[vc_row][vc_column][vc_column_text] By: Randall Sutton
Oregon requires that most manufacturing employers pay daily overtime if an employee works more than 10 hours in a single day. As with most other employers, a manufacturer also must pay overtime when an employee works more than 40 hours in a single week. In many cases, an employee who earns daily overtime may also end up earning weekly overtime, raising the question as to how an employer should calculate overtime for the week.
For many years, BOLI has advised manufacturing employers that they are in compliance so long as they pay the greater of the daily or weekly overtime wages. For example, if an employee works 12 hours on Monday, and ultimately works 42 hours for the week, the employee would only be entitled to two hours of overtime pay.
BOLI is about to upend this longstanding interpretation of the law, by requiring employers to pay both the daily overtime and weekly overtime earned. In the above situation, the employee would be entitled to four hours of overtime premium to cover the two hours of daily overtime worked and the same two hours that exceed the 40 hour weekly threshold. Essentially, by receiving a double premium for these hours, an employee who is in this position will be paid double-time.
Why the change?
In August, the Northwest Justice Project filed a class action lawsuit in Multnomah County on behalf of factory workers at Portland Specialty Baking, alleging wage and hour violations for failure to pay both hourly and weekly overtime. The reasoning in the complaint appears to have persuaded BOLI, which intends to issue an update its Field Operations Manual and its employer FAQs to require manufactures to pay both overtime premiums rather than the more generous of the two.
How does this affect me?
Let’s take a look at a hypothetical schedule of one factory worker to see how the new calculation would differ from the old calculation:
|Total Hours||46||Daily: 2
Let’s assume that this employee earns $10 an hour. Under the old calculation, looking at the greater of the daily and weekly overtime earned, the employer would be responsible to pay the overtime premium on only six hours. As a result, the employee would earn 46 hours at $10 per hour, with an additional $5.00 per hour paid for the six overtime hours, for total weekly compensation of $490: (46 x $10 = $460) + (6 x $5.00).
Under the new interpretation, the employee is entitled to payment of the overtime premium for daily overtime in addition to weekly overtime. In the same situation, the employee would receive a total of eight hours of overtime premium (two hours of daily overtime and six hours of weekly overtime). As a result, the employee would earn 46 hours at $10 per hour, with an additional $5.00 per hour paid for the eight overtime hours, for total weekly compensation of $500 (46 x $10 = $460) + (8 x $5.00). In effect, the employee can receive the equivalent of double-time when working daily overtime.
What can we expect going forward?
For now, the double payment of overtime is a novel legal theory asserted in the pending class action lawsuit. If the case goes to trial, it ultimately may not prevail nor be upheld on appeal. Nevertheless, because BOLI has announced a change in its position on this issue, employers should obtain legal advice on the matter to evaluate potential risks and outcomes. BOLI should be expected to apply this interpretation when enforcing overtime claims going forward, and it is possible that BOLI will also expect employers to correct payments made over the prior two-year statute of limitations period.
For more information about this article, you can contact Randy Sutton, or any other member of our employment law team.