In Abshire v. Redland Energy Services, LLC, five current and former employees filed a complaint against Redland Energy Services, LLC, a servicer of natural gas wells, alleging the company violated the Fair Labor Standards Act (FLSA) by failing to properly pay overtime. The employees’ claims arise from a change to their defined workweek under the FLSA and the impact on their overtime hours as a result.
The employees at issue, operators of Redland’s two drilling rigs, initially worked 12-hour shifts for seven consecutive days and then would be off for the next seven days. While these employees were subject to a Tuesday-to-Monday workweek for calculating overtime, all other Redland employees had a Sunday-to-Saturday workweek. Then, in May 2009, Redland changed the drilling rig employees’ workweek to Sunday-to-Saturday. The memo announcing the change stated: “There will be no adjustment of your work week, which will remain from Tuesday-Monday [but] you will begin to have a reduction in overtime hours as your work week will be split into 2 payroll periods.” Redland explained that the workweek change saved significant resources because it streamlined payroll and reduced overtime pay.
The impacted employees claimed the change to their workweek violated the FLSA because Redland adjusted their workweeks to decrease overtime compensation.
After a complaint was filed with the U.S. Department of Labor, that agency investigated the situation and found no violation of the FLSA. Likewise, the United States District Court for the Western District of Arkansas found no FLSA violation and granted Redland’s motion for summary judgment.
On appeal to the United States Court of Appeals for the Eighth Circuit, the employees argued that the FLSA prohibits an employer from changing an existing workweek for the purpose of reducing employee overtime, and that Redland’s claim of administrative efficiency was pretextual. The Eighth Circuit affirmed, noting that although the statute does not define workweek, a Department of Labor regulation provides a meaning to the term. Under federal regulations, a workweek is defined as:
a fixed and regularly reoccurring period of 168 hours – seven consecutive 24-hour periods. It need not coincide with the calendar week but may begin on any day and at any hour of the day . . . . Once the beginning time of an employee’s workweek is established, it remains fixed regardless of the schedule of hours worked by him.
Citing numerous cases, the Eighth Circuit opined that “an employer does not violate the FLSA merely because, under a consistently designated workweek, its employees earn fewer hours of overtime than they would if the workweek was more favorably aligned with their work schedules.” The court found the FLSA requires that “the starting date remain constant and that the employees not work more than 40 hours within the 168 hour week without receiving overtime compensation. After noting that it is “aware of no contrary authority,” the court held that “the FLSA does not prescribe how an employer must initially establish its ‘workweek’ for overtime purposes.”
Going further, the Eighth Circuit then held that the FLSA does not limit an employer’s ability to change an existing workweek designation so long as the change is intended to be permanent. Federal regulations provide that: “The beginning of the workweek may be changed if the change is intended to be permanent and is not designed to evade the overtime requirements of the Act.” The court found that no employees had contested the permanence, but rather argued that Redland had changed the workweek to evade the FLSA’s overtime requirement. The court disagreed that there was any such “intent” requirement in the FLSA, reasoning that contemporary authority holds that reducing payroll expenses through a reduction in overtime is not contrary to the FLSA’s purposes. The court explained that an employer can make scheduling changes to avoid overtime and still comport with the FLSA. Thus, the Eighth Circuit concluded that “[s]o long as the change is intended to be permanent, and it is implemented in accordance with the FLSA, the employer’s reasons for adopting the change are irrelevant.”
While the Eighth Circuit’s decision is illustrative on how at least one circuit court interprets the FLSA regulations, it is important to note that the result might be different under state law. In Seymore v. Metson Marine, Inc., a California Court of Appeal evaluated a similar situation under the California Labor Code and determined that employers may designate a workweek that differs from the schedules of their employees if the reason for the modified worksheet has a bona fide business reason “which does not include the primary objective of avoiding the obligations of overtime.”
The Eighth Circuit specifically referenced the analysis from Seymore and noted that that decision was premised on California law, which is more protective than the FLSA. The Eighth Circuit was quick to point out that the FLSA analysis by the Seymore court “was wrong.” The Eighth Circuit’s not-so-subtle language presents a cautionary tale for all wage and hour practitioners: avoid conflating the federal law controlling the application and interpretation of the FLSA with the state law that controls similar state wage and hour laws.