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4th Circuit recognizes ‘overtime gap time’ claim under FLSA

Correy E. Stephenson//January 31, 2022

4th Circuit recognizes ‘overtime gap time’ claim under FLSA

Correy E. Stephenson//January 31, 2022//

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An emergency medical services employee adequately alleged a violation of the Fair Labor Standards Act, or FLSA, under the theory of “overtime gap time,” a panel of the 4th U.S. Court of Appeals has ruled in reversing judgment on the pleadings for the employer.

The district court had dismissed the suit based on a “misreading” of the 4th Circuit’s 1996 opinion in Monahan v. County of Chesterfield, Judge James Wynn wrote for the court. Under the correct standard articulated by the panel, the plaintiff survived the defendant’s motion to dismiss.

Wynn’s opinion is Conner v. Cleveland County, North Carolina (VLW 022-2-001).

Shorted on straight time

Sara B. Conner worked as an emergency medical services, or EMS, employee for Cleveland Emergency Services. EMS personnel are assigned to a 21-day repeating schedule in which each employee works a 24-hour shift followed by 48 hours off. Individuals on this schedule always work more than 40 hours per week, since they will have at least two — and sometimes three — 24-hour shifts each week.

For at least three years prior to 2018, Cleveland County paid Conner pursuant to an ordinance that established salary “grades” with “steps” within each grade, with a plan that provided the calculation for the overtime rate.

First, the employee’s regular hourly pay was calculated by dividing the annual salary by 2,928 hours (the number of hours worked per year based on the 24 on/48 off schedule). Next, the resultant hourly rate was multiplied by 1.5 to determine the overtime rate. Conner did not challenge this rate.

However, the plan also provided for a “revised semi-monthly rate” for regular wages. This was calculated by multiplying the hourly rate that was used to calculate overtime by 2,080 (representing 40 non-overtime hours per week worked for 52 weeks) and then dividing this number by 24. The resulting number was paid to the employee each pay period.

Conner sued. She claimed that the revised semi-monthly rate unlawfully paid her regular wages using overtime compensation, resulting in overall lower pay and violating the FLSA.

For example, Conner’s hourly rate in 2017 was $12.60 (an annual salary of $36,900 divided by 2,928 hours), with an overtime rate of $18.90 per hour. Her total compensation would have been $52,927.20 ($36,900 plus overtime of $16,027.20).

But with the revised semi-monthly rate used by Cleveland County, her annual salary for regular wages was cut to $26,208, resulting in total compensation for the year of $42,235.30 — or $10,692 less than she should have been paid, she argued.

Cleveland County changed its policy effective Jan. 1, 2018, to pay EMS personnel regular wages in an amount equal to 1/24 of their annual salary.

Conner alleged that her employer violated the overtime provisions of the FLSA by underpaying straight time wages. Cleveland County moved to dismiss, arguing that Conner failed to plead a case under the statute because she did not affirmatively plead that she was not paid the requisite overtime wages she was due.

The district court agreed. Conner’s claims that she was shorted on her straight time pay amounted to a state law contract claim, rather than an FLSA claim, the court said, declining to exercise supplemental jurisdiction and granting Cleveland County’s motion for judgment on the pleadings.

Conner appealed.

A ‘species’ of overtime violation

The FLSA requires employers to pay their employees at least the federal minimum wage and to pay not less than time and a half for each hour worked over 40 hours during a workweek, the 4th Circuit said.

“There are situations, however, that fall between these two provisions of the FLSA,” Wynn wrote. “‘In addition to seeking unpaid overtime compensation, employees may seek to recover wages for uncompensated hours worked that ‘fall between the minimum wage and the overtime provisions of the FLSA,’ otherwise known as ‘gap time.’”

Courts are divided on whether an employee can bring an overtime gap time claim for unpaid straight time worked in an overtime week and the FLSA does not include language about overtime gap time, Wynn acknowledged.

But he relied upon guidance from the Department of Labor, or DOL, that “extra compensation for the excess hours of overtime work under the [FLSA] cannot be said to have been paid to an employee unless all the straight time compensation due him for the nonovertime hours under his contract (express or implied) or under any applicable statute has been paid.”

This guidance — Section 778.315 — was released by the DOL in 1968, has remained unchanged for 53 years and has been referenced in four other department interpretations, Wynn noted.

“Further, this interpretation makes sense as it reflects the policy objective of the FLSA overtime provision by ensuring employers do not mitigate or skirt the financial pressures of working their employees above the forty-hour threshold,” he wrote. “Without such guidance, an employer can engage in wage theft … while claiming to abide by the letter of the FLSA overtime provision.”

Wynn disagreed with Cleveland County’s interpretation of the Monahan decision, instead characterizing overtime gap time violations as “a species” of overtime violation, as “an employee who has not been paid all the straight time she is owed has not been properly paid her overtime.”

Allowing any amount other than the full amount of straight-time wages to count as compliance would frustrate the purposes of the FLSA just as surely as would nonpayment for specified hours, Wynn said.

“If we did not mandate that all straight wages be paid, we might encourage employers to simply shift wages to the ‘overtime’ bucket and reduce the wages for straight time promised by the employment agreement,” he added.

Pleading standard satisfied

With recognition in place for overtime gap time claims under the FLSA, Wynn laid out the standard for determining whether a plaintiff has pled sufficient factual allegations of a violation to overcome a motion to dismiss.

“To do so, the facts in the complaint must support a reasonable inference that: (1) the employee worked overtime in at least one week; and (2) the employee was not paid all straight-time wages due under the employment agreement or applicable statute,” he said.

Conner satisfied this standard, the panel found. She alleged she worked a 24 on/48 off schedule, which dictated that she worked more than 40 hours in any given week, and Cleveland County admitted as much. Conner was not required to identify a particular week that she worked overtime, Wynn said, but merely needed to provide enough factual context for her claim to be plausible.

As for the second prong, Conner averred there was an employment agreement between the parties that governed the work and compensation arrangement between them, and that her straight-time wages were not paid according to that arrangement. That was sufficient, Wynn said.

“In sum, we hold that an overtime gap time claim is cognizable under the FLSA,” he concluded. “The FLSA ensures employees are adequately paid for all overtime hours. To do this, courts must ensure employees are paid all of their straight time wages first under the relevant employment agreement, before overtime is counted.”

The panel reversed the grant of Cleveland County’s motion for judgment on the pleadings and remanded for a determination on the merits of Conner’s overtime gap time claim under the FLSA.

Legal representation

Neither Charlotte attorney Philip J. Gibbons Jr., who represented Conner, nor Christopher S. Edwards of Wilmington, who represented Cleveland County, responded to a request for comment.

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