Pennsylvania District Court Rules Employer Could Not Credit Purported Premiums Included in Its Lump Sums Towards Overtime Compensation as Required by the FLSA and DOL Rules.

In Hickman v. TL Transportation, LLC, 318 F. Supp. 3d 718 (E.D. Pa. 2018), former employees brought a class action lawsuit alleging their former employer failed to properly compensate them for overtime hours worked under the federal Fair Labor Standards Act (“FLSA”), the Pennsylvania Minimum Wage Act (“PMWA”), and the Maryland Wage and Hour Law (“MWHL”).

Plaintiffs claimed that although they often worked in excess of eight hours each shift, Defendant would only pay them $160 for each day worked, regardless of how many hours they actually worked. Defendant argued that under the FLSA, the lump sum paid to employees should be credited to any amount owed to Plaintiffs because the payment included a premium for overtime hours, which is recognized under the FLSA. The employer explained they determined the $160 lump sum payment based on the expectation that each employee would work ten hours a day, providing compensation for eight hours plus two hours of overtime compensation. However, the Court ultimately rejected Defendant’s argument, explaining a lump sum premium to employees must still take into account the amount of hours actually worked by the employee. Evidence showed that the employees often worked in excess of ten hours most work days.

The Court noted Defendants’ pay policy failed to provide an incentive to reduce employee hours—contrary to the goal of Congress in passing the FLSA to reduce overtime hours and create more employment opportunities. Therefore, the lump sum to employees could only be considered a “day rate” and the employer could not credit the alleged “premium” towards overtime compensation owed to the employees for any week they worked in excess of 40 hours.

For more information, call our Philadelphia employment lawyers for Fair Labor Standards Act in Philadelphia and South Jersey at the Law Office of Sidkoff, Pincus & Green at 215-574-0600 or contact us online.