Ninth Circuit Holds that Cash Paid “In Lieu” of Health Benefit Coverage Must be Included in the “Regular Rate of Pay”

Earlier this month, the Ninth Circuit issued its opinion in the Flores case – holding that amounts paid to employees in lieu of health benefits (for example, when an employee can show proof of alternative coverage) must be included in the regular rate for purposes of calculating overtime under the FLSA. (Flores v. City of San Gabriel, 9th Circuit Court of Appeals Nos. 14-56421 and 14-56514.) Moreover, the Ninth Circuit also concluded that because of the high percentage of cash in relationship to the overall plan cost to the City of San Gabriel, the entire cost of the insurance must be counted toward the regular rate, regardless of whether it is actually paid in cash to the employee.

It is important to note that the Flores case – which was handled by the Liebert Cassidy firm – is not yet final. A petition for rehearing was filed on June 16, and our firm is representing the League of California Cities as an amicus curiae in support of the City of San Gabriel.

We understand that a number of lawsuits have already been filed against public agencies by the Mastagni firm, and Flores is apparently spawning the next wave of FLSA litigation.

We will keep our clients informed as to the status of this development.

For more information, contact:
Art Hartinger (ahartinger@publiclawgroup.com, (510) 995-5800)