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No Good Deed Goes Unpunished... but Sometimes the Do-gooder Is Vindicated

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The U.S. Court of Appeals for the Eleventh Circuit just held - shock alert! - that paying an employee more than is legally required does not violate the Fair Labor Standards Act.  This should seem obvious, but apparently it wasn't, until now.

The case involved an employee who was compensated using the fluctuating workweek (FWW) method allowed by the Fair Labor Standards Act (FLSA).  This method is for workers who normally are paid on an hourly basis and are not exempt from the FLSA's overtime requirement.  The employer pays a nonexempt employee a fixed weekly salary, plus overtime when the employee works over 40 hours.  The weekly salary can't be reduced or docked, except in extraordinary circumstances; and the employer must explain the pay method to the employee (that should be in writing).  

An employee compensated using this method is entitled to overtime but it's calculated differently.  Because the weekly salary covers all hours worked - whether 30 or 50 - the employer only has to pay an additional .5 times the regular rate, instead of the usual 1.5 times.  To calculate FWW overtime the employer divides the weekly salary by total number of hours worked and pays half that rate times the number of hours over 40.  That satisfies the FLSA because the employee gets the required 1.5 their regular rate when the .5 premium is added to the basic rate covered by their salary.

When this method is strictly applied it means that the more the employee works, the less they earn per hour.  But it doesn't have to be that way.  In the case before the Eleventh Circuit the employer instead divided the weekly salary by 40 and then paid .5 times that amount for every overtime hour.  In addition to simplifying the paperwork, the net effect was to avoid the diminishing-rate problem by paying more than the regulations actually required.

You'd think the employee would have been happy with that but they sued, claiming that they should get back pay at 1.5 times their regular rate for overtime hours because the employer hadn't strictly followed the regulations.  This led the Court, in a snappy 7-page opinion, to observe that the FLSA sets a pay floor, not a pay ceiling.  The FLSA isn't violated when the employer pays more than the minimum required.

Critical to this employer's success in the court was a memo the employee had signed explaining how his pay would be calculated, which satisfied the FLSA's requirement of an understanding.  

The fluctuating workweek method can work well for certain employers and employees when the number of hours to be worked varies.  The employee gets a guaranteed weekly wage, plus an overtime bonus; and the employer can compensate overtime hours at one-third the normal cost.  

The case is Hernandez v. Plastipak Packaging, Inc., No. 22-11608, 2023 U.S. App. LEXIS 1665 (11th Cir. Jan. 23, 2023).

This article is part of our March 2023 Newsletter.

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