Federal Employees’ Entitlement To Unpaid Back Overtime Wages Does Not Constitute Property Protected By The Fifth Amendment
In this case, the United States Court of Appeals for the Federal Circuit upheld the federal government’s power summarily to limit its obligation to its employees for back overtime pay. The case involved Congress’s attempt to save funds by retroactively eliminating liability under administrative law for overtime wages claimed by over 14,000 mid- to high-level federal employees. For years, federal agencies had resisted the application of the Fair Labor Standards Act’s overtime standards (which Congress extended to federal workers in 1974) to their higher level employees, claiming that these employees were exempt as executive, administrative, or professional employees. In litigation brought in the early 1990s challenging the agencies’ position, the courts found that the employees were eligible for overtime, which, under then applicable administrative law, entitled them to compensation for unpaid overtime for a six-year period amounting in the aggregate to as much as $460,000,000. Faced with this liability, the Comptroller General overruled 16 years of administrative law precedent and retroactively applied a two-year statute of limitations to the employees’ claims, thereby depriving them of compensation for four years of the full six-year period. The employees successfully lobbied Congress, which in 1994 overruled the Comptroller General’s decision by statute, P.L. 103-329 § 640 (Sept. 30, 1994), eliminating the two-year statute of limitations and thereby recognizing that six-years’ compensation was owed. Ultimately, however, federal administrators secured passage of another statute by Congress that effectively nullified the 1994 legislation. The employees then sued to recover the full overtime to which they were entitled in the Court of Federal Claims, lost, and appealed to the Federal Circuit, on the ground that by reneging on its 1994 recognition of their full claims, Congress effected a taking under the Fifth Amendment. Consistent with its core concern for protecting private property against unjust and arbitrary government regulation,
NELF filed an amicus curiae brief urging the Court to recognize the government’s obligations to the employees for the payment of money as a property right within the purview of the Fifth Amendment. Otherwise, NELF argued, the government could alter other obligations, like bond payments, as it had altered its overtime wage commitment to its employees, with no recourse for those thereby deprived of payment. NELF argued on historical grounds and by analogy that the Fifth Amendment’s Taking Clause protected the employees’ claims for unpaid wages which, therefore, would survive the retroactive reduction of the applicable statute of limitations wrought by the federal administrators and Congress. The Federal Circuit disagreed, determining that the employees’ wage claims were not “property,” but simply “property interests,” protected by the Fifth Amendment’s Due Process Clause, not the Takings Clause. The hurdle for the government’s retroactive cancellation of mere “property interests” is relatively low. The Federal Circuit directly addressed, and rejected, NELF’s argument that the overtime wages at issue were similar to the interest due to clients on lawyers’ trust fund accounts, which the Supreme Court has found to be property, and not merely property interests, for Fifth Amendment purposes. The Federal Circuit held that the Supreme Court precedent cited by NELF was limited to the particular facts of that case and did not apply to the federal employees’ claims. The plaintiffs petitioned the Supreme Court for certiorari on April 13, 2005, and NELF reiterated its arguments in the amicus curiae brief it filed in support of the petition on July 6, 2005. The petition for certiorari was denied on October 3, 2005.
In this case, the United States Court of Appeals for the Federal Circuit upheld the federal government’s power summarily to limit its obligation to its employees for back overtime pay. The case involved Congress’s attempt to save funds by retroactively eliminating liability under administrative law for overtime wages claimed by over 14,000 mid- to high-level federal employees. For years, federal agencies had resisted the application of the Fair Labor Standards Act’s overtime standards (which Congress extended to federal workers in 1974) to their higher level employees, claiming that these employees were exempt as executive, administrative, or professional employees. In litigation brought in the early 1990s challenging the agencies’ position, the courts found that the employees were eligible for overtime, which, under then applicable administrative law, entitled them to compensation for unpaid overtime for a six-year period amounting in the aggregate to as much as $460,000,000. Faced with this liability, the Comptroller General overruled 16 years of administrative law precedent and retroactively applied a two-year statute of limitations to the employees’ claims, thereby depriving them of compensation for four years of the full six-year period. The employees successfully lobbied Congress, which in 1994 overruled the Comptroller General’s decision by statute, P.L. 103-329 § 640 (Sept. 30, 1994), eliminating the two-year statute of limitations and thereby recognizing that six-years’ compensation was owed. Ultimately, however, federal administrators secured passage of another statute by Congress that effectively nullified the 1994 legislation. The employees then sued to recover the full overtime to which they were entitled in the Court of Federal Claims, lost, and appealed to the Federal Circuit, on the ground that by reneging on its 1994 recognition of their full claims, Congress effected a taking under the Fifth Amendment. Consistent with its core concern for protecting private property against unjust and arbitrary government regulation,
NELF filed an amicus curiae brief urging the Court to recognize the government’s obligations to the employees for the payment of money as a property right within the purview of the Fifth Amendment. Otherwise, NELF argued, the government could alter other obligations, like bond payments, as it had altered its overtime wage commitment to its employees, with no recourse for those thereby deprived of payment. NELF argued on historical grounds and by analogy that the Fifth Amendment’s Taking Clause protected the employees’ claims for unpaid wages which, therefore, would survive the retroactive reduction of the applicable statute of limitations wrought by the federal administrators and Congress. The Federal Circuit disagreed, determining that the employees’ wage claims were not “property,” but simply “property interests,” protected by the Fifth Amendment’s Due Process Clause, not the Takings Clause. The hurdle for the government’s retroactive cancellation of mere “property interests” is relatively low. The Federal Circuit directly addressed, and rejected, NELF’s argument that the overtime wages at issue were similar to the interest due to clients on lawyers’ trust fund accounts, which the Supreme Court has found to be property, and not merely property interests, for Fifth Amendment purposes. The Federal Circuit held that the Supreme Court precedent cited by NELF was limited to the particular facts of that case and did not apply to the federal employees’ claims. The plaintiffs petitioned the Supreme Court for certiorari on April 13, 2005, and NELF reiterated its arguments in the amicus curiae brief it filed in support of the petition on July 6, 2005. The petition for certiorari was denied on October 3, 2005.
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