Source: https://flsaovertimelaw.com/2013/11/04/w-d-tex-hourly-pay-for-weekend-work-identical-to-work-performed-during-week-and-purportedly-paid-at-day-rates-rendered-so-called-hybrid-day-rates-impermissible/
Timestamp: 2019-04-26 14:15:44+00:00

Document:
Rodriguez v Republic Services, Inc.
This case was before the court on the parties’ cross-motions for summary judgment. At issue was whether the defendants pay policy—whereby they paid their trash collector employees purported “day rates” for days worked during the week (i.e. Monday-Friday) and hourly pay for weekend work—complied with 29 C.F.R. § 778.112, the regulation governing payment of day rates. The court held that it did not, because violated the clear language of the regulation and because the plaintiffs performed the same work during the week for the defendants as they did on the weekends (i.e. it was 2 different forms of pay for the same type of work). Following the court’s order denying their motion for summary judgment, the defendants sought reconsideration, which was also denied by the court with a further explanation. Both order are discussed here.
Defendant BFI Waste Services of Texas, LP d/b/a Allied Waste Services of San Antonio (“BFI”) operates a residential collection, recycling and waste disposal business in and around San Antonio, Texas. Gilbert Rodriguez (“Plaintiff Rodriguez”) and Refugio Campos (“Plaintiff Campos”) were employed by BFI as Residential Route Drivers and thus were primarily responsible for driving through various residential garbage routes collecting and disposing of residential waste. Plaintiff Rodriguez worked for BFI from August of 2012 until February of 2013, while Plaintiff Campos worked for BFI from September of 2012 until November of 2012.
During the relevant time period, BFI paid Plaintiff Rodriguez and Plaintiff Campos (collectively “Plaintiffs”) under a “hybrid compensation plan” that included payments based on both a daily and hourly rate. For the five regularly scheduled work days of the week, Plaintiffs were paid a base day rate of $120. Plaintiffs were also required on occasion to work a day during the weekend (the “Sixth Day”) at the discretion of their supervisor. On the Sixth Day, despite Plaintiffs performing the same work as on the regularly scheduled days, Plaintiffs were paid at an hourly rate based upon each employee’s regular rate of pay for a trailing thirteen-week average. In addition, it appears that Plaintiffs were provided “incentive payments” of $10 for each day worked, including both the regularly scheduled days and the Sixth Day.
If Plaintiffs worked for more than forty hours in a workweek, BFI paid them overtime. The way in which BFI calculated this overtime is exemplified by the pay stub of Plaintiff Rodriguez for the week ending on September 1, 2012. During this week, Plaintiff Rodriguez worked for a total of 51.23 hours at a day rate of $120 over the five regularly scheduled work days. In addition, Plaintiff Rodriguez worked for 6.12 hours on the Sixth Day at an hourly rate of $15. Thus, when taking into account the $60 incentive payment, Plaintiff Rodriguez’s compensation for 57.35 hours was $751.80.
To calculate Plaintiff Rodriguez’s overtime compensation, BFI first determined the “regular rate of pay” by dividing Plaintiff Rodriguez’s total non-overtime compensation for the week by his total number of hours worked. Specifically, BFI divided Plaintiff Rodriguez’s total non-overtime compensation of $751.80 by his 57.35 hours worked. Accordingly, the resulting “regular rate of pay” obtained by BFI for the week ending on September 1, 2012, was $13.11.
BFI then paid Plaintiff Rodriguez overtime for all hours worked in excess of forty at half their regular rate of pay. For the week ending on September 1, 2012, this meant that BFI paid Plaintiff Rodriguez 17.35 hours of overtime at $6.55 per hour, for a total of $113.72 in overtime pay. BFI then added this overtime amount to Plaintiff Rodriguez’s “straight-time” compensation, found by applying the regular rate of $13.11 to all 57.35 hours, to arrive at Plaintiff Rodriguez’s total compensation of $865.52 for the week.
After a brief discussion of 778.112 and 778.115 (the regulation which permits an employer to pay 2 different amounts/types of pay for 2 different types of work), the court explained that 778.115 was inapplicable to the case, because the plaintiffs here performed the same type of work, regardless of the day of the week (i.e. the defendants could not substantiate the hourly pay on this ground). The court similarly analyzed and disposed of the defendants’ 3 remaining arguments as well.
Defendants have provided the Court with a 1967 DOL opinion letter which Defendants argue demonstrates the DOL’s approval of a compensation plan “very similar to the one at issue in this case.” The scenario addressed in the opinion letter revolved around school bus drivers who were also employed as custodians and who were compensated at a day rate of $10. In addition, these bus drivers were paid $2.00 per hour for taking extra bus trips. The letter goes to outline the method for calculating an employee’s regular rate of pay under sections 778.112 and 778.115, before appearing to conclude that the regular rate of pay for these employees could be calculated under section 778.112 by adding the wages earned at both the day and hourly rates and then dividing by the total hours worked in the week. From this, Defendants reason that the DOL has previously approved “essentially the same compensation structure” as the one at issue.
Defendants also argue that, when viewed in the proper context, the DOL regulation concerning day rates supports BFI’s “hybrid” compensation plan. To reach this conclusion, Defendants correctly note that following section 778.109 in the FLSA regulations is a list of “some” different compensation arrangements and the proper method for calculating the employee’s regular rate of pay under each. See 29 C.F.R. § 778.109. Given this context, Defendants reason that section 778.112 merely sets forth one specific situation in which the DOL chose to illustrate the proper regular rate calculation. In other words, Defendants believe that section 778.112 only demonstrates the proper calculation method for scenarios in which an employee is paid a day rate and “no other form of compensation for services.” Defendants therefore conclude that while this regulation exemplifies one way that a regular rate of pay may be determined, it does not serve as a categorical rule prohibiting employers from providing additional compensation to employees paid on a day rate basis.
29 C.F.R. § 778.115 (section titled “Employees working at two or more rates”). Further, section 778.112, upon which Defendants rely, appears to directly contradict the notion that an employee may be compensated on the basis of both a day and hourly rate. Rather, section 778.112 states that it covers employees that are paid a day rate and who also receive “no other form of compensation for services.” Id. at § 778.112.
[I]f the employee has worked 50 hours and has earned $ 491 at piece rates for 46 hours of productive work and in addition has been compensated at $ 8.00 an hour for 4 hours of waiting time, the total compensation, $ 523.00, must be divided by the total hours of work, 50, to arrive at the regular hourly rate of pay—$ 10.46.
The Court is not persuaded by Defendants’ analogy between BFI’s hybrid compensation plan and the arrangement described in the piece rate regulation. Rather, the Court finds that it is more appropriate to compare this example, which involves payment based upon both a flat piece rate as well as an hourly rate to compensate the employee for waiting time, to the scenario in which hospital personnel are compensated for being on-site and on-call. This latter scenario was at issue in Townsend v. Mercy Hospital of Pittsburgh, a Third Circuit case involving hospital personnel that received one wage for their performance of active duties, and another for working “on-premises-on-call” shifts. 862 F.2d at 1010–11. During these “on-premises-on-call” shifts, the hospital personnel were required to stay on the hospital’s premises, but had no assigned duties and were free to eat, sleep, read, and watch television. Id. at 1011. Given the substantive difference in duties, the Third Circuit determined that the personnel’s active periods constituted a different kind of work from the on-call shift when the only responsibility was to be present. Id. at 1011–12.
Viewing the section 778.111 example in light of such authority, the Court finds that the “waiting time” compensation described therein is easily analogous to the “on-premises-on-call” compensation received by the hospital personnel in Townsend. Thus, the employee’s “waiting time” in the example is best viewed as a different kind of work from the active duties being compensated under a piece rate. As noted above, however, the work being performed by BFI’s Residential Route Drivers remains the same throughout the entirety of the workweek, including the occasional Sixth Day. Consequently, rather than endorsing a hybrid compensation arrangement like the one employed by BFI, the example provided in the piece rate regulation and cited by Defendants is distinguishable.
In light of the foregoing, the court denied the defendants’ motion for summary judgment, and held the plaintiffs’ motion in abeyance.
In this case the parties appear to agree that if Plaintiffs only worked Monday through Friday and Defendants had merely paid the Plaintiffs their day rate, section 778.112 would apply. In this scenario, rather than receiving overtime at one and one-half times the regular rate, Plaintiffs would only receive overtime at half-time the regular rate. For whatever business reasons, the employer here employed two additional compensation methods in the payroll system. To acquiesce to this system, however, the court would have to rewrite section 778.112 as follows: If the employee is paid a flat sum for a day’s work … without regard to the number of hours worked in the day …, and if he receives no other form of compensation for services, his regular rate is determined by totaling all the sums received at such day rates … in the workweek and dividing by the total hours actually worked. See Rodriguez v. Carey Intern., Inc., 2004 WL 5582173 (S.D.Fla. Sept.15, 2004) (“[Section 778.112] does not provide definitional contours, nor is there case law to explain the clause. But the most logical and likely reasoning is that the regulation does not apply if one of the other forms of compensation delineated in the surrounding regulations is also utilized, or if the employee is given some other form of compensation separate and apart from the job rate. For example, if besides a job rate, an employee also receives an hourly rate, salary, or commission, for some of his work, the job rate regulation would not apply.”).
While these 2 decisions should seem to be “no-brainers” based on the clear statutory language of 778.112, surprisingly not all courts have agreed the language in 778.112 means what it says. For this reason, these decisions are noteworthy.
Click Rodriguez v Republic Services, Inc. to read the initial Order denying the defendants’ motion for summary judgment and Order on Reconsideration for the Order denying the motion for reconsideration.
By Andrew Frisch in Day Rates on November 4, 2013 .

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