Labor & Employment Law

Failure To Include Certain Payments In Regular Rate Can Lead To Class Action Liability

By Mark Tabakman

A federal judge has conditionally certified a FLSA collective action which was instituted by a production workers in an action in which the plaintiffs claim that many kinds of payments were not included when the company calculated their overtime.  There were lump sum payments, flexibility payments for working during certain operational contingencies, various night work premiums, holiday premium pay and annual payments for certain employees when they renewed their licenses.

Production bonuses or other promised payments must be factored in when paying overtime to non-exempt employees.  Unless a bonus or other kind of payment is not dependent on the occurrence of a particular event (e.g. attaining ten years of service/longevity) and is given completely at the whim of the employer, these payments increase the regular rate.  They must be allocated over the period of time (week, quarter, annual) that in which the bonus has been earned and then overtime paid accordingly.

When the payments are promised to employees in company policies or documents, the Fair Labor Standards Act is even clearer and more emphatic that they be included in the calculation of the regular rate.

Although these calculations add in very little to labor costs on a week-to-week basis, if they are not undertaken, then the potential liability should a lawsuit ensue may conceivably escalate quickly.  This is because it is likely that many employees are subject to the same policy and these smallish weekly amounts, when multiplied by (perhaps) several hundred employees over two or three years (the possible statute of limitations in a FLSA action) become an amount that may be daunting.
 

Full post as published by Wage & Hour - Development & Highlights on November 18, 2010 (boomark / email).