Sanders v. County of Ventura, 87 F.4^th 434 (9th Cir. 2023)

The Ninth Circuit affirmed the district court’s grant of summary judgment in favor of the employer (Ventura County) in this putative class action arising under the federal Fair Labor Standards Act (“FLSA”), brought by county firefighters and police officers who opted out of their union- and employer-sponsored health plans. The employees who opted out of these health plans received monetary compensation in return, however part of the compensation was deducted as a fee that was then used to fund the plans from which they had opted out. The employees argued that this opt-out fee should count as part of their “regular rate” of pay for purposes of calculating overtime compensation under the FLSA.

The Court held that these opt-out fees should not be considered part of the employees’ “regular rate” of pay. Instead, the fees should be exempted as “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing” health insurance, per the statutory exemption set forth in 29 U.S.C. § 207(e)(4). The opt-out fees deducted from the credit employees received was provided to their union, and employees had no ability to access this sum. The court also rejected an argument from the plaintiffs that the 29 U.S.C. § 207(e)(4) exception should only apply to contributions made to support plaintiffs’ own health care (not that of other employees).