Ninth Circuit: Wage Rates Used for Overtime Hours Cannot Be Lower Than Those Used for Non-Overtime Hours

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March 21, 2017

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In Brunozzi v. Cable Communications, Inc., the Ninth Circuit stated that wage rates cannot be decreased in weeks when overtime is worked, as compared to weeks when no overtime is worked. There, two cable technicians were paid a piece rate per cable system installed, plus a contractually-based production bonus each pay period as part of their regular wages.  When the employer calculated overtime, it reduced the production bonus by the amount of overtime paid for piece rate work, which meant that employees received lower wage rates than when they did not work overtime.

The Ninth Circuit stated that the operative wage agreement, using this method of calculation, violated Dept. of Labor regulations. Under the FLSA, employers are not permitted to reduce an employee’s hourly rate when the employee works overtime in an effort to pay employees less. Rather, the court stated that the piece rate plus the production bonus should have been added together when dividing the total hours worked to properly determine the regular hourly rate when calculating overtime.  By reducing the technicians’ production bonus in weeks when the technicians worked overtime, the employer had inappropriately paid the technicians less than they earned.

Action Items

  1. Employers should review compensation calculation methods with payroll staff to ensure employees are paid appropriately.
  2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

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