Thibodeaux v. Executive Jet Internaional, Inc.

United States Court of Appeals

Fifth Circuit

F I L E D

UNITED STATES COURT OF APPEALS April 16, 2003

For the Fifth Circuit Charles R. Fulbruge III

Clerk

No. 01-31227

LARRY J. THIBODEAUX, JR., individually and on behalf of all those

similarly situated,

Plaintiff – Appellee,

VERSUS

EXECUTIVE JET INTERNATIONAL, INC.,

Defendant – Appellant.

Appeal from the United States District Court

For the Eastern District of Louisiana

Before DAVIS, BARKSDALE, and DENNIS, Circuit Judges.

PER CURIAM:

Larry Thibodeaux, a flight attendant for Executive Jet

International, Inc. (“EJI”), brought this action on behalf of

himself and all other similarly situated flight attendants employed

by EJI, alleging that they were denied the overtime compensation

required by the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§

201–19. The district court granted summary judgment in

-1-

Thibodeaux’s favor on the issue of liability under the Act. EJI

appeals and contends that it is not liable for overtime

compensation because § 13(b)(3) of the FLSA exempts Thibodeaux and

his fellow flight attendants from the Act’s overtime pay

requirements. We agree. Accordingly, we reverse the district

court’s judgment and remand this case for entry of judgment in

favor of EJI.

I. BACKGROUND

EJI has employed Larry Thibodeaux as a flight attendant since

August 1998. On November 1, 2000, Thibodeaux brought this action

against EJI seeking to recover unpaid overtime compensation under

the FLSA. In his Complaint for Class Certification and for

Damages, he alleged that he and similarly situated flight

attendants regularly work over forty hours per week but are not

paid overtime. Section 13(b)(3) of the FLSA provides, however,

that the overtime provisions of the Act do not apply to “any

employee of a carrier by air subject to the provisions of title II

of the Railway Labor Act [(“RLA”), 45 U.S.C. §§ 181–88].”1 Those

subject to Title II of the RLA include “every common carrier by air

engaged in interstate or foreign commerce.”2 Thus, EJI asserted in

its answer to Thibodeaux’s complaint that it is a “common carrier

by air” subject to Title II of the RLA and that, as a consequence,

1

29 U.S.C. § 213(b)(3).

2

45 U.S.C. § 181.

-2-

it is not liable for overtime compensation. Determining whether

EJI’s defense is a valid one requires an appreciation of its

business, the business of its parent and affiliate corporations,

and its regulatory environment.

A. Executive Jet International, Inc., and Related Entities

EJI is engaged in the business of operating, maintaining, and

managing Gulfstream IV and Gulfstream V aircraft that are

fractionally owned or fractionally leased by persons or entities

participating in a program known as “NetJets.” EJI also provides

air charter services with Gulfstream aircraft. EJI is a wholly-

owned subsidiary of Executive Jet, Inc. EJI, in turn, owns EJI

Sales, Inc., a company that sells and leases aircraft to EJI’s

customers. EJI has a facility in East Granby, Connecticut, and

Bluffton, South Carolina, is its principal place of business.

EJI operates flights for customers under Parts 91 and 135 of

the Federal Aviation Regulations (“FAR”).3 Generally speaking, FAR

Part 91 applies to private or non-commercial carriage. “Common

carriers,” on the other hand, have traditionally been subject to

the more stringent safety standards of FAR Part 135. EJI operates

its NetJets flights under Part 91 and its charter flights under a

Part 135 Certificate issued by the Federal Aviation Administration

(“FAA”).

According to EJI, the duties and responsibilities of its

3

See 14 C.F.R. §§ 91, 135.

-3-

flight attendants do not differ significantly from those of flight

attendants employed by the major commercial airlines. As of March

2001, EJI employed ninety-eight flight attendants. Of this number,

eight attendants were qualified under FAA rules and regulations to

work on EJI’s Part 135 charter flights in the capacity of

“crewmembers.” The remaining flight attendants, including

Thibodeaux, worked flights operated under Part 91.

Executive Jet, Inc., also owns Executive Jet Aviation, Inc.

(“EJA”), whose principal place of business is Columbus, Ohio. Like

its sister EJI, EJA is engaged in the business of operating,

maintaining, and managing aircraft that are fractionally owned or

fractionally leased by persons or entities participating in the

NetJets program. The aircraft used by EJA in the NetJets program

are likewise purchased by its wholly owned subsidiary, Executive

Jet Sales, Inc., and then sold or leased in fractions to EJA’s

customers. EJA also possesses a Part 135 Certificate, which

permits it to conduct charter operations. The makes and models of

aircraft currently operated by EJA are: Boeing 737, Cessna

Citation V Ultra, Cessna Citation Excel, Cessna Citation VII,

Cessna Citation X, Raytheon Hawker 800 XP, Raytheon Hawker 1000,

and Dassault Falcon 2000.

With the exception of the type of aircraft, the record

reflects little difference between the air charter operations

conducted by EJA and EJI under their respective Part 135

-4-

Certificates. Similarly, with the exception of the type of

aircraft, there is little difference between the nature of the

owner-occupied or lessee-occupied flight operations conducted by

EJA and EJI in the NetJets program pursuant to Part 91.

Furthermore, each company’s operations in the NetJets program far

exceed its air charter operations. From 1999 to 2001, EJI operated

only 2% of its flights under Part 135. It operated the remaining

98% of its flights under Part 91. EJA’s operations are nearly

proportional to those of its sister company.4 One important

distinction between EJA and EJI makes these similarities

significant to this case: EJA’s employees are unionized, but those

of its younger sister EJI are not.5

EJA’s maintenance personnel have been represented for purposes

of collective bargaining by the International Brotherhood of

Teamsters, Airline Division, since 1971. The Teamsters’

certification was issued by the National Mediation Board (“NMB”),

the federal agency responsible for administering the RLA.6 The

maintenance employees’ terms and conditions of employment are

governed by a collective bargaining agreement negotiated pursuant

4

In 1999, EJA operated approximately 3.7% of its flights under

Part 135; the remaining 96.3% of its flights were operated under

Part 91. In 2000 and 2001, approximately 3.4% of EJA’s flights

were operated under Part 135, while the remaining 96.6% of the

flights were operated under Part 91.

5

EJI was incorporated in 1995.

6

The district court correctly recognized that the NMB has

primary jurisdiction to determine the scope of the RLA.

-5-

to the terms of the RLA. The Teamsters also represent EJA’s

pilots.

EJA employs flight attendants for the Falcon and Boeing

aircraft it operates. All those attendants work on flights

operated under Part 91. Prior to July 12, 2001, EJA’s flight

attendants were not represented by a labor organization. In

December 1999, the NMB conducted an election among the attendants

to determine whether they wanted to be represented by the

Teamsters. Because less than a majority of the eligible employees

cast valid ballots in the election, the NMB found no basis for

certification and dismissed the Teamsters’ application. But in May

2001 the Teamsters filed an application for investigation of a

representation dispute with the NMB and sought another election.

The NMB again exercised jurisdiction over EJA and oversaw the

election. Ballots were counted on July 11, 2001, and a majority of

flight attendants voted in favor of union representation.

This brief sketch of EJA’s labor relations history reveals

that the NMB has ruled on several occasions—most recently in July

2001—that EJA is covered by Title II of the RLA and therefore

subject to the jurisdiction of the Board.7 EJI contends that if

EJA is a “common carrier by air” subject to the RLA, then it is

likewise a covered carrier because its operations are virtually

identical to those of EJA. Put differently, if a labor dispute

7

See, e.g., In the Matter of the Representation of Employees of

Executive Jet Aviation, Inc., 28 N.M.B. 471 (2001).

-6-

that had the potential to interrupt commerce arose at EJI, the

company contends that the NMB would have jurisdiction over the

dispute just as it did over the disputes at EJA.

B. The NetJets Program

The NetJets program is marketed on the internet and in

publications such as The Wall Street Journal, Business Week,

Business Journal, Forbes, Cigar Aficionado, Fortune, and Town and

Country. Marketing is also conducted through direct mail campaigns

as well as at public and quasi-public events, such as the annual

convention of the National Business Aviation Association, the

Berkshire Hathaway annual shareholders meeting, the Paris Air Show,

and the Farnborough Air Show.

A participant in the NetJets program will enter into three

contracts. A customer interested in flying on a Gulfstream

aircraft will enter into a Purchase Agreement or Lease Agreement

with EJI Sales. The Lease Agreement is five years in duration and

the leased share of the aircraft remains titled to EJI Sales. A

customer who prefers a Boeing 737, Citation, Hawker, or Falcon

aircraft will enter into a Purchase Agreement or Lease Agreement

with Executive Jet Sales. The EJA Lease Agreement like the EJI

Lease Agreement is five years in duration; the leased share of the

aircraft remains titled to Executive Jet Sales.

Next, the customer will enter into a Management Agreement with

either EJI or EJA, depending on the type of aircraft. The

-7-

Management Agreement covers all services related to the aircraft.

Thus, EJI provides pilots and flight attendants, as well as

maintenance, flight planning, and other flight-related services, to

owners or lessees of the Gulfstream aircraft.

The third contract is a Master Interchange Agreement between

the customer and Executive Jet Services, Inc., a sister company of

EJA and EJI. The Master Interchange Agreement permits an owner or

lessee to use another owner’s or lessee’s aircraft in the event the

aircraft in which he has a share is unavailable.

This alternative method of acquiring interests in aircraft has

proved quite appealing to people or businesses who want ready

access to air travel but cannot justify the purchase of a whole

aircraft:

By purchasing an interest in an aircraft that is part of

the [NetJets] program, an owner gains round-the-clock

access to a private jet at a fraction of the cost. In

addition to access to the aircraft in which it owns an

interest, it also has access to all other aircraft in the

program, as well as the support of a management company

that will handle all arrangements relating to

maintenance, crew hiring, and all administrative details

relating to the operation of a private aircraft.8

Under NetJets, neither EJI or EJA own the aircraft they

manage. Instead, each participant is an owner or a lessee that, in

the companies’ view, operates the aircraft for itself. EJI and EJA

simply provide the ancillary services that enable each owner to

8

Eileen M. Gleimer, When Less Can Be More: Fractional Ownership

of Aircraft—The Wings of the Future, 64 J. Air L. & Com. 979, 981

(1999).

-8-

“operate.” The purported vesting of operational control in the

owner is critical to the operation of the NetJets aircraft under

FAR Part 91—the regulatory framework under which NetJets was

developed.9 NetJets was designed with this framework in mind

because Part 91’s operating rules are less restrictive than those

that apply to traditional commercial operators. Among other areas,

Parts 91 and 135 differ with respect to the size of airports that

can be used, criteria governing the hiring of flight crews, and

crew rest and duty requirements.10

FAR Part 91 was designed for non-commercial operations, but

NetJets does not comfortably fit within the traditional

understanding of private aviation. If EJI is deemed to be in

operational control of the aircraft it manages, then it would be

carrying passengers—namely the fractional owners and their

guests—and receiving compensation in the form of an hourly

operating cost plus the management fee it charges.11 If the FAA

adopted such a view, NetJets would be subject to the rules of Part

135, and those rules would dramatically affect its business.12

When the NetJets program began in 1986, however, FAA regional

9

See id. at 1002.

10

See id. at 1002–05.

11

See id. at 1002.

12

See id. at 1006 (“[C]ompliance with Part 135 would change the

fundamental nature of the operation of aircraft in fractional

ownership programs.”).

-9-

officials concluded that NetJets could operate under Part 91.13 But

the rapid growth in the fractional ownership business has since

caused the FAA to rethink its position. The FAA’s study of the

issue resulted in a proposed rule that will soon govern the use of

aircraft in fractional ownership programs.14 Although this recent

development does not influence our decision, the foregoing

regulatory background is critical to understanding Thibodeaux’s

successful argument in the district court that EJI is not a common

carrier by air because it operates primarily under Part 91.

C. Proceedings in the District Court

EJI moved for summary judgment in the district court claiming

that § 13(b)(3) of the FLSA exempts it from overtime compensation

liability because it is a common carrier by air. In denying the

motion, the court first found that there were disputed issues of

material fact concerning whether EJI is a “common carrier by air”

subject to Title II of the RLA. More specifically, the court

declined to decide whether EJI is a common carrier based on an

analogy to its sister company EJA because there was no showing of

the percentages of flights that EJA operates under FAR Part 135 as

opposed to FAR Part 91. The court noted that only 2% of EJI’s

13

See id. at 1014.

14

See Regulation of Fractional Aircraft Ownership Programs and

On-Demand Operations, 66 Fed. Reg. 37,520 (July 18, 2001) (to be

codified at 14 C.F.R. pt. 91); see also Eileen M. Gleimer, The

Regulation of Fractional Ownership: Have the Wings of the Future

Been Clipped?, 67 J. Air L. & Com. 321 (2002).

-10-

flights during the preceding three years were conducted under Part

135, while the rest were conducted under Part 91. In its view,

“EJI’s rather insubstantial charter operations under Part 135 . .

. could play a pivotal role in the ultimate determination of

whether or not EJI is a common carrier by air.” Second, the court

found that even if EJI is a common carrier by air, there was at

least a genuine issue of material fact as to whether Thibodeaux

spends more than 20% of his time each workweek performing

“nonexempt” work. In support of this finding, the court relied on

29 C.F.R. § 786.1, a regulation issued by the Department of Labor

providing that the § 13(b)(3) exemption applies even if an employee

performs some nonexempt work during the workweek so long as the

nonexempt work is not “substantial.” The regulation further

provides that nonexempt work is substantial if it occupies more

than 20% of the employee’s workweek. Suggesting that work

performed on Part 91 flights is nonexempt, the district court

concluded that the § 13(b)(3) exemption would be “defeated” if

Thibodeaux spends more than 20% of his workweek on Part 91 flights.

After the denial of its summary judgment motion, EJI moved for

reconsideration and supplied the district court with the EJA

operating percentages that it previously found missing from the

record. The court treated the motion as being filed under Rule

59(e) and refused to consider the supplemental information because

it was available to EJI when it filed its motion for summary

-11-

judgment. But the court also stated that even if an analogy to EJA

indicates that EJI is a common carrier, “the court cannot conclude

as a matter of law that this exemption is applicable here because

there is at least a genuine issue of material fact as to whether

Plaintiff spends more than 20% of his time during the workweek

performing nonexempt work.” The court therefore denied the motion

for reconsideration.

Following the failure of its motion for reconsideration, EJI

requested a status conference with the district court. It conceded

that Thibodeaux spends 100% of his time performing work on Part 91

flights and that only questions of law remained. But Thibodeaux

had not filed a cross-motion for summary judgment, so EJI sought

the court’s guidance on how to proceed. The court held a status

conference and, on the following day, entered a Rule 54(b) judgment

in Thibodeaux’s favor on the liability portion of the case without

requiring him to file a motion for summary judgment. The court

concluded, as a matter of law, that EJI is not a “common carrier by

air” because it operates most of its flights under Part 91. The

court was “unpersuaded by EJI’s analogy to its sister company,

Executive Jet Aviation, Inc., to rule otherwise.” In addition, the

court found that even if EJI is a “common carrier by air,” thus

triggering the FLSA § 13(b)(3) exemption from overtime pay, “this

exemption is nevertheless inapplicable here because: (1)

Plaintiff’s work on Part 91 flights is ‘nonexempt’; and (2) such

-12-

nonexempt work is ‘substantial’ because it occupies more than

twenty percent of the time worked by Plaintiff.”

EJI filed a notice of appeal from the district court’s Rule

54(b) judgment. Because the district court’s determination of

EJI’s liability under the FLSA was interlocutory in nature and not

within the scope of Rule 54(b), this court directed the parties to

brief the issue of appellate jurisdiction.15 In response, EJI filed

an unopposed motion to remand the case for certification of

judgment under 28 U.S.C. § 1292(b). This court granted the motion,

and the district court entered a § 1292(b) certification on remand.

This court then granted EJI leave to appeal from the district

court’s interlocutory order, which we now treat as a grant of

partial summary judgment limited to the issue of EJI’s liability.16

II. ANALYSIS

A. Standard of Review

This court reviews summary judgment de novo, applying the same

standards as the district court.17 Summary judgment is appropriate

when there is no genuine issue as to any material fact, and the

15

See Kaszuk v. Bakery & Confectionery Union & Indus. Int’l

Pension Fund, 791 F.2d 548, 553 (7th Cir. 1986) (“A decision that

fixes liability but not damages is not appealable, despite the

entry of an order under Rule 54(b).” (citing Liberty Mut. Ins. Co.

v. Wetzel, 424 U.S. 737 (1976))).

16

See Liberty Mut., 424 U.S. at 744.

17

Cochran v. B.J. Servs. Co. USA, 302 F.3d 499, 501 (5th Cir.

2002).

-13-

moving party is entitled to judgment as a matter of law.18

B. Applicability of the Air Carrier Exemption to the FLSA

The FLSA generally requires employers to pay premium overtime

provisions to employees who work in excess of forty hours per

week.19 There are specific exemptions, however, to the overtime

requirements, including the exemption for “any employee of a

carrier by air subject to the provisions of title II of the Railway

Labor Act.”20 Those subject to Title II of the RLA include “every

common carrier by air engaged in interstate or foreign commerce .

. . .”21

Neither the RLA nor the FLSA defines the term “common carrier

by air.” In Woolsey v. National Transportation Safety Board, a

case involving the FAA’s revocation of a commercial pilot’s

certification, this court looked to the common law to determine

whether the pilot’s company, a small air carrier that specialized

in transporting musicians, was a “common carrier” subject to FAR

Part 135 or a private carrier subject to the less stringent

regulations of FAR Part 91.22 We found that “the crucial

determination in assessing the status of a carrier is whether the

18

Fed. R. Civ. P. 56(c).

19

See 29 U.S.C. § 207.

20

Id. § 213(b)(3).

21

45 U.S.C. § 181.

22

993 F.2d 516, 522 (5th Cir. 1993).

-14-

carrier has held itself out to the public or to a definable segment

of the public as being willing to transport for hire,

indiscriminately.”23 And we emphasized that our test “is an

objective one, relying upon what the carrier actually does rather

than upon the label which the carrier attaches to its activity or

the purpose which motivates it.”24

The parties dispute the significance of the Woolsey case.

Thibodeaux cites as controlling our observation that “FAR Part 91

specifically excludes common carriers from its coverage, leaving

them subject to the more stringent safety standards of FAR Part

135.”25 In his view, which the district court embraced, EJI is not

a common carrier because it operates most of its flights under Part

91. But the Woolsey test for common carrier status does not refer

to the Federal Aviation Regulations. Indeed, the pilot in Woolsey

argued that his company was not a common carrier because it

designed its lease agreements with the musicians it transported

with an eye to compliance with the requirements of Part 91, but we

found that the company’s subjective intentions were not

controlling: “[W]hether or not the leases comport with the

requirements of FAR Part 91, the crucial question remains whether

[the company] acted as a common carrier with respect to the flights

23

Id. at 523.

24

Id. (internal quotation and citation omitted).

25

Id. at 521–22.

-15-

in question.”26 Similarly, EJI’s belief that it can operate under

Part 91 would be unavailing if the FAA revoked the license of a

NetJets pilot for failure to comply with Part 135. The key inquiry

instead would be whether EJI held itself out to the public as being

willing to transport for hire.

EJI argues, on the other hand, that Woolsey is wholly

inapplicable because this case does not involve a license

revocation. It suggests that we look instead to the decisions of

the National Mediation Board for a definition of the term “common

carrier.” In the principal decision it cites, however, the NMB

recognized that the RLA does not define the phrase “common carrier

by air” and then looked to the common law for a definition, just as

this court did in Woolsey.27 Although the Board was not as concise

as this court, it identified the same factors and relied on some of

the same authorities. All in all, the Board’s definition of common

carrier does not materially differ from the test this court

established in Woolsey. Furthermore, in Valdivieso v. Atlas Air,

Inc., a case also involving the air carrier exemption to the FLSA,

the Eleventh Circuit determined the characteristics of a common

carrier by discussing Supreme Court and circuit court precedents

instead of NMB decisions.28 In fact, the Valdivieso court cited the

26

Id. at 518.

27

See In re Southern Air Transport, 8 N.M.B. 31 (1980).

28

305 F.3d 1283, 1286–87 (11th Cir. 2002).

-16-

Woolsey decision.29 We therefore choose to apply our own test for

common carrier status to the facts of this case.

Turning, then, to the Woolsey test, Thibodeaux argues that EJI

satisfies neither its “holding out” nor its “transport for hire”

elements. He contends that there is no “holding out” because EJI

does not market the NetJets program. Instead, Executive Jet

Services, EJI’s sister company, conducts the program’s marketing

efforts. And Thibodeaux further contends that EJI does not

transport for hire because the company merely maintains and

operates aircraft for customers who own their airplanes. Thus,

Thibodeaux urges us to evaluate EJI’s operations narrowly rather

than focusing on the NetJets program as a whole.

A 1997 case from the Federal Circuit involving EJA supports

taking the broader approach. In Executive Jet Aviation, Inc. v.

United States, EJA appealed from a judgment of the Court of Federal

Claims that dismissed EJA’s action for a tax refund.30 The refund

that EJA sought represented the difference between the total air

transportation taxes that were paid pursuant to Internal Revenue

Code (“IRC”) § 4261 with respect to certain flights EJA conducted

for Texaco Air Services, a NetJets participant, and the total taxes

that would have been paid had the flights instead been subject to

29

See id.

30

125 F.3d 1463 (Fed. Cir. 1997).

-17-

the IRC § 4041(c) fuel tax for non-commercial aviation.31 EJA

argued that it had to provide the means for conveyance in order for

Texaco Air’s flights to have been subject to the § 4261

transportation tax. In its view, which is very similar to

Thibodeaux’s, providing services that facilitate the use of an

aircraft by the person who owns it or has an independent right to

use it (i.e., Texaco Air) does not mean that the provider is in the

business of transporting persons for hire.32 Although EJA furnishes

flight-related services, NetJets participants like Texaco Air

provide the means for their own conveyance; they are in operational

control of the aircraft.

The Federal Circuit rejected the argument that Texaco Air’s

flights under the NetJets program were not subject to the

transportation tax because EJA did not own or lease the aircraft it

serviced. The court stated that “[t]he central question is whether

EJA was in the ‘business of transporting persons or property for

hire by air,’ for it is undisputed that neither Texaco nor any of

the other participants in the NetJets program were in such a

business.”33 After describing the NetJets program in some detail,

the court agreed with the Court of Federal Claims that there are

31

Id. at 1464. The transportation tax and the fuel tax for non-

commercial aviation are mutually exclusive. See id. at 1465.

32

Id. at 1467.

33

Id. at 1469 (quoting 26 U.S.C. § 4041(c)).

-18-

“negligible differences between the NetJets aircraft interchange

program and the operation of a commercial air charter business.”34

Because the substance rather than the form of a transaction is

generally controlling for tax purposes, the court held that the

transportation tax was properly imposed:

While it is true that Texaco Air held legal title in

N111QS [(a Cessna Citation S/II jet aircraft)] to the

extent of its fifty percent ownership interest, the

agreements which framed the NetJets program placed

extensive limitations on the exercise of that interest.

At the same time, EJA coordinated all of N111QS’ flights

with the needs of the other participants in the

interchange program and reserved for itself exclusive use

of the aircraft for its charter service and for training

pilots when the aircraft was not being used by one of its

owners. Texaco Air’s highly circumscribed ownership

interest in N111QS simply was the vehicle through which

Texaco Air entered into, and was allowed to participate

in, an arrangement pursuant to which it obtained from EJA

transportation from one airport to another. We hold

that, through its NetJets program, EJA was in the

“business of transporting persons or property for hire by

air.” Accordingly, Texaco Air’s flights on N111QS and

other interchange aircraft were properly subject to the

air transportation tax of IRC § 4261.35

The text of the RLA suggests that a similar substance-over-

form analysis should apply here. In 1934, Congress amended the RLA

and expanded the definition of “carrier” to include carrier

affiliates that perform services related to transportation: “The

term ‘carrier’ includes any railroad . . . and any company which is

directly or indirectly owned or controlled by or under common

control with any carrier by railroad and which operates any

34

Id.

35

Id.

-19-

equipment or facilities or performs any service . . . in connection

with the transportation . . . of property . . . by railroad.”36

This focus on the whole entity engaged in transportation indicates

that Congress sought “(1) to avoid the possibility that certain

employees could interrupt commerce with a strike, and (2) to

prevent a carrier covered by the RLA from evading the purposes of

the Act by spinning off components of its operation into

subsidiaries or related companies.”37 Title II of the RLA

establishes that any consequences flowing from § 151’s expansive

definition of the term “carrier” apply with equal force to common

carriers by air and their employees.38 Thus, in the air carrier

context, the affiliate prong of the § 151 definition results in RLA

coverage for carrier affiliates that do not fly aircraft for the

transportation of freight or passengers if their functions are

nevertheless related to air transportation.39 Here, EJI operates

36

45 U.S.C. § 151, First.

37

Verrett v. Sabre Group, Inc., 70 F. Supp. 2d 1277, 1281 (N.D.

Okla. 1999).

38

See 45 U.S.C. § 181 (extending the RLA to common carriers by

air); id. § 182 (“The duties, requirements, penalties, benefits,

and privileges prescribed and established by the provisions of

subchapter I of this chapter, except section 153 of this title,

shall apply to said carriers by air and their employees in the same

manner and to the same extent as though such carriers and their

employees were specifically included within the definition of

‘carrier’ and ‘employee’, respectively, in section 151 of this

title.”).

39

See, e.g., Verrett, 70 F. Supp. 2d at 1281–83 (holding that a

provider of customized management information services and computer

reservation services to affiliated and non-affiliated airlines was

-20-

aircraft for the transportation of passengers, so the affiliate

cases are not entirely applicable.40 But because EJI, EJA, and

Executive Jet Services are each components of an air transportation

program, and the RLA has a “whole entity” focus, we will evaluate

the NetJets program to determine whether EJI is a common carrier.

The record reflects that NetJets is marketed on the internet,

through direct mail, in business and upscale publications, and at

public and quasi-public events. Despite these marketing efforts,

Thibodeaux argues that NetJets does not offer air transportation to

individuals or businesses indiscriminately and observes, in support

of this argument, that EJI has no regular schedule of flights nor

fixed fares for passengers on a per-flight basis. In Woolsey,

however, we found that uniform tariffs and regular flight schedules

are not essential characteristics of a common carrier: “While most

common carriers do utilize uniform tariffs applicable to all who

apply for service, we agree with the FAA that the absence of

tariffs or rate schedules, transportation only pursuant to

separately negotiated contracts, or occasional refusals to

a carrier subject to the RLA); District 6, Int’l Union of Indus.,

Serv., Transp. & Health Employees v. National Mediation Board, 139

F. Supp. 2d 557, 560–62 (S.D.N.Y. 2001) (holding that a catering

company under common control with an air carrier is also a carrier

subject to the RLA).

40

Nevertheless, EJI’s analogy to its sister EJA is persuasive.

Because the companies perform nearly identical operations, and the

NMB has asserted jurisdiction over EJA, if this court found that

EJI is not a common carrier then the two companies would be subject

to different labor–management regimes despite their similarities.

-21-

transport, are not conclusive proof that the carrier is not a

common carrier.”41 “What is crucial is that the common carrier

defines itself through its own marketing efforts as being willing

to carry any member of that segment of the public which it

serves.”42 NetJets clearly satisfies this requirement. Although

its target customers represent a small segment of the general

population, the services that NetJets provides are offered

indiscriminately to any member of that segment willing to pay for

those services.43 Thus, NetJets satisfies the “holding out” prong

of the Woolsey test.

The final inquiry is whether NetJets constitutes a

transportation-for-hire business. The Federal Circuit answered yes

in its assessment of EJA’s participation in NetJets, and the

similar analysis that applies here leads us to conclude that,

through its participation in the NetJets program, EJI is in the

business of transporting persons for hire. A NetJets participant’s

“highly circumscribed” interest in the aircraft is simply the

vehicle through which he obtains transportation from EJI from one

41

Woolsey, 993 F.2d at 524 (internal quotation and citation

omitted).

42

Id.

43

See id. at 524 n.24 (“Only those carriers who affirmatively

hold themselves out to the public, either by advertising or by a

course of conduct evincing a willingness to serve members of the

general public (or a segment thereof) indiscriminately, so long as

they are willing to pay the fee of the carrier, will qualify as

common carriers.”).

-22-

airport to another.44

In sum, because EJI “has held itself out . . . to a definable

segment of the public as being willing to transport for hire,

indiscriminately,” it qualifies as a “common carrier” and is

therefore subject to Title II of the RLA.45 And because it is

subject to the RLA, EJI’s employees are exempt from the overtime

provisions of the FLSA.46

C. The “Nonexempt Work” Enforcement Policy—29 C.F.R. § 786.1

Title 29 C.F.R. § 786.1, entitled “Enforcement policy

concerning performance of nonexempt work,” formalizes the position

of the Wage and Hour Division of the Department of Labor that the

§ 13(b)(3) exemption to the FLSA applies even if an employee

performs some “nonexempt” work during the workweek, unless the

amount of nonexempt work is “substantial”:

The Division has taken the position that the exemption

provided by section 13(b)(3) of the Fair Labor Standards

Act of 1938, as amended, will be deemed applicable even

though some nonexempt work (that is, work of a nature

other than that which characterizes the exemption) is

performed by the employee during the workweek, unless the

amount of such nonexempt work is substantial. For

enforcement purposes, the amount of nonexempt work will

be considered substantial if it occupies more than 20

percent of the time worked by the employed during the

workweek.47

44

Executive Jet Aviation, Inc., 125 F.3d at 1469.

45

Woolsey, 993 F.2d at 523.

46

See 29 U.S.C. § 213(b)(3).

47

29 C.F.R. § 786.1.

-23-

The district court found that even if EJI is a “common carrier by

air,” the § 13(b)(3) exemption is inapplicable because Thibodeaux’s

work on Part 91 flights is nonexempt, and this nonexempt work is

substantial because it occupies 100% of his workweek. This

finding, however, is incorrect.

First, the district court erred by equating nonexempt work

with service on flights operated under Part 91. Apart from the

fact that § 786.1 does not mention the FAR, by defining “nonexempt

work” in relation to the FAA’s regulations, the district court

overlooked the Department of Labor’s definition of that term.

“Nonexempt work” is “work of a nature other than that which

characterizes the exemption.”48 Section 13(b)(3) of the FLSA

exempts employees of air carriers that are subject to the RLA. “In

adopting the Railway Labor Act, Congress endeavored to bring about

stable relationships between labor and management in this most

important national industry.”49 In other words, “[t]he purpose of

the restrictive provisions of the Railway Labor Act is to keep

transportation moving.”50 It therefore follows that an employee

whose work is not directly related to the air transportation

activities of his employer performs “work of a nature other than

48

Id.

49

Bhd. of R.R. Trainmen v. Chicago River & Ind. R.R. Co., 353

U.S. 30, 40 (1957).

50

Pan Am. World Airways, Inc. v. United Bhd. of Carpenters &

Joiners of Am., 324 F.2d 217, 220 (9th Cir. 1963).

-24-

that which characterizes the exemption.” Conversely, an employee

whose duties are directly related to air transportation performs

work that qualifies for coverage under the RLA.51 In short, the

applicability of the § 13(b)(3) exemption depends on both the

nature of the employee’s duties and the nature of the employer’s

business—not the FAR.

Second, because the district court did not apply the proper

definition of “nonexempt work,” it never determined whether

Thibodeaux’s work is transportation related. This inquiry is an

easy one, for Thibodeaux does not argue that the particular duties

he performs are unrelated to EJI’s transportation activities.

Because a flight attendant employed by a common carrier will

generally perform work that qualifies for coverage under the RLA,

and Thibodeaux has made no showing to the contrary, § 786.1 does

not “defeat” Thibodeaux’s exemption from the overtime provisions of

the FLSA.

III. CONCLUSION

In granting summary judgment to Thibodeaux, the district court

relied too heavily on the Federal Aviation Regulations. The Fair

Labor Standards Act and the Railway Labor Act provide the

51

See, e.g., Valdivieso, 305 F.3d at 1287 (11th Cir. 2002)

(“Appellants do not dispute that their positions as loadmasters are

integral to the transportation of cargo; therefore, these positions

are included in the air carrier exemption to the FLSA.”).

-25-

substantive law relevant to this dispute. Because EJI is a “common

carrier by air” subject to Title II of the RLA, the FLSA exempts

the company’s flight attendants from its overtime requirements. We

therefore reverse the district court’s judgment and remand this

case for the entry of judgment in favor of EJI.

REVERSED AND REMANDED WITH INSTRUCTIONS.

-26-