Dive Brief:

• The Chicago Transit Authority failed to pay late-shift workers the correct overtime rate because it did not include shift differential wages in its pay calculations, according to a class action lawsuit (Byrd, et al. v. Chicago Transit Authority, No. 1:20-cv-03613 (N.D. Ill. June 19, 2020)).
• The plaintiffs, employees who work the evening and night shifts, receive a 10% shift differential for evening work and a 15% differential for night work, as spelled out in a collective bargaining agreement. However, they say, for the last three years the employer has not included shift differential pay in its calculation of the regular rate of pay, which is used to determine the overtime pay rate.
• The plaintiffs alleged a failure to pay proper overtime in violation of the Fair Labor Standards Act (FLSA) and Illinois Minimum Wage Law.

Dive Insight:

The FLSA generally requires that nonexempt employees be paid at least time and a half their regular rate for hours worked beyond 40 in a workweek. Many state laws mirror that requirement. Regular rate of pay doesn't just include an employee's hourly wages; all forms of compensation must be included, with certain exceptions.

The definition of "regular rate" of pay was revamped late last year. The U.S. Department of Labor (DOL) updated its regulations explaining the forms of compensation that must be included in the regular rate of pay, addressing, among other things, criteria for determining whether discretionary or non-discretionary bonuses should be included in an employee's regular rate.

Collective action suits dealing with improper payment of overtime pay can lead to hefty settlements for employers. Delta Air Lines, Inc. recently agreed to pay $3.5 million to settle class action allegations that it incorrectly calculated overtime pay under California law for nonexempt employees. The airline was accused of failing to include in the calculation of the regular rate of pay items such as shift differential payments, certain types of bonuses, profit-sharing payments and the fair market value of the airline passes it provided to employees. Golden State law mirrors the FLSA when calculating the regular rate of pay.

A Pennsylvania healthcare provider and a Connecticut lighting manufacturer settled with DOL over charges that they violated the FLSA by incorrectly calculating workers' overtime payments. The employers allegedly paid less overtime than was due because they failed to include shift bonuses and shift differentials when computing the regular rate of pay. Both employers also allegedly failed to maintain legally required accurate time and payroll records.