As you plan for 2009, every employer should take steps to address the amendments to the Americans with Disabilities Act (ADA), the new Family and Medical Leave Act (FMLA) regulations, and the anticipated passage of the Employee Free Choice Act (EFCA). The following is a suggested "to do" list.
The Family and Medical Leave Act (FMLA) generally provides 12 weeks of unpaid leave during a 12-month period to an eligible employee suffering from a serious health condition. An employee who takes FMLA leave is entitled to be restored to the job he or she held at the time the leave commenced, or to an equivalent position. If, however, the employee is unable to return to work at the end of that 12-week period, he or she is no longer protected by the FMLA. Roberts v. The Health Association, 2d Circ., No. 07-3553-cv, February 3, 2009.
Laura Roberts was terminated from her employment with The Health Association (THA) in June 2004. At the time of her termination, Roberts had been out of work for approximately 10 weeks, on an approved FMLA leave. However, at the time of Roberts’ discharge, her doctor had opined that she would be unable to work until at least July 19, 2004, which would have come after the end of her 12-week leave.
Roberts sued her employer, alleging interference with her rights under the FMLA, and claiming retaliation for her exercise of those rights. The district court dismissed the claims, and Roberts appealed to the 2d U.S. Circuit Court of Appeals. The Second Circuit upheld the lower court’s decision on the basis that Roberts could not have returned to her original position at the end of her 12-week leave, based upon her doctor’s opinion. Therefore, the Court held, Roberts was not prejudiced by the early termination. In addition, THA actually paid Roberts for 12 weeks worth of health benefits, which is all to which she would have been entitled had she completed the 12 weeks of leave before being discharged.
In addition, Roberts was unable to show that the circumstances surrounding her termination created an inference of retaliation. In fact, the evidence showed that Roberts was made aware that her job was in jeopardy prior to her formal request for FMLA leave. That fact precluded Roberts from successfully alleging that her termination was based upon a protected FMLA leave request.
In addition to her FMLA claims, Roberts argued that THA violated the Americans with Disabilities Act when the company fired her because it regarded her as disabled. In order to succeed on that claim, Roberts would have to prove that THA regarded her as substantially limited in a major life activity. Where, as in this case, the “major life activity” at issue is working, an employee is required to show that the employer believes the individual to be suffering from a condition that prevents her from working in a broad range of jobs, not simply the job she previously held. Because Roberts did not provide such evidence regarding THA’s actions, the Second Circuit concluded that the lower court’s decision to dismiss the ADA claim was correct, as well.
The FMLA is one of the most administratively difficult federal anti-discrimination laws, partly because of its complexity, and partly because of its overlap with other federal statutes, as in this case. It is essential that an employer understand both its obligations under the FMLA, and the rights that can be appropriately exercised by an employer in dealing with individual employees with medical impairments and serious health conditions. In this case, the employer’s record keeping (which documented the early conversations with Roberts informing that her job was in jeopardy), along with the company’s willingness to treat Roberts fairly by allowing her to collect the 12 weeks of benefits to which she would have been entitled under the FMLA, supported the court’s decision that the company’s actions had a legitimate business basis, and did not violate federal law.
The Family and Medical leave Act allows “eligible” employees to take unpaid leave for reasons articulated in that act, including leave of up to 12 workweeks during a 12-month period for the birth or adoption of a child. The act defines “eligible employee” as one who has been employed for at least 12 months and who has worked for the employer for at least 1250 hours during the previous 12-month period. The FMLA specifically makes it unlawful for an employer to “deny the exercise of or the attempt to exercise, any right provided under the FMLA.”
One federal district court recently addressed the issue of whether an employee is barred from proceeding with an FMLA claim when he had been employed for less than 12 months, but requested FMLA leave that would begin more than a year after his employment had begun. Reynolds v. Inter-Indus. Conf. on Auto Collision Repair, N.D. Ill., No. 08-2115, Jan. 23, 2009.
In that case, Christopher Reynolds asked for FMLA leave to care for his newborn son, who was born prematurely and had suffered medical complications. Reynolds began employment with Inter-Industry Conference on Auto Collision Repair (a/k/a/I-CAR) on August 25, 2005. His son was born on August 8, 2006. Reynolds promptly notified his employer of the child’s birth and medical problems, and was granted immediate time off work because of the emergency nature of the situation. On or about August 16, Reynolds returned to work and notified the company’s HR department that his son would remain hospitalized for three months. While the child’s mother would be with the baby during those months, Reynolds asked for his own FMLA leave to begin in November when the baby left the hospital, so that he could assist in his family’s care at that time. At the end of the business day, Reynolds received a phone call from his supervisor and the HR director, terminating his employment for reasons, they said, “related to his skill set.” At the time of his termination, Reynolds had worked for the company for slightly less than one year.
Reynolds then filed a lawsuit alleging, in part, that the company violated the FMLA by firing him immediately after his request for leave. The company filed a motion to dismiss that claim, arguing that Reynolds was not an “eligible employee” (because he had not worked there for 12 months at the time of his request for leave) and, therefore, could not assert a cause of action under the FMLA.
The district court denied the motion to dismiss, allowing the case to go forward. It based that decision on the provision of the FMLA which states that an employer is entitled to 30 days of notice in instances where a requested leave is foreseeable. According to the court, it would be illogical to interpret the notice requirement in a way that would require employees to disclose requests for leave as a convenience to the employer, but then would allow that same employer to retaliate against the employee, based simply on the fact that the employee was just short of becoming “eligible” under the FMLA. The court’s decision means that under the FMLA, an employer may not terminate an “ineligible” employee for requesting foreseeable future leave for which that employee will be eligible and to which he or she will be entitled at the time the leave is to begin.
While this case is a district court decision, and therefore is appealable, the opinion is instructive and is an indication of the fact that courts are recognizing that one purpose in enacting the FMLA was to “balance the demands of the workplace and the needs of families.” Employers should understand that in light of this, courts that address this issue in the future are likely to interpret the FMLA consistently with this opinion.
In an unpublished opinion, the U.S. Circuit Court of Appeals for the 10th Circuit reminds us that whether a case is based on allegations of discrimination or on allegations of retaliation, the individual bringing the lawsuit carries the ultimate burden of proof in the case. Sunderman v. Westar Energy, Inc., 10th Cir., No. 08-3059, Jan. 14, 2009.
To establish retaliation under Title VII, an individual’s evidence must withstand the three-part analysis established by the U.S. Supreme Court in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). Under that test, the plaintiff first bears the burden of establishing a prima facie case: (1) that he engaged in a protected activity; (2) that he suffered a materially adverse employment action; and (3) that a causal connection existed between the protected activity and that action. Once the individual meets that burden, the employer must offer a legitimate, non-retaliatory reason for its employment action. Should the employer satisfy this burden, the plaintiff then bears the ultimate burden of demonstrating that the employer’s reason is “unworthy of credence” so that a fact-finder could infer that the employer did not act for those reasons but instead, for some retaliatory reason.
Derek Sunderman was employed as a manager by Westar Energy, Inc., a public utility company. In March 2002, Sunderman made a complaint to Westar’s HR department regarding certain allegedly offensive sexual comments made by a supervisor, and followed up in October of that year with a written complaint to his own supervisor (Olsen). He then filed a claim with the KHRC and the EEOC, alleging that Westar retaliated against him - by reducing his compensation and suspending him in late October - for making the complaints.
During a 2002-2003 reorganization which was in process prior to Sunderman’s complaints, Westar eliminated a number of positions, including Sunderman’s, and transferred the responsibilities of those positions to the company’s Customer Support Group. Sunderman was referred to the company’s Career Placement Center, and his employment was terminated in August 2003. He then brought a lawsuit against Westar, alleging that his employment there was terminated in retaliation for filing a complaint to the Kansas Human Rights Commission (KHRC) and the EEOC in November 2002. Westar countered that Sunderman’s discharge was based upon the reorganization and was strictly a business decision. The lower court granted summary judgment in favor of Westar. That decision was upheld on appeal to the Tenth Circuit.
The dismissal of Sunderman’s claims was based primarily on the fact that he had provided insufficient evidence showing a causal connection between (1) his complaint to Olsen and/or the filing of his complaint with the KHRC/EEOC, and (2) his termination. The facts showed that Olsen was not a decision-maker in the reorganization or with respect to Sunderman’s ultimate termination. While some cases of retaliation rest upon a “cat’s paw” theory, where a biased individual who lacks decision-making power uses a formal decision-maker as a “dupe” in a deliberate scheme to trigger a discriminatory employment action, Sunderman presented no evidence that Olsen suggested either the reorganization or the subsequent discharge. While the Tenth Circuit determined that the employment actions taken against Sunderman in 2002 (reduction in compensation and a suspension) could be raised by Sunderman as background evidence for the retaliation claim, it also determined that Westar had provided sufficient evidence of its business-related decision regarding Sunderman, and that those two incidents were “insufficient . . . to raise a jury question on the causation and pretext issues that are associated with plaintiff’s [August 2003] termination.”
It is clear that in this case, the company’s documentation of the business reasons for its actions were a primary focus of the court’s analysis and review. Although Sunderman had the ultimate burden of proof in this case, the company’s ability to support its own defense with evidence and testimony was sufficient to refute Sunderman’s claims. Once again, objective and complete documentation of a company’s business decision is integral to a favorable result in a claim related to that decision.
Before an individual may file a lawsuit under Title VII or the ADEA, he or she is required to file (or cross-file) a charge of discrimination with the EEOC. The charge is legally sufficient only if it describes with particularity the parties and the actions or practices of which the individual is complaining. The scope of a plaintiff’s right to file a federal lawsuit is determined by the contents of that charge; that is, the lawsuit must be based upon the claims described in the charge, or reasonably related to those described in the charge. Typically, a claim submitted to federal court will be dismissed if the EEOC charge alleges one basis of discrimination, and the formal litigation alleges another, unrelated basis.
The 4th U.S. Circuit Court of Appeals has allowed a plaintiff to allege “retaliatory discharge” in her federal lawsuit, although her employment was not terminated until after a charge for which she already had received a right-to-sue notice and which, therefore, did not specifically claim her firing as part of the complained-of retaliation. Jones v. Calvert Group Ltd., 4th Cir., No. 07-1680, 1/05/09.
Linda Jones is an African-American female who filed a complaint with the Maryland Commission on Human Relations in 2003, alleging that she had been denied a promotion on the basis of her race, sex, and age. That complaint was resolved in 2004 by written agreement, under which the company agreed to provide certain training and assistance to Jones to enable her to qualify for promotions ion the future.
Immediately after that resolution, Jones received a negative performance evaluation - her first ever. She then filed another charge of discrimination. In the second charge, Jones alleged that in retaliation for her first charge, she was denied mentoring opportunities and that her performance was unduly scrutinized, resulting in an undeserved negative evaluation. Jones received a right-to-sue letter for the second charge on August 6, 2006. Her employment was terminated on October 19, 2006.
On November 3, 2006, Jones filed a lawsuit alleging that she was discriminated against because of her race, sex, and age, and that she was terminated in retaliation for engaging in activity protected by Title VII and the ADEA. The company argued that Jones had failed to exhaust her administrative remedies, since her second charge had not set forth specific claims of discrimination, and that her retaliatory discharge was not specifically mentioned in the charge. The lower court granted summary judgment against Jones on all of her claims. On appeal, the Fourth Circuit agreed that Jones failed to specifically include her claims of discrimination in her second charge and, therefore, failed to exhaust her administrative remedies under Title VII and the ADEA. In addition, however, the Fourth Circuit remanded the retaliation claim back to the lower court for further proceedings on that claim.
The Fourth Circuit’s decision was based on the position of a number of other courts that have addressed this issue, and which have held that a plaintiff may raise the retaliation claim for the first time in federal court if that claim is “like or related to allegations contained in the [prior, timely] charge.” Jones’ second charge alleged a pattern of conduct, including denial of mentoring opportunities, and actions that resulted in her first-ever negative performance review. She specifically alleged that she was being continually “subjected to differential treatment” in retaliation for her first charge. In light of Jones’ allegation that retaliatory conduct was ongoing, the court held that her termination was “merely the predictable culmination of [the employer’s] alleged retaliatory conduct.” Therefore, Jones’ federal court claim of retaliatory discharge was “reasonably related” to the allegations set forth in her second charge, and should be allowed to go forward in the federal court action.
Employers must recognize that discrimination and retaliation are two separate legal claims and that – as in this case – an employee who is unable to support a claim of discrimination, either substantively or procedurally, may still be able to sufficiently support a claim of retaliation. Supervisors and managers must be understand the type of activity that is protected under federal and state anti-discrimination laws, and must be trained to work cooperatively with employees who have exercised their rights to engage in such activity.
The 8th U.S. Circuit Court of Appeals recently upheld summary judgment in favor of an employer who discharged an employee for failing to follow a company policy requiring employees to call in each day during an extended absence. This ruling is notable because the employee previously had been granted leave under the FMLA. Bacon v. Hennepin County Medical Center, 8th Cir., No. 08-1237, Dec. 22, 2008.
Melondy Bacon was employed as a janitor by Hennepin County Medical Center (HCMC). In the summer of 2003, Bacon began periodically to break out in hives while at work. On July 8, 2004, Bacon obtained FMLA paperwork from HCMC, and had the paperwork completed by her physician. According to the doctor’s report, Bacon needed to take intermittent leave for a chronic skin irritation caused by chemicals at work. While the doctor was unable to specify the duration of the necessary intermittent leave, she predicted that Bacon would need treatment approximately once each month, and that 24 hours would be needed for recovery from such treatment. It is undisputed that Bacon’s medical documentation neither specified the length of time during which she would need intermittent leave nor provided a return-to-work date. Bacon submitted the paperwork to her supervisor, telling him that she was going to be on extended leave until she could get an appointment with an allergist.
During the following month, Bacon called HCMC each day on which she was scheduled to work, reporting that she had not yet seen the allergist, and that she would be absent on that particular day. Her absences were recorded by HCMC as FMLA-related. Bacon called in pursuant to HCMC’s policy which requires an employee on indefinite sick leave to call in every day to report an absence.
On August 5, 2004, Bacon stopped calling in to report her absences. On August 11, Bacon’s employment was terminated under a provision of the applicable union contract which states that three consecutive days of absence without notice is considered to be a resignation of employment. Bacon filed for unemployment benefits, explaining that her failure to continue calling in came after she “received information on the federal guidelines for FMLA which did not require any call ins.” Bacon subsequently filed suit in federal court, claiming that HCMC interfered with her rights under the FMLA by terminating her employment.
The district court granted summary judgment in favor of HCMC, and that dismissal was affirmed on appeal to the Eighth Circuit. The Eighth Circuit specifically held that an employer who takes an adverse action against an employee who is exercising FMLA rights will not be liable if the employer can prove that it would have made the same decision had the employee not exercised those rights.
Employers should recognize that HCMC took two actions that assured its ability to successfully defend against Bacon’s claim. First, its request for FMLA leave form requires the employee to acknowledge in writing that the HR policies and the prevailing labor agreement (including the call-in procedure) extend to FMLA leave. Second, HCMC’s employee handbook includes language that provides that the FMLA “does not change the County’s leave of absence procedures” and that the “Human Resources Rules and/or union contracts continue to apply.” Because HCMC had written policies that were consistently enforced, it was therefore able to show that the call-in procedure applied to all extended absences whether or not FMLA-related, and was able to prove definitely that it did not single out Bacon for disciplinary action because she was on FMLA leave.
A judge for the United States District Court for the Western District of Washington recently ruled that a Seattle apprenticeship program was the “joint-employer” of a plumbing apprentice for purposes of coverage under the FMLA. Frees v. UA Local 32 Plumbers & Steamfitters, W.D. Wash., No. C07-1469 (11/21/08).
Frees, a plumbing apprentice, was part of an apprenticeship program operated by the Seattle Area Plumbing and Pipefitting Industry Journeyman and Apprentice Training Committee (“JATC”). The program required Frees to complete 10,000 hours of “reasonably continuous employment” and required 216 hours of class time per year. Frees entered the program in 2003 and had worked with 5 different plumbing contractors until his discharge in 2006.
In May 2006, Frees received a call from his wife’s physician ordering emergency testing for his wife to determine whether she was suffering from multiple sclerosis. Frees informed his instructor, and left class early that day. He also missed three subsequent days of work while attending to his wife. Frees was dismissed from the program that same month for poor attendance.
Frees filed suit against JATC and the UA Local 32 Plumbers & Steamfitters, alleging violations of the FMLA. The Union was dismissed on summary judgment on grounds that it was not Frees’ employer. JATC also moved for summary judgment on the grounds that it was not Frees’ “employer” within the meaning of the FMLA.
Under DOL regulations, two or more separate corporations or entities may be treated as a single employer for purposes of counting employees if they have a joint employment relationship. JATC contended that the joint-employer doctrine did not apply, because JATC is an educational or academic institution. JATC argued that the FMLA was designed to protect those in the workplace, as opposed to students. JATC argued that the FMLA should not be interpreted to inhibit an educational institution from taking disciplinary action, including dismissal, against students for missing classes, failing to complete assignments or taking examinations due to family or medical needs.
The court, in finding against JATC, declined to shield academic institutions, solely based upon their “educational” designation. The court found that although JATC identifies itself as an educational institution, the standards for apprenticeship fit more appropriately under an “employer” definition. Under the standards of the program, a commercial plumbing apprentice is required to average 38.5 hours per week working, while only attending class approximately 4.2 hours per week. Furthermore, the JATC standards give the JATC coordinator sole authority to make the apprentices’ assignments, dictate the quantity of assignments, outline wages, and control the amount of time the apprentices remain in a certain rotation. Based upon the factors as a whole, JATC was found to have sufficient control over the apprentices to be considered an “employer” for purposes of the FMLA. The court denied summary judgment, finding a joint-employment relationship existed.
The 1st U.S. Circuit Court of Appeals has upheld summary judgment in favor of an employer who asserted that it had terminated the employment of a human resource manager because of his poor performance and a reduction-in-force, and not because of his prior testimony in a sexual harassment claim filed against the company. Dennis v. Osram Sylvania, Inc., No. 07-2670 (1st Cir. Dec. 10, 2008).
In order to set forth a case of retaliation under Title VII, an employee must show that he engaged in a statutorily protected activity, that he suffered an adverse employment action, and that the protected activity and the adverse action were causally connected. Once that prima facie case has been proven, the employer has the burden of offering a legitimate business reason for the adverse action. Once that legitimate reason has been asserted, the employee must prove that the proffered reason was simply a “pretext” for the alleged retaliation.
Richard Dennis was employed with Osram Sylvania from August 1995 until March 2004, when his employment was terminated. At the time of his discharge, Dennis held a position in Osram’s human resources department, representing the company at recruiting fairs and assisting with its internship program. On February 5, 2004, Dennis gave deposition testimony in a case in which a female employee filed a sexual harassment complaint against a co-worker at Osram. The following day, in an instance of unfortunate timing, an investigation was undertaken into a complaint against Dennis which had been received by the company on January 28. In that complaint, an unsuccessful applicant for employment at Osram (Molina) claimed that Dennis had subjected him to “inappropriate and unprofessional” conduct, including references to the applicant’s personal problems, and then sharing details of those problems with a company supervisor.
After a meeting between an Osram in-house counsel and Dennis’ supervisors, it was decided that a written warning would be placed in Dennis’ file. When Dennis was requested to sign a statement to that effect, he refused, and told his supervisor (Franz) that he viewed the Molina investigation as retaliation for his prior testimony in the sexual harassment case. Franz had no knowledge of that deposition at the time that he disciplined Dennis.
Dennis was terminated on March 24, 2004. Franz recommended the termination as part of a reduction-in-force (RIF), stating that Dennis’ performance was “severely weakened” by the Molina investigation, and that the RIF required him to choose between Dennis and another employees, who Franz considered to be a “high achieving human resources manager.” Dennis then filed a complaint under the New Hampshire state anti-discrimination law. The case ultimately was removed to federal court, where summary judgment was granted in favor of Osram. Dennis appealed that dismissal.
The First Circuit upheld the lower court’s decision, stating that Dennis had not set forth the third prong of his prima facie case, since he was unable to connect his protected deposition testimony to his subsequent termination. The court based that conclusion on the fact that the individuals responsible for Dennis’ termination “knew nothing about the [prior] deposition.” The court alternatively concluded that even if Dennis had successfully established a prima facie case of retaliation, Osram had set forth legitimate reasons (prior poor performance and the RIF) for the termination, and that Dennis was unable to show that those reasons were simply pretext for retaliation.
Although this case was decided on the specific facts and testimony in the matter, the court’s decision provides some direction in the analysis of a retaliation claim, and once again underscores the importance of full and objective documentation. The court found that much of Dennis’ argument regarding the company’s actions was based upon unsupported speculation and inference. Dennis offered no evidence that the individuals who were involved in the decision to terminate his employment consulted with anyone who attended the deposition which Dennis viewed as his “protected activity.” Further, because the company was able to support Dennis’ poor performance with documentation, it was able to support its decision in the RIF, and Dennis was unable to carry his burden to prove that the rationale for his termination was pretextual.
The Fair Labor Standards Act provides that employers violating the Act’s overtime pay requirements are liable for the amount of unpaid overtime. In addition, such an employer may be held liable for an equal amount of liquidated damages, unless it can show that it acted in “good faith” and with “reasonable grounds for believing” that it was in compliance with the Act. Recently, the 8th U.S. Circuit Court of Appeals held that an employer’s argument that it was unaware that employees were working at more than one franchise location was insufficient to avoid the imposition of liquidated damages. Dept. of Labor v. Barbeque Ventures, LLC., No. 08-1284 (8th Cir., November 28, 2008).
Between May of 2004 and May of 2006, Barbeque Ventures and Old Market Ventures, the defendants in this case, operated five Famous Dave’s restaurants in the Omaha, Nebraska area. The individual owners of the defendants also owned other fast food restaurants in the Omaha area (Godfather’s Pizza and Popeyes Fried Chicken), a number of which had written policies prohibiting employees from working at multiple locations without prior approval. Employees of those restaurants who did work at multiple locations had work hours combined for purposes of calculating overtime pay. Famous Dave’s had no such policy during the period relevant to this case.
During that period, a number of individuals working at Famous Dave’s applied to work at locations other than the one by which they currently were employed. Some of the applications actually included Famous Dave’s as the current employer, and two of them even listed the name and contact information of the employee’s current Famous Dave’s supervisor. The Area Manager who oversaw all five restaurants testified that he visited each of the five restaurants regularly, and recognized some employees working at more than one location.
The defendant companies also engaged a third-party payroll management company to process its payrolls. Neither the employers nor the payroll company tracked whether an individual employee worked at more than one Famous Dave’s location. As a result, work hours from multiple locations were never combined for overtime purposes.
In October 2006, the Department of Labor filed a complaint on behalf of 25 Famous Dave’s employees, seeking over $90,000 in unpaid overtime, as well as liquidated damages, post-judgment interest, and injunctive relief. The court granted the DOL’s motion for summary judgment with respect to the monetary damages. Defendants appealed only the imposition of liquidated damages, arguing that they established a good faith defense, and had provided reasonable grounds for believing that they had not violated the FLSA.
The Eighth Circuit upheld the award of liquidated damages, finding that the defendants had not established the required “honest intention to ascertain and follow the dictates of the FLSA.” It went further and, in response to the defendants’ argument that they were unaware that employees worked at multiple locations, specifically stated that “lack of knowledge is not sufficient to establish good faith.” In addition, the court held that delegating the payroll function to a third-party does not rid the employer of the duty to comply with the FLSA. Because the defendants failed to show an affirmative good faith effort to comply with the FLSA, the court did not have to address the issue of whether the companies had provided reasonable grounds for believing they had not violated the Act, and upheld the imposition of liquidated damages.
This case is a clear example of the importance of an employer’s compliance with the overtime regulations of the FLSA. Misunderstanding of the law’s provisions, or an absence of willful violation is not sufficient to avoid liability. To avoid liability, an employer must affirmatively establish that he acted in good faith by attempting to ascertain the Act’s requirements, and that any subsequent violation was inadvertent. Complete documentation of work hours, well-constructed and consistently implemented pay policies, and recognition of the full reach of the FLSA’s provisions can assist in establishing such good faith.
The Fair Labor Standards Act requires that overtime compensation be paid at a rate of not less than one-and-a-half times the regular rate of pay of all hours worked in excess of 40 during a particular workweek. Recently, the Department of Labor’s Wage and Hour Division responded to a request for an opinion on whether compensation for “on-call” time in a specific week may be averaged over a two week pay period for purposes of computing the regular rate of pay on which employees’ overtime wages were based during the entire pay period. In response, the DOL informed the employer that an employee’s regular rate of pay must be computed on a workweek basis, and that payment for on-call time must be attributed to the specific workweek that included the on-call assignment. Wage and Hour Opinion Letter, FLSA 2008-6, 9/22/08 (released 11/14/08).
DOL regulations generally require that overtime pay be based upon the average hourly wage earned during a single workweek. The calculation is done by first determining the “regular rate of pay” for the employee. That is done by determining the total wages earned during a workweek, and dividing that number by the hours actually worked. The resulting figure is the regular rate of pay earned by the individual during that workweek. Overtime pay is then calculated by multiplying that number by 1.5 (to determine overtime rate of pay), and then multiplying that figure by the actual number of overtime hours worked.
In this case, employees at a city’s water treatment plant are asked to be on call during one week each month. In addition to an hourly wage for hours worked, they are paid $2.50 for each on-call hour. During that on-call time, they are required to wear a pager and to respond within 30 minutes to any work-related emergency. However, according to the city, employees rarely are called back to work and often go months without having to report for duty during an on-call period. The city recognizes that on-call pay must be included in computing the regular rate of pay for employees’ overtime calculations, but wants to spread the on-call pay across the two-week pay period within which the on-call compensation is received. The DOL states that such calculation would not be consistent with its regulations and that instead, the on-call compensation must be attributed to the specific workweek in which the on-call hours occurred.
An employee who is not required to remain on the employer’s premises, and is simply required to be available during a certain time period is not “working” while on call. Therefore, those hours generally are not calculated in the number of hours worked to reach the 40-hour threshold for overtime. The payment received for that period of time, however, is paid as compensation. Therefore, that amount must be calculated as part of an individual’s “regular rate of pay” for purposes of overtime calculations.
The DOL’s opinion letter includes an example: if an employee earning $10 per hour works 40 hours in workweek one of a two-week pay period and works 45 hours at $10 per hour and in addition to his 40-hour wage earns $100 of on-call compensation in workweek two, the regular rate of pay would be calculated separately for workweeks one and two. The additional on-call pay would raise the employee’s regular rate of pay for workweek two. That higher regular rate would also form the basis of the overtime pay for the 5 overtime hours worked during that week, resulting in a higher overtime pay than if the employer had spread the on-call pay over the entire two week calculation of “regular rate of pay.”
As set forth in this opinion letter, an employee’s regular rate of pay must be computed on a workweek basis, and payment for on-call time must be attributed to the week in which the on-call time actually occurred. Any other method of calculation will violate DOL regulations that guide overtime pay.
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