, 11, 82 S.Ct. 585, 591, 7 L.Ed.2d 492 (1962); Commissioner of Internal Revenue v. Engle, 464 U.S. 206, 217, 104 S.Ct. 597, 604, 78 L.Ed.2d 420 (1984); Kokoszka v. Belford, 417 U.S. 642, 650, 94 S.Ct. 2431, 2436, 41 L.Ed.2d 374 (1974).

A. The Text

The relevant provision states that, notwithstanding Section 10504(b), commuter railroads like N.J. Transit are “subject to applicable laws of the United States related to—(1) safety; (2) the representation of employees for collective bargaining; and (3) employment retirement, annuity, and unemployment systems or other provisions related to dealings between employees and employers.” 49 U.S.C. § 10504(c) (1982). The district court read “dealings” in the last clause to mean “business interactions,” which it found to include negotiations over collective bargaining agreements but not rules concerning wages or hours. App. at 41. We disagree. The use of the phrase “other provisions related to dealings between employees and employers” in conjunction with the preceding references to safety, labor negotiations, retirement, and unemployment implies that Congress had a broad conception of “dealings.” Moreover, the district court’s equation of dealings with negotiations would render the final clause of the provision redundant, given the language of Section 10504(c)(2) preserving laws “related to ... the representation of employees for collective bargaining,” a reference to the Railway Labor Act. 45 U.S.C. § 151, et seq. In short, a law concerning overtime pay requirements is, on its face, a provision relating to dealings, or business interactions, between employees and employers.

A more plausible argument is that the phrase “subject to applicable laws of the United States” refers only to affirmative regulation imposed by federal law and not to exemptions from such statutory regulation. This argument was apparently adopted by the district court when it found that “ ‘applicable laws of the United States’ refers to broad statutory schemes ... not to narrowly tailored specific exemptions from statutory schemes.” App. at 16. The amicus curiae makes the same argument in somewhat different terms when it asserts that the phrase “subject to” is inconsistent with the preservation of a regulatory exemption since a railroad cannot be “subject to” a beneficial exception. While we find this parsing of the legislative text plausible, it is not compelling. The point is not whether this somewhat inartfully drafted statute means to make N.J. Transit “subject to” a beneficial exemption. The statute makes N.J. Transit “subject to applicable laws” and the question then is whether Section 207(a) of the FLSA is an “applicable law” or not. If the Section 207(a) overtime provisions are meant not to be applicable because of the exemption, then N.J. Transit is simply not “subject to” the overtime requirements; thus, the semantic problem of being “subject to” an exemption would appear to be off the mark. The real issue, then, is whether the Congressional intent was that “applicable laws” include the FLSA overtime requirements, or continue, as had been the case for the preceding four decades, to exclude those provisions.

Textual parsing, especially here, is not alone an indisputable indication of Congressional intent. Rather, we believe this textual analysis must be tested by reference to the purpose of the statute and the legislative history. When the savings clause is read against this background, it becomes clear that it was intended to maintain the status quo in all of the areas referred to in subsection (c) and that this result can be achieved only by construing it to preserve the overtime exemption as well as coverage by the railroad employment laws.

B. The Statutory Purpose

Initially, it is important to put the savings clause of Section 10504 in the context of the law as it existed immediately before its adoption by Congress. Historically, Congress has elected to regulate the relationship of railroad workers with their employers in a series of statutes independent of those which apply to other industrial workers and their employers. Thus, the Railway Labor Act, 45 U.S.C. § 151, et seq., rather than the Labor Management Relations Act, 29 U.S.C. § 141, et seq., governs labor-management relations in the railroad industry. Other examples include the Railroad Retirement Tax Act, 26 U.S.C. § 3231, et seq., the Railroad Retirement Act of 1974, 45 U.S.C. § 231, et seq., the Railroad Unemployment Insurance Act, 45 U.S.C. § 351, et seq., the Federal Employee Liability Act, 45 U.S.C. § 54, and the Hours of Service Law, 45 U.S.C. § 61. All of these statutes were in force in 1976 immediately prior to the passage of Section 10504. The 1976 regulatory environment for railroads also included Section 213(b)(2) of the FLSA which exempted railroad workers from the overtime provisions of that Act. The Railway Labor Act, 45 U.S.C. § 151, the Railroad Retirement Tax Act, 26 U.S.C. § 3231(g), the Railroad Retirement Act, 45 U.S.C. § 231(a)(l)(i), the Railroad Unemployment Insurance Act, 45 U.S.C. § 351(b), and the Section 213(b)(2) overtime exemption each defined their applicability by reference to the Interstate Commerce Act.

The exemption from the overtime provisions of the FLSA was granted to railroads in recognition of the nature of railroad operations and the fact that such operations may result in irregular hours for railroad workers. See Southland Gasoline Co. v. Bayley, 319 U.S. 44, 48-49, 63 S.Ct. 917, 919-20, 87 L.Ed. 1244 (1943). The reference to the ICA was made solely for the purpose of identifying the workers to be covered by the exemption and not because the ICA provided an alternative scheme for regulating overtime compensation. This is clear from the fact that the scope of the exemption, as originally proposed, was defined by reference to employees covered by the Hours of Service Act and reference to the ICA was substituted by amendment in order to make sure that all types of railroad workers were included in the exemption.¹ See Keele v. Union Pacific Railroad Co., 78 F.Supp. 678 (S.D.Cal.1948) and the legislative history detailed therein.

It is undisputed that commuter rail lines, such as the service now operated by N.J. Transit, were subject to this special railroad regulatory scheme — including ICC regulation, coverage by the railroad employment statutes, and exemption from the overtime provisions of the FLSA — prior to the passage of Section 10504 in 1976.

Section 10504, as the district court recognized, represents a Congressional judgment that ICC regulation of publicly-operated commuter rail lines is unnecessary when their fares are subject to control by the chief executive of a state. Thus, the purpose of Section 10504 was to free this subclass of railroads from redundant rate control mechanisms by removing it from the jurisdiction of the ICC. The issue presented by this case is whether Section 10504 also reflects a Congressional intent to otherwise alter the regulatory environment in which this subclass of railroads had been operating prior to its passage. We find no evidence of such an intent. To the contrary, when Section 10504 is read in the context of the pre-existing law, we believe it evidences an intent to preserve the status quo in all of the areas subsumed under Section 10504(c), including the area of overtime compensation.

The Section 10504(c) savings provision is necessary because, as we have seen, a number of statutes regulating the activities of railroads define their applicability by reference to the Interstate Commerce Act. The reference in subsection (c)(2) to “the representation of employees for collective bargaining,” for example, clearly preserves the regulation afforded by the Railway Labor Act. The references to “retirement, annuity, and unemployment systems” preserve the regulation provided by the Railroad Retirement Tax Act, the Railroad Retirement Act of 1974, and the Railroad Unemployment Insurance Act. Similarly, we believe the sweeping reference to “other provisions related to dealings between employees and employers” reflects a Congressional intent to preserve the regulatory status quo with respect to other statutes in the area of employment relations whose applicability might have been altered by changing the ICC’s jurisdiction.²

In this context, we think it highly unlikely that Congress used the phrase “subject to applicable laws of the United States” to indicate that only statutes affirmatively regulating railroad activity, and not exemptions, were to be preserved. The district court’s reading of this phrase necessarily attributes to Congress a decision to impose a hybrid and unique regulatory environment on this small subclass of railroads, one involving both the special railroad employment statutes and the FLSA overtime rules. Yet, neither Local 304 nor the ami-cus curiae has suggested any reason why Congress might have chosen to fashion such a hybrid scheme applicable only to publicly-operated commuter lines whose fares are controlled by the chief executive of their states. While the statutory definition of this subclass of railroad provides a ready explanation as to why Congress might decide to remove them from ICC jurisdiction, there is nothing about the subclass which would suggest a rationale for changing the laws governing their employee relations. In particular, we can perceive no reason why Congress might wish commuter rail lines whose rates are controlled in this manner to be subject to the overtime provisions of the FLSA while other commuter rail lines remain entitled to the Section 213(b)(2) exemption. In short, consideration of the purpose of Section 10504 and the regulatory context in which it was enacted strongly suggests that the savings clause was intended to preserve the status quo across the entire spectrum of railroad-employment regulation. We turn now to the legislative history.

C. The Legislative History

The ICA exemption now contained in Section 10504 was originally enacted as a part of the Railroad Revitalization and Regulatory Reform Act of 1976. Pub. L. No. 94-210, § 804, 90 Stat. 31, 139 (1976). The exemption in this statute was broader than the current law, exempting from ICC regulation all commuter passenger service provided by local public bodies. The savings clause was contained in this first effort. Later in the same year, Congress, as a part of the Rail Transportation Improvement Act, narrowed the ICA exemption to railroad commuter passenger service provided by local public bodies the fares of which were subject to control by the chief executive officer of the state. Pub. L. No. 94-555, § 206, 90 Stat. 2613, 2621 (1976). The legislative histories of these Acts comment only briefly on Section 10504. In neither instance is anything said or done which suggests that Congress believed it was effecting any change other than a narrowing of the ICC’s jurisdiction.³

When Congress abandons previously articulated policies, one “would normally expect some expression by Congress that such results are intended.” United States v. United Continental Tuna Corp., 425 U.S. 164, 169, 96 S.Ct. 1319, 1323, 47 L.Ed.2d 653 (1976). Finding no such expression here in the legislative history and further finding in the statutory text a strong indication that Congress intended to maintain the status quo in the area of employment relations, we hold that Section 10504 does not deprive N.J. Transit of its exemption from the overtime provisions of the FLSA.

III.

In response to the question certified by the district court, we conclude that the Section 213(b)(2) exemption from the overtime provisions of the FLSA was preserved by the Section 10504(c) savings clause. It follows that the district court erred in denying N.J. Transit’s motion for dismissal of the overtime claim. We therefore vacate the order denying N.J. Transit’s motion so that the district court may enter an order consistent with this opinion. Each party will bear its own costs.

1 . The dissent argues that exemptions from the FLSA should be narrowly construed. There is, however, no dispute as to the meaning of § 213(b)(2). The pertinent question is whether § 10504(c) should be construed to provide for the continued application of § 213(b)(2) notwithstanding the change in ICC jurisdiction enacted in § 10504(b).

Moreover, unlike the dissent, we believe the Supreme Court’s decision in Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985), is unhelpful in resolving this dispute. Garcia involved an intrastate bus operator, not a railroad. The one-time exemption from the FLSA discussed in Garda, namely 29 U.S.C. § 213(a)(9) [repealed], related to employees of local mass transit operators. The overtime exemption applicable to railroad employees under § 213(b)(2) was not at issue.

2 . The dissent argues that N.J. Transit does not quality for the § 213(b)(2) overtime exemption unless we find that § 10504(c) saved Part I of the ICA with respect to N.J. Transit. While we agree with the dissent that it would be absurd to find that § 10504(c) preserved the ICC regulation explicitly halted in § 10504(b), we do not agree that such a finding is necessary to find that N.J. Transit continues to qualify for the overtime exemption. We note that ICC jurisdiction determines the applicability of the Railway Labor Act, the Railroad Retirement Act, the Railroad Retirement Tax Act, and the Railroad Unemployment Insurance Act. Judge Garth’s formulation would necessarily lead to the conclusion that these laws, in addition to the overtime exemption, no longer apply to N.J. Transit. Under this analysis, we would perceive no function that is served by the savings clause.

3 . See, e.g., S.Conf.Rep. No. 595, 94th Cong., 2nd Sess. (on Pub.L. No. 94-210), reprinted in 1976 U.S.Code Cong. & Ad.News, 14, 148, 237; House Conf.Rep. No. 1743, 94th Cong., 2nd Sess. (on Pub.L. No. 94-555), reprinted in 1976 U.S.Code Cong. & Ad.News 5837, 5846, 5863.