                    United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 05-3803
                                  ___________

Rob Senger; Mike Eliason; Jeff        *
Fiferlick; Mario Gourde; Austin       *
Hearnen; Rob Johnson; Brooks          *
Kleffman; Tim A. Medenwald;            *
Keith A. Sharisky,                    *
                                      *
            Appellants,               *    Appeal from the United States
                                      *    District Court for the
      v.                              *    District of South Dakota.
                                      *
City of Aberdeen, South Dakota,       *
                                      *
            Appellee.                 *
                                      *
__________________                    *
                                      *
United States Department of Labor,    *
                                      *
            Amicus Curiae.            *
                                 ___________

                            Submitted: June 15, 2006
                               Filed: September 29, 2006
                                ___________

Before ARNOLD and BEAM, Circuit Judges, and DOTY,1 District Judge.
                            ___________



      1
      The Honorable David S. Doty, United States District Judge for the District of
Minnesota, sitting by designation.
ARNOLD, Circuit Judge.

       The plaintiffs are current and former firefighters for the City of Aberdeen,
South Dakota, who have sued the City to recover overtime pay that they claim is due
them under the Fair Labor Standards Act (FLSA). Both sides agreed that no facts
were in dispute and moved for summary judgment. The district court denied the
plaintiffs' motion for partial summary judgment but granted judgment to the City,
concluding that the FLSA's plain language prevents the payment of overtime wages
to those who have not actually worked. We review the district court's grant of a
motion for summary judgment de novo. Woods v. DaimlerChrysler Corp., 409 F.3d
984, 990 (8th Cir. 2005). Because the relevant facts are not in dispute and the
judgment is final, we also review the court's denial of the plaintiff's motion for partial
summary judgment de novo. See White Consol. Indus., Inc. v. McGill Mfg. Co.,
165 F.3d 1185, 1190 (8th Cir. 1999). After careful consideration, we reverse.

        The plaintiffs were often scheduled to work more hours than the FLSA permits
an employee to work without receiving overtime pay, and on some of those occasions
the plaintiffs would ask other employees to work shifts on their behalf. This kind of
arrangement is common among firefighters and is permissible under the FLSA so long
as it is voluntary and done with the employer's permission. 29 U.S.C. § 207(p)(3).
When a substitution occurs, the employer pays the scheduled employee and not the
substitute; the amount that the substitute receives is fixed by private agreement
between the two employees. The City paid the plaintiffs straight time for their
substituted shifts and also credited them for the purposes of seniority and leave time,
but it refused to pay them the overtime to which the FLSA plainly would have entitled
them had they worked the shifts themselves. The plaintiffs contend that a federal
regulation entitled them to the same amount of overtime pay when substitutes worked
their shifts for them.




                                           -2-
       When a public employee works a shift for another employee, the law provides
that "the hours such employee worked as a substitute shall be excluded by the public
agency in the calculation of the hours for which the employee is entitled to overtime
compensation under this section." 29 U.S.C. § 207(p)(3). A brief example may help:
Imagine two employees who are each scheduled to work 44 hours one week.
Employee A works thirty-six hours and asks employee B to work the last eight-hour
shift on her behalf. Employee B agrees and works the shift. Even though employee
B worked fifty-two hours that week, he is paid for only forty-four hours and receives
only four hours of overtime pay. (As we have said, the compensation that employee B
receives for the additional eight hours is determined by agreement between employees
A and B.)

       The parties concede this but disagree on whether the employer in our example
has to pay four hours of overtime pay to employee A. The Department of Labor has
promulgated a regulation stating that when one employee substitutes for another the
hours worked are "excluded" from the hours "for which the substituting employee
would otherwise be entitled to overtime compensation," and "each employee will be
credited as if he or she had worked his or her normal work schedule for that shift."
29 C.F.R. § 553.31(a). The plaintiffs read this regulation as requiring the City to pay
overtime wages to the scheduled employee. The City contends that the regulation is
void because a statute governing overtime, 29 U.S.C. § 207(a)(1), requires that a
person actually work more than the statutory maximum number of hours to receive
overtime pay.

       When reviewing an agency's construction of a statute, we look first to whether
the statute's language and legislative history clearly demonstrate what Congress
intended. North Dakota ex rel. Olson v. Centers for Medicare & Medicaid Servs.,
403 F.3d 537, 539 (8th Cir. 2005). When they do, that intent controls and a court will
not to defer to any regulation that interprets the statute in a contrary manner. Id; see
also Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837,

                                          -3-
843, 845 (1984). But when Congress's intent is unclear and the statute contains an
explicit or implicit gap, we will defer to the agency's regulation so long as it is not
"arbitrary, capricious, or manifestly contrary to the statute." Id. at 844; Friends of the
Boundary Waters Wilderness v. Bosworth, 437 F.3d 815, 821-22 (8th Cir. 2006).

       In support of its plain-language argument, the City cites to language in the
FLSA that says "no employer shall employ any of his employees who in any
workweek is engaged in commerce or in the production of goods for commerce, or
is employed in an enterprise engaged in commerce or in the production of goods for
commerce, for a workweek longer than forty hours unless such employee receives
[overtime wages]." 29 U.S.C. § 207(a)(1) (emphasis added). This language, the City
says, means that the employee must be engaged (i.e, actively working) to receive
overtime wages. But a more careful parsing of the section reveals that the statute uses
the phrase "engaged in commerce" as a kind of applicational threshold: The overtime
provisions of § 207(a) apply if the employee is engaged in commerce or in the
production of goods for commerce at any time during the work week. And even if the
employee is not engaged in commerce or in the production of goods for commerce,
§ 207(a) applies if the "enterprise" for which he or she works is so engaged. Id. The
word "engaged" therefore relates not to whether the employee was actively working,
but whether the employee's or enterprise's work was of a certain kind.

        We question, moreover, the applicability of § 207(a) to these current and former
firefighters. Congress amended the FLSA in 1974 so that its provisions would apply
to state and local employees. In the course of passing those amendments, the House
and Senate agreed to a partial exemption to the overtime rules for firefighters and
police officers. Section 207(k) of the FLSA reflects that compromise. Under that
provision, state and local employers of firefighters are not bound to the seven-day
work period in 207(a), but may instead extend the relevant work period to as long as
28 days. 29 U.S.C. § 207(k). In addition, an employer must pay overtime wages only
if a firefighter's total "tours of duty" exceed 212 hours in a 28-day work period; for

                                           -4-
shorter work periods, the ratio of 212 to 28 is used to compute how many hours must
be in a firefighter's total "tours of duty" before he or she is entitled to overtime pay.
Id.; 29 C.F.R. § 553.230(c). We see no indication in § 207(k) that all of those hours
must be worked by the employee him- or herself. We therefore conclude that the
FLSA's plain language does not reveal a Congressional intent to deny an employee
overtime wages when another worker voluntarily substitutes for him or her with the
employer's permission.

       Examining the legislative history surrounding § 207(p)(3) helps clarify matters.
This provision was part of the 1985 FLSA amendments, see Fair Labor Standards
Amendments of 1985, PL 99-150 §3(a), 99 Stat. 787 (November 13, 1985), and both
the House and Senate Reports regarding those amendments note that employees
engaged in fire-protection or law-enforcement activities traditionally traded shifts with
one another without the substitution affecting the computation of overtime for either
employee. H.R. Rep. No. 99-331, at 25 (1985); S. Rep. No. 99-159, at 13 (1985).
The concern arose that without § 207(p)(3), certain FLSA regulations could require
the state or local government to pay overtime to the substitute employee. Consider
our earlier example, assuming that § 207(p)(3) did not exist. Employee B still works
eight hours on behalf of employee A: If the FLSA requires the employer to pay
employee B overtime for all the hours that he or she works above the statutory
maximum, the employer would have to pay employee B twelve hours of overtime
rather than four. Such a rule would leave the employer unable to control its overtime
expenditures, since the employees' voluntary substitutions could cause some
employees to accrue massive amounts of overtime. The only way that the employer
could cabin these costs would be to forbid voluntary substitutions altogether, which
would deprive both employers and employees of a useful and flexible tool.

       Addressing this concern, both the House and Senate Reports explain that under
the new subsection (§ 207(p)(3)), "[i]f two employees trade hours ... , each employee
will be credited as if he or she had worked his or her normal work schedule." H.R.

                                          -5-
Rep. No. 99-331, at 25 (1985); S. Rep. No. 99-150, at 13 (1985). This is a clear
indication that the purpose of § 207(p)(3) was to fashion a way to allow voluntary
substitutions without having overtime costs spiral out of control. By having the
employer credit each employee for the shift to which he or she was scheduled, the
subsection limits the amount that an employer will have to pay in overtime wages to
no more than what it would have paid absent the voluntary shift substitutions. The
Department of Labor used exactly the same language when it promulgated
§ 553.31(a). The regulation as written is therefore fully consistent with the clearly
expressed intent of Congress.

       Even though the regulation as written is plainly consistent with Congress's
intent, we are still left with a question: What precisely does the regulation mean when
it says that each employee will be "credited"? The City contends that the word
"credited" requires it to give the scheduled employee only normal wages for the shift
along with any attendant benefits that he or she would have accrued. The plaintiffs,
on the other hand, argue that it means that the employer must treat the scheduled
employee in all respects as if he or she had worked the shift, including paying him or
her overtime wages if otherwise warranted. These arguments demonstrate that the
term is susceptible to two different interpretations; in other words, the regulation is
ambiguous on the question. The Department of Labor has consistently interpreted the
regulation to mean that "the employee scheduled to work receives credit (and
compensation) as if he or she had worked." Application of the Fair Labor Standards
Act to Employees of State and Local Governments, 52 Fed. Reg. 2012, 2018 (Jan. 16,
1987); see also Wage and Hour Opinion Letter, 2004 WL 3177870 (Nov. 23, 2004).
The Department of Labor's amicus brief in this case has reiterated that position. An
agency's interpretation of its own ambiguous regulation will stand so long as it is not
" 'plainly erroneous or inconsistent with the regulation.' " Rain & Hail Ins. Serv. v.
Federal Crop Ins. Corp., 426 F.3d 976, 979 (8th Cir. 2005) (quoting Auer v. Robbins,
519 U.S. 452, 461 (1997) (quotation marks and citations omitted). The agency's
interpretation in this case easily passes that test.

                                         -6-
        We do not see much merit in the City's argument that the Department of Labor's
interpretation of § 553.31(a) creates an unreasonable burden on employers. All the
City has to do is pay the scheduled employee as if he or she had worked the scheduled
shift; it need not keep any additional records. And the City need not monitor all shift
exchanges, because any voluntary substitutions that take place will not cause the
employer's actual overtime expenditures to vary from the expectations that it
developed when it first scheduled the employees.

      For the foregoing reasons, we reverse both the grant of the defendant's motion
for summary judgment and the denial of the plaintiffs' motion for partial summary
judgment, and we remand the case for further proceedings not inconsistent with this
opinion.

BEAM, Circuit Judge, dissenting.

      I believe the City of Aberdeen has correctly construed and applied the
applicable statutes. Accordingly, I respectfully dissent.

      Like the district court, I think the language adopted by Congress in 29 U.S.C.
§ 207(a) as part of the Fair Labor Standards Act (FLSA) controls the practices
involved in this litigation and requires an employee to actively work to receive an
overtime rate of compensation. The statute says "no employer shall employ any of his
employees who in any workweek is engaged in commerce or in the production of
goods for commerce . . . for a workweek longer than forty hours unless such employee
receives [overtime wages]." 29 U.S.C. § 207(a)(1).2 The words "shall employ any of
his employees who in any workweek is engaged in commerce or in the production of
goods for commerce" for a period of time beyond an FLSA-designated workweek

      2
       While the words "engaged in commerce" standing alone might well be
construed as requiring only a general employment in commerce, the additional words
"in any workweek" clearly lead to the more precise intent I find.

                                         -7-
embrace the overarching and continuing overtime-pay focus of the Act, that is, that
overtime compensation is only due for actual working time beyond the non-overtime
pay periods established by the statute. While 1974 amendments (that added coverage
of state and local employees and congressional recognition that a "forty hour
workweek" frequently does not suffice for the employment of firefighters and
similarly situated public employees) slightly altered the thrust of the Act, see id. §
207(k), no modifications were made to the above-referenced "employee . . . engaged
in" language and nothing in the amendment attenuates or alters the purpose and intent
of section 207(a).

       Amendments to the FLSA in 1985 validated an already established practice of
substitution of services for scheduled work hours. In this regard Congress said:

      If an individual who is employed in any capacity by a public agency
      which is a State, political subdivision of a State, or an interstate
      governmental agency, agrees, with the approval of the public agency and
      solely at the option of such individual, to substitute during scheduled
      work hours for another individual who is employed by such agency in
      the same capacity, the hours such employee worked as a substitute shall
      be excluded by the public agency in the calculation of the hours for
      which the employee is entitled to overtime compensation under this
      section.

Id. § 207(p)(3). While this language clearly excludes overtime pay for substituted
services, it says nothing about to whom or by whom regular time compensation will
be paid for the substituted hours. But, as noted above, the statute is unambiguous in
commanding that these substitute hours "shall be excluded . . . in the calculation of the
hours for which the [substituting] employee is entitled to overtime compensation."

      Then, enters the Department of Labor (DOL) with a regulation on substitution.
The agency essentially repeats the section 207(p)(3) statutory language and adds
"[w]here one employee substitutes for another, each employee will be credited as if

                                          -8-
he or she had worked his or her normal work schedule for that shift." 29 C.F.R.
§ 553.31(a) (third sentence). The remainder of section 553.31 otherwise takes the
public employer out of the compensation arrangements between the substituted-for
employee and the substituting employee, matters not directly at issue in this appeal.

       DOL contends that sentence three "mandates the payment of overtime
compensation to the substituted-for firefights in this case." Amicus brief at 8.
Plaintiffs and the court, applying Chevron deference to DOL's regulatory gloss, agree
that the crediting arrangement in section 553.31(a) is responsive to an ambiguously
expressed statutory intent to require the public employer to pay overtime
compensation to the nonworking, substituted-for employee. I disagree with this
analysis.

       The statutory amendments referred to by the court and the subsequent
regulatory edicts from DOL simply cannot override the clearly expressed legislative
intent contained in section 207(a). The section states that to require an employer to
pay overtime compensation a substituted-for employee must actually work overtime-
eligible hours. Thus, DOL's overtime-oriented slant on the statute cannot command
deference from this court because the regulation is "plainly erroneous or inconsistent
with [section 207(a)]." Auer v. Robbins, 519 U.S. 452, 461 (1997) (quotations
omitted). Section 553.31(a) (third sentence) simply attempts to rewrite the language
of the Act on this point. And in doing so, DOL ignores established Supreme Court
precedent. In Tennessee Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S.
590 (1944),3 the Supreme Court analyzed this portion of the legislative language in
section 207(a). The Court noted that the Act "defines the word 'employ' to include 'to
suffer or permit to work."' 321 U.S. at 597. Then, applying this definition, the Court
stated that the language of section 207(a) is "necessarily indicative of a Congressional

      3
        In response to judicial interpretation of the FLSA, Congress passed the 1947
Portal-to-Portal Pay Act, codified as 29 U.S.C. §§ 251-262, which, among other
things, even more narrowly defined compensable activities. See 29 U.S.C. § 254.

                                          -9-
intention to guarantee either regular or overtime compensation for all actual work or
employment." Id. at 597-98 (emphasis added). Thus, DOL's attempted regulatory
imprint on the unambiguous language of section 207(a) is improper. The City and
the district court were correct. Indeed, at the bottom line, I believe that under the
Tennessee Coal holding there is no enforceable FLSA-based requirement that a public
agency pay anyone anything for not working, but this is perhaps an issue for another
day.

      Accordingly, I respectfully dissent.
                      ______________________________




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