Overtime Lawyer Blog

In a recent decision, Alvarado v. Corporate Cleaning Service, Inc., a federal judge for the Northern District of Illinois determined that window washers may proceed against their employer with a claim for overtime benefits under the Fair Labor Standards Act (FLSA).

The FLSA provides that all employees who are not exempt from the FLSA must be paid overtime benefits at a rate of one and one half times their regular rate of pay for all hours worked in excess of 40 hours in a work week.

In Alvarado, the window washers often worked between 60 and 70 hours per week, but never received overtime premiums. Despite the employees’ demands for payment, the employer asserted that the window washers were exempt from the FLSA because they were partially paid on a commission-based compensation system. Under the FLSA, employees who receive more than half their compensation in the form of “commissions on goods or services” are generally not entitled to overtime payment.

Determining whether a “commission-based” compensation scheme exists is not always clear-cut. Case law has found a commission-based system exists where compensation is linked to the price charged to the consumer for the good or service being sold and where compensation is “related to the value of the service performed.”

Although some evidence indicated that the window washers were paid a commission – i.e. the window-washers were paid on a point system rather than an hourly wage – additional evidence showed that the employer was inconsistent in charging customers in this manner. As a result, the federal judge denied the employer’s motion for summary judgment and allow

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On June 16th the Labor Department’s Wage and Hour division issued a new interpretation regarding compensation for time spent changing clothes under the Fair Labor Standards Act.

Pursuant to the FLSA, Sec. 29 U.S.C. Sec. 203(o), under certain circumstances employers may exclude the time spent changing clothes from employee’s compensable time. Previous Bush-era interpretations concluded that the exclusion extended to protective clothing.

Stating that these interpretations should no longer be relied upon, the WHD administrator concluded that employers are not excused from paying employees for time spent “donning and doffing” protective equipment that is “required by law, by the employer, or the nature of the job.”

This interpretation follows several recent cases that have evaluated whether individuals – such as firefighters – are entitled to pay for time spent donning and doffing.

Emphasizing the difference between the plain meaning of the term “clothes” and the protective equipment worn by workers such as in the meat packing industry, the WHD administrator determined that compensating those who must don and doff protective clothing and equipment “adheres most closely” to the guidance provided by statutory language and legislative history.

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Under the Fair Labor Standards Act (the FLSA) non-exempt employees are entitled to minimum wages and overtime pay at a rate of one and one-half times their regular rate for all hours worked in excess of 40 hours in any workweek. When employers misclassify employees as “independent contractors” – mistakenly or not – employees may lose substantial amounts of overtime compensation.

In a recent case, a federal court in Indiana ruled that FedEx workers are employees of the company and not independent contractors.

Applying Illinois law, the court determined that the FedEx workers duties and actions were in furtherance of FedEx’s course of business, and hence not excluded from the legal definition of employee.

In making its determination, the court reasoned that such factors as the requirement that the drivers wear FedEx uniforms and drive trucks displaying FedEx logos, along with testimony from FedEx officials that drivers are the “centerpiece” of the workforce created an employment relationship. FedEx’s relationship with its drivers could be distinguished from other messenger delivery companies wherein the drivers were allowed to work for other delivery companies and weren’t required to wear uniforms.

FedEx drivers were also subject to other rules such as being required to pick up packages at a FedEx terminal, meet company approval, and follow a prescribed delivery list. Each one of these actions showed a connection between the worker’s action and the company. Hence, the court determined their appropriate classification was as employees and not independent contractors.

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Many times numerous employees are exposed to certain patterns or acts of discrimination by the same company. Discrimination may occur in many different ways, such as in the way overtime is calculated, in the failure to promote or hire groups based on tests scores and imposing dress-codes or English-only laws.

Often the best and most efficient way to seek redress for the same discriminatory action across a group of employees is to file a collective action. In order to bring a collective action, the plaintiffs must demonstrate that all of the potential members were “similarly situated.”

In a recent case, University of Phoenix enrollment counselors sought to bring a class action based on overtime violations of the Fair Labor Standards Act against the University’s parent company, Apollo Group, Inc.

At campuses across the country, counselors were required to meet specific performance goals each week. The counselors were told that they would not be compensated for overtime if it took more than 40 hours to complete these tasks. In fact, plaintiffs were told they had to meet certain goals and they [the managers] didn’t care how they met them.”

In making its determination on the collective action, the U.S. District Court for the Eastern District of Pennsylvania considered whether the counselors fit the “similarly situated” criteria.

Factors considered included:
• Consistent performance requirements of employees throughout the company;
• Similar overtime practices at all locations; and
• Difficulty by employees at all campuses completing required tasks during an eight-hour workday.

Here, the court held that the evidence presented was sufficient to demonstrate that the class members experienced an injury resulting from an employment policy affecting all members in a similar fashion. As a result, conditional certification was justified, notwithstanding the existence of a company policy providing for overtime compensation.

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The Court of Appeals for the Fifth Circuit affirmed the lower court’s determination that a staffing company violated the Fair Labor Standards Act (FLSA) when it failed to include a per diem payment in its “regular rate of pay” calculation.

Pursuant to the FLSA, all non-exempt employees must be paid at a rate of one and one half times their regular rate of pay for all hours worked in excess of 40 hours in any workweek. “Regular rate” is defined under the act as “all remuneration for employment.” The overtime rate then become s a mathematical computation based on a factual determination.

In Gagnon v. United Technisource, Inc. an employee – a skilled craftsman – was paid $5.50 per hour plus a $12.50 per diem per hour payment by a staffing company. The typical rate of pay for his position was as much as $24 per hour.

The lower court acknowledged that in some instances per diem payments are not included in the regular rate of pay analysis. In this instance however, the court was suspicious that the payment schedule was designed to circumvent overtime laws. A skilled craftsman typically earns 3-4 times the rate of pay offered by the staffing company. The court noted that they were “troubled by the fact that the combined ‘straight time’ and ‘per diem’ hourly rates matched the prevailing wages.”

The court likened this fee arrangement to other situations where employers artificially lower an employee’s regular rate of pay as a bonus in order to avoid paying a premium for overtime work.

As a result, the lower court held it was a violation not to include the per diem payments as part of the “regular rate of pay” calculation. The 5th Circuit affirmed.

Overtime premiums can be a great source of extra income to employees. However, in order to avoid paying employees the total compensation due, some employers and companies try to alter how overtime is calculated. In most cases when an employer mischaracterizes your rate of pay, they have violated the FLSA.

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