Overtime rules under the Fair Labor Standards Act and Texas Payday Law result in improper wage calculations in employment law. Some employers engage in illegal acts to avoid paying overtime. Many fail to fully understand when they must pay overtime and how the calculation of overtime pay must occur. (For a primer on overtime pay, visit this blog post.) Even well-meaning employers underpay employees by failing to understand the overtime provisions of the FLSA and Texas Payday Law. It is not a defense to an unpaid overtime pay claim that the employer meant to pay what it owed. If you believe your employer violated your rights to overtime pay then you should talk to overtime pay lawyers in Texas right away.
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Overtime pay and personal leave under federal and Texas employment law
In today’s post I want to address a particularly odd overtime question. This question has to do with personal leave time and overtime, including both sick time and holiday pay. The problem arose because a human resource employee not only failed to understand overtime according to the law but made up her own version of the law to try to deprive the employee due overtime of pay. This was surely a problem of an insufficiently trained HR employee; but she created a real problem for her employer. Let’s turn to question:
Zeke is an employee of Acme Corporation, a corporation that produces various products for Wile E. Coyote. Zeke is an at-will employee subject to the minimum wage and overtime provisions of the FLSA and Texas Payday Law. He is an hourly, non-exempt employee paid on a biweekly basis. Zeke’s schedule for the past two weeks looks like this:
Week 1: 50 hours worked and 8 hours of holiday pay for New Years Day.
Week 2: 25 hours worked and 15 hours of paid sick leave.
Trixie, the HR payroll manager, calls Zeke into her cubicle after reviewing Zeke’s payroll records for the upcoming paycheck. Trixie proceeds to tell him that because the combination of the hours worked and holiday pay exceed 80 hours he cannot use sick time according to “labor law” to pad his hours. So Trixie tells him that he will be paid for the 75 hours worked plus the 8 hours of holiday pay for a total of 83 hours and since 3 of those hours exceed the 40 hours per week threshold to receive overtime pay he will receive overtime on those 3 hours. Zeke, unsurprisingly, felt like Trixie was wrong and sought out some advice from a Dallas overtime pay lawyer.
Trixie is wrong, wrong, wrong.
I didn’t write “wrong” three times just for effect. She is wrong on three issues.
1. An employer does not have to pay overtime on paid leave time in Texas
Trixie’s first and least significant mistake is believing the employer must pay for overtime on paid leave time. Under the FLSA and Texas Payday Law, an employer is not required to include any paid leave time when calculating overtime pay. An employer can choose to include paid leave time in that calculation if it wants. Here, it does not appear Acme has such a policy. Trixie is just misinformed.
There’s no harm to Zeke if Acme wants to give employees a more generous pay calculation than the law requires; but Trixie is probably costing Acme more in payroll than necessary. She could also expose Acme to various liabilities for discrimination and pay claims by employees or terminated employees if she is not applying that calculation to all employees.
2. Under Department of Labor regulations an employee must receive pay for hours worked in the workweek
According to the federal Department of Labor, and followed by the Texas Workforce Commission, an employee’s pay must be calculated for each individual workweek. Each workweek must comprise a fixed, consecutive seven day schedule (e.g. Sunday-Saturday or Thursday-Wednesday) regardless of whether the employee receives pay weekly, biweekly or semi-monthly. (See 29 C.F.R. 788.105.)
If an employee has worked more than 40 hours in a workweek then the employee must receive overtime on the excess hours in that week. An employer may not combine the hours worked in multiple weeks within the same pay period to determine whether overtime is due. (See 29 C.F.R. 788.104.)
This is another one of Trixie’s mistakes. It doesn’t matter whether Zeke is normally paid biweekly so two workweeks are included in one pay period.
Each workweek is a wage calculation by itself. In this situation Zeke’s pay for week 1 should include 40 hours of straight pay for hours worked, 8 hours of straight pay for holiday pay and 10 hours of overtime pay for the 10 hours worked over 40 in that week. Week 2 should include 25 hours of straight pay plus 15 hours of pay for paid sick leave.
That amounts to a biweekly paycheck with 88 hours of straight pay and 10 hours of overtime pay.
This mistake can get Acme into a lot of trouble. Zeke will have a claim for unpaid overtime pay which he can pursue in various ways. Along with the unpaid overtime, Zeke’s dashing employment lawyer (we’re talking about me now) can also pursue interest on the unpaid wages plus attorney fees and court costs.
If it can be proven that Acme intentionally miscalculated pay to avoid overtime then Zeke could also double his wage claim as liquidated damages (sort of like punitive damages.)
So Zeke’s 10 hours of overtime could turn into a much larger claim very quickly. Zeke’s unpaid overtime claim could also invite the DOL to audit Acme’s pay records. The DOL may find that thanks to Trixie’s merging of workweeks into a single calculation that she has failed to keep accurate weekly wage records, which could in turn subject Acme to administrative penalties. It is also probable that this is not the first time Trixie has miscalculated overtime.
The DOL audit could uncover other miscalculations. It could require Acme to pay all that unpaid overtime, plus interest and additional penalties.
3. An employer cannot retaliate against an employee for receiving overtime in Texas
Paid leave is almost always a gratuitous fringe benefit subject to little or no protection under employment law. Acme is free to offer or not offer paid sick time or holiday pay but when it chose to offer that benefit it cannot be given or taken away in a manner that discriminates against employees on the basis of a protected trait (race, religion, age, sex/gender, disability, national origin) or the exercise of a legal right (such as receiving overtime or making a claim to your employer for overtime pay you are owed).
Here, Trixie seeks to deprive Zeke of his paid sick leave benefit because the employer owes overtime pay in a different workweek. We can see the connection between the two very clearly. Had Zeke not worked more than 40 hours the prior week there would have been no reason for Trixie to refuse to put the 15 hours of paid sick leave on the second week’s wage calculation.
Retaliation is a serious problem in employment and that is why most federal and state employment laws include strong anti-retaliation provisions. The FLSA and Texas Payday Law include such provisions. Zeke’s tall, dark and handsome employment lawyer (still talking about me) can pursue this retaliation claim in addition to the unpaid overtime.
Under this retaliation claim, Zeke could receive pay for the unpaid sick leave, plus interest and attorney fees. Zeke may also double his claim for the paid sick leave as liquidated damages because retaliation is an intentional act.
But some exceptions do exist under labor and employment law…
If we change some of the facts in poor Zeke’s situation we might see some different legal rules apply. For example, if Zeke was a salaried, exempt employee he would not receive overtime pay. If Zeke is a salaried non-exempt employee then the calculation of overtime pay and regular pay would change.
Or Zeke worked under an employment contract or a union’s collective bargaining agreement, then that contract may require the employer to calculate overtime pay including all paid leave time but Zeke’s remedies then may be through a combination of breach of contract, a labor dispute (if he works under a collective bargaining agreement) and wage law.
If Zeke worked in a residential medical care facility then his pay could calculate under a fourteen day “workweek” subject to a slightly different overtime pay calculation (the 8/80 rule.) As you can see, the particular facts of any situation can change the analysis of an employment situation.
Wrapping this up
We can see that Trixie’s three mistakes could be a real disaster for Acme. Trixie could easily cost Acme tens, if not hundreds, of thousands of dollars with this one miscalculated paycheck. It isn’t a pleasant experience for Zeke, who probably has bills to pay. Zeke would rather receive wages on time than hire a lawyer. However, unless Trixie has a change of heart Zeke will have to take his wage claim to the next level.
These kinds of seemingly minor wage and overtime claims occur frequently because most employers do not fully understand wage law. They get away with it in many cases because employees also usually have incomplete knowledge of wage law. The employer has no obligation to inform employees about wage law beyond posting the FLSA wage poster.
If mis-paid your employer likely violated your rights under the FLSA and/or Texas Payday Law. Texas overtime pay lawyers understand these situations and help employees recover wages owed for overtime, minimum wage and other wage provisions. You should speak with an overtime pay lawyer about your situation.