In U.S. Department of Labor v. Fire & Safety Investigastion Consulting Services, the Fourth Circuit addresses an overtime claim where the employer utilized a “blended” pay scheme that changed depending on the total hours worked in a two week pay period.
The FLSA requires that covered employers pay their employees “at a rate not less than one and one-half times the regular rate for any hours worked in excess of 40 hours per workweek. At issue in this case was the definition of an employee’s “regular rate.” Typically, the regular rate is the hourly rate that the employer pays the employee for the normal, non-overtime forty hour workweek. However, in some cases, employers may attempt to assert that their pay scheme is intended to cover the base pay for all overtime hours. In this case, the Fourth Circuit rejects the employer’s argument, cautioning that employers should not reply upon “creative” pay schemes that retroactively calculate overtime and non-overtime components for the benefit of the employer.