Employers cannot artificially reduce an employee’s pay rate to avoid paying the proper amount of overtime, the 11th Circuit Court of Appeals has affirmed.
The court reiterated that, under the Fair Labor Standards Act, an employer is prohibited from scheduling an employee for a workweek of more than 40 hours without paying the employee overtime. Further, the court said, the FLSA requires an employer to pay two different compensation rates: the employee’s regular rate, without overtime pay, and the employee’s overtime rate, which must be at least one-and-a-half times the regular rate.
The ruling came in the case of security guard David Thompson, who sued his employer, Regional Security Services, for allegedly setting two sets of pay rates during his tenure with the company, artificially reducing his non-overtime pay. According to court records, Thompson was hired at a rate of $13 an hour, and he typically worked a 40-hour week. After seven months on the job, the company reportedly started scheduling him to work overtime and reduced his rate to $11.15 per hour. Then, about a year later, the overtime work stopped and Thomas’ regular hourly pay returned to $13, Thomas said.
“This appeal turns on the meaning of the statutory phrase ‘regular rate.’ As the Supreme Court has explained, an employee’s ‘regular rate’ is the ‘keystone’ of the FLSA’s overtime provisions,” the court opined.
The appellate court vacated a lower court’s decision to dismiss the case “because Thompson’s allegations plausibly suggest that Regional Security used the fluctuation in his weekly average rate as a device to avoid paying him overtime,” according to court records.
“As the Eleventh Circuit’s decision highlights, an employer may not artificially manipulate an employee’s regular rate in an effort to reduce or eliminate overtime pay, without running afoul of the [Fair Labor Standards Act] (or comparable state law),” attorney Justin Barnes wrote for the National Law Review.
