Dive Brief:
- Cognizant Technology Solutions will pay $5,726,000 to settle allegations brought by current and former employees that the company underpaid them overtime. A federal judge signed off on the agreement on June 1 (Mishra v. Cognizant Technology Solutions, et al., No. 2:17-cv-01785 (E.D. Cali. June 1, 2020)).
- The plaintiffs allege that following a 2012 reclassification, the IT services company "underpaid overtime" by failing to include certain items when calculating the regular rate of pay.
- The defendants contended that the class members did not work the overtime hours and "merely recorded overtime as a means of obtaining faster and more evenly spread pay." The defendants also said overtime work was not necessary because they have an offshore team that worked during off hours.
Dive Insight:
The federal Fair Labor Standards Act (FLSA) generally requires that nonexempt employees be paid at least 1.5 times their regular rate for hours worked beyond 40 in a workweek. However, regular rate of pay doesn't just include an employee's hourly wages; with certain exceptions, all forms of compensation must be included.
Delta Air Lines, Inc. recently agreed to pay $3.5 million to settle class action allegations that it incorrectly calculated overtime pay under California law for nonexempt employees. Although the case involved California law, the attorneys noted that Golden State law mirrors the FLSA when calculating the regular rate of pay. The airline was accused of failing to include in the calculation of the regular rate of pay items such as shift differential payments, certain types of bonuses, profit-sharing payments and the fair market value of the airline passes it provided to employees.
What constitutes the regular rate of pay changed early this year. The U.S. Department of Labor (DOL) updated its regulations defining compensation that must be included, addressing, among other things, criteria for determining whether a discretionary or non-discretionary bonus should be included in an employee's regular rate.
A few months later, DOL clarified whether certain bonuses and benefits could be excluded when calculating overtime pay in three opinion letters. DOL opinion letters give stakeholders the opportunity to ask a question and receive a response that experts have said is a full affirmative defense if the inquirer is taken to court; however, some recent court rulings have questioned the value of the opinion letters.