Opinion ID: 2623203
Heading Depth: 3
Heading Rank: 4

Heading: Shift Differential Rates in the Computation of Hutka's Overtime Rate of Pay

Text: Hutka's next argument regarding the calculation of her hours concerns the amount of her rate of overtime pay. Hutka asserts that premium rates for shift differentials should be included in her overtime rate. We begin our analysis by considering Providence's policies regarding shift differential pay. Providence's hospital policies provide premium pay rates for nonexempt employees who work evening, night, or weekend shifts. Providence refers to evening and night rates as shift differentials and calls weekend rates weekend differentials. [32] Providence's overtime policy includes shift differential rates of pay in the calculation of the regular rate of pay for computing overtime if applicable. This adjusted regular rate is then multiplied by 1.5 to compute the amount of overtime compensation earned. The Providence policy on weekend differentials, however, does not allow weekend differential rates to be added to the employee's base rate of pay. [33] The superior court found that the shift differential part of the salary ... is a contract provision and it's not a contract to which Ms. Hutka was a party.... Her contract with Providence was as a supervisory employee that didn't include that and what she has available to her are the FLSA remedies. She has no contract remedies in that sense so shift differential is not applicable. The trial court decided that although Hutka is not exempt from receiving overtime under the FLSA, other contract terms that Providence provides to employees classified as nonexempt should not apply to Hutka unless these terms are also mandated by the FLSA. Under the FLSA, a regular rate is defined as all remuneration for employment paid to, or on behalf of, the employee. [34] This definition suggests that Hutka's regular rate should include the pay rate of all compensation Providence paid to her for her employment. If Providence had paid her a premium for the hours she worked during differential shifts, then the FLSA would require that such premiums be included in the regular rate. Since Providence did not pay Hutka such a premium from July 1992 to May 1995, the FLSA would not require a premium adjustment to the regular rate. The only other provision of Section 207 of the FLSA that concerns shift differentials places a restriction on when such premiums can be added to the regular rate. Under Section 207(e)(7), a regular rate shall not include a premium for additional hours if the premium is more than 1.5 times the regular pay. [35] The negative phrasing of the provision again indicates that the inclusion of the premium is not mandatory unless it is part of a contract. Hutka's reasoning relies heavily on Thomas v. Howard University Hospital, [36] a case that involved an employer that had already paid its employees a shift differential premium as a part of their employment compensation but had failed to include the premium in their regular rate. In that case, there was no question as to whether the employees were entitled to premium rates; such premium rates were clearly granted to the employees under their collective bargaining contract and on that ground, Thomas is distinguishable from this case. A second case cited by Hutka, Local 246 Utility Workers Union of America v. Southern California Edison, [37] is also distinguishable on the basis that it involved an employee who was clearly entitled to supplementary pay. The central question in that case was whether such supplementary pay, disability pay, can be considered compensation and included in the regular rate for overtime compensation. The dicta in Local 246 appears to reinforce the superior court's decision rather than strengthen Hutka's argument. The Ninth Circuit relied on Bay Ridge Operating Co. v. Aaron [38] for the proposition that [t]he regular rate of pay cannot be left to a declaration by the parties as to what is to be treated as the regular rate for an employee; it must be drawn from what happens under the employment contract. [39] The Local 246 court further reasoned that [t]he regular rate ... must reflect all payments which the parties have agreed shall be received regularly during the workweek.... It is not an arbitrary label chosen by the parties; it is an actual fact. [40] The established fact in this case is that Hutka's contract with Providence did not provide premium rates for her work during evenings and nights, and did not pay her such premiums for these hours. Providence convincingly argues that the FLSA does not mandate the addition of any premium rate to Hutka's regular rate of pay for purposes of computing overtime. The superior court's judgment that Hutka should not include shift differential rates of pay in her computation of overtime hours was not in error.