Are auto mechanics and technicians entitled to overtime pay? This question lies at the heart of several wage and compensation claims and lawsuits within the automotive service and repair industry.
FLSA Overtime, Regular Wage and Minimum Wage Lawsuits
The resulting Fair Labor Standards Act (FLSA) lawsuits seek to address minimum wage, regular wage and overtime claims on behalf of auto mechanics and technicians who are subjected to the often convoluted and confusing payment structures called “flat rate” and “flag rate” systems.
Flat Rate, Flag Rate, Piece Rate and Booked Hours
Under the flat rate and flag rate systems, the customer is charged a certain number of assigned or “booked” hours per job, regardless of the actual time it takes a mechanic to perform the job. The mechanic is paid a set amount of money for each flagged hour completed. Businesses often believe this piece-rate method of service increases productivity and may also allow them to escape paying overtime.
Mechanic Booked Hours vs. Actual Hours Worked
How does flat and flag rate payment structures affect a mechanic’s pay? When a mechanic is paid for the hours “booked” this does not take into account the actual hours the mechanic worked. This raises unpaid and overtime wage questions. For instance, the mechanic may spend time cleaning a work station, prepping tools, performing other assigned tasks, and waiting for customers to appear, which is work for which the mechanic is not paid.
Pep Boys is Sued in California
An example of a recent class action lawsuit brought by mechanics in California (March 2012) can be found in the Pep Boys case. At issue is the failure to pay regular and over time wages, failure to pay minimum wages, failure to indemnify employees for hand tools and equipment, failure to pay final wages within the required time, failure to provide itemized wage statements, failure to maintain records, unfair and unlawful competition, and PAGA claims. Note that California state wage laws are significantly more favorable to workers and provide claims that similar workers in most states will not have. Notably, Pep Boys has been served with class action lawsuits in several states including Tennessee and California.
Appeal Upheld in Tennessee Against Pep Boys
In May 2009, the United States Court of Appeals for the Sixth Circuit affirmed a ruling of the U.S. District Court Tennessee in Wilks v. The Pep Boys, 11 Wage & Hour Case. 2d 1554, finding that certain automotive mechanics and technicians paid on a flat-rate or flag-rate are entitled to overtime under the FLSA.
The court found that the auto mechanics and technicians were employed by an auto repair shop rather than a retail auto dealer (dealers have a specific exemption to FLSA overtime requirements). The court also concluded that to qualify as a “commission” under the exemption, the employer must compensate employees at a rate that is proportionally related to the amount it charges its customers. Pep Boys failed to produce evidence that the system it uses to compensate its flat-rate mechanics and technicians met even the most basic standards of proportionality.
The Federal Fair Labor Standards Act On Mechanics
Section 7(i) of the FLSA provides an exemption from the overtime pay requirement for any employee of a retail or service establishment if:
1. The regular rate of pay of such employee (i.e., his hourly rate) is in excess of one and one-half times the minimum wage, and
2. More than half of the employee’s compensation for a representative period (not less than one month) is from commissions on goods or services.
Although the phrase “commissions on goods and services” is not defined in either the statute or regulations, the Department of Labor acknowledges in some cases that the flat rate system constitutes a commission under section 7(i) and in other cases it constitutes a piece-rate or job-rate system. Employees paid on a piece-rate or job-rate are absolutely entitled to overtime under the FLSA, while those paid on “commission” may be exempt under 7(i).
In short, whether mechanics and technicians are entitled to overtime wages depends on (a) where they work (auto dealer or repair shop), (b) how they are paid (commission or not), (c) how much they make (regular hourly rate and commissions), and (d) the state in which they work.
Have Your Rights as an Employee Been Violated?
If you believe that your rights to collect overtime pay have been violated, please Contact us for a Free & Confidential Review of your situation. We defend and protect the rights of mechanics and technicians and are just a phone call or “click” away.