Fifth Circuit Triples Texas Unpaid Overtime Award

It is a rare case when the United States Court of Appeals for the Fifth Circuit (one of the more conservative in the country) rules that a plaintiff was not awarded enough in damages.  Thus, a recent opinion from the Fifth Circuit, in which the Court found that the Plaintiff should receive triple the amount awarded by the district court, made many attorneys take notice.  The Fifth Circuit recently reversed and remanded an unpaid overtime case filed in Dallas, Texas, ruling that the fluctuating workweek method used by the district court was improper and that the Plaintiff should have been awarded one and a half times her regular rate of pay, rather than the half-time that she was awarded by the district court.  See Black v. SettlePou, No. 12-10972, 5th Cir. Oct. 11, 2013).

The unpaid overtime case was filed in federal court in Dallas under the Fair Labor Standards Act, or FLSA, by Betty Black, who formerly worked at a legal secretary and paralegal at a law firm.  Initially, Ms. Black received a salary and overtime pay.  However, she was “promoted” to supervising a legal secretary, and was re-classified by the law firm as exempt from overtime pay.  Ms. Black complained about her re-classification as exempt from overtime pay to her supervisors, but these complaints were not resolved in her favor.  She was terminated in 2010, and filed suit shortly thereafter seeking to recover unpaid overtime.

The case went to trial, and the jury found that the plaintiff was owed 274 hours of overtime pay.  The district court calculated damages by utilizing the “fluctuating workweek,” and thus multiplied the 274 hours of overtime by half of her hourly rate.  On appeal, the plaintiff argued that the fluctuating workweek was not a proper methodology for calculating her overtime pay, and that she instead should have been awarded one-and-a-half times her regular rate for each hour of overtime that she worked.

The fluctuating workweek is an employment arrangement in which an employee receives a fixed weekly pay for a fluctuating work schedule with a varying number of hours worked each week.  Under the Fair Labor Standards Act (FLSA), employers utilizing this method must meet the following requirements:

1. The employee’s hours must fluctuate from week to week both below and above 40

2. The employee must receive a fixed salary that does not vary according to the hours worked each week

3. The fixed weekly amount must exceed the minimum wage in any given week

4.  The employer and employee must have a clear and mutual understanding that the employer will pay a fixed salary regardless of the hours actually worked

If the court determines that this method is acceptable, the employer is liable only for half time for each hour worked above forty, with the rationale being that the employee has already been compensated at his or her regular rate of pay for the overtime, and thus only the half-time is owed.

The Fifth Circuit, in deciding the issue, held that “the fluctuating workweek method of overtime calculation is appropriate when the employer and the employee have agreed on a fixed weekly wage to work fluctuating hours.”  The Court stated that “[t]he parties’ initial understanding of the employment arrangement as well as the parties’ conduct during the period of employment must both be taken into account in determining whether the parties agreed that the employee would receive a fixed salary as compensation for all hours worked in a week, even though the number of hours may vary each week.”   The Court noted that the Plaintiff testified at trial that she understood that she was to work a regular schedule, and that she complained to her supervisors after she was re-classified as exempt.  The Court stated that this evidence demonstrated that the parties had not agreed on a fixed weekly wage to work fluctuating hours.  Accordingly, the Court held that it was clear error for the Court to apply the fluctuating workweek method in calculating the Plaintiff’s overtime pay.  Thus, the Court vacated the judgment and remanded the case back to the district court, so that the court could recalculate the Plaintiff’s unpaid overtime using time and a half, rather than half time, and thus effectively tripling the original damage award.

About the author: Josh Borsellino represents plaintiffs and defendants in unpaid overtime litigation.  If you have questions regarding unpaid overtime, call Josh Borsellino at 817.908.9861 or complete this form for a free consultation.