149 Madison Ave. Corporation v. Asselta, 331 U.S. 199 (1947)
Facts: Service and maintenance employees sued to recover overtime pay. Under their employment agreement, employees were scheduled to work 46 or 54 hours per week depending on their position. The employees argued that under the agreement overtime pay is not provided, as is required under the statute, after they work 40 hours each week; rather they begin to receive 1 and ½ regular rate only after working in excess of 46 or 54 hours. They assert that the problem lies in the formula used to calculate hourly/regular rate.
Case History: The District Court agreed with the workers and allowed recovery of overtime pay; the Circuit Court of Appeals affirmed.
Holding and Disposition: Held, the labor agreement in this case called for “a workweek in excess of 40 hours without effective provision for overtime pay.” The Supreme Court affirmed workers’ recovery.
Reasoning: The formula used by the employer to calculate the “regular rate” for purposes of determining overtime pay does not meet the standard for a “regular rate” under the Fair Labor Standards Act. While the formula itself may have been perfectly acceptable, the actual implementation of it revealed an attempt to pay employees on a pro-rata basis for hours scheduled rather than a regular rate for 40 hours and 1 and ½ regular rate for hours worked beyond 40.
Significance and Key Points: While the employer may use a formula to calculate an hourly rate from a weekly rate, the formula may not simply divide the number of hours scheduled by the amount of pay without taking into account overtime. If the formula set out in a labor agreement does meet the standard then the employer must implement it in a way that meets the standard.
Walling v. Harnischfeger Corp., 325 U.S. 427 (1947)
Facts: Production employees sued electrical products corporation for recovery of overtime pay. Employees argue that the regular rate of pay should include the amount paid over the hourly base rate for incentive bonuses. According to the employees, calculating the regular rate without the incentive pay results in an incorrect amount of overtime pay.
Case History: District Court held that the company violated the FLSA by not including incentive or piece work bonuses in its calculations of regular rate. Court of Appeals reversed the judgment.
Holding and Disposition: Held, incentive bonuses must be included in the calculation of regular pay if it can be demonstrated “that such bonuses are a normal and regular part of their income.” Court of Appeals reversed and District Court affirmed.
Reasoning: ”When employees do earn more than the basic hourly rates because of the operation of the incentive bonus plan the basic rates lose their significance in determining actual rate of compensation.”
Significance and Key Points: Court will consider the actual payments which the parties have agreed to rather than the names the parties give those payments in the contract to determine regular rate. “Piece [incentive] work wages forming only a part of the normal weekly income must also be an ingredient of the statutory regular rate.”
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