Dive Brief:

• Delta Air Lines, Inc. has agreed to pay $3.5 million to settle class action allegations that it incorrectly calculated overtime pay under California law for certain nonexempt employees (Fan v. Delta Air Lines, Inc., No. 2:19-cv-04599 (N.D. Calif., March 22, 2019)).
• The Georgia-based air carrier was accused of failing to include certain payments in calculating employees’ "regular rate of pay" for the purpose of determining overtime premiums. The plaintiffs alleged that Delta ignored shift differential payments, “Shared Rewards” bonuses, profit-sharing payments and the fair market value of airline passes it provided. Because of this practice, the plaintiffs alleged they were underpaid for overtime hours.
• The plaintiffs claimed the alleged violations were "knowing, willful and intentional" because in a previous legal action, Delta did not dispute that it unlawfully failed to include certain types of employee compensation in its calculation of the regular rate of pay for its ground employees in California. Delta then did not make any changes, the court documents state. The court has been asked to sign off on the agreement.

Dive Insight:

The Fair Labor Standards Act generally requires that non-exempt employees receive overtime for hours worked in excess of 40 in a workweek, at a rate of at least one-and-a-half times their regular rate of pay. However, regular rate of pay doesn’t just include an employee’s hourly wages; it generally includes all remuneration, with a few exceptions. The plaintiffs noted in the lawsuit that California law mirrors the FLSA when it comes to regular rate of pay.

Earlier this year, a Pennsylvania healthcare provider and a Connecticut lighting manufacturer settled charges with the U.S. Department of Labor (DOL) that they violated the FLSA by incorrectly calculating workers' overtime payments. The employers paid less overtime than was due because they failed to include shift bonuses and shift differentials when computing regular rates. Both employers also allegedly failed to maintain legally required accurate time and payroll records.

Notably, DOL is contemplating changes to the regular rate calculation. The federal agency is looking to "clarify and update the regulations governing the regular rate requirements," the agency said in a fact sheet published in March. In a Notice of Proposed Rulemaking, DOL proposed that employers be allowed to exclude certain items such as the cost of wellness programs, unused leave or reimbursed expenses. The comment period for the rulemaking closed in June.