PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

DOUGLAS E. MAYHEW,
Plaintiff-Appellant,

v.                                                                 No. 96-1175

CARL H. WELLS, Sheriff,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Virginia, at Roanoke.
Jackson L. Kiser, Senior District Judge.
(CA-94-570-R)

Argued: March 3, 1997

Decided: September 10, 1997

Before MURNAGHAN and ERVIN, Circuit Judges, and
MICHAEL, Senior United States District Judge for the
Western District of Virginia, sitting by designation.

_________________________________________________________________

Affirmed by published opinion. Judge Ervin wrote the opinion, in
which Judge Murnaghan and Senior Judge Michael joined.

_________________________________________________________________

COUNSEL

ARGUED: Terry N. Grimes, KING, FULGHUM, SNEAD, NIXON
& GRIMES, P.C., Roanoke, Virginia, for Appellant. Walter Wayne
Heslep, HESLEP, NATKIN & KEARNEY, P.C., Lexington, Vir-
ginia, for Appellee.

_________________________________________________________________
OPINION

ERVIN, Circuit Judge:

Plaintiff-Appellant Douglas E. Mayhew appeals from a judgment
below awarding him compensatory damages under the Fair Labor
Standards Act, 29 U.S.C. § 201 et seq., unsatisfied with the method
employed in calculating those compensatory damages and with the
denial of double, liquidated damages. We affirm the judgment below
in its entirety.

I.

Mayhew is a former deputy sheriff of the Bedford County, Vir-
ginia, Sheriff's Department. Defendant-Appellee Charles H. Wells
was the Sheriff of Bedford County during the relevant time. Mayhew
worked full-time as a Drug Abuse Resistance Education (D.A.R.E.)
officer from 1978 to November 1993, and thereafter, until January
1995, as a correctional officer. In addition, Mayhew owned a dog that
was used sporadically as the Sheriff's Department's tracking dog.
This dispute concerns the appropriate level of overtime compensation
due Mayhew for the care of his dog.

Mayhew's brother owned a tracking dog whose use he volunteered
to the Department. When his brother became ill in May 1985, the dog
was given to Mayhew who agreed to the continued use of the dog by
the Department. Mayhew agreed to care for, train, and utilize the dog,
and, in exchange, Wells agreed that the Department would pay for
food, veterinary care, and any tracking/training tools. Mayhew did not
mention any other compensation at that time.

In 1986, Mayhew replaced the first dog, which became ill, with
another dog, and Mayhew and Wells agreed to this substitution under
the same terms as previously negotiated. Again, there was no discus-
sion of compensation for the time Mayhew spent caring for and train-
ing this dog. Mayhew would later testify that he spent approximately
14 hours per week on these activities, but there was no evidence that
this time was spent at the direction of Wells. When Mayhew was
reassigned from D.A.R.E. to a correctional position in November

                    2
1993, he unilaterally decided to stop using the dog for tracking pur-
poses.

Mayhew filed suit on July 18, 1994, seeking overtime compensa-
tion for the time spent caring for and training his dog pursuant to the
Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq. The district
court granted Mayhew summary judgment on the issue of liability
after Wells failed to timely present his opposition. A one-day bench
trial was held on November 20, 1995, on the issue of damages. In a
memorandum opinion filed January 20, 1996, the district court
awarded Mayhew $5299 in compensatory damages for unpaid over-
time compensation. The court determined that Mayhew was normally
compensated by a salary that was fixed for fluctuating hours, and
thus, pursuant to 29 C.F.R. § 778.114, Mayhew's overtime was to be
compensated at one-half of his regular pay rate. The district court also
denied Mayhew liquidated damages pursuant to 29 U.S.C. § 260,
finding that Wells possessed several reasonable grounds to believe his
actions did not violate FLSA.

Mayhew appeals the damages award, claiming both that he should
have been compensated at one and one-half times his regular rate of
pay, not one-half, and that he should have been awarded liquidated
damages that would, in effect, double his award.

II.

Mayhew instituted the present action pursuant to FLSA, 29 U.S.C.
§ 216(b), which grants federal jurisdiction. See also 28 U.S.C. § 1331.
This appeal arises from a final decision below, and thus we possess
appellate jurisdiction under 28 U.S.C. § 1291.

We review "the district court's legal conclusions de novo and its
factual findings for clear error." Waters v. Gaston County, N.C., 57
F.3d 422, 425 (4th Cir. 1995). The district court's denial of liquidated
damages under FLSA, 29 U.S.C. § 260, is reviewed for abuse of dis-
cretion. See Burnley v. Short, 730 F.2d 136, 140 (4th Cir. 1984).

III.

The parties expend considerable time characterizing certain evi-
dence in light of three dog-care cases that each held that the off-duty

                    3
care of canine unit dogs was compensable under FLSA. See Truslow
v. Spotsylvania County Sheriff, 783 F. Supp. 274, 279 (E.D. Va.
1992); Nichols v. City of Chicago, 789 F. Supp. 1438, 1442-43 (N.D.
Ill. 1992) (relying on and finding the Truslow court's analysis "highly
persuasive"); Levering v. District of Columbia, 869 F. Supp. 24, 27
(D.D.C. 1994) (agreeing with Truslow). That emphasis is misplaced,
however, for Wells has not appealed his liability, and that issue is not
before us. Instead, we need only contend with the very narrow issues
of whether the district court applied the proper rate for determining
Mayhew's overtime compensation and whether the district court
abused its discretion in denying Mayhew liquidated damages.

A.

The district court relied on 29 C.F.R. § 778.114, as interpreted by
the district court in Knight v. Morris, 693 F. Supp. 439, 445 (W.D.
Va. 1988), in determining that Mayhew should be compensated for
his overtime with the dog at a rate of one-half his regular pay rate.
That section of part 778, which constitutes an official interpretation
by the Department of Labor but not a formally promulgated regula-
tion, provides in part:

          (a) An employee employed on a salary basis may have hours
          of work which fluctuate from week to week and the salary
          may be paid him pursuant to an understanding with his
          employer that he will receive such fixed amount as straight
          time pay for whatever hours he is called upon to work in a
          workweek, whether few or many. Where there is a clear
          mutual understanding of the parties that the fixed salary is
          compensation (apart from overtime premiums) for the hours
          worked each workweek, whatever their number, rather than
          for working 40 hours or some other fixed weekly work
          period, such a salary arrangement is permitted by the Act if
          the amount of the salary is sufficient to provide compensa-
          tion to the employee at a rate not less than the applicable
          minimum wage rate for every hour worked in those work-
          weeks in which the number of hours he works is greatest,
          and if he receives extra compensation, in addition to such
          salary, for all overtime hours worked at a rate not less than
          one-half his regular rate of pay. . . . Payment for overtime

                    4
          hours at one-half such rate in addition to the salary satisfies
          the overtime pay requirement because such hours have
          already been compensated at the straight time regular rate,
          under the salary arrangement.

29 C.F.R. § 778.114(a). The district court in Knight found that the
deputy sheriffs of Greene County, Virginia, were on a fixed salary but
worked a fluctuating number of hours per work period and that there-
fore their overtime should be compensated at a rate one-half their reg-
ular pay rate. Knight, 693 F. Supp. at 445. The court explained that
the deputies had already been "paid," in part, for their overtime hours
by their fixed salary and that, by receiving an additional one-half their
regular pay rate for the overtime hours, they would effectively receive
"time and a half" for overtime hours. Id.

The court below equated Mayhew's situation as a deputy sheriff
with that of the deputies in Knight. Mayhew v. Wells, No. CA-94-570-
R, slip op. at 7 (W.D. Va. Jan. 10, 1996). Whether this be a factual
or legal conclusion, even a more penetrating de novo review by us
fully supports this conclusion. The Department's payroll clerk pro-
vided unchallenged testimony that Mayhew was a salaried employee
whose annual salary was set by the Compensation Board of the Com-
monwealth of Virginia. Deputies were expected to work 160 hours in
each 28-day cycle but were paid their fixed salary whether they
worked more or fewer hours. This testimony was exactly corroborated
by Wells. Mayhew himself admitted that he was a salaried employee,
and testified that he was neither "docked" for running personal
errands during the work day nor paid more when he frequently
worked ten extra hours a week.

Although the district court properly determined that Mayhew was
employed on a fixed salary for fluctuating hours, that does not end
our inquiry into whether Mayhew should be additionally compensated
for overtime at a one-half rate. Since the time of the district court's
opinion, we have twice had occasion to interpret§ 778.114. In both
Bailey v. County of Georgetown, 94 F.3d 152, 156 (4th Cir. 1996),
and Monahan v. County of Chesterfield, Va., 95 F.3d 1263, 1281 (4th
Cir. 1996), we held that § 778.114 requires a"clear mutual under-
standing" between employer and employee that the fixed salary is to
be compensation for all straight time hours worked, whether few or

                     5
many. Without such a clear mutual understanding, the fluctuating
work period method of "half time overtime" cannot be utilized. In
Bailey, we further held that this understanding did not have to extend
to the manner in which overtime pay itself would be calculated, since
neither FLSA nor any regulation was to the contrary, and an employer
need not secure written acknowledgements from employees indicat-
ing that the pay plan had been explained to them. Bailey, 94 F.3d at
156. In Monahan, although we ultimately determined that § 778.114
was inapplicable to the case at bar, we noted that the section places
the burden on the employer to prove the "clear mutual understanding"
since the section otherwise acts as an exemption to the strict overtime
requirements of FLSA. Monahan, 95 F.3d at 1281. Nevertheless, the
existence of such an understanding may be "based on the implied
terms of one's employment agreement if it is clear from the employ-
ee's actions that he or she understood the payment plan in spite of
after-the-fact verbal contentions otherwise." Id. at 1281 n.21. What
was dicta in Monahan, we now expressly hold.

There can be little doubt that Wells and Mayhew possessed a clear
mutual understanding as to Mayhew's fixed salary. Mayhew's testi-
mony demonstrates that he knew he would never be paid more than
his fixed salary no matter how many hours he worked, nor would he
be docked if he worked fewer than the expected 160 hours per work
period. Because the fixed salary was set by the Compensation Board,
which provided no additional funds for overtime pay, in no case was
overtime ever paid in money. Instead, Wells's policy was to give one-
for-one compensatory time off ("comp time"), i.e. one hour off for
one extra hour of work, as soon as practical after the extra hours were
worked. The goal of this comp time policy was to keep actual hours
worked around 160 per work period. Only if total hours worked
exceeded 171 in any given work period was comp time"paid" back
at one and one-half hours for each hour above 171. Although Mayhew
testified that he did not know whether the Compensation Board would
pay overtime, he was absolutely sure that even if he worked 250
hours, 160 hours was what was "always turned into[sic] the Compen-
sation Board." J.A. at 134. Wells has sustained his burden of demon-
strating a clear mutual understanding with Mayhew that Mayhew
would be compensated by a fixed salary for fluctuating hours worked.1
_________________________________________________________________
1 Mayhew's reliance on Roy v. County of Lexington, S.C., 928 F. Supp.
1406 (D.S.C. 1996), is totally misplaced. In the first place, the court in

                    6
See Monahan, 95 F.3d at 1281. Although the evidence is equivocal
as to whether Mayhew fully understood the comp time arrangement,
such an understanding is not necessary to the validity of the "half time
overtime" scheme of § 778.114. See Bailey, 94 F.3d at 156.

A de novo review therefore fully supports the district court's deci-
sion to apply the "half time overtime" method permitted by § 778.114
in calculating Mayhew's overtime pay. We therefore affirm the dis-
trict court's award of $5299 as compensatory damages.

B.

Turning to the issue of liquidated damages, FLSA plainly envisions
that liquidated damages in an amount equal to the unpaid overtime
compensation are the norm for violations of § 7 of the Act. 29 U.S.C.
§ 216(b). Only where "the employer shows to the satisfaction of the
court that the act or omission giving rise to [the] action was in good
faith and that he had reasonable grounds for believing that his act or
omission was not a violation" of FLSA may the court exercise its dis-
cretion to deny liquidated damages. Id. at§ 260; see also Brinkley-
Obu v. Hughes Training, Inc., 36 F.3d 336, 357 (4th Cir. 1994);
Burnley v. Short, 730 F.2d 136, 140 (4th Cir. 1984). We have previ-
ously interpreted the exemption entailed by § 260 to place a "plain
and substantial burden" upon the employer to persuade the court that
_________________________________________________________________
Roy determined that the employees there were on a fixed salary subject
to a fluctuating workweek, id. at 1419 & n.23, which seriously under-
mines Mayhew's argument that he was not a salaried employee. But
more importantly, the court refused to find there was a "clear mutual
understanding," in part because the employer had issued a memorandum
to its employees advising them that they would be paid overtime at one
and one-half times their hourly rate (apparently by mistake, but a mistake
that was never corrected) and, in part, because the court looked to author-
ity requiring a document signed by the employees, absent there, to help
demonstrate the mutual understanding, an approach repudiated in Bailey.
Roy, 928 F. Supp. at 1420. Significantly, in light of Bailey, the Roy court
has vacated that part of its opinion dealing with this issue and issued a
new opinion in which it finds that the salary arrangement was, in fact,
clear to the employees. See Roy v. County of Lexington, S.C., 948 F.
Supp. 529, 531 (D.S.C. 1996).

                    7
the "failure to obey the statute was both in good faith and predicated
upon such reasonable grounds that it would be unfair to impose upon
him more than a compensatory verdict." Brinkley-Obu, 36 F.3d at 357
(quoting Richard v. Marriott Corp., 549 F.2d 303, 306 (4th Cir.), cert.
denied, 433 U.S. 915 (1977)) (internal quotation marks omitted).
Despite certain language in Richard requiring the employer to estab-
lish both good faith and reasonableness, see also Burnley, 730 F.2d
at 141-42 (Winter, C.J., concurring and dissenting) (noting that
Fourth Circuit precedent establishes such a two-prong test to excuse
liability from liquidated damages), we have previously found no
abuse of discretion when the court below was convinced only of one
prong. See, e.g., Brinkley-Obu, 36 F.3d at 357-58 (finding no abuse
of discretion where the court below was satisfied as to the employer's
good faith).

In the instant case, the district court stated in its opinion a number
of the factors that established to its satisfaction that Wells had had
reasonable grounds to believe he was not violating FLSA. See
Mayhew, slip op. at 8-9. Although the district court did not explicitly
address the good-faith prong of Wells's burden, we believe that the
factors the district court did discuss, as well as other aspects of the
record before both us and the court below, plainly establish Wells's
objective good faith in failing to pay Mayhew for the overtime spent
caring for the tracking dog. See Clifton D. Mayhew, Inc. v. Wirtz, 413
F.2d 658, 661-62 (4th Cir. 1969) (holding that the good-faith prong
requires an objective, not subjective, good faith). 2

Perhaps most probative of Wells's good faith and reasonableness
is the fact that Mayhew individually owned the dog, unlike the law
enforcement agency-owned dogs in every other dog-care case. Thus
Mayhew would have had to spend the same amount of time feeding
and caring for the dog whether it was used by the Department or not.
Moreover, Mayhew owned a second dog, and much of the time spent
caring for and feeding the tracking dog was simultaneously spent on
this second dog. Therefore, even if Mayhew had not owned the track-
ing dog, Mayhew still would have spent this time with the second
_________________________________________________________________
2 Mayhew's exclusive reliance on case law from the District of Colum-
bia Circuit, to the exclusion of our own relevant precedent, results in
Mayhew misunderstanding the requirements to prevail before us.

                    8
dog. The district court also found probative of Wells's reasonableness
the quid pro quo agreement by which the Department paid for the
dog's food, veterinary care, and training tools in exchange for May-
hew's activities with the dog. See Mayhew, slip op. at 8. In other
words, Wells could have reasonably believed that Mayhew was
already being compensated for his dog-time. This evidence plainly
supports the district court's conclusion that Wells possessed reason-
able grounds to believe he was not violating FLSA. 3

Not only do these factors establish Wells's objective good faith,
but such a conclusion is bolstered by other testimony before the court
below. Mayhew himself testified that he never approached Wells
about receiving comp time for his overtime work with the dog, and
that Wells gave him complete freedom to determine how much time
to spend with the dog. Lt. Stephen Rush, Mayhew's immediate super-
visor, testified that Mayhew consistently recorded his overtime when
the dog was used for tracking purposes and that Mayhew received the
appropriate comp time for those periods but that Mayhew never even
claimed time for feeding and training the dog. And, finally, Wells tes-
tified that had Mayhew claimed the time for feeding and training from
the outset, then he could have gotten appropriate comp time for it.
This cumulative evidence objectively establishes that Wells acted in
good faith when he failed to compensate Mayhew for the overtime
spent caring for the dog since Mayhew received comp time for all
overtime he did claim and never sought comp time for the time spent
caring for the dog.

The evidence plainly demonstrates that the court below was satis-
fied as to Wells's good faith and reasonableness, 4 a conclusion fully
_________________________________________________________________
3 The district court also noted that Wells could have reasonably
believed that Mayhew's care and training of the dog was not a "principal
activity" of a D.A.R.E. officer within the meaning of 29 U.S.C. § 254.
See Mayhew, slip op. at 8.
4 Additional support for the view that the court below was satisfied as
to Wells's good faith is found in its analysis of the statute of limitations
issue, not on appeal here, in which it determined that Wells lacked the
"willfulness" necessary to subject him to the three-year statute of limita-
tions under 29 U.S.C. § 255(a). See Mayhew , slip op. at 4-6; cf. Brinkley-
Obu, 36 F.3d at 357 (noting that a jury's finding of non-willful behavior
on the statute of limitations issue can provide an objective basis to prem-
ise a finding of good faith on the liquidated damages issue (citing Fowler
v. Land Management Groupe, Inc., 978 F.2d 158, 163 (4th Cir. 1992)).

                    9
supported by the record. Moreover, in the totality of these circum-
stances, it would be unfair to impose on Wells more than a compensa-
tory verdict. See Brinkley-Obu, 36 F.3d at 357. Because the district
court did not abuse its discretion in denying liquidated damages, see
id. (reviewing the district court's denial of liquidated damages for
abuse of discretion); Burnley, 730 F.2d at 140 (same), we therefore
affirm the judgment below.

IV.

The evidence demonstrates that Wells and Mayhew had a clear
mutual understanding that Mayhew was employed on a fixed salary
for fluctuating hours. Mayhew knew he would never be paid any dif-
ferent amount than his fixed salary no matter how many hours he
worked since the Department's policy was only to allow comp time.
Following our de novo review, we conclude that the district court
properly applied the "half time overtime" method permitted by 29
C.F.R. § 778.114 in calculating Mayhew's overtime pay.

Although an employer faces a substantial burden in avoiding liabil-
ity for liquidated damages under FLSA, the evidence in this case
establishes that the district court was satisfied that Wells acted in
good faith in not compensating Mayhew for the overtime with the dog
and with reasonable grounds for believing that not doing so was not
a violation of FLSA. Mayhew owned the dog; Mayhew was compen-
sated, in kind, with dog food, veterinary care, and supplies; Mayhew
received comp time for all overtime logged, including time spent uti-
lizing the dog on investigations; and Mayhew never asked Wells
whether he could be compensated for time spent caring for and feed-
ing the dog. The district court did not abuse its discretion in denying
liquidated damages.

We affirm the judgment below in its entirety.

AFFIRMED

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