Hernandez v. Plastipak Packaging, Inc.

15 F.4th 1321

Hector HERNANDEZ, on his own behalf and on behalf of those similarly situated, Plaintiff-Appellee,

v.PLASTIPAK PACKAGING, INC., a Foreign Profit Corporation, Defendant-Appellant.

No. 19-12655

United States Court of Appeals, Eleventh Circuit.

Filed: October 13, 2021

Kimberly De Arcangelis, Attorney, Morgan & Morgan, PA, Orlando, FL, Andrew R. Frisch, Morgan & Morgan, PA, Plantation, FL, for Plaintiff-Appellee.

Ronald G. Acho, Cummings McClorey Davis & Acho, PLC, Livonia, MI, Michael O. Cummings, Cummings McClorey Davis & Acho, PC, New York, NY, Thomas M. Gonzalez, GrayRobinson, PA, Tampa, FL, for Defendant-Appellant.

Before Luck and Brasher,^* Circuit Judges.

Luck, Circuit Judge:

Under the Fair Labor Standards Act, employers must pay non-exempt employees for their overtime hours "at a rate not less than one and one-half times the regular rate at which [they are] employed." 29 U.S.C. § 207(a)(1). In Overnight Motor Transportation Co. v. Missel , 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942), the Supreme Court examined how to apply this statutory requirement to employees who work "irregular hours for a fixed weekly wage." Id. at 573, 62 S.Ct. 1216. The answer is today known as the fluctuating workweek method. Where an employee has a "fixed salary" and works fluctuating hours, her employer need only pay for her overtime hours at a rate of "one-half" of her "regular rate of pay." See 29 C.F.R. § 778.114(a) (2016).

The issue in this case is whether Plastipak Packaging, Inc. paying Hector Hernandez bonuses—a shift premium for night work and holiday pay—on top of his fixed salary precludes the use of the fluctuating workweek method. After reviewing the Act, the Supreme Court's decision in Missel , and the Department of Labor's regulatory guidance, we hold that it does not. So long as an employee receives a fixed salary covering every hour worked in a week, the payment of a bonus on top of the employee's fixed salary does not bar an employer's use of the fluctuating workweek method to calculate overtime pay. Because the district court erred in concluding otherwise, we reverse the district court's summary judgment for Hernandez and remand for further proceedings consistent with this opinion.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The fluctuating workweek method

Before we talk about how Plastipak paid Hernandez, it's helpful to first explain how the fluctuating workweek method works. Under the Act, an employer must pay non-exempt employees for overtime hours "at a rate not less than one and one-half times the regular rate at which [they are] employed." 29 U.S.C. § 207(a)(1). Take, for example, an hourly worker who earns ten dollars an hour. This employee would be entitled to overtime pay of fifteen dollars for each hour worked over forty hours—"one and one-half" times her regular rate. This method of calculating overtime pay is known as "time and one-half." See Davis v. City of Hollywood , 120 F.3d 1178, 1179 (11th Cir. 1997).

But some workers receive a fixed salary, rather than an hourly wage, and work fluctuating hours each week. For workers with a fixed salary and variable weekly hours, the employer can use the fluctuating workweek method to determine overtime pay. Under this approach, the employer calculates the employee's regular rate by "dividing [the] weekly salary by the number of hours actually worked" that week. Lamonica v. Safe Hurricane Shutters, Inc. , 711 F.3d 1299, 1311 (11th Cir. 2013). When using this method, an employer need only pay for overtime hours at a rate of one-half times the employee's regular rate—not at one and one-half times. That's because the employee "has already been compensated at the straight time regular rate" for those hours "under the salary arrangement." Id. (citation omitted); see also Condo v. Sysco Corp. , 1 F.3d 599, 605 (7th Cir. 1993) ("The fixed salary compensates the employee [working variable hours] for all his hours, the overtime ones included. He therefore receives 100% of his regular rate for each hour that he worked. As such, he is entitled only to an additional fifty percent of his regular rate for the hours that he worked in excess of forty." (emphasis omitted)).

Here's an example of how the fluctuating workweek method works. Take an employee with a fixed weekly salary of $1,000 who works variable hours. In a week where she works fifty hours, her regular rate would be $20 an hour ($1,000 divided by fifty hours) and she would be entitled to overtime pay for ten hours (every hour worked over the fortieth hour). Under the fluctuating workweek method, this employee would be entitled to $100 as overtime pay for her ten hours of overtime (one-half of her regular rate multiplied by ten). Although this employee's overtime pay is lower compared to an employee whose overtime pay is calculated using the time and one-half method, the tradeoff is she still earns her full $1,000 fixed salary even in weeks where she works less than forty hours.

Hernandez's regular and overtime compensation

Plastipak is a plastic packaging company with manufacturing facilities across the country. Hernandez worked for Plastipak from March 14, 2011, until May 15, 2016. He worked in the Plant City, Florida facility as a process technician and later as a maintenance technician.

Hernandez was a salaried "non-exempt" employee, meaning that he was covered by the overtime provisions of the Act. Plastipak paid Hernandez a fixed biweekly salary of $1,964.99, but the number of hours he worked varied each week. Sometimes he worked forty hours or more. Sometimes he worked less than that. Either way, Plastipak paid him his full fixed salary regardless of the total hours that he worked in a week.

Plastipak also paid Hernandez an overtime premium whenever he worked more than forty hours in a workweek. Plastipak used the "fluctuating workweek" method to calculate Hernandez's overtime pay. Hernandez signed a form when he was hired acknowledging that Plastipak would use this method to determine his overtime pay.

Plastipak used a more generous version of the fluctuating workweek method to determine Hernandez's overtime pay. It calculated his regular rate for a given week by dividing his weekly salary by forty hours (rather than by the total number of hours he worked that week). Plastipak then multiplied Hernandez's regular rate by the number of overtime hours he worked that week (rather than multiplying half of his regular rate by his overtime hours).

Here's Plastipak's formula in action. Take a week where Hernandez worked fifty hours. His weekly fixed salary was $982.50 (half of his biweekly salary of $1,965). Under the fluctuating workweek method, Hernandez's regular rate for this week would be $19.65 an hour ($982.50 divided by fifty hours), and he would receive $98.25 in overtime pay (one-half his regular rate multiplied by ten overtime hours). But under Plastipak's approach to overtime, Hernandez's regular rate for this week would be $24.56 an hour ($982.50 divided by forty hours) and he would receive $245.60 in overtime pay (his regular rate multiplied by ten overtime hours).

There were two final parts to Hernandez's compensation. First, Plastipak paid him a "shift premium" of $30 when he worked the night shift for a week. If Hernandez worked less than a full week on the night shift, the shift premium was prorated based on the number of night hours he had worked. In other words, Plastipak paid him an additional $0.75 for each night hour. In weeks where Hernandez worked night hours and worked over forty hours, Plastipak paid him an extra $0.75 for each night hour worked over forty hours.

Plastipak also gave Hernandez "holiday pay." If Hernandez did not work on a holiday, he was credited as if he had worked eight hours that day. If he did work on a holiday, he was credited as having worked an additional eight hours beyond the actual time he worked that day. To receive these credited hours, Hernandez was required to work the scheduled workdays before and after the holiday.

The district court proceedings

Hernandez sued Plastipak in 2017, bringing a single claim under the Act for recovery of overtime pay.¹ Hernandez alleged that Plastipak violated the Act by failing to pay time and one-half compensation for his overtime hours.

Both parties moved for summary judgment. Plastipak argued that it properly used the fluctuating workweek method to calculate Hernandez's overtime pay because he received a fixed biweekly salary and his hours "fluctuated from week to week." The additional compensation from the night shift premium and holiday pay didn't bar the use of this method, Plastipak argued, because Hernandez's "base salary" remained fixed each week. Plastipak also argued there was a "clear mutual understanding" that the fluctuating workweek method would apply to Hernandez's overtime payments, as shown by the acknowledgment Hernandez had signed.

Hernandez responded that Plastipak was precluded from using the fluctuating workweek method because he didn't receive fixed "straight time pay." His weekly compensation varied depending on the number and type of hours he worked, Hernandez argued, because of the shift premium he received when he worked night hours and because of his holiday pay. Hernandez argued that he was entitled to summary judgment because Plastipak didn't pay him time and one-half of his regular rate for his overtime hours, and because there was no clear mutual understanding between the parties that the fluctuating workweek method would apply to his overtime payments.

The district court granted summary judgment for Hernandez. The district court said that an employer had to satisfy four requirements to use the fluctuating workweek method: (1) "the employee's hours fluctuate from week to week"; (2) "the employee receives a fixed salary that does not vary with the number of hours worked" in a week; (3) "the fixed salary at least equals the minimum wage"; and (4) "the employer and employee share a ‘clear...