In 1993, the nurses at Pomona Valley Hospital Medical Center in California voluntarily created and voted for a plan to work 12-hour instead of 8-hour shifts while retaining their hourly rate without being paid overtime.
Under the plan, the nurses went from $22.83 an hour for 8 hours to $19.57 for 12 hours. However, for the 12-hour shifts, they would be paid time-and-a-half for hours nine through twelve and double-time thereafter. The goal was to keep the 12-hour shifts revenue neutral when weighed against the 8-hour pay scale.
Even after the nurses later joined the Service Employees International Union (SEIU) and negotiated a higher hourly rate, the union certified the same 12-hour, revenue-neutral scheme in its collective bargaining agreement.
Everyone was happy to be working fewer days and making the same money as before, until….
A nurse named Louise Parth, who had originally voted in favor of the plan, filed a class action claim on the grounds that the hospital’s approach violated the Fair Labor Standards Act (FLSA) by paying nurses working 8-hour shifts more per hour than those working 12-hour shifts, alleging that it was all a scheme to avoid paying overtime.
A district court heard arguments and granted summary judgment in favor of the hospital. Parth appealed, but the Ninth U.S. Circuit Court of Appeals sided with the district court and dismissed the claim.
The Circuit Court’s opinion was based on an earlier decision by the Supreme Court that ratified such schemes.
After the FLSA was enacted in 1938, many employers altered their compensation schemes—by lowering base hourly rates—to ensure that they paid employees the same overall wages after complying with the FLSA’s overtime requirements, but the Supreme Court had already examined these practices in Walling v. A. H. Belo Corp. (1942) 316 U.S. 624 and ruled that even when the employer’s purpose in lowering hourly base rates “was to permit as far as possible the payment of the same total weekly wage after the [FLSA] as before…nothing in the [FLSA] bars an employer from contracting with his employees to pay them the same wages that they received previously, so long as the new rate equals or exceeds the minimum required by the [FLSA].”
Employers, to help you understand overtime pay requirements under the FLSA, Personnel Concepts has developed its comprehensive but easy-to-implement FLSA Overtime Rules Compliance Kit.