Staffing agency failed to include bonus and per diem in overtime calculation. Pays $3.2M to settle.

A nurse staffing company has agreed to pay a settlement of $3.2 million to compensate employees who claim that the agency underpaid overtime by failing to include the value of per diem stipends and monetary bonuses in the calculation of overtime rates of pay. 

This settlement is yet another instance where non-exempt hourly healthcare professionals employed by or through a staffing agency have successfully recovered millions of dollars in unpaid back overtime wages due to either miscalculation of their pay or misclassification of their job.  

In this particular case, the agency staffed nurses and other healthcare professionals on short-term travel assignments, usually lasting 13 weeks, at hospitals nationwide. The lead plaintiff worked multiple travel assignments as a nurse in San Diego, California in 2016 and filed the case, as a class / collective action, in federal court for the Southern District of California.

The case asserted five causes of action:   (1) unpaid overtime under California law (2)  unfair business practices under  California law  (3)  waiting time penalties under  California law  (4)  civil penalties pursuant  to the  California Labor Code Private Attorney general Act (“PAGA”) and (5) unpaid overtime under the federal Fair Labor Standards Act(“FLSA”). All of these claims are based on challenging the legality of not including two types of remuneration from the “regular rate” when calculating overtime: (1) per diem stipends and (2) monetary bonuses.  The lawsuit alleges that the per diem stipends must be included in the “regular rate” because the stipends are earned and vary each week based on the number of hours worked, as opposed to the amount of expenses incurred, and that the monetary bonuses must be included in the “regular rate” because they are promised by contract and, therefore, non-discretionary. The question – should bonus and per diem payments be included when calculating overtime pay, is a common and valid one among workers in all types of businesses.  

The employees’ claim for underpayment of overtime wages due to the improper calculation method used was based  on  case  law  holding – per  diem payments that are based on and vary with the amount of  hours worked must be included in the “regular rate.”  They assert that the company policies, procedures and pay records reveal that the amount of weekly per diem stipends is, in fact, based on, and fluctuates with, the number of hours worked per week, as opposed to actual expenses incurred.

In defense, the nurse staffing company claimed that the per diem stipends qualify as “reasonable payments for traveling expenses” and, consequently, are properly excluded from the “regular rate.”  The Court disagreed, and ultimately found that the per diem stipends constitutes compensation for hours worked that must be included in the employees’ “regular rate” of pay.

The California state and federal courts that have been asked to rule on this issue to date have reached conflicting rulings, in once case deciding that “per diem system” that “varies with the number of hours worked per day or week” need not be included in the “regular rate” and in another case, stating that “reducing the per diem and housing payment based on the number of shifts worked inextricably ties the payments to the hours worked,  rendering them part of the employee’s regular rate”. The California appeals courts have yet to addressed whether expense payments tied to hours worked must be included in the regular rate when calculating overtime.     

The settlement in this case benefits all non-exempt hourly health care professionals employed by the staffing agency in  California, and nationwide, who worked pursuant  to a  Traveler  Assignment  Confirmation worked overtime and had the value of the per diem stipend and/or loyalty, extension or completion bonus paid to them excluded from their regular rate for purposes of calculating overtime.

The recovery will be allocated pro-rata among the members of the class based on the number of overtime hours each member worked during the class period. The recovery will first be divided by the total number of overtime hours worked by the entire class to determine the monetary value of each overtime hour.  Each class member’s share of the settlement will then be calculated by multiplying that individual’s number of overtime hours by the monetary value of each such hour.