                                                                                                                           Opinions of the United
2000 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


12-22-2000

Madison v. Resources for Human Dev.
Precedential or Non-Precedential:

Docket 99-1821




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Corrected Reprint

Filed November 15, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-1821

DANNETT MADISON, on behalf of herself and others
similarly situated

v.

RESOURCES FOR HUMAN DEVELOPMENT, INC.,
       Appellant

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. Civil Action No. 97-cv-07402
(Honorable Marvin Katz)

Argued July 14, 2000

Before: SCIRICA and McKEE, Circuit Judges,
and ACKERMAN, District Judge*

(Filed: November 15, 2000)

_________________________________________________________________

* The Honorable Harold A. Ackerman, United States District Judge for
the District of New Jersey, sitting by designation.
       GLENN A. WEINER, ESQUIRE
        (ARGUED)
       PAUL G. NOFER, ESQUIRE
       Klehr, Harrison, Harvey, Branzburg
        & Ellers
       260 South Broad Street, Suite 400
       Philadelphia, Pennsylvania 19102

        Attorneys for Appellant

       JAY H. DAHLKE, ESQUIRE
        (ARGUED)
       JOSHUA P. RUBINSKY, ESQUIRE
       Brodie & Rubinsky
       924 Cherry Street, Suite 400
       Philadelphia, Pennsylvania 19107

        Attorneys for Appellee

OPINION OF THE COURT

SCIRICA, Circuit Judge.

The issue on appeal is whether the Fair Labor Standards
Act applies to a non-profit corporation pr oviding residential
human services programs for mentally ill and mentally
retarded adults. The District Court held the FLSA applied,
and granted plaintiffs summary judgment, r elying in part
on an interpretive guideline of the Department of Labor. We
agree the FLSA applies. But in view of the Supr eme Court's
recent clarification of the amount of defer ence to be
accorded administrative agencies' infor mal statutory
interpretations, we will vacate the judgment and remand for
further findings. See Christensen v. Harris County, 529 U.S.
576, 120 S.Ct. 1655, 1662 (2000).

I. Background

Plaintiffs are current and for mer employees of Defendant
Resources for Human Development, Inc. (RHD). RHD is a
Pennsylvania non-profit corporation that pr ovides its
clients--mentally ill and mentally retar ded adults--with
human services programs such as community health

                                  2
centers, transportation services, and community living
facilities and assistance. RHD employs approximately 2,400
persons. Plaintiffs, residential advisers in RHD's "Mandela"
and "Visions" programs, claimed RHD violated the FLSA by
underpaying them. Specifically, they claim RHD improperly
calculated their regular and overtime pay rates by failing to
include in the calculation the value of the RHD employee
benefits plan, which has a cash option. RHD denied
coverage on the ground that its residential advisors in the
Mandela and Visions programs fell within FLSA's
"companionship exemption."

A. The RHD Fairshare Employee Benefit Plan

RHD provides its employees with a benefit plan--the
"Fairshare Plan"--that allows employees to select benefits
from a "menu" of choices including health insurance,
medical reimbursement accounts, life insurance, long-term
disability insurance, and cash.1 Each month, RHD
contributes to each of its employees' Fairshar e accounts an
amount comprising $100.00 plus seven percent of the
employee's base monthly salary. Employees also may
supplement their accounts to buy additional benefits.
Employees who want to receive some or all benefits in cash
must sign a written waiver of health insurance coverage.
RHD then includes the cash amount in the employee's
regular paycheck.

When calculating an employee's regular pay rate, RHD
does not include its contributions to the employee's
Fairshare account. RHD uses an employee's r egular pay
rate to calculate any overtime pay; overtime pay is equal to
1.5 times an employee's regular pay rate.

B. RHD's Mandela and Visions Programs

RHD's Mandela and Visions programs pr ovide assistance,
support, and training to mentally ill and mentally r etarded
adults. Both programs are "community living
arrangements" that help clients make the transition from
_________________________________________________________________

1. Because employees can select differ ent benefits from a "menu," the
plan is referred to as a "cafeteria" plan. The cash option is consistent
with the Internal Revenue Code's provisions regarding cafeteria plans.
See 26 U.S.C. S 125(d)(1)(B).

                               3
institutional to independent living. Each client is supported
by a team assembled by the county, which includes a
county case manager, mental health pr ofessionals, family
members, and an RHD staff member. The county managers
and other county officials monitor RHD's services to ensure
they comply with a service plan. The service plan content is
set by state and federal regulations. The plan itself is
funded with the state and federal money that funded the
client's prior institutionalization.

With the help of RHD residential advisors, clients in the
Mandela and Visions programs select r esidences from a list
of RHD-approved options. RHD rents the pr operty and
subleases it to its clients.2 Although utility service is
arranged in clients' names, payment is made thr ough RHD.
RHD prepares lists of potential roommates from which
clients may choose.3 If they wish, clients can change
locations or residential advisors. Clients also may
discontinue RHD's services, but then they must vacate the
RHD-leased property.

Clients pay up to 72 percent of their monthly Social
Security Disability payments to cover rent and other
ordinary living expenses. RHD maintains a custodial
account for clients' Social Security benefits; RHD is the
payee of some benefit checks. For some clients who receive
spending money, RHD holds and distributes the money.

Mandela clients' subleases with RHD include "house
rules." House rules state: (1) no drugs, alcohol, or loud
music; (2) residents be dressed if outside their bedrooms
between 8:30 a.m. and 10:00 p.m.; and (3) residents keep
the staff informed of their wher eabouts at all times. Visions
clients' subleases have no house rules.

Clients in both programs must maintain and keep up
their residences; they also may choose their home
furnishings. They must choose, purchase, and prepare food
for their own meals. They must maintain personal hygiene,
_________________________________________________________________

2. In a few cases, RHD owns the property and rents it directly to
program participants.

3. On occasion, the county refers clients to RHD to live with another
person in the program.

                                4
and select and wash their own clothes. But if a client is
physically or mentally unable to cook, clean, or maintain
the residence, RHD employees will do so.

RHD retains keys to clients' residences. On-duty RHD
employees may use the keys to enter clients' r esidents, but
must knock before entering. Clients deemed capable keep
their own keys. In the Mandela program, only six of eleven
clients have keys to their own residences; only three are
allowed to leave their residences unattended.

II. Proceedings

Dannett Madison, an RHD resident advisor , filed this
class action in the United States District Court for the
Eastern District of Pennsylvania on December 5, 1997.
Madison claimed RHD improperly calculated overtime pay
by excluding from the regular pay rate calculation: (1)
Fairshare benefits payments; (2) bonuses; and (3) the 15-
minute periods by which plaintiffs came to work early each
day. Twenty-two additional plaintiffs opted into the class
action; fourteen before the District Court issued its
summary judgment decision and eight after, in accord with
the FLSA's opt-in provisions.4 See 29 U.S.C. S 216(b).

RHD moved for summary judgment on three gr ounds.
First, RHD claimed the FLSA wage and hours rules did not
apply to plaintiffs because they fell within the
"companionship exemption." That provision excludes from
FLSA coverage "domestic service" employees who provide
companionship services to "individuals who (because of age
or infirmity) are unable to car e for themselves." 29 U.S.C.
_________________________________________________________________

4. Four members of the class, including Madison, also filed a class action
suit in Pennsylvania state court alleging RHD failed to include
contributions to its employee benefit plan in its calculation of overtime
pay rates; RHD failed to include yearly bonuses in its calculation of
overtime pay rates; and RHD failed to pay all wages and bonuses when
due.

One plaintiff, Carl Scott, filed suit in the Eastern District of
Pennsylvania alleging retaliation by RHD for having opted in to this class
action. A bench trial in that case resulted in judgment for RHD which is
currently being appealed.

                                5
S 213(a)(15). Second, RHD contended its benefit plan was a
bona fide health and welfare benefits plan, and thus its
payments properly were excluded fr om the regular pay rate
calculation. See 29 U.S.C. S 207(e)(4).5 Third, RHD argued
bonuses need not be included in the calculation of the
regular rate of pay. See 29 U.S.C.S 207(e)(3). Plaintiffs
opposed the motion, but did not file their own cr oss-motion
for summary judgment.

On January 8, 1999, the District Court granted in part
and denied in part RHD's motion for summary judgment.
The court found there were no material factual disputes on
the application of the FLSA and of S 213(a)(15) and
S 207(e)(4). See Madison v. Resour ces for Human
Development, Inc., Civ. No. 97-7402, slip op. at 4 n.4 (E.D.
Pa. Jan. 8, 1999). The court also held as a matter of law
RHD could not claim the companionship exemption and the
bona fide plan exclusion. See id. at 18. The parties settled
the 15 minutes issue and stipulated to the amount of
damages and prospective relief on the benefits issue.6

In June 1999, on RHD's motion, the District Court closed
the class, and in September 1999 entered judgment in
favor of 17 plaintiffs. RHD appealed.

We have jurisdiction under 28 U.S.C. S 1291. Our review
of summary judgment is plenary. We view all evidence and
draw all inferences in the light most favorable to the non-
movant, affirming if no reasonable jury could find for the
non-movant. See Whiteland Woods, L.P . v. Township of West
Whiteland, 193 F.3d 177, 180 (3d Cir . 1999). Our review of
the district court's interpretation of the FLSA is plenary.
See, e.g., Stephens v. Kerrigan, 122 F .3d 171, 176 (3d Cir.
1997).
_________________________________________________________________

5. "[T]he "regular rate" at which an employee is employed shall be
deemed to include all remuneration for employment paid to, or on behalf
of, the employee, but shall not be deemed to include. . . (4)
contributions irrevocably made by an employer to a trustee or third
person pursuant to a bona fide plan for pr oviding old-age, retirement,
life, accident, or health insurance, or similar benefits for employees
. . . ." 29 U.S.C. S 207(e)(4).

6. The District Court granted RHD summary judgment with respect to
the bonus issue. See Madison, Civ. No. 97-7402, slip op. at 18.

                               6
III. Discussion

A. The District Court Complied With
       Fed. R. Civ. P. 56

A threshold issue is whether the District Court complied
with Federal Rule of Civil Procedure 56 in deciding RHD's
summary judgment motion. The District Court concluded
plaintiffs "are not employees exempted from FLSA coverage
by the companion exemption, so RHD's overtime payment
must comply with FLSA's rules." Madison, Civ. No. 97-
7402, slip op. at 18. RHD asserts the decision constituted
a sua sponte summary judgment in Madison's favor ,
without the notice required by Rule 56. 7 RHD is correct
that "a district court may not grant summary judgment sua
sponte unless the court gives notice and an opportunity to
oppose summary judgment." Otis Elevator Co. v. George
Washington Hotel Corp., 27 F.3d 903, 910 (3d Cir. 1994).
But that did not happen here.

Faced with RHD's motion for summary judgment, the
District Court decided whether RHD was entitled to
judgment as a matter of law under 29 U.S.C. S 213(a)(15).
In addressing the motion, the court found no dispute of
material fact with respect to whether FLSA and its
companionship exemption applied (a conclusion neither
party contests), and concluded as a matter of law RHD was
not entitled to judgment under that provision. In rejecting
RHD's asserted affirmative defense, the District Court held
RHD could not, as a matter of law, meet its bur den of
proof. See Madison, Civ. No. 97-7402, slip op. at 4.

Holding RHD could not prevail as a matter of law, on
what RHD apparently considered one of its strongest
affirmative defenses, does not mean the court improperly
granted summary judgment to plaintiffs. The District
Court's judgment left intact RHD's other affir mative
defenses (statute of limitations, laches, waiver , estoppel,
_________________________________________________________________

7. Defendant argues the same with r espect to the District Court's
conclusion that RHD's Fairshare Plan was not exempted from the regular
pay rate calculation under 29 U.S.C. S 207(e)(4). Given our disposition of
that issue, we need not address RHD's summary judgment argument
with respect to S 207(e)(4). See discussion infra.

                                7
good faith) that RHD was free to pursue. Indeed, the court
did not enter judgment for plaintiffs until nine months after
denying in part RHD's summary judgment motion. RHD
appealed only after the parties stipulated to damages and
prospective relief, and settled other claims. We see no
violation of Rule 56.

B. The FLSA Companionship Exemption

       1. Interpreting "domestic service employment"

The District Court held the FLSA companionship
exemption did not apply to RHD's Mandela and V isions
employees. That provision excludes from FLSA minimum
wage and maximum hours rules:

       [A]ny employee employed in domestic service
       employment to provide companionship services for
       individuals who (because of age or infirmity) are unable
       to care for themselves (as such terms ar e defined and
       delineated by regulations of the Secretary) . . . .

29 U.S.C. S 213(a)(15). The statute does not define
"domestic service employment." To construe the exemption,
the District Court relied on 29 C.F.R.S 552.3, which defines
"domestic service" as

       services of a household nature perfor med by an
       employee in or about a private home (permanent or
       temporary) of the person by whom he or she is
       employed. The term includes employees such as cooks,
       waiters, butlers, valets, maids, housekeepers,
       governesses, nurses, janitors, laundresses, caretakers,
       handymen, gardeners, footmen, grooms, and
       chauffeurs . . . . This listing is illustrative and not
       exhaustive.

The District Court understood this regulation to mean the
exemption applied only to employees who "per form
household services in a private home." See Madison, Civ.
No. 97-7402, slip op. at 3. The District Court then
concluded RHD could not establish that its clients' homes
were "`private' within the meaning of the statute." Id. at 4.

We agree with the District Court's r eliance on 29 C.F.R.

                               8
S 552.3 to determine the meaning of"domestic service." We
also agree that in order for services to constitute a
"domestic service" under Section 552.3, they must be
provided in "private homes."8 But there is scant regulation,
legislative history, or case law to guide deter mination of
whether the living arrangements here constitute"private
homes."

       2. Regulatory, legislative, and case law
       interpretations of "private home"

The pertinent regulation discussing "private home" as
used in 29 C.F.R. S 552.3 is not dispositive. It provides:

       (a) The definition of "domestic service employment"
       contained in S 552.3 is derived from the regulations
       issued under the Social Security Act (20 CFR 404.1057)
       and from "the generally accepted meaning" of the term.
       Accordingly, the term includes persons who are
       frequently referred to as "private household workers."
       See S. Rep. 93-690, p. 20. The domestic service must
       be performed in or about the private home of the
       employer whether that home is a fixed place of abode or
       a temporary dwelling as in the case of an individual or
       family traveling on vacation. A separate and distinct
       dwelling maintained by an individual or a family in an
       apartment house, condominium or hotel may constitute
       a private home.

       (b) Employees employed in dwelling places which ar e
       primarily rooming or boarding houses ar e not
       considered domestic service employees. The places
_________________________________________________________________

8. Neither party disputes the role 29 C.F .R. SS 552.3 and 552.101 should
play in our construction of 29 U.S.C. S 213(a)(15). If, as is the
situation
here, the underlying statute is ambiguous, we afford deference to formal
agency regulations resulting from notice and comment rule making
construing the statutory provision unless those regulations constitute an
impermissible interpretation of the statute. See Chevron U.S.A. Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). There is no
dispute the regulations construing 29 C.F .R. S 213(a)(15) are formal
regulations. We find the pertinent r egulations to be reasonable and thus
are guided by their definitions in our construction of the "companionship
exemption."

                                9
       where they work are not private homes but commercial
       or business establishments. Likewise, employees
       employed in connection with a business or pr ofessional
       service which is conducted in a home (such as a r eal
       estate, doctor's, dentist's or lawyer's office) ar e not
       domestic service employees. . . .

29 C.F.R. S 552.101. Although the r egulation provides some
guidance as to what constitutes a "private home," it does
not settle the question.

The legislative history is similarly unhelpful. In
discussing changes to the FLSA intended to cover domestic
service employees--which in turn created the need for the
companionship exemption at issue here--the House Report
accompanying the 1974 Amendment to the FLSA noted:

       The domestic service must be performed in a private
       home which is a fixed place of abode of the individual
       or family. A separate and distinct dwelling maintained
       by the individual or family in an apartment house or
       hotel may constitute a private home. However , a
       dwelling house used primarily as a boarding or lodging
       house for the purposes of supplying such services to
       the public, as a business enterprise, is not a private
       home.

House Rep. No. 93-913 reprinted in 1974 U.S.C.C.A.N.
2811, 2845. This discussion of "private home" does not
provide a definitive answer either.

The case law is divergent. In Terwilliger v. Home of Hope,
Inc., 21 F. Supp. 2d 1294 (N.D. Okla. 1998), the United
States District Court for the Northern District of Oklahoma
faced a similar factual scenario. See id. at 1297-1298.
Holding the homes in question were private, the court in
Terwilliger noted the defendant did not acquire either the
residence or the furniture for the client; 22% of the homes
were owned by the client or the client's par ent or guardian,
with the remainder rented or leased fr om third parties in
the client's name; the defendant did not co-sign the lease
and had no property interest in the client's residence; the
defendant had keys to the residences only for emergency or
consensual use; and the defendant paid rent fr om the
client's trust account. Id. at 1300. The Terwilliger court

                               10
distinguished its holding from that in Linn v. Dev. Svcs.,
891 F. Supp. 574 (N.D. Okla. 1995). Linn held homes were
not "private homes" because the defendant acquired the
homes and furniture; maintained keys to the homes;
decided how many and which clients lived in the homes;
frequently signed leases for the clients; and r eceived state
money on the clients' behalf, which it then used to pay rent
on the clients' behalf. Linn, 891 F. Supp. at 579. Terwilliger
differed because the defendant ther e did not acquire the
residences in question, maintained keys to the homes only
for emergency and consensual use, and did not decide
where and with whom clients would live. See id. at 1300.
Thus, the homes in Terwilliger wer e held to be private. See
id. at 1300.

The Utah Supreme Court also has consider ed when
domestic services are provided in a "private home" and
therefore covered by the FLSA companionship exemption.
That court applied four factors to reach its decision: (1) the
facility's source of funding; (2) the public's degree of access
to the facility; (3) the facility's status as a for -profit or not-
for-profit organization; and (4) the size of the organization.
See Bowler v. Deseret Village Ass'n, Inc., 922 P.2d 8, 13-14
(Utah 1996). Applying its test, the Court found the
defendant, a "privately funded, nonprofit Utah corporation
which provides a residential and vocational `development
habitation' for fourteen marginally mentally and physically
handicapped adults," was "more like a`private home' than
an `institution' or a business enterprise." Id. at 11, 14.

We conclude that none of these cases, nor the relevant
administrative and legislative material, provides clear
guidance in this matter. What is clear is that the
determination of what constitutes a "private home" in the
context of the FLSA companionship exemption must be
made on a case-by-case basis, taking into account all
aspects of the living arrangements.

       3. The Mandela and Visions programs residences
       are not "private"

We construe FLSA exemptions narrowly against the
employer. See Mitchell v. Kentucky Fin. Co., 359 U.S. 290,

                                11
295 (1959); Reich v. Gateway Press, Inc. , 13 F.3d 685, 694
(3d Cir. 1994). The District Court concluded, as a matter of
law, that RHD had not overcome its significant burden in
establishing its affirmative defense. W e agree.

Several aspects of the Mandela and Visions living
arrangements support the District Court's conclusion that
the companionship exemption does not apply. For example,
RHD clients do not have a possessory interest in their RHD
homes. The right of RHD clients to remain in their housing
depends completely on their continued relationship with
RHD. If clients terminate that relationship, they cannot
remain in RHD housing. This is not the kind of possessory
interest individuals enjoy in a private home.

RHD clients do not have full control over others' access
to their RHD homes. RHD retains keys to the homes of all
clients in the Mandela and Visions pr ogram. Indeed, RHD
keeps the only set of keys with respect to nearly half the
clients in the Mandela program. Less than half of the
clients in that program (five of eleven) have keys to their
houses.

RHD clients do not have unfettered freedom in their day-
to-day conduct. They must comply with rules that do not
typically apply to adults in private homes. One such rule
requires RHD clients to be dressed when outside their
rooms between the hours of 8:30 a.m. and 10:00 p.m. This
rule is incongruous with the notion of a "private home."9

Given the contours of the living arrangements at issue
here, and the rule that FLSA exemptions should be
narrowly construed against the employer , we conclude as a
matter of law the RHD residences are not"private homes"
_________________________________________________________________

9. As noted by the District Court, Terwilliger differs from this case in
important respects. See Madison, Civ. No. 97-7402, slip op. at 8. In
Terwilliger, the court placed a significant emphasis on the nature of the
possessory interest clients had in the pr operty in question. The clients
there had either an ownership or direct lessee interest in the property.
See Terwilliger, 21 F. Supp. 2d at 1299-1300. In contrast, RHD's clients
have significant restrictions placed on their interest and rights
concerning the property. They sublease the property from RHD, and
their right to remain on the property is tied directly to their continued
involvement in the RHD-administered program.

                                12
for purposes of S 213(a)(15). We will affirm the District
Court's holding that the FLSA applies to the plaintiffs'
employment relationship with RHD.

We now turn to the question whether RHD's
contributions to the Fairshare accounts should be included
in plaintiffs' regular and overtime pay rates.

C. Applying FLSA to RHD's Fairshare Account
       Contributions

FLSA requires overtime pay to be at least 1-1/2 times the
"regular rate" of pay. See 29 U.S.C. S 207. Section 207(e)(4)
provides the "regular rate" includes all remuneration paid
to, or on behalf of, the employee, but does not include:

       (4) contributions irrevocably made by an employer to a
       trustee or third person pursuant to a bonafide plan for
       providing old-age, retirement, life, accident, or health
       insurance, or similar benefits for employees . . ..

29 U.S.C. S 207(e)(4).

The District Court concluded RHD's contributions to the
Fairshare accounts were not excludable under S 207(e)(4).
The court based its analysis on 29 C.F.R.S 778.215(a)(5),
which provides:

       (a) General Rules. In order for an employer's
       contributions to qualify for exclusion from the regular
       rate under section 7(e)(4) of the Act, the following
       conditions must be met:

       . . .

       (5) The plan must not give an employee the right to
       assign his benefits under the plan nor the option to
       receive any part of the employer's contributions in
       cash instead of the benefits under the plan: Provided,
       however, That if a plan otherwise qualified as a bona
       fide benefit plan under section 7(e)(4) of the Act, it
       will still be regarded as a bona fide plan even though
       it provides, as an incidental part ther eof, for the
       payment to an employee in cash of all or a part of
       the amount standing to his credit (i) at the time of
       the severance of the employment relation due to
       causes other than retirement, disability, or death, or

                                13
       (ii) upon proper termination of the plan, or (iii)
       during the course of his employment under
 655<!>circumstances specified in the plan and not

       inconsistent with the general purposes of the plan to
       provide the benefits described in section 7(e)(4) of the
       Act.

RHD claims the District Court erred in r elying on this
regulatory provision because the gover ning statutory
authority, 29 U.S.C. S 207(e)(4), is not ambiguous. It also
argues that because the Administrator who issued 29
C.F.R. S 778.215(a)(5) did not have delegated authority to
interpret S 207(e)(4), "the Administrator's interpretation may
be considered only if it is a well-reasoned, persuasive
interpretation of S 207(e)(4) consistent with congressional
intent." Even if 29 C.F.R. S 778.215(a)(5) governs, RHD
insists its Fairshare Plan conforms with the Administrator's
dictates.

We agree S 207(e)(4) is ambiguous in this context. But we
will vacate the District Court's denial of summary judgment
for failure properly to analyze 29 C.F .R. S 778.215(a)(5). The
District Court treated S 778.215(a)(5) as a formal agency
regulation, when it is not.10 Section 778.215(a)(5) is merely
an interpretative guideline of the agency.

       1. FLSA S 207(e)(4) is ambiguous

It is well-settled that if a statute unambiguously
expresses Congress's intent, courts must give effect to that
intent. See, e.g., FDA v. Brown & Williamson Tobacco Corp.,
529 U.S. 120, 120 S.Ct. 1291, 1297 (2000) (citing Chevron
U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 842-43 (1984)). RHD argues S 207(e)(4) is clear
and unambiguous, because although the statute does not
define "bona fide," that term has an ordinary usage. Relying
on Black's Law Dictionary and Random House Webster's
Unabridged Dictionary, RHD contends "bonafide" means
"good faith." It argues there is nothing to suggest its
_________________________________________________________________

10. Because we will remand for the District Court to examine the
administrative provision under the proper deference standard, we need
not reach RHD's final argument that the Fairshare Plan conforms with
the dictates of S 778.215(a)(5).

                               14
Fairshare Plan is anything but a good faith attempt to
provide its employees with benefits.

Assuming arguendo that "bona fide" does not render
S 207(e)(4) ambiguous, we cannot say the same of the
remainder of the provision. As noted, the section allows
exclusion of contributions to plans that provide "old-age,
retirement, life, accident, or health insurance, or similar
benefits for employees." 29 U.S.C. S 207(e)(4). The "or
similar benefits" language is imprecise by its own terms
and capable of ambiguity. Therefore, we hold the plain
language of S 207(e)(4) does not provide sufficient guidance
to govern the application of the statute in this case.

       2. The weight of authority of 29 C.F.R.
       S 778.215(a)(5)

In light of the statutory ambiguity, we must examine 29
C.F.R. S 778.215(a)(5) for guidance, and determine what
deference, if any, it is owed in our construction of the
statute. See Cleary v. Waldman, 167 F .3d 801, 808 (3d Cir.
1999) cert. denied. 120 S.Ct. 170. That deter mination is
crucial because formal agency regulations receive more
deference than mere interpretive guidelines. See
Christensen v. Harris County, 529 U.S. 576, 120 S.Ct.
1655, 1662 (2000) ("Interpretations such as those in
opinion letters--like interpretations contained in policy
statements, agency manuals, and enforcement guidelines,
all of which lack the force of law--do not warrant Chevron-
style deference.").

       a. 29 C.F.R. S 778.215(a)(5) is an interpretive
       guideline.

The District Court appears to have interpreted 29 C.F.R.
S 778.215(a)(5) as a formal agency regulation.11 See, e.g.,
Madison, Civ. No. 97-7402, slip op. at 11 (r eferring to 29
C.F.R. S 778.215(a)(5) as a "Department of Labor
regulation[ ]"). But Section 778.215(a)(5) is not a formal
administrative regulation. This is made clear by 28 C.F.R.
_________________________________________________________________

11. The District Court did not explicitly addr ess the level of deference
that it applied to S 778.215(a)(5).

                               15
S 778.1, which lays out the purpose of Part 778 of the Code
of Federal Regulations. Section 778.1 provides:

       This Part 778 constitutes the official interpr etation of
       the Department of Labor with respect to the meaning
       and application of the maximum hours and overtime
       pay requirements contained in section 7 of the Act. It
       is the purpose of this bulletin to make available in one
       place the interpretation so these provisions which will
       guide the Secretary of Labor and the Administrator in
       the performance of their duties under the Act unless
       they are otherwise directed by authoritative decisions
       of the court or conclude, upon reexamination of an
       interpretation, that it is incorrect. These official
       interpretations are issued by the Administrator on the
       advice of the Solicitor of Labor, as authorized by the
       Secretary.

29 C.F.R. S 778.1. Section 778.1 leaves no doubt that
S 778.215(a)(5) is an interpretive guideline, issued on the
advice of the Solicitor of Labor and authorized by the
Secretary, not an official regulation pr omulgated after
notice-and-comment rule making.

       b. Under Christensen v. Harris County, informal
       agency interpretations are not binding, but are
       entitled to respect to the extent they ar e
       persuasive.

We have made clear that agency interpr etive guidelines
"do not rise to the level of a regulation and do not have the
effect of law." Brooks v. V illage of Ridgefield Park, 185 F.3d
130, 135 (3d Cir. 1999). The Supreme Court recently
clarified the distinction between the level of deference to be
accorded formal agency regulations and informal agency
interpretations. In Christensen v. Harris County, 529 U.S.
576, 120 S.Ct. 1655 (2000), the Court explained that
informal agency interpretations in "opinion letters and
similar documents" are not entitled to Chevron deference.12
_________________________________________________________________

12. As noted, Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467
U.S. 837 (1984), held courts must defer to an agency's regulation
interpreting an ambiguous statute, if the statute is one the agency is
charged to administer.

                               16
Instead, they are "entitled to respect" under Skidmore v.
Swift, 323 U.S. 134 (1944), but only to the extent they have
the "power to persuade."13 Christensen, 529 U.S. 576, 120
S.Ct. at 1663. To grant Chevron deference to informal
agency interpretations would unduly validate the results of
an informal process.

The Supreme Court's clarification in Christensen requires
us to revisit our previously applied parameters of deference.
See, e.g., United States v. Occidental Chemical Corp., 200
F.3d 143, 151-52 (3d Cir. 1999) (following Cleary; court
must defer to agency's statutory interpretation that find
support in informal agency practice); Br ooks v. Ridgefield
Park, 185 F.3d at 135 (agency's interpr etive bulletins do not
have the effect of law; level of defer ence due is governed by
bulletin's persuasiveness); Cleary, 167 F .3d at 808
(agency's informal interpretation is accorded deference if
agency is charged to interpret the statute, if the
interpretation is consistent with agency's other
pronouncements, and if the interpretation furthers the
statute's purposes). Christensen now confirms that informal
agency interpretations are entitled to r espect based only on
their persuasiveness. So that the District Court may apply
this standard, we will remand this case for a determination
of the "power to persuade" of S 778.215(a)(5) and the extent
to which it is "entitled to respect" in interpreting FLSA
S 207(e)(4).

As to the persuasiveness of agency interpretive
guidelines, we note our continued reliance on the
framework laid out in Skidmore v. Swift , 323 U.S. 134
(1944). See, e.g., Cleary, 167 F .3d at 809. The
Skidmore Court explained:

       [R]ulings, interpretations and opinions of the
       Administrator under this Act, while not contr olling
       upon the courts by reason of their authority, do
       constitute a body of experience and informed judgment
       to which courts and litigants may properly r esort for
_________________________________________________________________

13. As the Supreme Court noted, defer ence to agency interpretation is
appropriate for an agency's interpretation of its own regulation where the
regulation itself is ambiguous. Christensen , 529 U.S. 576, 120 S.Ct. at
1663. That is not the case here.

                               17
       guidance. The weight of such a judgment in a
       particular case will depend upon the thoroughness
       evident in its consideration, the validity of its
 774<!>reasoning, its consistency with earlier and later

       pronouncements, and all those factors which give it
       power to persuade, if lacking power to contr ol.

Skidmore, 323 U.S. at 140. In applying the Skidmore test,
the Supreme Court has noted that agency interpr etations
issued contemporaneous with a statute are entitled to
greater deference. See, e.g., Public Citizen v. Department of
Justice, 491 U.S. 440, 463 n.12 (1989) (one r eason
deference was not due an agency interpr etation was the
passage of time between enactment of the statute and
promulgation of the regulation in question); General Electric
Co. v. Gilbert, 429 U.S. 125, 142 (1976) (EEOC guideline
did not "fare well" under Swift standards in part because it
was "not a contemporaneous interpretation"). An agency
interpretation's persuasiveness also is derived in part from
the "thoroughness evident in its consideration, the validity
of its reasoning, [and] its consistency with earlier and later
pronouncements." Skidmore, 323 U.S. at 140. To be
persuasive, an agency interpretation cannot run contrary to
Congress's intent as reflected in a statute's plain language
and purpose. See Cleary, 167 F.3d at 808.

       3. FLSA presumes remuneration is to be included
       in the regular pay rate

We make a final observation. RHD ar gues Christensen
stands for the proposition that unless a r elevant FLSA
provision expressly or implicitly pr ohibits the employer's
policy, an employee cannot demonstrate a statutory
violation. That argument stretches Christensen in
unconvincing fashion. The Court in Christensen was
concerned with whether the FLSA prohibited municipal
employers from compelling the use of compensatory time.
See Christensen, 529 U.S. 576, 120 S.Ct. at 1658. The
Court read the applicable provisions of the FLSA only to
"guarantee that an employee will be able to make some use
of compensatory time when he requests to use it." Id. at
1662. The Court found the provision silent with respect to
the employer's requiring employees to use compensatory

                               18
time. See id. ("[T]hat provision says nothing about
restricting an employer's efforts to r equire employees to use
compensatory time.").

But here, the FLSA expressly provides the regular rate of
pay "shall be deemed to include all remuneration for
employment paid to, or on behalf of, the employee" unless
it falls under a specific exemption. See 29 U.S.C. S 207(e).
Unlike in Christensen, there is a statutory presumption
here that remuneration in any form is included in the
regular rate calculation. The burden is on the employer to
establish that the remuneration in question falls under an
exemption. Unlike in Christensen, the statutory silence in
Section 207(e)(4) relied on by RHD cuts against it rather
than in its favor. In short, Christensen does not compel
summary judgment for RHD.

IV. Conclusion

For the foregoing reasons, we will vacate the District
Court's grant of summary judgment and remand for
proceedings consistent with this opinion.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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