- A West Virginia-based fire investigation company violated the Fair Labor Standards Act (FLSA) when it used a payment calculation for its consultants that failed to pay them proper overtime, the 4th U.S. Circuit Court of Appeals has ruled (U.S. Department of Labor v. Fire & Safety Investigation Consulting Services, LLC, et al., No. 18-1632 (4th Cir. Feb. 4, 2019)).
- Fire & Safety Investigation Consulting Services provides fire investigation and security guard services to clients in the oil and gas industry. For about two years, consultants were scheduled to work a "hitch," a common industry schedule under which workers were assigned to work 12 hours a day for 14 consecutive days, followed by 14 days off, resulting in a total of 168 hours worked during a "full hitch." For that time, Fire & Safety paid a fixed sum that allegedly included a regular rate and an overtime rate, the court said. But if the consultant worked less than a full 168-hour hitch over the two weeks, his or her pay was adjusted using a blended rate. Following an anonymous tip, the U.S. Department of Labor (DOL) investigated and sued.
- A district court agreed with DOL, finding that the company violated the FLSA and awarding the workers $817,902 in back wages and an equal amount in damages. On appeal, the 4th Circuit noted that while the FLSA allows employees who work a fixed set of overtime hours to be paid a fixed sum each week, that "does not address the issue raised in the instant case: whether the FLSA permits an alternative means of compensation, here, the blended rate, when an employee works fewer than a fixed number of overtime hours." Because the blended rate operated as the workers' regular rate here, they were owed back wages for overtime hours worked during a full 168-hour hitch, the court said, adding that "the FLSA shields employees from precisely the type of payment scheme utilized by Fire & Safety — one that appears to compensate employees for both non-overtime and overtime but in reality, uses a single rate for all hours worked, regardless of whether they are non-overtime or overtime hours."
The FLSA requires that covered employers pay their employees one-and-one-half times their regular rate for any hours worked beyond 40 in a workweek, unless an exemption applies. DOL Wage and Hour Division investigators found that Fire & Safety violated the FLSA’s overtime pay requirements when the consultants worked more than 40 hours in a workweek but did not hit the 168 hour "hitch rate." While a hitch rate may be an industry standard, employers also must keep solid records and pay the appropriate overtime rate when it applies.
Overtime remains a hot topic and a source of confusion for employers. DOL recently confirmed in an opinion letter that an employer can use a pay plan in which employees' average hourly rates varied from week to week, so long as those rates remained at or above the FLSA minimum wage — but an assumption of regular rate of pay for the purpose of calculating overtime may not comply with FLSA's overtime requirements if the overtime rate is equal or less than the employee's regular pay rate.
Notably, a new regular rate calculation appears to be on the way. In an unexpected move, DOL said last year that it will be changing the regulations that define how employers should determine workers' regular rate of pay under the FLSA. And in January, both a new overtime rule and a rule regarding regular rate of pay were sent to the White House's Office of Management and Budget for review. A Notice of Proposed Rulemaking (NPRM) is expected in March, at least for the overtime rule.