The Eighth Circuit Court of Appeals recently affirmed a district court’s decision that an employer does not violate the FLSA by strategically defining when its “workweek” begins and ends in the manner that restricts to the largest extent possible the overtime hours its employees will incur. Abshire v. Redland Energy Services, LLC. The Eighth Circuit looked to the U.S. Department of Labor’s interpretive guidance and numerous federal and state court decisions in determining how an employer may define the workweek and found that the only catches are these: (1) the workweek must contain 168 consecutive hours (i.e., a full seven, consecutive days); and (2) once the workweek is defined, any changes to it must be intended to be permanent.
In Abshire, the employer took advantage of this flexibility to permanently redefine its workweek for the purpose of drastically reducing the amount of overtime its drilling rig operators incur. The drilling rig operators work 12-hour shifts on seven consecutive days (Tuesday through Monday), followed by seven days off. The FLSA workweek for these employees was initially Tuesday to Monday as well. Over a two-week period, this resulted in 40 regular hours and 44 overtime hours in the first week and no pay in the second week. The employer made a permanent change to the workweek (Sunday to Saturday) while maintaining the Tuesday-to-Monday schedule. This put 40 regular hours and 20 overtime hours in the first week, and 24 regular hours in the second week of the pay period. Thus, in changing the workweek, the overtime due in each two-week pay period was reduced from 44 to 20 overtime hours.
When the employer changed the workweek, the drilling rig operators sued on the grounds that the change was made in a clear effort to limit the number of hours subject to the overtime premium. Upholding the decision of the district court, the Eighth Circuit rejected the employees’ claims, stating quite clearly: “. . . an employer’s effort to reduce its payroll expense is not contrary to the FLSA’s purpose.” The court also rejected the employees’ attempt to read into the FLSA a requirement that employers have a “legitimate business purpose” to justify a permanent change in the workweek.
What does this decision mean for employers? In truth, the Eighth Circuit’s decision is not groundbreaking in the sense that employers have for many decades had the flexibility under federal law to define when their employees’ workweek will begin and end. Although most employers probably structure their workweeks around the typical Monday to Friday workweek, some employers have, for many years, structured their employees’ work schedules and the FLSA workweek to limit the amount of overtime due or to provide additional workplace flexibility.
The Eighth Circuit’s new decision may encourage other employers to reconsider how their workweeks are defined. If an employer chooses to do so, it should proceed with caution. First, the employer should consider whether applicable state laws permit the same flexibility as federal law in defining the workweek. Second, if state law is not an impediment, then in order to effectuate a proper change to a workweek, an employer should:
- Ensure that the change to the workweek is intended to be permanent. Workweeks may not “shift” back and forth based, for example, on an employee’s start time for the week.
- Consider and comply with any applicable state laws regarding advance notice to employees of the workweek change.
- Continue to look and pay properly for overtime hours when they are incurred even if the workweek is aligned with employees’ work schedules in such a manner that overtime work should normally not occur. Despite an effective alignment of work schedules and the workweek, non-exempt employees may still incur overtime hours by not adhering to their scheduled start and end times or by working beyond them. No matter the reason for the overtime being incurred, if a non-exempt employee works more than 40 hours during the defined workweek, she is owed overtime compensation.
- Take care to memorialize the workweek so that any successors in management will know what it is and can be sure that the overtime premium is still paid when it is owed.
- Remember to split between the first and second workweek an employee’s hours if the employee’s shift starts in one workweek and ends in the next. For example, if the workweek runs from 11:27 pm on Tuesday to 11:26 pm the following Tuesday and the employee works on Tuesday from 4:00 pm to midnight, then the first 7 hours and 26 minutes of the employee’s shift should be counted in the first workweek, and the last 34 minutes of the employee’s shift should be counted in the second workweek.
- Finally, in situations in which the change in workweek results in overlapping workweeks for the first pay period, the employer should calculate the overtime due as though it had been worked in both workweeks, then pay the greater of the amounts due.