The Fair Labor Standards Act (“FLSA”) requires employers to pay one and one-half times an employee’s regular rate of pay for all hours worked over 40 in one week. It provides for certain offsets against this obligation for certain types of non-required premium pay. Thus, if an employer, for example, pays employees premium pay at time and one-half for hours worked on holidays, which is not required under the FLSA, the employer may offset those payments against any overtime it might otherwise owe.

In Smiley v. E.I. DuPont de Nemours and Co., No. 14-4583 (3rd Cir. October 7, 2016), the court explained that, except in the specific circumstances provided in the FLSA, no offsets against overtime owed are allowed. The plaintiff in Smiley brought a class action seeking overtime pay for time spent putting on and taking off uniforms and protective gear, and for time spent in mandatory pre- and post-shift meetings. The employer provided paid meal periods – which are not required by the FLSA – to these employees. This pay was then considered as part of the employees’ regular rate of pay for calculation of overtime. This paid time always exceeded the time the employees spent putting on and taking off uniforms and in pre- and post-shift meetings. Therefore, the employer argued that these amounts should be offset against any overtime owed, and would result in no additional compensation being owed.

The Third Circuit court disagreed. It noted that the FLSA specifically permits offsetting only in three circumstances: (1) where a premium rate is paid for hours worked over eight in one day, or for hours worked in excess of the employee’s normal working hours; (2) where a premium rate is paid for work on weekends, holidays, regular days of rest or last two days of the workweek, where the premium rate is at time and one-half; (3) where a rate of at least time and one-half is paid to employees under a contract or collective bargaining agreement for work outside established hours. 29 U.S.C. §§ 207(e)(5)-(7), (h)(1)-(2).

While the employer had argued that the FLSA does not preclude offsets in other circumstances, the court held that only offsets specifically outlined by the FLSA may be taken. Accordingly, the court rejected the employer’s argument that any amount owed could be offset, and remanded the matter for further proceedings.

What Does This Mean For You? Cases brought pursuant to the FLSA can become very expensive. Employers need to be aware that paying employees amounts that are not required to be paid under the FLSA does not mean that such amounts can be offset against other amounts that are statutorily required. Therefore, such payments should not be made with the expectation that they can be used to offset potential FLSA liability.

If you have any questions about this or any other employment or labor law issue, please contact Whitney Rahman at (717) 509-7237 orswr@blakingerthomas.com.

**This update is provided for informational purposes only and
should not be construed as legal advice or as creating an
attorney-client relationship where one does not already exist**