On October 10, 2012, the Eighth Circuit in Abshire v. Redland Energy Services, LLC (Case No. 11-3380) confirmed that under the FLSA, employers are allowed to alter the days contained in employees’ workweek to minimize overtime pay as long as the change is intended to be permanent. While this decision is certainly a victory for employers, employers (particularly in California) should nevertheless ensure compliance with state law before making any changes.
Abshire involved claims against employer Redland Energy Services, LLC, a company that drills and services natural gas wells in Arkansas. Most of Redland’s workers worked a regular Monday-to-Friday schedule, and any weekly overtime was calculated on a regular Sunday-to-Saturday week. Redland’s drill operators, however, worked 12-hour shifts on seven consecutive days, from Tuesdays through Mondays, and then received seven days off. Originally, Redland calculated weekly overtime for its drill operators on a Tuesday-to-Monday week. In May 2009, however, Redlands switched to a Sunday-to-Saturday week, thereby making the workweek consistent for all employees. Redland claimed that this switch was made not only to decrease payroll expense by reducing the number of hours that drill operators must be paid at the FLSA-mandated overtime rate, but also to reduce administrative costs because the change would allow the company to calculate the overtime for all of its employees on the same weekly basis. The drill operators alleged that the supposed reduction of administrative costs was merely a pretext, and the effort to reduce the amount of overtime paid was impermissible under the FLSA.
The district court found that Redlands had not violated the FLSA, and granted summary judgment. On appeal, the Eighth Circuit affirmed the ruling, relying in large part on Section 778.105 of the Department of Labor’s regulations, which states that “the beginning of the workweek may be changed if the change is intended to be permanent and it not designed to evade the overtime requirements of the act.” The court rejected the argument that the purpose of the FLSA was to maximize the payment of overtime rates, and instead held that an employer’s effort to reduce its payroll expense is not contrary to the FLSA’s purpose. Therefore, because the plaintiffs never asserted that Redland’s change in calculating overtime would not be permanent, the court upheld the grant of summary judgment.
Even though Abshire confirms that under the FLSA, employers may change the day the workweek commences, employers must be wary of state laws which may restrict their ability to make such changes. In California, for example, courts have found that the state’s labor code prevents employers from splitting up the workweek to avoid paying overtime to employees who work seven consecutive days if the avoidance of overtime pay is the sole reason for the choice of the workweek. In Seymore v. Metson Marine, Inc., 194 Cal. App. 4th 361 (2011), on facts similar to Abshire, the court recognized that California Labor Code section 510 mandates employees be paid an overtime premium for all hours worked on the seventh consecutive day of work. The court held that the employer’s selected workweek violated Section 510 because the employer did not have any legitimate business reason for selecting the days in the workweek; rather, the workweek was set solely to reduce its overtime pay obligations. Because state laws regarding overtime pay vary, employers should consult counsel to ensure compliance with both the FLSA and state law before changing the days contained in its employees’ workweek.