Court Rules on “Regular Rate” Meaning in Overtime Pay Case

The Fair Labor Standards Act (“FLSA”) governs overtime pay in Texas. In a nutshell, the FLSA requires that employers pay their non-exempt employees one-and-a-half times their “regular rate” for every hour worked in excess of forty in any given week. But what constitutes an employee’s “regular rate” of pay under the FLSA? The Fifth Circuit recently issued a ruling on the meaning of this term in an unpaid overtime case. See Lopez v. Genter’s Detailing, Inc., 2013 WL 573797 (5th Cir. 2013).

In Lopez, the Plaintiffs were former employees of the defendant’s automotive detailing business. They sued their former employer in Dallas federal court for unpaid overtime. Prior to trial, plaintiffs and the defendant stipulated as to the number of total hours worked and overtime hours worked by each plaintiff in each two-week pay period at issue. They also stipulated that each of the plaintiffs’ paychecks had shown only a single hourly rate of pay, regardless of the number of hours worked per pay period. At the conclusion of the plaintiffs’ case at trial, the defendant filed a motion for judgment as a matter of law. At the conclusion of the defendant’s case, the plaintiffs filed a motion for judgment as a matter of law as well. The district court denied both of these motions. The jury returned a verdict finding that the defendant had violated the FLSA with respect to every plaintiff and awarding unpaid overtime damages to each former employee.  After various post-trial motions, the district court entered a judgment totaling almost $200,000 in unpaid overtime, liquidated damages and attorney’s fees, and the defendant appealed.

The defendant argued that, while the employees’ paychecks showed consistent hourly rates for all of their hours worked, they actually reflected payment of a “blended” hourly rate that combined both regular and overtime rates. Thus, according to the defendant, the former employees actually received the overtime pay owed to them under the FLSA, despite their apparently constant hourly rate of pay. The Fifth Circuit began its discussion by stating that “[w]hile the words ‘regular rate’ are not defined in the Act, they obviously mean the hourly rate actually paid for the normal, non-overtime workweek.” Walling v. Helmerich & Payne, Inc., 323 U.S. 37, 40, 65 S.Ct. 11, 89 L.Ed. 29 (1944).

The Court noted that the defendant’s stipulations unequivocally established that the plaintiffs were paid at the same hourly rates regardless of whether or not they worked overtime during a given pay period. It further noted that the Supreme Court has held that blended pay schemes that fail to account for the actual number of regular and overtime hours that an employee works are impermissible replacements for traditional overtime pay rates under the FLSA. Id. (citing 149 Madison Ave. Corp. v. Asselta, 331 U.S. 199, 203–09, 67 S.Ct. 1178, 91 L.Ed. 1432 (1947)). The Court found that in this case, the plaintiffs were being compensated at their purportedly blended rates “for the normal, non-overtime workweek.” Thus, the court found that “the district court was correct in concluding that these rates necessarily constitute plaintiffs’ ‘regular rates’ for the purposes of the FLSA and that appropriate overtime rates would have been one and one-half times these regular rates. We therefore hold that the district court’s entry of judgment as a matter of law and its [unpaid overtime] damages award were not in error.”

The court also rejected the defendant’s argument that the unpaid overtime judgment should have been reversed because the plaintiff failed to offer legally sufficient evidence that the FLSA was violated in any single workweek, relying instead on biweekly paychecks. The court found that the biweekly method of calculating hours for the purposes of overtime was sufficient to support the unpaid overtime award.

About the author: Josh Borsellino is a Texas attorney that regularly advises employees regarding their rights to unpaid overtime. Josh Borsellino offices in Fort Worth, but is admitted to practice in every state and federal court in Texas. If you have questions regarding unpaid overtime, call Josh Borsellino at 817.908.9861, or complete this online form. There is no charge for an initial consultation regarding unpaid overtime. If Josh Borsellino accepts your unpaid overtime case, the matter will be handled on a contingency basis, meaning you pay no legal fees unless there is a recovery.