Overtime Pay Plan for Flexible Workweek Approved

Louise Parth, an emergency room nurse at Pomona Valley Hospital Medical Center in Pomona, California, filed a class-action lawsuit against the hospital alleging that its alternative pay scheme to compensate nurses working four 12-hour shifts a week violated the overtime pay requirements of the Fair Labor Standards Act. Employees who agreed to work the 12-hour-per-day, four-day workweek received a lower base hourly rate (which exceeded the legal minimum wage) in exchange for the 12-hour schedule. Parth agreed to participate in the plan in 1993, and as a result her base hourly rate was reduced, from $22.93 to $19.57 an hour.

Under normal circumstances, the FLSA requires an employer to pay nonexempt employees who work more than 40 hours in a workweek one and a half times the employees’ “regular rate” of pay. In hospitals and health care facilities, however, there is an additional overtime requirement that employers pay time and a half for hours worked in excess of eight hours in any workday. [See: 29 U.S.C. § 207(j).]

The U.S. District Court dismissed the action on the grounds that the hospital’s pay plan did not violate the FLSA, and on appeal to the U.S. Court of Appeals for the 9th Circuit, that decision was affirmed. The 9th Circuit agreed that nothing in the FLSA “bars an employer from contracting with his employees to pay them the same wages they received previously, so long as the new rate equals or exceeds the minimum required by the [FLSA].” The court also found no evidence that the altered compensation schedule was adopted for the purpose of avoiding overtime payments. Parth v. Pomona Valley Hospital Medical Center, No. 08-55022 (10/22/09).

Impact: Employers may implement an alternative pay schedule so long as employees continue to earn approximately the same salary at an hourly rate that meets or exceeds the minimum requirements of the FLSA.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.