FLSA: Don’t Change an Employee’s Hourly Rate to Avoid Overtime



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Efforts by employers to avoid overtime pay can sometimes backfire.

Employers devise lot of strategies to avoid overtime.  After all, overtime can be costly.  I’m not a math major, but time-and-a-half is fifty percent more expensive.  Last week, an employer in Florida learned that its strategy to avoid overtime might violate the Fair Labor Standards Act.  See Thompson v. Regions Security Svcs., Inc., No. 21-1094, 2023 WL 3515222 (11th Cir. May 18, 2203).

David Thompson worked as a security guard for Regions Security.  He generally worked 40 hours per week and was paid $13.00 per hour.  In January 2019, however, Regions began to schedule him for approximately 20 hours of overtime per week — with an overtime rate of $19.50 per hour.  On July 22, 2019, Regions reduced Thompson’s hourly rate to $11.15 per hour — which equated to an overtime rate of $16.73 per hour.  A year later, Regions returned Thompson to a 40-hour-per-week schedule and raised his pay to $13.00 per hour.

Thompson sued and claimed Regions artificially lowered his pay to avoid paying $19.50 per hour in overtime.  The trial court dismissed Thompson’s claim, presumably because Regions did what the language of the FLSA requires: it paid time-and-a-half.  The Eleventh Circuit Court of Appeals reversed that decision.

The dispute centered on determining Thompson’s “regular rate” of pay — because the FLSA requires employers to pay time-and-a-half for  the “regular rate” in a work week.  Thompson claimed his regular rate was $13.00, while Regions said it was $11.15 during the year he was earning plenty of overtime.  The Eleventh Circuit relied upon guidance from the United States Department of Labor to find that employers are not allowed to reduce an employee’s hourly rate to avoid overtime:

That prohibition on lowering an employee’s regular rate and increasing the hours in his workweek prevents an employer from circumventing the FLSA’s overtime requirements. As 29 C.F.R. § 778.327 demonstrates, this non-circumvention rule prevents an employer from playing with an employee’s hours and rates to effectively avoid paying time-and-a-half for an employee’s overtime hours. Otherwise, an employer could use “simple arithmetic” to lower an employee’s rate and increase his hours so that he could never earn time-and-a-half pay—“no matter how many hours he worked.” Id. § 778.327(a).

Thompson, 2023 WL 3515222 at *5.

Importantly, the Eleventh Circuit established this rule in the context of a motion to dismiss.  Regions Security argued that it did not lower Thompson’s rate of pay to avoid overtime.  And, as the case progresses, it may be able to prove that fact-based defense.  But, because this was the beginning of the case, Thompson will be given the opportunity to show that his FLSA rights were violated.