The Employer's Legal Resource: Collective Action Claims Employees' "Regular Rate" should Include $35.00 Per Diem when Calculating Overtime Pay
Over 200 current and former non-exempt employees of employer, CGG Land, brought a collective action in Tulsa claiming that they were improperly paid overtime. Basically, everyone agreed they were paid overtime at 1.5 times the employee's hourly rate of pay. But the law requires that overtime be paid at 1.5 times the employee's "regular rate" of pay. So, the debate was as to the difference between the hourly rate and the regular rate of pay.
CGG is a company providing seismic-mapping services throughout the United States. Employees were required to travel a great deal. When travelling, they would be go to remote locations and be there usually from four to eight weeks at a time. While travelling, they were paid $35 per diem for meals. CGG calculated overtime without including the $35 per diem. The employees claimed that their "regular rate" of pay should have included that per diem.
The district court found in favor of CGG as did the Tenth Circuit Court of Appeals. The Court held that, when an employer requires an employee to travel overnight for work (including the days/nights the employee is working at the other location), the payments an employer makes for reasonable living expenses, including the cost of food, does not affect the regular rate. Simply stated, this per diem is not included in the regular rate used to calculate overtime.
The Court also addressed the argument that the payment was simply an attempt to skirt overtime pay. The Court disagreed noting that the parties agreed the $35 was a reasonable approximation of the amounts needed to cover meals each day. The Court noted there are situations where some employers have paid "per diems" which were tied to the number of hours worked in what have been called employer attempts to skirt wage and hour laws. Such "per diems" are not the types of payments addressed by the Court. "Here, Employees traveled to remote job sites away from home to perform lengthy work stints for CGG. While away from home, Employees incurred meal expenses while serving CGG as employees and while furthering CGG's interests. For all the reasons stated, these travel expenses are [properly not included in the regular rate of pay.]"
By Kristen L. Brightmire, firstname.lastname@example.org