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Calculation of FLSA Offsets

 Personnel and Employment Calculation of FLSA Offsets The plaintiffs were employees of the City of Lowell, Massachusetts, and members of a union. The collective bargaining agreement (CBA) established the terms and conditions of employment and provided for three pay augmentations: employees could receive a $3.00/ hour augmentation to their pay for plowing snow, a 5% differential for working undesirable night shifts, and a $150 weekly “standby” payment for employees at a water distribution system. The CBA also allowed employees to earn overtime pay of one-and-one-half times their regular pay if they worked in excess of eight hours in one day, or 40 hours in one week. The crux of this dispute was whether the three pay augmentations had to be included in the employees’ regular rate of pay for the purpose of calculating overtime wages and, if so, how the City was permitted to “net out” those augmentations against other “premiums” paid to employees beyond the requirements of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 207 et seq. The plaintiffs claimed that the City was under-calculating the “regular rate” of pay used to determine overtime wages. More specifically, section 207(h)(2) of the FLSA provided that: “[e]xtra compensation paid as described in paragraphs (5), (6), and (7) of subsection (e) of this section shall be creditable toward overtime compensation payable pursuant to this section.” The parties did not dispute that the extra compensation provided for in the CBA fell within the compensation described in subsection (5), (6) and (7), and could be used to offset the City’s underpayment, pursuant to § 207(h)(2). What was in dispute was whether premium compensation earned in one week could be used to offset an underpayment in a different week. The plaintiffs argued that their damages for unpaid overtime should be calculated on a work-week basis, and that any offsets pursuant to § 207(h)(2) could only be attributed to the singular work-weeks in which the premiums and overtime were earned. Accordingly, an underpayment one week could not be offset by a premium payment made in a different week. The City, however, argued that it was entitled to a “cumulative offset,” consisting of all premium payments, against any FLSA overtime it owed, regardless of when the premium payments were earned or made. The FLSA did not expressly address this, and the circuit courts of appeal were divided on the issue. The district court held that, based on the purpose of the FLSA and its interpretation by the Department of Labor (DOL), and the First Circuit’s language in O’Brien v. Town of Agawam, 350 F.3d 279, 289 (1st Cir. 2003), § 207(h)(2) offsets should be calculated on a work-week, and not cumulative, basis. The FLSA overtime requirement used a single work-week as its basic unit of measurement (29 U.S.C. § 207(a) (1)), and the “focus on the unitary workweek [was] prevalent throughout § 207 and the DOL’s interpretation of that section.” Similarly, 29 C.F.R. § 778.104 provided that “[t]he Act takes a single workweek as its standard” and that cumulative offsets were not contemplated. “[P]erhaps most importantly, the DOL [had] also issued an opinion letter stating that ‘surplus overtime premium payments, which may be credited against overtime pay pursuant to section 7(h) of FLSA, may not be carried forward or applied retroactively to satisfy an employer’s overtime pay obligation in future or past pay periods.’” The purpose of the FLSA, to protect workers from “excessive work hours and substandard wages,” was also best served by the work-week offset model. Accordingly, the plaintiffs’ damages for unpaid overtime were to be calculated on a work-week basis, and any offsets pursuant to § 207(h)(2) were to be attributed only to the singular work-weeks in which both premiums and overtime were earned. Only the premium portions of the extra payments (i.e., the extra one-half of the regular rate) could be used to offset the City’s overtime liability. Rudy v. City of Lowell, No. 07–11567–NMG, 2011 WL 915334 (D. Mass. March 14, 2011). Search & Seizure Overnight Guest and Common Areas In a ruling of first impression for the circuit, the U.S. Court of Appeals for the Tenth Circuit has ruled that an overcontinued on page 39 May/June 2011 Vol. 52, No. 3 35