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Trial Court Rules Against Requiring that Manufacturers Pay Daily and Weekly Overtime

March 15, 2017

Overview

The court case that sparked the Bureau of Labor & Industries (“BOLI”) to change its long-standing interpretation of Oregon’s overtime rule for manufacturers has now led a judge to the opposite conclusion.  On March 9, 2017, Multnomah County Circuit Court Judge Kathleen Dailey sided with Portland Specialty Baking’s argument that a manufacturer must pay an employee the greater of either weekly overtime or daily overtime, but not both.

How did we get here?

The judge’s ruling comports with BOLI’s previous guidance, which stated, “When employees who are entitled to and have worked daily overtime have also worked more than 40 hours in the workweek, the employer should calculate overtime wages for hours worked on both a daily basis and a weekly basis and then pay the greater of the two.”  However, in December 2016, after plaintiffs filed a lawsuit against Portland Specialty Baking, claiming that they were owed overtime because the employer had not paid both daily and weekly overtime, BOLI revised its guidance.  As we explained in our recent employment seminar for manufacturers, BOLI’s revised guidance explained that daily and weekly overtime are two independent statutory requirements, which means that employers must pay both daily and weekly overtime.

Where BOLI’s revised guidance breaks down is in the math.  The plaintiffs in Mazahua et al. v. Portland Specialty Baking argued that an employee who works a 44-hour workweek consisting of four 11-hour workdays is entitled to daily and weekly overtime.  The plaintiffs suggested that the employee should receive daily overtime for the 1 hour above 10 hours that the employee worked the first three days.  Then, for the fourth day of work, the employee should receive three hours of weekly overtime for working above 40 hours for the week week.  This left one hour of overtime unaccounted for because the employee worked 44 total hours.  The plaintiffs suggested that this last hour should be paid as daily or weekly overtime, but not both so as to avoid double-counting.  This “creative” math made my head hurt, probably yours, and apparently the judge’s as well.  As the trial court judge asked, if daily and weekly overtime are distinct, why wouldn’t an employee also be entitled to daily and weekly overtime for the final hour of overtime work?  “The obvious answer is that such a double-payment violates the ‘one and one-half times the regular rate’ clause of ORS 653.261.”  In other words, accepting plaintiffs’ argument that daily and weekly overtime apply leads to the violation of a different statute that requires employers to pay 1.5 times the regular rate of pay for overtime.

What should employers do now?

  1. Support Senate Bill 984

    Senate Bill 984
    clarifies that if an employee works more than 10 hours in any one day and more than 40 hours in one calendar week, the employer must calculate overtime on a daily and weekly basis, but pay only the greater amount.  If this bill passes, BOLI and the courts will have clear guidance that daily and weekly overtime are not independent statutory requirements.  Ultimately, this should resolve any remaining confusion and significantly decrease the risk of overtime violations by employers.  In order to support Senate Bill 984, contact your representative by clicking here.

  2. Remember that BOLI’s interpretations are not the law, but may still bite

    This is a good reminder that what BOLI says is not the law.  However, keep in mind that BOLI may nonetheless enforce the law through its decisions on BOLI complaints, fines, etc., based on its own interpretation.  Therefore, employers who choose to pay employees daily or weekly overtime but not both are still at risk. 

    BOLI can also change its mind at any time and issue new guidance.  Our hope is that BOLI will do just that and re-issue its prior guidance.

  3. Weigh your own risks and proceed with caution

    The plaintiffs in Mazahua may appeal this decision or another plaintiff’s lawyer may take another run at getting a different trial judge to issue the opposite decision.  You obviously do not want to be the defendant-employer in that future case.  However, paying daily and weekly overtime may mean huge increases in labor costs.  While this opinion is certainly good news for manufacturers, the battle is not yet over.

Overtime issues can be complicated.  Feel free to contact us and we will be happy to guide you through this process and reach a decision that works for you and your business.   

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