Piece Rate Overtime FLSA Class Action Shows Danger In Improper Overtime Computation: The Nuances of the Overtime Regulations (29 CFR 778)

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I have many clients that want to comply with the Fair Labor Standards Act (“FLSA”) and pay workers properly, especially for overtime. However, I have found that even the most well-intentioned employers sometimes will not consider the nuances and vagaries of overtime calculations under the FLSA and a class action is the result. In this recent case, a proposed class of Nissan workers allege that they were shorted on overtime as the employer did not correctly compute overtime under the piece rate system that was utilized to pay workers. The case is entitled Ayala et al. v. Nissan North America Inc., and was filed in federal court in the Middle District of Florida.

The workers allege that this errant practice was applied at many dealerships throughout the country, hinting (not so subtly) at a wide-ranging class action. The Complaint alleges that “by controlling its dealerships through detailed policies and procedures, Nissan itself has made certain that the plaintiffs and the putative class are similarly situated by having virtually the same job duties, pay provisions, factory training, and a manual that specifically states will apply to all dealerships within the United States.”

The theory of their case is that the workers were paid for each unit produced or service rendered, without consideration for the amount of time, i.e. working time, it took the worker to make the unit. Based on this alleged fundamental error, the workers failed to receive the minimum wage and if they worked more than forty hours in a week, they did not get overtime. They want to include all workers at all dealerships in Florida; such a class could conceivably include more than 740 workers.

The lead plaintiff also alleged that the Company did not pay workers for extra tasks, which, if job related and compelled by the employer, would also be compensable working time. These duties included cleaning, being compelled to sit for meetings and trainings, as well as preparing paperwork. These preliminary and postliminary tasks are also the subjects of numerous FLSA class actions.

The Takeaway

This is a very dangerous case for the employer. Piece workers still must receive overtime, regardless of how much per piece they receive, and the FLSA regulations provide detailed guidance on how such calculations must be done. If the Company’s legal analysis shows that the computations were faulty (or non-existent), this case must be settled quickly. The preliminary work allegations are equally troubling. Best thing here is to cut the losses and get out early.

The sooner the better…

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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