Alan L. Demos and Ronald Graham v. City of Indianapolis and Bart Peterson , Mayor of the City of Indianapolis

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 01-2952
A LAN L. D EMOS AND R ONALD G RAHAM ,
Plaintiffs-Appellants,
v.
C ITY OF I NDIANAPOLIS AND B ART P ETERSON ,
M AYOR OF THE C ITY OF I NDIANAPOLIS ,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 99-C-22—Sarah Evans Barker, Judge.
____________
A RGUED N OVEMBER 26, 2001—D ECIDED A UGUST 30, 2002
____________
Before R OVNER , D IANE P. W OOD , and W ILLIAMS , Circuit
Judges.
W ILLIAMS , Circuit Judge. Plaintiffs Alan L. Demos
and Ronald Graham brought suit against the City of In-
dianapolis and Mayor Bart Peterson (collectively “the
City”), seeking unpaid overtime pay and vacation time
credits allegedly due them under the Fair Labor Stan-
dards Act, 29 U.S.C. §§ 201-219 (“the FLSA” or “the Act”).
The plaintiffs claim that because the City’s policies re-
quired that their pay be docked if they failed to work
an eight-hour day, they were not salaried employees un-

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2 No. 01-2952
1 An “exempt” employee is one who is not subject to the over-
time provisions of the Fair Labor Standards Act. See 29 U.S.C.
§ 213(a)(1).
2 During disposition of this case below, defendants substituted
current Mayor Bart Peterson for former Mayor Goldsmith pur-
suant to Fed. R. Civ. P. 25(d)(1).
der the Act. Rejecting these arguments, the district court
granted summary judgment to the City, holding that
plaintiffs were salaried executive or administrative em-
ployees exempt from the FLSA, 1 and as government em-
ployees were subject to the Department of Labor’s pub-
lic accountability exception to its no-docking rule. We
agree with the district court and affirm the judgment below.
I. BACKGROUND
This dispute began almost a decade ago, when the City
of Indianapolis elected Mayor Stephen Goldsmith.2 Gold-
smith made aggressive changes to staffing and manag-
ing City government by eliminating employee positions
in several of the City’s major agencies and departments.
In conjunction with these changes, employees classified
as exempt from the Act were instructed to record no more
than eight hours per day and forty hours per week in
their time records—no matter the hours actually worked
beyond that amount. Select salaried supervisors received
additional pay for working extra hours; however, other
salaried supervisors, including the plaintiffs, did not re-
ceive that additional pay. The City also implemented a
policy of docking salaried employees if they worked less
than a forty-hour week or less than eight hours per day.
Under the City’s policy, if an employee had a partial day
absence, accrued benefit leave would have to cover that
absence, or pay would be docked from the weekly salary.

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No. 01-2952 3
3 Demos v. City of Indianapolis, 139 F. Supp. 2d 1026 (S.D. Ind.
2001). Other parties to the original action were either dismissed
or settled their claims, leaving only Demos’s and Graham’s claims
for this appeal.
As a result of reduced staffing by the City, Demos and
Graham claim that they were required to routinely work
more than forty hours per week and their supervisory
duties “gradually diminished.” Plaintiffs filed this action
claiming that they were no longer exempt employees,
and the City’s failure to pay them overtime violated the
Act. After significant discovery and motion practice, the
City moved for summary judgment.
Initially, the district court granted summary judgment
in part to the City, but found that it failed to provide
sufficient undisputed facts regarding whether its employees
were paid pursuant to principles of public accountabil-
ity—and therefore whether it was permitted to dock a
salaried employee’s pay for time not worked. Demos v. City
of Indianapolis, 126 F. Supp. 2d 548 (S.D. Ind. 2000). The
district court later reconsidered and found that although
the City initially failed to prove that it was entitled to the
public accountability exception, the court could take ju-
dicial notice of various Indiana laws that, coupled with
the previously admitted and undisputed evidence, dem-
onstrated that the City proved that it was publicly ac-
countable. 3 Demos and Graham appeal.
II. ANALYSIS
We review the district court’s grant of summary judg-
ment de novo. See Albiero v. City of Kankakee, 246 F.3d
927, 931-32 (7th Cir. 2001). When reviewing cases decided
on summary judgment, we construe all facts and draw
all reasonable inferences in the light most favorable to

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4 No. 01-2952
the nonmoving party—in this case the plaintiffs. See id.
Applying these principles, we must decide whether the
district court properly determined that: (1) notwithstand-
ing its policy of docking employees for partial-day ab-
sences, the City meets the salary basis test because it pays
its employees pursuant to principles of “public account-
ability” and (2) plaintiffs performed executive or adminis-
trative duties as defined by the regulations.
Pursuant to the FLSA, employees must be paid at least
one and one-half the amount of their regular wages for
work beyond forty hours per week or eight hours per day.
Persons who are employed “in a bona fide executive,
administrative, or professional capacity,” however, are
exempt from the Act’s overtime provisions. 29 U.S.C.
§ 213(a)(1); see also 29 U.S.C. § 207(a)(1). The City claims
that Demos and Graham are exempt under the Act, pur-
suant to a three-part regulation-based analysis common-
ly referred to as the “short test.” See 29 C.F.R. §§ 541.119,
541.214, 541.315.
The short test has three elements: (a) the salary basis
test, (b) the employee’s classification as professional, ad-
ministrative, or executive, and (c) the employee’s duties
test. See 29 C.F.R. §§ 541.1, 541.118; see also 29 C.F.R.
§§ 541.2, 541.3. The plaintiffs claim that the City failed
to prove each prong of the short test.
A. The Salary Basis Test
Under the short test’s first prong, the City is required
to prove that Demos and Graham were paid on a salary
basis. Because Demos and Graham were paid more than
$250 per week, the City must show that each plaintiff’s
salary was also: (a) a pre-determined amount constitut-
ing all or part of his compensation and (b) not subject to
reduction because of variations or quantity of the work
performed. See 29 C.F.R. § 541.118(a). The City bears the

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No. 01-2952 5
4 See Subsection 118(a); 19 Fed. Reg. 4405-06 (July 17, 1954); see
also Donovan v. Carls Drug Co., Inc., 703 F.2d 650, 652 (2d Cir.
1983) (finding under the Act that “a salaried professional em-
ployee may not be docked pay for fractions of a day of work
missed”).
burden of proof here because the FLSA “is a remedial act
and exemptions from its coverage are to be narrowly
construed against employers.” Klein v. Rush-Presbyterian-
St. Luke’s Medical Center, 990 F.2d 279, 282 (7th Cir. 1993);
see also Bankston v. Illinois, 60 F.3d 1249, 1252 (7th Cir.
1995).
If an employee’s salary is docked for partial-day ab-
sences, the regulations presume that the employee is not
paid on a salary basis. See Bankston, 60 F.3d at 1253; 29
CFR § 541.118. 4 At its inception in 1938, the Act (and there-
fore the salary basis test) applied only to private sector
employers. See 29 U.S.C. § 203(d) (1940 ed.), 5 Fed. Reg.
4,077 (Nov. 7, 1940) (salary basis test). However, in 1974,
Congress amended the Act to extend its coverage to virtu-
ally all employees of state and local governments, except
those employees that perform public safety functions. See
Pub. L. No. 93-259, § 6, 88 Stat. 58-62. Although the Su-
preme Court initially found that this extension of the
Act violated the Tenth Amendment, see National League
of Cities v. Usery, 426 U.S. 833 (1976), it later held that
the Act’s provisions were valid as extended to state and
local employees. See Garcia v. San Antonio Metropolitan
Transit Authority, 469 U.S. 540, 556-57 (1985).
In contrast to private sector employers, some govern-
ment employers dock the pay of salaried workers for
absences of even one hour during a forty hour work week,
either because they are required by law to keep track of
individual employees’ hours or because the public expects
government workers to be available during normal busi-
ness operating hours. See Hilbert v. District of Columbia,

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6 No. 01-2952
23 F.3d 429, 435 (D.C. Cir. 1994). Under this arrangement,
many state and local governments do not pay their sal-
aried employees in a fashion consistent with the salary
basis test. See 57 Fed. Reg. 37,677 (Aug. 19, 1992). In other
words, whether a government employee’s wages are docked
is not a good indicator of whether the employee is a bona
fide executive, administrative, or professional employee.
In response to this problem, the Department of Labor
developed a regulation which allows government employers
to dock employees’ pay if the docking is pursuant to a
system of public accountability:
An employee of a public agency . . . shall not be
disqualified from exemption . . . on the basis that
such employee is paid according to a pay system
established by statute, ordinance, or regulation, or
by a policy or practice established pursuant to
principles of public accountability, under which the
employee accrues personal leave and sick leave
and which requires the public agency employee’s
pay to be reduced or such employee to be placed
on leave without pay for absences for personal
reasons or because of illness for not less than one
workday when accrued leave is not used by an
employee because—
(1) permission for its use has not been sought or
has been sought and denied;
(2) accrued leave has been exhausted; or
(3) the employee chooses to use leave without
pay.
29 C.F.R. § 541.5d(a).
See Letter Ruling, Dept. of Labor, Wage and Hour Divi-
sion (Jan 9, 1987); 56 Fed. Reg. 45,824-25 (Sept. 6,
1991); 57 Fed. Reg. 37,666 (Aug. 19, 1992). This regula-
tion is commonly known as the “public accountability” ex-

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No. 01-2952 7
5 We recently addressed this issue in Mueller v. Reich, 54 F.3d
438, 442 (7th Cir. 1995), vacated on other grounds, Wisconsin
v. Mueller, 519 U.S. 1144 (1997), in which we acknowledged
that the principle is “deeply rooted in the American political
culture” and noted that citizens are “suspicious of their civil
servants” and demand “public accountability for every minute, or
at least every hour.” But Mueller did not require us to directly
address the scope of the exception.
6 The Department of Labor defines it, in part, as “a broad con-
cept that forms the foundation for many governmental adminis-
trative practices [whereby] elected officials and public agencies
are held to a higher level of responsibility under the public trust
that demands effective and efficient use of public funds in order
to serve the public interest.” 57 Fed. Reg. 37,666 (Aug. 19, 1992).
ception to the no-docking rule contained within the salary
basis test.
There is no precise definition of public accountability, and
neither our previous cases 5 nor the text of the regulation
attempt to create one. 6 However, under the regulation’s
plain language, a government employer can meet the re-
quirements of the salary basis test, notwithstanding its
docking policy, if the docking policy was “established pur-
suant to principles of public accountability.” This suggests
that providing proof of the government’s purpose for
creating or maintaining the pay system is relevant to de-
termining whether the exception applies. But, at a mini-
mum, the City must prove that its policy is consistent
with the government’s efforts to maintain a precise ac-
counting of its employees’ hours for reasons that extend
beyond calculating an appropriate salary, such as avoid-
ing ghost-payrolling problems.
Applying these principles to the facts of this case, we
conclude, as the district court did, that the City’s undis-
puted evidence that plaintiffs’ compensation was consis-
tent with public accountability principles qualifies it for

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8 No. 01-2952
the exemption under 29 C.F.R. § 541.5d(a)(1). First, the
City cites Indiana’s “Ghost Employment Statute”, claiming
that the statute makes it publicly accountable for prevent-
ing non-working employees, who do not request or are
denied leave time, from receiving compensation. Under
that statute, “a person employed by a governmental en-
tity who, knowing that he has not been assigned any
duties to perform for the entity, accepts property from the
entity commits ghost employment, a Class D felony.” See
Ind. Code § 35-44-2-4(c); Fadell v. State, 450 N.E.2d 109,
118 (Ind. Ct. App. 1983).
The City also claims that its Code of Ethics prevents it
from paying employees for not working during a regularly
scheduled workday, which is evidence of its public ac-
countability. The City’s Code of Ethics specifies that:
No officer or employee shall use or permit the use
of any individual, funds or property under his or
her official control, direction or custody, or of any
funds or property of an agency, for a purpose
which is, or to a reasonable person would appear
to be, for the private benefit of an officer or em-
ployee or any other person.
Indianapolis Municipal Code, § 293-105(b).
The City’s final undisputed evidence of its public ac-
countability also relates to work week scheduling. The
City’s employee manual explains that the “job perform-
ance and personal conduct of each employee impact di-
rectly on the public’s trust,” and details numerous rules
designed to establish procedural safeguards for the on-
time job performance of each public employee. In addi-
tion, the employee manual makes clear that the leave
policies, flex-time, and workplace hours are to be set
by department supervisors, who have final authority
over such matters. In accordance with these guidelines,
the City also points to Indiana Code § 36-3-6-3, which

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No. 01-2952 9
7 Compare Abshire v. County of Kern, 908 F.2d 483, 486-87 (9th
Cir. 1990) and Brock v. Claridge Hotel & Casino, 846 F.2d 180,
184-85 (3d Cir. 1988) (both finding the practice inconsistent with
payment on a salary basis) with York v. City of Wichita Falls,
944 F.2d 236, 242 (5th Cir. 1991) and Hartman v. Arlington
County, 720 F. Supp. 1227, 1229 (E.D. Va. 1989), aff’d, 903 F.2d
290 (4th Cir. 1990) (finding hourly based overtime compatible
with payment on a salary basis).
requires that “salaried employees . . . work a regularly
scheduled work week, in accordance with the sched-
ule of compensation.” We agree with the City that these
explicit requirements regarding an employee’s work
week scheduling are further proof of its public account-
ability, because Indiana law requires that the working
hours of each employee be fully accounted for.
Rather than directly addressing this evidence, plaintiffs
argue that the City’s overtime payments on an hourly
basis to other salaried employees makes those employees,
as well as plaintiffs, exempt under the Act and entitled
to hourly overtime. While it is true that other salaried
employees received discretionary payments that appear to
be calculated solely based on hours worked in excess of
forty hours per week, this practice is not necessarily
inconsistent with the salary basis test if it is a part of
a bonus or incentive scheme. See 29 C.F.R. § 541.118(b)
(“[a]dditional compensation besides the salary is not in-
consistent with the salary basis of payment,” as long as it
is part of a bonus or incentive scheme). We note that
our sister courts are divided as to whether the payment
of bonus monies in this manner meets or defeats an em-
ployer’s proof of payment on a salary basis. 7 However, we
need not decide that issue here, because the plaintiffs
never received a discretionary payment. Therefore, they
cannot use discretionary payments to others as a basis
for their claims that such discretionary payments, if ap-
plied to them, would make them hourly employees.

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10 No. 01-2952
8 Neither party claims that the plaintiffs were employed in a
“professional” capacity.
B. Short Test—Prongs Two and Three: The Capacity and
Duties Tests
Although we have found that the City has met the sal-
ary basis test, it is also required to prove that: (1) plain-
tiffs were employed in professional, administrative, or
executive capacities 8 and (2) plaintiffs either primarily
managed more than two employees or performed manage-
ment or operations work that required the exercise of
discretion and independent judgment. See 29 C.F.R.
§§ 541.119, 541.214, 541.315.
1. Demos’s capacity and duties were administrative.
The parties agree that the City’s only possible over-
time pay exemption for Demos arises under his capacity
as an administrative employee. That requires the City
to prove that Demos’s primary duties were “either the
performance of office or nonmanual work directly related
to management policies or general business operations
of the employer or the employers.” 29 C.F.R. § 541.214(a).
In addition, the City must show that his primary duties
included work “requiring the exercise of discretion and
independent judgment.” Id.
Demos only challenges the district court’s conclusion
that he exercised discretion and independent judgment in
his employment in the Department of Capital Asset Man-
agement from 1997 to 1998. In his deposition, Demos tes-
tified that he spent most of his time “putting out fires” for
his supervisor and serving as “the buffer between what
[his supervisor] wanted done with what the users of
the other Parks Department(s) wanted done out in the
field.” In addition, he recommended modifications to the

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No. 01-2952 11
department’s asset plan, which included negotiating with
managers to figure out how funding could be reduced
for some projects in order to provide sufficient funding
for other projects. He also performed disability compli-
ance work and served as a representative to the public, the
park board, and outside contractors. Demos’s supervi-
sor relied heavily upon Demos’s advice regarding various
park projects and facilities matters.
Notwithstanding his deposition testimony, Demos
submitted an affidavit claiming that he spent forty-five
percent of his time filing various documents and twenty
percent of his time in project management activities.
Calculating that more than fifty percent of his time was
spent on duties that did not call for the exercise of dis-
cretion and judgment, he argues that the district court
erred in finding him an exempt administrative employee.
We reject this rigid approach. Although the Secretary’s
regulations suggest that the primary duty of an employee
is that work that constitutes more than fifty percent of his
or her time, the Secretary’s guidelines caution that time
is not the only test. See 29 C.F.R. § 541.103.
Although the totality of plaintiff’s duties are relevant,
we may also consider the relative importance of those
duties to the employer, the frequency that the employee
exercises discretion, and the employee’s autonomy and
authority in his or her organization. Id. The employee’s
primary duty “is that which is of principal importance
to the employer, rather than collateral tasks which
may take up more than fifty percent of his or her time.”
Reich v. Wyoming, 993 F.2d 739 at 742 (10th Cir. 1993)
(considering and rejecting plaintiff’s majority-time ap-
proach to identifying an employee’s primary duties).
Considering his deposition testimony and the other
evidence in the light most favorable to Demos, we find
that virtually all of Demos’s duties were administrative.

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12 No. 01-2952
9 29 C.F.R. § 541.207(a) notes, in part, that “discretion and
independent judgment [involve] the comparison and the evalua-
tion of possible courses of conduct and acting or making a deci-
sion after the various possibilities have been considered. . . .” Like-
wise, Demos’s recommendations for action included financial
decisions and other commitments that are explicitly identified
in 29 C.F.R. § 541.207(d)(2).
See 29 C.F.R. §§ 541.2(e)(2), 541.214(a). At a minimum,
“putting out fires” for his supervisor meets the discretion-
ary component of § 541.214(a), and recommending the
proper allocation of finances and working with outside
groups meets the “independent judgment” component as
well. 9 The only way that we could conclude that Demos’s
activities were primarily non-administrative would be
to ignore his deposition testimony and the other undis-
puted evidence. However, as we made clear in Piscione
v. Ernst & Young, LLP, 171 F.3d 527 (7th Cir. 1999), it
is Demos’s deposition testimony that controls—not his
belated and self-serving affidavit. Lacking any other
basis for his non-exemption under the short test, no rea-
sonable juror could conclude that Demos was at any time
anything but an exempt administrative employee.
2. Graham’s capacity and duties were executive.
The parties agree that the City’s only possible over-
time exemption for Graham arises under his capacity as
an executive employee. That capacity requires the City
to prove that Graham’s primary duties were “manage-
ment of the enterprise in which the employee is em-
ployed or of a customarily recognized department or
subdivision thereof.” 29 C.F.R. §§ 541.119(a), 541.1(f). In
addition, the City must prove that Graham’s primary duties
included “the customary and regular direction of the work
of two or more other employees therein.” Id.

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No. 01-2952 13
10 As with Demos, a minor dispute about the increasing burden
of clerical work shouldered by Graham led, in part, to his decision
to file this action. Although Graham certainly demonstrates that
he was burdened by the lack of support staff, shouldering part of
this burden does not, by itself, render him a non-exempt em-
ployee. See also 29 C.F.R. §§ 541.108(a) and (b) (considering
this form of work to be directly related to management and su-
pervision of employees).
The undisputed evidence shows that Graham was an
executive employee. Graham’s position was, on its face, one
of executive responsibility. In fact, as Facilities Mainte-
nance Supervisor, most of his work was spent manag-
ing other employees. For these reasons, Graham concedes
that at least forty percent of his time, he was engaged in
exempt executive management duties and managing
more than two employees. However, he argues that the
remainder of his executive time was spent in record keep-
ing, making him a non-exempt employee. We disagree.
The Act’s implementing regulations, see 29 C.F.R.
§ 541.103(b), speak directly to Graham’s claim, because
they specify that “the keeping by a supervisor of production
or sales records of his own subordinates for use in super-
vision or control [is] exempt work.” 10 Therefore, Graham’s
challenge fails for two reasons: his primary duties were
all clearly executive and the large majority of his time
was spent performing those duties. Both of these fac-
tors qualify him as an exempt employee under three
separate sections of the regulations. See 29 C.F.R.
§§ 541.119(a), 541.1(f), 541.103. Lacking any other basis
for his non-exemption under the short test, no reason-
able juror could conclude that Graham was at any time
anything but an exempt executive employee.
In sum, we conclude that there are no material issues
of fact regarding the plaintiffs’ status as salaried admin-
istrative or executive employees exempt from the FLSA.

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14 No. 01-2952
11 As we mentioned in Talano v. Northwestern Medical Faculty
Foundation, 273 F.3d 757, 760 n.1 (7th Cir. 2001), a “motion to
reconsider” does not exist under the Federal Rules of Civil Pro-
cedure. The City’s motion pursuant to Rule 59(e) is properly
termed a motion to alter or amend the judgment. See also, United
States v. Deutsch, 981 F.2d 299 (7th Cir. 1992).
C. The City’s Motion to Reconsider
Finally, the plaintiffs object to the decision of the dis-
trict court to grant summary judgment to the City on its
“motion to reconsider.” 11 They claim that this decision
was unfair for two reasons: (1) they object to the district
court’s taking judicial notice of previously unmentioned
Indiana statutes and (2) they object to the City’s provid-
ing substantive arguments on its public accountability
exception at such a late date. As to both issues, we review
for abuse of discretion. See, e.g., Waid v. Merrill Area Pub.
Sch., 130 F.3d 1268, 1272 (7th Cir. 1997).
The judicial notice issue is settled, because a district
court can always rely on public statutes. See Fed. R.
Evid. 201; see also Newcomb v. Brennan, 558 F.2d 825, 829
(7th Cir. 1977) (“matters of public record such as state
statutes, city charters, and city ordinances fall within the
category of ‘common knowledge’ and are therefore prop-
er subjects for judicial notice”).
Plaintiffs also claim that the district court should have
denied the motion because the City’s arguments were
untimely. The district court was well within its discretion
to admonish the City for its tardiness, which it did at
length. See Demos, 139 F. Supp. 2d at 1027-28. The dis-
trict court was also not required to accept the City’s late
arguments, but was within its discretion in doing so. A
review of the record shows that the City mentioned
the public accountability exception in its proposed jury
instructions, its case management plan, and briefly in
its motion for summary judgment. It is hard to see how

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No. 01-2952 15
12 The record shows that the parties must have raised the public
accountability exception prior to summary judgment, as evi-
denced by the district court’s initial rejection of that argument in
its first opinion. In a case like this, where a party opposes a sum-
mary judgment motion on multiple grounds, the opposing party
must “wheel out all its artillery to defeat it.” Caisse Nationale
de Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1270 (7th
Cir. 1996). To that end, we note that when the plaintiffs finally
were squarely presented with the City’s evidence of its public
accountability, they did not contest its substance.
USCA-97-C-006—8-30-02
the plaintiffs were prejudiced here, because they certain-
ly had an indication that the City’s public accountabil-
ity was at issue in this case. 12 After acknowledging on
the record that the City had not fully developed the law
appropriate to this case, the district court promptly and
honestly corrected the mistake in accordance with Rule
59. See, e.g., Russell v. Delco Remy Div. of Gen. Motors
Corp., 51 F.3d 746, 749 (7th Cir. 1995).
III. CONCLUSION
There are no material issues of fact with respect to the
City’s entitlement to the public accountability exception
to the salary basis test’s no-docking rule or with respect
to the classification and duties of the plaintiffs. Therefore,
we A FFIRM the district court .
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit

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