Employers should be aware of a recent appellate court ruling concerning how an employer defined its workweek for purposes of calculating overtime compensation due to employees.
The court ruled that the employer "could not artificially designate the workweek in such a way as to circumvent the statutory requirement to pay overtime rate for the seventh consecutive day worked in a workweek." Seymore et. al. v. Metson Marine, Inc. et. al., 2011 Cal. App. LEXIS 222
Details of the Job
The employees worked 14 consecutive days on Metson’s ships providing emergency cleanup of oil spills and other environmentally hazardous discharges off the California coast. The 14-day hitches alternated with 14 days off. The employees’ shift started on a Tuesday at noon and ended at noon on the Tuesday 14 days later. Employees were paid to work a 12-hour daily shift during this two-week period, except on crew-change days, when they worked only six hours. The employer paid an hourly rate for the full 12-hour shift whether or not the employees actually performed any work during the full 12 hours.
The employees received their regular hourly rate for the first eight hours and time and a half for the additional four hours. On the occasions that plaintiffs worked more than 12 hours in a day while responding to an emergency, they were paid double time for all hours in excess of the usual 12-hour shift. The remaining 12 hours in each 24-hour period were designated by the employer as "off-duty," with eight hours of the "off-duty" time as sleep time, three hours as meal times and one hour as free time.
During the "off-duty" time, employees were required to be on "stand by." Crew members could leave the boat during their "off-duty" time, but were required to "check in and check out" when they left the ship. When employees left the ship, they were required to carry a cell phone or pager and be able to return to the ship within 30-45 minutes of an emergency call. Employees were provided with sleeping quarters because they were required to sleep on board the vessels. If an emergency was reported while the crew members were asleep, crew members were required to respond and return to work. Crew members were prohibited from consuming alcohol at any time during the two-week hitch.
Overtime was calculated based on a workweek beginning at 12:00 a.m. on Monday and ending at 11:59 p.m. the following Sunday. Under this calculation, employees worked six days in the first workweek, seven days in the second workweek and two days in a third workweek. Because the employer used the Monday through Sunday workweek for payroll, employees were paid for the seven-day premium only at the end of the second workweek.
California Labor Code Section 510 and Section 3 of the IWC Orders require employers to pay time and one-half the employee’s regular rate for all hours in excess of eight in one workday, 40 in one workweek and the first eight hours on the seventh day of work in any one workweek. These same sections require employers to pay twice the employee’s regular rate for any work in excess of 12 hours in one day and in excess of eight hours on the seventh day of work in a workweek.
The terms "workday" and "workweek" are clearly defined in section 500 of the California Labor Code and Section 2 of the IWC Orders. Labor Code section 500 defines a "workday" as "any consecutive 24-hour period beginning at the same time each calendar day" and defines a "workweek" as "any seven consecutive days, starting with the same calendar day each week."
The Division of Labor Standards Enforcement (DLSE) enforces the labor code and wage orders. The DLSE has interpreted the language defining workweek and workday as allowing employers to establish whatever workday and workweek they choose as long as it is consistent and regularly recurring. Daily overtime was restored in 2000 and both before and after the restoration, DLSE operated on the presumption that an employee’s workday need not coincide with the beginning of an employee’s shift.
DLSE has considered 24-hour shifts where the employee was required to remain on the premises as "hours worked." The agency has, however, allowed employers to deduct eight hours sleep time from the 24 hours as long as the employee had the opportunity to receive at least six hours uninterrupted rest time. (DLSE Manual Section 46.4 et. seq.) The DLSE has also allowed employers to deduct three hours meal time.(See DLSE opinion letters 1998.11.09 and 2003:04.23, and Aguilar v. Association for Retarded Citizens, 234 Cal.App. 3d 21).
Court of Appeal Decision
The Court held that the employer "could not artificially designate the workweek in such a way as to circumvent the statutory requirement to pay overtime rate for the seventh consecutive day worked in a workweek." The Court concluded that restrictions placed on the employees during their on-call hours, including the requirement that they sleep aboard the ships and remain within no more than 45 minutes of the ship at all times, subjected the employees to control for the entire 14 day period and therefore constituted "hours worked."
Commenting on the DLSE’s Opinion Letter, the Court stated: "This language does not suggest that an employer can require its employees to work one workweek, such as from Tuesday noon to Tuesday noon, and designate another workweek, such as Monday to Sunday night, for the purpose of calculating compensation. Metson may designate any workweek it wishes, but the workweek it selects and requires its employees to observe is the workweek it must use for the purpose of calculating employee compensation."
In this instance of 14 consecutive days of work, the Court concluded that the employer established a schedule that amounted to the workweek running from Tuesday noon through Tuesday noon, two weeks later. Having done so, the employer could not determine that it had a workweek running from Monday through Sunday.
"Even if Metson’s reading of the DLSE memorandum were correct, the opinion would be entitled to no weight to the extent that it conflicts with the plain language of the statute and the remedial purpose of California’s overtime laws." As the court explained: "the first sentence of Labor Code section 510(a) bluntly states: Eight hours of labor constitutes a day’s work. In the context of an overtime statute, this sentence clearly conveys the legislature’s intent that, other than in the case of specific enumerated exceptions, a shift of more than eight hours of consecutive work qualifies for overtime pay."
The court noted that prior cases have held that the interpretations in the DLSE Manual are not binding on the courts, and thus the opinions may be ignored.
Sleep time and Stand By
The compensability of Metson’s "off duty, standby" time depends upon the control exercised by the employer. The Seymore Court considered a 45-minute response time as too restrictive when coupled with an alcohol usage ban and the requirement of sleeping on the ship. "Thus, the degree of control exercised by requiring the employees to sleep aboard ship, which is not their residence, renders the eight sleep-time hours as "hours worked" under California law."
However, the Court looked at the Wage Order covering the business. Wage Order 9 contains an overtime exemption where there is an agreement between the employer and ambulance drivers and attendants to exclude eight hours sleep time and three hours meal time.
While conceding that no such written agreement existed in this case, the court referred to federal regulations (29 CFR 785.22) that provide "that when an employee works 24 hours or more, the employer and the employee may agree to exclude a 'regularly scheduled sleeping period of not more than 8 hours ...' provided adequate sleeping facilities are furnished by the employer and the employee can usually enjoy an uninterrupted night’s sleep."
The undisputed facts established that sleeping facilities were provided for employees on the ships, and that it was exceptionally rare for their sleep to be interrupted by an emergency.
The implied agreement between the parties was found in the handbook that plaintiffs received prior to employment. The handbook stated "that employees would not be compensated for eight hours of 'off-duty' sleep time each day."
As to the deduction for meal breaks, the Court relied on DLSE’s enforcement policy to treat meal periods during which the employee is required to remain at the site as hours worked. Thus, the employer could not consider meal periods as non-compensable.
- By scheduling employees for fourteen consecutive days of work, the employer effectively established that such a work schedule amounts to two workweeks for the purpose of overtime calculations. According to the Metson Court, the employer must designate both the workweek and the period of time used to calculate overtime as the same period of time. For example, if an employee works Monday through Friday, the workweek could begin on Saturday, Sunday or Monday, but the workweek for calculating overtime must include the days the employee actually works.
- Any time an employee works in excess of eight hours in a shift, he or she is entitled to overtime compensation. The troubling question raised by this conclusion is that it would appear that each employee’s 24-hour workday commences when his shift starts. Thus employers with more than one shift have more than one 24-hour workday.
- For work shifts of 24 hours, employers may deduct eight hours sleep time, implied from the policies of the employer and conduct of the parties.
- An employer may not deduct mealtime from time worked if an employee is required to remain on the work premises.