October 21, 2013
By Malani L. Kotchka, Lionel Sawyer & Collins
In Betty Black v. SettlePou, P.C., decided by the Fifth Circuit Court of Appeals on October 11, 2013, Betty Black was employed as a legal secretary and paralegal at the Dallas law firm SettlePou from 2005 through 2010. The law firm classified her as non-exempt while she worked as a legal secretary and a paralegal. However, in 2007, SettlePou told Black that she was supposed to supervise a legal secretary and, therefore, she would be reclassified as exempt. Since she no longer received overtime pay, Black complained both verbally and in writing to her supervising partner and to the Human Resources Director and said that she should be paid overtime for her extra hours worked. A jury found that SettlePou had willfully violated the Fair Labor Standards Act by misclassifying Black as exempt from overtime pay and that she was owed 274 hours of overtime pay. While the district court calculated Black’s overtime award using one-half of her hourly pay rate, the Fifth Circuit Court of Appeals decided that she should have been paid one and one-half times her regular work rate for all overtime hours because the fluctuating workweek did not apply to Black.
If an employee and employer agree that an employee will work whatever hours the employee is called upon to work in a workweek, then the payment for overtime hours should be at a rate not less than one-half the employee’s regular rate of pay. Black testified that it was her understanding that she would be compensated with a fixed weekly wage to work a regular schedule of 37½ hours per week even though she had been classified as exempt. The firm’s Human Resources Director testified that she, too, was unaware of any fluctuating workweek agreement with Black. Finally, a SettlePou partner testified that a full-time employee’s regular workweek at SettlePou was 37½ hours per week. The Fifth Circuit concluded that the parties’ testimony weighed in favor of finding that Black and SettlePou had agreed that Black’s weekly salary was intended only to compensate her for a regularly-set schedule of 37½ hours per week.
SettlePou argued that Black’s conduct in accepting her fixed weekly pay without additional compensation for hours worked above the standard workweek was conclusive of the fact that she understood and agreed that her fixed weekly salary would cover all of the hours worked on her varying schedule. However, the Court found that the fact that SettlePou paid Black a fixed salary for varying hours was not evidence that SettlePou and Black had agreed that a fixed salary would compensate her for all the hours she worked each week. The Fifth Circuit Court of Appeals concluded that Black’s immediate and repeated voicing of her disagreement with her lack of overtime pay after being reclassified as exempt showed that she did not agree that her fixed weekly salary was intended to compensate her for all the hours she worked each week. Therefore, she was entitled to one and one-half times her regular rate for her overtime hours. If an employer is going to use the fluctuating workweek as a method of paying for overtime, the employee must agree to this method of payment.