Human Resources News & Insights

Don’t use this company’s approach to cutting OT costs

With the DOL looking to make another four million employees OT-eligible this December, many employers will be looking for ways to limit their OT exposure. Just don’t try the method this company used. 

One of DuPont’s manufacturing plants in Towanda, PA, was sued by three employees claiming they weren’t being fully compensated for their OT work.

DuPont had a company-wide policy that it called “shift relief.” At the end of each shift, each employee was required to use fifteen minutes or more to stick around and make sure the incoming shift was up to speed on the day’s happenings. Plus, employees also needed time to change into and out of their protective gear before and after each shift.

DuPont didn’t consider this time worked, so employees weren’t compensated for any of it.

DuPont tried to get the lawsuit thrown out. It argued that it didn’t need to pay employees for the pre- and post-shift work since it paid employees for three half-hour meal breaks during their 12-hour shifts.

It claimed that the paid lunch breaks offset the time employees spent on pre- and post-shift activities and should therefore count as a credit against OT time worked. Essentially, DuPont believed it was building up a “bank” of time for FLSA credit since it wasn’t required by the law to provide the paid lunch breaks.

Not an FLSA-approved practice

The court disagreed with DuPont, stating that nothing in the FLSA authorizes the type of offsetting against OT liability that DuPont was using, and the practice didn’t excuse DuPont of its obligation to pay its employees for the time they spent working.

In fact, the court specifically said this type of bookkeeping was one of the things the FLSA was created to combat.

According to the court, the FLSA permits only three types of compensation for OT — all of which are some form of premium compensation (at least time and a half) for any work considered “extra” or in excess of 40 hours in a week. And in some cases, courts have specifically ruled that the only acceptable form of compensation is time and a half.

In the DuPont case, the court pointed out that companies are more than welcome to pay more than time and a half, but time and a half, at the bare minimum, must be provided for hours worked over 40 in a week to be in compliance with FLSA — without any “offsets” taken for paid break time.

The court is allowing the lawsuit to proceed. Now DuPont’s facing an expensive legal defense bill or settlement.

The bottom line: There’s very little wiggle room when calculating OT costs. And you can expect the DOL, courts and employee-side attorneys to crack down even more on pay practices that don’t comply with the FLSA once the new OT rules take effect on Dec. 1, 2016.

Cite: Smiley v. EI. DuPont de Nemours and Company

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