Private employer’s use of comp time in lieu of overtime unlawful

Employees of a private housing development were granted summary judgment on their claim that their employer unlawfully provided compensatory time off in lieu of overtime wages. However, a federal district court in New York denied their motion for summary judgment with respect to their claim that the employer failed to incorporate a nighttime wage differential in their base pay when calculating overtime wages. In a related action, the employees were granted certification of a Rule 23 class action for three subclasses alleging that the employer violated the minimum wage and overtime provisions of the New York Labor Law (NYLL) (Ramirez v Riverbay Corp, August 1, 2014, Koeltl, J). Hourly employees of a housing development alleged that their employer violated the overtime provisions of the FLSA and NYLL. Specifically, they alleged the employer unlawfully provided compensatory time off in lieu of overtime wages and failed to incorporate a nighttime wage differential in their base pay in calculating overtime wages. Additionally, the employees alleged that the employer’s policies were used to impermissibly reduce their compensation by undercounting the hours they worked. It was alleged that the employer would round down on-the-clock time when an employee was more than three minutes late, and that they were asked to perform off-the-clock work before or after their shifts were scheduled to begin. The employees were employed in various positions, including peace officer, bookkeeper, secretary, dispatcher, customer service representative, among others. A number of the employees were union members whose employment was governed by the terms of various collective bargaining agreements. Employer status. As an initial matter, the court addressed a motion to dismiss by a corporate officer and individual defendant who asserted that the employees failed to adequately allege that he was an “employer” under the FLSA and NYLL, individually liable for the alleged violations. The Second Circuit has established a four-factor test to determine the “economic reality” of an employment relationship: “whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.” The officer served as the director of finance and head of the employer’s payroll department. According to the employees, he had the power to control the employer’s wage policies, employee work schedules, and employees’ rate of pay,” and that he “plays a leading role in developing and modifying payroll practices and policies for RiverBay and its employees.” The court found these allegations sufficient to establish that the officer controlled the employer’s actual operations in a manner that related to the employees’ employment. Importantly, the officer’s involvement in the implementation of one of the allegedly unlawful timekeeping systems, and in the approval of compensatory time linked his control of the employer’s operations directly to the circumstances that gave rise to the employees’ various claims. Thus, the court concluded that he satisfied the definition of “employer” under the FLSA for purposes of individual liability, and denied his motion to dismiss. LMRA preemption. Next, the court had no difficulty in disposing of the employer’s contention that the employees’ comp time and nighttime differential claims were preempted under Sec. 301 of the LMRA. Section 301 preempts state-law claims that require interpretation of an underlying CBA. Similarly, it precludes claims under the FLSA that involve interpretation of a CBA. However, the employees nighttime differential claims were not precluded by Sec. 301 because they invoked statutory rights that were independent of the rights conferred on the parties by the CBAs. Although it was undisputed that the shift differential was called for in the CBA, the employees did not allege that the CBAs were breached. Rather, they asserted that the shift differential triggered their right to additional overtime compensation under the FLSA and NYLL. The employer’s assertion that the employee’s comp time claims were not preempted by Sec. 301 failed for substantially the same reasons. Comp time claims. Three of the four employees were granted their motion for summary judgment with respect to liability for their comp time claims. The employer did not dispute that it had a policy of paying comp time in lieu of cash for certain overtime hours, nor did it dispute that it is unlawful to pay comp time in lieu of cash to a private-sector employee for time worked in excess of 40 hours in a given week. Instead, it argued that the record did not support an inference that any of the employees received comp time in weeks in which they worked more than 40 hours. Section 207(o) of the FLSA permits states and their political subdivisions under certain circumstances to compensate their employees for time worked in excess of 40 hours in a given week by paying them compensatory time at a rate of one and one half hours for every hour worked. By contrast, the substitution of comp time for cash wages by private-sector employers is not expressly authorized, and courts have generally concluded that it is therefore not permitted. Here, two of the employees submitted weekly pay records indicating that they were provided comp time for hours in excess of 40 in at least one workweek. Thus, the court concluded that no other reasonable inference could be drawn but that they were provided comp time in lieu of cash overtime for time worked in excess of 40 hours in a given week. Such time constituted uncompensated overtime under the law, so that these employees were entitled to summary judgment as to liability on their comp time claims. “Cash out” payments. The court rejected the employer’s claim that the two employees were “cashed out” at the end of their tenure with it for all the comp-time hours that they accrued and that these “cash out” payments should cancel its liability for any uncompensated overtime hours. The employer’s reliance on cases applying the “banked method” for computing damages was misplaced, explained the court. The availability to the employer of an offset for cashed-out overtime hours was a question of remedy, not liability. Here, the employer’s cross-motion for summary judgment concerned liability. Moreover, the employer’s “cash out” payments would not apply to an employee who remained employed by the employer. With respect to a third employee, payroll records showed only the aggregate comp time she accrued. As a result, there was no direct support in the record for her assertion that “[w]hen [she] worked in excess of forty hours in a week, [she] received compensatory time off in lieu of overtime pay from Defendants.” Thus, there was a genuine issue of fact as to whether this comp time was accrued in weeks in which the employee worked in excess of 40 hours. Accordingly, the employee’s motion for summary judgment on her comp time claim was denied. Nighttime differential. Both parties were denied their cross-motions for summary judgment with respect to the nighttime wage differential. When calculating an employee’s “regular rate” of pay, an employer must generally include “all remuneration for employment,” subject to certain exceptions. An employee’s regular rate of pay includes shift differentials. Here, the employer did not dispute that the failure to include nighttime differential pay in an employee’s “regular rate” of pay for overtime purposes violates state and federal law. Instead, it argued that there was nothing in the employees’ submissions to establish that they earned nighttime differential pay in the weeks in which they worked more than 40 hours. The court found the employer’s argument meritless. With respect to one employee, none of the payroll records showed that she received a nighttime pay differential during any week within the FLSA limitations period in which she worked 40 hours. Thus, the principal basis for awarding summary judgment would be her own conclusory affirmation that she satisfied the legal standard. Records showed that she earned a substantial amount of nighttime differential pay; however, given the absence of weekly pay records supporting her claim that she received such differential during at least one week within the limitations period, summary judgment was not appropriate on her FLSA claim. NYLL claim. By contrast, with respect to her nighttime differential claim under the NYLL, the employee was situated identically to the four other named plaintiffs and their uncontested affirmation showed that she worked more than 40 hours and received nighttime differential pay in at least one week within the six-year limitations period under the NYLL. Standing alone, this would be a proper basis for summary judgment in the employee’s favor with respect to liability on her NYLL claim.
By Ronald Miller, J.D.