The case is Hornady, et al v. Outokumpu Stainless USA, LLC, 2024 WL 4471161 (11th Cir. October 11, 2024), involved more than discovery games. Games were also played with the Fair Labor Standards Act (FLSA). This article will discuss some mentioned in the case which may assist in identifying wrongs when reviewing an FLSA matter.
There are several games which seek to avoid overtime pay. Overtime exponentially increases costs for employers, and so naturally employers look to avoid overtime and still meet business needs. The FLSA requires employers to pay 1 and 1/2 times the regular rate for time beyond 40 hours in a work week 29 U.S.C. § 207(a)(1). Of course, this requires identification of the “regular rate” and the “work week”.
First, the “regular rate” bonus game. The FLSA says that the regular rate must reflect all compensation excluding overtime payments which the employee receives during the work week. 29 CFR § 778.209. A problem arises when an employee is entitled to receive a "nondiscretionary” bonus each month. If that is paid, it is due to be included in the regular rate calculation. So while a discretionary bonus may not be included, the argument arises that a system where a nondiscretionary payment is required, the regular rate of pay increases. For example, if an employee receives $10 per hour in a 40 hour work week and then receives a nondiscretionary bonus of $100 for that week, the real hourly rate is $12.50 per hour. If overtime is worked than the overtime rate is $18.75 per hour instead of $15 per hour.
Second the “work week” game. Part of understanding when overtime must be paid is understanding when the work week starts and when it ends. It is fine if the work week starts on Monday and ends on Sunday or starts on Sunday and ends on Saturday or any number of 7 day combinations. However, whenever the work week starts that is the week to be used for paying overtime. If the company is using a Monday through Sunday work week but calculates overtime between Sunday and Saturday, it is likely there will be a miscalculation.
Next the split shift game. This involves splitting the employee shift, so part is in one week and part is in another. For example, say an employee worked for a 12 hour shift beginning Saturday night at 6:00 p.m. and ending Sunday morning at 6:00 a.m. If the new work week starts at midnight on Sunday morning, the company cannot split that shift up into two different weeks. It has to capture the entire shift in the work week for Saturday.
The last game to be discussed is the failure to keep records. The FLSA requires a company to “make, keep, and preserve” all records relating to “wages, hours, and other conditions and practices of employment”. 29 U.S.C. § 211(c). In this instance, the law requires the employer to keep records that may actually make the case against the employer. The employer cannot defend the case by saying it no longer has records or did not keep records. It also cannot blame the payroll company if the blame is not truthful.
In this case, playing games, and then playing discovery games on top of this, led the 11th Circuit to conclude that the defendant gave up the right to litigate the case on the merits by “thumbing its nose at the judicial process”. This is not to say that these games could not have been defended. Perhaps there is some defense, but no court balked at the theories under these circumstances.
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