Mullally v. Waste Management of Massachusetts, Inc.

The plaintiffs, who represent a class of waste disposal truck drivers and laborers currently or formerly employed by the defendant, Waste Management of Massachusetts, Inc. (Waste Management), commenced a suit against Waste Management alleging, inter alia, that its payroll formula violated G. L. c. 149, § 27F, which mandates a particular minimum wage for certain public works contracts, and G. L. c. 151, § 1A, which governs overtime compensation. On cross motions for summary judgment, the judge ruled that Waste Management’s payroll formula complied with G. L. c. 149, § 27F, but violated G. L. c. 151, § 1A.2

The judge, on Waste Management’s unopposed motion, reported the following two questions of law to the Appeals Court pursuant to Mass. R. Civ. R 64, as amended, 423 Mass. 1410 (1996):

“1) Whether the defendant complied with prevailing wage law [G. L. c. 149, § 27F,] by paying wages which, when averaging overtime and straight earnings, meet the prevailing wage rate;

“2) Whether the defendant violated prevailing overtime [wage] law [G. L. c. 151, § 1A,] by calculating overtime wages using a regular hourly rate less than the prevailing wage eligible employees must be paid.”

We granted Waste Management’s application for direct appellate review. Because the judge concluded that there was no *528violation of the prevailing wage law and the plaintiffs did not challenge that ruling or brief it on appeal, we find it unnecessary to answer the first question.3

Statutory framework. General Laws c. 151, § 1A, provides, in relevant part:

“Except as otherwise provided in this section, no employer in the commonwealth shall employ any of his employees ... for a work week longer than forty hours, unless such employee receives compensation for his employment in excess of forty hours at a rate not less than one and one half times the regular rate at which he is employed.”3 4

General Laws c. 149, § 27F, which is set out in the margin,5 requires that the prevailing wage rate set by the director of the Department of Labor6 be paid to waste disposal employees performing under municipal contracts. See Perlera v. Vining Disposal Serv., Inc., 47 Mass. App. Ct. 491, 496 (1999) (§ 27F ap*529plies to municipal waste disposal contracts). An employer may prorate on an hourly basis qualifying health and welfare benefits paid on behalf of an employee and deduct that amount from the prevailing wage rate. G. L. c. 149, § 27F.

Facts. We summarize the undisputed material facts. Waste Management provides solid waste disposal services to various municipalities. Waste Management must pay employees the prevailing wage rate for work performed under contracts with those municipalities.

Waste Management utilizes a complicated payroll formula that assigns employees engaged in prevailing wage work a “base pay rate” below the applicable prevailing wage rate. It determines the base pay rate based on an assumption as to how many hours, including overtime hours, an employee typically works each week,7 and uses the base pay rate to calculate overtime pay, paying the employee the base pay rate for the first forty, “straight time” hours worked and one and one-half times the base pay rate for each overtime hour. Waste Management then averages the employee’s nonovertime and overtime pay in order to meet or exceed the prevailing wage rate after the deduction of qualifying health and welfare benefits. By using this base pay rate, Waste Management uses overtime compensation to “influence” an employee’s gross wages.8 When an employee’s average hourly rate in a given week falls below the prevailing wage rate because the *530employee has worked fewer hours than projected, Waste Management issues a “buffer check” payment to bring the employee’s earnings into compliance with G. L. c. 149, § 27F.9,10

Discussion. Waste Management contends that so long as employees are paid an hourly wage not less than the prevailing wage after qualifying deductions for all hours worked, including overtime, the requirements of G. L. c. 151, § 1A, are satisfied. We disagree.

*531We interpret G. L. c. 151, § 1A, “according to the intent of the Legislature, as evidenced by the language used, and considering the purposes and remedies intended to be advanced.” Glasser v. Director of the Div. of Employment Sec., 393 Mass. 574, 577 (1984). “We do not overlay the words of a statute with a convention of statutory construction that ‘would frustrate the general beneficial purposes of the legislation.’ ” Suffolk Constr. Co. v. Division of Capital Asset Mgt., 449 Mass. 444, 454-455 (2007), quoting Harborview Residents’ Comm., Inc. v. Quincy Hous. Auth., 368 Mass. 425, 432 (1975).

Waste Management’s use of a base pay rate below the prevailing wage rate frustrates the purposes of G. L. c. 151, § 1A. General Laws c. 151, § 1A, was “intended to be ‘essentially identical’ ” to the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. § 207(a)(1) (2000). Swift v. AutoZone, Inc., 441 Mass. 443, 447 (2004), quoting Valerio v. Putnam Assocs. Inc., 173 F.3d 35, 40 (1st Cir. 1999). Compare 29 U.S.C. § 207(a)(1) (2000) with G. L. c. 151, § 1A. Accordingly, we ascribe the legislative purposes underlying the FLSA to G. L. c. 151, § 1A, see Poirier v. Superior Court, 337 Mass. 522, 527 (1958) (“The adjudged construction by the Federal courts is to be given to the subsequent enactment by the Legislature”), and conclude that G. L. c. 151, § 1A, aims to reduce the number of hours of work, encourage the employment of more persons, and compensate employees for the burden of a long workweek. See Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 423-424 (1945).11

In light of the purposes underlying G. L. c. 151, § 1A, Waste *532Management’s payroll formula is untenable. Waste Management evades the economic disincentive to have an employee work more than forty hours a week in that it ultimately pays the employee an hourly wage equal to or nearly equal to the prevailing wage rate regardless of whether the employee works overtime. Using the hypothetical in note 10, supra, an employee would receive $22 per hour regardless of whether the employee worked forty or fifty hours. Even if an employee received slightly more than $22 per hour for having worked some overtime,12 that marginal increase hardly provides Waste Management with the economic disincentive intended by G. L. c. 151, § 1A. Moreover, unlike employers who may hire more employees in order to avoid paying existing employees overtime, Waste Management obviates the need to hire additional employees by using the “influence” of overtime compensation on an employee’s gross earnings to produce an average hourly wage equal or nearly equal to the prevailing wage rate, which Waste Management would otherwise pay to additional employees. Waste Management’s payroll formula also does not compensate employees for longer work weeks, as illustrated by the fact that an employee performing prevailing wage work receives approximately the same hourly wage regardless whether the employee works overtime.

The frustration of the purpose of G. L. c. 149, § 27F, provides yet another reason for rejecting Waste Management’s payroll formula. See Larson v. School Comm. of Plymouth, 430 Mass. 719, 724 (2000) (related statutes should be construed harmoniously and to implement intent of Legislature). The prevailing wage law endeavors to achieve parity between the wages of workers engaged in public construction projects and workers in the rest of the construction industry. See McCarty’s Case, 445 Mass. 361, 377 (2005) (Sosman, J., concurring); Felix A. Marino *533Co. v. Commissioner of Labor & Indus., 426 Mass. 458, 460 (1998). Waste Management’s formula subverts the purpose of G. L. c. 149, § 27F, by enabling Waste Management to offer its services for less than what is customarily charged by its competitors for nonpublic works contracts. In the hypothetical in note 10, supra, Waste Management may offer its services for substantially less ($20 per hour for straight time and $30 for each overtime hour) than other similarly situated service providers (who pay employees $22 per hour for straight time and $33 for overtime) by using a base pay rate lower than the prevailing wage rate to calculate overtime compensation. In so doing, Waste Management undermines the wage protections embodied in the prevailing wage laws. See McCarty’s Case, supra at 377 (Sosman, J., concurring); Felix A. Marino Co. v. Commissioner of Labor & Indus., supra at 460.

Our conclusion that Waste Management’s payroll scheme violates G. L. c. 151, § 1A, is consistent with an opinion letter issued by the division of occupational safety, the division of the Department of Labor charged with implementing G. L. c. 149, § 27F, and G. L. c. 151, § 1A, during this litigation.13 The division concluded that Waste Management’s payroll formula violated G. L. c. 151, § 1A, because G. L. c. 149, § 27F, required Waste Management to pay its employees an hourly wage equal to the prevailing wage rate minus qualifying deductions and that overtime compensation should have been calculated based on that figure. Because the agency’s interpretation is not contrary to the plain language of the statutes or their underlying purposes, it is entitled to deference. See Teamsters Joint Council No. 10 v. Director of the Dep’t of Labor & Workforce Dev., 447 Mass. 100, 109-110 (2006). Contrast Swift v. AutoZone, Inc., supra at 450 (opinion letter not entitled to deference because it was contrary to law).14

*534One final issue warrants discussion. The parties have expended considerable energy debating the meaning of the term “regular rate” in G. L. c. 151, § 1A.15 Title 455 Code Mass. Regs. § 2.02(3) (2003) provides that the overtime rate, subject to certain exemptions not relevant here, shall be “[o]ne and one half times an employee’s regular hourly rate, such regular hourly rate not to be less than the basic minimum wage . . . ,”16 “Regular hourly rate” refers to “[t]he amount that an employee is regularly paid for each hour of work.” 455 Code Mass. Regs. § 2.01 (2003). The regulation further explains:

“When an employee, other than an employee exempt from overtime under [G. L.] c. 151, § 1A, is paid on a piece work basis, salary, or any basis other than an hourly rate, the regularly [szc] hourly rate shall be determined by *535dividing the total hours worked during the week into the employee’s total weekly earnings. Regardless of the basis used, whether time rate, commission basis or piece rate, an employee shall be paid not less than the applicable minimum wage each week. The regular hourly rate shall include all remuneration for employment paid to, or on behalf of, the employee, but shall not include: ...(b) sums excluded under 29 U.S.C. § 207(e).” (Emphasis added.)

Id.

“[I]nterpret[ing] [the] regulation in the same manner as a statute, and according to traditional rules of construction,” Warce-wicz v. Department of Envtl. Protection, 410 Mass. 548, 550 (1991), the clear implication of 455 Code Mass. Regs. § 2.01 is that the rate paid to hourly employees forms the basis for calculating overtime and that that rate shall not be less than the “applicable minimum wage.” See id. The applicable minimum wage for public works contracts is the prevailing wage. This interpretation finds support in other sections of G. L. c. 149 that describe the prevailing wage rate as a minimum wage rate. See G. L. c. 149, § 26 (minimum wage rate). See also G. L. c. 149, § 27 (minimum rate or rates of wages). If, as Waste Management contends, the term “applicable minimum wage” was intended to refer to the basic minimum wage, see G. L. c. 151, § 1; 455 Code Mass. Regs. § 2.02(1), then the regulations would have explicitly stated so. This is especially true where, as here, the regulations use the term “basic minimum wage,” 455 Code Mass Regs. § 2.02(1), to refer to the absolute floor on wages set by G. L. c. 151, § 1. See Ginther v. Commissioner of Ins., 427 Mass. 319, 324 (1998) (“Where the Legislature used different language in different paragraphs of the same statute, it intended different meanings”).17 Even if the regulations do not expressly require an employer to calculate overtime using the prevailing wage rate, we will not interpret the regulations “in a way that produces a result which ‘is *536contrary to the plain language of [G. L. c. 151, § 1A,] and its underlying purpose.’ ” TBI, Inc. v. Board of Health of N. Andover, 431 Mass. 9, 13 (2000), quoting Protective Life Ins. Co. v. Sullivan, 425 Mass. 615, 618 (1997).

Conclusion. For the foregoing reasons, we answer the second question, “Yes,” and find it unnecessary to answer the first question. The case is remanded to the Superior Court for further proceedings consistent with this opinion.

So ordered.