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Connecticut Federal Judge Rejects “Chinese Overtime”

Yes, I know, it is a racist term, but it isn’t mine.  Some courts and some companies actually use this terminology.  I am confident that this is not the way that the Chinese pay their employees overtime pay.  I really do not know the genesis of this phrase.

With that behind us, the news is that Judge Janet C. Hall of the District of Connecticut issued a ruling on September 27, 2011 in the case of Perkins v. SNET rejected SNET’s argument that any damages in this overtime misclassification case should be calculated on the basis of the Fluctuating Work Week method of overtime calculation.

If you’ve never heard of it, this overtime pay scheme allows employers to pay half time, rather than time and a half for their non-exempt employees.  There is a very old (1942) U.S. Supreme Court case on this topic called Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942).  There is also a federal regulation.  C.F.R. Section 778.114.  These rules allow employers to pay their non-exempt employees overtime at this reduced rate as long as they do not dock their salary when they work less than 40 hours.  In other words, employers cannot have their cake and eat it, too.

The tricky part comes when employers have classified a group of employees as exempt from overtime, they are sued and lose, and now we have to figure out what the class of misclassified employees are owed.  Plaintiffs attorneys want to divide the weekly salary by 40 to come up with an hourly rate and pay that rate times 1.5.  ($800 weekly salary / 40 = $20 x 1.5 = $30 overtime rate). If the worker puts in 50 hours, they claim $300 for their 10 overtime hours.

Clever defense attorneys want to divide the salary by the total number of hours worked in the week, including overtime hours, lets say 50.  $800 / 50 = $16.  $16 x 1.5 = $24.  Since they claim to have already paid $16 for the 10 overtime hours, they claim that all they owe is $8 x 10 hours or $80.

In Perkins, SNET filed a motion in limine seeking a ruling that if they lose, they only owe overtime at the half time rate, not the time and a half rate discussed above.  In the above example, it is a difference of $220 per week per person.  Lots of money on the line.

Judge Hall rejected this argument and granted Plaintiff’s motion in limine, ruling that the time and a half method was applicable.  Her ruling (it is not yet published but can be found on Pacer.  It is civil action 3:07 CV 967 (JCH))contains a detailed and thoughtful analysis of the relevant statute, regulations, cases and DOL opinion letters.  It is must reading for any Connecticut wage / hour practitioner.

In the end, my favorite part of her ruling was her footnote 5:

“In addition, the court agrees that assessing damages using the fluctuating workweek method provides a perverse incentive to employers to misclassify workers as exempt, and a windfall in damages to an employer who has been found liable for misclassifying employers under the FLSA. (citations omitted).”

This ruling should provide powerful precedent going forward to other plaintiffs or groups of plaintiffs seeking to be compensated for unpaid overtime wages.
Congratulations to counsel for the plaintiffs, Sanford, Wittels & Heisler, LLP-NY.