Opinion ID: 497015
Heading Depth: 2
Heading Rank: 1

Heading: The Regular Rate of Compensation

Text: 17 To the extent pertinent to the present controversy, FLSA Sec. 7(a)(1) provides as follows: 18 (1) Except as otherwise provided in this section, no employer shall employ any of his employees ... for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed. 19 29 U.S.C. Sec. 207(a)(1). Section 207(e) defines regular rate, in pertinent part, as follows: 20 As used in this section the regular rate at which an employee is employed shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee, but shall not be deemed to include-- 21 .... 22 (7) extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the maximum workweek applicable to such employee under subsection (a) of this section [) ], where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek. 23 29 U.S.C. Sec. 207(e)(7) (footnote omitted). Section 207(e)(7) is also known as a clock overtime provision because it deals with premium compensation that is equal to the minimum statutory overtime rate, but is payable solely on the basis of the time of day in which the work is performed, independent of the number of hours worked. Under the terms of the Act, the premium portion of the clock overtime payment not only is not part of the regular rate, id., but also is creditable toward the required overtime compensation. 29 U.S.C. Sec. 207(h). 24 Continental contends that it was entitled to judgment in its favor because the evening- and night-shift portions of its pay schedule are premium rates that provide extra compensation within the meaning of Sec. 207(e)(7) and that it has thus complied with the Act. Alternatively it argues that since the night-shift portion of its pay schedule is one-and-one-half times its day-shift rate, and Congress intended that the Act be interpreted flexibly, we should (a) conclude that the night-shift rate complies fully with the Act and (b) require that the Company be given credit for the evening-shift premiums. We disagree. 25 Preliminarily, we note that, as the district court found, there was no collective bargaining agreement establishing Continental's day shift as the basic, normal, or regular workday. And, given the conflicting affidavits from employees, it is hardly clear that a trier of fact would find that there was a contract or agreement between Continental and its word processor employees establishing such a workday in good faith. Thus it is questionable whether Continental meets the contract-or-agreement requirement of Sec. 207(e)(7) for good-faith establishment of a regular workday. 26 More importantly, as a matter of law the Continental pay schedule plainly did not meet the quantitative prerequisites set by Sec. 207(e)(7) for minimum clock overtime compensation, for Sec. 207(e)(7) deals with premium rates that are not less than one and one-half times the established regular rate. For example, after February 1, 1985, Continental's rate for the evening shift, $16.50, was roughly one-and-one-quarter times the $13 day-shift rate that Continental contends was the regular rate. Thus, it is clear both that the evening premium rate alone was less than one-and-one-half times the alleged regular rate and that the evening and night premium rates, when averaged, were less than one-and-one-half times the alleged regular rate. Second, though the night rate viewed in isolation was one-and-one-half times the day rate, the fact that the evening rate was less than one-and-one-half times the day rate means that the evening rate itself must be factored in to determine what the regular rate was, for the very definition of regular rate in Sec. 207(e)(7) includes any off-hours premium as part of the regular rate if those premium rates are less than one-and-one-half times the basic rate. When Continental's evening rate is included in determining the regular rate, the regular rate was not $13 per hour but was more than $14.50 per hour, and even the night-shift rate of $19.50 per hour was less than one-and-one-half times the regular rate. 27 Continental argues that if its pay schedule contained only the day-shift rate and the night-shift rate, with no intermediate rate, that schedule would meet the quantitative requirements of Sec. 207(e)(7), and it contends that Congress would have intended that the employer be given credit, rather than be penalized, for adding an intermediate premium to its schedule. We see no basis in the legislative history for inferring that Congress had in mind a treatment at variance with that spelled out in the Act. The original clock overtime provision that was the forerunner to Sec. 207(e)(7) was added to the FLSA in 1949 to solve the problem experienced in particular by the longshore and stevedoring industries, and to an extent by other industries, such as electric and gas utilities, where continuous operations are essential, in complying with the Act. See S.Rep. 402 (S.Rep. 402), 81st Cong., 1st Sess., reprinted in 1949 U.S.Code Cong. & Admin.News (USCCAN) 1617. In these industries, it had been customary for employers and labor organizations representing the employees to provide by contract that compensation at the rate of one and one-half times the straight-time rate shall be paid for work outside the straight-time hours stipulated in the contract. Id. at 1619. In the longshore and stevedoring industries, [o]ne of the purposes of this arrangement, substantially realized, was to concentrate the work of the longshoremen in the straight-time hours. The intended effect of such concentration was to bring about the employment of more men as there is pressure for more work to be done in the straight time hours. Id. at 1619-20 (footnote omitted). 28 The original FLSA, which required that overtime be paid at the rate of one and one-half times the regular rate of pay, unfortunately contained no definition of regular rate, and the Supreme Court's interpretation of the Act was that the premium rates paid for work outside the straight-time hours were includable in calculating the regular rate. See Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 68 S.Ct. 1186, 92 L.Ed. 1502 (1948). Congress agreed with the employers that this interpretation resulted in the employers' paying overtime on overtime, and, to eliminate this effect, it enacted the so-called clock overtime provisions. S.Rep. 402, 1949 USCCAN at 1619-22. 29 This history does not suggest that Congress intended its clock overtime provision to apply in circumstances where, for some of the nonregular periods, the employer paid less than one-and-one-half times the basic rate. Every mention of the problem referred to employers who were paying, for the entire non-straight-time period, at least the rate required in the Act's overtime provisions. Consistent with this history, the Secretary has issued an interpretative bulletin, which is due some deference, interpreting the clock pattern exception to be applicable only when all, not just some, non-straight-time hours are compensated at time-and-one-half. See 29 C.F.R. Sec. 778.204 (1986). 30 Thus, both the Act's legislative history and its administrative interpretation, no less than its explicit language, require that we uphold the district court's conclusion that Continental's pay schedule does not comply with the overtime compensation provisions of the Act, and that the Company is not entitled to credit for the premium portions of its evening and night rates. If there is any merit in Continental's belief that Congress would not have intended application of Sec. 207(e)(7) in accordance with its terms to the business of agencies such as Continental, the Company's remedy is to seek an amendment of those terms by Congress.