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Pay rates blended for overtime

HR Magazine, Nov, 2007 by Justin E. Poore

Allen v. Board of Public Education for Bibb County, 11th Cir. No. 06-12131 (Aug. 17, 2007)

Employers can pay employees different rates for the same type of work and use the weighted average of those rates to calculate overtime pay without violating the Fair Labor Standards Act (FLSA), according to the 11th U.S. Circuit Court of Appeals.

The Board of Public Education for Bibb County, Ga., paid bus drivers different rates of pay depending on whether they were driving a "regular route" or an "additional route."

The drivers were paid an hourly rate determined primarily by their years of service when driving a regular route. However, the drivers received a set rate of $6 per hour for driving field trips or $7 per hour for performing any other work.

For employees receiving different rates of pay for "two or more different kinds of work," the FLSA and accompanying U.S. Department of Labor regulations provide that for overtime purposes, the employer may use the weighted average of these rates--that is, the total weekly compensation divided by the total number of hours worked--to calculate overtime rates. The employee must be paid at least one-and-a-half times this "blended rate" for time worked in excess of 40 hours per week.

The board used this method of calculating overtime for bus drivers being paid for both regular routes and additional routes. A group of bus drivers sued, claiming that the board should be calculating overtime using the higher hourly wage for regular routes, rather than using the blended rate. The drivers argued that the blended rate provisions established that such rates can be used only if the different hourly pay rates were for different types of work, and the district court agreed.

However, the district court disagreed with the plaintiffs' claim that they were performing the same type of work when driving regular routes and additional routes, and ruled that the employer was using the blended rates appropriately for calculating overtime.

The 11th Circuit upheld the district court, but for different reasons. The appellate court noted that the FLSAs overtime provisions were not intended to regulate employees' compensation or prescribe any particular hourly wage. Accordingly, the law does not prohibit employers from compensating an employee at more than one rate of pay, even if the employee only performed one type of work.

In addition, the three-judge panel held that the statute and regulations cited by the employees did not limit the use of blended rates to employees performing different types of work. Instead, these provisions were drafted to ensure that employers adhered to the wages they established themselves and paid a premium for overtime work.

Given this underlying purpose, the court interpreted the language regarding "two or more different kinds of work" as an illustration of how overtime rates can be calculated, not a requirement that different types of work be performed before an employer can pay different rates and use a blended rate to calculate overtime.

BY JUSTIN E. POORE, AN ATTORNEY WITH GILKEY & STEPHENSON PA, A WORKLAW[R] NETWORK FIRM IN ALBUQUERQUE, N.M.

Online Resources

New cases are posted online each week. Visit the online version of Court Report at www.shrm.org/hrnews.> RELATED ARTICLE: Professional Pointer

While employers have some flexibility in setting wages and calculating overtime rates, the application of these determinations will be valid only if supported by accurate recordkeeping.