Pepsi Beverages Company has recently joined a long list of employers who are being sued for paying what some employee’s refer to as “Chinese Overtime.” Yes, it’s not the best name for it. The proper name is Fluctuating Work Week overtime. Some refer to it as “half time” overtime. Whatever you call it, employee’s don’t like it and there are lawsuits all over the country challenging its use.
Usually, employers pay an hourly wage to their non-exempt workers and then pay one and one half that wage when they work overtime. For example, if someone makes $20 per hour, they get $30 per hour for overtime.
Well, in an ongoing effort by employers to save every nickel they can, they are now paying overtime pursuant to a rare and, many say unfair method.
They pay a salary to their employees, then, when they work say 50 hours, they divide that salary by 50 (not 40) to determine the hourly rate. They then pay ½ that rate for the overtime. For someone earning $800 per week, this means getting $80 for ten hours of overtime instead of $300.
Unfortunately, the U.S. Department of Labor allows this payment scheme but only in certain circumstances. Employees and their lawyers around the country are attacking this rule whenever they find a way.
The latest employer to use this method is Pepsi. Stephen Boyd has filed a lawsuit in the federal court in Massachusetts claiming that Pepsi is not following all the rules and therefore should not be allowed to pay ½ overtime. His lawsuit explains it all.
While the claims arise out of a collective bargaining agreement of a local union, it could be that Pepsi pays all of its BCRs this way. If so, BCRs from around the country might be able to join.
Most employers pay non-exempt workers an hourly rate, say $15.00, and they pay time and a half when they work more than 40 ($22.50). What if I told you that some companies only pay ½ time (not time and a half) for overtime hours? Would you say, hey they can’t do that? Well, you might be right.
While the normal way of paying overtime is time and a half, there is a little known and little used regulation in the federal wage laws that permits half time (or less) to be paid. They call in the “Fluctuating Work Week” method of overtime pay. Sometimes you may hear it referred to as “Chinese Overtime.”
The general rules are that the employee must make a fixed salary for their hours from 1 to 40, and then they get a ½ time rate for hours over 40. It is very complicated, confusing, and usually unfair to workers.
Take this example. A worker makes $800 per week. Most would convert this into an hourly rate of $20. Overtime would then be $30 (time and a half). Under this scheme, if that worker worked 50 hours in a week, they’d only get $8 per hour or $80 total for their 10 overtime hours. Most people would believe that they should get $300.
The Fresh Market uses this pay scheme to pay its Department Heads or Department Managers. A lawsuit has been filed in Federal Court in Connecticut challenging this pay scheme. Among other things, it claims that The Fresh Market’s deferral of some of the Department Head’s compensation into quarterly and year-end bonuses violates this law. The U.S. Department of Labor in 2011 rejected attempts by employers’ lobbies to permit bonuses for employees paid via the Fluctuating Work Week. The lawsuit also claims that The Fresh Market failed to clearly explain this pay scheme to its Department Heads.
Recently, lawyers for the Department Heads have filed a motion with the court asking permission to send a notice out to Department Heads and Department Managers around the country letting them know of their rights and that they can join the lawsuit. That motion is still pending. The Fresh Market has opposed that motion, claiming that all Department Heads are different.
If the court grants the motion, Fresh Market Department Heads around the country will receive notice and a consent form that they can use to join the case. More information can be obtained by visiting the website of the Hayber Law Firm.