EIGHT DAYS A WEEK? OHIO COURT ALLOWS EMPLOYER TO DEFINE WORKWEEK TO AVOID OVERTIME PAYMENTS IN JOHNSON V. PHOENIX GROUP, LLC., ET AL.
Employers are constantly attempting to keep wage costs down, and both federal and state wage and hour laws place strictures on the ability to avoid costly overtime payments to employees. Because the definition of overtime is based on the number of hours worked over seven consecutive days, some employers have gotten creative in defining when the “workweek” begins and ends. Recently, the Southern District of Ohio ruled on an employer’s motion to dismiss claims under Ohio state law and the Fair Labor Standards Act (“FLSA”) based upon the company’s internal definition of “workweek.”
In Johnson v. Phoenix Group, LLC., et al., plaintiffs brought a class action suit against their employer alleging violations of the FLSA for overtime compensation, violations of Ohio Rev. Code §4111.03 and §4111.10 for overtime compensation, and claims of wage conversion. Plaintiffs were employed by the Phoenix Group during the three years preceding the filing of the case. They were paid hourly but also received overtime wages and holiday pay. Plaintiffs alleged that they were regularly scheduled to work approximately 84 hours over seven consecutive days without overtime wages. After the seven consecutive days of work, plaintiffs were off for seven consecutive days. However, the employer’s overtime calculations were conducted based on pay periods commencing Sunday and ending fourteen days later, meaning that their seven consecutive workdays were split within the first and second week of the fourteen-day pay period.
Plaintiffs filed suit and advanced two theories of liability. First, plaintiffs believed that by working seven consecutive days starting Thursday, that their workweek should be deemed to start on Thursday. Second, the creativity by the Phoenix Group in defining the workweek amounted to nothing more than an unlawful scheme to avoid paying overtime in violation of the FLSA and Ohio law. In response, the employer moved to dismiss, arguing that neither body of law prohibits employers from splitting seven consecutive workdays between two separate, employer-designated workweeks.
In beginning its analysis, the Court cited the Eighth Circuit case of Abshire v. Redland Energy Services, Inc. In Abshire, the court held that the FLSA, “does not prescribe how an employer must initially establish its ‘workweek’ for overtime purposes.” Furthermore, the court noted that under §778.105 of the Code of Federal Regulations, a “workweek” is not synonymous with an employee’s schedule. Rather, as other courts had found, there is no requirement that an employee’s work schedule coincide with the workweek under the FLSA. Unfortunately for the Phoenix Group, the plaintiffs alleged that they worked 84 hours over the seven-day period, which exceeded the 80-hour cap which would have been in place over the two workweeks. As the Court was forced to accept the plaintiffs’ version of events due to the deferential standard of a motion to dismiss, they denied Phoenix Group’s motion as to plaintiffs’ first theory.
On the plaintiffs’ second theory of liability, the court found no prohibition against employers establishing a workweek “for the purpose of reducing the number of hours in [the employees’] normal schedule that must be paid at the overtime rate.” The Court relied heavily on Abshire, which presented a similar factual scenario. There, the subject employees worked twelve-hour shifts for seven consecutive days (Tuesday to Monday), followed by seven consecutive days off. The employer initially used a Tuesday to Monday designation for their workweek, but changed it to Sunday to Saturday. Thus, while their workweek remained the same, their overtime pay was reduced, as their seven consecutive days stretched into two pay periods. In deciding the case, the Abshire court stated “so long as the change is intended to be permanent, and it is implemented in accordance with the FLSA, the employer’s reasons for adopting [a change in workweek] are irrelevant.” As such, there is no prohibition on shifting the definition of an employer’s workweek, even if the sole reason for the change is to cut down on overtime pay. Following the reasoning of Abshire, the Johnson court dismissed the plaintiffs’ claims that their employer violated the FLSA by designating its workweek with the goal of reducing overtime payments.
Johnson is good news for employers in that they may have an avenue to reducing costly overtime by redefining the workweek. However, some caution must be taken, as any such change must be intended to be permanent and must be implemented in accordance with the other provisions of the FLSA and other applicable laws.