The opinion of the court was delivered by: HOGAN
THOMAS F. HOGAN, UNITED STATES DISTRICT JUDGE
These cases raise various aspects of the District of Columbia's obligation to comply with the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201-209 (1982).
Harrison and AFGE are presently before the Court on two calculation issues. First, plaintiffs allege that the District is failing to calculate the overtime rate as one and one-half times the "regular rate" as required by section 7(a)(1) of the Act. Second, plaintiffs allege that the District is improperly offsetting compensation paid to employees for annual and sick leave against the damage amounts due those employees for overtime under the Act. The Court directed the parties to rebrief the issues and conducted a hearing on April 11, 1989. The Court has spent considerable time on the first calculation issue -- which is more fit for accountants than lawyers -- and is now prepared to rule upon it. The Court shall reserve judgment on the second issue, however, pending the District's response to the affidavit of plaintiffs' accountant.
The Regulations provide in terms even a layman could understand that "the regular hourly rate of pay of an employee is determined by dividing his total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid." 29 C.F.R. § 778.109; see also 29 U.S.C. § 207(e) (regular rate with seven exclusions is "deemed to include all remuneration for employment paid to, or on behalf of, the employee"). The District has admitted and the Court has held that certain forms of "premium pay" must be included in the regular rate. Harrison v. District of Columbia, 674 F. Supp. 34 (D.D.C. 1987). The present dispute arises from the District's contention that it does not have to include such premium pay in the calculation of both the regular rate and the overtime rate.
The District's contention, however, is simply wrong.
Under FLSA, the overtime rate cannot be divorced from the regular rate, as the District suggests. The overtime rate is simply a multiple of the regular rate. Plaintiffs are thus perfectly correct in their contention that premium pay is factored into both the regular rate and the overtime rate. The District's apparent concern with "double counting" is specifically addressed in the Act. That is, certain forms of premiums, such as, most obviously, an overtime premium, are excluded from the calculation of the regular rate to avoid counting them twice. See 29 U.S.C. § 207(e)(5). Other premiums, however, such as those involved here, are not excluded from the regular rate, and double counting is therefore not an issue. Moreover, once the regular rate is determined, the calculation of overtime compensation becomes a matter of basic arithmetic.
The parties' most recent submissions indicate that they agree on this basic arithmetic. Nonetheless, at argument both counsel insisted that the method of calculation adopted by the District will not always lead to the same result in cases where premium pay is not paid for all the hours worked. In the Court's analysis, however, both sides are wrong in this regard. As demonstrated below, it makes no difference how much and for what hours a premium is paid, as long as it is properly added into the regular rate.
Both parties cite to an example used in the Regulations. That example, captioned "Hourly rate and bonus," provides as follows:
If the employee receives, in addition to his earnings at the hourly rate [assumed to be $ 6], a production bonus of $ 9.20, the regular hourly rate of pay is $ 6.20 an hour (46 hours at $ 6 yields $ 276; the addition of the $ 9.20 bonus makes a total of $ 285.20; this total divided by 46 hours yields a ["regular"] rate of $ 6.20). The employee is then entitled to be paid a total wage of $ 303.80 for 46 hours (46 hours at $ 6.20 plus 6 hours at $ 3.10, or 40 hours at $ 6.20 plus 6 hours at $ 9.30).
29 C.F.R. § 778.110(b) (emphasis added).
The two calculation options in the underscored language provide the key to the parties' misunderstanding. The first method involves multiplying the total number of hours worked (i.e., both non-overtime and overtime hours) times once the regular rate and then adding to that figure the overtime hours times half the regular rate. The second method involves multiplying the nonovertime hours times once the regular rate and then adding to that figure the overtime hours times one and one-half the regular rate. Properly applied, however, both methods will render the same results to a mathematical certainty. For, under either method, the regular rate is ultimately multiplied by one and one-half. While the Court, like plaintiffs, finds the second method more intuitively appealing, as it parallels the language of the statute, the first method, adopted by the District, is no less correct.
A few examples will illustrate the point. The District posits the example of an employee who earns $ 10 an hour and a 40 cent an hour dirty pay premium and who in one week works 40 non-overtime hours, for 20 of which he receives dirty pay, and 10 hours of overtime, for all of which he receives dirty pay. The employee has thus earned $ 10 an hour straight time pay for a total of 50 hours plus 40 cent an hour premium pay for 30 hours. His regular rate, both parties would agree, is calculated by taking the employee's total remuneration, including the premium pay, and dividing it by the hours worked, as follows:
40 hours x $ 10 = $ 400 (non-overtime hours times straight time rate)
10 hours x $ 10 = $ 100 (overtime hours times straight time rate)
30 hours x $.40 = $ 12 (hours at premium rate)
TOTAL = $ 512 /50 hours = $ 10.24 (regular rate, i.e., total
remuneration divided by total hours)
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