Court Affirms Employer's Authority to Schedule Workweek under FLSA

A core management task for employers is to properly schedule the workweek for their employees. If done correctly, an employer can reduce its obligation to pay overtime wages to its hourly, non-exempt employees. But an employer that fumbles in its scheduling of the workweek for its hourly employees can sustain liability under the Fair Labor Standards Act for unpaid overtime wages, liquidated damages, and attorney's fees.  29 U.S.C. Section 201 et seq. The U.S. Court of Appeals, Fifth Circuit, recently affirmed a summary judgment entered in favor of an employer that permanently changed its workweek schedule for a group of employees which had the effect of decreasing the amount of overtime wages that would have otherwise been paid by the employer. The employees had filed a class action complaint.

The FLSA requires employers to pay its hourly, non-exempt employees compensation at 1.5 x the regular rate at which they are employed for hours worked in excess of forty hours per workweek. 29 U.S.C. Sec. 207(a)(1). The FLSA does not define the term "workweek." Instead, the Department of Labor defines what "workweek" means in regulations it promulgated under the FLSA. 29 C.F.R. Sec. 778.105, authorized under 29 U.S.C. Sec. 259. The cited regulations permit the employer to decide when an employee's fixed period of "168 hours-seven consecutive 24-hour periods" starts and ends, and can be set to start on any day during the calendar week and at any hour of that day. Different workweeks may be established for a plant as a whole, or for different employees or groups of employees. An employer can only change the "workweek" schedule "if the change is intended to be permanent and is not designed to evade the overtime requirements of the Act."

The Johnson plaintiffs earned hourly wages as non-exempt employees. Their shift/work schedule constituted 12-hour shifts worked for seven consecutive days that started every other Thursday. The employer permanently implemented a workweek that ran from Monday through Sunday to calculate FLSA overtime and paid its employees on a bi-weekly basis. To maximize their overtime claim, the plaintiffs argued that their workweek actually started on Thursday and ended on the following Wednesday, in a manner consistent with their shifts. The trial court disagreed and entered summary judgment for the employer upon finding that by calculating overtime based upon a Monday through Sunday workweek, the employer did not violate the FLSA.

On appeal, the plaintiffs again urged that under the FLSA, their workweek should be formed in accord with their actual seven consecutive days of work, which would have entitled them to 44 hours each of overtime compensation per paycheck. The Court of Appeals, however, stressed that the FLSA does not require the employer to set a workweek that maximizes overtime compensation for its employees. Id. at 4. The court also cited the Department of Labor regulation, 29 C.F.R. Sec. 778.105, which does not require the employer to use the workweek proposed by plaintiffs. In addition, the Department of Labor had previously issued an opinion letter that explained how an employer can properly set a workweek to calculate overtime that resulted in reducing the amount of overtime that would otherwise be paid by an employer. While the DOL opinion letter did not constitute conclusive legal authority, the court found the letter to be persuasive authority indicating that the employer defendant had not violated the FLSA by setting a Monday through Sunday workweek.

The Johnson court also cited a recent U.S. Court of Appeals opinion where a court held that an employer did not violate the FLSA by permanently setting the work week for its employees so as to reduce the overtime compensation it paid. See Abshire v. Redland Energy Services, LLC, 695 F.3d 792, 796 (8th Cir. 2012), quoting Kerbes v. Raceway Assocs., LLC, 961 N.E.2d 865, 872 (1st Dist. Ill. Ct. App.)("Thus, a schedule whereby an employee's actual work schedule is split between two workweeks does not violate the [FLSA]."). The Johnson court concluded its analysis by holding that the employer complied with the FLSA even though the actual work/shift schedule of the employees spanned the two workweeks set by the employer and thereby decreased the overtime compensation the employees would have otherwise received. Id. at 8. The ruling of the Johnson court signals the need for every employer to evaluate the workweeks set for its non-exempt hourly employees under the FLSA, and state laws that govern its employees, to see if opportunities for efficiencies exist that can be obtained through permanent changes to workweeks set for different employees or groups of employees.

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