Overtime pay under federal law is calculated at one and a half times the employee’s regular rate. Most employers are already aware that the “regular rate” is not simply the employee’s agreed upon hourly rate of pay, but may also include shift premiums, many bonuses, and other types of compensation. See 29 U.S.C. § 207(e). A recent case from the Tenth Circuit highlights that while the regular rate includes most types of remuneration, employees cannot include contractually agreed overtime and thus get a federal overtime premium on top of the contractually agreed one.
In Chavez v. City of Albuquerque.pdf, the plaintiffs, all city employees, brought two collective actions against the City of Albuquerque contending that it had miscalculated the regular rate and thus had failed to pay them appropriate overtime. While they identified a number of issues, their primary claim rested on the overtime provisions negotiated by their unions. In the case of police officers and firefighters, their claim was bolstered by differences in the number of hours entitling them to overtime. Unlike most non-exempt employees, who receive overtime pay after 40 hours of work per week, for example, the FLSA entitles police officers to overtime only after 43 hours. The Albuquerque police collective bargaining agreement, however, gave them the right to overtime over 40 hours. Thus, the officers argued, they should be paid overtime pay after 40 hours under the contract AND then they were entitled to additional pay under the FLSA based on the the higher “regular rate” provided in the contract. The remaining plaintiffs, who were firefighters, clerical workers, transit workers, and others, raised essentially the same claim.
The trial court held for the City as to this claim and the Tenth Circuit affirmed. It held that the employees were entitled to only one dip of overtime compensation. For each hour, they were entitled to the greater of the FLSA or contractual overtime, but nothing in the statute required that the City pay FLSA overtime on top of contractual overtime. Similarly, it held that any overtime required by the contract would be calculated based on the contract and not based on federal law.
The court also addressed the employees’ claims that pay they received for unpaid sick and vacation time should be added back into the regular rate. While this claim was smaller, the district court found in their favor on both counts. The Tenth Circuit, however, reversed as to the vacation pay claim, citing long-standing Department of Labor regulations. It noted the well-settled principle that courts should defer to the Department of Labor’s rulings and interpretations. The DOL has indicated that a buy-back of sick pay is akin to an attendance bonus, which encourages certain behaviors wanted by the employer, and should be added to the regular rate. By contrast, vacation time is generally scheduled in advance and is not abused in the way that sick time may be. Deferring to this DOL distinction, the Tenth Circuit reversed the trial court’s finding with respect to the addition of reimbursement of unused vacation days to the regular rate.
The Bottom Line: Plaintiffs can exploit even minor FLSA violations effectively through collective actions, but ultimately they still need to establish a violation of the FLSA to recover.