Posted by Tamara
Georgia employers need to be aware of several recent courts cases involving companies attempting to artificially lower the hourly wage for straight time to avoid paying overtime.
The 5th Circuit Court of Appeals recently heard the case of Gagnon v. United Technisource. In this case, when United Technisource Inc. (UTI) hired Timothy Gagnon, a highly skilled aircraft painter, the prevailing wage for that job was $18 per hour. Instead, UTI offered Gagnon a mere $5.50 per hour, with a $12.50 per hour per diem that capped at $500. In addition, Mr. Gagnon was offered $20 per hour for hours in excess of 40 hours per week.
Gagnon accepted this offer and worked for UTI for over a year before filing a wage complaint for unpaid overtime. That was UTI’s first error. Under the Fair Labor Standards Act (FLSA) an employee cannot waive rights to minimum wage or overtime. In the court case, UTI argued that the law required only $5.50 x 1.5 = $8.25 per hour overtime and Gagnon received almost three times that amount. A lower court found for the company.
The 5th Circuit Court, however, found that if Mr. Gagnon worked 40 hours per week, his wages were $220 +$500 per diem = $720, or $18 per hour. Therefore, he was entitled to 1.5 times the “regular hourly rate” of $18, or $27 per hour for overtime. The court was also suspicious of the per diem cap. That was UTI’s second error. Under the U.S. Department of Labor regulations, any per diem paid to an employee must be included in the worker’s “regular hourly rate” to calculate overtime.
The judges found in favor of Mr. Gagnon and awarded nearly $65,000 in unpaid overtime, damages and lawyer’s fees. The willful attempt of UTI to avoid paying overtime costs of approximately $8,000 cost them over 8 times that amount.
In a similar suit in 2006, the court ruled that commissions and sales bonuses must be included in the “regular hourly rate” for Wal-Mart employees, resulting in a multi-million-dollar award.
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