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November 05, 2014 in Time & Labor, Payroll, Compliance

Court Approves Non-Traditional Work Week for Overtime Pay

Federal overtime pay standards under the Fair Labor Standards Act (FLSA) are strict, but that doesn’t mean employers can’t be flexible in scheduling workdays, even if it trims overtime wages.

Federal Overtime Pay with Non Traditional Work Week

 

Overtime Exemptions

The long list of employees exempt from both overtime and minimum wage provisions under the FLSA includes:

  • Executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and certain skilled computer professionals (as defined in Labor Department regulations);
  • Employees of certain seasonal amusement or recreational establishments;
  • Employees of certain small newspapers and switchboard operators of small telephone companies;
  • Seamen employed on foreign vessels;
  • Employees engaged in fishing operations;
  • Employees engaged in newspaper delivery;
  • Farm workers employed on small farms (i.e., those that used less than 500 “man-days” of farm labor in any calendar quarter of the preceding calendar year), and
  • Casual babysitters and persons employed as companions to the elderly or infirm.

In a recent case, the Fifth Circuit Court of Appeals affirmed a lower court ruling in determining that a Texas-based environmental solutions firm did not violate the FLSA by using a non-traditional workweek to calculate overtime pay (K. Johnson and B. Smith v. Heckmann Water Resources (CVR), Inc., 5th Circ., Case: 13-40824, 7/14/14).

Essentials of the Law

The FLSA is the main federal law affecting the rights and obligations relating to overtime pay and the minimum wage as administered by the Labor Department’s Wage and Hour Division (WHD). These standards affect more than 130 million full-time and part-time workers in the public and private sectors.

However, there are exceptions for some entities, including hospitals, educational institutions and federal, state and local government agencies.

In addition, certain employees are exempt from the overtime pay provisions. Because the exemptions are narrowly defined, employers should check the exact terms and conditions by contacting their advisers or local WHD office (see right-hand box).

Note that the FLSA does not limit the number of hours in a day or the number of days in a week that an employer may require an employee to work, as long as the employee is at least 16 years old. Similarly, it doesn’t limit the number of hours of overtime that can be scheduled.

However, employers must pay covered employees no less than one and one-half times their regular pay rate for all hours worked in excess of 40 hours in a workweek, unless the employees are exempt (e.g., many salaried employees).

Facts of the Case

Kevin Johnson and Brad Smith worked for Complete Vacuum and Rental, which later became Heckmann Water Resources (HWR). Both individuals were classified as non-exempt employees and paid hourly wages. They each worked for seven consecutive days beginning every other Thursday.

Johnson’s shift began at 6 p.m. while Smith began working at 6 a.m. HWR paid its employees on a bi-weekly basis and used a workweek of Monday through Sunday to calculate overtime.

Each of Johnson’s two-week pay periods reflected the following hours:

 

Week M T W Th F S Su Total
1       6 12 12 12 42
2 12 12 12 6       42

 

Each of Smith’s two-week pay periods reflected the following hours:

 

Week M T W Th F S Su Total
1       12 12 12 12 48
2 12 12 12         36

 

Based on these hours, HWR compensated Johnson for four hours of overtime per pay period and Smith for eight hours per pay period.

In their lawsuit, Johnson and Smith asserted that their workweek should have started on Thursday and ended on Wednesday. This would have entitled each one of them to 44 hours of overtime compensation per paycheck — a substantial difference.

But the district court held that HWR didn’t violate the FLSA by calculating the hours based upon a Monday through Sunday workweek. It granted summary judgment in favor of HWR. The two workers appealed.

Outcome of the Appeal

The Fifth Circuit Court of Appeals determined that the FLSA, as interpreted by Department of Labor regulations, requires employers to establish a workweek that is a “fixed and regularly recurring period of 168 hours” or “seven consecutive 24-hour periods.” HWR complied with that requirement.

It didn’t matter that the schedule spanned two Monday-through-Sunday workweeks and effectively reduced the workers’ overtime pay. “The mere fact that an established workweek does not maximize an employee’s overtime compensation does not, standing alone, violate the FLSA,” said the Fifth Circuit Court. It noted that Johnson and Smith failed to establish any authority requiring HWR to have its workweek coincide with the employees’ actual Thursday through Wednesday schedules.

Furthermore, the court referred to a 2009 Labor Department opinion letter (27 HRR 39, 1/19/09) and an Eighth Circuit ruling based on similar facts (Abshire v. Redland Energy Services, LLC, 695 F.3d 792, 10/15/12) in support of its conclusion.

“[N]umerous federal and state courts have concluded that an employer does not violate the FLSA merely because, under a consistently-designated workweek, its employees earn fewer hours of overtime than they would if the workweek was more favorably aligned with their work schedules,” the court said, quoting the Abshire case. “Thus, a schedule whereby an employee’s actual work schedule is split between two workweeks does not violate the [FLSA],” it concluded.

Lessons to be learned: The FLSA imposes standards for overtime pay and minimum wage that employers must rigorously follow. Generally, an overtime rate of time-and-a-half is required in cases where the employee exceeds 40 hours in a given workweek.

However, employers are allowed some leeway in scheduling a non-traditional workweek that is still in compliance with the FLSA. Make sure that your company’s scheduling meets the requirements under law and can withstand any challenge from the authorities or in the courts.