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        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT United States Court of Appeals
                                                Fifth Circuit

                                                               FILED
                                                           October 18, 2018
                                 No. 16-20751
                                                            Lyle W. Cayce
                                                                 Clerk
JOSEPH DACAR, individually and for similarly situated people; JASON
WHITELAW; DAVID TARDIFF, et al

             Plaintiffs - Cross-Appellees

LYLE DEROCHE; FELTON RAVIA,

             Plaintiffs - Appellants Cross-Appellees
v.

SAYBOLT, L.P.,

             Defendant - Appellee Cross-Appellant


                Appeals from the United States District Court
                     for the Southern District of Texas
                           ______________________

Before DAVIS, JONES, and HIGGINSON, Circuit Judges.
PER CURIAM:
      The fluctuating workweek (“FWW”) method is one way of calculating
overtime compensation that satisfies the requirements of the Fair Labor
Standards Act (“FLSA”). See 29 C.F.R. § 778.114(a). Saybolt LP, a petroleum
products company, used the FWW method to calculate overtime compensation
for some of its oil and gas inspectors who worked radically varying hours each
week. These inspectors also received incentive payments for working less
desirable hours during the workweek.        A group of these inspectors (“the
plaintiffs”), sued Saybolt, alleging that the incentive payments precluded use
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of the FWW method and placed their employer in violation of the FLSA. The
plaintiffs claimed that Saybolt’s violation was willful.
       The district court held that Saybolt’s payment scheme violated the
FLSA, but the violation was not willful.         The district court adopted the
plaintiffs’ model for calculating damages after concluding that Saybolt was
judicially estopped from challenging this model.           The district court also
awarded liquidated damages. We affirm the district court’s conclusions as to
liability and willfulness, reverse the district court’s ruling on estoppel and its
calculation of damages, vacate the district court’s order on liquidated damages,
and remand for reconsideration of the liquidated damages award and for
reconsideration of its calculation of damages in accordance with this opinion
and entry of an appropriate judgment.
                               BACKGROUND
 I.    Saybolt’s Payment Scheme and the FWW Method
       The FLSA requires that nonexempt employees receive an overtime
premium of not less than one and one-half times their “regular rate of pay” for
each hour worked over 40 hours in a given workweek. 29 U.S.C. § 207(a). Until
February 2012, Saybolt used two different methods to pay overtime. Saybolt
paid one group of inspectors (“the non-FWW inspectors”) using the FLSA’s
standard time and one-half method. These inspectors earned one and one-half
times their “regular rate” for every hour worked over 40. The “regular rate”
for salaried employees is simply the salary divided by the number of hours the
salary is intended to compensate.       29 C.F.R. § 778.113(a).      A non-FWW
inspector earning $600 for an intended 40-hour workweek would thus have a
“regular rate” of $15.00 per hour (the $600 base salary divided by 40 hours).
The non-FWW inspector’s “overtime rate” would be one and one-half times the
“regular rate”—here, $22.50 per hour (one and one-half times the $15.00
“regular rate”). Thus, in a workweek in which the non-FWW inspector worked
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60 hours (instead of the intended 40 hours), the non-FWW inspector would
receive the $600 base salary plus a $450 overtime premium (20 overtime hours
times the $22.50 “overtime rate”) for a total weekly compensation of $1050.
     A second group of Saybolt inspectors (“the FWW inspectors”) received
overtime compensation under the FWW method. Federal regulations state
that this method is appropriate when an employee works hours that fluctuate
from week to week and the employee agrees that a fixed weekly salary will
constitute straight-time pay (i.e., non-overtime pay) for all the hours worked
in a week, however many or few. See id. § 778.114(a). Accordingly, FWW
inspectors received the same weekly base salary, regardless whether they
worked 60 hours or only 20.
     Calculation of overtime premiums under the FWW method is different
from the standard FLSA method in several respects. First, the “regular rate”
under the FWW method is determined by dividing the weekly base salary by
the total number of hours an employee actually works during the week. This
is an application of the principle that the “regular rate” equals the weekly
salary divided by “the number of hours which the salary is intended to
compensate.” See id. § 778.113(a). In the FWW context, “the salary is intended
to compensate” all hours an employee actually works. Because the hours
actually worked each week fluctuate, the “regular rate” under the FWW
method will fluctuate from week to week as well. See id. § 778.114(a). As the
hours worked increase, the “regular rate” will decrease. Therefore, assuming
a $600 weekly base salary and 40 hours actually worked during the week, the
FWW method would yield a “regular rate” of $15.00 per hour (the $600 base




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salary divided by 40 hours). But a 60-hour workweek would yield a “regular
rate” of $10.00 per hour (the $600 base salary divided by 60 hours). 1
      Another key difference under the FWW method is that the “overtime
rate” is one-half, instead of one and one-half, times the “regular rate.” See id.
The reason for this is, again, that the fixed weekly salary is meant to
compensate all hours worked, including overtime hours. Before receiving an
overtime premium, an employee has already agreed to be compensated
according to the “regular rate” for every overtime hour worked. See id. The
employee need receive only an additional one-half times the “regular rate” to
satisfy the FLSA’s one and one-half times requirement. See id. In a 60-hour
workweek, then, an employee would receive an “overtime rate” of $5.00 per
hour (one half times the $10 “regular rate”). The total overtime premium
would be $100 (20 overtime hours times the $5.00 “overtime rate”).
      Under Saybolt’s payment scheme, FWW inspectors were purportedly
paid overtime under the FWW method. But the company also paid incentive
payments for working on a scheduled day off (“day-off pay”), working at sea
(“offshore pay”), and working on a scheduled holiday (“holiday pay”). Non-
FWW inspectors were ineligible for these incentives. When calculating the
“regular rate,” Saybolt added weekly incentive payments to the weekly base
salary. Therefore, if a FWW inspector had a weekly base salary of $600, earned
$150 in incentive payments, and worked a 60-hour workweek, the “regular
rate” for that week would be $12.50 per hour ($600 base salary plus incentive
payments of $150 for a total of $750 divided by the 60 hours worked). The
“overtime rate” would be $6.25 per hour (one half times the $12.50 “regular
rate”), resulting in an overtime premium of $125 (20 overtime hours times the



      1 Likewise, if the same employee worked only 20 hours, the FWW method would yield
a “regular rate” of $30.00 per hour for that week.
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$6.25 “overtime rate”). The FWW inspector’s total compensation for the 60-
hour week would be $875 ($600 base salary plus $150 incentive pay plus $125
overtime premium). 2
II.    Saybolt’s Legal Advice
       Saybolt communicated with outside counsel to assess whether the FWW
method allowed for additional incentive payments.                 In May 2009, Saybolt
contacted attorney Robert Ivey.            Ivey counseled Saybolt that combining
incentive payments with the FWW method was a “potential issue.”                        Ivey
explained that several district courts and the First Circuit had concluded that
paying hours-based premiums in addition to a weekly salary precluded the use
of the FWW method. But Ivey also explained that the Fifth Circuit had not
addressed the question and that the Department of Labor (“DOL”) had issued
proposed regulations in 2008 that would allow the payment of incentives under
the FWW method.
       Saybolt contacted Joseph Maddaloni, another outside attorney, in
January 2010. Saybolt forwarded Ivey’s recommendation to Maddaloni and
said that it was “seeking a final opinion and recommendation in order to bring
closure to this pay practice.” Maddaloni said he disagreed with the court
decisions rejecting the use of incentive payments under the FWW method. But
Maddaloni conceded that the judges involved were well respected and that a
New Jersey district court would likely find their reasoning persuasive.
Maddaloni concluded that “while I have always taken the position that
Saybolt’s use and application of the FWW was defensible, I am concerned that



       2 These hypothetical calculations do not reflect the actual wages earned by either the
FWW or non-FWW inspectors. Saybolt suggests that the total compensation for non-FWW
inspectors did not differ significantly from that of FWW inspectors. This conclusion is
reasonable: non-FWW inspectors would have been paid a much larger overtime premium
(especially for longer workweeks), but they received no incentive pay.
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under the present state of the law and the facts that may no longer hold true.”
Maddaloni later testified that he had considered the law on this issue to be
unsettled.
III.    Proceedings in the District Court
        In January 2010, Joseph Dacar, on behalf of Saybolt inspectors paid
under the FWW method, filed a collective action complaint in the Eastern
District of North Carolina. A year later, the case was transferred to the
Southern District of Texas, and the plaintiffs filed an amended complaint,
alleging that (1) Saybolt did not comply with the requirements for using the
FWW method and (2) Saybolt willfully violated the FLSA. The complaint also
substituted Lyle Deroche and Felton Ravia as named plaintiffs in place of
Dacar. The district court conditionally certified a collective action in June
2011, and a total of 112 employees and former employees opted into the case.
        In January 2013, the parties filed cross-motions for summary judgment.
Saybolt moved for partial summary judgment on the issue of willfulness; the
plaintiffs moved for summary judgment on willfulness, liability, damage
calculation, and liquidated damages.        In August 2014, the district court
granted Saybolt’s motion and held that Saybolt’s violation, if any, was not
willful. The plaintiffs moved for reconsideration.
        In December 2015, the district court denied the plaintiffs’ motion for
reconsideration but granted, in part, their motion for summary judgment. The
district court held that Saybolt had violated the FWW method because the
plaintiffs were not paid a “fixed salary,” that liquidated damages were
appropriate, and that damages should not be offset by the incentive payments
the plaintiffs already received.
        In December 2016, the district court held a hearing on damages. The
district court asked the parties to brief any remaining issues related to the

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damages calculation. Saybolt’s brief contended that the “regular rate” for
calculating overtime damages should be based on the plaintiffs’ hours actually
worked—not on a 40-hour workweek—and that overtime hours should be
multiplied by one half—not one and one-half—times that “regular rate.” The
district court held that Saybolt was judicially estopped from contesting the
appropriate damages model and ordered damages of $3,020,813.21 plus an
equal amount in liquidated damages.
      The plaintiffs timely appealed the district court’s partial grant of
summary judgment on Saybolt’s willfulness.         Saybolt cross-appealed the
district court’s summary judgment on liability and damages.

                         STANDARDS OF REVIEW
      A district court’s grant or denial of summary judgment is reviewed de
novo, applying the same standards as the district court. Castellanos–Contreras
v. Decatur Hotels, LLC, 622 F.3d 393, 397 (5th Cir. 2010) (en banc). The court
views all evidence in the light most favorable to the non-moving party.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587,
106 S. Ct. 1348, 1356 (1986). Summary judgment is appropriate only where
there is no genuine issue of material fact and the moving party is entitled to
judgment as a matter of law. Bolton v. City of Dallas, 472 F.3d 261, 263 (5th
Cir. 2006).
      A district court’s determination of judicial estoppel is reviewed for abuse
of discretion. See Love v. Tyson Foods, Inc., 677 F.3d 258, 262 (5th Cir. 2012).
A court’s imposition of liquidated damages is likewise reviewed for abuse of
discretion. See Singer v. City of Waco, 324 F.3d 813, 823 (5th Cir. 2003). The
correct methodology for calculating the amount of overtime pay due is a
question of law, which is reviewed de novo.          Black v. SettlePou, P.C.,
732 F.3d 492, 496 (5th Cir. 2013).

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                                     DISCUSSION
 I.    Liability
       As explained above, the FLSA generally requires that employees be paid
an overtime premium of one and one-half times the “regular rate of pay” for all
hours worked in excess of the 40-hour workweek.                   29 U.S.C. § 207(a)(1).
Although an employer may satisfy this requirement by using the FWW
method, courts require four prerequisites for its use:
       (1) the employee’s hours must fluctuate from week to week;
       (2) the employee must receive a fixed salary that does not vary with
           the number of hours worked during the week (excluding
           overtime premiums);
       (3) the fixed amount must provide compensation every week at a
           regular rate at least equal to the minimum wage; and
       (4) the employer and employee must share a clear mutual
           understanding that the employer will pay the fixed salary
           regardless of the number of hours worked.
Brantley v. Inspectorate Am. Corp., 821 F. Supp. 2d 879, 888 (S.D. Tex. 2011)
(citing 29 C.F.R. § 778.114(a), (c); O’Brien v. Town of Agawam, 350 F.3d 279,
288 (1st Cir. 2003)). The plaintiffs have the burden of proving noncompliance.
See Samson v. Apollo Resources, Inc., 242 F.3d 629, 636 (5th Cir. 2001). The
district court held that Saybolt did not meet the second requirement—that is,
Saybolt failed to pay a “fixed salary” because it paid additional incentives for
day-off, offshore, and holiday hours worked each week. 3 We agree with the




       3 At summary judgment, the plaintiffs also argued that Saybolt had failed to satisfy
the fourth requirement because there was no “clear mutual understanding” that their
salaries covered all hours worked. The district court pretermitted this question after finding
that Saybolt violated the “fixed salary” requirement.

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district court that Saybolt’s incentive payments disqualified it from using the
FWW method. 4
       The case against Saybolt is simple: the FWW method requires a fixed
weekly salary that does not vary by the number of hours worked, and Saybolt’s
incentive payments caused weekly variance in the FWW inspectors’ straight-
time pay. 5 Saybolt argues that nothing in the federal regulations detailing the
FWW method’s requirements, see 29 C.F.R. § 778.114, expressly prohibits an
employer from paying additional sums on top of a fixed salary—especially
when those payments are included in the “regular rate” and thus increased the
overtime premium.
       In O’Brien v. Town of Agawam, the First Circuit squarely addressed this
issue and found that payment of “additional compensation” for nighttime shifts
in addition to a fixed weekly base salary failed to comply with the FWW
method. 350 F.3d at 288-90. 6 Regarding the FWW regulations, the O’Brien
court noted that “by the plain text of § 778.114, it is not enough that the officers



       4 As a threshold matter, the plaintiffs claim that Saybolt waived the argument that it
paid a “fixed salary” by failing to raise it at summary judgment. On the contrary, Saybolt’s
response to the plaintiffs’ summary judgment motion stated that there were “genuine issues
of fact as to whether Plaintiffs received a fixed amount as straight-time pay.” The district
court discussed and ruled on the question.

       5  The plaintiffs also claim that Saybolt failed to pay a “fixed salary” by making
impermissible deductions from inspectors’ weekly salaries when they took time off. The
plaintiffs provide no evidence that these deductions were actually made from the plaintiffs’
salaries. Payment records demonstrate that sick or vacation pay would be used bump up
inspectors’ weekly wage to ensure a fixed weekly amount.

       6 Several district courts have followed O’Brien in finding that additional incentive
payments can invalidate the use of the FWW method. See Hanson v. Camin Cargo Control,
Inc., 2015 WL 1737394 (S.D. Tex. Apr. 16, 2015); Brantley v. Inspectorate Am. Corp., 821 F.
Supp. 2d 879 (S.D. Tex. 2011); Brumley v. Camin Cargo Control, Inc., No. 08–1798 (JLL),
2010 WL 1644066 (D.N.J. April 22, 2010); Adeva v. Intertek USA, Inc., 2010 WL 97991 (D.N.J.
Jan. 11, 2010); Ayers v. SGS Control Services, Inc., No. 03 Civ. 9077 RMB, 2007 WL 646326
(S.D.N.Y. Feb. 27, 2007).
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receive a fixed minimum sum each week.” See id. at 288 (emphasis in original).
The regulations refer to a “fixed amount” and a “fixed salary,” not a minimum
or base salary.     See 29 C.F.R. § 778.114(a).     Because Saybolt’s incentive
payments depend on the types of hours FWW inspectors worked each week,
their weekly straight-time compensation was not “fixed.”
      Indeed, despite the proposed regulations that Saybolt relied on, the DOL
ultimately decided against the amendment in 2011 and issued a final rule
stating that incentive payments are “incompatible with the fluctuating
workweek method” and that it would not “be appropriate to expand the use of
this method of computing overtime pay beyond the scope of the current
regulation.” See Updating Regulations Issued Under the Fair Labor Standards
Act, 76 Fed. Reg. 18832, 18848–50 (April 5, 2011). The final rule noted that
changing the regulations could cause “employers to pay a greatly reduced fixed
salary and shift a large portion of employees’ compensation into bonus and
premium payments, potentially resulting in wide disparities in employees’
weekly pay.” See 76 Fed. Reg. at 18850. As noted, such disparities in weekly
straight-time pay are incompatible with the “fixed salary” requirement.
      Saybolt relies on two decisions to support its payment scheme. Both
cases are readily distinguishable. First, Saybolt notes that in Aiken v. County
of Hampton, a district court affirmed the compatibility of the FWW method
with additional “holiday pay” bonuses. 977 F. Supp. 390, 397 (D.S.C. 1997),
aff’d, 172 F.3d 43 (4th Cir. 1998). But the “holiday pay” in Aiken was a “fringe
benefit” paid whether or not an employee actually worked the “holiday hours.”
977 F. Supp. at 397. Thus, though the Aiken employees’ total compensation
included the “holiday pay,” their salaries did not increase or decrease because
of the hours they worked.



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      Second, Saybolt contends that the First Circuit’s recent decision in Lalli
v. General Nutrition Centers, Inc., undermines O’Brien by holding that the
payment of additional commissions is compatible with the FWW method.
814 F.3d 1, 4-10 (1st Cir. 2016). In Lalli, however, the First Circuit reaffirmed
O’Brien, and held that the “time-based bonuses” addressed in O’Brien are
distinct from “performance-based bonuses” like commissions. See id. at 8.
Time-based bonuses, unlike performance-based commissions, run afoul of the
FWW regulations because they make weekly pay dependent on the type of
hours worked. Saybolt’s incentives are “time-based bonuses” because they
depend on the kind and number of hours worked—i.e. day-off hours, off-shore
hours, or holiday hours. Under Lalli, as under O’Brien, Saybolt’s payment
scheme is incompatible with the FWW requirements.
      In sum, we hold that Saybolt failed to comply with the FWW method,
and, therefore, its use of that method to calculate the FWW inspectors’
overtime premiums was erroneous.
 II. Willfulness
      If a plaintiff can demonstrate that a defendant’s violation of the FLSA
was willful, then the limitations period is extended from two to three years.
See 29 U.S.C. § 255(a). A willful violation occurs when the “employer either
knew or showed reckless disregard for the matter of whether its conduct was
prohibited.”   McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133,
108 S. Ct. 1677, 1681 (1988).    Plaintiffs bear the burden of establishing a
defendant’s willfulness. Ikossi–Anastasiou v. Bd. of Supervisors of La. State
Univ., 579 F.3d 546, 552 (5th Cir. 2009). The district court held that there was
no evidence that Saybolt violated the FLSA intentionally or recklessly.
Viewing the facts in the light most favorable to the plaintiffs, we agree.
      Evidence that a defendant was merely negligent regarding FLSA
requirements is insufficient to show willfulness. See Steele v. Leasing Enters.,
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Ltd., 826 F.3d 237, 248 (5th Cir. 2016). Here, it is not even clear that Saybolt’s
conduct was negligent: (1) Saybolt twice sought the advice of legal counsel to
ensure    compliance    with   the   FLSA;     (2) Saybolt   knew    from    these
communications that the relevant legal issue was unsettled and had not been
addressed in the Fifth Circuit; and (3) Saybolt knew that the DOL had issued
proposed regulations that would vindicate its application of the FWW method.
Ultimately, of course, Saybolt’s view of the law, though not irrational, was
rejected. After the plaintiffs filed this lawsuit in January 2011, more district
courts held that incentive payments were incompatible with the FWW
regulations. See, e.g., Brumley v. Camin Cargo Control, Inc., No. 08–1798
(JLL), 2010 WL 1644066 (D.N.J. April 22, 2010). Then, in 2011, the DOL’s
final rule affirmed this position and a district court in this circuit held
accordingly. See Brantley, 821 F. Supp. 2d. at 889-90. At this point, Saybolt
transitioned away from paying inspectors under the challenged method. Even
subject to hindsight bias, these facts do not suggest an intentional or reckless
violation.
      The plaintiffs contend that the legal opinions of Ivey and Maddaloni cast
doubt on the continuing viability of Saybolt’s payment procedure. But both
attorneys also communicated that the legal landscape was unsettled even if
courts within the First Circuit would likely rule against Saybolt’s payment
method. The plaintiffs also cite the existence of a 2009 lawsuit in New York
regarding the legality of Saybolt’s pay practices. See Lauer v. Saybolt LP, No.
09–CV–3442, 2010 WL 1992008 (E.D.N.Y. May 17, 2010). This lawsuit settled
without a final ruling on the merits to resolve the legality of the payment
scheme.
      In sum, the plaintiffs offer no evidence from which a court could infer
that Saybolt willfully violated the FLSA. This conclusion does not mean that

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an absence of controlling authority or reliance on advice of counsel or the
existence of proposed regulations necessarily preclude a willfulness
determination. But in this case, all three countervailing considerations are
present, and the plaintiffs have not created an issue of disputed fact regarding
Saybolt’s willfulness.
 III. Judicial Estoppel
      The district court held that Saybolt was judicially estopped from
challenging the methodology used to calculate overtime damages. The doctrine
of judicial estoppel is appropriate when (1) a party has asserted a position that
is plainly inconsistent with a previously asserted position, (2) the earlier
position was accepted by the court, and (3) the party did not act inadvertently.
Reed v. City of Arlington, 650 F.3d 571, 574 (5th Cir. 2011) (en banc). Under
this standard, the district court was mistaken about the nature of Saybolt’s
arguments and erred in applying judicial estoppel.
      Before the district court entered summary judgment, Saybolt suggested
that damages, if any, should be based on what the plaintiffs would have earned
under a non-FWW payment scheme.            Saybolt’s own non-FWW inspectors
would serve as comparators. Because non-FWW inspectors were not eligible
for incentive payments, Saybolt argued that any incentives the plaintiffs
earned should offset the damages or, at least, should not be included in the
“regular rate” used to calculate damages.
      At summary judgment, the district court rejected the non-FWW
comparator model by holding that incentive payments must be included in the
“regular rate” calculation and could not offset damages. The court did not
otherwise determine how damages would be calculated. Almost a year later,
the district court held its hearing on damages and asked for final briefing on
the issue. Saybolt’s brief argued that the FWW method should be used to
calculate damages. That is, the “regular rate” should be calculated by dividing
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total compensation (base salary plus incentives) by all the hours actually
worked by the plaintiffs and that the “overtime rate” for calculating damages
should be one-half times the “regular rate.” The district court held that Saybolt
was judicially estopped from making these arguments because Saybolt had
previously argued that the “regular rate” for damage calculation could be based
on a 40-hour workweek and that the plaintiffs could receive an “overtime rate”
of one and one-half times that “regular rate.” We disagree.
      Saybolt’s initial position—that damages should be calculated using non-
FWW inspectors as comparators—was not plainly inconsistent with its
subsequent argument that damages should be calculated under the FWW
method. Cf. Hall v. GE Plastic Pac. PTE Ltd., 327 F.3d 391, 398 (5th Cir. 2003)
(party estopped from arguing defective product manufactured by company A
because it initially argued that company B manufactured the product); Love,
677 F.3d at 262-63 (debtor estopped from pursuing damages claim because he
had told bankruptcy court he possessed no potential claims). In arguing for
the comparator model, Saybolt never conceded that the FWW plaintiffs were
paid based on a 40-hour workweek or were owed overtime at one and one-half
times the “regular rate.” There was thus no inconsistency.
      Nor did the district court accept Saybolt’s initial position as is required
for judicial estoppel.    Indeed, the court rejected the comparator model by
requiring that incentive payments be included in the “regular rate” calculation.
This is why Saybolt fell back on the alternative argument that, since incentive
payments must be included, the FWW method should be used to calculate the
plaintiffs’ damages.      Accordingly, the district court erred in holding that




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Saybolt was judicially estopped from challenging the plaintiffs’ damages
model. 7
 IV. Damages
       An employer who violates the FLSA’s overtime requirements is “liable to
the employee or employees affected in the amount of . . . their unpaid overtime
compensation.” 29 U.S.C. § 216. The district court adopted the plaintiffs’
damages model, under which the “regular rate” for calculating overtime is
based on a 40-hour workweek and the “overtime rate” equals one and one-half
times the “regular rate.” The plaintiffs’ model leaves them with significantly
more overtime compensation than they originally earned under Saybolt’s
application of the FWW method.               This is because their model employs a
hypothetical 40-hour divisor, which augments the “regular rate.” 8
       Because judicial estoppel does not prevent Saybolt from challenging the
plaintiffs’ model, we may consider the alternative models that Saybolt has
proposed. To begin with, we note that this is a difficult case in which to
estimate the plaintiffs’ “unpaid overtime compensation.”                        It is not a
misclassification case in which the plaintiffs were never paid overtime at all.
See, e.g., Hills v. Entergy Operations, Inc., 866 F.3d 610, 613 (5th Cir. 2017).
The plaintiffs have already received an overtime premium under the FWW



       7  We likewise reject the plaintiffs’ claims (1) that Saybolt waived its challenges to the
damages model and (2) that the invited error doctrine bars these arguments. Regarding
waiver, Saybolt pressed the arguments made on appeal multiple times before the entry of
final judgment; they were thus properly presented to the court. See Keenan v. Tejeda,
290 F.3d 252, 262 (5th Cir. 2002). For its part, the invited error doctrine “prevents a party
from complaining of errors that it induced the district court to make.” Feld Motor Sports,
Inc. v. Traxxas, L.P., 861 F.3d 591, 597 (5th Cir. 2017). As explained in the judicial estoppel
analysis, the district court was not misled into adopting Saybolt’s position.
        8 The 40-hour divisor—as opposed to using hours actually worked—augments the

“regular rate” because an employee is only owed overtime when she actually works more than
40 hours. Thus, when calculating overtime compensation, using the hypothetical 40-hour
divisor will always result in a larger “regular rate.”
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method. Nor is this a case in which incentive payments were erroneously
omitted from the “regular rate” calculation, thereby diminishing overtime
premiums.    See O’Brien, 350 F.3d at 295.        Saybolt added the incentive
payments to the base salary, thereby increasing the “regular rate,” the
“overtime rate,” and the resulting overtime premiums.
      Saybolt proposes that the Court assess damages by looking to its non-
FWW comparator inspectors. However, Saybolt has not thoroughly argued
this method of damages on appeal or explained how the non-FWW comparators
provide a sufficient empirical basis to make the damages model feasible.
      Saybolt’s fallback damages methodology contains two separable
elements: (1) the “regular rate” should be calculated using a denominator of all
hours actually worked and not a hypothetical 40-hour denominator and (2) the
plaintiffs should receive only one-half times this “regular rate” instead of the
one and one-half times awarded by the district court.
      DOL regulations and relevant case law establish that the “regular rate”
should be calculated based on the number of hours the plaintiffs’ salary was
intended to compensate. There is no 40-hour “default” for calculating the
“regular rate,” as the plaintiffs suggest. To the contrary, DOL regulations state
that the “regular rate” is “determined by dividing [an employee’s] total
remuneration for employment . . . in any workweek by the total number of
hours actually worked by him in that workweek for which such compensation
was paid.” 29 C.F.R. § 778.109 (emphasis added). Likewise, the regulation
pertaining to salaried employees specifies that the “regular rate” should be
computed by “dividing the salary by the number of hours which the salary is
intended to compensate.” Id. § 778.113. These regulations reflect the Supreme
Court’s holding in Overnight Motor Transportation Company v. Missel that
“[w]age divided by hours equals regular rate,” and the “regular rate” formula

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                                 No. 16-20751

is no different when a salary is intended to compensate hours that fluctuate
from week to week. 316 U.S. 572, 580 n.16, 62 S. Ct. 1216, 1221 n.16 (1942).
These authorities establish that it would be improper to calculate the “regular
rate” using a 40-hour divisor unless the plaintiffs’ salary was intended to
compensate 40 hours each week.
      Here, the record is unequivocal that the plaintiffs’ hours varied from
week to week and that they received the same base salary (plus incentives)
regardless whether they worked 25 or 65 hours. Under these circumstances,
it does not matter that the FWW regulations are inapplicable. For instance,
in Singer, the firefighter plaintiffs worked 120 hours in one 14-day pay period
and 96 hours in the next. 324 F.3d at 824. As in this case, the plaintiffs argued
that the divisor for calculating the “regular rate” should include only non-
overtime hours. See id. This court acknowledged that the FWW method was
inapplicable, but nevertheless held that the “regular rate” for calculating
overtime damages should “include[] both non-overtime and overtime hours in
the divisor.” Id. at 824-25 & n.4. Following Singer, a number of district courts
in this circuit have affirmed that the “regular rate” divisor should include all
hours actually worked even when the FWW method has been violated. See, e.g,
Brantley, 821 F. Supp. 2d at 894 (“[T]he fact that Plaintiffs’ hours frequently
did not correspond to a 40 hour work week, weigh[s] against calculating
Plaintiffs’ regular hourly rate based on a 40 hour work week.”).
      The plaintiffs cite several cases to support the district court’s use of a
hypothetical 40-hour divisor, but these are distinguishable or unpersuasive.
See Yourman v. Dinkins, 865 F. Supp. 154 (S.D.N.Y. 1994), aff’d, 84 F.3d 655
(2d Cir. 1996), vacated on other grounds, 519 U.S. 1145, 117 S. Ct. 1078 (1997);
Ayers v. SGS Control Services, Inc., No. 03 Civ. 9077 RMB, 2007 WL 646326
(S.D.N.Y. Feb. 27, 2007); Brumley, 2010 WL 1644066. In Yourman, the district

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                                 No. 16-20751

court relied on a 35-hour divisor for some plaintiffs and a 40-hour divisor for
others because “those were . . . the hours reflected on plaintiffs’ paystubs.”
865 F. Supp. at 165. Here, of course, the plaintiffs’ paystubs reflect hours that
fluctuate significantly, so the reliance on a fixed number of weekly hours would
be inappropriate. In Ayers and Brumley, the district courts simply did not
analyze the “regular rate” divisor as a separate issue. Ayers, 2007 WL 646326,
at *3; Brumley, 2010 WL 1644066, at*7. As explained above, it is incorrect to
assume that a violation of the FWW regulations requires the court to resort to
a hypothetical 40-hour divisor. Under Missel, Singer, and the plain language
of the relevant regulations, the district court erred in failing to include all
hours intended to be compensated in the “regular rate” divisor.
      We agree with the district court’s conclusion that plaintiffs are entitled
to an award of one and one-half times the “regular rate” instead of using the
one-half multiplier that Saybolt claims is appropriate. Use of the one-half
multiplier depends on whether the employer establishes that the FWW method
of compensation is appropriate under the regulation.              See 29 C.F.R.
§ 778.114(a). The DOL’s April 2011 final rule makes it clear that the payment
of bonuses and premium payments are “incompatible with the FWW method
of computing overtime.” Updating Regulations, 76 Fed. Reg. at 18848-18850.
And the applicable regulation plainly provides that if an employer does not
meet the conditions necessary to employ the FWW method, it may not reap the
benefit afforded by it: namely, the deviation from the normal practice of using
the one and one-half multiplier of the regular rate to calculate overtime. See
29 C.F.R. § 778.114(a); Flood v. New Hanover Cty., 125 F.3d 249, 252 (4th Cir.
1997) (“The language of section 778.114 suggests that an employer must meet
the following requirement[] before it can pay an employee pursuant to the
fluctuating workweek method . . . the employee must receive a fixed weekly

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                                  No. 16-20751

salary that remains the same regardless of the number of hours that the
employee works during the week . . . .”).
        In Singer, we held that the FWW method did not apply because the
employer failed to establish one of the four requirements for its application.
Singer, 324 F.3d at 825 n.4. In concluding that the regular overtime rate of
one and one-half times the regular rate of pay applied, we stated:
        The fire fighters correctly observe that the fluctuating method
        would be inappropriate in this case. An employer can use this
        method only if the employer and employee have a “clear mutual
        understanding” that the method applies. 29 C.F.R. 778.114(a);
        Heder, 295 F.3d at 780; Valerio v. Putnam Assoc. Inc., 173 F.3d 35,
        39 (1st Cir.1999). In this case, neither party has presented
        evidence of such a “clear mutual understanding.”
        However, the fire fighters are incorrect to say that the district
        court applied the fluctuating method in this case. The district
        court did not calculate the fire fighters' damages by multiplying
        their overtime hours by one-half of their regular rate of pay.
        Instead, the district court multiplied the fire fighters' overtime
        hours (i.e., the hours exceeding 106 in a 14–day work period) by
        one-and-one half of their regular rate of pay. The district court
        thus used the usual method of calculating overtime pay, not the
        less common fluctuating method. See 29 C.F.R. § 778.107 (“The
        general overtime pay standard . . . requires that overtime must be
        compensated at a rate not less than one and one-half times the
        regular rate at which the employee is actually employed[.]”).
Id.
        Additionally, in O’Brien, the First Circuit rejected the district court’s
conclusion that the employer there had properly calculated police overtime in
accordance with the FWW. 350 F.3d at 279. The Court reasoned that because
the police officers did not receive a “fixed amount” for their labor each week,
§ 778.114 did not apply. Id. “For obvious reasons,” the Court noted, “an
employer may not simply elect to pay the lower overtime rate under § 778.114.



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                                      No. 16-20751

The regulation requires that [the] four conditions [of the regulation] be
satisfied before an employer may do so . . . .” 9 Id. at 288.
       We find nothing in the facts of today’s case to warrant a departure from
the general rule that the one-half multiplier can be used only in connection
with a qualified FWW payment method that meets each of the regulatory
requirements.       See 29 C.F.R. § 778.114(a).          The difference between the
majority’s approach and the dissent’s approach is that the majority enforces
the requirement set forth in § 778.114(a) that the employer must pay the
employee a “fixed salary.” This requirement of a “fixed salary” has existed
since § 778.114(a) was adopted in 1968. The final rule issued by the DOL in
2011 did not change the regulation.               Instead, the rule concluded that a
proposed regulation allowing inclusion of bona fide bonus payments and/or
premium payments in the calculation of the regular rate was “incompatible
with the fluctuating workweek method of computing overtime under section
778.114.” 76 Fed. Reg. at 18850. Therefore, the dissent’s contention that the
majority is applying the rule retroactively and unfairly is unfounded. Simply
put, because the preconditions for application of the FWW method were not
satisfied, Saybolt is not entitled to use that method.
       Because Saybolt failed to pay its workers a “fixed salary,” we must also
conclude that one and one-half is the applicable multiplier for calculating the
proper amount of overtime pay owed. Accordingly, the district court did not
err in using the one and one-half multiplier. Because we determine here that
the appropriate denominator for calculating the regular rate includes all hours
intended to be compensated, applying the one and one-half multiplier is not a


       9 Though the First Circuit remanded the case to the district court to calculate the
actual overtime owed, the reasoning in the opinion did not give the district court discretion
to apply the one-half multiplier because, as the court found, § 788.114 did not apply. See
id. at 287–90.
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                                   No. 16-20751

windfall to the plaintiffs. It is merely the ordinary calculation of overtime
mandated by the FLSA. See 29 U.S.C. § 207(a).
 V.     Liquidated Damages
        The FLSA provides that liquidated damages be awarded for FLSA
violations in an amount equal to the actual damages. 29 U.S.C. § 216(b). A
district court may, “in its sound discretion,” refuse to award liquidated
damages if the employer demonstrates good faith and reasonable grounds for
believing it was not in violation. 29 U.S.C. § 260. Whereas the burden is on
the plaintiffs to show willfulness, Saybolt bears the “substantial burden” of
proving the reasonableness of its conduct. See Ransom v. M. Patel Enters.,
Inc., 734 F.3d 377, 387 n.16 (5th Cir. 2013) (citing Singer, 324 F.3d at 823).
Here, the district court awarded liquidated damages after finding that Saybolt
had not met this “substantial burden.”
        To prove the reasonableness of its conduct, Saybolt repeats the reasons
that its conduct was not willful. Saybolt suggests that the district court’s
willfulness determination precludes the award of liquidated damages. This
fails to account for the fact that the evidentiary burden has shifted. Indeed,
this court has held that, “[e]ven if the district court determines that the
employer’s actions were taken in good faith and based on reasonable grounds,
the district court still retains the discretion to award liquidated damages.”
Heidtman v. Cty. of El Paso, 171 F.3d 1038, 1042 (5th Cir. 1999) (citing Lee v.
Coahoma Cty., 937 F.2d 220, 227 (5th Cir. 1991)). Accordingly, Saybolt has
failed to show that the district court abused its discretion.
        Nevertheless, because the district court erred in adopting the plaintiffs’
damages methodology, we must vacate the liquidated damages award and
remand for the district court to determine whether liquidated damages remain
appropriate.


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                                       No. 16-20751

                                     CONCLUSION
       For the foregoing reasons, we: (1) affirm the judgment of the district
court on liability and willfulness; (2) reverse the district court’s ruling on
estoppel and its calculation of damages; (3) vacate the district court’s order on
liquidated damages; (4) remand for reconsideration of the liquidated damages
award; and (5) remand for calculation of damages 10 in accordance with this
opinion and the entry of an appropriate judgment.




       10 As set forth above, a plaintiff is entitled to overtime pay for any week in which he
worked in excess of 40 hours. To determine the amount of overtime compensation due, the
district court should first determine a plaintiff’s regular hourly rate of pay by dividing the
total amount of remuneration paid in a workweek by the total number of hours intended to
be compensated (which, in this case, is the total number of hours actually worked) in that
workweek. The district should then compute the overtime rate by multiplying the regular
rate times 1.5. The overtime rate should then be multiplied by the number of overtime hours
worked in the workweek to arrive at the total amount of overtime compensation due for that
week. Finally, that total amount should be reduced by the amount of overtime pay the
plaintiff has already received from Saybolt for that workweek. The remainder is the amount
of overtime compensation due to the plaintiff.
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                                 No. 16-20751



EDITH H. JONES, Circuit Judge, concurring and dissenting:
      Although I agree with the per curiam opinion’s discussion of liability and
willfulness in this FLSA case, and I agree with requiring the use of hours
actually worked for purposes of damages, I would reverse the overtime rate
calculation on different grounds from those stated by the majority.          The
majority’s proposed formula effects an illegal windfall for the plaintiffs,
contrary to the Supreme Court and this court. I would remand for the district
court to calculate damages using the FWW weekly wage actually paid by
Saybolt, adding one-half times the hourly rate for each hour a plaintiff worked
in excess of 40 hours. The majority’s formulation, which affords a one-and-a-
half hourly multiplier for overtime, overcompensates the plaintiffs.         The
majority fail to recognize the plaintiffs have already been paid, under the FWW
method, a higher rate for weeks in which they worked less than 40 hours.
      The majority premises this result on DOL’s April 2011 final rule and on
this court’s decision in Singer. Neither rationale holds water. Using the
2011 rule to impose damages on Saybolt before the final rule was promulgated
is unfair. Worse, it confuses liability and damages. It is one thing to conclude
that the case law did not support Saybolt’s methodology before the 2011 rule
came into force; it is another to retroactively apply the rule for the purpose of
calculating damages.
      Under the circumstances of this case, the majority's invocation of time-
and-a-half for overtime contravenes the principle that the purpose of actual
damages under the FLSA is to compensate employees for unpaid overtime—it
is not to punish employers. Even a finding of willfulness does not impose
exemplary damages on employers but merely lengthens the limitations period
from two years to three. See 29 U.S.C. § 255(a). Courts also have discretion,

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                                       No. 16-20751

moreover, to award liquidated damages which are “not penal in [their] nature
but constitute[] compensation for the retention of a workman’s pay which
might result in damages too obscure and difficult of proof.” Brooklyn Sav. Bank
v. O’Neil, 324 U.S. 697, 707, 65 S. Ct. 895, 902 (1945). This court and others
have repeatedly emphasized that FLSA damages should reflect the plaintiffs’
actual losses and must not represent a windfall. See Johnson v. Martin, 473
F.3d 220, 222 (5th Cir. 2006); see also Roman v. Marietta Const., Inc., 147
F.3d 71, 77 (1st Cir. 1998) (explaining that FLSA plaintiffs are “entitled to be
made whole, not to a windfall at the [defendant’s] expense”) (citations omitted).
The best measure of damages will aim to approximate the difference between
the overtime premiums that plaintiffs were actually paid and the overtime
premiums that they should have been paid. 1
       When the FLSA’s purpose in awarding actual damages is faithfully
followed, it is apparent that the one-half multiplier for overtime hours
sufficiently compensates the plaintiffs here. The one-half multiplier is more
closely tied to Saybolt’s attempt to invoke the FWW method.                       The FWW
method’s logic is that, where the employees agreed to receive a fixed salary for
all hours worked in a pay period, and the actual hours worked varied below
and above 40/week, then they have already received straight-time pay for their
overtime and should receive only an additional one-half the “regular rate” for
each overtime hour. See 29 C.F.R. § 778.114(a). The majority here do not take



       1Consequently, there is significant logical appeal to Saybolt’s initial proposal that the
court should assess damages by looking to its non-FWW comparator inspectors. Saybolt
acknowledges that this would be a novel method of calculating damages, but here the method
seems to fit: the plaintiffs say they should not have been paid under the FWW method, and
the non-FWW comparators’ wages could demonstrate how the plaintiffs would have been paid
absent the mistake. Saybolt, however, has not thoroughly argued this method of damages on
appeal or explained how the non-FWW comparators provide a sufficient empirical basis to
make the damages model feasible.

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                                 No. 16-20751

issue with the fact that these employees understood they were being
compensated under the FWW regime for all hours they worked. See, e.g.,
Hanson v. Camin Cargo Control, 2015 WL 1737394, at *7-8 (S.D.Tx. Apr. 16,
2015). The record also shows that these employees, in receiving FWW-based
compensation, were paid more than their straight-time counterparts because
Saybolt added monetary incentives for less attractive duty situations. Finally,
as explained at the outset, the majority’s formula overcompensates the
plaintiffs beyond their actual damages.
      The majority erroneously rely on two cases in an attempt to support their
damage formula. As regards the FWW method, however, the footnote in Singer
v. City of Waco, 324 F.3d 813, 825 n.4 (2003), is pure dicta. The employer there
did not attempt to justify its wages based on an FWW calculation; the dispute
was between a 120-hour and 96-hour workweek for certain kinds of first
responders. The firefighters seemed to be contending that the court’s overtime
damages calculation was erroneously based on the FWW method, but they
were simply wrong. All Singer says in this connection is that “the usual
method” of calculating overtime, i.e., time-and-a-half, is appropriate. Id. The
court does not say this method is mandatory in every case. Nor do FLSA
regulations mandate this damage measure because to do so would contravene
the Supreme Court’s holding that overtime damages are compensatory, not
punitive.
      It is also significant that in Singer, the court approves offsetting the
time-and-a-half time owed for the firemen's “long” weeks by the amounts they
were overcompensated for every third “short” week. See Part VII of Singer,
324 F.3d 826-28. In this discussion, the court explains that overpayments in
the “short” weeks were in effect partial compensation for the “long weeks.” If
the majority were applying Singer “as she is writ,” the majority would require

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                                 No. 16-20751

the offset of time-and-a-half overtime for the Saybolt plaintiffs with the excess
hourly wages received by those plaintiffs in their “short” weeks.
      Finally, the majority miscite the First Circuit’s O'Brien decision as
supporting the incorrect damage methodology. O'Brien v. Town of Agarwam,
350 F.3d 279 (1st Cir. 2003). O'Brien, to the contrary, discusses only the town’s
FLSA liability for noncompliance with the FWW method, but the case declines
to reach either the damage award or the town’s claim for offsets for overtime
already paid. See 350 F.3d at 298.
      For these reasons, I respectfully dissent from that part of the majority
opinion which holds Saybolt liable for the punitive imposition of time-and-a-
half compensation under the circumstances of this case.




                                       26
