IPMA-HR joined with several other associations in an amicus brief urging the United States Supreme Court to review the decision of the United States Court of Appeals for the Ninth Circuit in the case of the City of San Gabriel v. Flores. The Ninth Circuit ruled that the any unspent dollars paid to employees as part of a cash-in-lieu of benefits program should be included in the regular rate used for determining overtime under the Fair Labor Standards Act (FLSA).
The City of San Gabriel provided a flat dollar amount every month to be used towards the purchase of medical, dental and vision insurance. Any unspent dollars were returned to employees and were considered taxable income. City employees contended that the monthly amount that they received as cash payments should be included when determining their regular rate of pay. The Ninth Circuit agreed with the employees and went further by ruling that since about 40-50% of the monthly amount is cashed out to employees, the plan was not a bona fide employee benefits plan resulting in the entire amount having to be included in the regular rate.
In the amicus brief, it was noted that over 30 lawsuits have been filed against jurisdictions in California based on this decision. The brief states that:
“The Ninth Circuit’s ruling has placed public employers offering cash-in-lieu programs in an untenable position. If that ruling stands, they will be forced to choose between maintaining their existing programs—which will result in substantial increased costs and inequitable overtime rates among employees who select different benefits options—or eliminating or reducing cash-in-lieu payments— which will deprive their employees of a valuable benefit.”
The amicus brief is available BELOW. For additional information on this case, please contact Neil Reichenberg, IPMA-HR executive director at firstname.lastname@example.org.