As reported here, the Seventh Circuit Court of Appeals recently held that plaintiffs could simultaneously proceed with state law wage claims brought as an opt-out class action under Federal Rule of Civil Procedure 23 in the same case with an opt-in collective action filed under the Fair Labor Standards Act (FLSA). However, a few days ago, a trial court in Pennsylvania held directly the opposite—rejecting the Seventh Circuit’s ruling and seemingly that court’s reasoning as unpersuasive. While only one federal appellate court (the Seventh Circuit) has weighed in so far on the propriety of such hybrid wage and hour litigation, there is still a split at the trial court level. We expect that other appellate courts will soon have the opportunity to consider this issue and, if such a split occurs at the appellate level, the United States Supreme Court will likely address this issue and end the circuit split.
In another case originating out of the Seventh Circuit, the Supreme Court recently declined to review a decision which approved the use of a half-time multiplier when computing the amount of overtime compensation due in misclassification cases. Urnikis-Negro v. American Family Property Services. The FLSA and state overtime laws mandate that nonexempt employees receive 1.5 times their regular hourly rate of pay for all hours worked over 40 in a work week. But under the half-time method of computation, when an employee agrees or understands that their fixed salary compensates them for all the hours that they may work in any work week, the employee only receives 0.5 times his regular hourly rate for the overtime hours worked (having already received straight time for those hours through his salary).
Plaintiffs have pushed hard against the use of the half-time method and urged courts to calculate all overtime by multiplying one and a half times their regular hourly rate by the number of overtime hours worked. Obviously a difference between 1.5 and 0.5 times the regular rate can be significant depending upon the circumstances. Either way, continued use of the half-time multiplier will result in less money owed to employees. While the Supreme Court’s decision not to review the Seventh Circuit’s half-time approach does not technically serve as an endorsement, it does mark a significant victory for employers and can help reduce some of the liability incurred in overtime litigation.