The U.S. Court of Appeals for the Eighth Circuit (with jurisdiction over Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota) has re-affirmed that the federal Fair Labor Standards Act permits an employer to change its employees' seven-day workweek, even when one of the stated reasons for the change is to reduce FLSA overtime costs.
 
The underlying lawsuit in Abshire v. Redland Energy Services, LLC was brought by drilling-rig operators whose schedule was to work seven, consecutive, twelve-hour days from Tuesday through Monday, followed by seven, consecutive days off.  Originally, the employer had also designated a Tuesday-through-Monday workweek for these employees.  The employer had used this timeframe to determine how many FLSA overtime hours the operators had worked.
 
The employer decided to change the operators' workweek to a Sunday-through-Saturday one, such that their future hours worked in the seven-day schedule would fall into two, separate workweeks.  This had the effect of lowering the operators' number of overtime hours worked in a single workweek, which in turn decreased the amount of FLSA-required overtime wages they were due.  The employer argued that it had made the change to increase payroll-administration efficiencies and to reduce the employees' FLSA overtime hours and pay.

The operators contended that the FLSA prohibited the employer from changing the workweek in order to reduce their overtime compensation.  In rejecting this argument, the court embraced the propositions that:
 
♦   There is no general FLSA principle requiring that an employee's overtime pay be maximized under his or her schedule;
 
♦   A workweek may be established from the outset so as to limit FLSA-required overtime under an employee's schedule;
 
♦   Changing the workweek in a way that has this effect is therefore also lawful; and
 
♦   Even if an employer's motivation for changing the workweek is to avoid overtime expense, this intention does not in itself mean that the change is an unlawful evasion of the FLSA's overtime requirements.

The court also brushed aside a claim that the FLSA requires a "legitimate business purpose" for adopting a new workweek.  The court said that, so long as the change is intended to be permanent and is otherwise implemented in accordance with FLSA principles, the employer's reasons for doing this are irrelevant.
 
This employer's communication of the workweek change could have complicated its defense had the employees made more of it than they apparently did.  The announcement said, "There will be no adjustment to your work week, which will remain Tuesday-Monday [but] you will begin to have a reduction in overtime hours as your work week will be split into 2 payroll periods."  Using "work week" to mean "schedule", and using "payroll period" to refer to the FLSA "workweek", risks exactly the confusion and potential vulnerability that we remarked upon in our earlier summary of FLSA-related workweek requirements.

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Our last post raised questions about how to calculate a non-exempt employee's pay under the federal Fair Labor Standards Act for the timeframe during which the employer adopts a different workweek.

When the FLSA workweek is changed, the period in which the conversion occurs typically involves hours worked falling within, or overlapping, both the new and the old workweeks.  As an enforcement policy, the U.S. Labor Department will deem FLSA wages to have been paid properly if the employer uses a particular computation method.  This approach calls for an employer to:

♦   Assume that the overlapping hours were worked in only the "old" workweek, compute FLSA straight-time and overtime pay due for each of the workweeks, and then total the sums;

♦   Perform the same calculation assuming instead that the overlapping hours were worked in the "new" workweek; and

♦   Pay the employee the greater of the two totals.

See 29 C.F.R. § 778.301, 778.302.

For example, assume that an employer is changing its workweek from one beginning on Monday and running through Sunday to one spanning from Friday through Thursday.  Assume also that an employee paid on an hourly basis at the rate of $10.00 works the following hours during the period of the workweek change:

-------------------- Old WW -------------------

M       T         W        Th        F        Sat      Sun      M      T          W        Th
8      8.25     10        9        7.5      8.5       9         1      8.25     8         8

                                           ------------------- New WW -----------------

This employee's wages would be computed as follows:

Pay for 60.25 "old" workweek's hours:

[(40 hrs. × $10.00) + (20.25 OT hrs. × 1.5 × $10.00)] = $703.75

Pay for 25.25 "new" workweek's hours:

($10.00) × (25.25 hrs.) = $252.50

TOTAL DUE FOR ELEVEN-DAY PERIOD:   $956.25

Pay for 50.25 "new" week's hours:

[(40 hrs. × $10.00) + (10.25 OT hrs. × 1.5 × $10.00)] = $553.75

Pay for 35.25 "old" week's hours:

($10.00) × (35.25 hrs.) = $352.50

TOTAL DUE FOR ELEVEN-DAY PERIOD:  $906.25

Because the first computation produces the greater figure, that is, $956.25, the employer would pay this amount.

Once again, this is something employers should also check into under any applicable laws of a state or other jurisdiction.  For instance, some states might require a different approach or might prescribe a minimum period of advance notice before the new workweek may take effect.

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Many compensation policies and similar documents refer to wages for non-exempt employees in the context of a "week", a "pay week", a "pay period", "the schedule", an "overtime week", or some other ambiguous word or phrase.  But the timeframe that matters under the federal Fair Labor Standards Act is a term-of-art:  A "workweek".  For instance, with few exceptions, FLSA overtime pay is due for a non-exempt employee's hours worked over 40 in a single workweek, which is not necessarily the same thing as the calendar week or an employee's scheduled week or pay period.

An FLSA workweek is a fixed, regularly-recurring period of 168 hours – that is, seven, consecutive, 24-hour periods – that the employer expressly adopts in order to maintain FLSA compliance.  FLSA recordkeeping regulations require covered employers to select and document at least one such workweek.  The workweek can be set to begin on any calendar day and at any time of day, but thereafter the employer must apply that workweek in complying with the FLSA.

If an employer has not designated and documented a workweek, or if it computes pay based upon some timeframe other than the applicable workweek, this can lead to non-compliance.  As an illustration, for the overwhelming majority of employees whose overtime must be determined on a workweek basis, the FLSA's requirements are not satisfied by paying overtime based just upon the number of hours worked over 80 in a two-week period or upon worktime exceeding 86.67 hours in a semi-monthly period.

What the workweek is can also affect what pay is due to an employee who must be paid on a "salary basis" in order to qualify for a particular FLSA exemption.  For example, the FLSA "salary basis" exemption principles say that the salary need not be paid for any workweek in which the employee performs no work.  However, to decide whether these are the circumstances, one has to know what workweek applies to that employee in the first place.

An employer is permitted to have more than one workweek under the FLSA, and the workweek does not have to be the same for every group of employees or for every location.  It is possible to establish different FLSA workweeks for different groups, for different locations, or even for different people.  Variations in work patterns or tendencies in different workforce segments can sometimes mean that it is advantageous to adopt a different workweek for a particular group or location, or even for a few particular employees.

It is possible to change a workweek, of course.  But an employer may neither do this frequently nor otherwise manipulate the workweek so as to produce a purported series of non-overtime workweeks.  Once the workweek has been established, it remains fixed regardless of the employees' schedules or numbers of hours worked.

Employers should also check into any applicable laws of a state or other jurisdiction to see whether there are any workweek-related requirements or restrictions that are different from or tougher than the FLSA's.

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