Hrly Rate Changed When Shift Changed
Petard
24 Posts
Here's an FLSA issue for forum members with 24-hour manufacturing operations. Because of an acquisition, we have inherited a dubious pay practice. I need some Forum assistance to point me toward a resolution.
Once upon a time, the acquired operation employed three, 8-hour, rotating shifts. The workers worked five shifts per week, and they had one extra day every four weeks. You can do the math, but it comes out to 2184 scheduled hours per year. Somewhere along the way, the workers and the company agreed to implement two 12-hour shifts. There are now all kinds of different schedules (e.g., 4-on/4-off, 7-on/7-off, and modified DuPont), but on average, the workers continue to have a schedule of 2184 hours per year.
Now here's where it gets interesting. Under the new schedule, the workers were to receive overtime pay after eight hours per day instead of the usual after-40-per-week rule. And because of the daily overtime pay, the annual costs of the 12-hour shifts would have been higher than for the same amount of annual work under the old 8-hour schedules. The company wanted the change to be cost-neutral, so they reduced the hourly rate sufficiently that, with the scheduled overtime pay, the employees average out to the same hourly rate as they had before. For example, if an employee earned $10 per hour under the old schedule, he or she now earned $8.78 per hour under the new schedule.
So far, so good. Here's the catch: The employees understood the desire to be cost-neutral, but they didn't want to lose money if they had unscheduled overtime. So they demanded that if the employee's actual work hours exceed the scheduled hours (e.g., more than 12 per day), the hourly rate reverts to the original $10 rate for all additional overtime pay. In other words, the "factored" rate applies for the neutral hours, but then the higher, original rate applies to any extra hours.
Something tells me that this might run afoul of the "regular rate" stipulations in the FLSA, but I can't find anything specific. Has anybody gone through a similar exercise? Can you cite specific regs that apply?
Once upon a time, the acquired operation employed three, 8-hour, rotating shifts. The workers worked five shifts per week, and they had one extra day every four weeks. You can do the math, but it comes out to 2184 scheduled hours per year. Somewhere along the way, the workers and the company agreed to implement two 12-hour shifts. There are now all kinds of different schedules (e.g., 4-on/4-off, 7-on/7-off, and modified DuPont), but on average, the workers continue to have a schedule of 2184 hours per year.
Now here's where it gets interesting. Under the new schedule, the workers were to receive overtime pay after eight hours per day instead of the usual after-40-per-week rule. And because of the daily overtime pay, the annual costs of the 12-hour shifts would have been higher than for the same amount of annual work under the old 8-hour schedules. The company wanted the change to be cost-neutral, so they reduced the hourly rate sufficiently that, with the scheduled overtime pay, the employees average out to the same hourly rate as they had before. For example, if an employee earned $10 per hour under the old schedule, he or she now earned $8.78 per hour under the new schedule.
So far, so good. Here's the catch: The employees understood the desire to be cost-neutral, but they didn't want to lose money if they had unscheduled overtime. So they demanded that if the employee's actual work hours exceed the scheduled hours (e.g., more than 12 per day), the hourly rate reverts to the original $10 rate for all additional overtime pay. In other words, the "factored" rate applies for the neutral hours, but then the higher, original rate applies to any extra hours.
Something tells me that this might run afoul of the "regular rate" stipulations in the FLSA, but I can't find anything specific. Has anybody gone through a similar exercise? Can you cite specific regs that apply?
