Plaintiffs Matteo Brunozzi and Casey McCormick worked as cable and internet technicians for Cable Communication Inc. (CCI). They were paid on a piece work basis with a diminishing bonus provision based on the amount of overtime they worked per week. They both filed lawsuits alleging that CCI’s compensation plan violated the overtime provisions of the FLSA. Originally, the district court granted summary judgment in favor of CCI on those claims. However, the technicians appealed, and on March 21, 2017, a Ninth Circuit panel reversed, remanding the matter to the district court for further proceedings.
The key issue in the Ninth Circuit’s review was whether CCI properly determined the technicians’ regular rates for purposes of calculating overtime pay. As the Panel noted, the Supreme Court has interpreted the “regular rate” for purposes of the FLSA to mean “the hourly rate actually paid the employee for the normal, non-overtime workweek for which he is employed.” (Op. at 9 (citing Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 424 (1945)). The regular rate must include all the piece work amounts and bonuses that form the normal weekly income of the employee. (Id. (citing Walling v. Alaska Pac. Consol. Min. Co., 152 F.2d 812, 815 (9th Cir. 1945)).
The Ninth Circuit panel found that during a normal non-overtime workweek, a technician would earn the total value of the piece work tasks he completed (his “Piece Rate Total”), plus a Production Bonus in the amount of 1/6 his Piece Rate Total. The Panel held that because the Production Bonus was a portion of the regular wages that the technician was entitled to receive under his regular wage contract, that it was not a true “bonus” as defined by the Department of Labor Regulation 29 C.F.R. Section 778.502(a).
Because the Piece Rate Total and the Production Bonus formed the technicians’ normal weekly income, CCI should have divided the sum of that amount by the total number of hours worked in a week to determine the technicians’ regular hourly rates for that week. But this is not what CCI did. Instead, on weeks where technicians worked overtime, CCI reduced the Production Bonus proportionately, resulting in technicians being paid a diminished hourly rate during weeks when they worked overtime.
The panel emphasized repeatedly throughout its opinion that employees and employers cannot legally agree or declare as to what is to be treated as the regular rate for an employee. It must be drawn from what is provided for in the contract for a normal, non-overtime workweek.
For more information about piece work compensation and overtime regulations, contact Ford & Diulio PC at jdiulio@forddiulio.com or call us at 714-450-6830.