Overtime can be expensive, but the Court of Appeals for the Eighth Circuit has approved one method of reducing costs. The Fair Labor Standards Act (“FLSA”) requires payment of one and one-half times the employee’s regular hourly rate for all hours over forty in a workweek. Employers seeking to reduce costs have the option to permanently gerrymander workweeks to avoid paying overtime, according to a recent Eighth Circuit case, Abshire v. Redland Energy Services, LLC. By changing when a workweek starts and ends, employers can minimize their obligations to pay premium overtime pay to non-exempt employees.
The impact of such a change can be substantial, as the facts in the Abshire case show. Before the workweek was changed, drill rig employees worked 12-hour shifts for 7 consecutive days, Tuesday to Monday, then had the following week off and were paid on a Tuesday-to-Monday workweek. Every other week, the employer would need to pay 44 hours at the premium overtime rate. Under this scheme, each employee working that schedule would earn overtime pay for 1144 hours per year. Without changing the actual work schedule, the employer changed the start and end days for its “workweek” to a Sunday-to-Saturday week. After the change, the employees worked at most 60 hours in a workweek, saving the employer 624 overtime hours per employee per year.
While the Court was clear that the employer’s purpose did not affect the legality of such a change under the FLSA, the employer must intend the change to be permanent. Thus, an employer cannot avoid overtime payments by changing the workweek designation from week to week. However, the employer is not barred from changing the workweek again in the future, as long as it intends that change to be permanent.
With rising costs of doing business, employers may want to consider whether restructuring the workweek will save them overtime pay. However, they should also consider the potential for employee backlash. Employees who receive consistent overtime pay expect a certain amount in their paychecks. Reducing their pay while they work the same hours may cause them financial hardship and can lead to resentment toward the company. This is one case where employers will want to consider more than just the legality of their actions.
Brody and Associates regularly advises management on complying with state and federal employment laws including wage-and-hour laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.
