Agreement to Work Without Overtime Pay Is Unfair and Not Enforceable
Almost all workers enter into some type of “agreement” with their employer as to how they will be paid. These agreements can be either informal understandings or formal written offer letters or employment contracts that are signed by the parties. While most aspects of such agreements are valid and may be recognized by courts or labor departments, one important term is typically not – that is an agreement that attempts to have a non-exempt employee waive or give up their right to receive overtime pay. This tends to occur in several different scenarios, and leads workers to believe that there is nothing they can do about trying to recover their unpaid overtime wages since they initially agreed to it. This is rarely the case, so it is important for workers to know that it takes more than such an agreement to give up this very valuable and legally protected right.
The federal Fair Labor Standards Act (the FLSA), along with many state labor laws, offer substantial protection of employees’ overtime pay rights and prevent employers from using their superior bargaining position and influence to get workers to “agree” to give up their legal right. Particularly at the time of hire, most employees are so eager to get the job they will sign almost anything to land the job – just think about all the paperwork employees sign when starting a new job, most without even an opportunity to thoroughly review and consider. For decades, the Department of Labor, state workforce commissions and the courts have understood this reality and have adopted rules and regulations to prevent overreaching by aggressive employers seeking to shortchange workers’ wages.
The following are a few scenarios in which employers improperly and unfairly attempt to have employees agree to work over 40 hours per week without receiving time and a half their regular rate of pay.
- Paying a Set “Salary”. While it is not illegal to pay non-exempt employees using a weekly salary, it does not relieve them from the obligation to pay overtime, even if this was the agreement. This fact is commonly misunderstood. Workers who are paid a salary are still required to be paid an overtime premium, but that premium can vary and must be calculated based on the actual number of hours worked during each workweek. The method used to calculate overtime for salaried non-exempt employees is called the fluctuating workweek method (a/k/a Chinese Overtime) and results in workers being paid an additional “half-time” amount for each hour of overtime in addition to their base salary. Note that under the overtime labor laws in some states, such as Pennsylvania, employers are not permitted to use the fluctuating workweek method of calculating overtime pay.
- Paying Straight Time. This is the most blatant of all overtime pay violations, yet is still seen in numerous offer letters and employment contracts. Offering to pay non-exempt employees the same hourly rate for all hours worked, including those over forty per week, is never legal but usually occurs when a relatively high hourly rate is offered (eg. $25, $30 or $40+). The thinking is that this amount is enough to keep the employee from asking questions and content, while making the payroll calculation easy and saving the employer a lot of money. This pay plan is also used by many staffing companies and temp agencies to whom large companies turn for a variety of highly skilled workers, including shipyard workers, petrochemical workers, CAD designers and many others. While there is an exemption for certain workers who earn over $100,000 per year, it does not apply to workers who are paid hourly with no guaranteed base salary. Even highly compensated hourly workers have a legal right to receive overtime pay.
- Paying a Day Rate. Particularly common among oilfield related employers of all sizes, is the use of a daily rate pay scheme under which workers are paid a fixed amount for each day they work, no matter how many hours they spend working during the day. As with a salary, use of a day rate pay system is not in and of itself unlawful, but it does not allow an employer to escape liability for payment of overtime. Overtime must still be paid when employees exceed 40 hours per week (or in certain states such as California, 8 hours per day), but is calculated using a different process that reduces the total compensation paid, including most bonuses, for all days worked during each workweek to an hourly rate upon which overtime must be paid. The result is that the employee gets paid the agreed upon day rate plus an additional amount for the overtime hours worked during each week.
The general rule is that non-exempt employees (meaning employees that the law recognizes as being entitled to overtime pay) may not give up their legal right unless the agreement to do so has been reviewed and approved by either the Department of Labor or a judge. This type of review and approval is almost always related to the settlement of claims brought by workers to enforce their overtime pay rights and recover past unpaid overtime. Once an employer has been caught violating the overtime labor laws and an agreement has been reached to repay the back overtime wages owed to workers, the settlement agreement needs to be reviewed and approved by either the DOL or a judge in order for it to be binding and release the claims against it. Private settlements that do not receive such review and approval are typically not effective to release the workers’ claims and leave the employer open to further claims.
Just because you have “agreed” to be paid in a manner that does not include time and a half for all hours worked over forty per week, does not mean that you have forfeited your rights to this extra pay – see “Can my employer make a ‘different deal’?” and “What if I agreed to work for a ‘flat salary’?” It does, however, mean that you will need to take some type of action to claim and recoup the often significant amount of compensation you were denied, and do so in a timely manner. To protect your rights you must be aware of the strict time limits for bringing these types of claims – legally known as the statute of limitations. If you wait too long, they will be gone, along with compensation for all those long hard hours.
Do not delay in taking action because you think that you cannot afford to consult with or hire a lawyer. Law firms like ours handle overtime claims across the country (on a contingent fee basis), so there is absolutely no up-front cost for employees to pursue their claims. A contingent fee is only earned and owed once a recovery has been obtained on behalf of the client(s).
If you have any doubts as to your entitlement to overtime, contact the overtime pay experts at The Lore Law Firm for a FREE and CONFIDENTIAL review of your circumstances – because it’s your time and your money.