Employer’s Creative Method to Reduce Overtime Pay Upheld by Federal Court
Under the Fair Labor Standards Act ("FLSA"), non-exempt employees eligible to receive overtime are entitled to receive one and a half times their regular rate of pay for each hour worked over 40 hours during any work week. On an oil rig maintained by Redland Energy Services ("Redland"), employees were receiving over 40 hours of overtime per week. By simply changing when the workweek was deemed to start and stop, Redland managed to cut this overtime pay obligation in half. Although Redland’s change to the start and end date of the workweek was challenged by the employees, the change was ultimately upheld by the Eighth Circuit Court of Appeals in the matter, Abshire, et al., v. Redland Energy Services, LLC, 695 F.3d 792 (2012).
The plaintiffs in this matter worked as operators of oil rigs maintained by Redland. They regularly worked 12 hour shifts from Tuesday to Monday seven days straight (84 hours per week), followed by a week off. Although the workweek had initially been calculated using the same Tuesday to Monday schedule regularly worked by the oil rig employees, Redland changed the workweek designation to Sunday to Saturday, the same designation used for all other employees at Redland. As a result, the oil rig employees now worked no more than 60 hours in any designated workweek. The Eight Circuit Court of Appeals upheld a challenge to Redland’s workweek change, noting that so long as the change to the workweek is “intended to be permanent, and it is implemented in accordance with the FLSA, the employer’s reasons for adopting the change are irrelevant.” Id. at 796.
While most employers will not find themselves regularly paying their employees overtime to the extent found in the Redland matter, the costs of overtime can certainly add up for any business. By being creative and reviewing and revising all workplace policies, such as how the workweek is scheduled or how the work week and pay period are defined, it is often possible for an employer to limit significant overtime exposure. If you have questions or would like to discuss your business policies, please feel free to contact us to discuss your situation.