Dive Brief:
- A Georgia-based aviation staffing company violated the Fair Labor Standards Act and the North Carolina Wage and Hour Act by using a “straight time for overtime” plan to pay an avionics tech mechanic and more than 100 other workers, according to a proposed collective and class-action lawsuit filed Friday.
- The plaintiff in Reaves v. Complete Aviation Services and Modification alleged that Complete Aviation Services and Modification categorized a large portion of the workers’ hourly wages as an hourly, untaxed “per diem,” a “well-known ploy used in the industry for evading the FLSA’s overtime requirements.”
- The plaintiff seeks to form an FLSA collective and a North Carolina-based class that includes all CASM employees who were paid “straight time” for overtime over the past three years (for the collective) and two years (for the class).
Dive Insight:
According to the lawsuit, CASM paid the plaintiff, who worked for the company from May 2023 through March 2025, on an hourly basis. She allegedly made $32.75 an hour for all hours worked, including those over 40 in a workweek.
The company allegedly listed the plaintiff’s taxable wages as $8 per hour at her hiring, which was later upped to $8.75. The lawsuit noted the U.S. Bureau of Labor Statistics lists the average hourly rate for an avionics tech mechanic at more than $35.
But the worker also earned an untaxed hourly “per diem” of $24 per hour up to 40 hours, according to the lawsuit. When added together, the plaintiff earned $32.75 per hour, allegedly making her eligible for an hourly overtime rate of $49.13.
The plaintiff allegedly only received overtime pay based on the taxable wages, however, bringing her actual hourly overtime rate to $13.13 at the end of her time at CASM, per the lawsuit. For overtime hours, CASM allegedly accounted for time-and-a-half on her regular rate and then adjusted down the per diem pay until the plaintiff continued to make $32.75 per hour.
Courts have previously ruled against “per diem” schemes that reduce overtime pay, the complaint in Reaves pointed out. In a 2010 case, for example, the 5th U.S. Circuit Court of Appeals sided with an aircraft painter who alleged his employer used a similar “straight time” and “per diem” split to avoid paying overtime.
The 5th Circuit said it was “troubled” that the combined rates approximately matched the prevailing wage for aircraft painters, found it “suspect” that a raise was applied to the per diem rather than the regular rate, and noted it could “conceive of no reason” why a per diem would be capped at the 40-hour mark, “which not-so-coincidentally corresponds to the point at which regular wages stop and the overtime rate applies.”
The U.S. Department of Labor has previously reminded employers that they must be careful when factoring per diem payments into compensation. In November 2024, the department issued an opinion letter warning employers not to exclude reimbursement payments from workers’ regular rate of pay if the employee did not in fact incur those expenses.
“Please note that tool and expense reimbursement payments cannot be used to artificially reduce employees’ regular rates of pay, in an attempt to reduce the amount an employer must pay its employees for overtime work,” Jessica Looman, then-administrator of DOL’s Wage and Hour Division, wrote at the time. “The FLSA does not permit schemes of this kind.”
CASM did not respond to a request for comment by press time.
