Court Rejects Department Of Labor Rule For Calculating Non-Payment Of Overtime - But Reaches Same Result
URNIKIS-NEGRO v. AMERICAN FAMILY PROPERTY SERVICES (August 4, 2010)
.jpg)
Todd Lash owned American Family Property Services, a real estate appraisal firm. Although Lash was the only certified appraiser at the firm, he worked with associate appraisers, both independent and employed by the firm. In mid-2004, Lash hired Brenda Urnikis-Negro to help him review appraisal reports. Urnikis-Negro was hired at an annual salary of $52,000 with an understanding that her hours would probably fluctuate and not be limited to a 40-hour week. Urnikis-Negro's work at the firm turned out to be fundamentally clerical in nature and did not involve the exercise of judgment or discretion. Although no one kept track of her actual hours, the firm was very busy in 2004 and 2005 and Urnikis-Negro worked in excess of 40 hours per week. By the end of 2005, business was off and Urnikis-Negro was fired. She filed suit against the firm seeking overtime compensation pursuant to the Fair Labor Standards Act ("FLSA") and the Illinois Minimum Wage Law. After a bench trial, Judge Kennelly (N.D. Ill.) found that Urnikis-Negro's position was not exempt as an "administrative" position and that she was therefore entitled to overtime compensation. He also made a finding of willfulness which allowed Urnikis-Negro to recover overtime for the entire period of her employment. In calculating the amount of her overtime compensation, however, the district court rejected Urnikis-Negro's position that she should be treated as earning $1000 per 40-hour week. Instead, the court made its calculations based on an assumption that her fixed $1000 per week salary was her regular hourly rate compensation for every hour worked in each week. The court also made findings with respect to the totals hours worked during four different time periods of her employment. For each hour of overtime during her employment, the court awarded half of her hourly rate that applied during that period. Her total overtime compensation came to just over $12,000. The court awarded liquidated damages in an equal amount as well as attorney's fees. Urnikis-Negro appeals the calculation.
In their opinion, Judges Bauer, Rovner, and Williams affirmed. The Court first took exception to the district court's application of the fluctuating workweek ("FWW") method of calculating Urnikis-Negro's rate of pay. The FWW method is set forth in a rule promulgated by the Department of Labor. Under that method, an employee's rate of pay is derived by dividing the weekly wage by the total number of hours worked. If an employee works more than 40 hours per week, the method results in a lower hourly wage rate for the employee. Several aspects of the application of the FWW bothered the Court. First, the rule is a forward looking rule that provides a methodology for an employer to comply with the overtime obligations imposed by statute. Second, it is not remedial in nature. Third, it requires an understanding between the employer and employee that the fixed weekly wage is meant to cover regular pay for all hours worked. The Court noted a difference of opinion among the courts in the propriety of using the FWW method in calculating a remedy in an overtime case. The Court found the reasoning of the courts that have rejected the rule to be more persuasive. Having rejected the application of the Department of Labor rule adopting the FWW method, the Court nevertheless approved of the application of the same method based on the Supreme Court's decision in Missel. In Missel, the Supreme Court addressed the situation in which an employee was paid a fixed sum for any and all hours worked, worked substantial overtime, and was not compensated for that overtime. The correct approach in that situation is to calculate a rate of pay by dividing the weekly wage by the hours worked. The employee is entitled to an overtime premium for overtime hours of one half the hourly rate. The result is thus the same as the application of the FWW.
