FLSA2007-12 — Police officers working for city convention authority and section 7(p)(1)

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

FLSA2007-12

December 31, 2007

Dear Name*:

This is in response to your letter and follow-up communications requesting an opinion
concerning the applicability of section 7(p)(1) of the Fair Labor Standards Act (FLSA) to
officers of the City’s Police Department who perform security duties during their off duty hours
for the Name* (the “Authority”), a private non-profit corporation organized under state law.
1

As discussed more fully below, based on your representations, it is our opinion that the City
Police Department would not be obligated to include the hours worked by police officers on
special assignment to the Authority in calculating and paying overtime due them.

The Agreement and Lease regarding the City’s Convention Center/Arena attached to your letter
describes that in spring 2000, voters of the City approved the formation of the Authority to
manage the construction and operations of the new convention center. You state that the
Authority is charged with complete responsibility for and control over the development and
operation of the downtown convention center and arena, and its lease extends for 99 years. The
Authority has independent power to schedule the operation of the facility, to set fees, to rent
parts of the facility, and to grant concessions. It has no taxing power but receives its funding
from fees, rental charges, and other revenue generated at the facilities and, only for a period of
10 years, from the City’s annual budget. The Authority makes all decisions regarding the use
of funds it receives from any source, including those provided by the City. The Authority is
headed by a chief executive officer who reports to a five person board of directors appointed by
the Mayor and the City Council and confirmed by the City Council. Members of the board of
directors may only be removed for incompetence, neglect of duty, or malfeasance in office.

You further state that the Authority has its own payroll budget, negotiates its own pay scale,
offers its own pension and benefit plans, and maintains its own accounting system for
compensating employees and paying contracts for services. It has full power to hire and
compensate all personnel necessary to operate the facility.

The Authority anticipates hiring off-duty City police officers to provide security. Police
officers undertake these special details for the Authority voluntarily. Pursuant to the collective
bargaining agreement with the union representing police personnel, the off-duty employment
must first be approved by the Police Chief to ensure that the employment is not inconsistent
with the interests of the City. The terms of the security work for the Authority are negotiated
between the Authority and the individual officers. The City is not involved in paying the
officers for work done on behalf of the Authority.

1
Unless otherwise noted, any statutes, regulations, opinion letters, or other interpretive material cited in this letter
can be found at www.wagehour.dol.gov.

A follow-up discussion between the Deputy City Attorney and a member of my staff confirmed
that the Authority personnel do not participate in the City’s retirement system. The Authority
has the power to sue and be sued in its own name. Police officers would work for the City a
higher percentage of time than for the Authority. It was the Authority’s chief executive officer
who decided to employ officers of the Police Department, with no City involvement in this
personnel decision. Follow-up correspondence states that the City’s $2 million yearly
contribution to the Authority initially represented 10.07% of the Authority’s total operating
income. However, the Authority’s operating income is expected to increase in the coming
years and, with the City’s contribution remaining unchanged, the percentage of income
represented by the City’s support is expected to decrease.

Section 7(p)(1) of the FLSA, 29 U.S.C. § 207(p)(1), makes special provision for fire protection
and law enforcement employees of public agencies who, at their own option, perform special
duty work in fire protection, law enforcement or related activities for a separate and
independent employer (public or private) during off-duty hours. The hours of work for the
separate and independent employer are not combined with the hours worked for the primary
public agency employer for the purposes of overtime compensation. Section 7(p)(1) applies to
such outside employment provided (1) the special detail work is performed solely at the
employee’s option, and (2) the two employers are in fact separate and independent. See 29
C.F.R. §§ 553.227(a)-(b).

This special provision applies even if the public agency facilitates the employment or affects
the conditions of employment of such employees. Section 7(p)(1) applies to special details
even where a state law or local ordinance requires that such work be performed and that only
law enforcement or fire protection employees of a public agency in the same jurisdiction
perform the work. These principles are exceptions to the usual rules on joint employment set
forth in 29 C.F.R. Part 791. See 29 C.F.R. §§ 553.227(d)-(f).

In other words, under section 7(p)(1), when a public agency fire protection or law enforcement
employee is jointly employed by a separate and independent employer during the same
workweek, the primary public employer would not be liable for the payment of any overtime
compensation which may otherwise be due as a result of the special detail joint employment.
Section 7(p)(1) does not prevent a public agency from prohibiting or restricting outside
employment by its employees. See 29 C.F.R. § 553.227(h).

As indicated in 29 C.F.R. § 553.227(c), the determination of whether two employers are, in
fact, separate and independent is made on a case-by-case basis. One factor that is relevant to
whether two agencies are separate is whether they are treated separately for statistical purposes
in the Census of Governments. See 29 C.F.R. § 553.102(b). However, the Census is just one
factor, and the preamble to that regulation explains that while the Census might identify an
entity as being dependent upon another public agency, an agency such as a school district or
port authority may, in fact, be independent for FLSA purposes. See 52 Fed. Reg. 2012, 2019-
20 (Jan. 16, 1987) (copy enclosed). Our prior opinion letters identify other factors that also are
relevant to the determination of whether two agencies are separate employers, including: (1)
whether the employers have separate payroll/personnel systems; (2) whether the employers
have separate retirement systems; (3) whether the employers have separate budgets and funding
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authorities; (4) whether the employers are separate legal entities with the power to sue and be
sued; (5) whether the employers deal with each other at arm's length concerning the
employment of the individuals in question; (6) how they are treated under state law; and (7)
whether one employer controls the appointment of the officers of the other entity. See Wage
and Hour Opinion Letters
FLSA2006-21NA and FLSA2002-3.

Analyzing these factors, it is our opinion that the City Police Department and the Authority
appear to be separate and independent employers for the application of section 7(p)(1) of the
FLSA. The 2002 Census of Governments (the most recent available) does not include the
Authority, because the Authority was not fully operational when it was prepared. With regard
to the other factors, the Authority has a separate payroll system, negotiates its own pay scale,
and has independent personnel authority. The Authority also has a separate retirement system.
It has an accounting system for compensating employees and paying contracts for services.
Although the Authority temporarily obtains a small percentage of its funding from the City, the
City exercises no discretion over how the Authority uses those funds, and the vast majority of
the Authority’s funding comes from fees, rental charges, concessions, and other revenue
generated at the facility. Moreover, the Authority is a non-profit entity organized under state
law, with the authority to sue and be sued in its own name. Finally, although the Mayor and
City Council appoint and confirm the members of the Authority’s board of directors, they may
only be removed for incompetence, neglect of duty, or malfeasance in office. Therefore,
provided the other provisions of section 7(p)(1) are met, the City Police Department would not
be obligated to include the hours worked by police officers on special assignment to the
Authority in calculating and paying overtime due them.

This opinion is based exclusively on the facts and circumstances described in your request and
is given based on your representation, express or implied, that you have provided a full and fair
description of all the facts and circumstances that would be pertinent to our consideration of the
question presented. Existence of any other factual or historical background not contained in
your letter might require a conclusion different from the one expressed herein. You have
represented that this opinion is not sought by a party to pending private litigation concerning
the issues addressed herein. You have also represented that this opinion is not sought in
connection with an investigation or litigation between a client or firm and the Wage and Hour
Division or the Department of Labor.

We trust that this letter is responsive to your inquiry.

Sincerely,

Paul DeCamp
Administrator

* Note: The actual name(s) was removed to preserve privacy in accordance with 5 U.S.C.
§ 552(b)(7).
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